Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-2_10-cv-01813/USCOURTS-azd-2_10-cv-01813-1/pdf.json

Nature of Suit Code: 891
Nature of Suit: Agricultural Acts
Cause of Action: 07:499 Agricultural Commodities Act

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WO

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

John Harmon, dba Harmon Company

Produce, 

Plaintiff, 

vs.

RAR Enterprises, Inc., et. al., 

Defendants. 

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No. CV-10-01813-PHX-FJM

ORDER

The court has before it plaintiff's motion for default judgment (doc. 43), defendants'

opposition (doc. 46), and plaintiff's reply (doc. 51). We also have before us defendants'

motion to dismiss for lack of jurisdiction or alternatively motion to change venue or transfer

the case (docs. 48, 50) and plaintiff's response (doc. 54). Defendants did not file a reply.

I. Background

On August 24, 2010, plaintiff filed this action against defendants alleging three claims

for relief: (1) breach of contract; (2) insufficient funds check and 3) Perishable Agricultural

Commodities Act ("PACA") award. Plaintiff alleges that defendant RAR Enterprises, Inc.

("RAR") maintained an open account with plaintiff to purchase perishable agriculture.

Plaintiff claims that defendant RAR breached its open account contract by failing to pay all

debts, totaling $79,929.00. On January 12, 2010 the United States Department of Agriculture

Case 2:10-cv-01813-FJM Document 56 Filed 06/03/11 Page 1 of 7
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entered a default order pursuant to the Perishable Agricultural Commodities Act ("PACA")

against defendant RAR in the amount of $79,929.00 as reparation for damages plaintiff

suffered. See doc. 1, ex. 1. Defendants have not complied with the default order. Plaintiff

now seeks an order pursuant to 7 U.S.C. § 499e(c) that defendant RAR's agricultural

commodities and any receivables or proceeds therefrom, be held in trust for the benefit of

plaintiff until the debts are satisfied. Plaintiff's second claim is asserted against the

individual defendants, Raul and Genoviva Ramirez for writing and issuing, on behalf of

RAR, two bad checks in violation of A.R.S. § 12-671(a). 

We have before us a motion for default judgment and a motion to dismiss for lack of

jurisdiction or alternatively motion to change venue/transfer the case. We address the motion

to dismiss first because without jurisdiction we have no power to enter default judgment.

II. Personal Jurisdiction

Defendants move to dismiss the complaint for lack of personal jurisdiction pursuant

to Rule 12(b)(2), Fed. R. Civ. P. Defendants maintain that they are residents of California

and have not established minimum contacts with Arizona such that the exercise of

jurisdiction would be reasonable. Plaintiff argues that we have personal jurisdiction over

defendant RAR pursuant to 7 U.S.C. 499g(b). As for the individual defendants, plaintiff

asserts that by writing and issuing two bad checks, the individual defendants intentionally

directed their activities to Arizona such that we have personal jurisdiction.

Plaintiff bears the burden of establishing personal jurisdiction over defendants by

making a prima facie showing of all jurisdictional facts. See Pebble Beach Co. v. Caddy,

453 F.3d 1151, 1154 (9th Cir. 2006). For the purposes of a motion to dismiss, all factual

allegations are taken as true and any conflicts must be resolved in plaintiff's favor. Harris

Rutsky & Co. Ins. Servs. v. Bell Clements Ltd., 328 F.3d 1122, 1129 (9th Cir. 2003). We

assess personal jurisdiction over each defendant individually.

Plaintiff contends that we have personal jurisdiction over defendant RAR pursuant to

7 U.S.C. § 499g(b). We agree. The statute states that if any merchant "does not pay the

reparation award within the time period specified in the Secretary's order, the complainant

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1

In the motion to dismiss, defendants argued that plaintiff asserted all three claims

against the individual defendants. Plaintiff conceded in his response to the motion to dismiss

that the complaint was poorly pled. Plaintiff states that the only claim asserted against the

individual defendants is claim two. 

2

 Plaintiff originally named Alvaro Ramirez and his wife as individual defendants.

Claims against both parties were dismissed without prejudice.

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. . . may within three years of the date of the order file in the district court of the United

States for the district in which he resides." § 499g(b). On January 12, 2010, the Secretary

of Agriculture issued a reparation award ordering defendant RAR to pay plaintiff within

thirty days of the order. Defendant RAR did not pay plaintiff. Plaintiff is entitled to bring

this action in the District of Arizona because he is an Arizona resident. We have personal

jurisdiction over defendant RAR.

