Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-4_05-cv-04504/USCOURTS-cand-4_05-cv-04504-6/pdf.json

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

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UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

REY REY PRODUCE SFO, INC.,

Plaintiff(s),

v.

M&M PRODUCE AND FOOD SERVICE

SUPPLIES, INC., FELIPE CEJA

and CHRISTIAN CEJA,

Defendant(s).

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No. C05-4504 BZ

AMENDED REPORT AND

RECOMMENDATION ON

PLAINTIFF’S MOTION FOR

DEFAULT JUDGMENT

Plaintiff’s motion for entry of default judgment against

defendants M&M Produce and Food Service Supplies, Inc.

(“M&M”), Felipe Ceja and Christian Ceja came on for hearing on

April 19, 2006, at 10:00 a.m. Christian Ceja appeared on

April 19, 2006, and the motion was continued to July 5, 2006,

to allow the parties to exchange information and discuss a

resolution. The parties did not reach a resolution and

plaintiff’s motion came on for hearing again on July 5, 2006. 

Defendants did not appear and did not request that their

default be set aside. As defendants have not consented to

magistrate judge jurisdiction, the following is a report and

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recommendation for entry of default judgment.

On November 4, 2005, plaintiff filed a complaint for

violations of the Perishable Agricultural Commodities Act

(“PACA”) under 7 U.S.C. §499e, et seq. Plaintiff alleged that

it sold and shipped $8,316.80 in perishable agricultural

commodities to defendants for which they have failed and

refused to pay. Complaint (“Compl.”) ¶¶ 11, 13.

Plaintiff served defendants with a copy of the complaint

on November 21, 2005. Defendants failed to answer the

complaint or otherwise defend the action. On December 22,

2005, the Clerk of this court entered defendants’ default

under Rule 55(a). By their default, defendants are deemed to

have admitted the well-pled averments of the complaint except

those as to the amount of damages. See Fed. R. Civ. P. 8(d). 

A court may not enter a default judgment against an

unrepresented minor, an incompetent person, or a person in

military service. See Fed. R. Civ. P. 55(b)(2); 50 App.

U.S.C. § 521. Plaintiff submitted the declaration of its

attorney who stated on information and belief that none of the

defendants are infants or incompetent persons or in military

service. See Declaration of Bart M. Botta ¶ 12 (“Botta

Decl.”). I reminded plaintiff in my Scheduling Order that

compliance with the Soldiers’ and Sailors’ Civil Relief Act of

1940 may not be satisfied on information and belief, but at

the April 19, 2006 hearing, it was apparent that Christian

Ceja is not a minor, an incompetent person or in military

service, and he did not raise this concern on behalf of his

father. The corporate defendant, M&M, is not subject to this

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limitation. 

Pursuant to Rule 55(b)(2), a court may enter a default

judgment against a party against whom default has been

entered. The decision to grant or deny a default judgment

under Rule 55(b) is within the discretion of the court. Eitel

v. McCool, 782 F.2d 1470, 1471-72 (9th Cir. 1986). Having

reviewed the complaint, I find that the allegations are

sufficiently well-pled to support default judgment. 

PACA makes it unlawful for any commission merchant,

dealer, or broker in connection with any transaction in

interstate or foreign commerce to “fail or refuse truly and

correctly to account and make full payment promptly in respect

of any transaction in any [perishable commodity] to the person

with whom such transaction is had” or “fail to maintain the

trust as required under section 499e(c).” 7 U.S.C. § 499b(4). 

Section 499e(c) requires a trustee to hold any commodities and

receivables or proceeds from the sale of such commodities in

trust for the benefit of all unpaid suppliers or sellers until

full payment of the sums owing have been received by the

supplier or seller. 7 U.S.C. §499e(c). Under PACA, a

commission merchant, dealer, or broker that violates any

provision of section 449b shall be liable for the full amount

of damages sustained in consequence of such violation. 7

U.S.C. § 499e(a). “‘PACA liability attaches first to the

licensed seller of perishable agricultural commodities. 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

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trust.’” Sunkist Growers, Inc., v. Fisher, 104 F.3d 280, 283

(9th Cir. 1997)(citing Shepard v. K.B. Fruit & Vegetable,

Inc., 868 F. Supp 703, 706 (E.D. Pa. 1994)). As such,

“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.” 

