Opinion
CV-23-00054-TUC-JAS (LCK)
02-22-2024
Prosisat SA de CV, Plaintiff, v. FAMA Energy Resources LLC, Defendant.
REPORT AND RECOMMENDATION
HONORABLE LYNNETTE C. KIMMINS UNITED STATES MAGISTRATE JUDGE
Pending before the Court is Plaintiff's Motion for Entry of Default Judgment. (Doc. 18.) Pursuant to the Rules of Practice in this Court, the matter was assigned to Magistrate Judge Kimmins for a report and recommendation. The Magistrate Judge recommends the District Court, after its independent review of the record, enter an order granting Plaintiff's Motion for Entry of Default Judgment.
FACTUAL AND PROCEDURAL BACKGROUND
On January 27, 2023, Plaintiff filed its Complaint alleging Defendant was in breach of numerous contracts it had entered with Plaintiff. (Doc. 1.) Specifically, Plaintiff alleged the parties had entered twelve contracts between July 1, 2021, and July 23, 2021, for Defendant to deliver ultra-low sulfur diesel to Tucson, Arizona and Imperial, California. (Id. ¶¶ 4, 7, 8.) Pursuant to the contracts, Plaintiff alleges it paid Defendant $276,092.18. (Id. ¶ 9 & Exs. A-L.) Plaintiff alleges Defendant never delivered the diesel as required under the contracts and did not return the money Plaintiff had paid. (Id. ¶ 10.) Plaintiff alleges Defendant is in breach of the contracts and has been unjustly enriched. (Id. ¶¶ 16-25.) Subject matter jurisdiction is based on diversity of citizenship and an amount in controversy exceeding $75,000, pursuant to 28 U.S.C. § 1332(a). (Id. ¶ 3.) Plaintiff requested compensatory damages of no less than $276,092.18 plus interest, punitive damages, and fees and costs. (Id. ¶¶ A-C.)
On April 28, 2023, service was completed on Defendant by providing a summons and the Complaint to Defendant's registered agent. (Doc. 13.) When Defendant did not timely file an answer, Plaintiff sought and received a Rule 55(a) entry of default. (Docs. 14, 15.)
DISCUSSION
After the Clerk has entered default under Federal Rule of Civil Procedure 55(a), the Court has discretion to grant default judgment pursuant to Rule 55(b). See Aldabe v. Aldabe, 616 F.2d 1089, 1092 (9th Cir. 1980); Draper v. Coombs, 792 F.2d 915, 924 (9th Cir. 1986). Upon entry of default, "the factual allegations of the complaint, except those relating to the amount of damages, are taken as true." Hayden v. Prestige Horizons, No. CV-19-00335-TUC-DCB, 2020 WL 6203517, at *1 (D. Ariz. Oct. 22, 2020) (citing TeleVideo Sys., Inc. v. Heidenthal, 826 F.2d 915, 917 (9th Cir. 1987) (citing Fed.R.Civ.P. 55(b)(2))). In deciding whether to grant a default judgment, the Court should consider these factors, (1) the possibility of prejudice to Plaintiff, (2) the merits of the claims, (3) the sufficiency of the complaint, (4) the amount of money at stake, (5) the possibility of a dispute concerning material facts, (6) whether default was due to excusable neglect, and (7) the policy favoring a decision on the merits. See Eitel v. McCool, 782 F.2d 1470, 1471-72 (9th Cir. 1986).
First, Plaintiff will be prejudiced if the motion is denied because, in the absence of Defendant's appearance, it has no remedy available aside from a default judgment. Next, the two causes of action, breach of contract and unjust enrichment, are straight forward and adequately pled. See Black & Decker (U.S.), Inc. v. All Spares, Inc., No. CV 09-2126-PHX-MHM, 2010 WL 3034887, at *2 (D. Ariz. Aug. 3, 2010) (finding factors two and three favored entry of default judgment for breach of contract and unjust enrichment). Plaintiff's complaint states a claim for relief and, taking the allegations as true, the claims have merit. See Frenchans LLC v. Vestige LLC, No. CV-22-00241-PHX-JZB, 2023 WL 3951172, at *4 (Apr. 17, 2023) (evaluating factors two and three together and finding it satisfied if the complaint states a claim on which the plaintiff can recover), report and recommendation adopted, 2023 WL 3950140 (D. Ariz. May 5, 2023). There is no contrary evidence before the Court, and Plaintiff has offered documentation of the contractual payments it made to Defendant and the balance sheet between the two companies. (Doc. 18, Ex. 1, Exs. A, B.) Therefore, with respect to factor five, the likelihood of a material factual dispute is low.
