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Young Poong USA Corp. v. Young Poong Paper Manufacturing Co., Ltd.

United States District Court, D. Arizona

July 3, 2018

Young Poong USA Corporation, an Arizona corporation, Plaintiff,
v.
Young Poong Paper Manufacturing Co., LTD, a foreign corporation, Defendant.

          TO THE HONORABLE STEPHEN M. MCNAMEE, SENIOR UNITED STATES DISTRICT JUDGE.

          REPORT AND RECOMMENDATION

          Honorable Deborah M. Fine United States Magistrate Judge.

         Before the Court are Plaintiff's motion for default judgment against Defendant (Doc. 19), motion updating requested damages (Doc. 28), motion for attorneys' fees and costs (Doc. 20) and amended/supplemental motion for attorneys' fees and costs (Doc. 29). Defendant has not answered or otherwise appeared. The undersigned Magistrate Judge currently presides over this case pursuant to Local Rule Civil 3.7(b) pending the consent of all parties. However, because Defendant has not appeared, this report and recommendation is directed to Senior United States District Court Judge Stephen M. McNamee.

         I. BACKGROUND [1]

         Plaintiff is an Arizona corporation, while Defendant is a South Korean corporation with principal offices located in South Korea. (Doc. 1 at 1-2) The parties entered into a paper materials supply agreement in October 2010, under which Plaintiff agreed to sell to Defendant all “supply materials” required by Defendant, and Defendant agreed not to purchase supply materials or similar goods from any other vendor for the duration of the agreement (“2010 Supply Agreement”). (Id. at 3) Defendant further agreed to purchase “a minimum of 4, 000 metric tons per month of materials from [Plaintiff].” (Id.) The agreement expressly stated that its terms would “be construed in accordance with the laws of the State of Arizona.” (Id. at 14) The parties provided for the option to amend the 2010 Supply Agreement, and concurred that the Supply Agreement would terminate in September 2025. (Id. at 3-4)

         From approximately January 2015 through July 2016, Defendant purchased “substantially less” than the minimum required amount of material as defined in the 2010 Supply Agreement, and purchased materials from suppliers other than Plaintiff, in violation of the agreement. (Id. at 3) On December 27, 2015, the parties executed an additional agreement to amend the 2010 Supply Agreement to alter Defendant's minimum purchase requirements during a new, and significantly truncated four-year term (“December 2015 Agreement”). (Id. at 4) The parties further agreed that if they did not execute a modified supply agreement by the end of December 2016, Defendant immediately would pay Plaintiff compensation in the amount of 2 billion KRW. (Id. at 4, 17) The parties met in April, June, and November 2016, to execute a modified supply agreement, without success, after which Plaintiff consented to an extension of the deadline by one month, to January 31, 2017. (Id. at 4-5) Defendant failed to meet this deadline, and on February 10, 2017, Plaintiff “sent correspondence to [Defendant]

         notifying it that [Plaintiff] was terminating the Supply Agreement, effective as of the date of said letter.” (Id. at 5) However, in January 2017, Defendant received and accepted, but did not pay for, six shipments of product from Plaintiff. (Id., Doc. 19-1 at 4) Plaintiff alleges that Defendant owes $148, 713.29 USD for these materials, and has filed both an affidavit from Mr. Younglin Woo, Plaintiff's President, and copies of invoices relating to these six shipments. (Id. at 4, 7-12)

         II. SUMMARY OF PROCEEDINGS TO DATE

         Plaintiff filed its Complaint on July 20, 2017 (Doc. 1), and also filed notice of service of process pursuant to the Hague Convention, which service occurred on November 10, 2017 (Doc. 15 at 1). Plaintiff states that in December 2017, after Defendant had received service of the Complaint, Defendant's “corporate representative called [Plaintiff] regarding the Complaint.” (Doc. 16 at 2) On January 16, 2018, Plaintiff requested entry of default based on Defendant's failure to answer or otherwise defend (Id. at 1-2), which the Clerk of the Court entered on January 17, 2018. (Docs. 17, 18)

         Plaintiff alleged claims of breach of contract, and breach of the implied covenant of good faith and fair dealing, each with regard to the December 2015 Agreement, and asserted damages in the amount of 2 billion Korean Won (“KRW”), with interest. (Doc. 1 at 5-6) Plaintiff further alleged claims of breach of contract, and breach of the implied covenant of good faith and fair dealing, each under the Uniform Commercial Code, with regard to the 2010 Supply Agreement, and asked for damages of $148, 713.29, with interest. (Id. at 6-7) Plaintiff also asserted an alternative claim for unjust enrichment as to the materials received by Defendant in January 2017, valued at $148, 713.29. (Doc. 1 at 7-8) Plaintiff does not seek judgment on this claim, and agrees to voluntarily dismiss it without prejudice pursuant to Federal Rule of Civil Procedure 41(a)(1)(A), if the Court grants its motion for default judgment. (Doc. 19 at 3 n.2). Plaintiff further asserted it is entitled to an award of attorneys' fees pursuant to A.R.S. § 12-341.01. (Id. at 8)

