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Ningbo Yang Voyage Textiles Co., Ltd v. Sault Trading

United States District Court, E.D. New York

October 18, 2019

NINGBO YANG VOYAGE TEXTILES CO., LTD., a Chinese Limited Company, Plaintiff,
v.
SAULT TRADING, A/K/A SALUT TRADING INC, a New York Business Corporation, Defendant.

          REPORT AND RECOMMENDATION

          STEVEN L. TISCIONE UNITED STATES MAGISTRATE JUDGE

         Plaintiff Ningbo Yang Voyage Textiles Company (“Ningbo Yang”) sues Defendant Sault Trading to recover the unpaid balance of a contract for the sale of goods. Ningbo Yang makes a claim under the United Nations Convention on Contracts for the International Sale of Goods (“CISG” or the “Convention”), Apr. 11, 1980, S. Treaty Doc. No. 98-9 (1983), 19 I.L.M. 668; it also asserts claims for state law breach of contract, account stated, unjust enrichment, and declaratory judgment. See Complaint (“Compl.”), Dkt. No. 1, ¶ 22-42.[1] Sault Trading did not respond to the Complaint in any fashion. The Clerk of Court entered default pursuant to Rule 55(a) of the Federal Rules of Civil Procedure. See Clerk's Entry of Default, Dkt. No. 8. On October 15, 2018, Ningbo Yang filed a Motion for Default Judgment. See Dkt. No. 9. Judge Allyne R. Ross referred the Motion to me for a report and recommendation. For the reasons stated below, I recommend that the Motion be GRANTED in part and DENIED in part.

         A. Background

         Ningbo Yang is a Chinese company that specializes in the manufacturing of silk products. Compl. ¶ 3. Ningbo Yang entered into an alleged agreement with Sault Trading, a New York corporation, for the sale of 55, 560 pieces of silk polyester curtain products for the purchase price of $103, 341.60. Compl. ¶¶ 4, 9. The invoice allows for a variance of five-percent, either more or less, of the actual quantity of pieces ordered. Compl. ¶ 9. After receiving a deposit in the amount of $10, 109.00, Ningbo Yang shipped 56, 760 pieces of silk curtain products on July 27, 2017 for a total price of $105, 773.60. Compl. ¶ 12. Ningbo Yang has not received any payment on the contract following its shipment in July 2017. Compl. ¶ 15.

         On March 31, 2018, Ningbo Yang filed suit alleging five causes of action for the alleged breach of contract. See Compl. Two days later, on April 2, 2018, the Court issued a Summons notifying Sault Trading that a suit had been filed against it, and informing it that it had twenty-one days after service of the Summons to file an answer to the Complaint or file a motion under Rule 12 of the Federal Rules of Civil Procedure. See Summons in a Civil Action, Dkt. No. 4. Sault Trading received service of the Summons on May 29, 2019 through its authorized agent, the Secretary of State of the State of New York. See Affidavit of Service - Secretary of State, Dkt. No. 6. To date, Sault Trading has not responded to the Complaint, nor otherwise appeared in this action.

         On September 26, 2018, Ningbo Yang requested that the Court enter a default against Sault Trading for failure to appear or otherwise defend the action. See Request for Certificate of Default, Dkt. No. 7. The Clerk of Court entered default on September 28, 2018. See Clerk's Entry of Default, Dkt. No. 7. On October 15, 2018, Ningbo Yang filed a Motion for Default Judgment. See First Motion for Default Judgment, Dkt. No. 9. Attached to the Motion was an Affirmation in Support stating the facts in support of the claims in the underlying complaint. See Id. ¶ 6. On January 30, 2019, Ningbo Yang submitted a Memorandum of Law in Support of Default Judgment. See Dkt. No. 13. On May 1, 2019, in response to orders issued by this Court, Ningbo Yang submitted evidence that its counsel had attempted to serve its Motion for Default Judgment on Sault Trading at its last known address in compliance with Local Rule 55.2(c). See Dkt. Nos. 14-15.

         B. Subject Matter Jurisdiction

         Before reaching the merits, this Court must first examine the asserted basis for jurisdiction. Federal courts have limited jurisdiction to hear disputes under the Constitution or as authorized by Congress. Cty. of Nassau, N.Y. v. Hotels.com, LP, 577 F.3d 89, 91 (2d Cir. 2009). Thus, a claim that does not state a basis for the court's subject matter jurisdiction must be dismissed, see Jenkins v. Murphy, 356 Fed.Appx. 500 (2d Cir. 2009), even if a party has not raised the issue before the court. See Durant, Nichols, Houston, Hodgson & Cortese-Costa P.C. v. Dupont, 565 F.3d 56, 62 (2d Cir. 2009).

