Mor USA, Inc. v. Adam Trading, Inc.

MOR USA, INC., A NEW JERSEY CORPORATION, Plaintiff, v. ADAM TRADING, INC., A NEW YORK DISSOLVED CORPORATION,AND WALID M. ALI, AN INDIVIDUAL, Defendants.

19-cv-07283 (AMD) (ST)

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF NEW YORK

February 10, 2021

REPORT AND RECOMMENDATION

TISCIONE, United States Magistrate Judge:

Mor USA, Inc. ("Plaintiff") commenced this action against Adam Trading, Inc. ("Adam Trading") and Walid M. Ali ("Ali") (together, "Defendants") on December 30, 2019, alleging causes of action under New York State law and the Perishable Agricultural Commodities Act of 1930, as amended, 7 U.S.C. §§ 499a-t ("PACA"). Defendants have failed to answer or otherwise respond to Plaintiff's Complaint, and Plaintiff has filed a Motion for Default Judgment against Defendants. The Honorable Ann M. Donnelly referred Plaintiff's Motion to the undersigned to issue a Report and Recommendation.

For the reasons set forth below, the Court respectfully recommends that Plaintiff's Motion for Default Judgment be GRANTED.

I. BACKGROUND

a. Factual Background

Plaintiff is a New Jersey corporation with its principal place of business in Avondale, Pennsylvania. Compl. ¶ 1. Adam Trading is a New York dissolved corporation with its principal place of business in Staten Island, New York, and Ali is an individual who resides in Staten Island, New York. Id. ¶ 2. During the relevant time period, Ali was an officer, director, investor, shareholder, or employee of Adam Trading and controlled or was in a position to control Adam Trading's PACA trust assets. Id. ¶¶ 48-49. Ali had knowledge of and responsibility for Adam Trading's operations and financial dealings, a duty to ensure that Adam Trading fulfilled its duties as a trustee of the PACA trust, and a duty to ensure that Adam Trading maintained sufficient PACA trust assets to pay PACA trust beneficiaries as their claims became due. Id. ¶¶ 50-52.

Between April 1, 2019 and September 20, 2019, Plaintiff and Adam Trading entered into contracts for Plaintiff to sell Adam Trading produce in interstate commerce. Id. ¶ 6. The total invoice amount of the produce was $73,119.04. Id. Adam Trading accepted the produce without objection, but, despite Plaintiff's demands, failed to pay for the produce. Id. ¶¶ 7-8. Plaintiff sent Adam Trading invoices that reflected the agreed upon amounts that Adam Trading owed. Id. ¶ 9. Adam Trading did not deny receipt of the invoices and produce, nor did it deny the terms and conditions stated on the invoices. Id. ¶ 10. During the time of the transactions, Plaintiff held a valid PACA license that was issued by the United States Department of Agriculture. Id. ¶ 32; see Decl. Robin Sporn Supp. Mot. Default J. ("Sporn Decl."), Ex. 1, Dkt. No. 13-3.

b. Procedural History

Plaintiff commenced this action against Defendants on December 30, 2019. See generally Compl. Plaintiff served Adam Trading on January 31, 2020 and Ali on March 5, 2020. Summonses Returned Executed, Dkt. Nos. 7, 10. Defendants failed to answer or otherwise respond to Plaintiff's Complaint. Thereafter, Plaintiff requested default be entered against Defendants. Reqs. Certificates Default, Dkt. Nos. 8, 11. The Clerk of Court entered defaultagainst Adam Trading on March 16, 2020 and against Ali on April 6, 2020. Clerk's Entries Default, Dkt. Nos. 9, 12.

Before the Court is Plaintiff's Motion for Default Judgment, filed on May 12, 2020. See generally Mot. Default J. ("Mot."), Dkt. No. 13. Plaintiff's Motion argues Adam Trading breached its contract with Plaintiff, Plaintiff is a valid PACA trust beneficiary of Adam Trading, Ali is personally liable to Plaintiff, and Plaintiff is entitled to contractual attorneys' fees and pre-judgment interest in addition to damages. See id. In sum, Plaintiff's Motion seeks: a declaration that Plaintiff has a valid PACA trust claim against Adam Trading; and judgement holding Defendants jointly and severally liable to Plaintiff for principal damages, costs, attorneys' fees, pre-judgment interest, and post-judgment interest. Id. at 8. In support of its Motion, Plaintiff submits the Declaration of Robin Sporn, who is Plaintiff's sales manager, and the Declaration of Steven E. Nurenberg ("Nurenberg"), who is an attorney for Plaintiff. See generally Sporn Decl.; Decl. Steven E. Nurenberg Supp. Mot. Default J. ("Nurenberg Decl."), Dkt. No. 13-4.

On January 29, 2021, the undersigned held a hearing on Plaintiff's Motion. Min. Order Mot. Hr'g, Dkt. No. 16. In connection with that hearing, Plaintiff filed documents supporting its damages claims. See generally Pl.'s Resp. Ct.'s Jan. 18, 2021, Min. Order ("Resp. Min. Order"), Dkt. No. 14; Pl.'s Notice Suppl. Filing Supp. Mot. Default J. ("Suppl. Filing"), Dkt. No. 15.

