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UNITED STATES BANKRUPTCY COURT FOR THE WESTERN DISTRICT OF TEXAS SAN ANTONIO DIVISION

IN RE: DELTA PRODUCE, L.P., Debtor

Case No. 12-50073-LMC (Chapter 11) JOINTLY ADMINISTERED

THE R&J GROUPS RESPONSES TO THE SPECIAL PACA COUNSELS OBJECTIONS TO PACA TRUST CLAIMS In accordance with the February 29, 2011 Amended Order Establishing a Deadline to File PACA Trust Claims (referred to as the PACA Claims Procedure Order), PACA creditors Bernardi and Associates, Inc., DiMare Enterprises, Inc., Uesugi Farms, Inc., Franks Distributing of Produce, LLC, Fresh Pac International, Harvest Crown Co., Inc., J-C Distributing, Inc., Mission Produce, Inc., California Artichoke & Veg Growers Corp. dba Ocean Mist Farms, Pacific International Vegetable Marketing Inc. dba Pacific International Marketing Prime Time Sales, LLC, Royal Flavor, LLC, and Wilson Produce, LLC ( hereinafter referred to as the R&J Group), by and through their undersigned counsel, hereby submit the following responses to objections filed by the Special PACA Counsel to the R&J Groups trust claims against Delta Produce, L.P.

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(Debtor) under the Perishable Agricultural Commodities Act (PACA), 7 U.S.C. 499a, et seq. I. THE R&J GROUPS RESERVES THE RIGHT TO FILE A MOTION FOR ATTORNEYS FEES AND COSTS AT A LATER DATE A general objection was made to the attorneys fees claims of all claimants, and specific objections were made to the attorneys fees claims of R&J Group claimants Fresh Pac International, Harvest Crown Co., Inc., J-C Distributing, Inc., Mission Produce, Inc., Pacific International Vegetable Marketing, Inc., Royal Flavor, LLC and Wilson Produce, LLC.1 Each of the R&J Group claimants that included attorneys fees in their proof of claim have provisions on their invoices their sales contracts entitling them to recover attorneys fees from the Debtor, in the event collection of their outstanding invoices became necessary. Thus, the attorneys fees incurred by each of these PACA trust beneficiaries and included in the calculations set forth in their respective Proofs of Claim are part of their underlying PACA trust claims and must be given the same priority for payment. Pursuant to the PACA Claims Procedure Order paragraph 15, the R&J Group shall file a motion for attorneys fees and costs after all claims have been resolved and all PACA Trust assets have been collected.

Specific objections were not made to each R&J Group claimant that included attorneys fees in their proof of claim.

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II. A.

INDIVIDUAL OBJECTIONS Bernardi & Associates, Inc

Special PACA Counsel objected to the inclusion of brokerage charges in the amount of $9,973.62 in Bernardi & Associates, Inc.s claim. The scope of the PACA trust extends to non-produce charges to the extent those other charges are owing in connection with the underlying produce transaction, such as freight, palletization, handling, temperature recorders, inspection fees and other non-produce charges. For the same reasons that the attorney fees and finance charge amounts become part of a PACA trust creditors PACA trust claims, the amounts that Debtor owes for items such as brokerage charges, freight, temperature recorders and inspection fees also are part of the PACA trust claims. The PACA itself contemplates trust protection extending to sums owing in connection with produce sales. See, 7 U.S.C. 499e(c)(2). More specifically, 7 U.S.C. 499e(c)(2) provides as follows: Perishable agricultural commodities received by a commission merchant, dealer, or broker in all transactions. . . and any receivables or proceeds from the sale of such commodities or products, shall be held by such commission merchant, dealer, or broker in trust for the benefit of all unpaid suppliers or sellers of such commodities or agents involved in the transaction, until full payment of the sums owing in connection with such transactions has been received by such unpaid suppliers, sellers or agents . . . . (emphasis added). Therefore, the plain language of the statute itself makes it clear that all sums due and owing on the invoice are entitled to protection under the PACA. The legislative intent is clear; namely, it would be too burdensome for an unpaid seller to review all

