Plastech Co., Ltd. v. Revere Packaging, LLC ( 2024 )

1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 FOR THE EASTERN DISTRICT OF CALIFORNIA 10 11 PLASTECH CO., LTD., No. 2:22-cv-01700-TLN-CKD 12 Plaintiff, FINDINGS AND RECOMMENDATIONS ON PLAINTIFF’S MOTION FOR DEFAULT 13 v. JUDGMENT 14 REVERE PACKAGING, LLC, 15 Defendant. 16 17 18 Plaintiff, Plastech Co., Ltd., seeks default judgment for breach of contract, goods sold and 19 delivered, and account stated against defendant, Revere Packaging, LLC, in the amount of 20 $265,542.47, plus interest and costs. (See ECF Nos. 1, 9.) The undersigned took plaintiff’s 21 motion under submission without oral argument in accordance with Eastern District Local Rule 22 230(g). Defendant has not filed an opposition to the motion for default judgment in accordance 23 with Local Rule 230(c). The undersigned issues the following findings and recommendations 24 upon review of the documents in support of this motion and good cause appearing. 25 //// 26 //// 27 //// 28 1 I. Background 2 Plaintiff is in the business of manufacturing industrial plastic sheets in South Korea and 3 exports them to companies located around the world, including the United States. (ECF No. 9-2 4 at ¶ 3.) Between October 2019 and March 2020, defendant entered into eleven (11) written 5 agreements with plaintiff for the purchase of goods, via purchase orders that defendant submitted 6 to plaintiff and that plaintiff fulfilled by delivering the ordered goods to defendant along with 7 invoices requesting payment for the goods. (Id. at ¶ 4.) Of the shipments pursuant to these 8 eleven agreements, the first three shipments were delivered to defendant’s facilities in 9 Shelbyville, Kentucky and the latter eight shipments were delivered to defendant’s facilities in 10 Sacramento, California. (Id.) After receiving each of the eleven purchase orders from defendant, 11 plaintiff shipped goods conforming with what defendant had ordered. (Id. at ¶ 5.) 12 On November 10, 2019, and continuing thereafter, defendant breached the terms of the 13 eleven agreements by failing to pay plaintiff for the goods it had ordered. (Id. at ¶ 6.) Although 14 plaintiff promptly sent invoices along with each shipment of goods to defendant and made 15 demands to defendant for payment of the outstanding amounts owed under the eleven invoices, 16 defendant refused and continues to refuse to pay the amounts due and owing. (Id. at ¶ 7.) 17 Plaintiff filed this lawsuit on September 27, 2022, alleging breach of contract, goods sold 18 and delivered, and account stated against defendant for defendant’s failure to pay plaintiff for 19 goods it had ordered and received. (ECF No. 1.) On September 30, 2022, defendant was served 20 with the Summons and Complaint. (ECF No. 6.) Plaintiff requested entry of default after 21 defendant failed to respond to the complaint, which was entered by the clerk on November 30, 22 2022. (ECF Nos. 7, 8.) Plaintiff moved for default judgment and seeks $265,542.47, plus 23 interest accrued at the rate of 10% per annum from the date of each breach until entry of 24 judgment, and costs of $532.00. (ECF No. 9-2 at ¶ 14.) 25 ///// 26 ///// 27 ///// 28 ///// 1 II. Legal Standards 2 Pursuant to Federal Rule of Civil Procedure 55, default may be entered against a party 3 against whom a judgment for affirmative relief is sought who fails to plead or otherwise defend 4 against the action. See Fed. R. Civ. P. 55(a). However, “[a] defendant's default does not 5 automatically entitle the plaintiff to a court-ordered judgment.” PepsiCo, Inc. v. Cal. Sec. Cans, 6 238 F. Supp. 2d 1172, 1174 (C.D. Cal. 2002) (citing Draper v. Coombs, 792 F.2d 915, 924-25 7 (9th Cir. 1986)). Instead, the decision to grant or deny an application for default judgment lies 8 within the district court's sound discretion. Aldabe v. Aldabe, 616 F.2d 1089, 1092 (9th Cir. 9 1980). In making this determination, the court considers the following factors: (1) the possibility 10 of prejudice to the plaintiff, (2) the merits of plaintiff's substantive claim, (3) the sufficiency of 11 the complaint, (4) the sum of money at stake in the action[,] (5) the possibility of a dispute 12 concerning material facts[,] (6) whether the default was due to excusable neglect, and (7) the 13 strong policy underlying the Federal Rules of Civil Procedure favoring decisions on the merits. 