Opinion
17-CV-07762 (AT) (VF)
11-06-2023
RENZER BELL, Plaintiff, v. ANDREW MICHAEL KOSS, a/k/a MICHAEL KOSS, JOHN DOE, EXOTIC EURO CARS, and “ABC CORPORATIONS” being unknown, and fictitious at this time, Defendants.
HONORABLE ANALISA TORRES, United States District Judge.
REPORT AND RECOMMENDATION
VALERIE FIGUEREDO, United States Magistrate Judge.
On October 10, 2017, Plaintiff Renzer Bell commenced this action against Defendants Dr. Kain Kumar, Sharmini Kumar, Exotic Euro Cars (“EEC”), Andrew Michael Koss, ABC Corporations, and John Doe, asserting claims for breach of contract. See ECF No. 1 (“Compl.”). On January 15, 2022, Plaintiff moved for entry of default judgment against Koss and EEC. To date, Koss has not appeared or otherwise defended against this action; EEC has not appeared or otherwise defended against this action since June 3, 2019. For the reasons that follow, I respectfully recommend that default judgment be entered against EEC and Koss and that Bell be awarded damages as calculated below.
On August 7, 2020, the Court granted Dr. Kumar and Sharmini Kumar's motion to dismiss and thus those individuals are no longer in this case. See ECF Nos. 31, 139. ABC Corporations and John Doe are named in Bell's complaint, but Bell never identified those defendants. Therefore, the only remaining named defendants in this matter are Koss and EEC.
BACKGROUND
A. Factual Background
Plaintiff Renzer Bell is “actively engaged in the business of purchasing and trading a variety of valuable commodities,” in this case, exotic high-end automobiles. See Compl. ¶ 3. Defendant EEC is a California corporation that sells high-end luxury cars as an “alter ego” of Defendant Koss. Id. at ¶¶ 11, 12. Koss is the Secretary and Chief Financial Officer of EEC. Id. at ¶¶ 4, 6.
From May 30, 2013, to December 14, 2015, Bell, Koss, and EEC entered into eight agreements, whereby Bell agreed to procure specific luxury cars from a car dealer for EEC and Koss, who were obligated to pay Bell a specified fee and the car dealer the Manufacturer's Suggested Retail Price (“MSRP”) plus an additional agreed upon sum of money. See id. at ¶¶ 30140. The contractual terms of all eight agreements are substantially the same, except the agreements vary in the amount of money EEC and Koss owe Bell and the car dealer. See id. at Exs. 20-27. Bell annexed all eight agreements with EEC and Koss to his complaint. Id.
On May 30, 2013, Bell, EEC, and Koss entered into a contract (“the First Agreement”), whereby Bell agreed to “sell, assign, and transfer” to EEC and Koss a 2013 Lamborghini Aventador Roadster in exchange for Koss and EEC paying Bell $4,580. Id. at Ex. 20 at ¶ 1. EEC and Koss agreed to pay the car dealer the car's “sales price of MSRP + $55,500.” Id. at Ex. 20 at ¶ 4. In paragraph 2 of the First Agreement, EEC and Koss agreed that within 72 hours of receiving the “buyer's order/purchase agreement/bill of sale/contract” from Bell or the car dealer, they would pay Bell the full amount of his fee and they would pay 10% of what they owed the car dealer. Id. at Ex. 20 at ¶ 2.
On July 23, 2023, Bell sent a letter to Koss with a purchase tag for a 2013 Lamborghini Aventador Roadster. Id. at Exs. C-D. Koss and EEC failed to pay Bell and the car dealer the amounts owed for the car, despite Bell providing Koss and EEC with notice that the car was available for pickup. Id. at ¶¶ 142, 146-57. Section 9 of the First Agreement contains a liquidated damages clause, requiring EEC to pay Bell $95,580 as partial liquidated damages for “noncompliance” with the terms of the agreement. Id. at ¶ 40, Ex. 20 at ¶ 9.
