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mean, however, that such a breach of fiduciary duty makes the claim nondischargeable pursuant to § 523(a)(4).64
What constitutes "fresh fruits and vegetables" is not defined in the PACA statutes and therefore raises issues regarding whether the floating PACA trust extends to proceeds from the debtor's sale of prepared foods. For example, sliced potatoes that were oil seared to enhance the freezing process qualified as fresh vegetables,65 but sliced potatoes treated with a batter to enhance their taste or heat preservation as french fries may not qualify,66 nor do dried prunes and apricots67 or canned goods.68
The other major issue that has arisen with PACA is whether it applies to restaurant chains that buy perishable commodities in wholesale quantities and therefore fall within its scope as "dealers." Although the United States Department of Agriculture has excluded restaurants from its coverage for 75 years, three appellate court decisions have recently held that restaurants satisfy the statutory terms so no deference need be paid the regulating agency's interpretation.69 PACA issues will arise much more commonly in bankruptcy cases if restaurants are included within its scope as "dealers."
An unpaid supplier or seller may perfect its interest PACA trust fund benefits by
64 In re McCue, 324 B.R. 389 (Bankr. M.D. Fla. 2005); contra, In re Masdea, 307 B.R. 466 (Bankr. W.D. Pa. 2004).
65 Endico Potatoes, Inc. v. CIT Group/Factoring, Inc., 67 F.3d 1063 (2nd Cir. 1995).
66 In re Long John Silver Restaurants, 230 B.R. 29 (Bankr. D. Del. 1999); but see Fleming Cos. v. USDA, 322 F. Supp. 2d 744 (E.D. Tex. 2004)(PACA applies to battered and coated potato products).
67 In re L. Natural Foods Corp., 199 B.R. 882 (Bankr. E.D. Pa. 1996).
68 Cavendish Farms v. Fleming Co., 316 B.R. 809 (D. Del. 2004).
69 In re Old Fashioned Enterprises, Inc., 236 F.2d 422 (8th Cir. 2001); In re Magic Restaurants. Inc., 205 F.3d 108 (3d Cir.), cert. denied, 121 S. Ct. 56 (2000); In re Country Harvest Buffet Restaurants, Inc., 245 B.R. 650 (9th Cir. BAP 2000); but see Sysco Food Serv. Chicago, Inc. v. Reservoir Dogs, Inc., 2001 U.S. Dist. LEXIS 16879 (N.D. Ill. 2001)(relying on legislative and regulatory history, court concluded restaurant was not a dealer).
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