Leprino Foods Co. v. JND Thomas Co.

LEPRINO FOODS COMPANY, Plaintiff, v. JND THOMAS COMPANY, INC., et al., Defendants.

Case No. 1:16-cv-01181-LJO-SAB

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF CALIFORNIA

January 12, 2017

FINDINGS AND RECOMMENDATIONS RECOMMENDING GRANTING PLAINTIFF'S MOTION FOR DEFAULT JUDGMENT

(ECF Nos. 13-16, 21, 23, 25, 29)

OBJECTIONS DUE WITHIN FOURTEEN DAYS

Currently before the Court is Plaintiff Leprino Foods Company motion for default judgment. (ECF Nos. 13-16.) Defendants JND Thomas Company and Dennis Thomas have not filed an opposition to the motion and the time to do so has expired.

Oral argument on Plaintiff's motion was set for December 28, 2016. Counsel Patrick Markham appeared telephonically for Plaintiff Leprino Foods Company. Defendants did not appear for the hearing.

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I.BACKGROUND

On May 6, 2011, Plaintiff Leprino Foods Company ("Plaintiff") and Defendant JND. Thomas Company ("Defendant JND") executed a By-Product Removal Service Agreement. (First Am. Compl. ¶ 6.) The agreement provided that Defendant JND would remove and lawfully dispose of all by products from Plaintiff's business. (First Am. Compl. ¶ 7-9.) On September 21, 2015, Plaintiff and Defendant JND received a notice a notice of violation ("NOV") from the Central Valley Regional Water Quality Control Board based upon the handling of residual solids from Plaintiff's wastewater processing facility. (First Am. Compl. ¶ 11.) On October 2, 2015, Plaintiff tendered a demand that Defendant JND pay the costs and expenses incurred relating to the violation. (First Am. Compl. ¶ 13.) Defendant JND assured Plaintiff that Defendant JND would provide full indemnity for the costs and expenses. (First Am. Compl. ¶ 13.)

On January 22, 2016, a final Cleanup and Abatement Order ("CAO") found that Plaintiff's facility was not in compliance regarding the proper disposal of residual solids. (First Am. Compl. ¶ 12.) Plaintiff has incurred costs and expenses in excess of $89,000.00 to resolve the violations. (First Am. Compl. ¶ 15.) Plaintiff requested that Defendant JND pay the costs and expenses by May 17, 2016, or a civil action would be filed. (First Am. Compl. ¶ 16.) Defendant JND did not pay the requested costs and expenses. (First Am. Compl. ¶ 20.)

On August 10, 2016, Plaintiff filed this action against Defendants JND and Thomas alleging claims for breach of contract, declaratory relief, implied indemnity, and negligence. (ECF No. 1.) Defendants JND and Thomas were served on September 6, 2016. (ECF Nos. 5-1, 5-2.) On October 28, 2016, entry of default was entered against Defendants JND and Thomas. (ECF Nos. 11, 12.) Plaintiff filed a motion for entry of default judgment on November 23, 2016. (ECF Nos. 13-16.) Plaintiff is seeking monetary damages of $88,844.03, attorney fees and costs in the amount of $21,960.75, and a declaratory judgment that Defendants are responsible for further costs and attorney fees incurred pursuant to the agreement.

On December 12, 2016, an order issued requiring Plaintiff to show cause why thecomplaint should not be dismissed for failure to properly allege diversity jurisdiction and addressing specific deficiencies in the motion for entry of default judgment. (ECF No. 19.) Plaintiff filed a first amended complaint on December 16, 2016. (ECF No. 20.) On December 19, 2016, Plaintiff filed a response to the order to show cause and requested additional time to file a supplemental declaration and evidence. (ECF No. 21.) On December 20, 2016, an order issued discharging the order to show cause and granting Plaintiff's request to file a supplemental declaration and evidence. (ECF No. 22.) On December 22, 2016, Plaintiff filed two declarations in support of the motion for default judgment. (ECF Nos. 23, 25.) During oral argument on December 28, 2016, Plaintiff was permitted to file supplemental briefing addressing Colorado law. (ECF Nos. 26, 28.) On January 6, 2017, Plaintiff filed a supplemental memorandum of points and authorities. (ECF No. 29.)

II.LEGAL STANDARDS FOR DEFAULT JUDGMENT

Entry of default judgment is governed by Federal Rule of Civil Procedure 55(b), which states, in pertinent part:

(2) By the Court. In all other cases¹, the party must apply to the court for a default judgment. A default judgment may be entered against a minor or incompetent person only if represented by a general guardian, conservator, or other like fiduciary who has appeared. If the party against whom a default judgment is sought has appeared personally or by a representative, that party or its representative must be served with written notice of the application at least 7 days before the hearing. The court may conduct hearings or make referrals—preserving any federal statutory right to a jury trial—when, to enter or effectuate judgment, it needs to:

(A) conduct an accounting;

(B) determine the amount of damages;

(C) establish the truth of any allegation by evidence; or

(D) investigate any other matter.