Paragraph 6 of the First Agreement allowed Bell to exercise an option requiring EEC and Koss to purchase a “second automobile similar in specification” to the first car. Id. at Ex. 20 at ¶ 6. On September 27, 2013, Bell notified Koss that he intended to exercise this option. Id. at ¶ 152, Ex. J. Koss did not respond; Bell did not consummate the transaction for the second car. Id. at ¶ 154. EEC did not pay Bell the $4,580 owed to him for the second car. Id. at ¶ 157.
On July 18, 2013, Bell, Koss, and EEC entered into another contractual agreement (“the Second Agreement”). See id. at ¶ 47, Ex. 21. Paragraph 6 of the Second Agreement allows Bell to exercise an option requiring EEC and Koss to purchase a “second automobile similar in specification” to the first car, a 2013 Lamborghini Aventador Roadster. Id. at Ex. 21 at ¶¶ 1, 6. On August 18, 2013, Bell notified Koss that he intended to tender a second “buyer's order/purchase agreement/bill of sale/contract” pursuant to Paragraph 6. Id. at ¶¶ 161-62, 164. Koss failed to respond to Bell's notice of his intent to tender a second car. Id. at ¶¶ 161-62, 164, Ex. E. Because Koss did not respond, Bell did not purchase the car. Id. at ¶ 163.
Bell's breach-of-contract claim as it relates to the Second Agreement stems from Bell's exercise of this option to tender a second car. Bell does not allege that Koss and EEC failed to perform their obligations under the Second Agreement as it pertains to the procurement of the first car under the Agreement.
On November 8, 2013, Bell, Koss, and EEC entered into two contractual agreements (the “Third Agreement” and the “Fourth Agreement”). See Id. at ¶¶ 67, 74, Exs. 22-23. Under the terms of the Third and Fourth Agreements, Bell agreed to “sell, assign, and transfer” to EEC and Koss two 2014 Land Rover Range Rover L405 Autobiographies in exchange for EEC paying Bell $1,580 and $4,580 respectively. Id. at Ex. 22 at ¶ 1, Ex. 23 at ¶ 1. EEC and Koss agreed to pay the car dealer the “sales price of MSRP + $18,500” under the Third Agreement, and “MSRP plus $25,500” under the Fourth Agreement. Id. at Ex. 22 at ¶ 4, Ex. 23 at ¶ 4. Under the parties “course of dealing,” EEC and Koss had to nominate their preferred agent/lessor to facilitate the transaction. See id. at ¶¶ 169, 178. On November 16, 2013, Bell wrote Koss asking him to name the preferred agent/lessor for the two Land Rover vehicles; Koss failed to name a preferred agent/lessor and failed to pay Bell the $1,580 and $4,580 due under the Third and Fourth Agreement. See id. at ¶¶ 170-71, 179-82, Ex. K. Bell did not purchase the two Land Rover vehicles. See id. at ¶¶ 172, 181. Paragraph 9 of Third and Fourth Agreements is a liquidated damages clause, requiring EEC and Koss to pay Bell $35,580 per agreement as partial liquidated damages for “noncompliance.” Id. at ¶ 40, Ex. 22 at ¶ 9, Ex. 23 at ¶ 9.
On March 24, 2014, Bell, EEC, and Koss entered into another contractual agreement (the “Fifth Agreement”). See id. at ¶ 82, Ex. 24. Bell agreed to “sell, assign and transfer” to EEC and Koss a 2014 Land Rover Range Rover Autobiography Long Wheel Base, in exchange for EEC and Koss paying Bell $1,580. Id. at ¶ 83, Ex. 24 at ¶ 1. EEC and Koss agreed to pay the car dealer the “sales price of MSRP + $58,500.” Id. at Ex. 24 at ¶ 4. In paragraph 2 of the Fifth Agreement, EEC and Koss agreed to send Bell the amount they owed him and 10% of what they owed the car dealer within 72 hours of receiving the “buyer's order/purchase agreement/bill of sale/contract” from Bell or the car dealer. Id. On March 28, 2023, Bell sent a letter to Koss with an attached conditional sales agreement for a 2014 Land Rover Range Rover Autobiography Long Wheel Base. Id. at Ex. 24. Koss did not send Bell payment for the car and failed to pay Bell his fee. Id. at ¶¶ 188, 191.
