New Son Yeng Produce LLC v. United One Transp., Inc.

New Son Yeng Produce LLC v. United One Transp., Inc. United States District Court for the Eastern District of New York March 9, 2015, Decided; March 9, 2015, Filed CV 14-01931 (FB)(MDG) Reporter 2015 U.S. Dist. LEXIS 40863 NEW SON YENG PRODUCE LLC, Plaintiff, - against - UNITED ONE TRANSPORT, INC and JOHN DOE, person intended to be employed or engaged by the corporate defendant to operate the truck in this action, Defendants. Subsequent History: Adopted by, Judgment entered by New Son Yeng Produce, Inc. v. United One Transp., Inc., 2015 U.S. Dist. LEXIS 39528 (E.D.N.Y., Mar. 27, 2015) Counsel: [*1] For New Son Yeng Produce, Inc., Plaintiff: Leonard Kreinces, LEAD ATTORNEY, Kreinces & Rosenberg, P.C., Westbury, NY. Judges: MARILYN D. GO, UNITED STATES MAGISTRATE JUDGE. Opinion by: MARILYN D. GO Opinion REPORT AND RECOMMENDATION Plaintiff New Son Yeng Produce LLC ( New Son Yeng ) brings this action pursuant to the Carmack Amendment, 49 U.S.C. 14706 et seq., to recover its losses caused by a damaged shipment of 768 cartons of fresh lychee. The Honorable Frederic Block referred plaintiff s motion for default judgment against defendant United One Transport, Inc. ( United One ) to me to report and recommend. BACKGROUND The following facts adduced from plaintiff s Complaint ( Compl. ) (ct. doc. 1), the affidavit of Jimmy Sithol Yin in support of the default motion ( Yin Aff. ) (ct. doc. 19), and the exhibits attached thereto, are undisputed and taken as true for purposes of deciding this motion. See Greyhound Exhibitgroup, Inc. v. E.L.U.L. Realty Corp., 973 F.2d 155, 158 (2d Cir. 1992) (citations omitted). Plaintiff New Son Yeng is a New York corporation doing business in Brooklyn, New York. Compl. at 2. On May 25, 2013, plaintiff purchased from Dynasty Produce and Trading Co., Inc. ( Dynasty ) 768 cartons of fresh lychee for $34,560 and mangos which are not the subject of this lawsuit. Compl. at 14, 24; Yin Aff. at 6, 1 Exh. C (ct. [*2] doc. 19-6) (Invoice). As evidenced in a bill of lading dated May 25, 2013, United One agreed to transport the produce from Hildago, Texas to New Son Yeng s business premises in Brooklyn, New York. Compl. at 14; Yin Aff. at 6, 7, Exh. D (ct. doc. 19-7) (Bill of Lading). As confirmed by the bill of lading issued by United One, the lychees were in good order and condition. Compl. at 14, 15; Yin Aff. at 7, Exh. D. Each carton weighed about 15 pounds and contained eight pallets. Compl. at 14. United One agreed to deliver the fresh lychee to New Son Yeng by May 28, 2013. See id. at 15, 17; Yin Aff., Exh. E (ct. doc. 19-8) (Bill of Lading). However, United One did not deliver the shipment to New Son Yeng until May 31, 2013. See Compl. at 16-17; Yin Aff. at 8, Exh. E. Receiving the delivery under protest, New Son 1 Mr. Yin s affidavit states that the amount is $34,568.00, which I assume is a typographical error since the invoice and the complaint both state that the amount paid was $36,560.00.