Sunkist, 104 F.3d at 283. PACA also requires the unpaid

supplier, seller, or agent to give written notice of intent to

preserve the benefits of the trust. 7 U.S.C. §499e(c)(3),(4).

As a threshold matter, plaintiff alleges that defendants

were engaged in handling produce in interstate and/or foreign

commerce as dealers and/or commission merchants subject to

PACA. Compl. ¶ 9. According to the complaint, defendants

meet the statutory definition of trustee under PACA. Compl.

¶¶ 9, 21. Plaintiff alleges on information and belief that

Felipe Ceja and Christian Ceja were officers, directors,

and/or shareholders of M&M and were statutory trustees under

PACA in a position to control the trust assets that are the

subject of the action. Compl. ¶¶ 5-8. Defendants allegedly

failed to maintain the trust assets for the satisfaction of

their obligation to plaintiff and continue to fail and refuse

to make full payment. Compl. ¶¶ 21-22, 25; Declaration of

Manuel Reynoso ¶ 8 (“Reynoso Decl.”). Plaintiff gave written

notice of intent to preserve the benefits of the trust in its

invoices to defendants. Id. at Exh. 1. Plaintiff has

performed and fulfilled all duties required to preserve its

trust benefits under PACA. Compl. ¶¶ 14, 20. As plaintiff

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has satisfied the statutory requirements under PACA, it is

entitled to relief for all unpaid invoices.

In plaintiff’s motion for default judgment, plaintiff

seeks $8,316.80 in damages from defendants. Plaintiff has the

burden of proving damages through testimony or written

declaration or affidavit. According to the complaint, and

corroborated by the invoices and statements attached to the

declaration of Manuel Reynoso, defendants failed to pay

plaintiff $8,316.80. See Compl. ¶ 11; Reynoso Decl.; Exhs. 1-

3. Having reviewed the complaint, the motion for default

judgment, and the declaration and exhibits submitted in

support of the motion, I find that plaintiff has established

that defendants are liable for this amount. I recommend that

plaintiff recover $8,316.80 from defendants.

Plaintiff also requests $866.37 in attorney’s fees and

costs incurred in connection with this action. See Botta

Decl. ¶ 14. A district court has limited authority to grant

attorney’s fees to PACA claimants. Middle Mountain Land and

Produce Inc. v. Sound Commodities Inc., 307 F.3d 1220, 1225

(9th Cir. 2002). While an express statutory basis for

attorney’s fees does not exist under PACA, the Ninth Circuit

has found attorney’s fees proper in two situations: first,

when an enforceable contract exists giving the plaintiff a

right to attorney’s fees, id. at 1224-25, and second, when a

PACA claimant’s litigation efforts result in a common fund for

the benefit of a group of claimants. In re Milton Poulos,

Inc., 947 F.2d 1351, 1353 (9th Cir. 1991)(citing Boeing Co. v.

Van Gemert, 444 U.S. 472, 478 (1980)(“noting that it is wellCase 4:05-cv-04504-SBA Document 30 Filed 07/06/06 Page 5 of 8
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1 The Southern District of New York declined to follow

Middle Mountain in Nobles-Collier, Inc. v. Hunts Point Tomato

Co., Inc., 2004 WL 102756, at * 2 (S.D.N.Y Jan. 22, 2004),

while the Eleventh Circuit reasoned and concluded in Country

Best v. Christopher Ranch, LLC, 361 F.3d 629, 632-33 (11th Cir.

2004) as the Ninth Circuit did in Middle Mountain. 

