Dixon Seed Corp. v. Green Co., Ltd.

— 1 — — 2 — — 3 — — 4 — — 5 — — 6 — — 7 — 8 UNITED STATES DISTRICT COURT 9 FOR THE EASTERN DISTRICT OF CALIFORNIA — 10 — 11 DIXON SEED CORPORATION, No. 2:23-cv-00198-DC-SCR — 12 — Plaintiff, 13 FINDINGS AND RECOMMENDATIONS v. — 14 — GREEN CO., LTD, — 15 — 16 Defendant. — 17 — — 18 — 19 Plaintiff Dixon Seed Corporation’s motion for a default judgment in the amount of 20 $1,078,332.14, plus $3,323.58 in costs, for a total of $1,081,655.72 (ECF No. 33 at 2-3),1 is 21 before the undersigned pursuant to Local Rule 302(c)(19). This motion was taken under 22 submission on September 3, 2024. ECF No. 38. For the reasons provided below, the 23 undersigned recommends that Plaintiff’s motion be granted for the full amount requested. 24 BACKGROUND 25 Plaintiff, a global seed production company, initiated this matter by filing a Complaint on 26 January 30, 2023 against Defendant, a Vietnamese vendor and purchaser of vegetable seeds. ECF — 27 — 1 Page number citations such as this are to the page number reflected on the court’s CM/ECF 28 system and not to the page numbers assigned by the parties. 1 No. 1 at 1-2 (Compl. at ⁋⁋ 2-4). The Complaint alleges that on October 31, 2019, Plaintiff as a 2 seller and Defendant as a buyer entered a Sales and Service Agreement (“Agreement”) to govern 3 all future individual purchase order contracts. Id. at ⁋⁋ 11-13). The breach of any one purchase 4 order contract, or invoice, would therefore double as a breach of the Agreement. Id. at ⁋⁋ 14-15. 5 For one of these contracts, dated March 9, 2021, the parties agreed in mid-April 2021 that 6 Plaintiff would ship half the ordered seed by November 2021 and the other half in January or 7 February 2022. Id. at ⁋⁋ 13, 17-18, 21. This shipment would require six shipping containers, 8 which Defendant was supposed to pick up from Plaintiff’s facility in Glenn, California. Id. at ⁋⁋ 9 20-22. 10 Per the agreement, Plaintiff fulfilled its duty by bringing the seed to that location, while 11 Defendant assumed responsibility for arranging subsequent transport. Id. at ⁋⁋ 22-23. Plaintiff 12 informed Defendant on October 19, 2021, that the product was ready for pickup. Id. at ⁋ 24. 13 Disputes between Defendant and its shipping partners continuously delayed pickup. Id. at ⁋ 25. 14 The Complaint then alleges that on December 8, 2021, Plaintiff warned Defendant that 15 between the COVID-19 pandemic and climate restraints, production of Cucurbit seed would be 16 delayed. Id. at ⁋ 26. Section 7.2 of the Agreement held that Plaintiff was not liable for delays 17 caused by “Force majeure” events, but Plaintiff still reworked the shipping schedule around them. 18 Id. at ⁋⁋ 28-29. Defendant cancelled two of the six shipment containers, then postponed the 19 delivery date of the other four. Id. at ⁋⁋ 31-32. 20 The four uncancelled shipping containers were shipped from Plaintiff on January 31, 21 2022, and arrived at Defendant’s facility in late February. Id. at ⁋ 34. On April 22, 2022, 22 Defendant wrote Plaintiff that it was accepting all but one lot of delivered seeds. Id. at ⁋ 35. 23 Because section 4.2 of the Agreement requires any rejection to be within 30 days of delivery, this 24 was untimely. Id. at ⁋ 36. On September 21, 2022, Plaintiff nevertheless offered a 100% refund 25 of the rejected lot, or $10,387 in credit. Id. at ⁋ 38. 26 The Complaint alleges that the amount owed under the March 9, 2021 contract, across 27 three invoices, initially totaled $767,496.20. Id. at ⁋ 39. This amount was due on April 2, 2022, 28 60 days from the date of the last invoice. Id. at ⁋ 40. Defendant failed to pay this amount, which 1 has since accrued interest at a monthly rate of 1.5% under the Agreement. Id. at ⁋⁋ 41-43. As of 2 the Complaint’s filing, this interest had accumulated to 13.5% of the amount owed, or 3 $103,611.99, for a total of $871,108.19. Id. at ⁋⁋ 44-46. 