2015 U.S. Dist. LEXIS 40863, *3 Page 2 of 6 Yeng immediately requested the U.S. Department of Agriculture s Agriculture Marketing Service ( the USDA Service ) to inspect and grade the fresh lychee. Compl. at 18. Following an [*3] inspection of all the cartons conducted on May 31, 2013 from 8:00 a.m. to 9:14 a.m., the USDA Service found that about 30 to 86 percent of the fresh lychee had brown to black surface discoloration and that the lychee was in early to moderate stages of decay. Id. at 19, 21, 22; Yin Aff., Exh. F (ct. doc. 19-9) (Inspection Certificate). The USDA Service determined that the condition failed to meet the requirements of grade U.S. Number 1 and that the shipment had a check sum of 56 percent damage. Compl. at 21; Yin Aff., Exh. F. While plaintiff attempted to sell the lychee, the USDA Service conducted a second inspection on June 14, 2013. Yin Aff. at 9. The inspection certificate indicated that the fruit was in even worse condition and that much of the lot was discolored. Id. and Exh. F at 2. The fee for each inspection was $138.76, for a total of $277.52. See ct. doc. 19-9. Plaintiff sold the lychee at distressed prices for an aggregate amount of $6,484.74. Compl. at 23; Yin Aff. at 10, Exh. G (ct. doc. 19-10) (Sale Report). On November 26, 2013, plaintiff sent a notice of claim to United One. See Yin Aff. at 11, Exh. H (ct. doc. 19-11) (Pl. s Letter to United One). Having not received a response, [*4] plaintiff instituted the instant action against defendant on March 26, 2014. Defendants have failed to answer or otherwise respond to the complaint. DISCUSSION I. Default Judgment Standard Entry of a default judgment is a two-step process and requires first that the clerk of the court enter the party s default indicating that a party has failed to plead or otherwise defend. Fed. R. Civ. 55(a). After the clerk s entry of default, the opposing party generally requests that a court enter a default judgment against the defaulting parties. See Fed. R. Civ. P. 55(b)(2). A defendant s default is an admission of all well-pleaded factual allegations in the complaint except those relating to damages. See Greyhound Exhibitgroup, Inc. v. E.L.U.L. Realty Corp., 973 F.2d 155, 158 (2d Cir. 1992). The movant need prove only that the compensation sought relate[s] to the damages that naturally flow from the injuries pleaded. Id. [A]fter [a] default,... it remains for the court to consider whether the unchallenged facts constitute a legitimate cause of action, since a party in default does not admit conclusions of law. Leider v. Ralfe, 2004 U.S. Dist. LEXIS 15345, 2004 WL 1773330, at *7 (S.D.N.Y. 2004) (quoting In re Indus. Diamonds Antitrust Litig., 119 F. Supp. 2d 418, 420 (S.D.N.Y. 2000)). After establishing liability, the court must also determine the amount of damages that may be assessed. It is in the court s discretion to require an evidentiary hearing or to rely on detailed [*5] affidavits or documentary evidence in making this determination. See Fed. R. Civ. P. 55(b)(2); Chun Jie Yin v. Kim, 2008 U.S. Dist. LEXIS 118533, 2008 WL 906736, at *2 (E.D.N.Y. 2008) (collecting cases). II. Liability The Carmack Amendment governs the liability of motor carriers for loss or damage to goods transported in interstate commerce and creates uniform national rules that preempt all federal and state common law claims against the carriers. See 49 U.S.C. 14706(d); Am. Rock Salt Co., LLC v. Norfolk S. Corp., 387 F. Supp. 2d 197, 202 (W.D.N.Y. 2005). It relieves shippers of the burden of searching out a particular carrier from among the often numerous carriers handling an interstate shipment of goods. See Cleveland v. Beltman North American Co., Inc., 30 F.3d 373, 377 (2d Cir. 1994). The statute imposes broad liability on a common carrier for all losses relating to goods it

