Emerging Litigation Podcast
Litigators and other legal and risk professionals share their thoughts on ELP about new legal theories or areas of litigation that plaintiff attorneys, defense counsel, corporations, risk professionals and others will want to be aware of. The host is Tom Hagy, long-time legal news enthusiast, former editor and publisher of Mealey's Litigation Reports, current Editor-in-Chief of the Journal on Emerging Issues in Litigation, and owner of HB Litigation Conferences and Critical Legal Content. ELP is a co-production of HB, CLC, Law Street Media, and vLex Fastcase. Contact Editor@LitigationConferences.com.
Emerging Litigation Podcast
Fresh Produce Law, Contracts, and Risks with Katy Esquivel
According to the Department of Agriculture Americans consume 137 pounds of fresh produce per year. That not only fuels our bodies but also a $146 billion industry. Produce starts to degrade immediately after harvest, so transporting fresh fruits and vegetables from farms to stores in a safe and timely manner poses numerous challenges.
What legal and reputational risks do growers, brokers, and shippers face? What laws come into play? What are the essential components of contracts among participants in the supply chain?
Listen to my interview with Katy Esquivel, founder and principal attorney with Esquivel Law Chartered. Katy focuses on trust enforcement cases under the Perishable Agricultural Commodities Act (PACA) and representation of stakeholders in the transportation industry. Katy represents transportation brokers and shippers in matters including drafting contracts, handling claims, and advising clients on evolving legal issues impacting their businesses. She also counsels growers and sellers. Katy has also successfully completed the Produce Safety Alliance Grower Training Course to ensure that she is up to date on the latest food safety standards within the industry. She earned her J.D. from St. Thomas University Benjamin L. Crump School of Law.
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This podcast is the audio companion to the Journal on Emerging Issues in Litigation. The Journal is a collaborative project between HB Litigation Conferences and the vLex Fastcase legal research family, which includes Full Court Press, Law Street Media, and Docket Alarm.
If you have comments, ideas, or wish to participate, please drop me a note at Editor@LitigationConferences.com.
Tom Hagy
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Welcome to the Emerging Litigation Podcast, a co-production of HB Litigation and critical legal content, custom content for law firms and litigation service providers, and the newly formed VLAC's Fast Case, your World of Legal Intelligence and our friends at LawStreetMedia. I'm your host, tom Hagee, litigation Content Producer and enthusiast and an average bongo player. Contact me if you have an idea for an episode. In addition to often being polite, I'm always looking for new twists on the law, whether it's a new regulation, legislation or an important new opinion, or it could be a development in the world that will test existing law or anything you're dying to share with other litigators, organizations or individuals. And if you like what you hear, give us a rating. That always helps. And now here's today's episode.
Speaker 1:So fruits and vegetables. You've heard of them and if you're a typical American, you should probably get to know them better. That said, I didn't mean to be judgmental or laugh at that. We Americans consume about 137 pounds of fresh produce a year. That sounds like a lot. That's according to the Department of Agriculture's Economic Research Service. That includes 15 pounds of fresh oranges, and we drink the equivalent of another 72 pounds of oranges in juice form. That's why we can drink them, plus nearly 16 pounds of fresh apples how do you like them? Oranges?
Speaker 1:The United States is one of the world's largest producers of produce. We all knew that. We're big growers here. That accounts for about 10% of global production. In 2021, the value of US crop production was around 146, yeah, 146 billions, a lot of billions. That's according also to the Department of Agriculture. They estimate that about 50% of fresh produce is consumed in the United States is shipped from other states. You know well. So if you live in West Virginia, you got it from Arizona. I didn't need to spell that out. The top states for shipping fresh produce are California, florida, texas, arizona and Washington. Did you know?
Speaker 1:Gorillas are vegetarians or herbivores? Anyway, they eat plants and nuts, and you know. Look at them now, do they don't? They look like meat eaters. I mean, they're big and bulky, but no, they're pretty much vegetarians. But they also eat bugs. So that's not pure, but they do eat bugs.