Plaintiff's second claim alleges that the individual defendants, Raul and Genoviva

Ramirez violated A.R.S. § 12-671 by intentionally issuing checks drawn on accounts with

insufficient funds.1

 Arizona's long-arm statute permits personal jurisdiction to the extent

permitted by the due process clause of the United States Constitution. See Brainerd v.

Governors of the University of Alberta, 873 F.2d 1257, 1258 (9th Cir. 1989); see also

Ariz.R.Civ.P. Rule 4(e)(2). Thus, we need only determine whether personal jurisdiction

would meet the requirements of due process. 

The parties only dispute the existence of specific jurisdiction. The Ninth Circuit

applies a three-part test for specific jurisdiction: (1) the defendant has performed some act

or consummated some transaction within the forum or otherwise purposefully availed himself

of the privileges of conducting activities in the forum; (2) the claim arises out of or results

from defendant's forum-related activities; and (3) the exercise of jurisdiction is reasonable.

Pebble Beach Co., 453 F.3d at 1155. In the case of intentional torts, the purposeful

availment requirement also may be satisfied if the defendant intentionally directs his

activities into the forum state and causes harm therein. See Brainerd, 873 F.2d at 1259.

Plaintiff alleges that Raul Ramirez signed and issued bad checks on behalf of RAR.2

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Raul is the president of RAR. Genoviva is Raul's wife. Although Genoviva is not alleged

to have signed the bad checks, in order to reach assets of community property under Arizona

law, spouses must be sued jointly. See A.R.S. § 25-215(D); see also Rodgers v. Bryan, 82

Ariz. 143, 309 P.2d 773 (1957) (stating that community property may be liable for the

intentional tort committed by one spouse when the tort was committed for the benefit of the

community).

Plaintiff claims that by signing bad checks, Raul intentionally directed his activities

to Arizona and knew that the resulting harm and injury would occur in Arizona. Defendants

deny signing the bad checks and state that a third-party broker "may have." Because we

assume all factual allegations in the complaint to be true, and resolve all disputes in favor of

plaintiff, we assume that Raul did sign and issue the bad checks. By contacting and issuing

two bad checks to plaintiff in Arizona, Raul intentionally directed his activities to Arizona

and caused harm there. Thus, prongs one and two of the specific jurisdiction test are met.

Due process also requires the assertion of jurisdiction to be reasonable. Brainerd, 873

F.2d at 1260. Because we find that Raul purposefully directed his activities to Arizona,

personal jurisdiction is presumed to be reasonable, absent a compelling argument otherwise.

Id. Defendants do not make a compelling case. Defendants assert that they would suffer an

undue economic burden in defending the action in Arizona because only RAR has an open

book account with plaintiff and the individual defendants cannot be liable for the corporate

debt. Contrary to this assertion, however, there is authority supporting the notion that a

principal of a company may be personally liable for the PACA debts of a corporation if the

entity is unable to satisfy the debt. See Sunkist Growers, Inc. v. Fisher, 104 F.3d 280, 284

(9th Cir. 1997). Defendants fail to show that litigation in Arizona would be so "gravely

difficult and inconvenient" or place them at a "severe disadvantage." Burger King Corp. v.

Rudzewicz, 471 U.S. 462, 478, 105 S.Ct. 2174, 2185 (1985). Accordingly, we have personal

jurisdiction over Raul and Genoviva Ramirez. Having personal jurisdiction over defendants

RAR and Raul and Genoviva Ramirez, we deny defendants' motion to dismiss for lack of

personal jurisdiction. 

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III. Venue and Motion to Transfer

Defendants alternatively request that we dismiss this action for improper venue

pursuant to Rule 12(b)(3), Fed. R. Civ. P. and 28 U.S.C. § 1406. Defendants also move to

transfer the case pursuant to 28 U.S.C. § 1631. 

Section 1406 permits a court to transfer a case if venue is improper. As demonstrated

by the above discussion, venue is not improper in Arizona. 7 U.S.C. § 499g(b) clearly states

that an action to enforce a PACA award may be brought in the district in which the merchant

resides, here Arizona. As for the breach of contract and insufficient funds check claims,

venue is proper because a "substantial part of the events or omissions giving rise to the

claim[s] occurred" in Arizona. 28 U.S.C. § 1391. Plaintiff resides in Arizona, produced and

shipped the goods from Arizona, and received the bad checks in Arizona.

