Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_05-cv-04032/USCOURTS-cand-3_05-cv-04032-4/pdf.json

Parties Involved:
C. H. Robinson Company
Plaintiff
Marina Produce Co., Inc.
Defendant
Dominic Montalbano
Defendant
Donna Rodriguez
Defendant

Document Text:

United States District Court

For the Northern District of California

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IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

C. H. ROBINSON COMPANY,

Plaintiff,

 v.

MARINA PRODUCE CO., INC., a

corporation, DOMINIC MONTALBANO, an

individual; DONNA RODRIGUEZ, an

individual,

Defendants. /

No. C 05-04032 WHA

ORDER GRANTING

PLAINTIFF’S MOTION FOR

DEFAULT JUDGMENT AGAINST

DOMINIC MONTALBANO AND

DONNA RODRIGUEZ

INTRODUCTION

In this action seeking payment for produce sold to defendants, plaintiff now seeks

default judgment against defendants Dominic Montalbano and Donna Rodriguez personally in

order to obtain payment. Because defendants Montalbano and Rodriguez were the sole officers

and shareholders of Marina Produce and in a position to control the Perishable Agricultural

Commodities Act (“PACA”) trust assets, plaintiff’s motion for default judgment is granted.

STATEMENT

Plaintiff is a wholesale supplier of perishable agricultural commodities. Defendants are

dealers of perishable agricultural commodities. Defendants Montalbano and Rodriguez are the

owners of Marina Produce. Plaintiff sold and delivered produce to defendant Marina Produce. 

Plaintiff is still owed on fifteen outstanding invoices dating from October 18 to December 16,

2003. The outstanding balance is $23,814.55 (Br. 8; Jan. 31 Biesterfeld Decl. Exh. A). 

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Plaintiff originally filed this action on October 5, 2005. Default judgment was entered

against defendant Marina Produce by order dated March 13, 2006. In that order, the motion for

default judgment against defendant Marina Produce was granted and damages were awarded for

the unpaid goods, attorney’s fees and costs. Post-judgment interest was awarded to the extent

allowed by 28 U.S.C. 1961. Plaintiff’s request for pre-judgment interest was denied in a

subsequent order on April 28, 2006. The March 2006 order also denied default judgment

against defendants Montalbano and Rodriguez personally because plaintiff failed to allege

sufficient facts in its complaint regarding how defendants Montalbano and Rodriguez were

personally liable under PACA. 

Defendant Marina Produce still has not paid plaintiff, even after a default judgment was

entered against it. Plaintiff filed a first amended complaint on September 8, 2006, to rectify the

pleading deficiencies with respect to Montalbano and Rodriguez. The first amended complaint

contained particular allegations as to how defendants Montalbano and Rodriguez were involved

in the business. Default was entered as to Montalbano and Rodriguez on November 28, 2006. 

Plaintiff now brings this motion seeking an entry of default judgment against defendants

Montalbano and Rodriguez personally because plaintiff has been unable to secure payment

based on the earlier default judgment against defendant Marina Produce. Plaintiff seeks the

exact same amount in damages that plaintiff was granted in the March 2006 order: $23,814.55

in outstanding invoices, $4,200 in attorney’s fees, and post-judgment interest at the legal rate

(Br. 2).

ANALYSIS

The Court previously analyzed much of this claim in its March 2006 order. Because

almost all of the present discussion involves facts and law relevant to the previous discussion,

much of the analysis remains the same (Mar. 16 Order at 2–3, 5–6, 7). The question this order

is primarily concerned with is whether plaintiff now alleges sufficient facts to demonstrate

defendants Montalbano and Rodriguez’s personal liability for the failure of their company,

Marina Produce, to pay plaintiff amounts owed.

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United States District Court

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Under FRCP 55(b)(2), a party can apply to a district court for entry of judgment by

default. “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). The following factors are

considered:

(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 the 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). For the following reasons, these

factors favor entry of default judgment in this case.

1. MERITS OF SUBSTANTIVE CLAIMS AND SUFFICIENCY OF THE COMPLAINT.

After entry of default, well-pleaded factual allegations in the complaint are taken as true,

except as to the amount of damages. Fair Hous. of Marin v. Combs, 285 F.3d 899, 906 (9th Cir.

2002). 

