Ratto Bros., Inc. v. Lam ( 2021 )

1 2 3 4 UNITED STATES DISTRICT COURT 5 NORTHERN DISTRICT OF CALIFORNIA 6 7 RATTO BROS., INC., Case No. 20-cv-04178-PJH 8 Plaintiff, 9 v. ORDER ADOPTING IN PART AND MODIFYING IN PART MAGISTRATE 10 NAM D LAM, JUDGE'S REPORT AND RECOMMENDATION 11 Defendant. Re: Dkt. Nos. 25, 30, 32, 33 12 13 14 This case was reassigned to this court on October 18, 2021 after Magistrate Judge 15 Donna M. Ryu issued her Report and Recommendation (R&R) (Dkt. 30) to deny plaintiff’s 16 motion for a default judgment (Dkt. 25). On October 29, 2021, plaintiff moved for a de 17 novo determination. Dkt. 32. 18 The motion is now ripe for consideration and the court finds the matter suitable for 19 disposition without oral argument. See Cal. N.D. Civ. L.R. 7-1(b). Having conducted a 20 de novo review of the R&R, plaintiff’s motions, and the pleadings in this matter, the court 21 finds that the R&R is well reasoned and correct as a matter of law on almost all matters 22 raised. Accordingly, the court adopts it in part and modifies it in part, as discussed below. 23 DISCUSSION 24 A. Legal Standard 25 When a magistrate judge is assigned to hear a pretrial matter dispositive of a 26 claim, the magistrate judge must issue a recommended disposition for review by a district 27 judge. Fed. R. Civ. P. 72(b)(1). The recommended disposition must be served on the 1 district judge must determine de novo any part of the magistrate judge's disposition that 2 has been properly objected to.” Fed. R. Civ. P. 72(b)(3). “The district judge may accept, 3 reject, or modify the recommended disposition; receive further evidence; or return the 4 matter to the magistrate judge with instructions.” Id. 5 B. Analysis 6 This case is brought under the Perishable Agricultural Commodities Act (“PACA”), 7 7 U.S.C. § 499e. The term “dealer” under PACA is defined as “any person engaged in 8 the business of buying or selling in wholesale or jobbing quantities, as defined by the 9 Secretary, any perishable agricultural commodity in interstate or foreign commerce.” 7 10 U.S.C. § 499a(b)(6). “Wholesale or jobbing quantities” means “aggregate quantities of all 11 types of produce totaling one ton (2,000 pounds) or more in weight in any day shipped, 12 received, or contracted to be shipped or received.” 7 C.F.R. § 46.2(x). One of the 13 exceptions to this definition is that “no person buying any such commodity solely for sale 14 at retail shall be considered as a ‘dealer’ until the invoice cost of his purchases of 15 perishable agricultural commodities in any calendar year are in excess of $230,000.” 7 16 U.S.C. § 499a(b)(6). 17 A plaintiff may succeed on a PACA claim against a dealer by proving the following: 18 “(1) the commodities sold were perishable agricultural commodities; (2) the purchaser 19 was a commission merchant, dealer, or broker; (3) the transaction occurred in 20 contemplation of interstate or foreign commerce; (4) the seller has not received full 21 payment on the transaction; and (5) the seller preserved its trust rights by including 22 statutory language referencing the trust on their invoices.” Beachside Produce, LLC v. 23 Flemming Enterprises, LLC, No. C 06-04957 JW, 2007 WL 1655554, at *2 (N.D. Cal. 24 June 6, 2007). 25 The R&R concludes that plaintiff proves all elements of its PACA claims,1 including 26 that defendant was a “dealer” within the meaning of the statute. Specifically, the R&R 27 1 states that plaintiff properly alleges that (1) plaintiff sold and delivered perishable 2 agricultural commodities to defendant and that defendant received and accepted the 3 produce without objection; (2) defendant is a “person engaged in the business of buying 4 or selling [perishable agricultural commodity in interstate or foreign commerce] in 5 wholesale or jobbing quantities;” (3) the produce was purchased and sold in 6 contemplation of interstate commerce; (4) defendant failed and refused to pay plaintiff for 7 the produce; and (5) plaintiff sent defendant invoices that provided notice of its intent to 8 preserve the trust in accordance with 7 U.S.C. § 499e(c)(4). Dkt. 30 at 5–7. 