Eagle Eye Produce, Inc. v. CM International, Inc. et al

Filing 21

MEMORANDUM DECISION AND ORDER granting 17 Motion for Default Judgment. A separate Judgment will be entered in accordance with Fed. R. Civ. P. 58.. Signed by Judge B. Lynn Winmill. (caused to be mailed to non Registered Participants at the addresses listed on the Notice of Electronic Filing (NEF) by (krb)

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF IDAHO

EAGLE EYE PRODUCE, INC.,

Case No. 4:11-cv-00346-BLW

Plaintiff,

MEMORANDUM DECISION AND
ORDER

v.
CM INTERNATIONAL, INC., and
MIGUEL S. ORTEGA,
Defendant.

INTRODUCTION
The Court has before it Plaintiff’s Amended Motion for Default Judgment and for
Prejudgment Interest (Dkt. 17). On July 28, 2011, Plaintiff Eagle Eye Produce, Inc. filed
an Amended Motion for Default Judgment and for Prejudgment Interest (Dkt. 17). The
case was originally assigned to Magistrate Judge Bush, but because Defendants did not
appear, and no consents were filed, the case was reassigned to the undersigned District
Judge on November 9, 2012. Plaintiff seeks damages in the amount of 17,096.00 plus a
$500.00 “handling fee,” prejudgment interest in the amount of $3,439.81, attorney’s fees
in the amount of $4,323.00 and $902.80 in costs.
BACKGROUND
This case arises under the Perishable Agricultural Commodities Act (“PACA”).
Between November 9, 2010 and December 8, 2010, Plaintiff sold two truckloads of

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onions to Defendant, CM International, Inc. (“CMI”). CMI accepted delivery but failed to
pay Plaintiff the purchase price of $17,096.00. Complaint, Dkt. 1, ¶¶ 7-9. Plaintiff brings
four causes of action: (1) violation of 7 U.S.C. § 499 for not maintaining the PACA trust
against Defendant CMI; (2) unlawful disposition of PACA trust assets by corporate
official against Defendant Miguel S. Ortega (“Ortega”); (3) breach of contract against
CMI; and (4) unjust enrichment against CMI and Ortega. As explained below, the first
cause of action is sufficient to award Plaintiff all of its damages.
On or about March 23, 2011, Plaintiff filed a PACA complaint against CMI with
the Secretary of Agriculture of the United States of America. On July 1, 2011, an officer
of the Secretary of Agriculture of the United States entered a Default Order against CMI
awarding Eagle Eye $17,096.00, with interest thereon from January 1, 2011, until paid,
plus a $500.00 “handling fee” for filing its complaint. Compl. ¶ 12; Driscoll Aff., Dkt.
17-2, Ex. B. Pursuant to section 7(b) of PACA, 7 U.S.C. § 499g(b), on July 28, 2011,
Plaintiff filed the Complaint in the District Court for the District of Idaho, seeking
enforcement of the PACA reparation award.
On March 2, 2012, the Court issued an Order (Dkt. 11) allowing Plaintiff to serve
the Defendants by publication pursuant to Fed. R. Civ. P. 4(e)(1) and 4(h)(1), Idaho Rule
of Civil Procedure 4(b)(3) and Idaho Code § 5-508. The Summonses ran in the Orange
County Reporter once a week for four consecutive weeks: April 20, 2012; April 27, 2012;
May 4, 2012; and May 11, 2012. Driscoll Aff., Dkt. 17-2, Ex. E. Defendants have not
filed an appearance or answer within the time allotted by the rules.

