Free Declaration - District Court of California - California

Case 3:08-cv-00914-JLS-JMA

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LAW OFFICES RYNN & JANOWSKY 4100 NEWPORT PLACE DRIVE SUITE 700 NEWPORT BEACH, CALIFORNIA 92660 (949) 752-2911 FAX (949) 752-0953

PATRICIA J. RYNN State Bar No. 092048 ELISE O'BRIEN, State Bar No. 245967 RYNN & JANOWSKY, LLP 4100 Newport Place Drive, Suite 700 Newport Beach, CA 92660 Telephone: (949) 752-2911 Facsimile: (949) 752-0953 E-Mail: [email protected] E-Mail: [email protected]

Attorneys for Plaintiffs SUCASA PRODUCE, et al. UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF CALIFORNIA, SAN DIEGO DIVISION SUCASA PRODUCE, an Arizona Partnership; P.D.G. PRODUCE, INC., an Arizona corporation; EXPO FRESH, LLC, a California limited liability company; H.M. DISTRIBUTORS, INC., an Arizona corporation; PRIME TIME SALES, LLC, a California limited liability company; VANAL DISTRIBUTING, INC., an Arizona corporation, DEL CAMPO SUPREME, INC., an Arizona corporation; MEYER, LLC, a California limited liability company, Plaintiffs vs. SAMMY'S PRODUCE, INC., a California corporation; CALIFORNIA PRODUCE EXCHANGE, INC., a California corporation; US FARMS, INC., a California corporation; WORLD GARLIC & SPICE INC., a California corporation; AMERICAN NURSERY EXCHANGE, INC., a California corporation; YAN SKWARA, an individual; SAMUEL V. NUCCI, an individual; DARIN PINES, an individual, Defendants. 1
08-188/Dec. of PJR in Support of Motions to Amend and to Expand PI, Notice.doc

CASE NO. 08-cv-914 JLS (JMA) DECLARATION OF PATRICIA J. RYNN IN SUPPORT OF PLAINTIFFS' EX PARTE MOTION FOR ORDER SHORTENING TIME FOR LEAVE TO AMEND COMPLAINT AND TO EXPAND THE PRELIMINARY INJUNCTION, AND NOTICE TO OPPOSING COUNSEL

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DATE: TIME: ROOM:

Thursday, August 28, 2008 1:30 p.m. 6

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LAW OFFICES RYNN & JANOWSKY 4100 NEWPORT PLACE DRIVE SUITE 700 NEWPORT BEACH, CALIFORNIA 92660 (949) 752-2911 FAX (949) 752-0953

I, PATRICIA J. RYNN, declare as follows: 1. I am a partner with the law firm of Rynn & Janowsky, LLP, attorneys of record

for Plaintiffs herein, SUCASA PRODUCE. ("Sucasa"), and P.D.G. PRODUCE, INC. ("PDG") (hereinafter referred to collectively as "Plaintiffs"), and I make this declaration in support Plaintiffs' motion for leave to amend complaint and to expand the preliminary injunction. 2. I have personal knowledge of all matters stated in this declaration and if called as

a witness, I would and could competently testify thereto. 3. Plaintiffs seek leave from the Court to amend their Complaint to add additional

Plaintiffs: EXPO FRESH, LLC, H.M. DISTRIBUTORS, INC., PRIME TIME SALES, LLC, VANAL DISTRIBUTING, INC., DEL CAMPO SUPREME, INC., and MEYER, LLC (collectively "Additional Plaintiffs"); and to add additional Defendants: CALIFORNIA PRODUCE EXCHANGE, INC. ("Cali Pro"), US FARMS, INC. ("US Farms"), WORLD GARLIC & SPICE INC. ("World Garlic"), and AMERICAN NURSERY EXCHANGE, INC. ("American Nursery") (collectively "Additional Defendants"). This amendment is sought

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because: (1) the Additional Plaintiffs are trust creditors under the Perishable Agricultural Commodities Act, 7 U.S.C. sec. 499a, et seq. ("PACA") of Defendants and their claims are nearly identical to the existing Plaintiffs; and (2) the Additional Defendants are alter egos of Defendant SAMMY'S PRODUCE, INC. ("Sammy's"). 4. Subsequent to filing the Complaint in this action, I was contacted by the

Additional Plaintiffs to represent their claims against Defendants. 5. On or about June 17, 2008, Defendants Sammy's, YAN SKWARA ("YS"),

SAMUEL V. NUCCI ("SN"), and DARIN PINES ("DP") filed responsive pleadings with the Court and therefore Plaintiffs seek leave to amend the Complaint under Federal Rules of Civil Procedure 15(a)(2). 6. New information has been discovered leading that the Additional Defendants are

alter egos of Defendant Sammy's. The corporate structure of Defendant Sammy's and the Additional Defendants are incestuous and blur any individuality and separateness between

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LAW OFFICES RYNN & JANOWSKY 4100 NEWPORT PLACE DRIVE SUITE 700 NEWPORT BEACH, CALIFORNIA 92660 (949) 752-2911 FAX (949) 752-0953

Defendants them.

