Opinion
Case No. 1:19-cv-00109
05-04-2020
CONSUMER FRESH PRODUCE, INC., Plaintiff v. SPC ERIE COUNTY FARMS, INC; SUPER PRICE CHOPPERS MARKET, INC., d/b/a SPC ERIE COUNTY FARMS; SUPER PRICE CHOPPER, INC., d/b/a SPC ERIE COUNTY FARMS; SUPER PRICE CHOPPER MARKET, INC., d/b/a SPC ERIE COUNTY FARMS; ROBERT GUENTHER, individually and his corporate capacity; MUSHTAQ KAID, individually and in his corporate capacity; and HUSSEIN AWNS, individually and in his corporate capacity, Defendants.
SUSAN PARADISE BAXTER UNITED STATES DISTRICT JUDGE REPORT AND RECOMMENDATION in ON PLAINTIFF'S RENEWED MOTION FOR DEFAULT JUDGMENT ECF NO. 36 I. Recommendation
For the reasons stated herein, it is respectfully recommended that the Plaintiff's Renewed Motion for Default Judgment (ECF No. 36) be GRANTED against Defendant Super Price Choppers Market, Inc. d/b/a SPC Erie County Farms (Defendant). II. Report
A. Introduction
On April 16, 2019, Plaintiff Consumer Fresh Produce, Inc. (Consumer Fresh), commenced this action by filing a Complaint against these Defendants: SPC Erie County Farms, Inc., Super Price Chopper, Inc., Super Price Choppers Market, Inc., Super Price Chopper Market, Inc., Robert Guenther, Mushtaq Kaid, and Hussein Awns. ECF No. 1. Consumer Fresh's Complaint alleged violations of the Perishable Agricultural Commodities Act (PACA), 7 U.S.C. § 499a, et seq., and for breach of contract. Consumer Fresh then sought to serve the various Defendants. With the exception of the instant Defendant, this Court submitted a recommendation on November 5, 2019, that the Plaintiff's motion be granted. ECF No. 22. This Court adopted the Report and Recommendation and granted default judgment, in part, to the Plaintiff on January 7, 2019. ECF No. 34. In denying the motion for default against the instant Defendant, the Court found service to have been improper. See ECF No. 22; ECF No. 34. Plaintiff was directed to file either a renewed motion for default judgment against Defendant Super Price Choppers Market, Inc. d/b/a SPC Erie County Farms or a Rule 41(a) notice that Plaintiff is dismissing its claims against said Defendant. Id. Plaintiff renewed its motion or default judgment against the instant Defendant on February 7, 2020. The Defendant has neither challenged nor filed an opposition to the motion.
The Court of Appeals for the Third Circuit outlined the remedial purposes of the PACA, explaining, among other things, that the Act provides additional protection for agricultural producers. See Tanimura & Antle, Inc., v. Packed Fresh Produce, Inc., 222 F.3d 232 (3d Cir. 2000).
B. Applicable Legal Standards
1. Plaintiff's Request for Entry of Default.
Federal Rule of Civil Procedure 55 outlines a two-step process for obtaining a default judgment. See Fed .R. Civ. P. 55. The first step is an entry of default. See Fed. R. Civ. P. 55(a). "When a party against whom a judgment for affirmative relief is sought has failed to plead or otherwise defend, and that failure is shown by affidavit or otherwise, the clerk must enter the party's default." Id. Typically the entry of default is a ministerial task performed by the Clerk of Court and no motion is needed and no order is involved. See Turk v. Invacare Corporation, 2010 WL 4740196, *1 (W.D. Pa. Nov. 10, 2010).