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On July 30, 2012, the Clerk of Court entered default pursuant to Fed. R. Civ. P.
55(a). On September 4, 2012, Plaintiff filed an Amended Motion for Default Judgment
(Dkt. 17).
JURISDICTION AND SERVICE OF PROCESS
Courts have an affirmative duty to examine their own jurisdiction – both subject
matter and personal jurisdiction – when default judgment is sought. In re Tuli, 172 F.3d
707, 712 (9th Cir. 1999). Since this is an action under PACA, federal subject matter
jurisdiction arises under 29 U.S.C. §§ 1331 and 1367. Personal jurisdiction arises from
Defendants’ commercial activities within Idaho.
Plaintiff made several attempts to personally serve Defendants. See Driscoll Aff.,
Dkt. 8-1. Then, with Court approval, Plaintiff made service by publication in accordance
with Fed. R. Civ. P. 4(e)(1) and 4(h)(1), Idaho Rule of Civil Procedure 4(b)(3) and Idaho
Code § 5-508. After the summonses ran in the Orange County Reporter once a week for
four consecutive weeks, Defendants failed to appear or answer within the time allotted by
the rules.
DEFAULT JUDGMENT STANDARD
Where a party against whom judgment is sought has failed to plead or otherwise
defend, the party seeking relief must first secure an entry of default, and then may apply
to the court for default judgment. Fed. R. Civ. P. 55. Where a party is in default, “the
factual allegations of the complaint, except those relating to the actual amount of
damages, will be taken as true.” TeleVideo Sys., Inc. v. Heidenthal, 826 F.2d 915, 917-18

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(9th Cir. 1987). For purposes of default judgment, the court need not enter findings of
fact, except as to damages. Adriana Int'l Corp. v. Thoeren, 913 F.2d 1406, 1414 (9th Cir.
1990).
Whether to enter default judgment is in the sole discretion of the court. Lau Ah
Yew v. Dulles, 236 F.3d 415 (9th Cir. 1956). In Eitel v. McCool, the Ninth Circuit
identified several factors for the court to consider in exercising its discretion to enter
default judgment: (1) the potential prejudice to plaintiff; (2) the merits of plaintiff’s
substantive claim; (3) the sufficiency of the complaint; (4) the amount at stake in the
action; (5) the possibility of dispute concerning material facts; (6) whether default was
due to excusable neglect; and (7) the strong public policy underlying the Federal Rules
favoring a decision on the merits. Eitel v. McCool, 782 F.2d 1470, 1471-72 (9th Cir.
1986). “In applying this discretionary standard, default judgments are more often granted
than denied.” PepsiCo, Inc. v. Triunfo-Mex, Inc., 189 F.R.D. 431, 431 (C.D. Cal. 1999).
ANALYSIS
1.

Sufficiency of Claim and Individual Liability
Plaintiff brings claims against both CMI and Ortega, as a stockholder, director,

officer, general manager and agent of CMI in a position of control over the PACA trust
assets. Compl. ¶¶ 5, 20. After entry of default, well-pleaded factual allegations in the
complaint are taken as true. Televideo Sys., Inc., 826 F.2d at 917-18. Plaintiff alleges
violation of PACA, 7 U.S.C. § 499b. PACA applies to sales of perishable agricultural
commodities to any commission merchant, dealer, or broker. PACA gives the suppliers

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of such commodities special rights designed to ensure payment. It requires that the
perishable commodities or proceeds from the sale of those commodities be held in trust
by the dealer for the benefit of the unpaid seller until full payment is made. 7 U.S.C.
§ 499e(c)(2).
To establish the existence of a PACA trust, Plaintiff must show that: (1) the
commodities sold were perishable agricultural commodities; (2) the buyer was a
commission merchant, dealer or broker; (3) the transaction occurred in interstate
commerce; (4) the seller has not yet received full payment; and (5) the seller preserved its
trust right by giving proper notice to the buyer. 7 U.S.C. § 499e.
Plaintiff’s allegations of the existence of a PACA trust are sufficient. Plaintiff
claims to have sold perishable produce through interstate commerce to Defendant CMI
who was a holder of a PACA license (as a merchant, dealer or broker) and that Plaintiff
has not received full payment for sales between November 9, 2010 and December 8,
2010. Compl. ¶¶ 3-12. Plaintiff also alleges it has performed “all conditions, covenants,
and obligations required by its agreement with CMI and by the PACA.” Compl. ¶ 10.
Plaintiff has also established personal liability for individual defendant Miguel S.
Ortega. Ortega was identified in the PACA notice of order as someone “responsibly
connected with the firm” and Plaintiff identifies him in its Complaint as “a stockholder,
director, officer, general manager and agent of CMI, and an insider with actual and
constructive knowledge of the . . . PACA trust and the provisions set forth in 7 U.S.C.
§ 499a, et seq., and responsible for the daily management and control of CMI.” Compl.

