Perishable Agricultural Commodities Act (PACA): Key Protections for Produce Growers

Bradley Prowant
Associate, Litigation

Abstract

Bradley Prowant, Associate in the Litigation group at the firm’s Minneapolis and Boise offices, explains how the Perishable Agricultural Commodities Act (PACA) safeguards fruit and vegetable growers against unfair conduct and nonpayment. Enacted in the early 20th century, PACA levels the playing field between growers and buyers, offering protections that include preferred creditor status in bankruptcy, the ability to recover quickly through the USDA, and remedies for deceptive practices.

Prowant highlights PACA’s statutory trust provision, which requires buyers to hold produce sale proceeds in trust until growers are paid, enabling legal action to freeze assets if necessary. For smaller growers facing larger, more powerful buyers, PACA provides a fast and efficient route to secure payment without lengthy litigation. Its protections apply whether produce is sold fresh or frozen, making it a vital tool for anyone in the agricultural supply chain.

Transcript

I am Bradley Prowant. I am an associate in our litigation group, and I am in our Minneapolis and Boise offices. The Perishable Agricultural Commodities Act is a statutory and regulatory regime that is meant to create an even playing field between fruit and vegetable growers and their buyers. It was enacted in the early 20th century with a bunch of other agricultural laws. Really, they are farmer and grower focused where they are meant to protect farmers and growers. It is a super important act for anyone who is growing potatoes, cherries, any vegetable, any fruit, whether it becomes frozen or you sell it fresh. It is a way that they can ensure that they get paid and it gives them protection in bankruptcy. It gives them sort of this supreme lien over their crops. It gives them the power of the USDA if someone is treating them unfairly. It gives them power to complain to the USDA and achieve a quick result, so it is really helpful for someone to know about. And particularly maybe if you are a smaller grower and you are worried about your buyer being large and you are having trouble dealing with them, this is a particularly important thing to know about because it gives you a quick and efficient remedy if you are not getting paid.

This is important for them to know about because it provides protection for unfair conduct, so if you are not being paid in a certain amount of time, if someone is mislabeling your product, if someone is treating you in some way that seems like a deceptive practice, it has a lot of protections that are akin to consumer statutes. The law allows these farmers, these growers, to seek pretty quick relief through the USDA, or they can start a lawsuit. One of the remedies under PACA is what is called a statutory trust whereby once a farmer sells their goods, their fruit or their vegetable, their carrots or whatever, the person they sell it to holds that in trust for them until they get paid. If that person is a buyer who then sells on to a retailer and they get paid and then they use that to pay someone else or pay for something else, the law allows you to sue them and to potentially freeze assets and bank accounts in order for them to pay you first. If you get into bankruptcy, it can allow you to have more of a preferred creditor status otherwise. Effectively, it is just a way to ensure that you get paid, and hopefully, you can do it without some sort of protracted litigation.