14 Eitel v. McCool, 782 F.2d 1470, 1471-72 (9th Cir. 1986). Default judgments are ordinarily 15 disfavored. Id. at 1472. 16 Generally, once default is entered, well-pleaded factual allegations in the operative 17 complaint are taken as true, except for those allegations relating to damages. TeleVideo Sys., Inc. 18 v. Heidenthal, 826 F.2d 915, 917-18 (9th Cir. 1987). In addition, although well-pleaded 19 allegations in the complaint are admitted by a defendant's failure to respond, “necessary facts not 20 contained in the pleadings, and claims which are legally insufficient, are not established by 21 default.” Cripps v. Life Ins. Co. of N. Am., 980 F.2d 1261, 1267 (9th Cir. 1992) (citing Danning 22 v. Lavine, 572 F.2d 1386, 1388 (9th Cir. 1978)). 23 III. Discussion 24 A. Jurisdiction and Service of Process 25 In considering whether to enter default judgment, a district court must first determine 26 whether it has jurisdiction over the subject matter and the parties to the case. In re Tuli, 172 F.3d 27 707, 712 (9th Cir. 1999). “[T]he district court is not restricted to the face of the pleadings, but 28 1 may review any evidence, such as affidavits and testimony, to resolve factual disputes concerning 2 the existence of jurisdiction.” McCarthy v. United States, 850 F.2d 558, 560 (9th Cir. 1988). 3 1. Subject Matter Jurisdiction 4 In its complaint, plaintiff asserted the existence of diversity jurisdiction. (ECF No. 1 at 5 ¶¶ 5-6.) Plaintiff has properly alleged that the amount in controversy exceeds $75,000. (Id. at ¶¶ 6 16-17, indicating the jurisdictional amount is at least $265,542.47.) 7 For purposes of diversity jurisdiction, an LLC is a citizen of every state of which its 8 owners and members are citizens. Johnson v. Columbia Properties Anchorage, LP, 437 F.3d 894, 9 899 (9th Cir. 2006). Here, plaintiff is a citizen of Korea, whereas plaintiff alleges defendant is a 10 citizen of Texas. (Id. at ¶ 6.) Accordingly, complete diversity exists among the parties and the 11 court has subject matter jurisdiction. 12 2. Personal Jurisdiction 13 a. Basis for Personal Jurisdiction 14 To enter default judgment, the court must have a basis for the exercise of personal 15 jurisdiction over the defendants in default. In re Tuli, 172 F.3d at 712. “Without a proper basis 16 for [personal] jurisdiction, or in the absence of proper service of process, the district court has no 17 power to render any judgment against the defendant's person or property unless the defendant has 18 consented to jurisdiction or waived the lack of process.” S.E.C. v. Ross, 504 F.3d 1130, 1138-39 19 (9th Cir. 2007). 20 In order to subject a non-resident defendant to personal jurisdiction, that defendant must 21 have enough minimum contacts with the forum state that maintenance of the suit does not offend 22 “traditional notions of fair play and substantial justice.” Int'l Shoe Co. v. State of Wash., Office 23 of Unemployment Comp. & Placement, 326 U.S. 310, 316 (1945). Defendant maintains a 24 business premises located in this Sacramento, which lies in this district. (ECF No. 1 at ¶ 2.) 25 Additionally, plaintiff alleges that in approximately June 2019, defendant registered with the 26 California Secretary of State as a foreign business entity after merging with California-based 27 entity, Plastic Package, LLC. (Id. at ¶ 10.) Accordingly, personal jurisdiction is satisfied. 28 ///// 1 b. Service of Process 2 Personal jurisdiction requires notice that is “reasonably calculated, under all the 3 circumstances, to apprise interested parties of the pendency of the action and afford them an 4 opportunity to present their objections.” Mullane v. Cent. Hanover Bank & Tr. Co., 339 U.S. 5 306, 314 (1950). “A federal court does not have jurisdiction over a defendant unless the 6 defendant has been served properly under [Federal Rule of Civil Procedure 4].” Direct Mail 7 Specialists, Inc. v. Eclat Computerized Techs., Inc., 840 F.2d 685, 688 (9th Cir. 1988). Here, 8 plaintiff completed service of process on defendant on September 30, 2022. (ECF No. 6.) 