Paragraph 6 of the Fifth Agreement allowed Bell to exercise an option requiring EEC and Koss to purchase a “second automobile similar in specification” to the first car. See id. at Ex. 24 at ¶ 6. On April 5, 2014, Bell notified Koss that he intended to exercise that option. See id. at ¶ 198, Ex. M. Koss did not respond to Bell's notice, and Bell did not consummate the transaction for the second car. See id. at ¶¶ 199-200. EEC and Koss did not pay Bell the $1,580 owed to him for the second car. See id. at ¶ 203. Paragraph 9 of the Fifth Agreement is a liquidated damages clause, requiring EEC and Koss to pay Bell $75,580 as partial liquidated damages for “noncompliance” with the terms of the agreement. See id. ¶ 80, Ex. 24 at ¶ 9.
On March 25, 2014, Bell, EEC, and Koss entered into another contractual agreement (the “Sixth Agreement”). See id. at ¶ 97, Ex. 25. Under the Sixth Agreement, Bell agreed to “sell, assign, and transfer” to EEC and Koss a 2014 Land Rover Range Rover Autobiography Long Wheel Base in exchange for Koss and EEC paying Bell $4,580. Id. at ¶¶ 97-98, Ex. 25 at ¶ 2. EEC and Koss agreed to pay the car dealer the “sales price of MSRP + $55,500.” Id. at ¶ 97, Ex. 25 at ¶ 4. Koss did not nominate a preferred agent/lessor or provide the information necessary to complete the transaction with the car dealer so Bell did not purchase the car. Id. at ¶¶ 208-210, Ex. M. Section 9 of the Sixth Agreement has a liquidated damages clause, requiring EEC and Koss to pay Bell $75,580 as partial liquidated damages for “noncompliance” with the terms of the contract. Id. at Ex. 25 at ¶ 9.
On October 3, 2014, Bell, EEC, and Koss entered into another agreement (the “Seventh Agreement”). See id. at ¶ 108, Ex. 26. Under the Seventh Agreement, Bell agreed to “sell, assign, and transfer” to EEC and Koss a 2015 Lamborghini Huracan in exchange for Koss and EEC paying Bell $4,580. See Id. at ¶¶ 108-109, Ex. 26 at ¶ 1. EEC and Koss agreed to pay the car dealer the “sales price of MSRP + $20,080.” Id. In paragraph 2 of the agreement, EEC and Koss agreed to send Bell his fee and 10% of what they owed the car dealer within 72 hours of receiving the “buyer's order/purchase agreement/bill of sale/contract” from Bell or the car dealer. Id. at Ex. 26 at ¶ 42. On October 3, 2014, Bell notified Koss in writing that the car was ready for pickup and included the “buyer's order/purchase agreement/bill of sale/contract” Id. at Exs. N-O. Koss and EEC failed to pay Bell and the car dealer. See id. at ¶¶ 142, 146-57.
Paragraph 6 of the Seventh Agreement allowed Bell to exercise an option requiring EEC and Koss to purchase a “second automobile similar in specification” to the first car. See id. at Ex. 26 at ¶ 6. On October 21, 2014, Bell notified Koss that he intended to exercise this option. See id. at ¶¶ 119, 226, Ex. P. Koss did not respond; Bell did not consummate the transaction for the second car. Id. at ¶¶ 227-28. EEC and Koss did not pay Bell the $4,580 owed to him for the second car. Id. at ¶ 231. Paragraph 9 of the Seventh Agreement contains a liquidated damages clause, requiring EEC and Koss to pay Bell $75,580 as partial liquidated damages for “noncompliance” with the terms of the agreement. See id. at ¶ 40, Ex. 26 at ¶ 9.
