Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-4_05-cv-04502/USCOURTS-cand-4_05-cv-04502-1/pdf.json

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

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United States District Court

For the Northern District of California

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UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

REY REY PRODUCE SFO, INC.,

Plaintiff,

v.

MARIA MENDOZA,

Defendant.

____________________________________/

No. C-05-4502 CW (EMC)

REPORT AND RECOMMENDATION RE

PLAINTIFF’S MOTION FOR DEFAULT

JUDGMENT

(Docket No. 18)

Plaintiff Rey Rey Produce SFO, Inc. (“Rey Rey”), moves for default judgment against

Defendant Maria Mendoza, an individual doing business as Gary’s Produce (“Mendoza”). Default

was entered by the Clerk of the Court on December 7, 2005, and Plaintiff’s motion for default

judgment was filed on January 4, 2006. Because Defendant has not appeared in this action and has

not consented to the jurisdiction of the undersigned, the Court issues this report and recommendation

on this dispositive motion. Having considered all of the papers and evidence submitted therewith,

the Court hereby recommends that the motion for default judgment be GRANTED IN PART.

I. FACTUAL AND PROCEDURAL BACKGROUND

In a series of transactions between June 25, 2004, and June 10, 2005, Plaintiff Rey Rey

Produce sold and shipped perishable agricultural commodities to Defendant Mendoza. Reynoso

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1

 Initially, Plaintiff claimed Defendant agreed to pay a total sum of $6,472.50. Reynoso Decl.,

¶ 6. After failing to locate an invoice for one $360 transaction, however, Plaintiff reduced the total sum

by that amount, for a revised total of $6,112.50. Botta Supp. Decl., ¶¶ 4, 6. 

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Decl., ¶ 8. Defendant agreed to pay Plaintiff a total of $6,112.50.1 Botta Supp. Decl., ¶ 6. At the

time of each transaction, Plaintiff forwarded invoices to Defendant. Reynoso Decl., ¶ 9. Plaintiff

repeatedly demanded that Defendant pay the amounts due, but Defendant has not paid any part of

the sum due. Botta Supp. Decl., ¶ 8. Plaintiff’s invoices contain language allowing it to recover its

attorney’s fees and costs and pre- and post-judgment finance charges at the rate of 18 percent per

annum. Reynoso Decl., Exh. 1. Plaintiff claims attorney’s fees and costs of $953.32 and prejudgment finance charges of $1,111.83. Botta Supp. Decl., ¶ 13. The total claim is therefore for

$8,177.65 plus post-judgment finance charges at the rate of 18 percent per annum. Botta Supp.

Decl., ¶ 13. 

Plaintiff alleges that pursuant to the Perishable Agricultural Commodities Act of 1930

(“PACA”), 7 U.S.C. § 499e(c)(1)-(4), Plaintiff became the beneficiary of a floating, non-segregated

statutory trust on all of Defendant’s perishable agricultural commodities, all inventories of food or

other products derived from perishable agricultural commodities, and any receivables or proceeds

from the sale of such perishable agricultural commodities or products or assets derived therefrom.

On November 4, 2005, Plaintiff filed suit for (1) breach of contract, (2) enforcement of

statutory trust provisions under PACA, (3) failure to account and pay promptly in violation of

PACA, and (4) declaratory relief establishing Plaintiff’s superior right to the PACA trust funds. 

Defendant did not respond to the Complaint. Plaintiff moved for entry of default on December 5,

2005, and the Clerk of the Court filed entry of default on December 7, 2005. Plaintiff gave notice to

Defendant of its motion for default judgment on January 4, 2006, via U.S. mail. Defendant did not

respond.

II. DISCUSSION

A. Adequacy of Service of Process

In deciding whether to grant or deny a default judgment, a court must first “assess the

adequacy of the service of process on the party against whom default is requested.” Board of

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Trustees of the N. Cal. Sheet Metal Workers v. Peters, No. C-00-0395 VRW, 2000 U.S. Dist. LEXIS

19065, at *2 (N.D. Cal. Jan. 2, 2001). Plaintiff’s Proof of Service states that a copy of the Summons

and Complaint addressed to “Maria Mendoza, an individual doing business as Gary’s Produce” was

left with Mendoza at 36894 Hafner Street, Newark, California, 94560, on November 9, 2005. See

Docket No. 5. As Mendoza was personally served with a copy of the Summons and Complaint,

service of process was properly effected under Rule 4(e)(2).

