Opinion
Civ. 1:20-cv-01787-CL
06-16-2021
THE GREEN TRADING COMPANY, LLC, An Oregon limited liability company, J Plaintiffs, v. BARRY SHY, Defendant.
FINDINGS AND RECOMMENDATION
MARK D. CLARKE Magistrate Judge
This case comes before the Court on Plaintiffs Motion for Default Judgment (#11), filed against defendant Barry Shy, pursuant to Federal Rule of Civil Procedure 55. The Clerk of Court entered an order of default as to Barry Shy on December 22, 2020. (#10). On June 8, 2021, the Court held a prima facie evidentiary hearing via video conference. Plaintiff presented evidence in the form of exhibits and testimony given by Lesa Horton, a member and owner of the Plaintiff Green Trading Company. For the reasons stated below, the Court recommends Plaintiffs motion be GRANTED.
BACKGROUND
Witness Lesa Horton testified on behalf of Plaintiff Green Trading Company that she delivered 157 hemp bales for processing to Farmer's Choice, LLC, as agreed in a contract between the two parties. See Exhibit 1. She testified that Farmer's Choice failed to begin to process the hemp bales by the deadline in the contract, January 30, 2020, and it also failed to deliver the bales to another processor. See Exhibit 1. Ms. Horton testified that, in her experience, hemp that is vacuum sealed into bales, as the hemp was in this case, will “stay good” for about 8 or 9 months at the most. After that time, water accumulates inside the packages and the hemp deteriorates and begins to rot, making it unusable. Therefore, Plaintiff sought to reclaim the hemp bales from Farmer's Choice in order to take them elsewhere for processing, before they began to deteriorate.
Ms. Horton's testimony is that, after Farmer's Choice missed the processing deadline, Thomas Dubiel, the owner of Farmer's Choice, disappeared from the area and was nowhere to be found. Even by May, 2020, she could not get ahold of him by phone, email, or in person. Ms. Horton testified that, ultimately, on June 3, 2020, she went to the property where the hemp bales were being stored, 2251 Spalding Ave, Grants Pass, with 7 flatbed semi-trucks, two employees, and a “squeeze, ” which is a machine used to load the 2, 0001b bales into the trucks. However, during the process of loading the bales onto the trucks, the police arrived and told her she could not take the bales.
It is Ms. Horton's testimony that the defendant, Mr. Barry Shy, was involved with a company called BT Ventures, Inc. Ms. Horton's understanding is that BT Ventures was processing hemp flowers at 2250 Spalding Ave., next door to the Farmer's Choice 2251 Spalding Ave. location, where her hemp bales were being stored. According to a Business Registry Search of Farmer's Choice (Exhibit 4) and the Articles of Organization for BT Ventures, LLC, filed with the State of Oregon, (Exhibit 3), Farmer's Choice and BT Ventures are owned by the same person - Thomas Dubiel. The records for BT Ventures also show a “Rommy Shy” as an Organizer and an Individual with Direct Knowledge. Ms. Horton stated that Rommy Shy is Barry Shy's son. Plaintiff claims that, after the disappearance of Thomas Dubiel, Barry Shy somehow gained control over the property and the operations of Farmer's Choice and BT Ventures. Ms. Horton testified that when she went to pick up the hemp bales on June 3, 2020, Mr. Barry Shy and “his employees, ” including John Riccio, called the police and prevented her from taking the bales.
According to Ms. Horton, Jupiter Seed Company had previously delivered hemp flower products to BT Ventures for processing. Jupiter then claimed that BT Ventures negligently processed the products to the extent that they lost their value entirely. As a result, Jupiter was threatening BT Ventures with litigation. Meanwhile, Jupiter had a large crop of hemp that it was unable to harvest. Jupiter asked Ms. Horton and her company to harvest the hemp in exchange for 60% of the harvest, or about 300 bales, and she agreed. Ms. Horton testified that she took 157 of the 300 bales to Farmer's Choice for processing, and these were the hemp bales that she was attempting to pick up on June 3, 2020. Perhaps based on this transaction and history with Jupiter, BT Ventures and Barry Shy told Ms. Horton that they would not release the hemp bales to her until she signed a release on behalf of Jupiter Seed Company, releasing any and all legal claims against BT Ventures. See Exhibit 6. Ms. Horton testified that she could not sign the agreement because she has no authority to represent Jupiter, nor can she release any claims on their behalf.
