Opinion
20-CV-7708 (GBD)(BCM)
04-28-2023
AKF, INC. d/b/a FUNDKITE, Plaintiff, v. ARNOLD BROTHERS FOREST PRODUCTS, INC., et al., Defendants.
REPORT AND RECOMMENDATION TO THE HON. GEORGE B. DANIELS
BARBARA MOSES, UNITED STATES MAGISTRATE JUDGE.
Plaintiff AKF, Inc. d/b/a Fundkite (Fundkite), which is in the business of purchasing receivables, seeks damages for breach of contract from defendant Arnold Brothers Forest Products, Inc. (ABFP) and for breach of guaranty from defendants James Wyatt Belcher (Belcher) and Belcher Family Farms LLC (Belcher Farms). On December 10, 2020, after defendants failed to answer or otherwise respond to plaintiff's complaint, the Honorable George B. Daniels, United States District Judge, decreed that plaintiff have judgment against all three defendants, and referred this action to me for a damages inquest. For the reasons that follow, I recommend, respectfully, that plaintiff be awarded (i) $134,000 for breach of contract and breach of guaranty, (ii) prejudgment interest on that sum at the rate of 9% per annum ($33.04 per day) from April 9, 2020 until the date of judgment, and (iii) $3,557.50 in attorneys' fees and costs, and that the judgment run jointly and severally against all three defendants.
I. BACKGROUND
A. Factual Allegations
By virtue of defendants' default, the Court accepts as true all well-pleaded allegations contained in plaintiff's complaint, except as to damages. See City of New York v. Mickalis Pawn Shop, LLC, 645 F.3d 114, 137 (2d Cir. 2011) ("It is an 'ancient common law axiom' that a defendant who defaults thereby admits all 'well-pleaded' factual allegations contained in the complaint." (quoting Vermont Teddy Bear Co. v. 1-800 Beargram Co., 373 F.3d 241, 246 (2d Cir. 2004)); Finkel v. Romanowicz, 577 F.3d 79, 84 (2d Cir. 2009) ("In light of [defendant's] default, a court is required to accept all of [plaintiff's] factual allegations as true and draw all reasonable inferences in its favor[.]"). In addition to the facts alleged in the body of the complaint, the court may consider "documents attached to the complaint as exhibits, and documents incorporated by reference in the complaint." DiFolco v. MSNBC Cable L.L.C., 622 F.3d 104, 111 (2d Cir. 2010).
Plaintiff Fundkite is a New York corporation with its principal place of business in New York, New York. Compl. (Dkt. 1) ¶ 1. Defendant ABFP is a Texas corporation with its principal place of business in Atoka, Oklahoma. Id. ¶ 4. Defendant Belcher is a citizen of Oklahoma, where he is domiciled, and is the sole member of defendant Belcher Farms, which is a limited liability company. Id. ¶ 6. Belcher is also the "owner, principal, director, and officer" of ABFP and Belcher Farms. Id. ¶ 9.
On December 26, 2019, Fundkite (as "Funder") and ABFP (as "Merchant") entered into a Revenue Purchase Agreement (Agreement). Compl. ¶ 14 & Ex. A (Dkt. 1-1) (Ag.). Pursuant to that contract, ABFP "sold $227,800.00 of [its] future accounts receivable to Fundkite to be delivered to Fundkite from 10% of [ABFP's] weekly revenue for an upfront purchase price of $169,815[.]" Compl. ¶ 14; see also Ag. at 4. In other words, Fundkite disbursed $169,815 to ABFP (the gross purchase price of $170,000, less "Underwriting and Initial Fees" of $185) in exchange for ABFP's promise to pay 10% of its receipts to Fundkite until it had paid a total of $227,800. Ag. at 4-5. The Agreement authorized Fundkite to "ACH debit the specified remittances from [ABFP's] bank account on a daily basis," and required ABFP to "provide FUNDER with all required access codes and monthly bank statements" for that purpose. Ag. at 5. Rather than calculate the 10% figure on a daily basis as receipts came in, the parties to the Agreement "elected to have [Fundkite] debit the Alternative Daily Amount each business day." Id. The "Alternative Daily Amount" was "intended to represent the Specified Percentage [10%] of the Merchant's Receipts." Id. Somewhat confusingly, however, there is no Alternative Daily Amount set forth in the Agreement. Instead, the parties agreed on an "Alternative Weekly Amount" of $6,700. Id. at 4.