Plaintiff alleges a violation of Section 5(c) of PACA, 7 U.S.C. 499e(c). PACA applies

to any sales of perishable agricultural commodities to “any commission merchant, dealer, or

broker.” PACA gives the suppliers of such commodities special rights designed to ensure

payment. It requires that all produce-derived revenues “be held by such commission merchant,

dealer, or broker in trust for the benefit of all unpaid suppliers or sellers of such commodities . .

. until full payment of the sums owing in connection with such transactions has been received . .

. .” Section 499b(4) requires buyers to “make full payment promptly.” 

To establish the existence of a PACA trust, plaintiff must show that: (1) the

commodities sold were perishable agricultural commodities; (2) the buyer was a commission

merchant, dealer or broker; (3) the transaction occurred in interstate commerce; (4) the seller

has not yet received full payment; and (5) the seller preserved its trust rights by giving proper

notice to the buyer. 7 U.S.C. 499e. A seller can use “ordinary and usual billing or invoice

statements to provide notice of the [seller’s] intent to preserve the trust,” so long as they contain

the following language: 

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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). 

As established in the March 2006 order, a PACA trust was established when defendants

failed to pay plaintiff’s invoices. Plaintiff’s allegations of the existence of a PACA trust are

sufficient. Plaintiff claims to have sold perishable produce through interstate commerce to

defendants who were dealers, and that plaintiff has not received full payment for sales dating

back to October 18, 2003. Plaintiff has complied with PACA’s notice requirement under 7

U.S.C. 499e(c)(4). Plaintiff submitted invoices including the requisite statutory language.

The question that remained undecided from the March 2006 order was whether

defendants Montalbano and Rodriguez could be held personally liable. The deficiencies in the

initial complaint and the initial default judgment motion were that: (1) plaintiff had pled no

facts concerning the inability of defendant Marina Produce to satisfy the liability; (2) plaintiff

did not allege any facts as to how defendants Montalbano and/or Rodriguez controlled the

PACA trust assets; and (3) plaintiff did not allege how defendants Montalbano and/or

Rodriguez may have breached the fiduciary duty they owed to the trust. In its first amended

complaint and its motion for entry of default judgment against defendants Montalbano and

Rodriguez, plaintiff now satisfactorily alleges these facts.

Plaintiff has alleged in its first amended complaint that Montalbano and Rodriguez were

the sole owners of Marina Produce. Specifically, plaintiff stated: “Montalbano and Rodriguez

exercised exclusive control over the PACA assets as sole owners of Marina. As sole owners,

Montalbano and Rodriguez were solely responsible for ensuring that Marina’s liability to

[p]laintiff was satisfied out of the PACA trust assets” (First Amd. Compl. ¶ 5). Plaintiff also

specifically alleges that Montalbano and Rodriguez’s failure to pay plaintiff out of the trust

created by PACA amounted to a breach of the trust which made them individually liable to

plaintiff (First Amd. Compl. ¶ 19-20). 

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Individual shareholders, officers or directors of a corporation may be held personally

liable for the corporation’s debts when those shareholders, officers or directors are “in a

position to control PACA trust assets and . . . breach their fiduciary duty to preserve those

assets.” Sunkist Growers v. Fisher, 104 F.3d 280, 283 (9th Cir. 1997). Plaintiff has alleged

sufficient facts to find defendants Montalbano and Rodriguez personally liable for the debts

owed to plaintiff. Because Montalbano and Rodriguez were the sole owners of Marina

Produce, they were in a position to control the trust. By not paying plaintiff out of the trust

either when they received plaintiff’s invoices or when default judgment was entered against

them, defendants violated the duty they owed to the trust. By breaching that duty, defendants

became personally liable.

2. THE REMAINING EITEL FACTORS.

The remaining Eitel factors favor entry of default judgment. To deny plaintiff’s

application would leave plaintiff without a remedy. Moreover, defendants have refused to

litigate this action here after being properly served with the complaint and summons. In

general, the fact that a large sum of money is at stake is a factor disfavoring default judgment. 

Cf. Eitel, 782 F.2d at 1472 (stating that the fact that $3 million was at stake, when considered in

light of the parties’ dispute as to material facts, supported the court’s decision not to enter

judgment by default). Plaintiff asks for damages of $23,814.55. That amount pales beside the

$3 million dollars at stake in Eitel. Since defendants never filed an answer to the complaint, it

is unclear whether there is a possibility of dispute concerning the material facts. There is no

evidence that defendants’ failure to respond was the result of excusable neglect. Although

federal policy may favor a decision on the merits, FRCP 55(b) permits entry of default

judgment in situations, such as this, where the defendant has refused to litigate. On balance, the

Eitel factors weigh in favor of default judgment.