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¶ 5. The Ninth Circuit has recognized that individuals associated with corporate
defendants may be liable under a PACA trust theory “if the seller’s assets are insufficient
to satisfy the liability.” Sunkist Growers, Inc. v. Fisher, 104 F.3d 280, 283 (9th Cir. 1997)
(“[L]iability attaches first to the licensed seller . . . [and if] the seller’s assets are
insufficient to satisfy the liability, others may be found secondarily liable if they had
some role in causing the corporate trustee to commit the breach of trust.”) The Ninth
Circuit then stated that “individual shareholders, officers, or directors of a corporation
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.” Id.
Although it is not absolutely clear from the Complaint that CMI’s assets are
insufficient to satisfy the liability, the allegations sufficiently allege that Ortega
improperly controlled trust assets and breached his fiduciary duty. These allegations in
the Complaint are legally sufficient. Accordingly, Defendant Ortega is secondarily liable
on the the PACA trust theory.
Moreover, Plaintiff’s Complaint establishes an unjust enrichment claim against
Ortega. Plaintiff alleges that a benefit was conferred upon CMI and Ortega by delivering
produce to them, that CMI and Ortega appreciated the benefit of receiving the produce
and enjoying control over the possession, use and disposition of the produce, and that
allowing CMI and Ortega to retain the benefit of the product without payment for the
value of the produce would be inequitable. Compl. ¶¶ 28-30.
2.

Eitel Factors

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The Court will first address the Eitel factors with respect to the PACA claim.
Regarding possible prejudice to the Plaintiff, Defendants have failed to appear in this
matter and a failure to enter default judgment would prejudice Plaintiff because it would
be without recourse for recovery.
The next two factors, “require that a plaintiff state a claim on which the [plaintiff]
may recover.” PepsiCo, Inc. v. California Sec. Cans, 238 F. Supp. 2d 1172, 1175 (C.D.
Cal. 2002). The Complaint properly alleges the necessary elements for its PACA claim
and identifies the value Plaintiff conferred on Defendants in its sale of onions. The Court
finds that the allegations in the Complaint establish the merits of Plaintiff's claims.
Therefore these factors weigh in favor of entering default judgment.
The fourth factor which the Court must consider is the amount of money at stake
in relation to the seriousness of Defendants’ misconduct. Philip Morris USA, Inc. v.
Castworld Prods., Inc., 219 F.R.D. 494, 490 (C.D. Cal. 2003). Plaintiff seeks damages in
the amount of $17,096.00 plus a $500.00 handling fee. Given that Defendants have failed
to pay Plaintiff the amount owed as evidenced by invoices submitted in connection with
this motion, and its failure to comply with the judicial process or to participate in any
way in the present lawsuit, imposition of this monetary award is justified.
The Court must consider, as the fifth factor, whether there is a possibility of a
dispute as to any material facts in the case. As a consequence of the entry of default
against Defendants, all of Plaintiff's well-pleaded facts in the Complaint are taken as true.

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No disputes exist as to the material averments in the Complaint, which weighs in the
favor of default judgment.
Next the Court must consider the possibility that a default will be the result of
excusable neglect. Plaintiff has detailed its attempts to personally serve Defendants in its
motions to serve and to serve by publication, which the Court ultimately granted. See
Driscoll Aff., Dkt. 8-1. Plaintiff made several attempts to locate and serve Defendants,
none of which have resulted in Defendants’ appearance. The case has been pending for
over a year and there has been no attempt by Defendants to appear or defend itself. The
default is warranted.
The last factor is the public policy in favor of decision on the merits. However, as
the court recognized in Philip Morris, the mere existence of Fed. R. Civ. P. 55(b)
indicates that this factor alone is not dispositive. Philip Morris, 219 F.R.D. at 501.
Because Defendants have not appeared, a decision on the merits is impractical, if not
impossible.
Regarding the unjust enrichment claim against Ortega, the Court finds the Eitel
factors weigh in favor of granting default judgment for the same reasons as apply to the
PACA claim. Accordingly, the Court will enter Default Judgment pursuant to Fed. R.
Civ. P. 55(b) against CMI and Ortega on the PACA claim, and against Ortega on the
unjust enrichment claim.
3.

