Opinion
CV 23-00464-TUC-JCH (MAA)
02-12-2024
Bridges Produce Incorporated, an Oregon corporation, Plaintiff, v. Fresh Pick Produce LLC, an Arizona limited liability company; et al., Defendants.
REPORT AND RECOMMENDATION
Honorable Michael A. Ambri, United States Magistrate Judge
Pending before the court is a motion for default judgment filed by the plaintiff, Bridges Produce (“Bridges”), on January 9, 2024. Doc. 17. The defendants were served but have not yet appeared. Id.
Bridges alleges that, in January of 2023, it entered into contracts with the defendant, Fresh Pick Produce (“Fresh Pick”), to supply produce in interstate commerce valued at $17,981.60. Complaint, Doc. 1, p. 3. Bridges further alleges that Fresh Pick received the produce but failed to pay for it. Id. On October 6, 2023, Bridges filed a Complaint in this court to enforce its rights pursuant to the Perishable Agricultural Commodities Act of 1930 as amended (“PACA”), the PACA statutory trust, federal common law, and state law. Docs. 1, 17.
On October 20, 2023, Bridges filed proof of service on all defendants. Docs. 7, 8, 9, 10. On November 27, 2023, the Clerk entered default against all defendants for failing to appear pursuant to Fed.R.Civ.P. 55(a). Doc. 16. In the pending motion, the plaintiff moves for default judgment against the defendants pursuant to Fed.R.Civ.P. 55(b)(2). Doc. 17.
The case has been referred to Magistrate Judge Ambri for report and recommendation pursuant to the Local Rules of Practice. L.R.Civ.P. 72.1; Doc. 14. The Magistrate Judge recommends that the motion be granted.
Discussion
After the entry of default, the court may issue a default judgment against a nonappearing party. Fed.R.Civ.P. 55(b)(2). The decision to issue judgment is a matter left to the sound discretion of the court. Aldabe v. Aldabe, 616 F.2d 1089, 1092 (9th Cir. 1980).
“Factors which may be considered by courts in exercising discretion as to the entry of a default judgment include: (1) the possibility of prejudice to the plaintiff, (2) the merits of [the] plaintiff's substantive claim, (3) the sufficiency of the complaint, (4) the sum of money at stake in the action, (5) the possibility of a dispute concerning material facts, (6) whether the default was due to excusable neglect, and (7) the strong policy underlying the Federal Rules of Civil Procedure favoring decisions on the merits.” Eitel v. McCool, 782 F.2d 1470, 1471-1472 (9th Cir. 1986). The court will assume the factual allegations made in the complaint are true, except those related to damages. TeleVideo Systems, Inc. v. Heidenthal, 826 F.2d 915, 917-918 (9th Cir. 1987). The court considers the Eitel factors seriatim.
Prejudice to the Plaintiff
It appears that Bridges will have no other recourse if its motion for default judgment were denied. Accordingly, the first Eitel factor favors granting the plaintiff's motion for default judgment. See Amerifresh Inc. v. So Ono Food Prod. LLC, No. CV-19-01331-PHX-DJH, 2019 WL 3532156, at *2 (D. Ariz. Aug. 2, 2019) (“Without granting Plaintiff's Motion for Default Judgment, there is no doubt that [Plaintiff] will suffer prejudice and go without any recourse for recovery for services rendered.”).
The Merits of the Plaintiff's Claims and the Sufficiency of the Complaint
“PACA makes it unlawful for any commission merchant, dealer, or broker in connection with any transaction in interstate or foreign commerce to ‘fail or refuse truly and correctly to account and make full payment promptly in respect of any transaction in any perishable commodity to the person with whom such transaction is had' or ‘fail to maintain the trust as required under section 499e(c).'” Abbate Fam. Farms Ltd. P'ship v. P.Y. Produce LLC, No. C-11-00319 EDL, 2011 WL 7081569, at *2 (N.D. Cal. Nov. 22, 2011), report and recommendation adopted, No. C 11-0319 PJH, 2012 WL 177541 (N.D. Cal. Jan. 23, 2012) (citing 7 U.S.C. § 499b(4)). “Section 499e(c) requires a trustee to hold any commodities and receivables or proceeds from the sale of such commodities in trust for the benefit of all unpaid suppliers or sellers until full payment of the sums owing have been received by the supplier or seller.” Id. (citing to 7 U.S.C. § 499e(c)). “Under PACA, a commission merchant, dealer, or broker that violates any provision of section 449b shall be liable for the full amount of damages sustained in consequence of such violation.” Id. (citing to 7 U.S.C. § 499e(a)). “[I]ndividual shareholders, officers, or directors of a corporation who are in a position to control PACA trust assets, and who breach their fiduciary duty to preserve those assets, may be held personally liable under the Act.” Id.