Ms. Horton testified that she was able to contact the attorney for Jupiter, Mr. Mark Fields, and he contacted Barry Shy and his associates via phone and email to confirm that Ms., Horton was the lawful owner of the hemp bales being held by Farmer's Choice, and that Ms. Horton had no authority to sign a release on behalf of Jupiter. Ms. Horton testified regarding the numerous emails in the record (see Exhibit 8) that include Barry Shy as a participant or as a subject, and she testified that she had at least one phone call with both Barry Shy and Mark Fields on June 3, the day she tried to reclaim the bales, and the same day many of those emails were exchanged. She characterized the phone call between the two men as “extremely volatile” and “a screaming match.” However, all of those efforts were unsuccessful. Ms. Horton was never able to reclaim the hemp bales she had given to Farmer's Choice for processing.
Ms. Horton testified that she would have reclaimed 137 hemp bales from Farmer's Choice if she had not been prevented from doing so by defendant Barry Shy. She testified that she had already found and contracted with another processor in South Carolina, Specialty Oils. She testified that she sent the rest of the hemp from the deal with Jupiter to that lab, and she successfully had it processed and sold it at a profit. She planned to send the 137 bales from Farmer's Choice to Specialty Oils to process into isolate, and then process further into Delta 8.
Ms. Horton testified that she delivered 157 bales, but only would have reclaimed 137. It's unclear why there is a discrepancy of 20 bales.
Ms. Horton walked the Court through the following calculations to show her lost profit and the damages claimed in this case: 137 hemp bales, at 2, 0001bs each, is 274, 0001bs of hemp or “biomass.” It takes 601bs of biomass to make 1 liter of Delta 8 (“D8”). Thus, 274, 0001bs of hemp biomass makes 4, 566.7 liters of D8. One liter of D8 sells for $2,800. See Exhibit 9. If Plaintiff could sell all 4, 566.7L of D8, she would gross $12,786,666.6. Ms. Horton testified that there was and is a huge market for D8, and she could have sold “12 million liters” of it if she had the product. She claims that, after her expenses, her net profit on the $12.8M would be $5,659,000.00, as alleged in the Complaint.
LEGAL STANDARD
The decision to grant or deny a motion for default judgment is within the discretion of the court. Draper v. Coombs, 792 F.2d 915, 924 (9th Cir. 1986). In exercising its discretion, the court must consider seven factors, often referred to as the Eitel factors: (1) the possibility of prejudice to the plaintiff; (2) the merits of plaintiff's substantive claim; (3) the sufficiency of the complaint; (4) 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 excusable neglect; and (7) the strong policy favoring decisions on the merits. Eitel v. McCool, 782 F.2d 1470, 1471-72 (9th Cir. 1986).
Upon entry of default, plaintiff's well-pleaded allegations of fact regarding liability, except allegations relating to the amount of damages, will be taken as true. Geddes v. United Fin-Group, 559 F.2d 557, 560 (9th Cir. 1978). Plaintiff must establish damages by proof, unless the amount is liquidated or otherwise susceptible of computation. Davis v. Fendler, 650 F.2d 1154, 1161 (9th Cir. 1981) (internal citation omitted). Relief for cases of default judgment “must not differ in kind from, or exceed in amount, what is demanded in the pleadings.” Rule 54(c).
DISCUSSION
The Eitel factors weigh in favor of entering default judgment against the defendant.
I. The possibility of prejudice to Plaintiffs weighs in favor of default judgment.
First, if default judgment were not granted, Plaintiffs would be denied a legal remedy against the defendant for his allegedly unlawful actions and “would be left without a remedy given defendant's failure to appear and defend themselves.” J & J Sports Prods., Inc. v. Frei, No. 4:12-cv-0127-BLW, 2013 WL 3190685, *1 (D. Idaho Jun. 21, 2013). Here, Plaintiff has presented evidence and testimony that the defendant prevented her from reclaiming her hemp bales and interfered with her ability to process and sell the products associated with those bales. With the disappearance of the other participants, as well as the disappearance of the hemp itself, which has either been sold or deteriorated past the point of useability, Plaintiff would be left without a remedy for the defendant's actions in this case. This prejudice renders the first factor favorable to Plaintiff.