 Curiously, defendants did not move for a change of venue pursuant to 28 U.S.C. §

1404(b), which would permit transfer of a case for the convenience of the parties, witnesses,

and in the interest of justice. § 1404(a). Instead, defendants only seek to change venue under

§ 1406 and move to transfer the case pursuant to 28 U.S.C. § 1631. 28 U.S.C. § 1631 only

permits transfer of cases upon a finding that the court lacks jurisdiction. Having found we

have jurisdiction, we cannot transfer the case pursuant to § 1631. Accordingly as pled, we

deny defendants' motions to change venue or transfer the case. 

IV. Failure to State a Claim

Defendants next move to dismiss the complaint for failure to state a claim against the

individual defendants. Plaintiff only asserts claim two against the individual defendants.

A.R.S. § 12-671 allows an individual to assert an action against a "person who, for himself

or for another, with intent to defraud, makes, draws, utters or delivers to another person or

persons a check or draft on a bank . . . knowing at the time . . . that he or his principal does

not have an account or does not have sufficient funds" § 12-671(a). Plaintiff sufficiently

alleges that Raul signed two bad checks on behalf of RAR issued to plaintiff. Plaintiff has

stated a claim against Raul. Moreover, since Arizona law requires joining the spouse to

obtain community property assets to satisfy a judgment, plaintiff has stated a claim against

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Genoviva.

V. Motion for Default Judgment

Having found that we have personal jurisdiction over defendants, we address

plaintiff's motion for default judgment (doc. 43). Plaintiff moves for a default judgment

against RAR Enterprises, Inc., Raul Ramirez and Genoviva Ramirez. Defendants argue that

good cause exists to deny this motion because default was taken as a result of mistake,

inadvertence, or excusable neglect.

The procedural history of this case is quite confusing. Plaintiff originally filed proof

of service on all defendants, including Alvaro Ramirez, on October 18, 2010. On November

1, 2010, the clerk entered default as to RAR Enterprises and Alvaro and Raul Ramirez. We

then granted a default judgment on December 16, 2010 (doc. 32). On January 18, 2010,

plaintiff filed waivers of service by Genoviva and Raul Ramirez along with a "Request to

Vacate Judgment" (doc 35). The very next day, plaintiff filed another Application for Entry

of Default against Raul and Genoviva Ramirez, all the while leaving out defendant RAR.

We noted the perplexing nature of plaintiff's filings but nevertheless granted plaintiff's

request to vacate the judgment (doc. 40). Then, on the very same day we vacated the

judgment, plaintiff yet again filed another application for an entry of judgment (doc. 41) and

moved for default judgment (docs. 43, 44). 

Plaintiff and defendants attempt to explain the perplexing nature of the filings.

Although plaintiff thought he successfully served all defendants, in December, defendants'

counsel informed plaintiff that he could not have served Alvaro Ramirez because he was

dead. Counsel also claimed that the other defendants were not properly served. Upon

learning that service was ineffective, plaintiff sought to have the original judgment vacated

in exchange for defendants' waiving service and filing a responsive pleading on or before

January 17, 2011. When defendants failed to file anything, plaintiff filed another application

for default judgment.

Defendants now ask that we set aside the entry of default pursuant to Rule 55(c), Fed.

R. Civ. P. Rule 55(c) allows a court to set aside an entry of default for "good cause."

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Although a finding of good cause is ultimately within the discretion of the court, three factors

should be considered: (1) whether the defendant[s'] culpable conduct led to default; (2)

whether the defendant[s have] a meritorious defense; and (3) whether setting aside default

would prejudice the other party. Franchise Holding II, LLC v. Huntington Rests. Group, Inc.,

375 F.3d 922, 925-26 (9th Cir. 2004). The parties do not address this standard. 

Defendants argue that good cause exists to set aside the default because they could not

file a responsive pleading until the original default was vacated and counsel experienced

certain personal emergencies that caused him to neglect filing deadlines. Given the

procedural irregularities of the case, we find both parties' culpable conduct led to the entry

of default. Defendants, at least, should have attempted to file a responsive pleading, rather

than just ignore plaintiff's continued filings. We next consider whether defendants have a

meritorious defense. While it seems unlikely that defendant RAR has one, if a third party

broker, rather than Raul signed the checks, Raul and Genoviva may have a defense. Finally,

plaintiff offers no reason why he would be prejudiced by setting aside the default.

Considering all of the above, we deny plaintiff's motion for default judgment (doc. 43).

Accordingly it is ORDERED DENYING defendants' motion to dismiss or motion

to change venue/transfer case (doc. 48). It is FURTHER ORDERED DENYING plaintiff's

motion for default judgment (doc. 43).

DATED this 2nd day of June, 2011.

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