Speaker 1:Challenge is facing the US produce industry. We all have them, god knows. They're getting a lot of competition from other countries. Production costs, labor costs those are going up. Climate change and extreme weather events those are affecting everybody and they're real Food safety concerns, and that's the category we're going to discuss today. And, more specifically, how do we get our delicious melons and tomatoes from farm to fork?
Speaker 1:There's a lot of changing hands along the way when you think about how much is involved in getting these gorgeous fruits and vegetables into the supermarket. What agreements are required between growers and brokers and transporters? And there are federal laws which ones come into play? What legal and reputational risk to companies in this, what's less, face it essential supply chain? What risks do they face? And there's been some recent criticism of the industry. What about that?
Speaker 1:Well, here to tell us about all that and more, is Katie Esquivel. She is founder of Esquivel Law. Her practice primarily consists of trust enforcement cases under the Parishable Agricultural Commodities Act, or PACA, as she'll explain, and she represents stakeholders in the transportation industry too. She represents transportation brokers and shippers and matters including drafting contracts, handling claims and advising clients and all kinds of legal issues. And for the growers out there, she handles formal and informal reparation cases, and that's before the PACA branch of the US Department of Agriculture. She's also litigated cases. And in the transportation industry she also drafts contracts between shippers, carriers and brokers and gives a lot of advice there too. So I will put a link, of course, to her bio. You can read all about her. Here is my interview with Katie Esquivel. I hope you enjoy it. Katie Esquivel, thank you very much for talking with me today.
Speaker 2:Hi Tom, Thank you for having me. It's a pleasure being here.
Speaker 1:Let's dive into the first question. Could you highlight for me the essential components of a broker-carrier agreement? So just kind of make sure we spell out for the listeners who these parties are and what the key elements are to ensuring a successful partnership between brokers and carriers.
Speaker 2:Absolutely, and one of the threshold things that the listeners should understand is that a transportation broker's job is to connect a shipper who needs a cargo transported from point A to point B with a truck driver or carrier who is able to perform those services, and the broker facilitates that transaction and in doing so, the broker has liability to the shipper and also has a responsibility to make sure that the carrier is given appropriate and accurate instructions on how to handle the cargo in its possession. So, for example, when we're dealing with perishables or food products, it's really important for the contract to include terms regarding temperature control, monitoring the temperature during transit, making sure that the driver knows that he or she needs to be in regular communication with the broker so that they can ensure that there is an on-time delivery, and they can also help the carrier if something goes wrong, and they can help make sure that the transaction still goes smoothly to the best of their ability.
Speaker 1:Okay, and, as with any industry, sometimes things can go wrong. And then there is insurance coverage. Just briefly, what kind of insurance coverage do these companies have and what might be a typical claim, for example?
Speaker 2:Most of the time, brokers have their own liability insurance as a threshold issue. Then the carriers themselves have insurance on their vehicle and on the trailer, and then another really important component is to have cargo insurance. So if there's damage to the cargo that is inside the trailer, there's coverage for that, and in loads where the cargo is temperature-controlled say, for example, frozen foods of some sort or refrigerated products that needs to be held at a specific temperature there's also insurance policies that cover the refrigeration mechanism within the trailer, and so that's also a really important policy to have in place when transporting temperature-controlled goods.
Speaker 1:Okay, All right, now I should have asked, and the next question I've got is to what extent does the thorough vetting, selection and ongoing monitoring of motor carriers matter for a freight forwarder's operations? A freight forwarder's another way of saying a shipper, correct?
Speaker 2:It can be used to describe either a shipper, or it can be used to be described as a broker.
