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Reser's Fine Foods Inc. v. H.C. Schmieding Produce Company LLC

United States District Court, D. Kansas

March 1, 2017

RESER'S FINE FOODS, INC., Plaintiff,
v.
H.C. SCHMIEDING PRODUCE CO., LLC., and C & E FARMS, INC., Defendants. H.C. SCHMIEDING PRODUCE CO., LLC., Third-party Plaintiff,
v.
MARK A. RESER, PATRICIA J. RESER, PAUL A. LEAVY, and SUNTERRA PRODUCE TRADERS, INC., Third-party Defendants.

          MEMORANDUM AND ORDER

          Sam A. Crow, U.S. District Senior Judge.

         This case comes before the court on the motion for summary judgment (Dk. 17) filed by the individual third-party defendants, Mark A. Reser, Patricia J. Reser, and Paul A. Leavy; on the motion for leave to file two exhibits under seal (Dk. 25) filed by the plaintiff Reser's Fine Foods, Inc. (“Reser's”) and the individual third-party defendants; and on the motion for leave to file a surreply or conduct oral argument (Dk. 33) filed by the third- party plaintiff H.C. Schmieding Produce Co., LLC. (“Schmieding”). The court will take up the motions in reverse order.

         In September of 2016, Reser's filed this declaratory judgment action asking for an offset of $269, 519.87, as the alleged damages incurred from first a “recall” and then a “hold” being placed on a load of celery supplied by Schmieding and C & E Farms, Inc. in November of 2015. Reser's complaint alleges that it did not receive notice of the recall and hold until after it had used the celery in fresh food products that were ready for shipment. Reser's also alleges it did not receive notice of the hold being lifted until after it had been required to destroy the finished product containing the celery and to replace the destroyed product. (Dk. 1).

         Schmieding filed an answer and four counterclaims against Reser's including two counterclaims for failure to pay trust funds and failure to make prompt payment pursuant to the Perishable Agricultural Commodities Act (“PACA”), 7 U.S.C. §§ 499a, et seq. Schmieding also filed a cross-claim for indemnification against C & E Farms, Inc. Most important to the summary judgment motion now pending, Schmieding filed third-party claims against Mark A. Reser, Patricia J. Reser, and Paul A. Leavy for unlawful dissipation of PACA trust assets. These three individual third-party defendants are seeking summary judgment arguing that Reser's has adequate and readily available trust assets which mean that as a matter of law there has been no dissipation of trust assets and there is no basis for secondary personal liability.

         Motion for Leave to File a Surreply (Dk. 33).

         The early filing of a summary judgment motion in this case has created some unique procedural issues. It also has generated some evidentiary objections on matters about which discovery has yet to occur. In response to Schmieding's memorandum opposing summary judgment, the individual third party defendants did submit arguments and evidence in their reply memorandum which the court regards as new even if offered in reply to Schmieding's arguments. The court finds these unusual circumstances justify Schmieding's filing of its attached surreply. The court has considered the surreply in its summary judgment ruling.

         Motion for Leave to File Exhibits Under Seal (Dk. 25).

         Movants seek leave to file under seal two exhibits: Reser's consolidated balance sheet that reflects October totals for the years of 2015 and 2016 and the second affidavit of Paul A. Leavy that discusses, in part, figures from the balance sheet. (Dk. 25-1 and 25-2). As a privately held corporation, Reser's submits this balance sheet contains “confidential business information” that includes sensitive details about its financial condition which Reser's retains as private business information. While these allegations certainly leave room for more detail and explanation in the future, the court accepts for the limited purpose of these summary judgment proceedings that Reser's general interest in keeping its financial condition private currently outweighs the public's presumed right of access to this information. This conclusion is largely influenced by Reser's general financial condition not having a significant or central issue in these immediate proceedings. Should this change, the court may invite an additional showing on confidentiality and reconsider its decision to seal. For now, the court grants the motion on this condition.

         Motion for Summary Judgment (Dk. 17).

         “Summary judgment is appropriate only if ‘the movant shows that there is no genuine issue as to any material fact and the movant is entitled to judgment as a matter of law.'” Tolan v. Cotton, ___ U.S. ___, 134 S.Ct. 1861, 1866 (2014)(quoting Fed.R.Civ.P. 56(a)). A factual dispute is “material” only if it “might affect the outcome of the suit under the governing law.” Anderson v. Liberty Lobby, 477 U.S. 242, 248 (1986). A “genuine” factual dispute requires more than a mere scintilla of evidence in support of a party's position. Id. at 252.

         The moving party has the initial burden of showing “the absence of a genuine issue of material fact, ” and, if carried, the non-moving party then “must bring forward specific facts showing a genuine issue for trial as to those dispositive matters for which [it] carries the burden of proof.” National American Ins. Co. v. American Re-Insurance Co., 358 F.3d 736, 739 (10th Cir. 2004) (internal quotation marks and citation omitted). At the summary judgment stage, the court is not to be weighing evidence, crediting some over other, or determining the truth of disputed matters, but only deciding if a genuine issue for trial exists. Tolan, 134 S.Ct. at 1866. The court performs this task with a view of the evidence that favors most the party opposing summary judgment. Id. Summary judgment may be granted if the nonmoving party's evidence is merely colorable or is not significantly probative. Liberty Lobby, 477 U.S. at 250-51. Essentially, the inquiry is “whether the evidence presents a sufficient disagreement to require submission to the jury or whether it is so one-sided that one party must prevail as a matter of law.” Id. at 251-52.

         Counsel for Schmieding has filed a declaration which includes a review of the procedural posture of this case. (Dk. 19-1). The declaration notes that the movants filed for summary judgment before filing their answer to the third-party claims. Additionally, there is no scheduling order in place, and Schmieding has yet to obtain discovery from the movants. At paragraph ten, Mr. Brown declares:

Without such discovery, Schmieding is unable to test the assertions in the Leavy Affidavit, including the allegations concerning Reser's liquidity, Reser's preservation of PACA trust assets and its ability to pay any judgment entered in Schmieding's favor. As a result, Schmieding is wholly unable to present facts essential to justify its opposition on factual grounds. Notwithstanding the foregoing, Schmieding believes the Motion can and should be dismissed on legal grounds.

         (Dk. 19-1, ¶ 10). Schmeiding opposes summary judgment, in part, by asking that it “be permitted to engage in discovery to review evidence exclusively in the control of the movant which evidence the movant contends establishes undisputed material facts. Fed.R.Civ.P. 56(d)(2).” (Dk. 19, p. 7).

         The Tenth Circuit recently addressed the operation of Rule 56(d):

Rule 56(d) allows a nonmovant to show by affidavit or declaration that, for a specified reason, it cannot present facts essential to justify opposition to a motion for summary judgment. That is, it provides a means for a nonmovant to “ask the court to refrain from acting on the summary judgment request until additional discovery can be conducted.” Been v. O.K. Indus., Inc., 495 F.3d 1217, 1235 (10th Cir. 2007). Thus, Rule 56(d) serves a noticing function that “safeguards against an improvident or premature grant of summary judgment.” See 10B ...

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