In recognition of the fact that the Alternative Daily (or Weekly) Amount might not always reflect 10% of ABFP's actual receipts, the Agreement provided for a process by which either party could request a "reconciliation" once each calendar month. Ag. at 5. If such a request was made, Fundkite would review ABFP's bank statements and then "reconcile the Merchant's account by either crediting or debiting the difference from or back to the Merchant's bank account so that the amount debited in the immediately preceding calendar month equals the Specified Percentage of Merchant's actual receipts for that calendar month." Id. Thus, if ABFP experienced a business slowdown, the rate at which it was required to deliver the agreed-upon sum of $227,800 to Fundkite would also slow down. See id. at 6, § 1.2 ("There is no interest rate or payment schedule and no time period during which the Purchased Amount must be collected by FUNDER. If Receipts are remitted more slowly than FUNDER may have anticipated or projected because Merchant's business has slowed down, or if the full purchase price is never remitted because Merchant's business went bankrupt or otherwise ceased operations in the ordinary course of business, and Merchant has not breached this Agreement, Merchant would not owe anything to FUNDER[.]"). It is this feature which permits Fundkite to assert that it is not a lender, see Id. ("Merchant is selling a portion of a future revenue stream to FUNDER at a discount, not borrowing money from FUNDER"), and therefore that the repayment requirements set forth in the Agreement do not run afoul of state usury laws. See, e.g., Streamlined Consultants, Inc. v. EBF Holdings LLC, 2022 WL 4368114, at *4-5 (S.D.N.Y. Sept. 20, 2022) (holding that a similar funding agreement "is not a loan because [the funder] is not absolutely entitled to repayment under all circumstances").
As part of the same transaction, Belcher (as an Individual Guarantor) and Belcher Farms (as an Affiliated Business Guarantor) executed a Guaranty, pursuant to which they "guarantee[d] to FUNDER, Merchant's performance of all the representations, warranties, [and] covenants made by Merchant" in the Agreement. Ag. at 13. The Guarantors' obligations were "due at the time of any breach by Merchant of any representation, warranty, or covenant made by Merchant in the Agreement," id., and were "joint and several." Id. at 15.
For fourteen weeks, between December 26, 2019 and March 31, 2020, Fundkite successfully debited $6,700 from ABFP's designated bank account every week, for a total of $93,800. Compl. ¶ 20. However, on or about April 9, 2020, ABFP placed a stop payment on the account and refused to remit any further funds to plaintiff, even though it "continued to do business and generate and collect receivables." Id. ¶ 22. Fundkite alleges that, between April 8 and May 20, 2020, it "repeatedly reached and communicated with [ABFP] in an effort to have [ABFP] remit 10% of its receivables and furnish bank statements to ensure that Fundkite would receive only 10% of the receivables." Id. ¶ 23. ABFP nevertheless "refused to perform" under the Agreement. Id. ¶ 24. On August 25, 2020, a shopper visited ABFP's business location in Texas, observed that ABFP was open for business and selling products to customers, and made a purchase. Id. ¶ 27 & Ex. B (Dkt. 1-2), ¶¶ 3-6.
Under the terms of the Agreement, ABFP had an "outstanding balance" of $134,000 ($227,800 - $93,800) when it refused to perform further. Compl. ¶ 20. Neither Belcher nor Belcher Farms, which guaranteed ABFP's obligations, has "reimbursed Fundkite for its damages." Id. ¶ 38.
B. Procedural History
Plaintiff filed its Complaint on September 18, 2020, alleging a breach of contract by ABFP, Compl. ¶¶ 28-33, and a breach of guaranty by Belcher and Belcher Farms. Id. ¶¶ 34-40. On September 28, 2020, all three defendants were served with process via personal service of the summons and Complaint upon Belcher in Oklahoma. (Dkts. 11-13.) No defendant has appeared or answered the Complaint.
