D'Arrigo Bros Co. of New York, Inc. v. KNJ Trading Inc.

Background

D’Arrigo sued KNJ Trading Inc. and Byung Soo Kang, alleging that the defendants failed to pay for perishable agricultural commodities delivered between June 29, 2018, and October 31, 2018. The main claim arose under the Perishable Agricultural Commodities Act (PACA), 7 U.S.C. § 499e(c), which requires dealers to hold produce and its proceeds in trust for unpaid sellers until the sellers are fully paid.

The defendants were served with the complaint. Kang appeared without a lawyer, but neither he nor KNJ filed an answer or opposition papers. KNJ, a corporation, did not obtain counsel. The Clerk entered defaults against both defendants, and D’Arrigo moved for default judgment. The court had also previously granted D’Arrigo’s request for a preliminary injunction.

Liability

A default judgment is a final judgment entered after a defendant fails to defend. Although a defaulting defendant is treated as admitting the complaint’s well-pleaded factual allegations, the court must still determine whether those facts establish legal liability.

The court concluded that D’Arrigo established the five elements of its PACA trust claim: the goods were perishable agricultural commodities; KNJ was a PACA-licensed dealer; the transactions occurred in interstate commerce; KNJ did not fully pay; and D’Arrigo preserved its trust rights through written language on the invoices.

The court also held that Kang was jointly and severally liable with KNJ. The complaint alleged that Kang was an officer, director, and shareholder of KNJ, controlled the payment of its accounts, and chose not to pay D’Arrigo. Accepting those allegations for purposes of the default judgment, the court found that Kang controlled the PACA trust assets and could be held personally liable for the breach of fiduciary duty. Because the PACA claim resolved the dispute, the court did not address D’Arrigo’s alternative claims.

Damages and Costs

The court independently reviewed the requested damages because allegations about the amount of damages are not automatically admitted by a default. It found that the invoices provided a clear basis for calculating the unpaid produce amount and determined that no hearing was necessary.

The court awarded $65,970.14 for the produce sold between June 29, 2018, and October 31, 2018. It also awarded $590 in costs, including filing, Clerk, process-server, and statutory fees. The court found that the invoices made the buyer responsible for recovery costs if D’Arrigo had to enforce its PACA trust claim.

Disposition

The court GRANTED D’Arrigo’s motion for default judgment. It entered judgment for $65,970.14 in principal damages plus $590 in costs, totaling $66,560.14, directed the Clerk to enter judgment and close the case, and stated that the order resolved Docket No. 32.