Speaker 2:Okay, a freight forwarder can wear a lot of different hats, but really, at the end of the day, what is we really? Try to emphasize with our broker clients that vetting carriers is critically important to the success of their business. In vetting carriers, we recommend that brokers investigate the ownership of the carrier, look at what their safety ratings are, look at how they train their drivers and when they do that, they can ensure that they are hiring carriers who are behaving a professional manner and are well-equipped to transport the cargo from point A to point B. And those types of carriers are ones that are willing and able, ordinarily, to make sure that the cargo is handled appropriately if there's a problem, if it's rejected, if there's an accident while the cargo is en route to the destination. Those types of carriers. By working with ones that are professional and that have been properly vetted, the broker is saving themselves a lot of headaches in the future or in the event that something bad happens while the cargo is on the road.
Speaker 1:Okay, All right, so let's move on to regulatory requirements the Food Safety Modernization Act, the proto safety rule. So what requirements like that apply to transportation of perishable produce?
Speaker 2:Well, fisma includes provisions actually addressing specifically the safe and sanitary transportation of food and food products, and that requires carriers to make sure that their trucks are clean, to make sure that they aren't hauling, say, pesticides, and then the next load they haul might be, say, fruits or vegetables, something that humans would consume and where there's a possibility of contamination. The carriers are required to wash out their vehicles on a regular basis and, for the industry as a whole, all of the stakeholders are very involved in ensuring that each party has obligations to make sure that FISMA regulations, requirements and standards are adhered to by the shipper, the broker and, of course, the carrier who's actually performing the services.
Speaker 1:So how do they do that? Yeah, go ahead.
Speaker 2:One of the most important ways that they do that. Obviously there's cleanliness and there's inspect. You know shippers must inspect the trailer before they load it. So for example, if I have, if I'm getting ready to load a tractor trailer full of apples, the shipper is going to inspect the trailer before loading the apples, making sure there's no weird odors, there's no evidence of rodents or any type of insects. And then one of the other things that they do is many shippers because food safety has become such a critically important part of ensuring the safety of our food supply many shippers don't allow drivers or anyone else on the loading dock when they're loading the produce.
Speaker 2:They are taking every effort to minimize the number of hands that are touching the food before it gets on the truck. When it is on the truck, they oftentimes will apply what's called a seal to the truck. So once the trailer doors are closed, a seal is applied and that has a unique number assigned to it If it's resistant to tampering. So if anyone tries to break it or manipulate it or get it off, it's almost like a zip tie. You can't get it off without cutting it. That in and of itself, if there's a broken seal, automatically if the cargo in the trailer is food that is automatically deemed adulterated and it cannot be used for human consumption.
Speaker 1:Okay, so this is a separate question. How do logistics providers ensure compliance?
Speaker 2:They ensure compliance by limiting people who have access to the food. They do that by ensuring that the they have written policies and procedures for who can be on the loading dock for who applies the seal. For making sure the seal number is noted on the bill of lading and any other documents related to the transportation. The shipper also makes sure that the receiver of the load knows the specific seal number that was applied to the trailer so that when it arrives the receiver can make sure that the number that they were given by the shipper matches the number that is actually on the trailer when it rolls into their receiving facility.
Speaker 1:Okay, kind of on the technical side, what are some of the key challenges that these folks face in controlling temperatures when they're transporting fresh produce?
Speaker 2:It can be very difficult. There is a refrigerated mechanism in the back of tractor trailers and those are typically referred to as reefers, and they are refrigeration units and they will maintain the temperature of food, but they're not designed to take product that is loaded, say, at 80 degrees and cool it to 40 degrees. The product needs to be loaded at a specific temperature and then the reefers job is to hold that temperature during the course of transit. Disputes related to was the reefer functioning correctly? Many times shippers will put their own temperature logging devices within the cargo and those values and readings can differ substantially from the ones in the reefer units, the cooling unit in the trailer. So I've had cases where, say, a load of blueberries was supposed to be transported at 36 degrees and when it arrives the temperature unit within the cargo is showing 40-some degrees, but all of the readouts from the reefer are showing temperatures within the range that the carrier was instructed to transport the cargo at. So those are the types of disputes that we've dealt with, particularly with fresh produce.