In addition, Defendant Sammy's and the Additional Defendants have

commingled their financial affairs making transactions a clear piercing of the corporate veil. 7. Specifically, Sammy's, Cali Pro, US Farms, World Garlic, and American

Nursery conduct business from the same business location of 1635 Rosecrans Street, San Diego, California 92106. Attached as Exhibit 1 are copies of the "business search corporations" from the California Secretary of State identifying this business location for each corporate defendant. 8. World Garlic pays the debts owed by Defendant Sammy's. For example, World

Garlic remitted check number 1100 in the amount of $20,000.00 to Plaintiff Vanal Distributing, Inc. as partial payment for produce purchased by Defendant Sammy's. Attached as Exhibit 2 is a copy of World Garlic's check. 9. American Nursery pays the debts owed by Defendant Sammy's. For example,

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American Nursery remitted check number 1498 in the amount of $20,000.00 to Plaintiff Vanal Distributing, Inc., as partial payment for produce purchased by Defendant Sammy's. Attached as Exhibit 3 is a copy of American Nursery's check. 10. Defendant YS is the principal corporate officer for Sammy's, Cali Pro, US Farms,

World Garlic, and American Nursery. Attached as Exhibit 4 are copies of "People At Work" search research from www.accurint.com (a public records database) that identify Defendant YS as President for each corporation. 11. In addition, the U.S. Department of Agriculture, Fruit and Vegetable Programs,

PACA department confirms that Defendant YS is the principal officer for Sammy's, Cali Pro, and World Garlic. Attached as Exhibit 5 are copies of "Search PACA" search results from http://apps.ams.usda.gov/pacasearch that identify Defendant YS as the reported principal officer. 12. The same "Search PACA" search result attached as Exhibit 5 also identify Cali

Pro as having ownership interest in Sammy's and US Farms as having ownership interest in Cali Pro. 13. American Nursery's website at www.american-nursery-exchange.com identifies

American Nursery as a US Farms's company. Attached as Exhibit 6 is copy of said webpage.

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LAW OFFICES RYNN & JANOWSKY 4100 NEWPORT PLACE DRIVE SUITE 700 NEWPORT BEACH, CALIFORNIA 92660 (949) 752-2911 FAX (949) 752-0953

14.

Defendant YS controls the day-to-day operations of Sammy's, Cali Pro, US

Farms, World Garlic, and American Nursery. For example, Defendant YS has check writing authority for Sammy's, American Nursery and World Garlic. Attached as Exhibit 7 are copies of Sammy's check nos. 11108 for $5,000.00 and 11113 for $2,000.00, which bear the signature of Defendant YS and which match the signatures on World Garlic's check (Exhibit 2) and American Nursery's check (Exhibit 3). 15. Sammy's has made loan payments in amounts at least as great as $182,350.00 to The Balance Sheet provided by

US Farms during the first and second quarters of 2008.

Sammy's counsel on May 28, 2008 establishes that Sammy's made payments totaling $145,050.00 toward a note from its parent company, which I believe is US Farms, Inc., during the first quarter of 2008; the same time period in which Plaintiff P.D.G Produce was attempting to collect the amounts due it for produce sold to Sammy's. Consequently, there is reason to believe that Sammy's may have diverted and its parent company received PACA Trust assets belonging to Plaintiffs in breach of the trust. Furthermore, according to my review of the Sammy's balance sheet provided to the court by Defendant YS on June 16, 2008, Sammy's made another payment of $37,300.00 to its parent company on the note in April of 2008. This was at the same time both Plaintiffs were attempting to recover PACA Trust assets from Sammy's which rightfully belong to them. 16. On June 18, 2008, I sent a written demand to counsel for Sammy's asking that US

