Opinion
Case No. 16-cv-06991-BLF
07-14-2017
FRESH & BEST PRODUCE, INC., Plaintiff, v. OAKTOWN VENTURES, LLC, et al., Defendants.
ORDER CONSTRUING PLAINTIFF'S COUNSEL'S DECLARATION AS A MOTION FOR RECONSIDERATION; GRANTING MOTION FOR RECONSIDERATION; AND GRANTING PLAINTIFF'S MOTION FOR DEFAULT JUDGMENT AGAINST DEFENDANT RICHARD HACKETT
On July 3, 2017, Plaintiff Fresh & Best Produce, Inc. filed a document titled "Declaration of Susan E. Bishop in Support of Second Request for Default Judgment as to Richard Hackett." Bishop Decl., ECF 32. The document is a declaration of Plaintiff's counsel which acknowledges the Court's denial of Plaintiff's prior motion for default judgment against Defendant Richard Hackett (ECF 14) on the basis that Plaintiff had failed to establish this Court's personal jurisdiction over Hackett; asserts the existence of a new fact establishing the existence of personal jurisdiction over Hackett; and requests that the Court grant Plaintiff's prior motion for default judgment against Hackett. Id. The declaration relies on a proof of service filed by Plaintiff on June 16, 2017, showing personal service of process on Hackett within the state of California on June 7, 2017. POS, ECF 31.
The Court construes counsel's declaration as a motion for reconsideration of the Court's prior denial of default judgment against Hackett based on a new fact. For the reasons discussed below, the Court GRANTS Plaintiff's motion for reconsideration and GRANTS Plaintiff's (previously denied) motion for default judgment against Hackett.
I. BACKGROUND
On December 6, 2016, Plaintiff Fresh & Best Produce, Inc. filed this complaint against Defendants Oaktown Ventures, LLC and its managing member, Richard Hackett. Compl., ECF 1. Plaintiff alleges that Oaktown, which then was doing business as Jack's Oyster Bar and Fish House, ordered and accepted produce from Plaintiff but failed to pay invoices due and owing in excess of $27,000. Id. ¶¶ 2, 7-10. Plaintiff asserts claims against Oaktown for multiple violations of the Perishable Agricultural Commodities Act ("PACA"), 7 U.S.C. §§ 499a-499t, and for breach of contract. Id. ¶¶ 12-39. Plaintiff also asserts a single claim against Hackett for breach of fiduciary duty under PACA. Id. ¶¶ 40-49. Plaintiff alleges that as a result of Hackett's breach of fiduciary duty, Plaintiff "has incurred damages in the amount of $27,053.06, plus interest from the date each invoice became past de [sic], costs and attorneys' fees." Id. ¶ 47.
Neither Oaktown nor Hackett responded to the complaint. Plaintiff obtained a clerk's entry of default against Oaktown and Hackett and then filed a motion for default judgment against both defendants. Clerk's Entry of Default, ECF 12; Motion for Default Judgment, ECF 14. At that time, the case was assigned to Magistrate Judge Nathanael M. Cousins. Judge Cousins issued a Report and Recommendation ("R&R") recommending that Plaintiff's motion for default judgment be granted against Oaktown but denied against Hackett, and requesting that the case be reassigned to a district judge. R&R, ECF 22. The case thereafter was reassigned to the undersigned judge. Order Reassigning Case, ECF 23. This Court adopted the R&R, granted default judgment against Oaktown, and denied default judgment against Hackett. Order Adopting R&R, ECF 29. The basis for the denial as to Hackett was Plaintiff's failure to establish this Court's personal jurisdiction over Hackett. Id. The denial as to Hackett was without prejudice. Id.
Plaintiff has filed a declaration of counsel requesting that the Court grant default judgment against Hackett based upon Plaintiff's subsequent personal service of process on Hackett within the state of California on June 7, 2017. Bishop Decl. ¶ 7, ECF 32; POS, ECF 31. As noted above, the Court construes the declaration of counsel as a motion for reconsideration of the prior denial of default judgment against Hackett.
