Amerifresh Incorporated v. So Ono Food Products LLC ( 2019 )

1 WO 2 NOT FOR PUBLICATION 3 4 5 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE DISTRICT OF ARIZONA 8 9 Amerifresh Incorporated, No. CV-19-01331-PHX-DJH 10 Plaintiff, ORDER 11 v. 12 So Ono Food Products LLC, et al., 13 Defendants. 14 15 This matter is before the Court on Plaintiff’s Motion to Enter Default Judgment 16 (Doc. 19). Plaintiff requests the Court enter default judgment pursuant to Rule 55 of the 17 Federal Rules of Civil Procedure as to four of the six Defendants. 18 I. Background 19 This case arises from Defendants’ failure to pay outstanding invoices totaling 20 $23,265.00 related to a series of transactions in which Plaintiff sold and shipped 21 perishable food to the Defendants over a two-month period. (Doc. 1 ¶16). Plaintiff 22 Amerifresh, Inc. is a Delaware corporation with its principal place of business in 23 Scottsdale, Arizona (“Plaintiff” or “Amerifresh”). 24 Plaintiff filed its original Complaint (Doc. 1) on February 26, 2019 against So Ono 25 Food Products LLC, (“So Ono Food”); Mibo Fresh Foods LLC, (“Mibo Foods”); Fresh 26 Foods Hawaii Inc. (“Fresh Foods”) (collectively as “Corporate Defendants”); Uzor U. 27 Nwoko, an officer, director, shareholder, member, manager or insider of So Ono Food, 28 Mibo Foods, and Fresh Foods (“Mr. Nwoko”); Paul A. Janiak, an officer, director, 1 shareholder or insider of Mibo Foods (“Mr. Janiak”); and Richard C. Wheeler, an officer, 2 director, shareholder or insider of So Ono Food (“Mr. Wheeler”) (Mr. Nwoko, Janiak, 3 and Wheeler collectively as “Individual Defendants”). 4 Plaintiff asserts that Defendants violated the Perishable Agricultural Commodities 5 Act of 1930 (“PACA”), 7 U.S.C. §499a, because Defendants did not pay for the produce 6 delivered to them. Plaintiff seeks enforcement of the trust provisions under PACA (Doc. 7 1 at 5-7) and alleges breach of contract against the Corporate Defendants (Doc. 1 at 4-5); 8 unjust enrichment against all Defendants (Doc. 1 at 7-8); conversion against all 9 Defendants (Doc. 1 at 8); and breach of fiduciary duty against Mr. Nwoko, Janiak and 10 Wheeler. (Doc. 1 at 8-9). 11 Despite being properly served with the Complaint, court summons, and all other 12 related court pleadings, no Defendant has responded or otherwise appeared. Plaintiff filed 13 an application for entry of default pursuant to Fed. R. Civ. P. 55(a). The Clerk entered 14 default as to Defendants So Ono Food, Mibo Foods, Mr. Janiak, and Mr. Nwoko 15 (“Defaulting Defendants”)1 on April 18, 2019 under Fed. R. Civ. P. 55(a)(1). (Doc. 18). 16 Plaintiff now moves the Court to enter default judgment pursuant to Fed. R. Civ. 17 P. 55(b)(2) against the Defaulting Defendants for the following amounts: (1) the sum 18 certain in the cumulative amount of $23,265.00 for produce sold and delivered to 19 Defendants which was not paid for (Doc. 19-1 ¶10); (2) pre-judgment finance charges per 20 a written agreement with Defendants in the amount of $2,403.18 calculated at the rate of 21 1.5% per month (or 18% per annum) on unpaid principal sums from the date on which 22 each payment obligation first became due through April 25, 2019 (Id. ¶17); (3) attorneys’ 23 fees and costs totaling $11,757.50 (Doc. 19-1 ¶14); and (4) Post-judgment interest at the 24 rate of 18% per annum. 25 II. Motion for Default Judgment Legal Standard 26 Federal Rule of Civil Procedure 55(a) outlines two stages in a default proceeding – 27 1 Amerifresh has apparently been unable to serve Defendants Fresh Foods and Wheeler. 28 (Doc. 21 ¶7). The Court will not address default judgement as it pertains to Defendants Fresh Foods and Wheeler. 