4 The Complaint alleges causes of action for breach of contract, declaration of rights under 5 the Agreement, breach of the implied covenant of good faith and fair dealing, conversion, 6 negligence, unjust enrichment, and violation of California Business and Professions Code (“Cal. 7 Bus. & Prof.”) § 17200 et seq. ECF No. 1 at 7-12. It seeks all damages owed under the 8 Agreement, a declaration that Plaintiff is entitled thereto, damages based on Defendant’s benefit 9 in receiving the goods, and costs of suit. Id. at 13. 10 On June 11, 2024, Judge Morrison England, Jr., granted Plaintiff’s motion to serve the 11 Summons and Complaint by email. ECF No. 21. The executed Summons were returned on June 12 14, 2024. ECF No. 23. Plaintiff requested entry of default on July 11, 2024, and default was 13 entered on July 15, 2024. ECF Nos. 24-25. 14 On August 5, 2024, Plaintiff moved for default judgment with a declaration from 15 Plaintiff’s counsel. ECF Nos. 26-27. Following reassignment of this case to the undersigned, on 16 August 8 and 19, 2024, Judge England ordered Plaintiff to file the noticed motion for default 17 judgment before the undersigned. ECF Nos. 29-30, 32. On August 19, 2024, Plaintiff refiled the 18 motion before the undersigned, though the motion continues to rely on the declaration previously 19 filed by Plaintiff’s counsel. ECF Nos. 33-34. 20 LEGAL STANDARDS 21 Federal Rule of Civil Procedure 55(b)(2) governs applications for default judgment. Upon 22 entry of default, the complaint’s factual allegations regarding liability are taken as true, while 23 allegations regarding the amount of damages must be proven. Dundee Cement Co. v. Howard 24 Pipe & Concrete Prods., 722 F.2d 1319, 1323 (7th Cir. 1983) (citing Pope v. United States, 323 25 U.S. 1 (1944); Geddes v. United Fin. Group, 559 F.2d 557 (9th Cir. 1977)); see also DirectTV v. 26 Huynh, 503 F.3d 847, 851 (9th Cir. 2007); TeleVideo Sys., Inc. v. Heidenthal, 826 F.2d 915 , 91727 18 (9th Cir. 1987). 28 Where damages are liquidated, i.e., capable of ascertainment from definite figures 1 contained in documentary evidence or in detailed affidavits, judgment by default may be entered 2 without a damages hearing. Dundee, 722 F.2d at 1323 . Unliquidated and punitive damages, 3 however, require “proving up” at an evidentiary hearing or through other means. Dundee, 722 4 F.2d at 1323-24; see also James v. Frame, 6 F.3d 307, 310-11 (5th Cir. 1993). 5 Granting or denying default judgment is within the court’s sound discretion. Draper v. 6 Coombs, 792 F.2d 915, 924-25 (9th Cir. 1986); Aldabe v. Aldabe, 616 F.2d. 1089, 1092 (9th Cir. 7 1980). The court considers a variety of factors in exercising this discretion. Eitel, 782 F.2d at 8 1471-72. Among them are: 9 (1) the possibility of prejudice to the plaintiff, (2) the merits of plaintiff’s substantive claim, (3) the sufficiency of the complaint, (4) 10 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 11 excusable neglect, and (7) the strong policy underlying the Federal Rules of Civil Procedure favoring decisions on the merits. — 12 — 13 Eitel, 782 F.2d at 1471-72 (citing 6 Moore’s Federal Practice ¶ 55-05[2], at 55-24 to 55-26). 14 ANALYSIS 15 For the following reasons, the Eitel factors favor entry of default judgment. 16 a. Possibility of Prejudice to the Plaintiff 17 The first Eitel factor contemplates the possibility of prejudice to the plaintiff if default 18 judgment is not entered. Eitel, 782 F.2d at 1471. Prejudice can be established where failure to 19 enter a default judgment would leave plaintiff without a proper remedy. PepsiCo, Inc. v. Cal. 20 Sec. Cans, 238 F.Supp.2d 1172, 1177 (C.D. Cal 2002). Here, Plaintiff has no alternative for 21 recovering damages suffered from Defendant’s failure to pay amounts owed under the Agreement 22 and related invoices. This is particularly true when Defendant is a foreign company for whom 23 conventional means of service have proven ineffective, causing a judge to grant Plaintiff’s motion 24 to serve documents by email. ECF No. 21. Accordingly, the first factor weighs in favor of 25 default judgment. 