2015 U.S. Dist. LEXIS 40863, *5 Page 3 of 6 transports in interstate commerce. See Union Pacific R.R. v. Greentree Transp. Trucking, 293 F.3d 120, 127 (3d Cir. 2002); Windows, Inc. v. Jordan Panel Sys. Corp., 177 F.3d 114, 117 (2d Cir. 1999). In fact, Carmack effectively codified the strict liability rule that governed the liability of common carriers at common law. Sompo Japan Mut. Auto. Ins. Co. v. Union Pac. R.R. Co., 456 F.3d 54, 59 (2d Cir. 2006) (citations omitted), abrogated on other grounds by Kawasaki Kisen Kaisha Ltd. v. Regal-Beloit Corp., 561 U.S. 89, 130 S. Ct. 2433, 177 L. Ed. 2d 424 (2010). A plaintiff seeking to recover from a carrier for damage to a shipment under the Carmack Amendment must establish a prima facie case by showing delivery in good condition, arrival in damaged condition, and the amount of damages that resulted from the transportation. Nipponkoa Ins. Co. v. C.H. Robinson Worldwide, Inc., 2011 U.S. Dist. LEXIS 17752, 2011 WL 671747, at *3 (S.D.N.Y. 2011) (citing Missouri Pac. R.R. Co. v. Elmore & Stahl, 377 U.S. 134, 137, 84 S. Ct. 1142, 12 L. Ed. 2d 194 (1964)). New Son Yeng has provided a bill of lading listing United One as the carrier to transport the fruit from Hildago, Texas to Brooklyn, New [*6] York (ct. doc. 19-7) and alleged in the complaint, the fresh lychee was delivered to United One in good condition and was damaged while being transported by United One from Hildago, Texas to Brooklyn, New York. A shipper may prove that the goods were delivered to the carrier in good condition with a clean bill of lading for the shipment, provided that the cargo was packaged in a way that permitted its inspection by the carrier. Security Ins. Co. of Hartford v. Old Dominion Freight Line Inc., 391 F.3d 77, 83 (2d Cir. 2004). However, in the absence of contrary evidence, the carrier s acknowledgment on the bill of lading is sufficient to support a finding that the goods were in good condition at the point of origin. American Nat. Fire Ins. Co. ex rel. Tabacalera Contreras Cigar Co. v. Yellow Freight Systems, Inc., 325 F.3d 924, 929 (7th Cir. 2003) (quoting Hoover Motor Express Co. v. United States, 262 F.2d 832, 834 (6th Cir. 1959)). The USDA inspection conducted at New Son Yeng s business facility on the same day of delivery showed that about 30 to 86 percent of the fresh lychee had brown to black surface discoloration and that the lychee was in early to moderate stages of decay. Compl. at 21-22. By statute, the official inspection certificates for fresh fruits and vegetables issued by the Secretary of Agriculture pursuant to any law shall be received by all officers and all courts of the United States, in all proceedings under this chapter, and in all transactions upon contract [*7] markets under Commodities Exchange Act (7 U.S.C. 1 et seq.), as prima-facie evidence of the truth of the statements therein contained. 7 U.S.C.A. 499n. Clearly, plaintiff s undisputed allegations are sufficient to establish liability against United One. III. Damages Plaintiff seeks compensatory damages under the Carmack Amendment, plus interest, filing fees and handling fees. See Compl. at 23-26; Mem. in Support of Default Judgment at 8 (ct. doc. 20). A. Actual Loss or Injury Under the Carmack Amendment, a carrier is liable to the person entitled to recover under the receipt or bill of lading and an injured party is entitled to recover the actual loss or injury to the property caused by [a carrier s unreasonable delay or loss of the shipment]. 49 U.S.C. 14706(a)(1). Generally, actual loss is measured as the difference between the sound market value and the value as damaged at destination. Jessica Howard Ltd. v. Norfolk Southern R.R. Co., 316 F.3d 165, 168 (2d Cir. 2003). An appropriate measure of damages is the invoice value of the fruit minus its salvage value. See Am. Pacific Enters., LLC v. Celadon Trucking Servs., Inc., 2006 U.S. Dist. LEXIS 55236, 2006 WL 2289833, at *3 (S.D.N.Y. 2006) New Son Yeng has shown it paid $34,560 for the lychee but was able to sell the lychee only at a