“A PACA plaintiff must show that (1) the commodities sold were perishable agricultural commodities, (2) the purchaser was a commission merchant, dealer, or broker, (3) the transaction occurred in contemplation of interstate or foreign commerce, (4) the seller has not received full payment on the transaction, and (5) the seller preserved its trust rights by including statutory language referencing the trust on [its] invoices.” Andrews v. Triple R Distrib., LLC, No. CV 4:12-00346-TUC, 2013 WL 1177834, at *3 (D. Ariz. Feb. 28, 2013), report and recommendation adopted, No. CV 12-346-TUC-RCC, 2013 WL 1177700 (D. Ariz. Mar. 21, 2013).
Bridges alleges in its Complaint that it entered into contracts with Fresh Pick to supply perishable agricultural commodities (organic spaghetti squash from Mexico) in interstate or foreign commerce. Doc. 1, pp. 3-4; Doc. 19, pp. 2-3. It alleges that Fresh Pick is a commission merchant, dealer, or broker subject to PACA. Id., pp. 4-5. Bridges further alleges that it delivered the produce but Fresh Pick failed to pay for it. Id. Bridges claims that it is a PACA Trust beneficiary and it preserved its trust rights by “including the required statutory statement on the invoices it timely sent to Fresh Pick Produce.” Id. Bridges further alleges that the individual defendants, German Ibarrola and Cipriano Beltran, are Fresh Pick “principals” and were in a position to control the PACA Trust assets. Id., pp. 8-9. It claims that Ibarrola and Beltran breached their fiduciary duty and improperly transferred the PACA assets to Fresh Pick Repackers. Id., pp. 8-11.
In Count I of the Complaint, Bridges claims that Fresh Pick is in breach of contract. Doc. 1. In Count II, Bridges alleges that it holds a valid PACA Trust claim in the amount $17,981.60 against Fresh Pick. Id. In Count V, Bridges claims that the individual defendants, Ibarrola and Beltran, breached their fiduciary duty to maintain the PACA Trust for Bridges' benefit. Id. In Count VII, Bridges claims that the defendant, Fresh Pick Repackers, is unlawfully holding PACA Trust assets that should have gone to Bridges but were transferred to Fresh Pick Repackers by the individual defendants. Id. If the court grants a default judgment on these Counts, Bridges will not oppose a dismissal without prejudice of its remaining claims. Doc. 17.
Bridges' Complaint sets forth proper PACA claims and, assuming the factual allegations in the Complaint are true as the court must, those claims are meritorious. See Tele Video Systems, Inc. v. Heidenthal, 826 F.2d 915, 917-918 (9th Cir. 1987). Eitel factors 2 and 3 favor granting the pending motion.
The Sum of Money at Stake in the Action
“For the fourth Eitel factor, the court must consider the amount of money at stake in relation to the seriousness of Defendant's conduct.” William Consalo & Sons Farms, Inc. v. Mex-Produce Sales, LLC, No. CIV 08-348-TUC-CKJ, 2008 WL 4700017, at *3 (D. Ariz. Oct. 23, 2008). “If the sum of money at stake is completely disproportionate or inappropriate, default judgment is disfavored.” Id.
Here, Bridges seeks a judgment in the amount of $26,830.52 plus post-judgment interest. Doc. 17-1, p. 2. “Though not insignificant, that amount is modest, particularly for a PACA claim.” Corona Fruits & Veggies, Inc. v. MLC Berries, Inc., No. 2:20-CV-02525-SB-JPR, 2020 WL 9422353, at *5 (C.D. Cal. Oct. 20, 2020) (commenting on a “total judgment of $21,205.18 (plus an additional $6.31 per day in postjudgment interest)” and noting that a judgment of $42,553.91 was described as “relatively small” in the case law). It does not appear that this amount of money is an unreasonable estimation of the plaintiff's damages. See below. The fourth Eitel factor favors entry of default judgment.
The Possibility of a Dispute Concerning Material Facts
“Here, there is little possibility of dispute concerning material facts because (1) based on the entry of default, the Court accepts all allegations in [the plaintiff's] complaint as true (except for those relating to damages) and (2) Defendants have not made any attempt to challenge [the plaintiff's] Complaint or even appear in this case.” William Consalo & Sons Farms, Inc. v. Mex-Produce Sales, LLC, No. CIV 08-348-TUC-CKJ, 2008 WL 4700017, at *3 (D. Ariz. Oct. 23, 2008). The court may infer from the defendants failure to appear that they do not have a meritorious defense to the plaintiff's claims. The fifth Eitel factor favors entry of default judgment.