1 entry of default and entry of default judgment. Entry of default by the clerk of the court is 2 a prerequisite to judgment being entered by the court. Rule 55(a) mandates entry of 3 default by the clerk “when a party against whom a judgment for affirmative relief is 4 sought has failed to plead or otherwise defend . . . .” Further, the clerk may enter default 5 “if the plaintiff’s claim is for a sum certain or a sum that can be made certain by 6 computation” on the plaintiff’s request with an “affidavit showing the amount and costs 7 against a defendant who has defaulted for not appearing and who is neither a minor nor 8 an incompetent person.” Fed. R. Civ. P. 55(b)(1). Once default is entered, the “well- 9 pleaded factual allegations in the complaint are taken as true, except for those relating to 10 the amount of damages.” HTS, Inc. v. Boley, 954 F. Supp. 2d 927, 947 (D. Ariz. 2013). 11 III. Analysis 12 Defendants have failed to file a timely response to any court pleading and have 13 failed to “otherwise defend” themselves against the allegations. They have taken no 14 affirmative step, nor has any Defendant signaled to the Court or to Plaintiffs that it 15 intends to defend the case. In addition, each Defendant has received proper notice. 16 Further, the record indicates a sum certain can be readily ascertained from the invoices 17 sent to Defendants and affidavits provided by Amerifresh and there is no need to further 18 compute damages. There is also no reason to believe that any of the Individual 19 Defendants are minors or incompetent persons. 20 Though default judgments are generally disfavored, a court may enter judgment if 21 the factors articulated in the Ninth Circuit case Eitel v. McCool weigh in favor of entering 22 judgment. 782 F.2d 1470, 1472 (9th Cir. 1986). Those factors include: (1) the possibility 23 of prejudice to the plaintiff; (2) the merits of plaintiff’s substantive claim; (3) the 24 sufficiency of the complaint; (4) the sum of money at stake in the action; (5) the 25 possibility of a dispute concerning material facts; (6) whether the default was due to 26 excusable neglect; and (7) the strong policy underlying the Federal Rules of Civil 27 Procedure favoring decisions on the merits. Id. at 1471–72. 28 1 A. First, Fourth, Sixth, and Seventh Factors Favor Default Judgment 2 The Eitel factors favor judgment in this case. The first, fourth, sixth, and seventh 3 Eitel factors favor entering default judgment. The first Eitel factor considers whether 4 Amerifresh will suffer prejudice and go without other recourse of recovery if default 5 judgment is not entered. HTS, 954 F. Supp. 2d at 940. The Corporate and Individual 6 Defendants have failed to appear or defend themselves against the allegations. Without 7 granting Plaintiff’s Motion for Default Judgment, there is no doubt that Amerifresh will 8 suffer prejudice and go without any recourse for recovery for services rendered. This 9 factor weighs in favor of entering judgment. 10 The fourth Eitel factor balances the amount of money at stake with the seriousness 11 of the defendants’ conduct. Id. at 941. Here, Amerifresh seeks to recover the unpaid 12 amount for produce it delivered to Defendants, plus a pre- and post-judgment finance 13 charge, its attorney’s fees and court fees. Amerifresh also seeks enforcement of PACA, 14 specifically the trust provisions. Considering the seriousness of the allegations, the 15 amount requested is not excessive and would put Amerifresh back in the position it 16 would have been without the violations by Defendants. Further, the amounts are based on 17 the terms of the written agreement between the parties. This factor weighs in favor of 18 entering judgment. 19 The sixth Eitel factor considers whether default was a result of excusable neglect. 20 Eitel, 782 F.2d at 1472. Excusable neglect is unlikely because defaulting Defendants 21 were properly served with a Summons and Complaint. The record reflects that all 22 Defendants have been served by mail, at their place of business, with all documents 23 related to this pending litigation. (Docs. 11, 12, 13, 14). No Defendant has appeared or 24 responded to any court pleadings, and therefore they waived the opportunity to argue 25 excusable neglect. This factor weighs in favor of entering default judgment. 