         This Court is authorized to hear the present dispute arising between a U.S. Corporation and a Chinese company because it “arises under” federal law. See 28 U.S.C. § 1331; U.S. Const. art. III. Ningbo Yang asserts a claim under the United Nations Convention on Contracts for the International Sale of Goods (“CISG”), an international treaty. A treaty is a source of federal law providing a basis for jurisdiction. See Hanwha Corp. v. Cedar Petrochemicals, Inc., 760 F.Supp.2d 426, 430 (S.D.N.Y. 2011); see also Profi-Parkiet Sp. Zoo v. Seneca Hardwoods LLC, No. 13-CV-4358 (PKC) (LB), 2014 WL 2169769, at *3 (May 23, 2014), adopted by 2014 WL 2765793 (E.D.N.Y. June 18, 2014). The Convention is a self-executing multilateral treaty that governs the rights and obligations of parties who enter into international sales contracts. See id.; Filanto, S.p.A. v. Chilewich Int'l Corp., 789 F.Supp. 1229, 1237 (S.D.N.Y. 1992). “When two foreign nations are signatories to this Convention . . . the Convention governs contracts for the sale of goods between parties whose places of business are in these different nations, absent a choice-of-law provision to the contrary.” Claudia v. Olivieri Footwear Ltd., No. 96-CV-8052 (HB) (THK), 1998 WL 164824, at *4 (S.D.N.Y. Apr. 7, 1998) (finding that the CISG applies to a dispute between companies located in the United States and Italy); see also Delchi Carrier SpA v. Rotorex Corp., 71 F.3d 1024, 1027 n.1 (2d Cir. 1995). Here, there is no evidence that the agreement between the parties contained a choice-of-law provision, and the United States and China are both signatories to the CISG; thus, the CISG applies to the present dispute over an alleged contract for the sale of goods. See CISG, art. 3 (listing both the United States and China as signatories); Saint Tropez Inc. v. Ningbo Maywood Indus. & Trade Co., No. 13-CV-5230 (NRB), 2014 WL 3512807, at *8 (S.D.N.Y. July 16, 2014) (noting both the United States and China are CISG signatories); Weihai Textile Grp. Imp. & Exp. Co. v. Level 8 Apparel, LLC, No. 11-CV-4405 (ALC) (FM), 2014 WL 1494327, at *6 (S.D.N.Y. Mar. 28, 2014) (same); see also Profi-Parkiet Sp. Zoo, 2014 WL 2169769, at *3 (finding that, even when state contract claims are interposed, “federal district courts have subject matter jurisdiction over . . . claims [made under the CISG]”) (collecting cases).

         C. Standard of Review

         A defending party who fails to adequately respond to a complaint risks default. Courts are directed to engage in a two-step process for the entry of a judgment against a party who fails to defend: first, the Clerk of Court enters default, and second, a judgment is entered on the default. See City of New York v. Mickalis Pawn Shop, LLC, 645 F.3d 114, 128 (2d Cir. 2011). Rule 55(a) of the Federal Rule of Civil Procedure sets forth the first step as follows:

When a party against whom a judgment for affirmative relief is sought has failed to plead or otherwise defend, and that failure is shown by affidavit or otherwise, the clerk must enter the party's default.

Fed. R. Civ. P. 55(a). While a “typical” default is entered “because a defendant failed to file a timely answer[, ] . . . a district court is also empowered to enter a default against a defendant that has failed to ‘otherwise defend.'” Mickalis Pawn Shop, 645 F.3d at 129 (citing Fed.R.Civ.P. 55(a)) (other citation and bracket omitted).

         The second step is the entry of default judgment. In this step, the court “converts the defendant's admission of liability into a final judgment that terminates the litigation and awards the plaintiff any relief to which the court decides it is entitled . . . .” Id. at 128. Following the clerk's entry of default, a court considers as true all factual allegations in the complaint relating to liability. See Cement & Concrete Workers Dist. Council Welfare Fund v. Metro Found. Contractors Inc., 699 F.3d 230, 234 (2d Cir. 2012). But the court still must determine whether the factual allegations, taken as true, establish the defendant's liability as a matter of law. See Finkel v. Romanowicz, 577 F.3d 79, 84 (2d Cir. 2009) (following entry of default, the court is “required to determine whether the [plaintiff's] allegations establish [defendant's] liability as a matter of law”). “[B]ecause defaults are generally ...


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