Whether the Default was Due to Excusable Neglect
There is no indication that the defendants' default was due to neglect, excusable or otherwise. But see, e.g., Eitel v. McCool, 782 F.2d 1470, 1472 (9th Cir. 1986) (The defendant failed to timely answer because the parties were engaged in settlement negotiations.). It appears that the defendants were properly served with the Summons, Complaint, and the instant motion. Docs. 7-10, 17. The sixth Eitel factor favors entry of default judgment.
The Strong Policy Underlying the Rules Favoring Decisions on the Merits
The Rules of Civil Procedure favor deciding cases on the merits. Unfortunately, “the Defendants' failure to answer the Complaint makes a decision on the merits impractical, if not impossible.” William Consalo & Sons Farms, Inc. v. Mex-Produce Sales, LLC, No. CIV 08-348-TUC-CKJ, 2008 WL 4700017, at *4 (D. Ariz. Oct. 23, 2008). “[T]he policy encouraging decisions of cases on their merits does not weigh against granting default judgment here.” Id.
The court finds, based on its analysis of the Eitel factors, that the plaintiff's motion for default judgment should be granted.
Damages
The PACA authorizes “full payment of the sums owing in connection with such transactions.” 7 U.S.C.A. § 499e(c)(2). “The Ninth Circuit has determined that a PACA beneficiary may also recover expenses and fees that are due contractually or otherwise in connection with the transaction that is the subject of the PACA trust claim.” William Consalo & Sons Farms, Inc. v. Mex-Produce Sales, LLC, No. CIV 08-348-TUC-CKJ, 2008 WL 4700017, at *5 (D. Ariz. Oct. 23, 2008) (punctuation modified). Attorneys' fees and interest may be recovered if the “invoices and related communications” create a contractual right to these remedies. Id.; see also Produce Pay, Inc. v. Producers Int'l, Inc., No. 2016CV2451JCM(CWH), 2018 WL 3489236, at *1 (D. Nev. July 19, 2018) (“Terms on invoices, including attorneys' fees and costs of collection contained on the face of the invoice, are enforceable as additional terms of contract” pursuant to 7 U.S.C. § 499e(c)(2) and Uniform Commercial Code § 2-207); A.R.S. § 47-2207 (adopting U.C.C. § 2-2207).
In this case, Bridges alleges contractual damages totaling $17,981.60, which it supports with a declaration from Ben Johnson, president and custodian of records for Bridges, and copies of five invoices it sent to Fresh Pick. Doc. 18, p. 10.; Doc. 19, pp. 1-2.; Doc. 19-3, pp. 2-6. The five invoices state that “the buyer agrees to pay all costs of enforcement, including all attorneys' fees, together with any costs and expenses” and pre- judgment interest accruing at the rate of 18% per year. Doc. 18, p. 11; Doc. 19-3, pp. 2-6. Bridges requests $5,082.50 in attorneys' fees, which it supports with a declaration from Steven M. De Falco, Bridges' attorney of record. Doc. 20, p. 4. Bridges calculates the interest due totaling $3,068.42 and taxable costs totaling $698.10. Doc. 18, p. 11; Doc. 20, pp. 6-7; Doc. 20-2, pp. 1-5. Bridges has provided sufficient proof to support its demand for “a total judgment amount of $26,830.52, plus post-judgment interest at the rate set forth by 28 U.S.C. § 1961.” Doc. 18, pp. 12-13; see, e.g., Andrews v. Triple R Distrib., LLC, No. CV 4:12-00346-TUC, 2013 WL 1177834, at *6 (D. Ariz. Feb. 28, 2013), report and recommendation adopted, No. CV 12-346-TUC-RCC, 2013 WL 1177700 (D. Ariz. Mar. 21, 2013) (awarding principal, pre-judgment interest, costs, attorney's fees, and post-judgment interest pursuant to 28 U.S.C. § 1961 in a PACA action).
RECOMMENDATION
The Magistrate Judge recommends that the District Court, after its independent review of the record, enter an order GRANTING the motion for default judgment filed by the plaintiff, Bridges Produce (“Bridges”), on January 9, 2024. Doc. 17.
Pursuant to 28 U.S.C. § 636(b), any party may serve and file written objections within 14 days of being served with a copy of this report and recommendation. If objections are not timely filed, the party's right to de novo review may be waived. The Local Rules permit the filing of a response to an objection. They do not permit the filing of a reply to a response without the permission of the District Court.