II. DISCUSSION
A. Reconsideration
In order to obtain reconsideration of an interlocutory order, the moving party "must specifically show reasonable diligence in bringing the motion" and also must show one of the following: (1) "a material difference in fact or law exists from that which was presented to the Court before entry of the interlocutory order for which reconsideration is sought"; (2) "[t]he emergence of new material facts or a change of law occurring after the time of such order"; or (3) "[a] manifest failure by the Court to consider material facts or dispositive legal arguments which were presented to the Court before such interlocutory order." Civ. L.R. 7-9(a), (b).
Here, Plaintiff has satisfied the second prong by showing the emergence of a new material fact occurring after the Court's denial of Plaintiff's motion for default judgment against Hackett, namely, personal service of process on Hackett within the state of California. Bishop Decl. ¶ 7, ECF 32; POS, ECF 31. Personal service of process on an individual who is voluntarily in the forum state is sufficient to confer personal jurisdiction over that individual even if his presence in the state is unrelated to the litigation. Burnham v. Superior Court, 495 U.S. 604, 628 (1990). Plaintiff therefore has established personal jurisdiction over Hackett. Because lack of personal jurisdiction was the basis upon which the Court denied Plaintiff's motion for default judgment against Hackett, the Court will reconsider its denial of that motion.
B. Default Judgment
Having determined that reconsideration is appropriate with respect to its denial of Plaintiff's motion for default judgment against Hackett, the Court now revisits that motion.
1. Jurisdiction and Service
Pursuant to Federal Rule of Civil Procedure 55, a court may grant default judgment against a defendant who has failed to plead or otherwise defend an action. Fed. R. Civ. P. 55(b)(2). "When entry of judgment is sought against a party who has failed to plead or otherwise defend, a district court has an affirmative duty to look into its jurisdiction over both the subject matter and the parties." In re Tuli, 172 F.3d 707, 712 (9th Cir. 1999). The district court also must "assess the adequacy of the service of process on the party against whom default is requested." DFSB Kollective Co., Ltd. v. Bourne, 897 F. Supp. 2d 871, 877 (N.D. Cal. 2012) (internal quotation marks and citation omitted).
For the reasons discussed above, the Court is satisfied regarding the adequacy of service of process and the existence of personal jurisdiction over Hackett. Subject matter jurisdiction is based on federal question, as the bulk of Plaintiff's claims (including the only claim asserted against Hackett) are brought under PACA. Accordingly, the threshold requirements for default judgment have been met.
2. Eitel Factors
Plaintiff nonetheless is not automatically entitled to a default judgment, and "[t]he district court's decision whether to enter a default judgment is a discretionary one." Aldabe v. Aldabe, 616 F.2d 1089, 1092 (9th Cir. 1980). In exercising that discretion, this Court must consider the following seven factors articulated by the Ninth Circuit in Eitel v. McCool ("Eitel factors"): "(1) the possibility of prejudice to the plaintiff, (2) the merits of 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, 1471-72 (9th Cir. 1986). In evaluating the Eitel factors, well-pled allegations in the complaint are taken as true, except those regarding damages. Televideo Sys., Inc. v. Heidenthal, 826 F.2d 915, 917-18 (9th Cir. 1987). The Court may, in its discretion, consider evidence submitted with a motion for default judgment to determine damages. Id.
a. Prejudice (Factor 1)
With respect to the first factor, prejudice to the plaintiff, Plaintiff would have no recourse absent entry of default judgment because Hackett has elected not to respond to the complaint. See Wilamette Green Innovation Ctr., LLC v. Quartis Capital Partners, No. 13-cv-00848-JCS, 2014 WL 5281039, at *6 (N.D. Cal. Jan. 21, 2014) ("Denying a plaintiff a means of recourse is by itself sufficient to meet the burden posed by this factor."). This factor weighs in favor of default judgment.
