Opinion
99 Civ. 9311 (SAS) (JCF)
June 13, 2002
REPORT AND RECOMMENDATION
This is an action for breach of contract and breach of fiduciary duty, brought by the plaintiff, Antonios A. Alevizopoulos and Associates, Inc. ("Alevizopoulos, Inc.") against Comcast International Holdings, Inc., Comcast Corporation, Guilherme DeSouza Villares, and Elaine Marie Cortez Gonin. The Comcast defendants answered the complaint and settled with the plaintiff. Mr. Villares, however, failed to respond to the complaint, and a default was entered against him on November 6, 2000. The case was then referred to me for an inquest on damages, and a hearing was held on April 24, 2002. Although notice of the hearing was sent to Mr. Villares, he did not appear. Accordingly, the following findings are based solely on the evidence submitted by the plaintiff.
The claims of a second plaintiff, Peter Amoroso and Associates, Inc., were previously dismissed for failure to prosecute.
Background
In 1991, Antonios A. Alevizopoulos, the plaintiff's principal, met with Mr. Villares and they agreed to seek corporate funding for building a paging and cellular telephone operation in Brazil. (Amended Complaint ("Amended Compl.") ¶ 7; Tr. 4-6). Mr. Villares was going to secure the necessary licenses in Brazil, while Mr. Alevizopoulos would introduce Mr. Villares to telecommunications companies in America that would be potential partners in the venture. (Tr. 5). By 1993, Mr. Villares had secured licenses covering a substantial part of Brazil. (Amended Compl. ¶ 8). In the spring of that year, he met with Mr. Alevizopoulos and representatives of Comcast, and they agreed to investigate the possibility of a joint venture. (Amended Compl. ¶ 11).
"Tr." refers to the transcript of the evidentiary hearing held on April 24, 2002.
On April 24, 1993, the plaintiff and Mr. Villares memorialized their understanding of their relationship in a Consulting Equity Agreement. (Amended Compl. ¶ 13 Exh. A). According to this document, Mr. Villares would be entitled to a minimum thirty-five percent equity interest in any ultimate joint venture, and, out of Mr. Villares' share, the plaintiff would receive five percent of the total equity as a fee for having brought in an appropriate telecommunications company. (Amended Compl. ¶ 14 Exh. A ¶¶ 4, 5; Tr. 9-10). Furthermore, the agreement acknowledged that the plaintiff had procured several companies as possible joint venturers, including Comcast. (Amended Compl., Exh. A ¶ 2).
Subsequently, Comcast expressed a desire to negotiate with only a single representative acting on behalf of the plaintiff and Mr. Villares, and Mr. Villares assumed that role. (Amended Compl. ¶¶ 16-17, Tr. 8-9). In August 1993, Mr. Villares represented to the plaintiff that the discussions with Comcast had failed. (Amended Compl. ¶¶ 18-20). Near the end of that year, he advised the plaintiff that he no longer wished to pursue the joint venture. (Amended Compl. ¶¶ 20-21; Tr. 12).
As it turned out, however, Mr. Villares had continued his negotiations with Comcast, and in late 1993, they formed a joint venture to provide cellular service in Brazil. (Amended Compl. ¶¶ 22-26; Tr. 13). When the plaintiff discovered this, it initiated this litigation.
Discussion A. Jurisdiction
This case was originally filed in New York State Supreme Court but was removed to this Court on the basis of diversity since the plaintiffs were New York corporations, the Comcast defendants are incorporated in and have principal places of business in other states, Mr. Villares is a citizen of Brazil, and the amount in controversy exceeds $75,000. Thus, the Court has subject matter jurisdiction pursuant to 28 U.S.C. § 1332.
The Court also has personal jurisdiction over Mr. Villares. Because the agreement at issue was formulated and partially performed in New York, Mr. Villares transacted business here out of which the breach of contract claim arose. (Tr. 5-6). Thus, he is subject to New York long-arm jurisdiction. N.Y. Civ. Prac. Law Rules ("CPLR") § 302(a)(1). In addition, Mr. Villares is alleged to regularly conduct business in New York and to have committed the tort of breach of fiduciary duty while outside the state causing injury to the plaintiff here in New York. Thus, he is subject to personal jurisdiction under CPLR § 302(a)(3) as well.
B. Liability
Following a default, all factual allegations of the complaint, except those relating to damages, must be accepted as true. See Cotton v. Slone, 4 F.3d 176, 181 (2d Cir. 1993); In re Crazy Eddie Securities Litigation, 948 F. Supp. 1154, 1160 (E.D.N.Y. 1996). Here, the allegations support a finding that Mr. Villares is liable for both breach of contract and breach of fiduciary duty.