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settled ‘that a litigant or a lawyer who recovers a common

fund for the benefit of persons other than himself or his

client is entitled to a reasonable attorney’s fee from the

fund as a whole’”)). Plaintiff has not alleged nor does it

contend that its litigation efforts will result in a common

fund. Plaintiff instead argues that the following language

printed at the bottom of its invoices constitutes a contract

entitling it to attorney’s fees: “Terms: PACA a service

charge of 1 1⁄2% per month at the annual percentage rate of 18%

will be charged on all accounts not paid within thirty days. 

Buyer agrees to pay reasonable attorney’s fees if collection

in [sic] necessary.” Reynoso Decl., Exh. 1. 

To begin, although some districts do not include

attorney’s fees and costs in the awards covered under PACA,1

the Ninth Circuit has ruled that the language “in connection

with” in the statute authorizes “not only the price of the

perishable agricultural commodities but also additional

related expenses, including contractual rights to attorneys’

fees and interest, in a PACA claim.” Middle Mountain, 307

F.3d at 1222-23. The question then centers around whether

plaintiff has shown that it is due attorney’s fees pursuant to

a contract. The Ninth Circuit in Middle Mountain did not

decide the issue whether language similar to the “Terms”

language included in the invoices constituted a contract,

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remanding to the district court. 

The formation of this contract is governed by California

law. Comerica Bank v. Whitehall Specialties, Inc., 352

F.Supp.2d 1077, 1081 (C.D. Cal. 2004). The California version

of the Uniform Commercial Code applies to contracts for the

sale of goods. Cal. Com. Code § 2102. “A contract for sale

of goods may be made in any manner sufficient to show

agreement, including conduct by both parties which recognizes

the existence of such a contract.” Cal. Com. Code § 2204(1). 

Multiple invoices containing the “Terms” language and

continued acceptance of the goods by defendants without any

objections constitute a contract in this case. Reynoso Decl.

¶¶ 11-12. The attorney’s fees provision in the invoices

creates a contractual right binding defendants, and plaintiff

is therefore entitled to properly documented attorney’s fees

necessarily incurred in collection. See Weis-Buy Services,

Inc. v. Paglia, 307 F.Supp.2d 682, 694 (W.D. Pa.

2004)(awarding attorney’s fees and interest because it was

undisputed that the language in the invoices created a

contractual right), rev’d on other grounds. 

Plaintiff’s counsel has personal knowledge of the

attorney’s fees accrued and declares under penalty of perjury

that $866.37 has been billed on this matter. Botta Decl. ¶

14. This amount seems reasonable and necessary for plaintiff

to obtain a default judgment against elusive defendants. I

therefore recommend that plaintiff recover $866.37. 

Finally, plaintiff requests pre- and post-judgment

interest at 18%, requesting $2,006.80 in pre-judgment interest

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and post-judgment interest accrual at 18%. Reynoso Decl.,

Exh. 3. Similar to its attorney’s fees argument, plaintiff

contends that it is entitled to pre-judgment interest because

the “Terms” language printed at the bottom of its invoices

creates a contract. Just as PACA authorizes attorney’s fees,

it also authorizes interest to plaintiff if there is a

contract that does so. “[A] district court has broad

discretion to award prejudgment interest to PACA claimants

under 7 U.S.C. § 499e(c)(2).” Middle Mountain, 307 F.3d at

1226. Pursuant to statute, plaintiff is entitled to interest

on any monetary judgment in a civil case recovered in a

district court from the date of entry of the judgment. 

Although normally interest would accrue at the legal rate,

because the invoices created a contract, the interest rate of

18% on unpaid accounts agreed to by the parties is the correct

rate to apply. Citicorp Real Estate, Inc. v. Smith, 155 F.3d

1097, 1108 (9th Cir. 1998)(“affirm[ing] the district court’s

grant of post-judgment interest based upon the mutually agreed

upon contract rate”). 

For the foregoing reasons, I recommend that judgment be

entered against defendants for $8,316.80 in damages, plus

attorney’s fees and costs of $866.37, pre-judgment interest of

$2,006.80 and post-judgment interest at a rate of 18%. 

Dated: July 5, 2006

 Bernard Zimmerman 

 United States Magistrate Judge

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