II. LEGAL STANDARD

Rule 55 of the Federal Rules of Civil Procedure establishes the two-step process for a plaintiff to obtain a default judgment. First, "[w]hen 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." Fed. R. Civ. P. 55(a). Second, after a default has been entered against a defendant, and the defendant fails to appear or move toset aside the default under Rule 55(c), the Court may, on plaintiff's motion, enter a default judgment. Fed. R. Civ. P. 55(b)(2). In light of the Second Circuit's "oft-stated preference for resolving disputes on the merits," default judgments are "generally disfavored." Enron Oil Corp. v. Diakuhara, 10 F.3d 90, 95-96 (2d Cir. 1993). "Accordingly, just because a party is in default, the plaintiff is not entitled to a default judgment as a matter of right." Mktg. Devs., Ltd. v. Genesis Imp. & Exp., Inc., No. 08-CV-3168 (CBA) (CLP), 2009 WL 4929419, at *2 (E.D.N.Y. Dec. 21, 2009) (citing Erwin DeMarino Trucking Co. v. Jackson, 838 F. Supp. 160, 162 (S.D.N.Y. 1993)).

On a motion for default judgment, the Court "is required to accept all of the [plaintiff's] factual allegations as true and draw all reasonable inferences in its favor." Finkel v. Romanowicz, 577 F.3d 79, 84 (2d Cir. 2009) (citing Au Bon Pain Corp. v. Artect, Inc., 653 F.2d 61, 65 (2d Cir. 1981)). In determining whether to issue a default judgment, the Court has the responsibility to ensure that plaintiff's "allegations establish [defendant's] liability as a matter of law." Id.; accord City of New York v. Mickalis Pawn Shop, LLC, 645 F.3d 114, 137 (2d Cir. 2011). In other words, "after default . . . it remains for the court to consider whether the unchallenged facts constitute a legitimate cause of action, since a party in default does not admit conclusions of law." Rolls-Royce PLC v. Rolls-Royce USA, Inc., 688 F. Supp. 2d 150, 153 (E.D.N.Y. 2010) (citation omitted).

III. DISCUSSION

a. This Court has Jurisdiction

This Court has jurisdiction because Plaintiff's claims arise in part under PACA. 28 U.S.C. § 1331 ("The district courts shall have original jurisdiction of all civil actions arising under the . . . laws . . . of the United States."). In a "civil action of which the district courts have original jurisdiction, the district courts shall have supplemental jurisdiction over all other claims that are so related to claims in the action within such original jurisdiction that they form part ofthe same case or controversy . . . ." Id. § 1367(a). This Court may therefore exercise supplemental jurisdiction over Plaintiff's breach of contract claim.

Venue is proper because a substantial part of the events and omissions underlying this lawsuit occurred in this district. Id. §1391(b).

b. Defendants have Defaulted

Even though Plaintiff properly served Defendants, Defendants failed to answer or otherwise respond to Plaintiff's Complaint. See Summonses Returned Executed. In response to Plaintiff's requests, the Clerk of Court entered Defaults against Defendants. See Reqs. Certificates of Default; Clerk's Entries Default. Thus, per the standard provided by Federal Rule of Civil Procedure 55(a), Defendants are properly considered to have admitted all factual allegations in the Complaint and are subject to this Court's assessment of their liability thereby.

c. Adam Trading is Liable for Breach of Contract

Plaintiff alleges Adam Trading is liable for breaching contracts it entered with Plaintiff between April 1, 2019 and September 20, 2019. Compl. ¶¶11-16. The invoices that Plaintiff submitted in support of its claim do not contain a choice of law provision, though Plaintiff cites New York case law. See Mot. at 2. "New York law provides that parties may consent to the law of a particular jurisdiction through their conduct, absent 'strong countervailing public policy.'" Nedspice US Inc. v. Castella Imps., Inc., 20-CV-1802 (ARR) (SIL), 2020 WL 6785335, at *2 (E.D.N.Y. Oct. 22, 2020) (citations omitted), adopted by 2020 WL 6784178 (E.D.N.Y. Nov. 18, 2020). Here, Adam Trading is a dissolved New York corporation that had its principal place of business in New York and Plaintiff cites New York law in support of its breach of contract claim. Accordingly, the Court will apply New York law. See id. (applying New York law to resolve breach of contract claim where defendant in default is a New York corporation with itsprincipal place of business in New York and out-of-state plaintiff cites New York law in support of its claims). Under New York law, a plaintiff in a breach of contract action must show: "(1) the existence of an agreement, (2) adequate performance of the contract by the plaintiff, (3) breach of contract by the defendant, and (4) damages." Eternity Glob. Master Fund Ltd. v. Morgan Guar. Tr. Co. of N.Y., 375 F.3d 168, 177 (2d Cir. 2004) (citation omitted).

Plaintiff's well-pleaded allegations establish the existence of an agreement. The Complaint states that Plaintiff and Adam Trading entered into contracts for shipments of produce. Compl. ¶ 12. The Sporn Declaration provides further detail, explaining the contracts were for ...