"There must be effective service of process on a defendant before an entry of default can be made. Without proper service of process, the district court is without jurisdiction to make an entry of default against a defendant pursuant to Rule 55(a) as requested by the plaintiffs." Sandoval v. Bluegrass Regional Mental Health-Mental Retardation Board, 2000 WL 1257040, *5 (6th Cir.) (citing 10A Wright, Miller & Kane, Federal Practice and Procedure: Civil 3d § 2682). In support of his request for entry of default against the Defendant, counsel for the Plaintiff filed an affidavit in which he attested that "On November 11, 2019 [counsel for the Defendant] confirmed by email that Mr. Kaid would accept service on behalf of Defendant Super Price Choppers Market, Inc." ECF No. 38, ¶6. Counsel also stated that "On November 14, 2019, Mr. Kaid executed an Acceptance of Service of Process of the Amended Summons and Complaint on behalf of Super Price Choppers Market, Inc., and c and certified that he was authorized to do so under penalty of perjury." Id. at ¶ 8. Defendant was to file an answer or other motion under Fed. R. Civ. P. 12 by December 5, 2019, and to date has failed to do so. Id. at ¶¶ 9-10. Thus, the Clerk of Court entered default on January 13, 2020. ECF No. 35.
2. Plaintiff's Request for Entry of Default Judgment.
Plaintiff seeks a default judgment in his favor "in the principal amount of $83,318.33 plus interest in the amount $21,093.58 and attorney's fees in the amount of $36,222.57, for a total judgment amount of $140,634.48." ECF No. 56, p. 1. If a defendant is in default of prosecuting the case, the Court accepts as true all of a plaintiff's well-pleaded factual allegations in the complaint. Comdyne I, Inc. v Corbin, 908 F.2d 1142, 1149 (3d Cir. 1990). The Court, however, does not accept a plaintiff's legal conclusions as it is the Court that determines whether the pleaded facts set forth an actionable claim. See, e.g., Doe v. Simone, 2013 WL 3772532, at *2 (D.N.J. 17 July 2013). Nor does the Court accept a plaintiff's allegations about damages. Id. (citing 10A Charles A. Wright, Arthur R. Miller & Mary Kay Kane, FEDERAL PRACTICE & PROCEDURE § 2688, at 58-59 (3d ed. 1998 and Supp. 2013)). The determination whether to enter default judgment rests within the discretion of the district court. Hritz v. Woma Corp., 732 F.2d 1178, 1180 (3d Cir. 1984). The Third Circuit's repeatedly stated preference is that "cases be disposed of on the merits whenever practicable." Hritz, 732 F.2d at 1181.
Although Fed R. Civ. P. 55(b) (2)(B) specifies that a "court may conduct hearings when it needs to determine the amount of damages owed a party upon an entry of default judgment, the permissive language of that rule recognizes that such a proceeding will not be necessary in all circumstances, such as when damages are for a sum certain or for a sum which can by computation be made certain. Here, the Plaintiff seeks statutory damages, costs, and attorneys' fees, all of which can be made certain by computation. Thus, the Court may award damages without a hearing. --------
a. Jurisdiction
"[W]hen entry of a default judgment is sought against a party who has failed to plead or otherwise defend, the district court has an affirmative duty to look into its jurisdiction both over the subject matter and the parties." D'Onofrio v. Il Mattino, 430 F. Supp. 2d 431, 437 (E.D. Pa. 2006) (quoting Williams v. Life Sav. and Loan, 802 F.2d 1200, 1203 (10th Cir. 1986)). Here, the Court finds that subject matter jurisdiction is proper under 28 U.S.C. § 1331 because this action involves a federal question, the application of PACA. See, e.g., Frank Gargiulo & Son, Inc. v. Riverdell Mkt. Corp., 2009 WL 2151908, at *2 (D.N.J. July 14, 2009); see also 7 U.S.C. § 499e(5) ("The several district courts of the United States are vested with jurisdiction specifically to entertain...actions by [PACA] trust beneficiaries to enforce payment from the trust.").
b. The Plaintiff Has Established a Cause of Action against the Defendant under PACA.
