Opinion
22-CV-10108 (VSB) (KHP)
02-12-2024
S. KATZMAN PRODUCE, INC., Plaintiff, v. ABRAHAM PRODUCE CORP. t/a H LEE a/t/a H LEE TRUCKING, NAM H. LEE, et al. Defendants.
REPORT AND RECOMMENDATION
KATHARINE H. PARKER UNITED STATES MAGISTRATE JUDGE
TO: HONORABLE VERNON S. BRODERICK, United States District Judge FROM: KATHARINE H. PARKER, United States Magistrate Judge:
Plaintiff S. Katzman Produce Inc. (“Katzman”) brings this action against various entities and persons for violation of the Perishable Agricultural Commodities Act, 7 U.S.C. § 499e (“PACA”) and related common law claims. Katzman has setled with a number of defendants and they have been dismissed from this action. After a certificate of default issued, the Honorable Vernon S. Broderick granted Plaintiff a default judgment as to liability against the remaining “Defaulting Defendants” and referred this mater to the undersigned for an inquest on damages. (ECF No. 172.) The Defaulting Defendants are: New Aaron Fruit Market Inc., Brighton Beach Farm Market Inc., C&D Family Inc. trading as D&C Market, Errand Grocery & Deli, Inc. trading as Farm Fresh, 1490 Meat Corp. trading as Olive Tree, and Kyoung Suk Song also known as Hyoung Chul Song. For the reasons set forth below, I recommend damages be awarded in the amounts set forth below.
BACKGROUND
Katzman is an entity that buys and sells wholesale quantities of produce and is licensed as a dealer of such produce under PACA. (Second Amended Complaint (“SAC”) ¶ 4.) It originally brought this action against Abraham Produce Corp. trading as H. Lee and H Lee Trucking and Nam H. Lee (the “Initial Defendants”). The Initial Defendants sold produce on credit to the other defendants. On December 19, 2022, the Court entered a Preliminary Injunction and Order establishing a PACA Trust Claims Procedure and Granting Related Relief. (ECF No. 20.) There were twelve beneficiaries to the trust who in the aggregate had claims in the amount of $2,395,378.16. (SAC ¶ 36.) All of the beneficiaries are produce suppliers to the Initial Defendants, and the trust consists of all produce or produce-related assets of the Initial Defendants. (Id. ¶ 31.) Pursuant to the Court's order, Plaintiff, a beneficiary of the PACA Trust, added certain defendants (including the Defaulting Defendants) to this action because they were customers of the Initial Defendants and owed the Initial Defendants money (as reflected in the Initial Defendants' accounts receivable)-amounts recoverable under the procedures of the PACA trust. All of the Defaulting Defendants had received produce on credit from the Initial Defendants. (Id. ¶ 54.)
Plaintiff served each of the Defaulting Defendants with the SAC and a demand for payment. (Id. ¶ 57; ECF Nos. 110, 112-124, 126-127.) The amounts sought are based on the accounts receivables records of the Initial Defendants. (SAC ¶ 59.) The Defaulting Defendants did not make a payment or otherwise respond to the SAC or Plaintiff's demands. (ECF No. 137.) As a result, Plaintiff sought and obtained a default judgment from the Court and has submited a declaration from its counsel and from Defendant Nam H. Lee regarding amounts due from the Defaulting Defendants, as well as proposed findings of fact and conclusions of law and documentation of the accounts receivable. Plaintiff served the Defaulting Defendants with all relevant paperwork to its application for damages. (ECF Nos. 143-47, 157-165, 167, 172-173.)
