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Air Sea Transport, Inc. v. Niki International, Inc.

United States District Court, D. New Jersey

July 17, 2014

AIR SEA TRANSPORT, INC., Plaintiff,
v.
NIKI INTERNATIONAL, INC., et al., Defendants.

OPINION

KEVIN McNULTY, District Judge.

This matter comes before the Court on the motion (Docket No. 29) of Plaintiff, Air Sea Transport, Inc. ("AST"), for default judgment against Defendant Niki International, Inc. ("Niki"). AST moves for a default judgment against Niki International for failure to obtain substitute counsel and prosecute the case.

I. BACKGROUND

AST commenced this action to be indemnified for two 2012 judgments against AST. The judgments were obtained by Yantai Zhonglian Industry Co. ("Zhonglian") in the Qingdao Maritime Court, People's Republic of China (the "PRC judgments"). Pl. Br. (Docket No. 30) at 4, 7; Complaint (Docket No. 1). AST asserts claims under admiralty and common tort law against Defendants Niki and Welton Shipping Co.

The underlying PRC judgments concern two shipments of cotton bedding to the U.S. Id. at 4. On February 4, 2010, Niki contracted to purchase cotton bedding from Zhonglian for $192, 515.77. Id. at 1-2. On June 11, 2010, Niki and Zhonglian entered into a second cotton bedding purchase agreement for $215, 058.22. Id. at 2.

Plaintiff AST is a Non-Vessel-Operating Common Carrier. Pl. Br. at 2. AST was engaged by Zhonglian to transport the two shipments by sea from Qingdao, China, to the Port of Los Angeles, California. Id. The ocean carriage was arranged by Bondex, AST's PRC agent. Id. AST issued two House Bills of Lading ("HBL") for the ocean carriage. HBL QD05110060241 was issued June 23, 2010, for the first shipment and HBL QD0510080082 was issued August 11, 2010, for the second shipment. Id. Both HBLs identified Zhonglian as the shipper and Niki as the consignee/receiver. Id. The first shipment arrived in Los Angeles on or about July 10, 2010, and was picked up by Niki on or about July 28, 2010. Id. ; Answer (Docket No. 4) ¶ 14. To date, that shipment remains in Niki's possession, custody, or control. Id. at 3; Answer ¶ 15. The second shipment arrived in Los Angeles on or about August 27, 2010, and was picked up by Niki on or about September 30, 2010. Id. ; Answer ¶ 25. That shipment also remains in Niki's possession, custody, or control. Id. ; Answer ¶ 26.

On May 10, 2011, Zhonglian filed two lawsuits against AST and its agent Bondex in the Qingdao Maritime Court in the PRC. Pl. Br. at 3. Zhonglian alleged that Niki failed to make payment on the two shipments and further alleged that AST breached its obligation when it allowed Niki to take delivery of the shipments without proof that Niki had paid Zhonglian for them. Id. AST contended that it had no such obligation, but the Qindao Maritime Court entered judgment against AST in the amount of $405, 573.99. Id. (citing Zhou Cert. (Docket No. 31) ¶ 8). The court also awarded Zhonglian RMB 34, 518 (approximately $5, 685.42) in court fees. Id. (citing Zhou Cert. ¶ 12). AST appealed the judgment to the Shandong People's High Court of the PRC. The appellate court affirmed the judgment and awarded additional court fees in the amount of RMB 34, 518. Id. at 4 (citing Zhou Cert. ¶¶ 13-14).

On October 1, 2012, AST commenced this action, asserting that Niki and Welton Shipping Co. were bound to indemnify AST for its payment of the PRC judgments. (Docket No. 1). Niki filed an answer to the complaint on November 2, 2012. (Docket No. 4). On November 29, 2012, Welton also answered the complaint and asserted a cross-claim against Niki. (Docket No. 6).

On June 24, 2013, at an initial scheduling conference before Hon. Michael A. Hammer, United States Magistrate Judge, Niki's counsel stated that Niki had reached a settlement "in principle" with Zhonglian which would resolve the PRC judgments against AST. Pl. Br. at 4. However, no further communication was received by AST regarding a settlement, and in July 2013, AST was obligated to pay the two outstanding PRC judgments. Id. On July 12, 2013, Bondex, as AST's agent, paid the PRC court account RMB 2, 801, 362.45 (approximately $461, 409.62) in satisfaction of the two PRC judgments. Id. (citing Zhou Cert. ¶ 15).

On July 29, 2013, Judge Hammer entered a pretrial scheduling Order directing the parties to serve discovery requests on or before August 12, 2013. (Docket No. 21). On August 9, 2013, AST served Niki with interrogatories and document requests. Pl. Br. at 4 (citing Chang Decl. (Docket No. 32) Ex. E). Niki did not respond to the requests as required by Judge Hammer's July 29, 2013 Order. Id. AST contacted Niki's counsel by email on September 17, 2013, and by telephone on September 24, 2013. Id. (citing Chang Decl. Exs. E, F). Niki's counsel represented that Niki would respond to the outstanding requests by October 3, 2013. Id. (citing Chang Decl. Ec. G). Niki did not do so. Instead, Niki's counsel moved to withdraw as counsel on October 8, 2013. (Docket No. 22).

On November 8, 2013, Judge Hammer presided over an in-person conference and hearing on the motion of Niki's counsel to withdraw. See Docket No. 25. Niki's President/Vice President, Nikhil Poddar, attended the conference on Nikki's behalf. In an Order entered the same day, Judge Hammer granted the motion for withdrawal and directed Niki to obtain substitute counsel by December 8, 2013. (Docket No. 26). The Order stated that failure to comply with its terms would "result in sanctions pursuant to Fed.R.Civ.P. 16(1) and 37." Id. Despite this warning, Niki failed to obtain counsel or contact the Court regarding its failure to do so.

On December 10, 2013, AST requested that default be entered against Niki. The next day, the Clerk of the Court entered default against Niki for failure to plead or otherwise defend the lawsuit. (Docket No. 27). On December 18, 2013, Welton also requested that default be entered against Niki. (Docket No. 28). AST now moves for default judgment against Niki.[1] Pl. Br. (Docket No. 30) at 1. Niki has not opposed or otherwise responded to the motion.

II. ANALYSIS

In the ordinary course, "the entry of a default judgment is left primarily to the discretion of the district court." Hritz v. Woma Corp., 732 F.2d 1178, 1180 (3d Cir. 1984) (citing Tozer v. Charles A. Krause Milling Co., 189 F.2d 242, 244 (3d Cir. 1951)). Because the entry of a default judgment prevents the resolution of claims on the merits, "this court does not favor entry of defaults and default judgments." United States v. $55, 518.05 in U.S. Currency, 728 F.2d 192, 194 (3d Cir. 1984). Thus, before entering default judgment, the Court must determine whether the "unchallenged facts constitute a legitimate cause of action" so that default judgment would be permissible. ...


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