On December 14, 2015, Bell, EEC, and Koss entered into the final agreement (the “Eighth Agreement”). See id. at ¶ 122, Ex. 27. Paragraph 6 of the Eighth Agreement allowed Bell to exercise an option requiring EEC and Koss to purchase a “second automobile similar in specification” to the first car, a 2016 Porsche 911 GT3 RS. See id. at Ex. 27 at ¶¶ 1, 6. On January 22, 2016, Bell notified Koss that he intended to exercise this option. Id. at ¶ 235. Koss did not respond; Bell did not consummate the transaction for the second car. Id. at ¶¶ 227-28. EEC and Koss failed to pay Bell the $20,580 owed to him under the Eighth Agreement for the second automobile. Id. at ¶ 231. Section 9 of the Eighth Agreement has a liquidated damages clause, requiring EEC and Koss to pay Bell $75,580 as partial liquidated damages for “noncompliance” with the terms of the contract. Id. at Ex. 27 at ¶ 9.
Bell's breach-of-contract claim as it relates to the Eighth Agreement stems from Bell's exercise of this option to tender a second car. Bell does not allege that Koss and EEC failed to perform their obligations under the Eighth Agreement as it pertains to the procurement of the first car.
B. Procedural Background
Bell commenced this action on October 10, 2017, asserting eight claims for breach of contract-one claim for each of the eight agreements he executed with Koss and EEC. See ECF No. 1. Bell named six defendants in his original complaint: Koss, EEC, Dr. Kain Kumar, Sharmini Kumar, John Doe, and ABC Corporations. Id. John Doe and ABC Corporations were never identified by Bell. On January 19, 2018, Dr. Kumar and Sharmini Kumar moved to dismiss the complaint as against them, and on August 7, 2020, the Court granted their motion. See ECF Nos. 31, 139. Koss and EEC are the two remaining named defendants.
Bell served Koss the summons and complaint on December 4, 2017. ECF No. 17. To date, Koss has never appeared in this case. On December 29, 2017, the Clerk of Court entered a certificate of default against Koss. ECF No. 24.
Bell served EEC the summons and complaint on December 1, 2017. ECF No. 5. EEC filed an answer on December 15, 2017, and an amended answer on February 8, 2018. ECF Nos. 11, 40. On March 20, 2018, the Court stayed the action pending the resolution of EEC's bankruptcy proceeding. ECF No. 79. By February 2019, EEC's counsel in this action had withdrawn due to EEC's failure to pay and the company was no longer represented by counsel. See ECF Nos. 98, 103, 104. On July 25, 2019, the Honorable Analisa Torres ordered EEC to update the Court on the status of the bankruptcy proceedings by September 1, 2019. ECF No. 115. EEC did not respond to the Court's order. On September 4, 2019, Judge Torres issued a second order directing EEC to provide a status update by September 10. ECF No. 116. Again, EEC did not respond to the Court's order. Judge Torres issued a third order on September 13, 2019, directing EEC to provide a status update by October 4. ECF No. 117. ECC again did not respond. On October 14, 2021, Judge Torres directed Bell to move for default judgment. ECF No. 152. On November 19, 2021, Bell moved for a certificate of default against EEC, which the Clerk of Court issued on December 1, 2021. ECF No. 155.
On January 15, 2022, Bell filed a motion for default judgment against Koss and EEC. ECF No. 161. Judge Torres referred the motion for default judgment to Magistrate Judge Robert W. Lehrburger. ECF No. 162. On January 25, 2022, Judge Lehrburger issued an order to show cause, directing Koss and EEC to appear for a hearing on February 24, 2022, to show cause why the Court should not enter default judgment against them. ECF No. 163. Neither Koss nor EEC appeared for the hearing. See ECF No. 170. On February 18, 2022, Bell filed an affidavit in support of an award of monetary damages. ECF No. 166. In this affidavit, Bell provided proof of service of the certificate of default and his default judgment papers on Koss and EEC. ECF No. 166 at 195-96. On February 24, 2022, the matter was redesignated to the Honorable Debra C. Freeman, and on April 27, 2022, the matter was redesignated to the undersigned. See Minute Entries, dated Feb. 24, 2022, Apr. 27, 2022.