26 b. Merits of Plaintiff’s Substantive Claims and Sufficiency of the Complaint 27 The second and third Eitel factors jointly examine whether the plaintiff has pleaded facts 28 sufficient to establish and succeed upon its claims. Pepsico, Inc., 238 F.Supp.2d at 1175 (citing 1 Kleopping v. Fireman’s Fund, 1996 WL 75314 , at *2 (N.D. Cal. Feb. 14, 1996)). Although the 2 Complaint seeks recovery under seven causes of action, the damages for each claim are based on 3 amounts owed under the Agreement and three of the invoices generated under this Agreement. 4 See ECF No. 1 at 7-13. 5 i. Merits of the Agreement and Invoices 6 The Agreement provides a 30-day acceptance period after receipt of ordered goods at 7 Defendant’s facilities, during which Defendant may compare the product against predefined 8 “Rejection criteria” and claim rejection credit if applicable. ECF No. 27-4 at 4. If both parties 9 agreed in such time that the particular delivery was a “reject lot[,]” Plaintiff agreed to credit up to 10 the full value of the sale item. ECF No. 27-4 at 3. Failure to reject the lot within the 30-day 11 period would result in the delivery being deemed accepted. ECF No. 27-4 at 4. 12 The Agreement states that payment terms “will be cash on delivery, unless mutually 13 agreed to in writing by both parties.” ECF No. 27-4 at 3. Addendum B, however, added that 14 payment was due 60 days from the date of the invoice. ECF No. 27-4 at 11. Section 3.3 of the 15 Agreement imposes a late payment charge of 1.5% per month on any amounts unpaid after the 16 corresponding due date. ECF No. 27-4 at 3. 17 The Agreement’s force majeure clause does not hold either party liable for failure to 18 perform obligations thereunder due to “acts of God,…government regulations or other causes 19 beyond its reasonable control.” ECF No. 27-4 at 7-8. 20 One of the invoices at issue, dated January 31, 2022, assessed total charges of 21 $244,981.50. ECF No. 27-1 at 2. Two invoices dated February 1, 2022, assessed charges of 22 $224,379.25 and $298,135.45. ECF Nos. 27-2 at 2, 27-3 at 2. The principal of the three invoices 23 totals $244,981.50 + $224,379.25 + $298,135.45 = $767,496.20. 24 All three invoices had become due by April 2, 2022, 60 days after February 1, 2022. 25 Based on this, the Complaint alleges that as of its January 30, 2023 filing, the invoices had 26 accrued 9 x 1.5% = 13.5% interest, or $103,611.99. See Compl. at ¶¶ 44-46. Plaintiff now 27 requests 27 x 1.5% = 40.5% interest, or $99,217.50 + $90,873.59 + $120,744.85 = $310,835.94, 28 to reflect interest accrued as of August 5, 2024. ECF No. 33 at 2; ECF No. 27 at ¶¶ 14-22. 1 An amount awarded in default judgment may not “differ in kind from, or exceed in — 2 — amount, what is demanded in the pleadings.” Fed. R. Civ. P. 54(c). “The purpose of this rule is — 3 — to ensure that a defendant is put on notice of the damages being sought against him so that he may — 4 — make a calculated decision about whether it is in his best interest to answer.” Operating — 5 — Engineers Health and Welfare Trust Fund for Northern California v. Pipe-Net, Inc., 2024 WL 6 3390528, at *5 (N.D. Cal. June 14, 2024). — 7 — At the same time, clerks can enter default judgment with prejudgment interest, even — 8 — without application to the court, if interest is part of “a sum certain or a sum that can be made — 9 — certain by computation[.]” Fed. R. Civ. P. 55(b)(1). The Ninth Circuit in Franchise Holding II, — 10 — LLC v. Huntington Rests. Group, Inc. noted that in the First Circuit, damages were only for a sum — 11 — certain if “the complaint and supporting affidavits…set forth a claim capable of simple — 12 — mathematical computation[.]” 