On November 2, 2012, U.S. Bankruptcy Court Judge John Akard made an unprecedented ruling that denied all but $25,000.00 of over $200,000.00 in attorneys’ fee applications from various PACA trust creditors. In support of this ruling, the Court held that “because the case is being handled in bankruptcy court, unsecured creditors are not entitled to attorney fees incurred after the debtor files for bankruptcy protection.” Judge Akard further stated for the record that:
What we are seeing here, I think, is a bunch of vultures coming in and asking for fees and wasting time.
See The Packer: Judge Denies Most Attorney Fees in Delta Produce PACA Case
Quoting Jason Klinowski, The Packer stated that the court’s ruling could have “chilling effects” on the produce industry and that the ruling was both “dangerous” and “anti-industry.” Jason Klinowski further opined that “the PACA claimants did everything there were supposed to do to recover these funds.”
This ruling is currently the subject of various motions to reconsider and an appeal. The main thrust of these pleadings will focus on the fact that the court failed to appreciate and consider the impact of the PACA trust on the court’s administration of the Debtor’s estate. Specifically, PACA trust assets are not considered property of the Debtor’s estate and, therefore, the court should not handle PACA trust claims as unsecured claims against the Debtor’s estate. Rather, the court must treat the PACA trust creditors’ claims as trust claims against a common pool of PACA trust assets that are separate and apart from the Debtor’s estate.