9 B. Eitel Factors 10 Courts in this circuit use the Eitel factors to determine whether to grant default judgment. 11 The Eitel factors are: (1) the possibility of prejudice to the plaintiff, (2) the merits of plaintiff's 12 substantive claim, (3) the sufficiency of the complaint, (4) the sum of money at stake in the 13 action[,] (5) the possibility of a dispute concerning material facts[,] (6) whether the default was 14 due to excusable neglect, and (7) the strong policy underlying the Federal Rules of Civil 15 Procedure favoring decisions on the merits. Eitel, 782 F.2d at 1471-72. 16 1. Factor One: Possibility of Prejudice to Plaintiff 17 Potential prejudice to the plaintiff weighs in favor of granting default judgment. 18 See PepsiCo, Inc., 238 F. Supp. 2d at 1177. Here, plaintiff filed suit on September 27, 2022 and 19 defendant has failed to appear, respond to the complaint, or otherwise put forth a defense in this 20 action. Without default judgment, the litigation would remain at a standstill, prejudicing plaintiff. 21 Accordingly, the first factor weighs in favor of default judgment. 22 2. Factors Two and Three: The Merits of the Substantive Claim and the 23 Sufficiency of the Complaint 24 Factors two and three are considered together due to the relatedness of the inquiries. The 25 court must consider whether the allegations in the complaint are sufficient to state a claim that 26 supports the relief sought. See Danning, 572 F.2d at 1388; PepsiCo, Inc., 238 F. Supp. 2d at 27 1175. 28 //// 1 a. Breach of Contract 2 Under California law, a plaintiff asserting a claim for breach of contract must plead: (1) 3 the existence of contract; (2) the plaintiff’s performance or excuse for non-performance; (3) the 4 defendant’s breach; and (4) damage to the plaintiff resulting from the breach. Oasis W. Realty, 5 LLC v. Goldman, 51 Cal. 4th 811, 821 (2011). 6 Here, plaintiff sufficiently alleges the elements of a breach of contract claim with respect 7 to the goods that it delivered to defendant. First, it alleges that the parties entered valid contracts. 8 Plaintiff issued invoices detailing the goods delivered and amount due and owing on each invoice. 9 (ECF No. 1 at ¶¶ 12, 14, and 19.) Plaintiff fully performed under these agreements by delivering 10 the requested goods to defendant. (Id. at ¶¶ 15, 20). Defendant breached the agreement by 11 failing to pay plaintiff for the shipments it received, which caused plaintiff to incur damages. (Id. 12 at ¶¶ 13, 15, 21-22.) Therefore, plaintiff has sufficiently stated a claim for breach of contract. 13 Given that defendant has not disputed the existence of the contracts or its breach, plaintiff’s 14 allegations are sufficient. See Philip Morris U.S.A. Inc. v. Castworld Prods., 219 F.R.D. 494, 499 15 (C.D. Cal. 2003) (noting that a defaulting plaintiff is “deemed to have admitted the truth of” the 16 plaintiff's allegations); New High Ltd. v. Glob. Merch Grp., LLC, No. 221CV09608CASPVCX, 17 2022 WL 2905501, at *4–5 (C.D. Cal. July 21, 2022) (granting default judgment for breach of 18 contract where defendant did not dispute the existence of the contracts alleged). 19 b. Goods Sold and Delivered 20 “For a goods sold and delivered claim, it is sufficient to allege that the defendant was 21 indebted to the plaintiff at a specific time in a stated sum on an account for goods sold and 22 delivered by the plaintiff to the defendant at the defendant's request, and no part of the debt was 23 paid.” United States ex rel. Hajoca Corp. v. Aeroplate Corp., No. 1: 12–cv–1287–AWI–BAM, 24 2013 WL 3729692, *3 (E.D.Cal. July 12, 2013) (citing Abadie v. Carrillo, 32 Cal. 172, 175 25 (1867)). 