DISCUSSION
Federal Rule of Civil Procedure 55 sets forth a two-step procedure for the entry of judgment against a party who fails to defend: the entry of a default, and the entry of a default judgment. New York v. Green, 420 F.3d 99, 104 (2d Cir. 2005). The first step, entry of a default, simply “formalizes a judicial recognition that a defendant has, through its failure to defend the action, admitted liability to the plaintiff.” City of New York v. Mickalis Pawn Shop, LLC, 645 F.3d 114, 128 (2d Cir. 2011); see Fed.R.Civ.P. 55(a). The second step, entry of a default judgment, “converts the defendant's admission of liability into a final judgment that terminates the litigation and awards the plaintiff any relief to which the court decides it is entitled, to the extent permitted” by the pleadings. Mickalis Pawn Shop, 645 F.3d at 128; see also Fed.R.Civ.P. 54(b). Whether entry of default judgment at the second step is appropriate depends upon whether the allegations against the defaulting party are well-pleaded. See Mickalis Pawn Shop, 645 F.3d at 137.
“A defendant is always free to ignore the judicial proceedings [and] risk a default judgment.” Ins. Corp. of Ireland v. Compagnie des Bauxites de Guinee, 456 U.S. 694, 706 (1982). The consequence is an “admission of all well-pleaded allegations against the defaulting party.” Vermont Teddy Bear Co., Inc. v. 1-800 Beargram Co., 373 F.3d 241, 246 (2d Cir. 2004). Thus, because a party in default does not admit conclusions of law, “a district court need not agree that the alleged facts constitute a valid cause of action.” Mickalis Pawn Shop, 645 F.3d at 137. The essence of Federal Rule of Civil Procedure 55 is that a plaintiff can obtain from a default judgment relief equivalent to but not greater than that it would obtain in a contested proceeding assuming it prevailed on all of its factual allegations. See Finkel v. Romanowicz, 577 F.3d 79, 85 (2d Cir. 2009); see also Au Bon Pain Corp. v. Artect, Inc., 653 F.2d 61, 65 (2d Cir. 1981) (“[A] district court has discretion under Rule 55(b)(2) once a default is determined to require proof of necessary facts and need not agree that the alleged facts constitute a valid cause of action.”). Therefore, the Court is “required to determine whether [Bell's] allegations are sufficient to establish [the Defendants'] liability as a matter of law.” Finkel, 577 F.3d at 84. “The legal sufficiency of these claims is analyzed under the familiar plausibility standard enunciated in Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007), and Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009), aided by the additional step of drawing inferences in the [non-defaulting party's] favor.” WowWee Grp. v. Meirly, 18-CV-706 (AJN), 2019 WL 1375470, at *5 (S.D.N.Y. Mar. 27, 2019).
“[A] plaintiff is not entitled to a default judgment and any concomitant damages as a matter of right simply by virtue of a defendant's procedural default.” Gould v. Marconi Dev. Grp., LLC, 19-CV-1454 (MAD/DJS), 2020 WL 2042332, at *2 (N.D.N.Y. Apr. 28, 2020) (citing Erwin DeMarino Trucking Co. v. Jackson, 838 F.Supp. 160, 162 (S.D.N.Y. 1993) (noting that courts must “supervise default judgments with extreme care to avoid miscarriages of justice”)).