On October 26, 2020, plaintiff requested, and the Clerk of Court issued, a Certificate of Default as to each defendant. (Dkts. 18-20.) On November 16, 2020, plaintiff moved by proposed order to show cause (OSC) for a default judgment, pursuant to Fed.R.Civ.P. 55(b)(2). (Dkt. 22.) The proposed OSC was supported by the declaration of Christopher Murray, one of plaintiff's attorneys (Murray Decl.) (Dkt. 25), which in turn attached the declaration of Alex Shvarts, Fundkite's Chief Executive Officer (Shvarts Decl.) (Dkt. 25-3), concerning damages, as well as the Certificates of Default and other relevant docket entries. There is no indication on the docket that the Court ever issued the OSC. Nor is there any indication that the proposed OSC and its supporting papers were served upon defendants at that time, as required by Local Civil Rule 55.2(c) ("all papers submitted to the Court pursuant to Local Civil Rule 55.2(a) or (b) above [governing default motions] shall simultaneously be mailed to the party against whom a default judgment is sought").
On December 10, 2020, Judge Daniels found that defendants had "failed to answer, appear, or otherwise move with respect to the Complaint," and decreed that plaintiff "have judgment, plus statutory pre and post-judgment interest, attorneys' fees and costs" against all three defendants. See Default J. (Dkt. 26) at 1. On the same day, Judge Daniels referred the case to me for a damages inquest. (Dkt. 27.)
On December 11, 2020, I issued a Scheduling Order for Damages Inquest (Scheduling Order) (Dkt. 28), directing plaintiff to submit proposed findings of fact and conclusions of law, together with supporting papers, by February 11, 2021, and to serve them, along with a copy of the Scheduling Order, on defendants at their last known mailing addresses. Scheduling Order ¶¶ 1, 7. The Scheduling Order gave defendants a deadline of March 11, 2021, to file any opposition. Id. ¶ 8. On February 11, 2021, plaintiff timely filed its Proposed Findings of Fact and Law (Prop. Findings) (Dkt. 29), to which it attached copies of the previously-filed Murray and Shvarts Declarations, including their exhibits (Dkts. 29-2, 29-3), and served those materials on defendants by Federal Express. (Dkt. 30.) The next day, plaintiff served a copy of the Scheduling Order on defendants, also by Federal Express. (Dkt. 31.) Plaintiff seeks $134,000 in contract damages against all three defendants, plus $5,157.50 in attorneys' fees and $1,161.40 in costs, Prop. Findings ¶ 39; Shvarts Decl. ¶ 3, as well as "statutory pre and post-judgment interest of nine percent (9%) per annum." Prop. Findings ¶ 47.
Defendants did not submit any opposition papers.
Since neither party has requested a hearing on the issue of damages, and since defendants did not submit any written materials, I have conducted this inquest based solely upon the materials submitted by plaintiff. See Bricklayers & Allied Craftworkers Local 2 v. Moulton Masonry & Constr., LLC, 779 F.3d 182, 189 (2d Cir. 2015) (holding that Fed.R.Civ.P. 55(b)(2), which governs the determination of damages following default, "allows but does not require the district judge to conduct a hearing") (citations omitted); De Lage Landen Fin. Servs., Inc. v. Universal Wilde, Inc., 2019 WL 4195441, at *3 n.2 (S.D.N.Y. Aug. 15, 2019) (finding that a hearing was not required because plaintiff's sworn declarations provided sufficient bases to calculate damages), report and recommendation adopted, 2019 WL 4194574 (S.D.N.Y. Sept. 3, 2019).
II. ANALYSIS
A. Jurisdiction and Venue
1. Subject Matter Jurisdiction
I am satisfied that this Court has subject matter jurisdiction of the pending action pursuant to 28 U.S.C. § 1332(a)(1), which provides that a federal district court has original jurisdiction in cases among "citizens of different States" where the matter in controversy exceeds the sum or value of $75,000. For diversity purposes, a corporation is a citizen of the state where it is incorporated and the state where it has its principal place of business. 28 U.S.C. § 1332(c)(1). Thus, plaintiff Fundkite is a citizen of New York, see Compl. ¶ 1, while defendant ABFP is a citizen of Texas and Oklahoma. Id. ¶ 4. "An individual's citizenship, within the meaning of the diversity statute, is determined by his domicile." Palazzo ex rel. Delmage v. Corio, 232 F.3d 38, 42 (2d Cir. 2000) (citation omitted). Thus, defendant Belcher is a citizen of Oklahoma. Compl. ¶ 6. "[A] limited liability company . . . takes the citizenship of each of its members." Bayerische Landesbank, N.Y. Branch v. Aladdin Capital Mgmt. LLC, 692 F.3d 42, 49 (2d Cir. 2012) (citation omitted). Thus, defendant Belcher Farms is also a citizen of Oklahoma. Compl. ¶ 8.
