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In Nickey Gregory Co. LLC, v. AgriCap, LLC, No. 09-1130, the Fourth Circuit addressed the issue of whether the plaintiffs, sellers of perishable agricultural commodities, could seek disgorgement from a defendant-financier money owed them for the sale of produce to a bankrupt produce distributor under the Perishable Agricultural Commodities Act (PACA).
As stated in the decision: "The distinction between a sale and a loan controls the issue of whether AgriCap purchased the assets free of the PACA trust or merely held the assets to collateralize its loans to Robison Farms, in which case the receivables would have remained subject to the PACA trust and would have been required, by the terms of the regulations, to be made "freely available" to pay obligations to commodities sellers."
In concluding that the transaction in this case was a loan, the court affirmed the district court's holding that AgriCap must disgorge from the assets of the PACA trust amounts sufficient to pay unpaid PACA creditors. In so holding, the court rejected defendant's BFP defense and vacated the district court's award of damages to award the commodities sellers the full amount of the unpaid balance.