b. Merits of Claims/Sufficiency of Complaint (Factors 2 & 3)
The second and third factors, addressing the merits of the plaintiff's claims and the sufficiency of the complaint, are satisfied if the plaintiff asserts claims upon which he may recover. IO Group, Inc. v. Jordon, 708 F. Supp. 2d 989, 997 (N.D. Cal. 2010). Plaintiff's only claim against Hackett is a claim for breach of fiduciary duty under PACA. "PACA protects sellers of perishable agricultural goods by requiring a merchant, dealer, or retailer of perishable produce to hold in trust proceeds from the sale of the perishable produce, and food derived from that produce, for the benefit of all unpaid suppliers." Golden W. Veg, Inc. v. Bartley, No. 16-CV-03718-LHK, 2017 WL 2335602, at *5 (N.D. Cal. May 30, 2017). Individuals "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." Tom Ver LLC v. Organic All., Inc, No. 13-CV-03506-LHK, 2015 WL 2412381, at *2 (N.D. Cal. May 20, 2015). This Court previously determined that Plaintiff's PACA claims against Oaktown are sufficient. R&R at 6-8, ECF 22; Order Adopting R&R, ECF 29. The Court now concludes that Plaintiff's allegations regarding Hackett's control of Oaktown, and failure to preserve trust assets, is sufficient to state a PACA claim against him individually. See Compl. ¶¶ 41-48, ECF 1. Consequently, these factors weigh in favor of default judgment.
c. Sum of Money at Stake (Factor 4)
With respect to the fourth factor, the sum of money at stake, Plaintiff seeks $27,055.06 in unpaid invoices, plus prejudgment interest, attorneys' fees, and costs. PACA claims include contractual rights to interest and attorneys' fees. Middle Mountain Land and Produce Inc. v. Sound Commodities, 307 F.3d 1220, 1224-25 (9th Cir. 2002). This Court previously determined that as of May 19, 2017, the record evidence supported an award of damages in the amount of $27,055.06, prejudgment interest in the amount of $2,298.40, attorneys' fees in the amount of $1,199.00, and costs in the amount of $620.00. R&R at 10-12, ECF 22; Order Adopting R&R, ECF 29. Plaintiff has not requested an increase in these amounts. Accordingly, the total sum of money at stake is $31,172.46. This sum is relatively modest, and other district courts within the Ninth Circuit have granted default judgment in PACA cases involving similar amounts. See, e.g., Greenfield Fresh, Inc. v. Berti Produce-Oakland, Inc., No. 14-CV-01096-JSC, 2014 WL 5700695, at *2 (N.D. Cal. Nov. 3, 2014) (granting default in PACA case where sum of money at stake was $28,718.32); Family Tree Produce, Inc. v. Bautista, No. SA CV 13-00364-DOC, 2013 WL 6733576, at *4 (C.D. Cal. Dec. 13, 2013) (granting default in PACA case where sum of money at stake was $58,848.12). Therefore, this factor weighs in favor of default judgment.
d. Potential Disputes of Fact/Material Neglect (Factors 5 and 6)
The fifth and sixth factors focus on whether there are any potential disputes of fact and whether the defendant's failure to appear might be the result of excusable neglect. Service of process was effected on Hackett twice, the second time by personal service. Therefore, it is unlikely that Hackett's failure to appear was the result of excusable neglect or that Hackett - having failed to appear - will present any disputes of material fact. These factors weigh in favor of default judgment.
e. Public Policy (Factor 7)
The seventh and final factor, the strong public policy favoring decisions on the merits, does not preclude default judgment when the other Eitel factors favor it. PepsiCo, Inc. v. California Sec. Cans, 238 F. Supp. 2d 1172, 1177 (C.D. Cal. 2002). Here, Defendants' failure to answer the complaint "makes a decision on the merits impractical, if not impossible." Id.
C. Damages
"A plaintiff seeking default judgment must also prove all damages sought in the complaint." Golden W. Veg, 2017 WL 2335602, at *8 (internal quotation marks and citation omitted). "Federal Rule of Civil Procedure 55 does not require the Court to conduct a hearing on damages, as long as it ensures that there is an evidentiary basis for the damages awarded in the default judgment." Id. As discussed above, this Court previously considered and found sufficient Plaintiff's evidence regarding the amount of money owing on unpaid invoices and Plaintiff's entitlement to prejudgment interest, attorneys' fees, and costs. R&R at 10-12, ECF 22; Order Adopting R&R, ECF 29. //
III. ORDER
(1) Plaintiff's motion for default judgment is GRANTED as to Defendant Hackett in the total amount of $31,172.46, comprising $27,055.06 in unpaid principal balance, $2,298.40 in prejudgment interest, $1,199.00 in attorneys' fees, and $620.00 in costs; andDated: July 14, 2017
(2) The Default Judgment previously issued against Defendant Oaktown only shall be amended to reflect default judgment against both Defendant Oaktown and Defendant Hackett.
/s/_________
BETH LABSON FREEMAN
United States District Judge