Upon entry of default, the complaint's factual allegations regarding liability are taken as true. Geddes v. United Financial Group, 559 F.2d 557, 560 (9th Cir. 1977); Microsoft Corp. v. Nop, 549 F. Supp. 2d 1233, 1235 (E.D. Cal. 2008). However, the complaint's factual allegations relating to the amount of damages are not taken as true. Geddes, 559 F.2d at 560. Accordingly,the amount of damages must be proven at an evidentiary hearing or through other means. Microsoft Corp., 549 F. Supp. 2d at 1236; Garamendi v. Henin, 683 F.3d 1069, 1080 (9th Cir. 2012). Per Federal Rule of Civil Procedure 54(c), "[a] default judgment must not differ in kind from, or exceed in amount, what is demanded in the pleadings."

The Court's decision on whether to enter a default judgment is discretionary. Eitel v. McCool, 782 F.2d 1470, 1471 (9th Cir. 1986). The Ninth Circuit has set forth the following factors that the court may consider in exercising that discretion include:

(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, 782 F.2d at 1471-72.

III.DISCUSSION

A. Jurisdiction

The operative complaint in this action is the first amended complaint filed on December 16, 2016. (ECF No. 20.)

1. Subject-Matter Jurisdiction

The Court has subject-matter jurisdiction to rule on cases in which defendants and plaintiffs are citizens of different states and the amount in controversy is greater than $75,000. 28 U.S.C. § 1332. The Supreme Court has interpreted § 1332 to require complete diversity between parties, where "the citizenship of each plaintiff is diverse from the citizenship of each defendant." Caterpillar Inc. v. Lewis, 519 U.S. 61, 68 (1996). A corporation is deemed to be a citizen of any State by which it has been incorporated and of the State where it has its principal place of business. Lincoln Prop. Co. v. Roche, 546 U.S. 81, 94 (2005) (quoting 28 U.S.C. § 1332(c)(1)).

Plaintiff is a corporation formed under the laws of the State of Colorado with its principal place of business in Denver, Colorado. (First Am. Compl. ¶ 1.) Defendant JND is a corporationformed under the laws of the State of California with its principal place of business in Riverdale, California. (First Am. Compl. ¶ 3.) Defendant Thomas is a citizen of the state of California. (First Am. Compl. ¶ 3.) Plaintiff's allegations are sufficient to establish that diversity of citizenship exists between all defendants and the plaintiff in this action.

Plaintiffs are seeking damages of $88,844.03. (ECF No. 14 at 6.) The jurisdictional requirement for the amount in controversy is met.

As Plaintiff has adequately alleged diversity of citizenship and the amount in controversy requirement, the Court finds that jurisdiction exists under 28 U.S.C. § 1332.²

2. Service of Process

a. Service on Corporation

The Federal Rules of Civil Procedure provide for two ways to effectuate service on a corporation. Pursuant to Federal Rule of Civil Procedure 4(h), a corporation must be served "in a manner prescribed by Rule 4(e)(1) for serving an individual; or . . . by delivering a copy of thesummons and of the complaint to an officer, a managing or general agent or any agent, authorized by appointment or by law to receive service of process. . . ." Rule 4(e)(1) provides that service may be effectuated by following the law of the state in which the service is to be made.

Under California law service of a corporation may be made by service on the person designated as agent for service of process or "the president, chief executive officer, or other head of the corporation, a vice president, a secretary or assistant secretary, a treasurer or assistant treasurer, a controller or chief financial officer, a general manager or a person authorized by the corporation to receive service of process." Cal. Code. Civ. P. §§ 416.10(a) and (b). Under either method, service of a corporation must be made on either the agent for service or "a representative so integrated with the organization that he will know what to do with the papers." Direct Mail Specialists, Inc. v. Eclat Computerized Technologies, Inc., 840 F.2d 685, 688 (9th Cir. 1988) (citations omitted).

Dennis Thomas is the designated agent for service for JND Thomas Company, Inc. See Business Entity Detail for J.N.D. Thomas Company, Inc. located at http://kepler.sos.ca.gov/, enter JND Thomas Company at Entity Name, last visited December 7, 2016. Plaintiff served Defendant JND on September 6, 2016 by leaving the service documents with the operations manager at the address listed for the agent for service of process. (ECF No. 9-2 at 8.) On September 21, 2016, Plaintiff had copies of the service documents mailed to the address at which the...