Because each defendant "is a citizen of a different state from [] plaintiff," Owen Equip. & Erection Co. v. Kroger, 437 U.S. 365, 366, 373 (1978), the Complaint adequately demonstrates "complete diversity of citizenship," as required by § 1332(a)(1). Id. And because plaintiff seeks $134,000 in contract damages, see Compl. ¶¶ 20, 33, 40, the $75,000 jurisdictional threshold is met. See Jeong-Suk No v. Bank of Am., 2020 WL 1331934, at *3 (S.D.N.Y. Mar. 23, 2020) ("The sum claimed by the plaintiff will control if it is made in good faith.").
2. Personal Jurisdiction and Venue
I am also satisfied that this Court has personal jurisdiction over all three defendants, and that venue is proper in this District. The Agreement, which Belcher signed on behalf of all three defendants, is "governed by [and] constructed in accordance with the laws of the state of New York," and provides that "[a]ny suit, action or proceeding arising hereunder, or the interpretation, performance or breach hereof, shall if [plaintiff] so elects, be instituted in any court sitting in New York State[.]" Ag. at 10, § 4.5. Forum selection clauses are "prima facie valid and should be enforced unless enforcement is shown by the resisting party to be 'unreasonable' under the circumstances." M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 10 (1972) (citations omitted). Moreover, defects in venue may be waived, see Fed.R.Civ.P. 12(b)(3), and are deemed waived when a defendant defaults after having been "properly served with process by a court having subject matter jurisdiction." Hoffman v. Blaski, 363 U.S. 335, 343 (1960).
The Agreement further states that the Merchant "submits to the jurisdiction" of such courts, and "waives any and all objections to jurisdiction or venue," Ag. at 10, § 4.5, and the Guaranty expressly incorporates the terms of the main Agreement, including the consent-to-jurisdiction clause. See id. at 15. Thus, all three defendants have consented to this Court's personal jurisdiction.
B. Service
Before turning to the merits of the inquest, I must consider whether plaintiff's failure to mail its proposed OSC and supporting papers to defendants, as required by Local Civ. R. 55.2(c), bars the relief it seeks. Although the case law addressing this issue is sparse, several judges in this District have noted that there is no comparable requirement in Fed.R.Civ.P. 55(b), and have concluded that where, as here, a defaulted defendant was properly served with the summons and complaint, but failed to answer or otherwise respond to the lawsuit, a damages judgment may be entered without proof that the default motion papers (or any additional papers beyond the summons and complaint) were also served on that defendant. See Moskovitz v. La Suisse, 2013 WL 6197163, at *3 (S.D.N.Y. Nov. 25, 2013) (noting that where the defaulted party was served with process but never appeared, "the Federal Rules don't require that a default judgment [or the papers in support of the motion] be served on him at all."); Allstar Mktg. Grp., LLC v. Adfaderal, 2021 WL 5362640, at *3 n.7 (S.D.N.Y. Sept. 20, 2021) (recommending that damages be assessed against multiple defendants, including nine who were never served with the court's inquest scheduling order or plaintiff's inquest submissions, "because neither Federal Rule of Civil Procedure 55(b)(2) nor the SDNY local rules require that the clerk's certificate be served upon an opposing party who has not appeared and because every one of the Defendants was successfully served with the prior pleadings in this case"), report and recommendation adopted, 2021 WL 4892866 (S.D.N.Y. Oct. 19, 2021); WowWee Grp. Ltd. v. Haoqin, 2019 WL 1316106, at *1 (S.D.N.Y. Mar. 22, 2019) (rejecting magistrate judge's recommendation that no damages be assessed, due to plaintiff's use of "alternative methods" to serve its inquest submissions on the defaulted defendants, as "unfounded" and insufficient to "warrant barring Plaintiffs from damages or injunctive relief").