2015 U.S. Dist. LEXIS 40863, *7 Page 4 of 6 distressed price of $6,484.74. See ct. docs. 19-6; 19-10. Therefore, it has shown it suffered a loss in the amount of $28,075.26. Plaintiff also seeks to recover a 20 percent handling [*8] fee of $1,296, including approximately $275 for the inspection performed to determine the loss. See Mem. in Support of Default Judgment at 3. Courts often look to the federal common law of damages when considering the propriety of damage remedies under the Carmack Amendment. See Project Hope v. M/V IBN SINA, 250 F.3d 67, 75 (2d Cir. 2001); Hector Martinez & Co. v. S. Pac. Transp. Co., 606 F.2d 106, 108 (5th Cir. 1979) ( [the Carmack Amendment] incorporates common law principles for damages ). An injured party may recover incidental damages if those damages were foreseeable and within the contemplation of the parties at the time the contract was made. See, e.g., Gourmet Boutique, LLC v. Global Exp., Inc., 2012 U.S. Dist. LEXIS 72144, 2012 WL 1888136, at *3 (E.D.N.Y. 2012) (recovery of costs for destruction of unsalvageable food); American Pac. Enters., LLC v. Celadon Trucking Servs., 2006 U.S. Dist. LEXIS 55236, 2009 WL 2289833, at *3 (S.D.N.Y. 2006); Project Hope v. M/V IBN SINA, 2001 U.S. Dist. LEXIS 27093, 2001 WL 1875854, at *2 (S.D.N.Y. 2001), rev d on other grounds, 250 F.3d 67 (2d Cir. 2001). The Second Circuit has recognized that [r]elief available [under the Carmack statute] includes all damages resulting from any failure to discharge a carrier s duty with respect to any part of the transportation to the agreed destination. Windows, Inc., 177 F.3d at 118 (citing Southeastern Express Co. v. Pastime Amusement Co., 299 U.S. 28, 29, 57 S. Ct. 73, 81 L. Ed. 20 (1936)). I recommend that the Court award the cost of inspecting the damaged shipment since an inspection is a foreseeable cost within the contemplation of sophisticated actors in the shipping industry. See Am. Pac. Enters., LLC, 2006 U.S. Dist. LEXIS 55236, 2006 WL 2289833, at *3 (awarding survey costs); Coast Citrus Distributors, Inc. v. M/V CSAV HAMBURGO, 2011 U.S. Dist. LEXIS 29389, 2011 WL 1102851, at *15-*16 (S.D. Fla. 2011); but see Fireman s Fund Ins. Co. v. Never Stop Trucking, Inc., 2009 U.S. Dist. LEXIS 95165, 2009 WL 3297780, at *3 (E.D.N.Y. 2009) (holding that the Carmack Amendment does not provide for recovery of a surveying fee paid for investigating the cargo loss because the fee is not an allowable [*9] cost under 28 U.S.C. 1920). As United One is in the business of shipping fresh produce, it is clearly foreseeable to United One that New Son Yeng would request an inspection to assess the scope of the apparent damage to the fruit due to the delayed delivery. Given their admissibility, courts determining disputes over perishable produce have relied on the results of the USDA inspection reports. See Koam Produce, Inc. v. Dimare Homestead, Inc., 329 F.3d 123, 128 (2d Cir. 2003) (quoting 7 U.S.C. 499n(a) that inspection certificates... are prima-facie evidence of the truth of the statements therein contained ); DiMare Homestead, Inc. v. Alphas Co. of New York, Inc., 2012 U.S. Dist. LEXIS 48546, 2012 WL 1155133, at *17 (S.D.N.Y. 2012) (accepting results of two inspections and awarding costs); Taylor & Fulton Packing, LLC v. Marco Int l Foods, LLC, 2011 U.S. Dist. LEXIS 144996, 2011 WL 6329194, at *6-*7 (E.D.N.Y. 2011) (accepting evidence that produce passed inspection). Because the inspection expense is foreseeable and plaintiff has provided adequate documentation of those expenses, I recommend that plaintiff be awarded $277.52. 2 Ct. Doc. 19-9 (Invoices for USDA Inspection). In addition to the inspection fee, plaintiff seeks a 20 percent handling fee without submitting any explanation or supporting evidence for its request. Absent any basis for an award of such a fee, I recommend that plaintiff s request be denied, except for $277.52 [*10] paid for the two USDA inspections. 2 Although plaintiff requested $275 in its complaint, the actual cost of the two inspections is $277.52.