26 Under the seventh Eitel factor, a court must also consider the policy considerations 27 of the rule that, “whenever possible, cases should be tried on the merits.” Id. The 28 preference for resolving cases on the merits, however, is not absolute. PepsiCo, Inc. v. 1 California Sec. Cans, 238 F. Supp. 2d 1172, 1177 (C.D. Cal. 2002). Moreover, when a 2 defendant fails to “answer [the] Complaint, [a] decision on the merits [is] impractical, if 3 not impossible.” Id. Here, Defendants have failed to respond and a decision on the merits 4 is impossible. This factor weighs in favor of entering judgment. 5 B. Second and Third Factors Favor Default Judgment 6 The second and third Eitel factors consider the merits of the plaintiff’s claims and 7 the sufficiency of the complaint. Eitel at 1471. Moreover, if a district court has serious 8 reservations about the merits of Plaintiff’s substantive claim based upon the pleadings, 9 the court can refuse entry of judgment. Id. at 1472. 10 Here, Plaintiff contends that Defendants violated various provisions of PACA. To 11 prevail on its PACA claim under 7 U.S.C. §499a, Amerifresh must prove the following: 12 (1) the commodities sold constitute “perishable agricultural commodities” as provided in 13 7 U.S.C. §499a(b)(4); (2) the purchaser of the perishable agricultural commodities was a 14 commission merchant,2 dealer3 or broker4 as provided in 7 U.S.C. §499a(b)(5)-(7); (3) the 15 2 The term “commission merchant” means any person (including partnerships, 16 corporations, and associations) engaged in the business of receiving in interstate or foreign commerce any perishable agricultural commodity for sale, on commission, or for 17 or on behalf of another. 18 3 The term “dealer” means any person engaged in the business of buying or selling in wholesale or jobbing quantities, as defined by the Secretary, any perishable agricultural 19 commodity in interstate or foreign commerce, except that (A) no producer shall be considered as a “dealer” in respect to sales of any such commodity of his own raising; (B) 20 no person buying any such commodity solely for sale at retail shall be considered as a “dealer” until the invoice cost of his purchases of perishable agricultural commodities in 21 any calendar year are in excess of $230,000; and (C) no person buying any commodity other than potatoes for canning and/or processing within the State where grown shall be 22 considered a “dealer” whether or not the canned or processed product is to be shipped in interstate or foreign commerce, unless such product is frozen or packed in ice, or consists 23 of cherries in brine, within the meaning of paragraph (4) of this section. Any person not considered as a “dealer” under clauses (A), (B), and (C) may elect to secure a license 24 under the provisions of section 499c of this title, and in such case and while the license is in effect such person shall be considered as a “dealer.” 25 4 The term “broker” means any person engaged in the business of negotiating sales and 26 purchases of any perishable agricultural commodity in interstate or foreign commerce for or on behalf of the vendor or the purchaser, respectively, except that no person shall be 27 deemed to be a “broker” if such person is an independent agent negotiating sales for and on behalf of the vendor and if the only sales of such commodities negotiated by such 28 person are sales of frozen fruits and vegetables having an invoice value not in excess of $230,000 in any calendar year. 1 transactions occurred in contemplation of interstate or foreign commerce; (4) the buyer 2 “fail[ed] or refuse[d] [to] truly and correctly … account and make full payment promptly 3 in respect of any transaction in any such commodity to the person with whom such 4 transaction is had” as provided in 7 U.S.C. § 499b(4); (5) the seller has not received full 5 payment on the transaction (Id.); and (6) the seller preserved its trust rights by including 6 statutory language referencing the trust on their invoices. 7 U.S.C. § 499e(c)(2) and (3). 