As to factor four, the total recovery requested is $353,105.58, plus additional interest that has accrued and will continue to accrue before and after judgment. Plaintiff seeks to recover the sum of the payments it made to Defendant, for which it did not receive the fuel that Defendant agreed to provide, plus costs, attorneys' fees, and interest. This is the minimum recovery to compensate Plaintiff for Defendant's wrongful conduct. As to factor six, Plaintiff submitted proof of service on Defendant, and nothing in the record suggests excusable neglect caused Defendant's default.
The final factor, a policy preference for decisions on the merits, will always weigh in favor of denying a default judgment. However, it does not preclude entry of a default judgment when the remaining six factors favor the Court granting the only remedy available to Plaintiff. See Ungerer & Co. v. Alkaline88, LLC, No. CV-23-01153-PHX-MTM, 2024 WL 665985, at *3 (D. Ariz. Jan. 26, 2024) ("the mere existence of Rule 55(b) indicates that 'this preference, standing alone, is not dispositive'") (quoting PepsiCo, Inc. v. Cal. Security Cans., 238 F.Supp.2d 1172, 1177 (C.D. Cal. 2002)). Here, a decision on the merits is impossible, given that Defendant failed to appear. After reviewing and balancing the Eitel factors, the Court finds a default judgment is warranted.
The Court next turns to damages. Because the damages Plaintiff seeks are capable of a simple mathematical calculation, a hearing on damages is not necessary. Lasheen v. Embassy of The Arab Republic of Egypt, 625 Fed.Appx. 338, 341 (9th Cir. 2015) (quoting Davis v. Fendler, 650 F.2d 1154, 1161 (9th Cir. 1981)). Plaintiff seeks $276,092.18 for payments it made for fuel it did not receive. In the Complaint, Plaintiff relied solely upon contracts entered between July 1 and July 23, 2021. (Doc. 1 ¶ 7, Exs. A-L.) As explained by Plaintiff in its motion, the overpayments from those contracts totaled $265,541.43. (Doc. 18 at 8, Ex. 1, Ex. B.) Therefore, for breach of contract, Plaintiff may recover only that amount.
In the Complaint, however, Plaintiff also alleged that it paid Defendant $276,092.18 for fuel it did not receive, Defendant did not return those funds, and it would be unjust for Defendant to keep that money. (Doc. 1 ¶¶ 10, 22-25.) Review of the exhibits submitted by Plaintiff demonstrates that it paid Defendant $276,092.18 between February 16 and July 23, 2021, for which it did not receive anything in return. (Doc. 18, Ex. 1, Exs. A, B.) Therefore, Plaintiff is entitled to the entire amount requested in the Complaint, if not for breach of contract, then for unjust enrichment.
Second, Plaintiff requests prejudgment interest, which is determined under state law in diversity actions such as this one. Landsberg v. Scrabble Crossword Game Players, Inc., 802 F.2d 1193, 1200 (9th Cir. 1986). Plaintiff is entitled to 10% per annum in prejudgment interest under Ariz. Rev. Stat. § 44-1201(A)(2), because the Complaint indicates the claim is liquidated. See Frenchans LLC, 2023 WL 3951172, at *7. However, it is within the district court's discretion to determine when the interest began to accrue. See AMHS Ins. Co. v. Mut. Ins. Co. of Ariz., 258 F.3d 1090, 1103 (9th Cir. 2001). "[P]rejudgment interest begins when the creditor provides to the debtor 'sufficient information and supporting data so as to enable the debtor to ascertain the amount owed.'" Id. (quoting Homes & Son Constr. Co. Inc. v. Bolo Corp., 526 P.2d 1258, 1261, 22 Ariz.App. 303, 306 (1974)); see also Thompson v. StreetSmarts, Inc., No. CV-10-1885-PHX-LOA, 2011 WL 2600744, at *13 (June 30, 2011) ("[i]nterest should be calculated from the date the sums became due.") (quoting L.M. White Contracting Co. v. St. Joseph Structural Steel Co., 488 P.2d 196, 201, 15 Ariz.App. 260, 265 (Ct. App. 1971)), report and recommendation adopted, 2011 WL 13416556 (D. Ariz. Aug. 10, 2011). In other words, "[i]nterest does not begin to accrue until the defendant has received a demand" for the amount owed. Computerized Store Sys., Inc. v. Compaq Comput. Corp., 124 Fed.Appx. 521, 522-23 (9th Cir. 2005) ("Convenient satisfied the demand requirement by introducing into evidence a letter from a Compaq vice-president acknowledging that Convenient intended to hold Compaq responsible for $3.245 million in debt.") (citing Rawlings v. Apodaca, 726 P.2d 596, 602, 151 Ariz. 180, 186 (Ct. App. 1985)).