Speaker 1:Okay, all right, so there are some. So there's sometimes disputes with the manufacturers of the units.
Speaker 2:Yes, Well, the dispute becomes between the carrier and the owner of the goods of whether or not the carrier did not properly maintain the temperature during the course of transit and if so, did that cause damage to the product?
Speaker 1:Okay, Next let's talk about the Parishable Agricultural Commodities Act of 1930. Tell me about that. What does it do to protect domestic growers and sellers of produce?
Speaker 2:Well, paka is the acronym for the Parishable Agricultural Commodities Act and it is a really unique law and body of laws. I remember going to a seminar, probably 10 or 15 years ago, and I was talking casually to a federal judge who was also an attendee at this conference and I was telling him about what PAKA is and what PAKA does. I'll never forget, and he was an older, very experienced judge and he said are you sure that's what this law does? I've never heard of it. So that gives you a sense of how many lawyers and judges really know about this statute. Paka does two things. One, it establishes a framework where buyers and sellers in the produce industry are required to act within certain guidelines of fair and equitable trade practices. It basically says here's minimum standards of how everyone in these transactions is expected to behave the fairness and equity, really. And the statute was designed to protect farmers and make sure that they got paid for the produce that they grow and sell.
Speaker 2:The other component of PAKA is that it places a statutory trust on the produce, and so what that means is, if you sell me, say, a truckload of grapefruit and I don't pay you, no-transcript, I am holding that grapefruit in trust for you. It's not simply a buyer-seller relationship. It's not simply a debtor-creditor relationship. It is a trustee and trust beneficiary relationship. I am now the trustee. I am holding the produce in trust for your benefit as the seller. What that means is, when I go to sell it, any money I receive is not my money. It's money that I have to hold to pay you, and only once you are paid can I use that money for anything else.
Speaker 2:Because of the teeth that PAKA gives sellers of produce and the rights that are very unique to the produce and actually the meat industry has a similar statute if I don't pay you, it's very common for a seller to go into federal court and obtain an injunction freezing the assets of the buyer without notice. There are also remedies available where many times the debt is not dischargeable. In bankruptcy, like many other types of debt, are Also because of this statutory trustee-trust beneficiary relationship and concept. The people within the buyer who are running the business and are in a position to control the assets are personally liable to the seller for the debt. There's no requirement to pierce the corporate veil. There doesn't have to be a showing of wrongdoing. It's very close to a strict liability standard where the officers, directors and anyone in a position to control the money is also personally responsible for the unpaid debt.
Speaker 1:Okay, I'm just curious, is not on here. Are there any big cases brought under that recently that we might want to look up and be aware of?
Speaker 2:One of the ones that you may want to look at is there's a bankruptcy case involving Dean Foods. In that case there are a lot of unpaid produce sellers in that case. There are usually cases where a large buyer may either reorganize or become insolvent and you may have pens or hundreds of creditors all joining in a lawsuit against that customer, seeking payment from the cash, assets receivables and principles of the company.
Speaker 1:Okay, all right, got you. I'm almost afraid to ask the next one what are some of the things that most people don't know about how produce ends up on their plates?
Speaker 2:There's so much. I started working in this industry about 15 years ago and it was really enlightening for me to learn about all of the hardworking men and women in our country who grow our produce. It is a very risky proposition. It's expensive, there is a lot of risk involved. Many of the people who are growers especially mom and pop types of operations they don't know what they don't know and so it's very easy for them to be taken advantage of. And I have a new appreciation for all of the steps that it takes from a crop to be grown, harvested, packaged, have those packages put on pallets, have them shipped, sometimes across the country, and then sold. And for all of those steps to go through seamlessly is very, very difficult and there's a lot of hands on deck doing that and there's a lot of risk with every single stakeholder along the way.