In light of Koss's and EEC's default, I accept as true the well-pleaded allegations in the complaint, with the exception of those allegations relating to damages. See, e.g., Union of Orthodox Jewish Congregations of Am. v. Royal Food Distribs. LLC, 665 F.Supp.2d 434, 436 (S.D.N.Y. 2009) (“When the Court enters a default judgment, as regards liability it must accept as true all of the factual allegations of the complaint, but the amount of damages are not deemed true.”) (internal citations, alterations, and quotation marks omitted). As to damages, a district court must “conduct an inquiry in order to ascertain the amount of damages with reasonable certainty.” Credit Lyonnais Sec. (USA), Inc. v. Alcantara, 183 F.3d 151, 155 (2d Cir. 1999). This inquiry requires the court to: (1) “determin[e] the proper rule for calculating damages on . . . a claim,” and (2) “assess[ ] plaintiff's evidence supporting the damages to be determined under this rule.” Id.
Federal Rule of Civil Procedure 55(b)(2) “allows but does not require” the district court to conduct a hearing on the damages amount. Bricklayers and Allied Craftworkers Loc. 2, Albany, N.Y. Pension Fund v. Moulton Masonry & Const., LLC, 779 F.3d 182, 189 (2d Cir. 2015) (“[T]he court may conduct such hearings or order such references as it deems necessary and proper.”) (internal quotation marks and citation omitted); see also Cement & Concrete Workers Dist. Council Welfare Fund, Pension Fund, Annuity Fund, Educ. & Training Fund & Other Funds v. Metro Found. Contractors, Inc., 699 F.3d 230, 234 (2d Cir. 2012). Bell's submissions have not been contested and the submissions provide all the information needed to determine Bell's damages. As such, a hearing on Bell's damages is not necessary.
A. Defendants' Liability for Breach of Contract
Each of Bell's breach-of-contract claims are premised on Defendants' failure to perform their obligations under eight agreements executed between May 2013 and December 2015, for the sale or transfer of specific luxury cars. See Compl. ¶¶ 38, 47, 67, 74, 82, 97, 108, 122, 147, 157, 165, 174, 183, 193, 203, 212, 221, 231, 240, Exs. 20-27. For the Second and Eighth Agreements, Bell's breach-of-contract claim is based on Defendants' failure to perform under the contract as it relates to Bell's procurement of a second car. Compl. at ¶¶ 165, 237-38. For the other agreements, Bell's claim is based on Defendants' failure to perform their obligations as it relates to procurement of the first car. Each agreement provides that “the Agreement shall be governed by and construed under the laws of the State of New York, except for its conflict of law principles.” Id. at Exs. 20-27 at ¶ 11. Accordingly, New York law applies in determining whether Koss and EEC are liable for breach of contract. See Lisa Cooley, LLC v. Native, S.A., 20-CV-5800 (VEC), 2021 WL 860591, at *2 (S.D.N.Y. Mar. 5, 2021).
To state a claim for breach of contract in New York, “the complaint must allege: (i) the formation of a contract between the parties; (ii) performance by the plaintiff; (iii) failure of defendant to perform; and (iv) damages attributable” to the breach. Orlander v. Staples, Inc., 802 F.3d 289, 294 (2d Cir. 2015) (citing Johnson v. Nextel Commc'ns, Inc., 660 F.3d 131, 142 (2d Cir. 2011) (internal quotation marks omitted)). As explained below, Bell has adequately pled a breach-of-contract claim stemming from Defendants' nonperformance under each of the eight agreements.
First, Bell alleges that he entered into eight separate contracts with EEC and Koss. See Compl. ¶¶ 38, 47, 67, 74, 82, 97, 108, 122. The eight agreements are annexed to the complaint and they plainly state that EEC and Koss are counterparties to the agreements with Bell. See Id. at Exs. 20-27.
