## Facts

- A produce shipper sold a carload of cantaloupes to a produce dealer under an “f.o.b. Yuma, Arizona, on a rolling acceptance final basis” contract for $1,843.25.
- The cantaloupes were inspected at the shipping point on the shipment date and graded U.S. No. 1.
- The shipment arrived at destination about two weeks later; the buyer sent notice rejecting the load shortly after arrival.
- A federal inspector at destination found extensive deterioration, including soft and overripe melons and decay averaging about 85%, largely attributable to Cladosporium rot.
- The seller refused to retake the shipment; the goods were abandoned to the railroad and sold for $300.
- The seller separately pursued and settled a claim against the railroad for transportation issues, netting $703.80 after costs; the buyer was not consulted.
- The buyer paid none of the contract price.
- In a PACA reparation proceeding, the Secretary of Agriculture ruled for the seller, concluding the buyer had no right to reject under the “rolling acceptance final” term and was limited to damages based on shipping-point condition.
- The district court reversed the reparation order, reasoning that the buyer could reject based on the destination condition and relying in part on state sales-law concepts.
- The seller appealed.

## Issues

1. Whether a buyer may reject produce on arrival under an f.o.b. PACA “rolling acceptance final” contract because of decay discovered at destination.
2. Whether a federal court reviewing a PACA reparation order may displace PACA regulatory definitions of trade terms by applying state sales-law rejection principles.

## Decision

- The court of appeals reversed the district court’s judgment that set aside the Secretary’s reparation order.
- It held that, under PACA regulations defining “rolling acceptance final,” the buyer had no right to reject based on the condition at destination if the shipment conformed at the shipping point.
- The buyer’s remedy, if any, was limited to damages for breach measured by nonconformity at shipment (shipping-point grade/quality), not rejection at destination.
- The case was remanded for further proceedings consistent with that framework, including any necessary determination of damages.

## Legal Principles

- PACA regulations supply controlling meanings for industry trade terms used in covered produce transactions; those definitions govern the allocation of risk and remedies in PACA reparation disputes.
- In an f.o.b. “rolling acceptance final” sale, the seller’s performance is assessed at the shipping point; deterioration in transit does not create a right of rejection at destination.
- Under “rolling acceptance final,” rejection is contractually and regulatorily displaced; the buyer’s recourse is an action for damages based on proof that the goods failed to meet the contracted grade/quality at shipment.
- General state sales-law doctrines permitting rejection for nonconformity upon delivery cannot override PACA-defined contract terms in a PACA reparation proceeding.

## Conclusion

The court held that PACA-defined “rolling acceptance final” f.o.b. terms bar a buyer from rejecting produce on arrival due to decay at destination and confine any remedy to damages tied to the shipment’s condition at the shipping point, reversing the district court and reinstating the Secretary’s liability determination with a remand on damages.


L. Gillarde Co. v. Joseph Martinelli & Co., 168 F.2d 276 (1st Cir. 1948)