Plaintiff requests prejudgment interest from January 19, 2022. In support of that request, Plaintiff submitted email exchanges between a representative of Plaintiff and the statutory agent for Defendant. (Doc. 18, Ex. 2 ¶¶5, 6 & Ex. A.) Review of that documentation establishes that Plaintiff made a demand to Defendant on January 19, 2022, for the full amount on which interest now is requested, $276,092.18. Therefore, prejudgment interest began to accrue as of that date, at a rate of $75.64 per day until the date of judgment. (Doc. 18, Ex. 1, Ex. C.)
As of the day before the motion for default judgment was filed (January 8, 2024), prejudgment interest had accrued to the amount of $54,462.02. (Doc. 18, Ex. 1, Ex. C.) Prejudgment interest should be recalculated at the time of judgment to include all the days prior to entry of judgment.
Third, Plaintiff requests attorneys' fees and costs. When an action arises out of a contract, the court may grant reasonable attorney fees, and costs, to the winning party. A.R.S. §§ 12-341, 12-341.01. The request of $21,533.50 for attorneys' fees is substantiated by the billing records provided by counsel, and the Court finds it to be reasonable. (Doc. 18, Ex. 1, Ex. D.) The request for costs in the amount of $1017.88 also is substantiated by the records submitted by counsel. (Id., Ex. E.)
Finally, Plaintiff requests post-judgment interest, which is governed by federal law. 28 U.S.C. § 1961(a) (allowing post-judgment interest on any "money judgment in a civil case"); Northrop Corp. v. Triad Int'l Mktg., S.A., 842 F.2d 1154, 1155 (9th Cir. 1988); Reg'l Care Servs. Corp. v. Companion Life Ins. Co., No. CV-10-2597-PHX-LOA, 2012 WL 2260984, at *5 (D. Ariz. June 15, 2012). Plaintiff is entitled to post-judgment interest from the date of judgment to the date of collection. Cheval Farm, LLC v. Chalon, No. CV-11-00043-TUC-JGZ, 2013 WL 11826543, at *5 (D. Ariz. Sept. 13, 2013). The rate for such interest is "equal to the weekly average 1-year constant maturity Treasury yield, as published by the Board of Governors of the Federal Reserve System, for the calendar week preceding[] the date of the judgment." 28 U.S.C. § 1961(a).
The rates can be found here, https://www.federalreserve.gov/releases/h15/, or here, https://fred.stlouisfed.org/release/tables?rid=18&eid=290&od=.
RECOMMENDATION
The Magistrate Judge recommends the District Court grant Plaintiff's Motion for Default Judgment and enter Judgment for Plaintiff in the amount of $276,092.18 in damages; prejudgment interest (on the damages of $276,092.18) at a rate of $75.64 per day from January 19, 2022, to the date of judgment; $21,533.50 in attorneys' fees; $1017.88 in costs; and post-judgment interest at the published federal rate.
Pursuant to Federal Rule of Civil Procedure 72(b)(2), any party may serve and file written objections within fourteen days of being served with a copy of the Report and Recommendation. A party may respond to the other party's objections within fourteen days. No reply brief shall be filed on objections unless leave is granted by the district court. If objections are not timely filed, they may be deemed waived.