DISCUSSION
“PACA was enacted in 1930 ‘to suppress unfair practices in the marketing of fruits and vegetables in interstate and foreign commerce,' 49 Fed.Reg. 45737, and requires produce dealers to make ‘full payment promptly' for any produce they purchase. 7 U.S.C. § 499(b)(4).” S. Katzman Produce, Inc. v. Orel Produce, Inc., 2019 WL 4303423, at *2 (S.D.N.Y. Sept. 11, 2019), aff'd in part, vacated in part, 999 F.3d 867 (2d Cir. 2021). Under PACA, “perishable commodities or proceeds from the sale of those commodities are held in trust by the buyer for the benefit of the unpaid seller until full payment is made.” Coosemans Specialties, Inc. v. Gargiulo, 485 F.3d 701, 705 (2d Cir. 2007) (quoting 7 U.S.C. § 499e(c)(2)). “The trust is formed at the moment the produce is shipped to the buyer and remains in effect until the seller is paid in full.” Gold Medal Produce v. KNJ Trading Inc., 2020 WL 2747312, at *2 (S.D.N.Y. May 27, 2020) (alteration and citation omited). Furthermore, the fiduciary duty obligation under PACA includes the duty to repay the full debt owed to the produce supplier. Id. To recover proceeds from a PACA-created trust, a plaintiff must satisfy five elements:
First, a plaintiff must have sold defendant perishable agricultural commodities. Second, plaintiff must show that the “purchaser of the perishable agricultural commodities,” the defendant, was a “commission merchant, dealer, or broker,” pursuant to Section 499(a) of PACA.... Third, the transaction must have occurred in interstate commerce. Fourth, the seller of the perishable agricultural commodities has not received full payment from defendants on the transaction. Finally, the seller must have preserved its interest in the PACA trust by giving written notice.Associated Produce, Inc. v. LaSejita Produce, Inc., 2020 WL 2476036, at *4 (E.D.N.Y. Apr. 22, 2020) (colatus and internal citations omitted), report and recommendation adopted, 2020 WL 2475620 (E.D.N.Y. May 13, 2020).
In this case, Judge Broderick has already determined that all five elements were established. Indeed, Plaintiff has demonstrated through admissible proof that he sold perishable produce, that the Defaulting Defendants received such produce from the Initial Defendants on credit, and that the Defaulting Defendants were issued invoices for such produce and failed to pay such invoices after receiving a demand for payment. There also is no dispute that PACA applies or that the produce transactions occurred in interstate commerce.
It is well-settled that on a motion for a default judgment, a defendant's default does not constitute an admission as to the damages claimed in the complaint. See, e.g., id. at *3. The burden is on the plaintiff to establish, by a reasonable certainty, its entitlement to the relief requested. Credit Lyonnais Sec. (USA), Inc. v. Alcantara, 183 F.3d 151, 155 (2d Cir. 1999). To determine damages, the court may conduct an inquest, see Fed.R.Civ.P. 55(b)(2)(B), or it may rely on the affidavits and other documentary evidence provided by the plaintiff, obviating the need for a hearing on damages, Bricklayers & Allied Craftworkers Local 2 v. Moulton Masonry & Constr., LLC, 779 F.3d 182, 189 (2d Cir. 2015).
Here, Plaintiff has provided invoices and other documents that establish the unpaid amounts owed by the Defaulting Defendants. The Defaulting Defendants were served with all relevant papers and have not submited any response or otherwise contested Plaintiff's evidence on damages. Accordingly, the Court may award damages based on the affidavits and proof submited. See Double Green Produce, Inc. v. Forum Supermarket Inc., 387 F.Supp.3d 260, 272 (E.D.N.Y. 2019). The evidence shows that defendants are liable as follows:
New Aaron Fruit Market Inc. received produce valued at $23,546.40. (Lee Decl. ¶ 8; Exh. Q.) This defendant has never disputed the amount due or rejected any invoice, yet failed to pay the full amount due, leaving a balance of $23,507.15 (Lee Decl. ¶ 9; Exh. Q.) Accordingly, judgment should issue against this defendant in the amount of $23,507.15.
Brighton Beach Farm Market Inc. received produce valued at $30,698.90. (Lee Decl. ¶ 10; Exh. R.) This defendant has never disputed the amount due or rejected any invoice, yet failed to pay the full amount due, leaving a balance of $23,886.88. (Lee Decl. ¶ 11; Exh. R.) Accordingly, judgment should issue against this defendant in the amount of $23,886.88.
C&D Family Inc. trading as D&C Market received produced valued at $13,262.80. (Lee Decl. ¶ 12; Exh. T.) This defendant has never disputed the amount due or rejected any invoice, yet failed to pay the full amount due, leaving a balance of $12,463.30. (Lee Decl. ¶ 13; Exh. T.) Accordingly, judgment should issue against this defendant in the amount of $12,463.30.
Errand Grocery & Deli, Inc. trading as Farm Fresh received produced valued at $9,435.50. (Lee Decl. ¶ 14; Exh. S.) This defendant has never disputed the amount due or rejected any invoice, yet failed to pay the full amount due, leaving a balance of $9,394.25. (Lee Decl. ¶ 15; Exh. S.) Accordingly, judgment should issue against this defendant in the amount of $9,394.25.
1490 Meat Corp. trading as Olive Tree received produced valued at $20,931.70. (Lee Decl. ¶ 20; Exh. W.) This defendant has never disputed the amount due or rejected any invoice, yet failed to pay the full amount due, leaving a balance of $19,827.79. (Lee Decl. ¶ 21; Exh. W.) Accordingly, judgment should issue against this defendant in the amount of $19,827.79.
