(May 16) NEW YORK — In the end, all that was at stake was $4,800.

But the outcome of the first case challenging reparation orders issued against Hunts Point receivers over the Operation Forbidden Fruit bribery sting may be priceless for the produce industry.

In what is being described as a precedent-setting victory for shippers across the produce industry, U.S. 2nd Circuit Court Judges Joseph McLaughlin and B.D. Parker Jr., plus Richard Goldberg of the U.S. Court of International Trade, ruled May 9 against Hunts Point wholesaler Koam Produce Inc. in its appeal of an award of $4,800 to Homestead, Fla.-based tomato shipper DiMare Homestead Inc.

Shippers and DiMare’s attorneys say the decision is a victory for principle. They emphasize that the case will open the way for shippers who fear they were wronged at Hunts Point to pursue litigation without fear that costs involved in the appeals process will so far outweigh the benefits that there is no point of pursuing litigation.

“The receiver would appeal the decision, and the shipper would say, ‘I’m not going to go to federal district court and appeal this for $3,000,’” said Lewis Janowsky, an attorney with the Newport Beach, Calif.-based firm Rynn & Janowsky, which represented DiMare. “They just didn’t want to go through the hassle of expending the legal fees upfront. So, they’d just drop it.

“It’s a situation of the receivers bullying, if you will, and taking advantage of the legal system because no one in their right mind would litigate in federal district court a case where the amount in controversy was $4,800. It doesn’t make economic sense.”

Now, thanks to this ruling, it does, Janowsky said.

“I’m not sure of the exact number of cases that are on appeal, but there are at least a dozen or more, where the USDA issued decisions similar to that of DiMare’s and under the same kind of legal reasoning, and some of those (did not proceed) because of the small amount of the invoice at stake.”

DiMare had brought evidence that tomatoes of the same size, label and lot from the same growers were shipped all over the U.S. without any customer complaints about quality.

The judges rejected Koam’s position that it could only be liable to DiMare for downward price adjustments on invoices if DiMare had proven money was exchanged between Koam employee Marvin Friedman and the USDA inspector on each load. Friedman and the inspectors were convicted of bribery but not for the loads that were the subject of the reparation order.

The amount in question was the $4,800 reduction on the invoices that DiMare gave Koam on four loads of tomatoes.

The court rejected Koam’s contention that the affidavits of two Koam employees concerning the poor quality of the tomatoes as well as adjustments given by DiMare on prior transactions was proof that the tomatoes failed to meet grade.

The judges also dismissed Koam’s contention that the relatively low prices it obtained on the wholesale market for the tomatoes in question was evidence that the tomatoes were of a poor quality.

The court also upheld an award of $73,250 in attorneys’ fees and court costs that a district court in New York had granted in July.

The ruling was the third straight setback for Koam. The award was first made by the USDA’s Perishable Agricultural Commodities Act branch in November 2000 to compensate DiMare for downward price adjustments on four shipments of tomatoes.

The district court rejected Koam’s first appeal in July.

“It was the precedent for the industry, not so much for the DiMare company,” said Tony DiMare, a vice president with DiMare’s Homestead and Ruskin, Fla., offices. “We went through the feeling that we had a good case, and if we could win the case, it could set a precedent.”

DiMare originally had filed a claim saying it had paid $4,800 to Koam in unjustified price reductions based on fraudulent certificates issued by bribed inspectors. A USDA judicial officer determined that employees of Koam bribed USDA officials at the Hunts Point Produce Market and that those officials reduced the grade of certain tomato shipments from DiMare.

“It is clear that, when the parties agreed to the price adjustments, DiMare was mistaken as to both whether Koam had paid bribes to USDA inspectors to influence the outcome of inspections and whether the USDA inspectors who examined the tomatoes had accepted bribes,” the judges said in their decision. “It is equally clear that these mistakes impacted the basic assumptions on which DiMare made the price adjustments and that the effect of the mistakes was both material and adverse to DiMare.”

Mike Stuart, president of the Orlando-based Florida Fruit & Vegetable Association, agreed that precedent was the biggest issue.

“It was matter of the principle,” he said. “We felt that it was important enough to pursue this thing.”

Koam had argued that the award of attorneys’ fees was unreasonable in light of DiMare’s claim of only $4,800.

The court disagreed, ruling that “the claimed disproportionality between DiMare’s fees and its damages does not render the size of the fee award unreasonable” because of the potential costs of defending a favorable decision on appeal.

Meanwhile, Koam continues to do business and has no other cases pending in the courts, said Paul Gentile, an attorney for the company.

However, Gentile said Koam is still facing charges filed by the USDA and the possibility of losing its PACA license. A hearing in that matter is scheduled Nov. 17, he said.

At issue, Gentile said, is “whether the licensee, which is the company, was aware of what was going on and what should be the sanction for that, which could be (license) revocation, suspension or a fine.”

The company can appeal an adverse ruling, Gentile said.

Telephone calls to C.J. Park and Chang Park, co-owners of Koam, were not returned.

The company is in good shape, and it is not going to close, Gentile said.

“There’s no reason for them to go out of business,” he said. “This is an unfortunate episode that happened a number of years ago. They’re a good company. They pay their bills and do everything they’re supposed to do.”