7 The term perishable agricultural commodity means “fresh fruits and fresh 8 vegetables of every kind and character. Id. at § 499a(4)(A). The commodities here – the 9 carrots, kale, spinach and different types of lettuce – are fresh vegetables as defined in the 10 statute (Doc. 19-2 at 10-16) and therefore fall into the category of perishable agricultural 11 commodities. The Defaulting Defendants in this case likely qualify under any one of the 12 definitions of a commission merchant, dealer or broker. The record establishes that 13 Amerifresh “[E]ngaged in the business of buying or selling in wholesale or jobbing 14 quantities” to both the Individual and Corporate Defendants. Further, the Corporate 15 Defendants Mibo Foods and So Ono Foods held valid PACA licenses during all relevant 16 times. (Doc. 19-1 at 3). Plaintiff sold and shipped their commodities from Arizona to 17 Defendants’ businesses in Texas and Hawaii. Thus, there is no doubt that the transactions 18 occurred in contemplation of interstate commerce. As to (4) and (5), specifically whether 19 Amerifresh has received full payment, the buyers in the instant case are the Individual 20 and Corporate Defendants. Taking the facts as true, the record establishes that Defendants 21 failed to make full payment promptly for the commodities shipped to them by 22 Amerifresh. There is enough in the record to support Amerifresh’s claim that the 23 Defendants have yet to pay the full amount of the transaction. 24 There is also sufficient documentation in the record to support Amerifresh’s claim 25 that as the seller of the commodities, it preserved its trust rights by including the requisite 26 statutory trust language on the invoices provided to Defendants when it sold and shipped 27 the items. Amerifresh has provided copies of invoices and supporting affidavits to show 28 that it did print the statutory language on the invoices (Doc. 19-2 at 10-16) to Defendants 1 and thus, taking the facts as true, have preserved its trust rights under PACA. Taking the 2 allegations as true, Amerifresh has sufficiently pled that it sent perishable commodities to 3 the Defaulting Defendants, and the Defaulting Defendants have not paid the full amount 4 owed to Amerifresh in violation of PACA. These factors support entering default 5 judgment in this case. 6 C. Fifth Factor Weighs Neither for or Against Judgment 7 The fifth factor considers the likelihood of a dispute to the material facts of the 8 case. Eitel, 782 F.2d at 1471-72. But where a party fails to respond, that party does not 9 have an opportunity to dispute the material facts of the case. HTS, 954 F. Supp. at 941. 10 The court therefore cannot adequately weigh this factor and it weighs neither for or 11 against entry of judgment. Id. Here, because Defendants have not responded, they have 12 not disputed any material facts of the case. Thus, this factor is neutral. 13 IV. Conclusion 14 The Defaulting Defendants were properly served in this case but have failed to 15 appear, plead, or otherwise defend themselves in this action. Further, the Clerk of the 16 Court has entered default. Six of the seven Eitel factors weigh in favor of entering default 17 judgement. Having filed a proper motion in accordance with Federal Rule of Civil 18 Procedure 55 (a) and (b), the Court must enter default judgement in favor of Amerifresh, 19 Inc. against the Defaulting Defendants. Accordingly, 20 IT IS ORDERED that Plaintiff’s Motion for Default Judgement (Doc. 19) in the 21 cumulative amount of $23,265.00 as to Defendants So Ono Food, Mibo Foods, Mr. 22 Janiak, and Mr. Nwoko is GRANTED. However, judgment pursuant to Fed.R.Civ.Pro. 23 54 will not be entered at this time, because two Defendants remain in this action. 24 … 25 … 26 … 27 … 28 … 1 IT IS FURTHER ORDERED that Plaintiff shall submit a status report to the || Court no later than August 9, 2019, regarding Defendants Fresh Foods Hawaii Inc. and 3|| Mr. Wheeler. Alternatively, Plaintiff is free to voluntarily dismiss those Defendants by 4|| that date. 5 Dated this 2nd day of August, 2019. 6 7 , fa, ~ □□ □□ 9 United States District Fudge 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 -8-