"Congress enacted PACA in 1930 to deter unfair business practices and promote financial responsibility in the perishable agricultural goods market." Weis-Buy Servs., Inc. v. Paglia, 411 F.3d 415, 419 (3d Cir. 2005). Under PACA, it is unlawful for a dealer in commodities to fail to make prompt, full payment to the person with whom it made a commodity transaction. 7 U.S.C. § 499b(4). "To ensure payment, perishable agricultural commodities sold and the proceeds from the resale of those commodities are held in trust by the buyer for the benefit of the seller until full payment is made to the seller." Spring Valley Produce, 2015 WL 2365573, at *2. "The purchaser is charged with a duty to insure that the PACA trust has sufficient assets to ensure prompt payment of the amounts owed to the seller." Id. A purchaser who violates these provisions is liable for the full amount of damages the seller sustains. 7 U.S.C. § 499e(a).
"To create a PACA trust, a produce seller must provide the buyer with notice of its intention to preserve trust benefits." DiMare Homestead, Inc. v. Klayman Produce Co., 2012 WL 5354597, at *2 (E.D. Pa. Oct. 31, 2012). Notice may appear on a merchant's invoices in the following form:
The perishable agricultural commodities listed on this invoice are sold subject to the statutory trust authorized by section 5(c) of the Perishable Agricultural Commodities Act, 1930 (7 U.S.C. 499e(c)). The seller of these commodities retains a trust claim over these commodities, all inventories of food or other products derived from these commodities, and any receivables or proceeds from the sale of these commodities until full payment is received.7 U.S.C. § 499e(c)(4). Plaintiff included the necessary language on each of its invoices to the Defendant, creating a statutory trust under PACA in which Plaintiff's agricultural products are included as trust assets. See, e.g., ECF No. 1-3, p. 2. Further, in the uncontroverted pleadings of the Complaint, Plaintiff has alleged that it supplied the Defendant with agricultural commodities covered by PACA and that it has not received payment for those commodities. See, e.g., id. at ¶¶ 8, 15, 17, 26, 28. Plaintiff further alleges that the Defendant has failed to maintain the trust assets and keep them available to satisfy the claims as PACA required. Id. Thus, the Plaintiff has stated a valid claim that the Defendant is liable for the unpaid purchase price of the commodities. See 7 U.S.C. § 499e(a).
c. Default Judgment is Warranted.
Having determined that Plaintiff has alleged a valid claim against Defendants, the Court must next consider the three Chamberlain factors quoted above in determining whether a default judgment is warranted: "(1) prejudice to the plaintiff if default is denied, (2) whether the defendant appears to have a litigable defense, and (3) whether defendant's delay is due to culpable conduct." Chamberlain v. Giampapa, 210 F.3d 154, 164 (3d Cir. 2000).
First, "[p]rejudice to the plaintiff exists where denial of a default judgment would 'impair the plaintiff's ability to effectively pursue his or her claim.'" Spring Valley Produce, 2015 WL 2365573, at *3 (quoting Grove v. Rizzi, 2013 WL 943283, at *2 (E.D. Pa. March 12, 2013)). "Where, as here, a defendant fails to respond to the complaint, the potential delay threatens to carry on indefinitely, and that potential delay establishes prejudice to the plaintiff." Id. Second, "outside of the court's obligation to decide whether it has jurisdiction and whether the complaint states a claim, the court may presume that an absent defendant who has failed to answer has no meritorious defense." Joe Hand Promotions, Inc. v. Yakubets, 3 F. Supp. 3d 261, 271-72 (E.D. Pa. 2014). Third, "the defendant's failure or refusal to 'engage[ ] in the litigation process and [to] offer[ ] no reason for this failure or refusal' may 'qualif[y] as culpable conduct with respect to the entry of a default judgment—indeed, for the Court to conclude otherwise would be to reward the recalcitrant or the oppositional and uncooperative.'" Id. (quoting E. Elec. Corp. of N.J. v. Shoemaker Constr. Co., 657 F. Supp. 2d 545, 554 (E.D. Pa. 2009)). See also Mercedes-Benz Fin. Service USA LLC, v. Synergistiks, Inc., 2019 WL 481753, *2 (W.D. Pa. Feb. 7, 2019). For these reasons, under the three Chamberlain factors, default judgment is warranted.