In this case, all three defendants were served with the summons and Complaint at the outset of the case, but failed to appear and defend. In addition, all three were served with my Scheduling Order, apprising them that plaintiff was in the process of seeking a damages judgment against them on default, and with plaintiff's Proposed Findings, apprising them of the quantum of damages requested. Neither the Due Process Clause nor the Federal Rules of Civil Procedure requires more than this. Moskovitz, 2013 WL 6197163, at *3. Consequently, I will proceed to review plaintiff's inquest papers on the merits.
C. Liability
As noted above, following a default judgment, the court must accept all well-pleaded factual allegations in the complaint as true, except those relating to damages. Finkel, 577 F.3d at 83 n.6; see also Cotton v. Slone, 4 F.3d 176, 181 (2d Cir. 1993); Greyhound Exhibitgroup, Inc. v. E.L.U.L. Realty Corp., 973 F.2d 155, 158 (2d Cir. 1992). If those well-pleaded allegations establish the defaulting party's liability, the only remaining issue is whether plaintiff has provided adequate support for its requested damages or other relief. Gucci Am., Inc. v. Tyrrell-Miller, 678 F.Supp.2d 117, 119 (S.D.N.Y. 2008) (citing Credit Lyonnais Sec. (USA), Inc. v. Alcantara, 183 F.3d 151, 155 (2d Cir. 1999)). "Conversely, if the well-pleaded factual allegations in the complaint fail to state a claim upon which relief can be granted, no damages can be awarded, even if the post-default inquest submissions supply the missing information." Mondragon v. Keff, 2019 WL 2551536, at *4 (S.D.N.Y. May 31, 2019) (collecting cases), report and recommendation adopted, 2019 WL 2544666 (S.D.N.Y. June 20, 2019).
1. Breach of Contract
Under New York law, "[t]he essential elements for pleading a cause of action to recover damages for breach of contract are the existence of a contract, the plaintiff's performance pursuant to the contract, the defendant's breach of his or her contractual obligations, and damages resulting
from the breach[.]" Dee v. Rakower, 112 A.D.3d 204, 208-09, 976 N.Y.S.2d 470, 474 (2d Dep't 2013); accord Ellington Credit Fund, Ltd. v. Select Portfolio Servicing, Inc., 837 F.Supp.2d 162, 188-89 (S.D.N.Y. 2011)). Plaintiff has adequately alleged each of these elements. Fundkite and ABFP entered into the Agreement, which Fundkite performed by disbursing to ABFP the agreed-upon amount of $169,815. When ABFP placed a stop payment on its bank account, Fundkite had not yet debited the full amount due under the Agreement, falling short by $134,000. This triggered an Event of Default, see Ag. at 9, § 3.1, which in turn caused "the full uncollected Purchased Amount of Receipts plus all fees and charges (including legal fees) due under this Agreement" to "become due and payable in full immediately." Id. § 3.2. Yet ABFP has not paid any part of that sum. Compl. ¶¶ 20, 24. Accordingly, plaintiff has stated a claim for breach of contract against ABFP.
2. Breach of Personal Guaranty
Under New York law, the elements of a "prima facie case for breach of a written guaranty . . . requires a plaintiff to establish (1) an absolute and unconditional guaranty, (2) the underlying debt, and (3) the guarantor's failure to satisfy the unpaid debt." Myers Indus., Inc. v. Schoeller Arca Sys., Inc., 171 F.Supp.3d 107, 121 (S.D.N.Y. 2016) (citing City of N.Y. v. Clarose Cinema Corp., 256 A.D.2d 69, 71, 681 N.Y.S.2d 251, 253 (1st Dep't 1998)). All of these elements are present here.
Belcher and Belcher Farms guaranteed to ABFP:
Merchant's performance of all of the representations, warranties, [and] covenants made by Merchant in this [Agreement], as this Agreement may be renewed, amended, extended, or otherwise modified (the "Guaranteed Obligations"). Guarantor's obligations are due at the time of any breach by Merchant of any representation, warranty, or covenant made by Merchant in the Agreement.