2015 U.S. Dist. LEXIS 40863, *10 Page 5 of 6 B. Costs Plaintiff requests reimbursement of the court filing fee. Fed. R. Civ. P. 54(d)(1) provides that unless a federal statute... provides otherwise, costs--other than attorney s fees--should be allowed to the prevailing party. Fed. R. Civ. P. 54(d)(1). Since the Carmack Amendment does not disallow the recovery, plaintiff is therefore entitled to be awarded $400, the cost of filing this action. C. Interest Plaintiff also requests prejudgment interest at 1% per annum from May 31, 2013 to July 22, 2014, which amounts to $293.71. See Mem. in Support of Default Judgment at 8. In a Carmack Amendment case, [t]he decision to grant interest and the rate used is a matter confided to the district court s broad discretion. Fireman s Fund Ins. Co., 2009 U.S. Dist. LEXIS 95165, 2009 WL 3297780, at *3 (citing Endico Potatoes, Inc. v. CIT Grp./Factoring, Inc., 67 F.3d 1063, 1071 (2d Cir. 1995)). When granting interest, courts must be careful that an award of interest does not overcompensate a plaintiff. Id. (citing Am. Nat l Fire Ins. Co. v. Yellow Freight Sys., Inc., 325 F.3d 924, 935-36 (7th Cir. 2003)). The award of prejudgment interest is appropriate in this action to ensure that the injured plaintiff is fully compensated for its loss. See Fireman s Fund Ins. Co., 2009 U.S. Dist. LEXIS 95165, 2009 WL 3297780, at *3 (awarding prejudgment interest under the Carmack Amendment); Atl. Mut. Ins. Co. v. Napa Transp., Inc., 399 F. Supp. 2d 523, 525-26 (S.D.N.Y. 2005) (citing City of Milwaukee v. Cement Div., Nat. Gypsum Co., 515 U.S. 189, 195, 115 S. Ct. 2091, 132 L. Ed. 2d 148 (1995)) (granting recovery of prejudgment interest under the Carmack Amendment). Courts within this Circuit generally find the date of expected delivery the appropriate commencement date for the calculation of interest. See Atl. Mut. Ins. Co., 399 F. Supp. 2d at 525-26; Royal Ins. Co. of Am. v. S/S Robert E. Lee, 756 F. Supp. 757, 759 (S.D.N.Y. 1991). However, [*11] it is within a district court s discretion to set a later date. See Atl. Mut. Ins. Co., 399 F. Supp. 2d at 526 n.3 (citing Indep. Bulk Trans., Inc. v. Vessel Morania Abaco, 676 F.2d 23, 26 (2d Cir. 1982)). In this case, the expected delivery date was May 28, 2013 and the actual delivery date was May 31, 2013. Plaintiff suggests an accrual date of May 31, 2013, the date of actual delivery. See Mem. in Support of Default Judgment at 8. The Court finds that this is an appropriate start date for the computation of prejudgment interest. The interest rate applicable for prejudgment interest is also left to the discretion of the district court. See N.Y. Marine & Gen. Ins. Co. v. Tradeline (L.L.C.), 266 F.3d 112, 130-31 (2d Cir. 2001). A number of courts in this Circuit have used the rate provided by 28 U.S.C. 1961, which calculates interest based on the one-year constant maturity Treasury yield, as published by the Board of Governors of the Federal Reserve System, compounded annually. 28 U.S.C. 1961; see e.g., N.Y. Marine & Gen. Ins. Co., 266 F.3d at 130-31; Chandler v. Bombardier Capital, 44 F.3d 80, 84 (2d. Cir. 1994); Fireman s Fund Ins. Co., 2009 U.S. Dist. LEXIS 95165, 2009 WL 3297780, at *4; Atl. Mut. Ins. Co. v. Napa Transp., Inc., 399 F. Supp. 2d at 527. The average monthly yield on those Treasury securities from May 31, 2013 through March 31, 2015 is approximately 0.13%. See http://www.moneycafe.com/personal-finance/cmt-rate-1-year-co t-maturity-treasury/. Thus, I recommend that interest be awarded in the amount of $67.65 through March 31, 2015 and at the rate of $0.10 per day thereafter until the entry of default judgment. CONCLUSION For the foregoing reasons, I respectfully recommend that this Court award plaintiff

2015 U.S. Dist. LEXIS 40863, *11 Page 6 of 6 $28,352.78 [*12] in damages, $400 in costs, and prejudgment interest of $67.65 through March 31, 2015 and at a daily rate of $0.10 thereafter until entry of judgment. This report and recommendation will be filed electronically and a copy sent by mail to the defendant on this date. Any objections to the Report and Recommendation must be filed with the Clerk of Court, with a copy to Judge Block, by March 26, 2015. Failure to file objections within the time specified waives the right to appeal. See 28 U.S.C. 636(b)(1); Fed. R. Civ. P. 72(b). SO ORDERED. Dated: Brooklyn, New York March 9, 2015 /s/ MARILYN D. GO UNITED STATES MAGISTRATE JUDGE