B. Entry of Default

Once a defendant has been properly served, he has 20 days after service within which to

answer the complaint. Fed. R. Civ. P. 12(a)(1)(A). This time period is measured from the date

service was effective. 

Plaintiff personally served Defendant on November 9, 2005. Defendant then had 20 days to

answer; the answer was due November 29, 2005. Plaintiff filed a motion for entry of default on

December 5, 2005, and the Clerk of the Court filed entry of default on December 7, 2005. The

Defendant is not a minor or incompetent person, or in military service or otherwise exempted under

the Soldiers’ and Sailors’ Civil Relief Act of 1940, 50 App. U.S.C. § 521. Botta Decl., ¶ 12. 

Because Defendant did not file or serve an answer with the requisite 20 days, Plaintiff’s

motion for entry of default, and the Clerk’s entry of default, were proper.

C. Default Judgment and Eitel Factors

After entry of a default, a court may grant a default judgment on the merits of the case. See

Fed. R. Civ. P. 55. “The district court’s decision whether to enter a default judgment is a

discretionary one.” Aldabe v. Aldabe, 616 F.2d 1089, 1092 (9th Cir. 1980). Factors that a 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 v. McCool, 782 F.2d 1470, 1471-72 (9th Cir. 1986). 

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2

 Because Plaintiff’s Request for Default Judgment Against Defendant does not seek declaratory

relief, this memo evaluates the sufficiency of the first three causes of action but not the fourth.

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A default judgment may be refused where the court determines no justifiable claim has been

alleged or that a default judgment is inappropriate for other reasons. See Draper v. Coombs, 792

F.2d 915, 924 (9th Cir. 1986) (holding that district court did not abuse its discretion in denying

default judgment when defendant’s answer was late but did not prejudice plaintiff); Aldabe, 616

F.2d at 1092-1093 (holding that district court did not abuse its discretion in denying default

judgment against defendants who failed to answer because plaintiff’s substantive claims lacked

merit).

Here, the Eitel factors support a default judgment.

1. The Possibility of Prejudice to Plaintiff if the Default Judgment is not Entered

Plaintiff would suffer prejudice if default judgment were not entered, because it would lack

other means to recover the money due. See Elektra Entertainment Group, Inc. v. Bryant, No. CV

03-6381GAF(JTLX), 2004 WL 783123, at *3 (C.D. Cal. February 13, 2004) (noting that a plaintiff

is prejudiced under this factor when he lacks other recourse for recovery).

2. & 3. The Merits of Plaintiff’s Substantive Claims; the Sufficiency of the Complaint

These Eitel factors “require that a plaintiff state a claim on which [he] may recover.” Elektra

Entertainment Group, 2004 WL 783123, at *3. In order to weigh these two factors, the Court must

review Plaintiffs’ claims. Id. 

Plaintiff pleads four causes of action: (1) breach of contract, (2) enforcement of statutory

trust provisions under PACA, (3) failure to account and pay promptly in violation of PACA, and (4)

declaratory relief establishing Plaintiff’s superior right to the PACA trust funds. Defendant did not

respond to the Complaint.2

 This Court has jurisdiction over the complaint under 28 U.S.C. § 1331

since the causes of action under PACA raises a federal claim. Supplemental jurisdiction obtains

over the contract cause of action. 28 U.S.C. § 1367.

As to the first cause of action, under California law the elements of a breach of contract

claim are (1) the existence of a contract, (2) breach, and (3) damages. See Law Offices of Dixon R.

Howell v. Valley, 129 Cal.App.4th 1076, 1092 (Cal. Ct. App. 2005) (quoting Coyne v. Krempels, 36

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3

 Pursuant to regulations promulgated by the Secretary of Agriculture, payment is due within

10 days after the day on which the produce is accepted. 7 C.F.R. § 46.2(aa)(5). 

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Cal.2d 257, 261-62 (1950)). Here, Plaintiff has pleaded facts sufficient to make out a claim for

breach of contract. The Complaint states unequivocally that the parties had an agreement by which

Rey Rey sold and shipped perishable agricultural commodities to Mendoza in exchange for

Mendoza paying Rey Rey an aggregated sum of $6,112.50. Botta Supp. Decl., ¶¶ 6, 8. The

agreement(s) constitutes a contract or series of contracts. Mendoza, in turn, breached the contracts

by accepting delivery of the perishable agricultural commodities but failing to pay the sums due. 