         On April 6, 2018, the undersigned filed a report and recommendation (“R&R”) (Doc. 21) addressing Plaintiff's initial motion for default judgment (Doc. 19) and its initial motion for attorneys' fees and costs (Doc. 20). The R&R recommended granting Plaintiff's motion for default judgment in part, to award reasonable attorneys' fees and costs, and to award judgment on damages relating to the unpaid value of materials received by Defendant from Plaintiff in January 2017. (Doc. 21 at 10) The R&R further recommended deferral of a ruling on Plaintiff's motion for default judgment respecting its claim for liquidated damages under the December 2015 Agreement, and allowed Plaintiff to file a supplemental motion to provide evidentiary support, or to schedule an evidentiary hearing. (Id.) Based on the evidence in the pleadings, the undersigned questioned whether Plaintiff's requested amount of liquidated damages was a “reasonable forecast” of Plaintiff's damages under Arizona law. (Id. at 8) The undersigned recommended that the Court allow Plaintiff to file a supplemental motion providing evidentiary support for its claims for liquidated damages, or to schedule a hearing to consider such evidence. (Id. at 10)

         On April 20, 2018, Plaintiff filed a motion to supplement its brief supporting liquidated damages. (Doc. 22) Thereafter, on May 3, 2018, the undersigned set an evidentiary hearing on the issue of the reasonableness of the requested liquidated damages, and ordered Plaintiffs to file a hearing brief. (Doc. 23 at 3) At the same time, the undersigned vacated the R&R filed on April 6, 2018. (Id.) After Plaintiff filed its hearing brief (Doc. 26), the undersigned entered an order advising Plaintiff that the briefing had satisfied the Court's concerns about Plaintiff's claim for liquidated damages, and informed Plaintiff that a new R&R would be forthcoming and would include recommendations that Plaintiff's motion for default judgment should be granted in full and that reasonable attorneys' fees and costs should be awarded. (Doc. 27) The undersigned accordingly vacated the evidentiary hearing set for June 4, 2018, and ordered Plaintiff to file an updated motion for attorneys' fees and costs, along with supporting documentation. (Id.) The undersigned further ordered Plaintiff to file an update on the damages sought, including a current statutory interest calculation and any necessary information on the currency exchange rate. (Id.) On June 14, 2018, Plaintiff filed its amended motion for default judgment (Doc. 28) and its amended/supplemental motion for attorneys' fees and costs (Doc. 29).

         In its motion updating requested damages, Plaintiff claims sum-certain damages for breach of the December 2015 Agreement in the amount of 2 billion Korean Won (or the U.S. dollar equivalent) (Doc. 28 at 1), and for the value of materials ordered, received, and accepted by Defendant in January 2017, totaling $148, 713.29 USD (Id. at 2). Plaintiff also seeks pre-judgment interest pursuant to A.R.S. § 44-1201(A) at the rate of 10% per annum on both the 2 billion KRW compensation[2] and on the value of supply materials accepted by Defendant in January 2017[3]. (Id. at 1-3) Additionally, Plaintiff seeks attorneys' fees incurred through June 14, 2018, in the amount of $39, 112.20 (Doc. 29 at 2), and filing fee and others costs totaling $513.88 (Doc. 29 at 5).

         Plaintiff's supplemental motion for attorneys' fees and costs is supported by the declaration of the lead attorney, averring to the accuracy and reasonableness of the requested fees and costs. (Doc. 29-1) Attached to the declaration are detailed invoices for legal services provided, and resumes of the attorneys who billed time on this matter. (Doc. 29-1 at 6-59)

         III. LEGAL STANDARD

         Because Defendant's default has been properly entered pursuant to Rule 55(a), the Court has discretion to grant default judgment against Defendant under Rule 55(b). See Aldabe v. Aldabe, 616 F.2d 1089, 1092 (9th Cir. 1980), although the “starting point is the general rule that default judgments are ordinarily disfavored.” Eitel v. McCool, 782 F.2d 1470, 1471-72 (9th Cir. 1986). The Ninth Circuit instructs that in assessing whether entry of default judgment should be granted, a court may consider a number of factors (the Eitel factors), including:

(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 underlying the Federal Rules of Civil Procedure favoring decisions on the merits.

NewGen, LLC v. Safe Cig, LLC, 840 F.3d 606, 616 (9th Cir. 2016) (quoting Eitel, 782 F.2d ...


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