9 Nevertheless, the R&R recommends denying plaintiff’s motion for a default 10 judgment. The R&R reasons that plaintiff fails to show that one of the exceptions to the 11 definition of “dealer” did not apply to defendant, specifically the retailer exception. The 12 R&R states that under PACA only retailers whose “purchases of perishable agricultural 13 commodities in any calendar year are in excess of $230,000” can be considered 14 “dealers.” Id. at 7. The R&R notes that plaintiff’s “amended complaint does not contain 15 allegations addressing this exception; specifically, it does not allege facts regarding 16 whether [d]efendant purchases the relevant commodity ‘solely for sale at retail’ or not, 17 and if so, whether their purchases exceed $230,000 per year.” Id. On this basis, the 18 R&R concludes that “it is not clear if [d]efendant falls into an exception to the term 19 ‘dealer,’ which could defeat [plaintiff’s] PACA claims.” Id. 20 Plaintiff moves for de novo review on this particular finding in the R&R. Dkt. 32. 21 Plaintiff argues that the R&R goes beyond the amended complaint to discuss an 22 exception to the definition of “dealer” that it never raised. Id. at 3. 23 The court respectfully disagrees with the R&R’s approach to the exception of the 24 term “dealer.” Nowhere in plaintiff’s pleadings or briefing does it assert that defendant is 25 a retailer or could potentially fall within the retailer exception. In fact, per the magistrate 26 judge’s instructions (Dkt. 19), plaintiff amended its complaint to expressly allege how 27 defendant squarely fit the definition of “dealer” in PACA, adding allegations about 1 acknowledges plaintiff’s allegations, stating that plaintiff submitted evidence supporting its 2 claim that defendant is a dealer engaged in the business of buying or selling in 3 “wholesale or jobbing quantities.” Dkt. 30 at 7. The court is not aware of a legal 4 requirement that a moving party on a default judgment must disprove affirmative 5 defenses that a defendant might have raised had it chosen to appear and defend itself. 6 Indeed, in other contexts, a moving plaintiff would not have to plead the absence of 7 affirmative defenses. Even where affirmative defenses are raised, a plaintiff is not 8 required to disprove the defenses in the defendant’s absence. See Lehman Bros. 9 Holding v. IZT Mortg., Inc., No. C-09-4060 EMC, 2011 WL 2313601, at *3 (N.D. Cal. June 10 9, 2011) (stating that even though defendant filed an answer to plaintiff’s complaint, in 11 which it asserted various affirmative defenses, “the possibility of a dispute concerning 12 material facts is, in all likelihood, small given [defendant’s] failure to defend”). 13 Accordingly, the court modifies the R&R in this respect only. 14 The court finds the remainder of the R&R to be correct, well-reasoned and 15 thorough, and adopts it in every respect. 16 Plaintiff is correct that its invoices with defendant state that penalties, fines, 17 attorneys’ fees, and costs will be charged and enforced in the event of defendant’s non- 18 payment. Accordingly, plaintiff is entitled to the following relief from defendant: 19 1. principal in the amount of $7879.00; 20 2. pre-judgment finance charges on the principal balance through and including 21 March 1, 2021, in the amount of $1,005.23; 22 3. attorney’s fees to plaintiff in the amount of $2697.50; 23 4. costs to plaintiff in the amount of $503.45; and 24 5. post-judgment finance charges on the principal balance only at the rate of 12% per 25 annum to plaintiff, an average of $9.45 per day, from March 1, 2021 until fully paid. 26 The court DENIES plaintiff’s motion to augment the record to include the 27 declaration of Frank Ratto. Dkt. 33. Neither the R&R nor the court relied on the 1 The hearing on this motion is VACATED. 2 IT IS SO ORDERED. 3 Dated: December 8, 2021 4 /s/ Phyllis J. Hamilton PHYLLIS J. HAMILTON 5 United States District Judge 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27