Milestones: E. Armata, Inc. v. Korea Commer. Bank, 367 F.3d 123 (2d Cir. 2004)

Summary:

Defendant bank gave a line of credit to a produce wholesaler. The line of credit was secured by the wholesaler's personal assets rather than the proceeds of the sales, which violated Perishable Agricultural Commodities Act (PACA). The wholesaler went insolvent and did not pay its creditors. The creditors sued the bank, claiming that the bank violated its duty to keep a trust as required by PACA.

The court found that the bank that provided a checking account to a PACA trustee is not necessarily liable to the trust beneficiaries, and reserved and remanded the district court's opinion that found the bank liable.

Takeaway:

Here we have an interesting area of law--a walled-off garden where an entire segment of industry is regulated by a single statute.