Ag. at 14 (emphasis added). This guaranty is absolute and unconditional. As discussed above, plaintiff has also pled that ABFP's stop payment left "an outstanding balance of $134,000" owing to plaintiff under the Agreement, Compl. ¶ 20, which remains unpaid. Lastly, plaintiff has pled that neither Belcher nor Belcher Farms has "reimburse[d] Fundkite for its losses sustained as a result of [ABFP's] breach." Id. ¶ 39. Plaintiff has therefore adequately pled that defendants Belcher and Belcher Farms have breached the Guaranty.
Because the Guarantors guaranteed ABFP's obligations under the Agreement, all defendants are jointly and severally liable for the damages. See Gallagher's NYC Steakhouse Franchising, Inc. v. N.Y. Steakhouse of Tampa, Inc., 2011 WL 6034481, at *10 (S.D.N.Y. Dec. 5, 2011) (holding defendants jointly and severally liable for damages stemming from breaches of contract and guaranty); Century Bus. Credit Corp. v. Gargiulo Foods, L.L.C., 2003 WL 21998959, at *1 (S.D.N.Y. Aug. 22, 2003) (same).
D. Damages
The only remaining question is whether plaintiff has provided adequate support for its calculation of the damages resulting from defendants' breaches. Alex Shvarts, plaintiff's Chief Executive Officer, attests that the "facts and circumstances" set forth in the Complaint are "true and correct." Shvarts Decl. ¶ 2. Among those "facts and circumstances" are that ABFP stopped payment on the designated bank account, and refused to remit any further funds to plaintiff after remitting only $93,800, leaving an "outstanding balance" of $134,000, Compl. ¶¶ 19-22, notwithstanding that it continued to sell products and generate receivables. Id. ¶ 27. Given these facts, which constitute an "Event of Default," the terms of the Agreement itself dictate that Fundkite is entitled to damages of $134,000 ("the full uncollected Purchased Amount of Receipts"), Ag. at 9, §§ 3.1, 3.2. See Oscar Gruss & Son, Inc. v. Hollander, 337 F.3d 186, 196 (2d Cir. 2003) ("Under New York law, damages for breach of contract should put the plaintiff in the same economic position he would have occupied had the breaching party performed the contract.").
E. Fees and Costs
The Agreement also entitles plaintiff to "court costs and attorneys' fees." Ag. at 9, § 3.3. Plaintiff seeks $5,517.50 in attorneys' fees, and $1,161.40 in costs, based on "itemized invoices from counsel" that Shvarts attaches to his declaration. See Shvarts Decl. ¶ 3. According to Shvarts, the fees sought are "reasonable, and considerably less than the amount [Fundkite] would otherwise have incurred if it had paid a contingency fee of 30-40%." Id. ¶ 4.
"Under New York law, a contract that provides for an award of reasonable attorneys' fees to the prevailing party in an action to enforce the contract is enforceable if the contractual language is sufficiently clear." NetJets Aviation, Inc. v. LHC Commc'ns, LLC, 537 F.3d 168, 175 (2d Cir. 2008). Here, the contractual language is clear, and the hourly rates charged by plaintiff's counsel appear reasonable, but Invoice # 4689, attached to the Shvarts declaration, reflects $3,157.50 in attorneys' fees billed to and paid by Fundkite in connection with this action, not $5,157.50. See Shvarts Decl. at ECF pp. 4-5. Further, although Invoice # 4689 reflects $1,161.40 in costs, no documentation is provided for a $761.40 expense listed only as "Process service." Id. at ECF p. 5. See Fisher v. S.D. Prot. Inc., 948 F.3d 593, 601-02 (2d Cir. 2020) (approving expenses only to the extent "documented . . . in the receipts and invoices submitted by counsel"); Piedra v. Ecua Rest., Inc., 2018 WL 1136039, at *20 (E.D.N.Y. Jan. 31, 2018) (rejecting expenses beyond filing fee because "the Court cannot simply accept at face value the other costs that plaintiff's counsel seeks, such as service of process and translator services, without additional supporting documentation for those costs"); see also Scheduling Order ¶ 5 ("Plaintiff must also submit . . . evidence documenting plaintiff's costs and expenses."). Consequently, plaintiff's fee award should be limited to $3,157.50, and its costs to $400, for a total of $3,557.50 in fees and costs.
Shvarts also attaches Invoice # 4896, reflecting another $2,653.50 in fees. Shvarts Decl. at ECF pp. 6-7. However, # 4896 is conspicuously watermarked as a "DRAFT," and most of the legal fees reflected on that document were incurred in connection with "General representation regarding merchant cash advance litigation," id., rather than this action specifically.