375 F.3d 922 , 929 (9th Cir. 2004) (citing KPS & Assocs., Inc. v. — 13 — Designs By FMC, Inc., 318 F.3d 1 , 20 (1st Cir. 2003)). Adopting this approach, it held that when — 14 — the submitted documents provided both “the specific formulas for determining the amount owed” — 15 — and “the various amounts necessary for calculating the total amount due[,]” entry of default — 16 — judgment for such damages was allowed. Franchise Holding II, 375 F.3d at 929. — 17 — Here, although the Complaint specified the interest that had accrued up to that point, the — 18 — Prayer for Relief simply asked for “damages…and interest on such amounts as provided by the” — 19 — Agreement. ECF No. 1 at 13. As discussed above, the court can ascertain the interest accrued — 20 — based on the value of the invoices and the monthly interest rate. See ECF Nos. 27-1–27-4. — 21 — Default judgment for the full $310,835.94 in interest is permissible.2 — 22 — Ascertainable damages under the Agreement total $767,496.20 + $310,835.94 = — 23 — $1,078,332.14. — 24 — 2 The motion for default judgement does not address one allegation from the Complaint 25 that might conceivably reduce the amount owed. In September 2022, months after Plaintiff generated the three invoices at issue, Plaintiff offered Defendant a $10,387 credit for a lot that 26 Defendant sought to reject. Compl. at ¶ 38. Defendant had not rejected the lot, however, until April 22, 2022, over 30 days after the deadline for rejection had passed, and did not specify a 27 legitimate reason for the untimely rejection. Id. at ¶¶ 35-37; ECF No. 27-4 at 3-4. Plaintiff extended the offer solely as a sign of good will, and the Complaint does not suggest Defendant 28 ever accepted it. Compl. at ¶ 38. The Court will not reduce damages by this amount. 1 ii. Attorney’s Fees and Costs 2 In an attachment to his affidavit, counsel for Plaintiff provides statements showing it 3 incurred $185.79 x 2 = $371.58 in costs for attempting personal service of the Summons and 4 Complaint. ECF Nos. 27-5–27-6. Plaintiff then paid $2,550 for service on Defendant in Vietnam 5 via “request to a Central Authority designated by the state for Hague purposes (Article 5).” ECF 6 No. 27-7 at 2. Counsel for Plaintiff also asserts that it paid a $402 filing fee for this action. ECF 7 No. 27 at 3. Nothing suggests that these costs are unreasonable. Costs total $371.58 + $402 + 8 $2,550 = $3,323.58 9 iii. Summary of Analysis Concerning Damages, Fees, and Costs 10 For the reasons explained herein, under Eitel factors two and three, Plaintiff is entitled to 11 $1,078,332.14 in damages and $3,323.58 in attorney’s fees and costs, for a total of 12 $1,081,655.72. 13 c. Sum of Money at Stake 14 In weighing the fourth Eitel factor, “the court must consider the amount of money at stake 15 in relation to the seriousness of the defendant’s conduct.” PepsiCo, Inc., 238 F.Supp.2d at 1176 - 16 77. This factor weighs against default judgment when a large sum of money is at stake. Eitel, 17 782 F.2d. at 1472. 18 Here, Plaintiff seeks $1,078,332.14 in damages and $3,323.58 in attorney’s fees and 19 costs, for a total of $1,081,655.72. Although this amount is substantial, Defendant is an 20 international company that bought three shipments of seeds for $767,496.20. The damages at 21 issue are reasonably proportionate to the harm caused by Defendant’s failure to pay three-quarters 22 of a million dollars for over two years. This factor does not weigh against default judgment. 