26 Here, plaintiff alleges that defendant is indebted to plaintiff in the amounts listed in the 27 invoices that plaintiff issued to defendant. (ECF No. 1 at ¶¶ 14, 16, 24.) Plaintiff alleges that the 28 debt is for the goods that plaintiff delivered to defendant at defendant’s request. (Id. at ¶¶ 15, 24.) 1 Plaintiff alleges that defendant has not paid the debt it incurred by ordering the goods. (Id. ¶¶ 16, 2 25.) Accordingly, plaintiff has sufficiently pleaded a claim of goods sold and delivered. 3 c. Account Stated 4 The elements of an account stated claim are: “(1) previous transactions between the 5 parties establishing the relationship of debtor and creditor; (2) an agreement between the parties, 6 express or implied, on the amount due from the debtor to the creditor; (3) a promise by the debtor, 7 express or implied, to pay the amount due.” Leighton v. Forster, 8 Cal. App. 5th 467, 491 (2017) 8 (quoting Zinn v. Fred R. Bright Co., 271 Cal. App. 2d 597, 600 (1969)). A defendant's consent to 9 an account may be implied where the defendant, after receiving the account, “waits for an 10 unreasonable time before making or without making any objection” to it. Cal. Bean Growers 11 Ass'n v. Williams, 82 Cal. App. 434, 442 (1927). 12 Here, plaintiff promptly issued invoices along with each of the eleven shipments to 13 defendant, detailing the goods delivered and amount due and owing on each invoice. (ECF No. 1 14 at ¶¶ 12, 14, 29.) Defendant failed to pay the amounts due and owing under each of the eleven 15 invoices and failed to dispute the total principal amounts owing confirmed by email. (Id. at ¶¶ 16, 16 29; ECF No. 9-2 at ¶ 13.) A reasonable time to object or to appear in this action to contest the 17 statement of account has lapsed. Thus, plaintiff has established its claim for account stated as to 18 the principal outstanding sum of $265,542.47 under the eleven unpaid invoices. 19 Plaintiff has sufficiently pleaded its claims of breach of contract, account stated, and 20 goods sold and delivered. Accordingly, the second and third Eitel factors favor default. 21 3. Factor Four: The Sum of Money at Stake 22 Under the fourth factor cited in Eitel, “the court must consider the amount of money at 23 stake in relation to the seriousness of defendant's conduct.” PepsiCo, Inc., 238 F. Supp. 2d at 24 1176-77; see also Philip Morris USA, Inc. v. Castworld Prods., Inc., 219 F.R.D. 494, 500 (C.D. 25 Cal. 2003). “This requires . . . the court [to] assess whether the recovery sought is proportional to 26 the harm caused by [the] defendant’s conduct.” Landstar Ranger, Inc. v. Parth Enters., Inc., 725 27 F. Supp. 2d 916, 921 (C.D. Cal. 2010). 28 1 Plaintiff seeks $265,542.47 in principle, plus interest and costs. The principal sought by 2 plaintiff is proportional to the harm caused by defendant’s failure to pay the outstanding invoices. 3 (See ECF No. 9-2 at 9-73, copies of invoices). Accordingly, the fourth Eitel factor favors default 4 judgment. 5 4. Factor Five: The Possibility of a Dispute Concerning Material Facts 6 Where the clerk has entered default and defendant has not appeared, there is no likelihood 7 that any genuine issue of material fact exists. See, e.g., Elektra Entm't Group Inc. v. Crawford, 8 226 F.R.D. 388, 393 (C.D. Cal. 2005) (“Because all allegations in a well-pleaded complaint are 9 taken as true after the court clerk enters default judgment, there is no likelihood that any genuine 10 issue of material fact exists.”); accord Philip Morris USA, Inc., 219 F.R.D. at 500; PepsiCo, Inc., 11 238 F. Supp. 2d at 1177. Here, the clerk of court entered default against defendant on November 12 30, 2022 and defendant has not appeared. (ECF No. 8.) Accordingly, there is no likelihood that a 13 genuine issue of material fact exists. Therefore, the fifth Eitel factor favors entry of default 14 judgment. 15 5. Factor Six: Whether the Default Was Due to Excusable Neglect 16 Defendant’s default is not due to excusable neglect. Defendant has not responded to any 17 of the filings in this case, even after plaintiff served defendant with plaintiff’s request for entry of 18 default and the court’s order vacating the hearing on plaintiff’s motion and ordering defendant to 19 respond. (ECF No. 9-1 at 7, ECF No. 10, ECF No. 11.) Accordingly, the sixth Eitel favor 20 weighs in favor of a default judgment. 