G.W. Palmer & Co. v. Agricap Financial

The en banc court vacated the district court's summary judgment for AgriCap in an action brought by produce growers under the Perishable Agricultural Commodities Act (PACA). The en banc court joined other circuits and adopted a "true sale" test to determine whether assets transferred in transactions that are labeled "sales" remained assets of a PACA trust. The court held that a court must conduct a two-step inquiry when determining whether the questioned transaction is a sale or creates a security interest, i.e., a loan. First, a court must apply a threshold true sale test of which the transfer-of-risk is a key, but not the sole, factor. If a court concludes that there was a true sale, it must then determine if the transaction was commercially reasonable. The court held that a district court should look to the substance of the transaction to determine whether the transaction is a true sale or a secured loan. In doing so, the transfer of risk should be a primary factor to which a court looks. View "G.W. Palmer & Co. v. Agricap Financial" on Justia Law