Reynoso Decl., ¶ 11-12. Consequently, Rey Rey suffered damages in the cumulative amount of

$6,112.50, plus prejudgment interest of $1,111.83 and attorney’s fees and costs of $953.32 (as

provided in the invoices in the normal course of Rey Rey’s business), bringing the total claimed

damages to $8,177.65. Botta Supp. Decl., ¶ 13 and Exh. 1. 

Rey Rey’s state law claim for breach of contract is not pre-empted by PACA, which does not

“in any way abridge or alter the remedies now [on June 10, 1930] existing at common law or by

statute.” 7 U.S.C. § 499e(b). Therefore, these facts state a claim for breach of contract or contracts. 

Plaintiff’s claim is meritorious and the Complaint is sufficient in stating a claim for breach. See

Cripps v. Life Ins. Co. of No. America, 980 F.2d 1261, 1267 (9th Cir. 1992) (well-pleaded

allegations in the complaint are admitted by defendant’s failure to respond).

Because the second and third causes of action arise from the same facts and both seek an

order enforcing the PACA trust provisions, the two PACA causes of action are considered together. 

Both causes of action seek an order requiring Defendant to immediately account for and pay all

PACA trust assets to Plaintiff in the cumulative amount of $6,112.50, in addition to interest at 18

percent per annum, attorney’s fees, and costs. PACA requires produce buyers to “make full

payment promptly.”3

 7 U.S.C. § 499b(4); Maui Land & Pineapple Co. v. Hamada, 2000 U.S. Dist.

LEXIS 11252 (N.D. Cal. Aug. 2, 2000), at *1. The buyer’s failure to do so renders him liable for

“the full amount of damages . . . sustained in consequence of such violation.” 7 U.S.C. § 499e(a). 

PACA, meanwhile, mandates that a produce buyer must hold in trust all receivables or proceeds

from the sale of perishable agricultural commodities for the benefit of unpaid suppliers. 7 U.S.C. §

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499e(c); Hamada, 2000 U.S. Dist. LEXIS 11252 at *2. The PACA trust commences upon delivery

of the produce and continues until full payment is made. Id. To preserve the benefits of the trust,

however, the unpaid seller must give written notice of that intent. 7 U.S.C. § 499e(c)(3). Such

notice may appear on “ordinary and usual billing or invoice statements.” 7 U.S.C. § 499e(c)(4). In

that event, the face of the statement must contain the following: “The perishable agricultural

commodities listed on this invoice are sold subject to the statutory trust authorized by section 5(c) of

the Perishable Agricultural Commodities Act, 1930 (7 U.S.C. 499e(c)). The seller of these

commodities retains a trust claim over these commodities, all inventories of food or other products

derived from these commodities, and any receivables or proceeds from the sale of these

commodities until full payment is received.” 7 U.S.C. § 499e(c)(4). 

Hence, the elements of the PACA claims are: (1) a business engaged in selling and/or

shipping perishable agricultural commodities as defined in 7 U.S.C. § 499a(b), (2) delivery of

perishable agricultural commodities, (2) creation of the statutory trust, (3) notice of intent to

preserve the benefits of the trust, and (4) buyer’s failure to make prompt payment in full. Here, all

five elements are satisfied. Plaintiff is engaged in the business of shipping and selling perishable

agricultural commodities. Reynoso Decl., ¶ 6. Rey Rey delivered the produce, which automatically

gave rise to the statutory trust. Reynoso Decl., ¶ 8. Rey Rey further gave notice of its intent to

preserve the benefits of the trust by including a verbatim recitation of the statutory language on the

invoices sent to Mendoza. Reynoso Decl., ¶ 13, Exh. 1; Botta Decl., ¶ 6. Finally, Mendoza failed to

make prompt payment in full, leaving as damages the principal amount of $6,112.50, plus the abovementioned prejudgment interest, attorney’s fees, and costs. Botta Supp. Decl., ¶¶ 8, 13. Given that

these elements have been satisfied, Plaintiff is entitled to a finding that it is entitled to relief under

PACA requiring Defendant to account for and pay all trust assets to Plaintiff.