In order to demonstrate breach of contract under New York law, a plaintiff must establish: (1) the existence of a contract, (2) breach by the defendant, and (3) damages suffered as a result of the breach. See First Investors Corp. v. Liberty Mutual Insurance Co., 152 F.3d 162, 168 (2d Cir. 1998); Municipal Capital Appreciation Partners I, L.P. v. Page, 181 F. Supp.2d 379, 390 (S.D.N.Y. 2002). In this case, Alevizopoulos, Inc. has alleged that Mr. Villares breached the Consulting Equity Agreement by failing to tender the plaintiff's interest in the resulting venture, thus causing the plaintiff to lose the value of his share. Mr. Villares is therefore liable for breach of contract.
To establish a claim of breach of fiduciary duty, the plaintiff must demonstrate: (1) the existence of a fiduciary duty between the parties, (2) the defendant's breach of that duty, and (3) damages suffered by the plaintiff as a result of the breach. Antonios A. Alevizopoulos and Associates, Inc. v. Comcast International Holdings, Inc., 100 F. Supp.2d 178, 188 (S.D.N.Y. 2000). This Court has already found that:
Plaintiffs have alleged that they placed a special trust and confidence in Villares to negotiate on their behalf. See Complt. ¶ 17. This was done after Comcast demanded to negotiate with only one party. By entrusting Villares with this position, plaintiffs became completely dependent on him to negotiate on their behalf in good faith. Villares accepted this position without condition. Accordingly, Villares' position as the sole representative of plaintiffs created a fiduciary relationship between them. . . .
Id. Thus, the first element is satisfied. Moreover, the complaint adequately alleges that Mr. Villares breached his duty by falsely stating that discussions with Comcast had failed, when in fact, he continued such negotiations in secret on his own behalf. Finally, the plaintiff was damaged by this malfeasance because it was deprived of its share of the equity of the business that resulted from the negotiations. Accordingly, Mr. Villares is also liable for breach of fiduciary duty.
C. Damages
The breach of contract and breach of fiduciary duty damages are identical in this case. The plaintiff has offered two alternative calculations. The first is based on an actual transaction. The plaintiff presented evidence that Mr. Villares agreed to sell his share of the venture to Comcast for $2.3 million on November 20, 1995. (Tr. 15-16; Pl. Exhs. 2, 3, 4). According to the Consulting Equity Agreement, Mr. Villares' owned at least a thirty-five percent share of the entity. Therefore, the total value of the business at that time would have been $6,571,428.57 ($2,300,000 divided by .35). Under the contract, the plaintiff was entitled to a five percent share, or $328,571.43 ($6,571,428.57 times .05). This represents the amount of damages.
At the inquest, the plaintiff argued for the first time that the venture had a much greater value. Mr. Alevizopoulos testified that based on unidentified newspaper reports and the value of the cellular licenses of other companies, the business "must be worth close to a billion dollars, if not more." (Tr. 14). If the venture were valued at that figure, the plaintiffs' five percent share would be $50 million. This revised calculation is not adequately supported. If the plaintiff means to suggest that the venture was worth a billion dollars at the time Mr. Villares sold his interest, then the defendant's failure to obtain the fair market value of his share — by many orders of magnitude — is inexplicable. If, on the other hand, the plaintiff is arguing that the value of the business skyrocketed after Mr. Villares sold, it has simply failed to produce credible evidence to that effect. Mr. Alevizopoulos' testimony is conclusory and supported by no documentation or expert analysis. Therefore, the only credible evidence warrants an award of damages of $328,571.43.
D. Interest
A party found liable for breach of contract is also liable for prejudgment interest under New York Law. CPLR § 5001(a); see Graham v. James, 144 F.3d 229, 239 (2d Cir. 1998). That interest is calculated at the statutory rate of nine percent per year. CPLR § 5004; see Marfia v. T.C. Ziraat Bankasi, 147 F.3d 83, 90 (2d Cir. 1998). Interest must be computed from "the earliest ascertainable date the cause of action existed," CPLR § 5001(b), which in this case is November 20, 1995. On that basis, the plaintiff is entitled to interest of $194,366.98 up to June 14, 2002, with an additional $81.02 per day thereafter to the date of judgment.
Conclusion
For the reasons set forth above, I recommend that judgment be entered in favor of plaintiff Antonios A. Alevizopoulos and Associates, Inc. and against defendant Guilherme DeSouza Villares in the principal amount of $328,571.43, together with interest of $194,366.98 for a total of $522,938.41, plus $81.02 per day from June 14, 2002 to the date of judgment.
Pursuant to 28 U.S.C. § 636(b)(1) and Rules 72, 6(a), and 6(e) of the Federal Rules of Civil Procedure, the parties shall have ten (10) days from this date to file written objections to this Report and Recommendation. Such objections shall be filed with the Clerk of the Court, with extra copies delivered to the chambers of the Honorable Shira A. Scheindlin, Room 1050, and to the chambers of the undersigned, Room 1960, 500 Pearl Street, New York, New York 10007. Failure to file timely objections will preclude appellate review.
Respectfully submitted,