Damages

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Under PACA, merchants who violate its provisions “shall be liable to the person
or persons injured thereby for the full amount of damages . . . sustained in consequence
of such violation.” 7 U.S.C. § 499e(a). Plaintiff is therefore entitled to the full value of
the delivered produce, $17,096.00 plus the $500.00 PACA “handling fee.” See 7 U.S.C.
§ 499e(a). As explained above, CMI shall be primarily liable, and Ortega shall be
secondarily liable. However, Ortega shall be joint and severally liable based upon the
unjust enrichment claim.
4.

Prejudgment Interest
Plaintiff also seeks prejudgment interest in the amount of $3,439.81. In the Default

Order issued by Secretary of Agriculture, it is stated that an award of damages “where
appropriate, includes interest” and the interest to be applied “shall be determined in
accordance with 28 U.S.C. § 1961.” Driscoll Aff., Dkt. 17-2, Ex. B. The order then states
under the Reparation Award section: “Respondent shall pay Complainant as reparation
$17,096.00, with interest thereon at the rate of 0.17 percent per annum from January 1,
2011, until paid, plus the amount of $500.00.” Additionally, the invoices at issue stated:
“Interest at 1.5% per month added to unpaid balance. Buyer agrees to pay interest and
attorney’s fees incurred to collect any balance due hereunder. Interest and attorney’s fees
necessary to collect any balance due hereunder shall be considered sums owing in
connection with this transaction under the PACA trust.”
Under the controlling case of Middle Mountain Land & Produce, Inc. v. Sound
Commodities, Inc., 307 F.3d 1220 (9th Cir. 2002), prejudgment interest may be included

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in a PACA trust claim if supported by a contractual right; alternatively, the Court has
discretion to award reasonable prejudgment interest if such an award promotes the
interests of PACA claimants. Although the invoice creates an interest rate of 18% per
annum, Plaintiff seeks, and the Secretary of Agriculture awarded, prejudgment interest at
the rate of 17%. Plaintiff is entitled to prejudgment interest at the rate of 17% from
January 1, 2011 until the date of the Judgment entered concurrently herewith.
5.

Attorney’s Fees
Next, Plaintiff seeks attorney’s fees in the amount of $4,323.00. Under PACA, 7

U.S.C. § 499g(b), “[i]f the petitioner finally prevails, he shall be allowed a reasonable
attorney’s fee, to be taxed and collected as a part of the costs of the suit.” The Court has
reviewed the billing statements of attorney B.J. Driscoll in this matter (Driscoll Aff., Dkt.
17-2, Ex. A), and finds the amount of attorney’s fees requested is reasonable. Thus, the
fees will be awarded.
6.

Costs
Finally, Plaintiff seeks costs in the amount of $902.80. These include: U.S.

District Court filing fee ($350.00); process service fees ($142.50); Federal Express fees
for service of pleadings ($30.30); and publication of summons in the Orange County
Reporter ($380.00). Pursuant to 7 U.S.C. § 499g(b), “petitioner shall not be liable for
costs in the district court . . . .” Local Rule 54.1 defines the types of taxable costs
available to the prevailing party under Fed. R. Civ. P. 54(d)(1). See Dist. Idaho Loc. Civ.
R. 54.1(c)(1-7). Plaintiff seeks costs for clerk’s and service fees, which are allowable

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under Local Rule 54.1(c)(1). Accordingly, Plaintiff will be awarded costs in the amount
of $902.80.
ORDER
IT IS ORDERED THAT:
1. Plaintiff’s Amended Motion for Default Judgment and for Prejudgment
Interest (Dkt. 17) is GRANTED.
2. Judgment shall be awarded to Plaintiff and against Defendants CMI and
Ortega, jointly and severally, in the amount of $17,596.001, plus prejudgment
interest in the amount of 17% per anum from January 1, 2011 until the date of
the Judgment entered concurrently herewith, plus $4,323.00 in attorney fees,
plus $902.80 in costs.
3. A separate Judgment will be entered in accordance with Fed. R. Civ. P. 58.

DATED: January 11, 2013

_________________________
B. Lynn Winmill
Chief Judge
United States District Court

1

$17,096.00 plus the $500.00 handling fee equals $17,596.00.

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