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Farms return to Sammy's the nearly $200,000.00 in loan payments US Farms received in violation of the PACA trust. A true and correct copy of my correspondence to Mr. Pease attached hereto as Exhibit 8. Counsel for Sammy's responded to my demand by telling me that US Farms lost over $3,000,000.00 last year alone, and that US Farms does not have $200,000.00 lying around to reimburse the trust creditors of Sammy's. Please refer to Mr. Pease's response which is labeled Exhibit 9 and attached hereto. Based upon my review of the financial

information and my discussions with Mr. Pease, US Farms not only siphoned trust assets from its subsidiary Sammy's to repay itself for the capital it initially loaned to its subsidiary, Sammy's, in violation of the statutory PACA trust rights of plaintiffs, but US Farms too, has apparently now 4
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LAW OFFICES RYNN & JANOWSKY 4100 NEWPORT PLACE DRIVE SUITE 700 NEWPORT BEACH, CALIFORNIA 92660 (949) 752-2911 FAX (949) 752-0953

dissipated these "high-jacked" PACA trust assets. Under PACA, the trust assets misappropriated by US Farms rightfully belong to the plaintiff trust beneficiaries, and must therefore be disgorged. 17. On June 24, I had a telephone conversation with Mr. Pease wherein he discussed a

settlement reached with one of Sammy's accounts, and asked that we release a portion of the funds received per the settlement to him for attorneys' fees for the collection activities. He said that Defendant YS had been directing him which accounts against which to bring actions on behalf of Sammy's, but that US Farms was without the funds to pay his legal fees, and occasionally, US Farms could not even cover the $350.00 filing fee. I reiterated that US Farms unlawfully removed cash proceeds and PACA trust assets from Sammy's account over the past several months, and that these funds had to be returned to Sammy's account. I suggested that he enlist the assistance of Defendant SN to collect the receivables, and advised Mr. Pease that we were willing to discuss a fee arrangement with him for the collection work remaining, provided we could discuss the accounts with Defendant SN, direct him as to which receivables to collect, and could review the underlying documentation. I added that I found the dire financial condition of US Farms as he described it to be both shocking and of great concern to us, and that we would consequently be compelled to request that the Court to expand the Preliminary Injunction to cover and preserve for PACA creditors any remaining assets of Sammy's parent Company, US Farms, as well as Cali Pro, American Nursery, and World Garlic, the latter two of which made payments to Sammy's produce creditors for sums Sammy's owed such creditors. Finally, I assured Mr. Pease that while we appreciated the efforts he was making to collect the receivables of Sammy's, the amounts he was collecting represented an almost imperceptible portion of the total aggregate amount due to all of the PACA Trust creditors [$832,243.55], and that something more needed to be done quickly if the PACA creditors were to have any meaningful chance to recover the sums due them. Mr. Pease advised that he would discuss this with his client and get back to me. 18. I did not hear back from Mr. Pease that day or the next day and I called him again

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on Thursday, June 26 and left a voice mail. Not having spoken with Mr. Pease since I left the 5
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LAW OFFICES RYNN & JANOWSKY 4100 NEWPORT PLACE DRIVE SUITE 700 NEWPORT BEACH, CALIFORNIA 92660 (949) 752-2911 FAX (949) 752-0953

voice mail on June 26, I left another voicemail for him on Monday, June 30, notifying him that I would be filing a motion to amend the complaint to include our new plaintiffs and new corporate defendants, and that I would also be filing a Motion for an Order Shortening Time to have our Motion on the Preliminary Injunction heard. Mr. Pease responded to my voicemail with an email stating that he was preoccupied on another matter but would get back to me. I also placed calls to Mr. Testa on June 24 and June 30, and left voicemails on both dates, but have not received a return call from him. Courtesy copies of all pleadings e-filed with the court

concerning the Request for Order Shortening Time, the Motion to Amend, and our Motion to Expand the preliminary Injunction have been sent to the offices of Mr. Pease and Mr. Testa via Federal Express for delivery on the morning of Monday, July 7, 2008. 19. This law firm was retained by Plaintiffs on or about May 16, 2008, to represent

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them in this matter. As of June 30, 2008, my firm has expended 80.80 hours on this matter resulting in attorneys' fees in the amount of $21,721.50 (calculated at $350.00 per hour for partners, $250.00 per hour for associates, and $125.00 per hour for paralegals), plus the initial filing fee of $350.00. Additionally, finance charges have continued to accrue on all past due balances from the time each invoice became due. As of the date of this filing, finance charges for all Plaintiffs total $60,211.93. Accordingly, for reasons that are established in the Amended Complaint and Memorandum of Points and Authorities filed concurrently herewith, I am requesting that all Plaintiffs be allowed to recover their attorney's fees, costs, and finance charges in the cumulative amount of $82,283.43. 20. Clearly, Plaintiffs have shown that Defendants and the Additional Defendants

structure and transactions have pierced the corporate veil and Plaintiffs should be allowed to amend their Complaint and have the preliminary injunction order expanded accordingly. I declare under penalty of perjury under the laws of the State of California and the United States of America that the foregoing is true and correct. Executed this 3rd of July 2008 at Newport Beach, California. /s/ Patricia J. Rynn PATRICIA J. RYNN 6
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