II. The sufficiency of the complaint and the merits of Plaintiffs substantive claims also weigh in favor of default judgment.
Next, Plaintiffs' Complaint sufficiently states a claim for relief, thus meeting the second, and third Eitel factors. See Danningv. Lavine, 572 F.2d 1386, 1388 (9th Cir. 1978) (stating the second and third factors require a plaintiffs allegation “state a claim on which the [plaintiff] may recover”). Since the Clerk of the Court has entered default, the well-pleaded allegations of the complaint are taken as true and are binding against the defaulting party. Garcia v. Pacwest Contracting LLC, 2016 WL 526236, 1 (D. Or. Feb 9, 2016) (citing Televideo Sys., Inc. v. Heidenthal, 826 F.2d 915, 917 (9th Cir. 1987). Thus, the question is whether Plaintiff is entitled to recover on the facts set forth in the complaint and the prima facie evidence provided at the hearing. The Court concludes that Plaintiff is so entitled.
Plaintiffs contract with Farmer's Choice, LLC, admitted into evidence as Exhibit 1, allowed for Plaintiff to take the hemp bales to another processor if Farmer's Choice was unable to process them by the January 30 deadline. After the deadline passed, Plaintiff attempted to reclaim the hemp bales and take them elsewhere for processing. The testimony of Ms. Horton establishes that the defendant Barry Shy prevented Plaintiff from reclaiming possession of the hemp bales, thus interfering with the contract with Farmer's Choice. Plaintiff was never able to reclaim the hemp bales, resulting in conversion. Because Plaintiff provides sufficient allegations to state each of the claims for relief, Plaintiff has satisfied the second and third Eitel factors.
A claim for intentional interference with economic relations requires: (1) The existence of a professional or business relationship (which could include, e.g. a contract); (2) intentional interference with such relationship; (3) by a third party; (4) accomplished through an improper means or improper purpose; (5) a causal effect between the interference and damage to the economic relation; and (6) damages. Wieber v. FedEx Ground Package Sys., 231 Or.App. 477, 220 P.3d 68, 76 (2006), quoting McGanty v. Staudenraus, 321 Or. 532, 535, 901 P.2d 841 (1995).
The Restatement (Second) of Torts §222A (1965) defines conversion as “an intentional exercise of dominion or control over a chattel which so seriously interferes with the right of another to control it that the actor may justly be required to pay the other the full value of the chattel.”
III. The possibility of a dispute concerning material facts is a neutral factor, or it weighs in favor of granting default judgment.
As discussed above, the defendant has been properly served but has not appeared in this case. Without an appearance by the defendant and his version of the facts, or any other countervailing evidence, and because all well-pleaded allegations of the complaint are deemed true after entry of default, “no likelihood that any genuine issue of material fact exists” after default has been entered. Elektra Entm't Grp. Inc v. Crawford, 226 F.R.D. 388, 393 (C.D. Cal. 2005). This factor is neutral or weighs in favor of granting default judgment.
IV. The sum of money at stake in the action weighs in favor of granting default judgment.
“One of the factors the court is free to consider in exercising its discretion to grant or deny default judgment is the sum of money at stake.” J & J Sports Prods., Inc. v. Rafael, No. CIV S-l0-1046 LKK GGH, 2011 WL 445803, at *2 (E.D. Cal. Feb 8, 2011). Under this factor, a court considers the sum of money “in relation to the seriousness of [the defendant's] conduct.” PepsiCo, Inc. v. Cal. Sec. Cans, 238 F.Supp.2d 1172, 1176 (C.D. Cal. 2002). Here, Plaintiff has shown via exhibits and testimony that defendant's actions have caused Plaintiff to suffer damages of $5,659,000.00. This large sum of money, combined with the prejudice discussed in the first factor, weigh in favor of granting Plaintiffs motion.