The Court does not require documentation for the remaining $400 in costs, which reflects the filing fee for this action.
F. Interest
New York law provides for pre-judgment interest "at a rate of nine percent per annum." Sung Taek Kwon v. Leg Res., Inc., 2018 WL 2316630, at *4 (S.D.N.Y. May 7, 2018); N.Y. C.P.L.R. (CPLR) § 5004(a). In contract actions, this interest "shall be computed from the earliest ascertainable date the cause of action existed." CPLR § 5001(b). Here, that date was April 9, 2020, when ABFP placed a stop payment on its bank account. Plaintiff is therefore entitled to prejudgment interest at the daily rate of $33.04 (9% of $134,000, divided by 365) from April 9, 2020, until the date judgment is entered.
No interest should be awarded on the portion of the judgment comprising attorneys' fees and costs. See Eaton Partners, LLC v. Azimuth Cap. Mgmt. IV, Ltd., 2021 WL 4392478, at *6 (S.D.N.Y. Sept. 23, 2021) ("prejudgment interest on attorney's fees is disfavored in this Circuit outside the civil rights context"); Gill v. Bausch & Lomb Supplemental Ret. Income Plan I, 2015 WL 2129546, at *2 (W.D.N.Y. May 6, 2015) ("prejudgment interest on attorney's fees is 'clearly not the norm'").
Plaintiff is not, however, entitled to "post-judgment interest of nine percent (9%) per annum." Prop. Findings ¶ 47. In federal court, post-judgment interest runs "at a rate equal to the weekly average 1-year constant maturity Treasury yield, as published by the Board of Governors of the Federal Reserve System, for the calendar week preceding[] the date of the judgment." 28 U.S.C. § 1961(a). The federal post-judgment rate applies regardless of whether (as here) state law supplies the rule of decision or governs the award of pre-judgment interest. See Cappiello v. ICD Publ'ns, Inc., 720 F.3d 109, 113 (2d Cir. 2013) ("the statute's language applies to 'any money judgment in a civil case recovered in a district court,' 28 U.S.C. § 1961 (emphasis added), and it makes no exception for judgments rendered in diversity actions"); Partner Reinsurance Co. Ltd. v. RPM Mortg., Inc., 604 F.Supp.3d 121, 204 (S.D.N.Y. 2022) ("In cases over which a federal court exercises diversity jurisdiction, post-judgment interest is governed by 28 U.S.C. § 1961.").
III. CONCLUSION
For the reasons set forth above, I respectfully recommend that plaintiff be awarded, as against all defendants, jointly and severally: (i) $134,000 for breach of contract and breach of guaranty; (ii) pre-judgment interest on that sum at the rate of 9% per annum ($33.04 per day) from April 9, 2020 until the date of judgment; and (iii) $3,557.50 in attorneys' fees and costs. Once entered, the judgment will bear post-judgment interest at the federal statutory rate pursuant to 28 U.S.C. § 1961.
Plaintiff is directed to promptly serve a copy of this Report and Recommendation on defendants at their last known mailing address, and to file proof of such service on the docket.
NOTICE OF PROCEDURE FOR FILING OF OBJECTIONS TO THIS REPORT AND RECOMMENDATION
The parties shall have fourteen days from this date to file written objections to this Report and Recommendation pursuant to 28 U.S.C. § 636(b)(1) and Fed.R.Civ.P. 72(b). See also Fed.R.Civ.P. 6(a) and (d). Any such objections shall be filed with the Clerk of the Court, with courtesy copies delivered to the Hon. George B. Daniels at 500 Pearl St., New York, New York 10007. Any request for an extension of time to file objections must be directed to Judge Daniels. Failure to file timely objections will result in a waiver of such objections and will preclude appellate review. See Thomas v. Arn, 474 U.S. 140 (1985); Frydman v. Experian Info. Sols., Inc., 743 Fed.Appx. 486, 487 (2d Cir. 2018) (summary order); Wagner & Wagner, LLP v. Atkinson, Haskins, Nellis, Brittingham, Gladd & Carwile, P.C., 596 F.3d 84, 92 (2d Cir. 2010).