Double Green Produce, Inc. v. Forum Supermarket Inc.

387 F.Supp.3d 260

DOUBLE GREEN PRODUCE, INC., Plaintiff,

v.FORUM SUPERMARKET INC., and Hong Wen Cai, Defendants.

18-CV-2660 (MKB) (SJB)

United States District Court, E.D. New York.

Signed May 17, 2019

Gregory Adam Brown, McCarron & Diess, Melville, NY, for Plaintiff.

MEMORANDUM & ORDER

MARGO K. BRODIE, United States District Judge

Plaintiff Double Green Produce, Inc. commenced the above-captioned action on May 4, 2018, against Defendants Forum Supermarket Inc. ("Forum") and Hong Wen Cai, asserting claims pursuant to the Perishable Agricultural Commodities Act, 7 U.S.C. § 499a et seq. ("PACA"), and claims for failure to pay for goods sold, breach of contract, unlawful dissipation of trust assets by a corporate official, and breach of a personal guaranty. (Compl., Docket Entry No. 1.) Plaintiff alleges that Defendants accepted wholesale quantities of produce but have refused to pay for the goods. (Id. ¶¶ 7–8.) Plaintiff served Forum and Cai with a summons and Complaint on May 22, and 30, 2018, respectively. (Summons Returned for Forum, Docket Entry No. 5; Summons Returned for Cai, Docket Entry No. 7.) The Clerk of Court entered a certificate of default against Defendants on June 22, 2018. (Entry of Default, Docket Entry No. 10.)

On June 27, 2018, Plaintiff moved for a default judgment against Defendants solely pursuant to its PACA claim. (Pl. Mot. for Default J. ("Pl. Mot."), Docket Entry No. 11; Pl. Mem. of Law in Supp. of Pl. Mot. ("Pl. Mem."), Docket Entry No, 14.) By Order dated June 27, 2018, the Court referred Plaintiff's motion to Magistrate Judge Sanket J. Bulsara for a report and recommendation. (Order dated June 27, 2018.) By report and recommendation dated January 29, 2019, finding that the Court lacks subject matter jurisdiction, Judge Bulsara recommended that the Court deny Plaintiff's motion for default judgment and dismiss the Complaint without prejudice (the "R&R"). (See generally R&R, Docket Entry No. 17.) Plaintiff filed an objection to the R&R on February 5, 2019. (Pl. Obj., Docket Entry No. 18.)

By Order dated March 27, 2019, the Court denied Plaintiff's motion for default judgment but granted Plaintiff thirty (30) days to submit additional information that would establish that Forum is a "dealer" within the meaning of PACA. (Order dated Mar. 27, 2019.) On April 25, 2019, Plaintiff submitted a declaration attaching evidence in further support of its motion for default judgment. (Supplemental Declaration of Gregory Brown ("Brown Suppl. Decl."), Docket Entry No. 21.) For the reasons set forth below, the Court grants Plaintiff's motion for default judgment.

I. Background

a. Factual background

The Court assumes the truth of the factual allegations in the Complaint for purposes of determining Defendants' liability.

Plaintiff and Defendant Forum are New York corporations with their principal places of business in Brooklyn, New York, and are in the business of buying and selling wholesale quantities of produce. (Compl. ¶¶ 3–4.) During the relevant time period, Cai was "an officer, director and/or shareholder of Forum," who "controlled the operations of Forum," and "upon information and belief was in a position of control over the PACA trust assets belonging to Plaintiff." (Id. ¶ 5.)

From November 20, 2017 to January 6, 2018, Plaintiff sold and delivered produce worth $23,080.75 to Defendants. (Id. ¶ 7.) Defendants accepted the produce but failed to pay for the goods when payment was due. (Id. ¶ 8.) At the time Defendants received the produce, Plaintiff became a beneficiary of a PACA statutory trust designed to assure payment to produce suppliers."¹ (Id. ¶ 9.) Plaintiff "preserved its interest in the PACA trust in the amount of $28,080.75 and remains a beneficiary" until full payment is made on the balance owed. (Id. ¶ 10.) Plaintiff alleges that Defendants' failure to pay Plaintiff is an indication that Defendants have not "maintain[ed] sufficient assets in the statutory trust to pay [Plaintiff] and are dissipating trust assets." (Id. ¶11.)

Plaintiff seeks $23,080.75 in damages, as well as pre-judgment interest, costs, and attorneys' fees. (Id. at 6.)