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invoices and attempt to take out any charge that is not directly for the purchase price of the produce (invoice prices for produce often contain charges such as freight, upcharges for cooling, palletizing, cartons, etc.). These charges are part of an unpaid sellers PACA trust claim. In addition to the plain language of the PACA itself, the courts have also interpreted this language to mean that PACA trust protection will be extended to nonproduce charges where those charges [a]ppear to be related to the produce charges noted on the [invoice]. Fishgold v. Onbank & Trust Co., et al., 43 F. Supp.2d 346, 349 (W.D. New York 1999). In Fishgold, the court extended PACA trust protection to handling fees that appeared on the invoices. See also Weis-Buy Services, Inc. v. Rancone, 1997 WL 323523 (N.D.Ill. 1997), an unreported decision cited by the court in Fishgold, which held that contrary to defendants assertions, the scope of the PACA trust provisions expressly covers the sums owing in connection with the underlying produce transactions in addition to the produce itself. Although this case is unreported (and was later reversed on other grounds) its reasoning on this issue is well-founded and is supported by several other cases, including Morris Okun, Inc. v. Harry Zimmerman, Inc., 814 F. Supp. 346, 351 (S.D.N.Y. 1993) (interest and attorneys fees considered related expenses under the trust), and Middle Mountain Land and Produce, Inc v. Sound Commodities, Inc., 307 F.3d 1220 (9th Cir. 2002) and Country Best v. Christopher Ranch, LLC, 361 F.3d 629 (11th Cir. 2004) Special PACA Counsel specifically cites to Onions, Etc. v. Z&S Fresh, Inc. 2010 WL 2598932 (E.D. Ca. June 25, 2010) for the proposition that brokerage fees are not
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valid PACA trust claims. The decision in the Onions, Etc. case is inapposite. In that case, the broker I.G. Fruit was a sell-side broker that did not take title to or possession of the produce, acted on behalf of the buyer, and the invoices only contained charges for brokerage fees. Unlike I.G. Fruit, Bernardi & Associates, Inc. is not simply a sell-side broker. Bernardi & Associates, Inc. took title to the produce and the brokerage charges are contained in invoices for the produce that were sent to debtor. As such, the brokerage charges are sums owing in connection with the produce and Special PACA Counsels objection should be overruled. B. DiMare Enterprises, Inc.

Special PACA Counsel objected to the inclusion of handling charges in the amount of $10,959.00 in DiMare Enterprises, Inc.s claim. As detailed above in response to the objection to Bernardi & Associates, Inc.s claim, the handling and environmental charges listed on DiMare Enterprises, Inc.s invoices were necessary expenses to the produce transactions. Therefore, these charges are plainly sums owing in connection with the sale of produce. Special PACA Counsels objection should be overruled. C. Franks Distributing of Produce, LLC

Special PACA Counsel objected to interest in excess of 6% on Franks Distributing of Produce, LLCs claim. Franks Distributing of Produce, LLC concedes that interest should be calculated at 6%.

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D.

Fresh Pac International

Special PACA Counsel objected to interest in excess of 6% on Fresh Pac Internationals claim. Fresh Pac International notes that interest on its PACA claim form was calculated at 6%, and therefore no reduction in interest is appropriate. E. Mission Produce, Inc.

Counsel for the R&J Group and Special PACA Counsel have met and conferred on Special PACA Counsels objection to invoice #479240 and said objection by Special PACA Counsel has been waived. Special PACA Counsel objected to invoice #475297, claiming a $200 price reduction on this invoice. Mission Produce, Inc. did not agree to a price reduction in the amount of $200 on invoice #475297, and as such Special PACA Counsels objection should be overruled. F. Prime Time Sales, LLC

Counsel for the R&J Group and Special PACA Counsel have met and conferred on Special PACA Counsels objection to $23.50 and said objection by Special PACA Counsel has been waived. G. Royal Flavor LLC

Special PACA Counsel objected to Royal Flavor, LLCs invoice number 23429, stating that there were quality problems and the principal should be reduced by $9,543.50. $11,143.50. Invoice number 23429 was issued on 11/23/2011 in the amount of On 12/1/2011 a trouble adjustment was issued for quality problems,

adjusting the invoice downward by $1,600.00, leaving a balance due of $9,543.50. No

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other adjustments were authorized by Royal Flavor, LLC. As such, Special PACA Counsels objection should be overruled. WHEREFORE, the R&J Group respectfully pray that Special PACA Counsels objections to their claims be overruled as discussed above. Respectfully submitted, DATED: April 16, 2012 By: /s/ Bart M. Botta Bart M. Botta, Esq. Rynn & Janowsky, LLP 4100 Newport Place Drive, Suite 700 Newport Beach, CA 92660 (949) 752-2911 Tel 949-752-0953 Fax bart@rjlaw.com Email and Diana M. Geis, Esq. Curl & Stahl, P.C. 700 North St. Marys Street, Suite 1930 San Antonio, Texas 78205 (210) 226-2182 Tel (210) 226-1691 Fax dmgeis@curlstahl.com Email

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CERTIFICATE OF SERVICE I hereby certify that on April 16, 2012, I electronically filed the foregoing with the Clerk of the Court using the CM/ECF system which will send a notice of electronic filing to all parties of record. By: /s/ Bart M. Botta Bart M. Botta, Esq. Rynn & Janowsky, LLP 4100 Newport Place Drive, Suite 700 Newport Beach, CA 92660 (949) 752-2911 Tel 949-752-0953 Fax bart@rjlaw.com Email

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