21 6. Factor Seven: The Strong Policy Favoring Decisions on the Merits 22 “Cases should be decided upon their merits whenever reasonably possible.” Eitel, 782 23 F.2d at 1472. However, this policy, standing alone, is not dispositive, especially where a 24 defendant fails to appear or defend itself in an action. PepsiCo, Inc., 238 F. Supp. 2d at 25 1177; see also Craigslist, Inc. v. Naturemarket, Inc., 694 F. Supp. 2d 1039, 1061 (N.D. Cal. 26 2010). Accordingly, the policy does not, by itself, preclude the entry of default judgment. 27 Pursuant to the above analysis, the Eitel factors weigh in favor of entering default 28 judgment for breach of contract, account stated, and goods sold and delivered against defendant. 1 C. Pre-judgment interest 2 Plaintiff seeks pre-judgment interest from March 15, 2023, the date of plaintiff’s filing of 3 the motion of default judgment, through entry of judgment at a rate of 10 percent per annum and 4 based on a 365-day year (a daily rate of approximately $72.7513). (ECF No. 9-1 at 8-9.) As state 5 law determines the rate of prejudgment interest in diversity actions, California Civil Code 6 sections 3287(a)—entitling a plaintiff to recover interest from the date of breach on damages 7 certain (or capable of being made certain by calculation)—and 3289(b)—setting the legal rate of 8 interest at 10% per annum after a breach of a contract entered into after January 1, 1986 that does 9 not stipulate an interest rate—apply in this case. See CMI Integrated Techs., Inc. v. Xzeres Corp., 10 2016 WL 7058092, at *2-3 (C.D. Cal. July 11, 2016) (awarding prejudgment interest on multiple 11 invoices each from their own separate date of breach until the date judgment was entered). 12 D. Costs 13 Plaintiff seeks costs in the amount of $532.00, based on the $402.00 filing fee for the 14 Complaint and the $130.00 service of process fee, but cites no authority in support of such an 15 award. (ECF No. 9-3 at ¶ 9.) Accordingly, the undersigned declines to recommend that plaintiff 16 be awarded costs. 17 IV. Conclusion 18 The undersigned recommends that plaintiff's motion for default judgment against be 19 granted and that plaintiff be awarded $265,542.47, in damages, plus pre-judgment interest from 20 March 15, 2023 through entry of judgment at a rate of 10 percent per annum and based on a 365- 21 day year (a daily rate of approximately $72.7513). 22 FINDINGS AND RECOMMENDATIONS 23 Accordingly, it is HEREBY RECOMMENDED that: 24 1. Plaintiff’s motion for default judgment against defendant (ECF No. 9) be GRANTED; 25 2. Plaintiff be awarded final judgment in the amount of $265,542.47, plus pre-judgment 26 interest from March 15, 2023 through entry of judgment at a rate of 10 percent per 27 annum and based on a 365-day year (a daily rate of approximately $72.7513). 28 ] These findings and recommendations are submitted to the United States District Judge 2 || assigned to the case, pursuant to the provisions of 28 U.S.C. § 636(b)(1). Within fourteen 3 || (14) days after being served with these findings and recommendations, any party may file written 4 || objections with the court and serve a copy on all parties. Such a document should be captioned 5 || “Objections to Magistrate Judge's Findings and Recommendations.” Any reply to the objections 6 || shall be served on all parties and filed with the court within fourteen (14) days after service of the 7 || objections. The parties are advised that failure to file objections within the specified time may 8 | waive the right to appeal the District Court's order. Turner v. Duncan, 158 F.3d 449, 455 (9th 9 || Cir. 1998); Martinez v. YIst, 951 F.2d 1153, 1156-57 (9th Cir. 1991). 10 | Dated: January 8, 2024 ; 20 } it | / de □ ae, i CAROLYN K DELANEY 12 UNITED STATES MAGISTRATE JUDGE 13 14 | a1 ptas.1700 15 16 17 18 19 20 21 22 23 24 25 26 27 28 10