II. Discussion

a. Standard of review

Pursuant to Rule 55 of the Federal Rules of Civil Procedure, there is "a ‘two-step process’ for the entry of judgment against a party who fails to defend: first, the entry of a default, and second, the entry of a default judgment." City of New York v. Mickalis Pawn Shop, LLC , 645 F.3d 114, 128 (2d Cir. 2011) (citing New York v. Green , 420 F.3d 99, 104 (2d Cir. 2005) ). However, the Second Circuit has an "oft-stated preference for resolving disputes on the merits," Enron Oil Corp. v. Diakuhara , 10 F.3d 90, 95 (2d Cir. 1993), and therefore "[a] plaintiff is not entitled to default judgment as a matter of right, merely because a party has failed to appear or respond," LG Funding, LLC v. Florida Tilt, Inc. , No. 15-CV-631, 2015 WL 4390453, at *2 (E.D.N.Y. July 15, 2015) (citing Erwin DeMarino Trucking Co. v. Jackson , 838 F. Supp. 160, 162 (S.D.N.Y. 1993) ). "[T]he court may, on plaintiffs' motion, enter a default judgment if liability is established as a matter of law when the factual allegations of the complaint are taken as true." Bricklayers & Allied Craftworkers Local 2, Albany, N.Y. Pension Fund v. Moulton Masonry & Const., LLC , 779 F.3d 182, 187 (2d Cir. 2015). "A default ... only establishes a defendant's liability if those allegations are sufficient to state a cause of action against the defendant." Taizhou Zhongneng Imp. & Exp. Co., Ltd. v. Koutsobinas , 509 F. App'x 54, 56 (2d Cir. 2013) ; LG Funding , 2015 WL 4390453, at *2 ("To determine whether the default judgment should issue, the [c]ourt examines whether ‘the factual allegations, accepted as true, provide a proper basis for liability and relief.’ " (quoting Rolls-Royce PLC v. Rolls-Royce USA, Inc. , 688 F. Supp. 2d 150, 153 (E.D.N.Y. 2010) )).

The decision to grant a motion for default judgment is left to the sound discretion of the district court. See Finkel v. Romanowicz , 577 F.3d 79, 87 (2d Cir. 2009) ("In permitting, but not requiring, a district court to conduct a hearing before ruling on a default judgment, Rule 55(b) commits this decision to the sound discretion of the district court."); Palmieri v. Town of Babylon , 277 F. App'x 72, 74 (2d Cir. 2008). In determining whether to grant a default judgment, the court looks to the same factors which apply to a motion to set aside a default judgment, namely: (1) whether the defendant's default was willful; (2) whether the defendant has a meritorious defense to the plaintiff's claims; and (3) the level of prejudice the non-defaulting party would suffer as a result of the denial of the motion for default judgment. See Pecarsky v. Galaxiworld.com, Ltd. , 249 F.3d 167, 170–71 (2d Cir. 2001) ; United States v. Myers , 236 F. Supp. 3d 702, 706 (E.D.N.Y. 2017).

b. Defendants' default was willful

The Court first considers whether the default was willful. A default is considered willful where the defendant fails to answer a complaint without explanation or justification. See S.E.C. v. McNulty , 137 F.3d 732, 738–39 (2d Cir. 1998) ; Myers , 236 F. Supp. 3d at 707 ; see also Indymac Bank v. Nat'l Settlement Agency, Inc. , No. 07-CV-6865, 2007 WL 4468652, at *1 (S.D.N.Y. Dec. 20, 2007) (finding that failure to respond to both the complaint and a motion for default judgment demonstrates willful conduct).

Forum was properly served with a summons and Complaint, which were left with an authorized agent in the Office of the Secretary of State of the State of New York on May 14, 2018. (Summons Returned Executed.) In addition, Cai was properly served at both of his potential addresses. (Decl. of Service ¶¶ 2–4, Docket Entry No. 16.) Despite being properly served, Defendants failed to answer the Complaint, respond to Plaintiff's motion, or otherwise appear in the action. Accordingly, the Court finds Defendants' default to be willful. See Sola Franchise Corp. v. Solo Salon Studios Inc. , No. 14-CV-946, 2015 WL 1299259, at *6 (E.D.N.Y. Mar. 23, 2015) ("Defendant has not responded to [p]laintiffs' motion for default judgment, has not appeared in this action, and has not communicated with the [c]ourt in any way. Accordingly, [d]efendant's failure to answer the [c]omplaint and to respond to the instant motion is sufficient to establish willfulness.").

c. The Court is not aware of any meritorious defenses and Plaintiff would suffer prejudice

The Court is not aware of any meritorious defenses Defendants could present in this matter.

In addition, denying the motion for default judgment would be prejudicial to Plaintiff, "as there are no additional steps available to secure relief in this Court." Myers , 236 F. Supp. 3d at 708–09 (quoting Bridge Oil Ltd. v. Emerald Reefer Lines, LLC , No. 06-CV-14226, 2008 WL 5560868, at *2 (S.D.N.Y. Oct. 27, 2008) ).

d. Defendants' liability under PACA

Plaintiff argues that Defendants are liable under section 499e(c) of PACA for failing to promptly pay for the produce they bought from Plaintiff. (Compl. ¶ 6.)

"Congress enacted PACA in 1930 to regulate the sale and marketing of produce in interstate commerce." Am. Banana Co., Inc. v. Republic Nat. Bank of N.Y., N.A. , 362 F.3d 33, 36 (2d Cir. 2004). In the 1980s, "Congress determined that sellers needed greater protection" and, in 1984, "amended PACA ... to make the sellers' interests in the commodities and sales proceeds superior to those of the buyers' creditors, including secured creditors." Id. at 37. To effectuate its intent, Congress added section 499e(c), "which requires licensed dealers to hold all perishable commodities purchased on short-term credit, as well as sales proceeds, in trust for the benefit of unpaid sellers":

Perishable agricultural commodities received by a commission merchant, dealer, or broker in all transactions, and all inventories of food or other products derived from perishable agricultural commodities, and any receivables or

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