Kyoung Suk Song also known as Hyoung Chul Song received produced valued at $205,454.50. (Lee Decl. ¶ 24; Exh. Y.) This defendant has never disputed the amount due or rejected any invoice, yet failed to pay the full amount due, leaving a balance of $201,807.22. (Lee Decl. ¶ 24-25; Exh. Y.) Accordingly, judgment should issue against this defendant in the amount of $201,807.22.
Plaintiff also seeks prejudgment interest of 9%. While PACA does not itself establish a right to interest and collection costs, including atorney's fees, a purchaser “is required to pay such items when the parties' contract so provides; in such a case, the interest and collection costs become subject to the PACA trust together with the principal debt.” Dayoub Mktg., Inc. v. S.K. Produce Corp., 2005 WL 3006032, at *4 (S.D.N.Y. Nov. 9, 2005). For a PACA claim, “[t]he decision whether to grant prejudgment interest and the rate used if such interest is granted ‘are maters confided to the district court's broad discretion.'” Endico Potatoes, Inc. v. CIT Grp./Factoring, Inc., 67 F.3d 1063, 1071 (2d Cir. 1995) (citation omited). “Courts have awarded prejudgment interest under PACA based on congressional intent to protect agricultural suppliers.” E. Armata, Inc. v. Platinum Funding Corp., 887 F.Supp. 590, 595 (S.D.N.Y. 1995).
The invoices that the Plaintiff sent to the defendant does not contain an interest provision. Courts have routinely granted prejudgment interest under the PACA when invoices set interest at 18% per annum. See e.g., S. Katzman Produce, Inc. v. JAT Beverage Inc., 2018 WL 6437058, at *5 (S.D.N.Y. Dec. 7, 2018). The requested rate of 9% - the New York statutory interest rate for breach-of-contract claims under N.Y. C.P.L.R. § 5004 (9% per annum) - has been found reasonable in other PACA cases when, as here, an invoice did not set an interest rate. See, e.g., A & B Alternative Mktg., Inc. v. Page Food Distributors Corp., 2019 WL 7194431, at *2 (E.D.N.Y. Dec. 26, 2019) (granting interest rate provided in N.Y. C.P.L.R. § 5004 when invoices did not set interest rate). The grant of such interest is also in line with the congressional intent to protect agricultural suppliers. Therefore, I recommend that Plaintiff be warded interest at a rate of 9% per annum from th date this judgment is entered. The invoice dates ar interest should be computed based on those dates.
CONCLUS
For the foregoing reasons, I respectfully rec< following damages from the Defaulting Defendants on the invoice dates to the defendants listed below 2), R (ECF No. 175-3), S (ECF No. 175-4), T (ECF No. 175-7):
| Defendant Principal | Amount Due | Interest Rate |
| New Aaron Fruit | Market $23,507.15 | 9% per annum |
| Brighton Beach Farm Market | $23,886.88 | 9% per annum |
| D&C Market | $12,463.30 | 9% per annum |
| Farm Fresh | $9,394.25 | 9% per annum |
| Olive Tree | $19,827.79 | 9% per annum |
| Kyoung Suk Song | $201,807.22 | 9% per annum |
NOTICE
The parties shall have fourteen days from this date to file writen objections pursuant to 28 U.S.C. § 636(b)(1) and Fed.R.Civ.P. 72(b) to this Report and Recommendation. See also Fed.R.Civ.P. 6(a),(d). If Plaintiff files writen objections to this Report and Recommendation, Defendants may respond to the objections within fourteen days after being served with a copy. Fed. R. Civ. P.72(b)(2). If Defendants file writen objections to this Report and Recommendation, Plaintiff may respond to the objections within fourteen days after being served with a copy. Fed. R. Civ. P.72(b)(2).
Objections and responses to objections shall be filed with the Clerk of the Court, with courtesy copies delivered to the Hon. Vernon S. Broderick at 40 Foley Square New York, NY 10007-1312 and to any opposing parties. See 28 U.S.C. § 636(b)(1); Fed.R.Civ.P. 6(a), 6(d), 72(b). Requests for an extension of time to file objections must be directed to Judge Broderick. Failure to file timely objections will result in a waiver of those objections for purposes of appeal. See 28 U.S.C.§ 636(b)(1); Fed.R.Civ.P. 6(a), 6(d), 72(b); Thomas v. Arn, 474 U.S. 140 (1985).