4. The Sum of Money at Stake in the Action

Pursuant to the fourth Eitel factor, “the court must consider the amount of money at stake in

relation to the seriousness of Defendant’s conduct.” Philip Morris USA, Inc. v. Castworld Products,

Inc., 219 F.R.D. 494, 500 (C.D. Cal. 2003) (internal citations omitted) (noting that defendant’s

willful infringement of plaintiff’s trademarks justified the imposition of a substantial $2 million

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award); Eitel, 782 F.2d at 1471 (9th Cir. 1986). In the instant case, the total amount of judgment

sought by Rey Rey is $8,177.65, which consists of damages in the cumulative amount of $6,112.50,

plus prejudgment interest of $1,111.83 and attorney’s fees and costs of $953.32. Botta Supp. Decl.,

¶ 13. PACA supports a right to attorney’s fees and interest as part of a statutory trust claim. Middle

Mountain Land and Produce, Inc. v. Sound Commodities, Inc., 307 F.3d 1220, 1223 (9th Cir. 2002). 

So does the contract itself. The invoices sent to Mendoza state that “Buyer Agrees to Pay

Reasonable Attorney’s Fees if Collection in (sic) Necessary.” Reynoso Decl., Exh. 1. Given that

Rey Rey has provided receipts documenting the unpaid-for deliveries of produce, and considering

that PACA supports a contractual and statutory right to attorney’s fees, this factor weighs in favor of

granting a default judgment. Reynoso Decl., Exh. 1-3. 

5. The Possibility of a Dispute Concerning Material Facts

“Upon entry of default, all well-pleaded facts in the complaint are taken as true, except those

relating to damages.” Elektra Entertainment, 2004 WL 783123, at *4 (citing Televideo Sys., Inc. v.

Heidenthal, 826 F.2d 915, 917 (9th Cir. 1987)). If the plaintiff has filed a well-pleaded complaint

alleging facts sufficient to support his claim, and the clerk has entered default, the court presumes no

factual dispute exists. Id. Rey Rey’s complaint alleges facts sufficient to support a claim, the clerk

entered default, and the defendant has not answered; therefore, the court may presume no dispute

exists. This factor supports a default judgment.

6. Whether the Default was Due to Excusable Neglect

Usually, a court will ask whether the failure to answer is due to excusable neglect. See Eitel,

728 F.2d at 1472 (noting that the fact that the parties were engaged in settlement negotiations

excused defendant from failing to answer). “Due process requires that all interested parties be given

notice reasonably calculated to apprise them of the pendency of the action and be afforded an

opportunity to present their objections before a final judgment is rendered.” Elektra Entertainment,

2004 WL 783123, at *5 (citing Mullane v. Central Hanover Trust Co., 339 U.S. 306, 314 (1950)). 

In Elektra Entertainment, the Court held there was no excusable neglect when the defendant had

been properly notified of both the complaint and the entry of default and had failed to answer and to

oppose the motion for default. Id. Similarly, no excusable neglect is apparent in this case. As

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discussed above, Rey Rey served Mendoza with the Summons and Complaint on November 9, 2005. 

Rey Rey moved for entry of default on December 5, 2005, and Plaintiff gave notice to Defendant of

its motion for default judgment on January 4, 2006, via U.S. mail. See Docket No. 22. Mendoza’s

failure to respond is not due to excusable neglect.

7. The Strong Policy Underlying the Federal Rules of Civil Procedure Favoring

Decisions on the Merits

Generally, default judgments are disfavored because “cases should be decided upon their

merits whenever reasonably possible.” Eitel, 782 F.2d at 1472. However, because a discretionary

standard is applied, default judgments are more often granted than denied. See PepsiCo v.

TriunfoMex, Inc., 189 F.R.D. 431, 432 (C.D. Cal. 1999)); Chrysler Credit Corp. v. Macino, 710 F.2d

363, 367 (7th Cir. 1983). 

In this case, because Rey Rey has filed a well-pleaded complaint and served notice of the

Complaint and entry of default on Mendoza, who has failed to respond, the Court should grant Rey

Rey’s motion for default judgment.

D. Damages

Because default judgment is warranted, the Court must determine what damages are

appropriate. Plaintiff has the burden of “proving up” its damages. See Board of Trustees of the

Boilermaker Vacation Trust v. Skelly, Inc., 380 F.Supp.2d 1222, 1226 (N.D. Cal. 2005) (“Plaintiff

has the burden of proving damages through testimony or written affidavit.”).