23 d. Possibility of Disputed Material Facts 24 The fifth Eitel factor examines whether a dispute regarding material facts exists. Eitel, 25 782 F.2d. at 1471-72. Here, Defendant failed to appear, leading to an entry of default. Given that 26 circumstance, there is no possibility for a dispute of material fact. See Elektra Entm’t Group, Inc. 27 v. Crawford, 226 F.R.D. 388, 393 (C.D. Cal. 2005) (“Because all allegations in a well-pleaded 28 complaint are taken as true after the court clerk enters default judgment, there is no likelihood that 1 any genuine issue of material fact exists”). Indeed, it appears this factor generally weighs against 2 entry of default judgment only when a defaulting party contests a motion for default judgment 3 and meaningfully disputes material facts. See, e.g., NewGen, LLC v. Safe Cig, LLC, 840 F.3d 4 606, 610, 616 (9th Cir. 2016) (finding that defaulting party which did not answer because it 5 believed service was defective, but then contested a motion for default judgment, still had not 6 raised possibility of disputed material facts where it “stat[ed] only general objections to the 7 existence of a contract, the extent of the relationship between the parties, and the alleged services 8 performed”). This factor weighs in favor of a default judgment. 9 e. Whether the Default Was Due to Excusable Neglect 10 The sixth Eitel factor considers whether Defendants’ failure to answer is due to excusable 11 neglect. Eitel, 782 F.2d at 1471-72. This factor considers due process, ensuring defendants are 12 given reasonable notice of the action. See Mullane v. Central Hanover Bank & Trust Co., 339 13 U.S. 306 , 314 (1950). 14 Here, Defendant was properly served with a copy of the Complaint by email to three 15 different email addresses, following an order by Judge England granting Plaintiff leave to do so. 16 ECF Nos. 21, 23. No proof of service is on file for the request for entry of default (ECF No. 24), 17 said entry (ECF No. 25), the original motion for default judgment (ECF No. 26), the declaration 18 or proposed order in support thereto (ECF Nos. 27-28), or the current motion for default judgment 19 (ECF No. 33). Although this does raise questions as to whether Defendant would have appeared 20 if this motion was served, “[n]o service is required on a party who is in default for failing to 21 appear.” See supra; Fed. R. Civ. P. 5(a)(2). This factor does not weigh against default judgment. 22 f. Policy of Deciding Cases on the Merits 23 The seventh Eitel factor considers the courts’ general disposition favoring judgments on 24 the merits. Eitel 782 F.2d at 1472. Defendant’s failure to appear has made a judgment on the 25 merits impossible. Accordingly, this factor does not weigh strongly against a default judgment. 26 CONCLUSION 27 Having considered the Eitel factors, the undersigned finds they weigh in favor of granting 28 Plaintiff’s motion for default judgment. 1 IT IS HEREBY RECOMMENDED that: 2 Plaintiff's motion for default judgment (ECF No. 33) be GRANTED in the amounts of 3 | $1,078,332.14 in damages and $3,323.58 in attorney’s fees and costs. 4 These findings and recommendations are submitted to the United States District Judge 5 || assigned to the case, pursuant to the provisions of 28 U.S.C. § 636 (b)(1). Within fourteen (14) 6 || days after these findings and recommendations are filed, any party may file written objections 7 || with the Court. A document containing objections should be titled “Objections to Magistrate 8 | Judge’s Findings and Recommendations.” Any reply to the objections shall be served and filed 9 || within 14 days after service of the objections. The parties are advised that failure to file 10 | objections within the specified time may, under certain circumstances, waive the right to appeal 11 | the District Court’s order. See Martinez v. Yist, 951 F.2d 1153 (9th Cir. 1991). 12 || Dated: March 17, 2025 kmh — 14 — 15 SEAN C. RIORDAN UNITED STATES MAGISTRATE JUDGE — 16 — — 17 — — 18 — — 19 — — 20 — — 21 — — 22 — — 23 — — 24 — — 25 — — 26 — — 27 — — 28 —