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Get Fresh Produce, Inc. v. Lansal, Inc.

United States District Court, D. Massachusetts

March 9, 2018

GET FRESH PRODUCE, INC., Plaintiff,
v.
LANSAL, INC., t/a HOT MAMA'S FOODS, JOSEPH D. WARD, individually, MATTHEW D. MORSE individually, BARBARA MORSE, individually; and UNITED BANK, Defendants. HARVEST FOOD GROUP, INC., Intervening Plaintiff,
v.
LANSAL, INC., d/b/a HOT MAMA'S FOODS, JOSEPH D. WARD, individually, MATTHEW D. MORSE individually, and BARBARA MORSE, Defendants. FRESH CUT SOLUTIONS, LLC; CHRISTOPHER RANCH, LLC, Plaintiffs,
v.
LANSAL, INC. d/b/a HOT MAMA'S FOODS; JOSEPH D. WARD; MATTHEW D. MORSE; BARBARA MORSE, Defendants.

          MEMORANDUM AND ORDER ON UNITED BANK'S MOTION FOR DEFAULT JUDGMENT AS TO THE DEFENDANT, LANSAL, INC. d/b/a HOT MAMA'S FOODS PURSUANT TO FED. R. CIV. P. 55(a)

          KATHERINE A. ROBERTSON UNITED STATES MAGISTRATE JUDGE

         Now before the court is United Bank's Motion for Default Judgment as to the Defendant, Lansal, Inc. d/b/a Hot Mama's Foods Pursuant to Fed.R.Civ.P. 55(a) (“Default Motion”). The motion was referred to the undersigned for a report and recommendation by presiding District Judge Mark G. Mastroianni (Dkt. No. 115). See 28 U.S.C. § 636(b)(1)(B). The court held a hearing on United Bank's Default Motion on November 16, 2017 and set a deadline for a further submission by United Bank. Lansal did not appear at the hearing. Having reviewed that submission and related documents, the court recommends that United Bank's Default Motion be granted, and that judgment enter for the Bank in the principal amount of $188, 015 with attorney's fees in the amount of $72, 510 for a total of $260, 525. The court further recommends that: (1) $70, 000 of the principal amount of the judgment be subject to interest at a rate of 12% per annum from October 16, 2015 to the date of judgment; and (2) $118, 015 of the principal amount be subject to interest at the a rate of 12% from March 10, 2016 to the date of judgment.

         II. Relevant Background

         These cases were initiated by a complaint brought by Get Fresh Produce, Inc. against Lansal, Inc. d/b/a/ Hot Mama's Foods (“Lansal”), Joseph D. Ward, Matthew D. Morse, Barbara Morse, and United Bank pursuant to the Perishable Agricultural Commodities Act, 7 U.S.C. § 499e(c)(5) and § 499e(b) (“PACA”). Get Fresh Produce alleged in its complaint that it had sold and delivered produce to Lansal worth $73, 888.36, which Lansal accepted and for which it did not pay. Harvest Food Group, Inc. subsequently moved for, and was granted, leave to file an intervenor complaint, claiming that Harvest Food Group, Inc. had delivered produce to Lansal valued at $39, 435.99 for which it had not been paid and asserting PACA claims against Lansal. Finally, a separate case filed by Fresh Cut Solutions, LLC and Christopher Ranch, LLC against Lansal was consolidated with this case. Fresh Cut Solutions and Christopher Ranch alleged that they had delivered produce to Lansal which Lansal had accepted and for which it had not paid and also asserted claims against Lansal pursuant to PACA. The cumulative amount owing to Fresh Cut Solutions and Christopher Ranch was alleged to be $54, 382.60. Get Fresh, Inc., Harvest Food Group, Inc., Fresh Cut Solutions, LLC and Christopher Ranch, LLC are referred to herein as “the PACA Plaintiffs.”

         United Bank filed a cross-claim against Lansal and Matthew Morse alleging that United Bank made a number of loans to Lansal with Matthew Morse as guarantor of those loans (Dkt. No. 25 at 9-10). The bank alleged that Lansal failed to make payments due under its loan agreements with United Bank, after which United Bank provided notice that the loans were in default and due and payable in full (id. at 11). In or around August 2014, United Bank commenced proceedings against Lansal to collect on its loans (id. at 10). United Bank further alleged that, pursuant to the loan agreements, Lansal and Mr. Morse agreed to indemnify United Bank against any cost, claim, loss, liability, damages, or expense, including attorneys' fees, in connection with any litigation with any third party relating to the loan documents (id.) Lansal did not answer United Bank's cross-claim in this case. On August 17, 2017, the Clerk's Office entered default against Lansal in favor of United Bank (Dkt. No. 110). In view of Lansal's failure to answer the cross-claim, the facts alleged therein are taken to be true. See Ortiz-Gonzalez v. Fonovisa, 277 F.3d 59, 62-63 (1st Cir. 2002).

         PACA creates a statutory trust over any goods, receivables, or proceeds from perishable agricultural commodities until the buyer (here, Lansal) makes full payment. 7 U.S.C. § 499e(c); see also Hiller Cranberry Prods., Inc. v. Koplovsky, 165 F.3d 1, 4-5 (1st Cir. 1999). “In essence, PACA creates a trust in favor of the seller of unpaid goods which is superior to the interest of the buyer's secured lender.Hiller Cranberry Prods., Inc., 165 F.3d at 5 (emphasis supplied); see also B & R Produce Packing Co., Inc. v. A & H. Farms, Inc., Civil No. 13-cv-367-JD, 2014 WL 576210, at *2 (“PACA imposes a floating trust for the benefit of unpaid suppliers on purchasers' receivables and proceeds from the sale of commodities”). The PACA Plaintiffs claimed that United Bank possessed assets of Lansal that were subject to a so-called PACA trust in their favor, such that their claims to those assets were superior to the claims of United Bank as Lansal's secured lender. Ultimately, United Bank paid $188, 015 in settlement to the PACA Plaintiffs and incurred attorneys' fees in defending itself against the PACA Plaintiffs' claims (Dkt. No. 122 at 4). United Bank seeks entry of a default judgment against Lansal compensating it for its settlement payments to the various PACA Plaintiffs with interest running from the dates on which it made the settlement payments and reimbursement of the attorneys' fees it incurred in defending itself in this case.

         III. Discussion

         a. Standard of Review

         While a court should accept as true the well-pleaded factual allegations in the complaint when considering a motion for entry of default judgment, the court “need not accept the moving party's legal conclusions or factual allegations relating to the amount of damages.” Virgin Records Am., Inc. v. Bagan, Civ. No. 08-4694 (WHW), 2009 WL 2170153, at *2 (D.N.J. July 21, 2009) (citing Comdyne I, Inc. v. Corbin, 908 F.2d 1142, 1149 (3d Cir. 1990)). A court is required to conduct its own inquiry to ascertain the amount of damages with reasonable certainty. See Id. (quoting Int'l Assoc. of Heat & Frost Insulators v. S. Jersey Insulation Servs., No. 05-3143, 2007 WL 276137, at *1 (D.N.J. Jan. 26, 2007)).

         b. Damages

         The actual evidence of damages proferred by United Bank in this case consists of the Affidavit of William Demore, in which Mr. Demore represents, under the pains and penalties of perjury, that United Bank made the following payments to the PACA Plaintiffs to settle their claims and potential claims against United Bank:

• $70, 000 to Get Fresh Produce, Inc.;
• $75, 015 to Harvest Food Group, Inc. and Christopher ...

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