V. No evidence suggests default was due to excusable neglect; this factor is neutral or weighs in favor of granting default judgment.
No evidence exists to suggest the defendant's failure to respond to the Complaint was due to excusable neglect. Plaintiff provided sworn proof of service of process, and Plaintiffs counsel addressed the Court's concerns regarding service.
Federal Rule of Civil Procedure 4(e), “Serving an Individual Within a Judicial District of the United States, ” states:
Unless federal law provides otherwise, an individual-other than a minor, an incompetent person, or a person whose waiver has been filed-may be served in a judicial district of the United States by:
1. following state law for serving a summons in an action brought in courts of general jurisdiction in the state where the district court is located or where service is made; or
2. doing any of the following:
A. delivering a copy of the summons and of the complaint to the individual personally;
B. leaving a copy of each at the individual's dwelling or usual place of abode with someone of suitable age and discretion who resides there; or
C. delivering a copy of each to an agent authorized by appointment or by law to receive service of process.
Plaintiffs sworn proof of service includes a notarized statement from the process server, stating that he attempted to personally serve the defendant at his residence on three separate occasions but was unsuccessful. Ultimately, he left the summons at the defendant's “residence or place of abode with an individual named Amir Benwohanan, ” described as “Mid Eastern / Male I 40yrs / 5'10” / Blk hair / Brn eyes, a person of suitable age and discretion who resides there, ” on November 9, 2020 at 3:51p.m. Plaintiffs attorney stated on the record that she discovered the defendant's address using a Lexis Nexus public records search, and she verified it by finding local news reports mentioning the defendant's business dealings in the Los Angles, California area. Plaintiff counsel stated that the defendant is not, to her knowledge, a minor or an incompetent person. The Court is satisfied that Plaintiff has met the requirements of FRCP 4(e)(2)(B).
The defendant has not appeared in this case or otherwise indicated that he will do so. Plaintiff counsel has not had any contact from the defendant since the case was filed. No evidence of excusable neglect exists or is apparent in the record. This factor is neutral or weighs in favor of granting default judgment.
VI. Policy favors a decision on the merits of the case; this factor weighs against default judgment.
The one factor that weighs in favor of the defendant, and against default judgment, is the strong policy favoring decisions on the merits. However, this factor, without more, is not sufficient to preclude default judgment. “Although ‘cases should be decided upon their merits whenever reasonably possible,' ‘the mere existence of Fed.R.Civ.P. 55(b) indicates that this preference, standing alone, is not dispositive.'” Garcia v. Pacwest Contracting LLC, 2016 WL 526236, at *4 (D. Or. Feb. 9, 2016) (quoting PepsiCo, Inc., 238 F.Supp.2d. at 1177). Here, the defendant's “failure to defend against [Plaintiffs] claims makes a decision on the merits impossible. Accordingly, the policy favoring decision on the merits does not preclude the Court from entering default judgment against [the defendant].” Id.
CONCLUSION
The Eitel factors weigh in favor of granting Plaintiffs' motion for default judgment because the only factor that weighs against default judgment is the final, policy factor, and it is not dispositive. The Court notes that many gaps and questions still exist regarding the events and complicated relationships in this case. However, without an appearance by the defendant and his side of the facts or any other countervailing evidence, the factors weigh in Plaintiffs favor, and the Court cannot find a reason to deny the motion for default judgment.
RECOMMENDATION
For the reasons stated above, the Court recommends that Plaintiff's motion for default judgment (#11) be GRANTED and judgment be entered against defendant Barry Shy in the amount of $5,659,000.00.
This recommendation is not an order that is immediately appealable to the Ninth Circuit Court of Appeals. Any notice of appeal pursuant to Federal Rule of Appellate Procedure Rule 4(a)(1) should not be filed until entry of the district court's judgment or appealable order. The Report and Recommendation will be referred to a district judge. Objections to this Report and Recommendation, if any, are due fourteen (14) days from today's date. If objection are filed, any response to the objections is due fourteen (14) days from the date of the objections. See Fed.R.Civ.P. 72, 6.