Speaker 1:Yeah, yeah, on a personal level, you know. So I study Buddhism. I can't say I'm a Buddhist, but I do study it. No, one of the things is to be mindful about what you're doing, and so sometimes I think about okay, before I drink this coffee, right, I'm going to think about how it got here, and then, just using your imagination alone, who grew it? Where was it grown? Who dealt with it, like as you said then, who packaged it, who shipped it? And then all the steps along the way and the regulations going from one country to another country. I mean, just to have a lousy cup of coffee.
Speaker 2:You're just, you know it's complicated, without a doubt, so a lot of hands touch these things in a lot of lives.
Speaker 1:A lot of people's livelihoods are involved along the way. So it is pretty remarkable when you go to the grocery store in there, you just see these mountains of fruits and vegetables. Okay, a lot, maybe a few hundred thousand people went into putting all this stuff here at least.
Speaker 2:That and the risk that's involved. You know, a farmer may have hundreds of thousands of dollars invested in a crop and weather events happen freezes happen, tornadoes, hurricanes and there's hopefully there's insurance coverage for that. But some don't have a high level of sophistication and they may not be insured against that risk.
Speaker 1:Yeah, it's not just as simple as I'm like somebody grows a bunch of stuff and they make money from it. So it's yeah, they're business owners.
Speaker 2:Without a doubt. And there are also situations where, say, a farmer will enter into an agreement with an agent to sell his whole crop he may grow a whole, you know, a crop of watermelons for a season and enters into a deal with someone else, ordinarily called a sales agent, and their job is to sell that entire crop, take a commission and then remit the proceeds back to the grower. And there are many times where that grower's agent may be double dipping, may be not accounting to the grower the way that they should, or mishandling the sales, and those are all challenges that can present themselves along the way.
Speaker 1:What are some of the areas where representing the produce industry overlaps with other areas of law? And as you were just talking just now, I started thinking about, even in the competition realm, about all of the different alleged monopolies of this type of produce or this type of. You know, certainly in meat and poultry has been. That has been a real challenge and a lot of lawsuits and government action over that. But from your perspective, what other areas of law overlap with what you do, representing the produce industry?
Speaker 2:One of the unique issues that I was recently presented with by one of my clients was actually the overlap of intellectual property and the produce industry. There are growers and there are businesses who their job is to create varieties of seed of different types of produce, say watermelons, blueberries, tomatoes that maybe that have certain qualities, so they may create a specific type of tomato seed where the tomato doesn't ripen as quickly, so it has more time from the time it's picked until it ends up on the grocery store shelf. Those are proprietary types of seeds. They are licensed to be used by farmers and growers for a specific commission or percent of the sales. I also had a case where actual produce law overlapped with criminal law.
Speaker 2:I have a client who is a grower's agent and he sells crops on behalf of growers throughout the United States.
Speaker 2:He was having a dispute with a grower in Georgia. The grower believed that my client did not sell his produce at the correct sales price or that he was my client was cheating this farmer out of what he was owed. Well, we learned that in Georgia there is a state statute that says if you do not pay a farmer what the farmer is owed, you can be arrested. For that it can actually be a crime In a small community where everyone goes to church together, goes to school together, their families grow up together. This farmer was able to get the sheriff to issue a arrest warrant within a couple of hours to have my client arrested over what was really a commercial dispute about the produce itself. The quality of the produce, and all of those are factors that impact the sale price. The grower, of course, didn't want to talk about any of those things and was trying to use a arrest warrant as leverage to negotiate more money out of my client.
Speaker 1:Wow Okay.
Speaker 2:Exactly.
Speaker 1:Don't mess with farmers in Georgia, though Noted Not that it was on my list. So next, I wasn't aware of this. You had mentioned this Netflix documentary called Poisoned the Dirty Truth About your Food. I guess it reminded me. I haven't watched it yet, but I watched the trailer and halfway through I thought I'm just going to eat salads from now on. Until it got to the very end and they talked about somebody who became very ill from E coli and their salad. But would you say that this is documentary, is a fair depiction of what is going on, or what caveat would you give to anybody who wants to watch that?
