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A & J Produce Corp. v. Harvest Produce Corp.

United States District Court, S.D. New York

August 24, 2017

A & J PRODUCE CORP., Plaintiff,
v.
HARVEST PRODUCE CORP., CUONG LUC HOANG and DANNY TRUONG, Defendants.

          MEMORANDUM OPINION AND ORDER

          LAURA TAYLOR SWAIN UNITED STATES DISTRICT JUDGE

         A&J Produce Corp. ("Plaintiff) moves for a default judgment against Defendants, pursuant to Federal Rule of Civil Procedure 55(b)(2) and S.D.N.Y. Local Civ. R. 55.2(b), on its claim for breach of the trust provision of the Perishable Agricultural Commodities Act ("PACA"), 7 U.S.C. § 499e(c), which creates a trust in favor of the seller of perishable agricultural commodities and their proceeds upon receipt by the buyer, pending full payment. Plaintiff, a wholesale distributor that sold perishable agricultural commodities to Harvest Corp. ("Harvest") without receiving payment, brings this action against defendants Harvest, Cuong Luc Hoang and Danny Truong (collectively, "Defendants"), jointly and severally, asserting a variety of claims resulting from Defendants' alleged failure to pay Plaintiff for the wholesale quantities of produce sold and delivered by Plaintiff to Harvest. Defendants have not appeared or responded to the claims asserted in this action, despite being afforded ample time and opportunity to do so. The Court has jurisdiction over this action pursuant to 28 U.S.C. §§ 1331.

         The Court has reviewed Plaintiffs submissions carefully and, for the following reasons, Plaintiffs motion for default judgment is granted.

         Background[1]

The following facts are alleged in the Complaint. ("Compl., " Docket Entry No. 1). Both Plaintiff and Harvest are New York corporations engaged in the business of buying and selling wholesale quantities of produce in interstate commerce. (Compl. ¶¶ 3-4.) Each has its principal place of business in New York and both are licensed as dealers pursuant to PACA. (Id.) Hoang and Truong are "officers, directors and/or shareholders of Harvest, " and were "in a position of control of the PACA trust assets belonging to Plaintiff." (Id. ¶¶ 5-6.) On August 12, 2013, Hoang signed an agreement "that as a condition of A&J granting credit, [he] will personally guarantee the prompt payment of all invoices and costs firo[m] the collection of past due balances." (Ex. F.) Moreover, on April 4, 2014, Truong also signed as a personal guarantor. (Ex. G.)

         Plaintiff alleges, based on an attached invoice, that between June 27, 2016 and June 28, 2016, Plaintiff sold and delivered to Defendant Harvest $19, 812.00 worth of wholesale quantities of produce moved in interstate commerce. (Compl. ¶ 8, Ex. H.) Plaintiff performed its obligations and Defendants accepted the produce, received Plaintiffs invoice and never disputed the amount due, but failed to pay for the goods tendered despite repeated demands. (Compl. ¶ 9.) Plaintiff asserts that a trust was created, "[a]t the time of receipt of the produce, [where] A&J became a beneficiary of the PACA statutory trust designed to assure payment to produce suppliers." (Id. ¶ 10.) The face of the invoice includes the following requisite PACA statutory language to preserve trust protection:

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 commodities and any receivables or proceeds from the sale of these commodities until full payment is received.

(Ex. H.) Plaintiffs invoice further provides that "[p]ast due invoices shall accrue interest at the annual rate of 18%. If overdue accounts are referred to an attorney, you agree to pay our reasonable attorney's fees, plus the costs of all legal action as an additional charge under the contract of sale covered by this invoice." (Id.)

         On September 7, 2016, Plaintiff notified Harvest of the overdue invoice and requested attention for payment. (Id.) Plaintiff asserts that "[defendants' failure, refusal and inability to pay A&J indicates that [d]efendants are failing to maintain sufficient assets in the statutory trust to pay A&J and are dissipating trust assets." (Compl. ¶ 12.) Plaintiff asserts that it remains a beneficiary of the PACA statutory trust until it receives full payment for the produce. (Id. ¶11.)

         On September 16, 2016, Plaintiff filed the Complaint in this action, seeking to recover the principal amount of $19, 812.00 plus accrued interest and attorneys' fees for Defendants' breach of the PACA trust provisions and on other related theories of liability. (Docket Entry No. 1.) When Defendants failed to appear or file an Answer, Plaintiff requested entry of a certificate of default against all defendants, which was entered by the Clerk of Court on November 2, 2016. (Docket Entry No. 16.)

         Discussion

         Default Judgment

         In determining whether to grant a motion for default judgment, courts within this district first consider three factors: "(1) whether the defendant's default was willful; (2) whether defendant has a meritorious defense to plaintiffs claims; and (3) the level of prejudice the non-defaulting party would suffer as a result of the denial of the motion for default judgment." Indymac Bank, F.S.B. v. National Settlement Agency, Inc., No. 07 Civ. 6865 (LTS) (GWG), 2007 WL 4468652, at *1 (S.D.N.Y. Dec. 20, 2007) (internal citation omitted); see also Guggenheim Capital, LLC v. Birnbaum, 722 F.3d 444, 455 (2d Cir. 2013) (applying these factors in review of lower court grant of a default judgment). The Court finds that all three factors weigh in Plaintiffs favor.

         Defendants' failure to respond to either Plaintiffs Complaint or Motion for Default Judgment is indicative of willful conduct. See Indymac Bank, F.S.B., 2007 WL 4468652, at * 1 (holding that non-appearance and failure to respond to a compliant or motion for default judgment indicate willful conduct). Moreover, the court is unaware of any meritorious defenses and, because Defendants failed to appear, they cannot present such a defense. Finally, the Court finds that ...


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