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nondischargeable pursuant to § 523(a)(4).
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, but sliced potatoes treated with a batter to enhance their taste or heat preservation as french fries may not qualify, nor do dried prunes and apricots or canned goods.
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. 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 providing written notice to the nonpaying entity on the invoice. Perfection of a PACA trust fund interest is permitted under 11 U.S.C. §§ 362(b)(3) and 546(b).
Courts have held that PACA trust fund assets are not property of the estate. One court has held a PACA creditor could demand immediate payment of the amount of its interest in PACA trust funds, where the creditor perfected its interest 60 days prior to order