d. Plaintiff's Damages
First, Plaintiff is entitled to the unpaid purchase price of the produce that it sold and delivered to the Defendant: $83,318.33. The Court should award that amount in the Plaintiff's favor as against this Defendant. The Plaintiff preserved its claim to these commodities with the following language on their invoices:
The perishable agricultural commodities listed on this invoice are sold subject to the statutory trust authorized by section 5(c) of the Perishable Agricultural Commodities Act, 1930 (7 U.S.C. 499e(c)). The seller of these commodities retains a trust claim over these
commodities, all inventories of food or other products derived from these commodities, and any receivables or proceeds from the sale of these commodities until full payment is received.ECF No. 1-2, p. 2.
Besides the unpaid purchase price of the produce, Plaintiff seeks interest at 18% per annum (1.5% per month) on the unpaid balance and attorney fees in the amount of $21,093.58. See ECF No. 37, p. 7. "Where terms for attorney fees and interest are part of the contract between the parties, the fees and interest are recoverable as 'sums owing in connection with such transactions' under PACA." Food Team Int'l, Ltd. v. Unilink, LLC, 872 F. Supp. 2d 405, 419 (E.D. Pa. 2012) (quoting Weis-Buy Services, Inc. v. Paglia, 307 F. Supp. 2d 682, 694-695 (W.D. Pa. 2004), rev'd on other grounds, 411 F.3d 415 (3d Cir. 2005). See also Top Banana, L.L.C. v. Dom's Wholesale & Retail Ctr., Inc., 2005 WL 1149774, at *2 (S.D.N.Y. May 16, 2005) ("The law in this area is clear—PACA itself does not create a right to attorneys' fees or interest, but where the parties' contracts include such terms, they can be awarded."). Here, the invoices to the Defendant set forth language in clear print notifying the recipient of the goods that a trust is created pursuant to PACA upon delivery:
Customer agrees to pay interest and all attorney's fees incurred by Consumer Fresh Produce, Inc., to collect any balance hereunder. Customer agrees that interest and the attorney's fees shall be considered sums owing in connection with the transaction under the PACA trust."ECF No. 1-3, p. 2. Thus, a contractual basis for attorney's fees and prejudgment interest exists in the invoice Plaintiff sent to the Defendant. See, e.g., E. Armata, Inc. v. 27 Farmers Mkt., Inc., 2009 WL 2386074, at *3 (D.N.J. July 31, 2009) (contractual basis for attorney's fees and prejudgment interest exists in the invoice to defendant). Plaintiff contends that the "claim for pre-judgment interest at 18% ( [1.5%] per month on the unpaid balance) from through September 12, 2019, is supported by the terms of sale invoices, which clearly state "a finance charge of 1.5% per month (18% APR) may be applied to the previous balance of all past due accounts. Customer agrees to pay interest and all attorney's fees incurred ...." See., e.g., ECF No. 1-3, p. 2. Thus, as it did in its previous order, the Court should award the Plaintiff interest in the amount of $21,093.58 and attorney's fees in the amount of $36,222.57. See ECF No. 34, p. 3. Thus, it recommend that the Court award the Plaintiff a total amount of damages of $140,634.48 against this Defendant.
C. Conclusion
Given the foregoing, it is respectfully recommended that the Court grant the Plaintiff's Motion for Default Judgment against the Defendant and award damages in the amount of $140,634.48, as was done previously against the other Defendants here. Id. IV. Notice
The parties are referred to 28 U.S.C. § 636(b)(1) and Local Civil Rule 72(C)(2) for the appropriate procedure if any party desires to file objections to these findings and recommendations. Objections must be in writing and must be filed within fourteen days of this date. Failure to file timely objections may constitute a waiver of appellate rights. Angle v. Murin, 2013 WL 5888272, at *1 (W.D. Pa. Oct. 31, 2013).
Respectfully submitted this 4th day of May, 2020.
/s/_________
RICHARD A. LANZILLO
United States Magistrate Judge