Speaker 2:In my opinion, with respect to the production of produce in the United States, I think that the documentary did not give a full picture. There is nobody in this country with a more tangible vested interest in the safety of produce than growers and everyone who is along the supply chain that nobody wants this to happen, and growers implement countless measures to mitigate the risk and ensure the safety of the produce that they grow, handle and process. But the reality is that we are a huge country. The volume of produce that is grown, processed and distributed to Americans each and every day is huge. There is an inherent risk in doing that to all of us. That is just part of the risk of producing our own food.
Speaker 2:I've also had foodborne illness. I certainly understand and respect the spectrum of injuries that that can cause, but when I was watching the documentary I found myself feeling really frustrated and angry because I felt like it didn't fairly portray everything that produce growers and handlers do to minimize the risk of foodborne illness. It is a huge priority to everyone. I didn't feel like that was really conveyed by the documentary. That was frustrating because I see the food safety plans. I see the steps that farm workers go through. They wear booties, they wear hair nets, they have to wash their hands a certain way every so often, at specific intervals. All of these things have to be logged. I see everything that the farmer and the grower does to ensure safety. I didn't feel like that part of the analysis and that part of the production process was presented in a fair and balanced way.
Speaker 1:I guess, with so many things these days, it might just be a generalization that certainly there are some people in the food chain the food chain, I didn't mean to say it that way In the food supply chain who don't really follow rules, who may not be ethical or following this. I mean, that would seem to be an obvious statement that yeah, sure, there are some producers maybe that aren't as good as others, but what you're saying is the majority in the industry really pays attention to these roles. They have a vested interest in paying attention to these roles.
Speaker 2:Without a doubt, in any industry, when you're dealing with human beings, you're going to have some bad apples in the mix. There's always going to be people that want to save money. They don't want to follow these extra rules and regulations. They, for a lot of different reasons, may balk at the idea of complying with the standards that are current in the industry, but those, in large part, in my experience, are the exception and not the role.
Speaker 1:Yeah, I've got to give it a look and I started to think, gosh, it's just like a modern day the jungle kind of a thing. But it doesn't sound from what you're saying that that would be an accurate comparison.
Speaker 2:I don't think it is so. For example, I went to one of my clients invited me to see their tomato packing facility. When I got there, I had to, before anything. I had to show my ID at a gate before I could enter the premises. I then had to sign in in the security. I had to put on a jumpsuit, a protective white jumpsuit. I had to put booties over my feet, I had to put on a hair net and that was simply to observe.
Speaker 1:Wow Okay.
Speaker 2:While doing that, I saw hundreds of employees wearing the exact same thing day in and day out. More often than not, that's the bare minimum that you see. People in the industry want their produce to be safe. Nobody wants a food safety event to be traced back to them, their company, their business or even the growers that they're purchasing from. So everyone in the industry has a very, very heavily vested interest in ensuring food safety at every level.
Speaker 1:All right. Well, I feel better about my salad then. Thank you very much, Katie Esquivel. Thank you very much for talking with me about this. It's an important subject.
Speaker 2:Thank you, tom, it's been a pleasure being here.
Speaker 1:That concludes this episode of the Emerging Litigation Podcast, the co-production of HB Litigation, Critical Legal Content, VLex, Fast Case and our friends at LostG Media. I'm Tom Hagee, your host, which would explain why I'm talking. Please feel free to reach out to me if you have ideas for a future episode and don't hesitate to share this with clients, colleagues, friends, animals you may have left at home, teenagers you irresponsibly left unsupervised, and certain classifications of fruits and vegetables, and if you feel so moved, please give us a rating. Those always help. Thank you for listening.