Under 7 U.S.C. § 499e(a), a buyer who fails to pay for perishable agricultural commodities

“shall be liable to the person or persons injured thereby for the full amount of damages . . . sustained

in consequence of such violation.” Here, Rey Rey seeks damages of $6,112.50. Botta Supp. Decl.,

¶¶ 4-8. This amount represents the sum of six deliveries of perishable agricultural commodities for

which Mendoza never paid. Reynoso Decl., Exh. 2; Botta Supp. Decl., ¶ 8. Plaintiff has submitted

invoices totaling $5,389. Plaintiff seeks an additional $723.50 in damages, due to a check from

Mendoza that was returned on account of insufficient funds. Reynoso Decl., Exh. 2; Botta Supp.

Decl., ¶ 5, Exh. 1. This dishonored check was for a previous purchase of produce. Botta Supp.

Decl., ¶ 5. Although Plaintiff provides no receipt or invoice for this particular transaction, it has

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provided evidence that its practice has been to include invoices with the required statutory language. 

Reynoso Decl., ¶ 13; Botta Supplemental Decl., ¶ 6. Absent any evidence to the contrary, Plaintiff

has proven the $723.50 should be included in its damage claim. Damages thus total $6,112.50.

E. Prejudgment Interest

PACA supports a contractual right to interest as part of a statutory trust claim. Middle

Mountain Land and Produce, Inc. 307 F.3d at 1223. In Middle Mountain, a supplier of agricultural

products sought the amounts due on unpaid invoices, including interest. Id. at 1222. The moving

party based its entitlement to interest on language included in each of the invoices that it sent to the

buyer. Id. The Ninth Circuit held that, if valid, the supplier’s contractual claim for interest was

within the scope of the language “full payment of the sums owing in connection with perishable

agricultural commodities transactions” within 7 U.S.C. § 499e(c)(2). Id. at 1222-23 (emphasis in

original). The court also concluded that, absent an enforceable contract, “a district court may award

reasonable prejudgment interest to PACA claimants if such an award is necessary to protect the

interests of PACA claimants.” Id. at 1226.

Here, Rey Rey seeks prejudgment interest of $1,111.83. Botta Supp. Decl., ¶ 13. Rey Rey’s

invoices state that “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 30 Days.” Reynoso Decl., Exh. 1. Therefore,

Rey Rey is entitled to prejudgment interest, at 18 percent per annum, on the $6,112.50 in damages

that it is entitled to recover. Such an award is necessary to protect the interests of PACA claimants. 

As shown in the table below, the Court calculated the amount of interest due on the $6,112.50 in

damages as $1,201.38 (as of May 8, 2006). Botta Supp. Decl., Exh. 2. The Court founds this

amount reasonable and accordingly recommends awarding $1,201.38 in interest.

///

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Principal Loan

Amount and Date

Days Elapsed (as of

May 8, 2006)

Interest Due Daily Total Interest Due

$723.50 (9/07/2004) 608 $0.3568 $216.93

$1,618 (04/01/2005) 402 $0.7979 $320.76

$973 (05/13/2005) 421 $0.4798 $202.00

$1,843 (06/03/2005) 339 $0.9089 $308.12

$72 (06/03/2005) 339 $0.0355 $12.03

$883 (06/17/2005) 325 $0.4355 $141.54

TOTAL: $6,112.50 $1,201.38

F. Costs and Attorney’s Fees

Rey Rey seeks attorney’s fees and costs of $953.32. Botta Supp. Decl., ¶ 13. PACA

supports a contractual right to attorney’s fees as part of a statutory trust claim. Middle Mountain

Land and Produce, Inc. 307 F.3d at 1223. Here, the statement on Rey Rey’s invoices that “Buyer

Agrees to Pay Reasonable Attorney’s Fees if Collection in (sic) Necessary” creates an enforceable

contract, bringing the attorney’s fees and costs within the scope of PACA. The fees are reasonable

because they arise from only two hours of work at $295 an hour, for a total attorney fee amount of

$590. Botta Supp. Decl., ¶ 11. The costs consist of a $250 filing fee, a $101.75 process server fee,

and $11.57 for computerized legal research to locate and validate the address for service of process

on Defendant. Botta Supp. Decl., ¶ 11. These costs are similarly reasonable. Therefore, the Court

should award attorney’s fees and costs totaling $953.32. 

III. RECOMMENDATION

For the foregoing reasons, the Court recommends GRANTING IN PART Rey Rey’s motion

for default judgment, entitling Plaintiff to $6,112.50 in damages, $1,201.38 in prejudgment interest,

and $953.32 in attorney’s fees and costs, for a total award of $8,267.20.

Dated: May 8, 2006 

_________________________ EDWARD M. CHEN

United States Magistrate Judge

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