3. DETERMINATION OF DAMAGES, INTEREST, FEES AND COSTS.

As stated in the March 2006 order, damage allegations are not deemed true simply

because of the defendant’s default. Some proof of the amount is required. Geddes v. United

Fin. Group, 559 F.2d 557, 560 (9th Cir. 1977). The statute at issue provides that violators are

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liable “for the full amount of damages” and that buyers maintain the statutory trust “until full

payment of the sums owing in connection with such transactions has been received by such

unpaid suppliers . . . .” 7 U.S.C. 499e(a), (c)(2).

Plaintiff has submitted fifteen invoices showing a total amount of $23,814.55

outstanding (Jan. 31 Biesterfeld Decl., Exh. A). This accounting is sufficient and reflects the

exact amount plaintiff seeks in damages.

Plaintiff next seeks attorney’s fees in the amount of $4,200.00. Plaintiff argues that the

language on each invoice, which stated that “[i]nterest and attorneys fees necessary to collect

payment are sums owing in connection with the transaction,” constituted an agreement between

plaintiff and defendants for interest and attorney’s fees in any dispute (Br. 11).

Contractual claims for attorney’s fees and interest are within the scope of a PACA trust

claim. Middle Mountain Land & Produce, Inc. v. Sound Commodities, Inc., 307 F.3d 1220,

1224–25 (9th Cir. 2002). Absent a contractual claim, a district court has limited authority to

grant attorney’s fees. Id. at 1225.

The issue then is whether a contractual right was created by the provision on plaintiff’s

invoices stating that “[i]nterest and attorneys fees necessary to collect payment are sums owing

in connection with the transaction.” These are additional terms as the invoices were sent after

the produce had shipped. “Between merchants [additional] terms become part of the contract

unless: (a) [t]he offer expressly limits acceptance to the terms of the offer; (b) [t]hey materially

alter it; or (c) [n]otification of objection to them has already been given or is given within a

reasonable time after notice of them is received.” Cal. Com. Code 2207(2). There is no reason

to conclude that any of the exceptions apply. See United States v. A.E. Lopez Enters., Ltd.,

74 F.3d 972, 976 (9th Cir. 1996) (finding that interest terms on concrete supplier’s invoice

created an enforceable contract); JC Produce, Inc. v. Paragon Steakhouse Rests., Inc.,

70 F. Supp. 2d 1119, 1123 (E.D. Cal. 1999) (holding that the plaintiff’s invoices expressly

reserved PACA trust rights over interest and reasonable attorney’s fees). The invoices

submitted by plaintiff thus set forth the terms for past due accounts with respect to interest and

attorney’s fees.

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Plaintiff seeks an amount of $4,200.00 for attorney’s fees. Plaintiff submitted a

description of the legal work performed, a breakdown of the 16.8 hours expended, and the

attorney’s hourly rate of $250 per hour (Jan. 31 Cornell Decl. ¶¶ 6–7). This accounting is

sufficient.

Plaintiff next claims post-judgment interest. Post-judgment interest is mandatory. Air

Separation, Inc. v. Underwriters at Lloyd’s of London, 45 F.3d 288, 290 (9th Cir. 1994) (noting

that “[u]nder the provisions of 28 U.S.C. 1961, post-judgment interest on a district court

judgment is mandatory”). Post-judgment interest must be calculated in accordance with

28 U.S.C. 1961. That calculation will begin on the date judgment is entered against defendants

Montalbano and Rodriguez individually.

Finally, plaintiff claims court costs in the amount of $558.00. Plaintiff has submitted a

breakdown of the court costs which consist of fees for filing and service of process (Jan. 31

Cornell Decl. ¶ 5). This accounting is sufficient. 

CONCLUSION

Plaintiff’s motion for default judgment against defendants Montalbano and Rodriguez

for the principal amount of $23,814.55, for attorney’s fees in the amount of $4,200.00 and for

costs in the amount of $558.00 is GRANTED. To the extent allowed by 28 U.S.C. 1961, postjudgment interest is GRANTED.

IT IS SO ORDERED.

Dated: January 4, 2007. WILLIAM ALSUP

UNITED STATES DISTRICT JUDGE

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