Second, for each contract, Bell alleged that he performed his obligations as set forth in those agreements. For the First, Third, Fourth, Fifth, Sixth, and Seventh Agreements, Bell was required to notify Koss that he found a car that fit the agreement's specifications. Id. at Exs. 20, 22-26. The complaint alleges that Bell notified EEC and Koss that the car specified in the First, Fifth, and Seventh Agreements was available for pickup. Id. at ¶¶ 142, 146, 188, 192, 220. And, Bell attached to his complaint the letters he sent to Koss notifying Koss that the cars were available. See id. at Exs. C, N, O, 24. For the Third, Fourth, and Sixth Agreements, Bell alleges that he wrote to Koss asking him to name their preferred agent/lessor so that he could purchase the car specified in the contract. Id. at ¶¶ 170, 179, 208. Bell further alleges that if Koss had nominated the preferred agent/lessor, he was prepared to execute the transaction for the cars. Id. at ¶¶ 170, 179, 208. Bell also attached to the complaint the letters he sent to Koss asking him to name the preferred agent/lessor. Id. at Exs. K, M.
For the First, Second, Fifth, Seventh, and Eighth Agreements, Bell exercised his option to procure a second car for EEC and Koss. To fulfill his obligation, Bell was required notify Koss that he was “exercising [his] right.. .to tender” a second “buyer's order/purchase agreement/bill of sale/contract for a second automobile similar in specification” to the first car. Id. at Exs. 20, 21, 24, 26-27. Bell attached to the complaint the letters he sent to Koss with notice of his intent to exercise his option to tender a second car. Id. at Exs. E, J, M, P. Bell has thus adequately alleged that he performed his obligations under each of the eight agreements.
Third, Bell has alleged that Koss and EEC failed to perform their obligations under each of the eight agreements. For the First, Fifth, and Seventh Agreements, EEC and Koss were required to pay Bell within 72 hours of receiving the agreements to purchase the car. Id. at ¶¶ 144, 190, 218. Bell alleges that EEC and Koss failed to respond to his notifications that the cars were available for pickup and failed to pay Bell and the car dealer the amounts owed for those cars. Id. at ¶¶ 142, 145, 188, 190, 216-217, 219.
For the Third, Fourth, and Sixth Agreements, EEC and Koss were required to name their preferred agent/lessor once notified of the car's availability and failed to do so. Id. at ¶¶ 170-171, 179-80, 208-09. Bell also alleges that EEC and Koss failed to pay Bell and the car dealer the amounts owed under those agreements. Id. at ¶¶ 171-72, 173, 180-81, 182, 209, 211.
Lastly, for the First, Second, Fifth, Seventh, and Eighth Agreements, EEC and Koss were required to respond to Bell's notice of intent to exercise his right to purchase a second car. Id. at ¶¶ 153, 161, 198, 226, 235. Bell claims that EEC and Koss did not respond to his letters notifying them of his intent to tender a second car and failed to pay Bell the amounts owed under the contracts. Id. at ¶¶ 153, 156, 162, 164. 199-200, 202, 227-28, 230, 236-37, 239.
Finally, the complaint alleges that Bell suffered damages as a result of Koss and EECs' breaches of the agreements. See id. at ¶¶ 150, 159, 167, 176, 185, 196, 205, 214, 224, 233, 242. Bell seeks compensatory, consequential, and incidental damages for breaches of the First, Second, Fifth, Seventh, and Eighth Agreements. See id. at ¶¶ 159, 167, 205, 233242. He seeks liquidated damages for breaches of the First, Third, Fourth, Fifth, Sixth, and Seventh Agreements. See id. ¶¶ 150, 176, 185, 196, 214, 224.
In short, Bell has sufficiently pled that Koss and EEC are liable for breach of the eight agreements entered into between May 2013 and December 2015.
For each of the eight agreements, Bell, in the alternative, also pled an anticipatory repudiation claim. See Id. at 30-43. “Where a plaintiff proceeds on both a breach of contract theory and an anticipatory repudiation theory-both of which theories constitute a breach if proven-a court may dismiss one of the claims as duplicative.” Exch. Listing, LLC v. Inspira Techs., Ltd., 22-CV-1889 (KPF), 2023 WL 240323 at *6 (S.D.N.Y. Mar. 8, 2023); see, e.g., Safka Holdings LLC v. iPlay, Inc., 42 F.Supp.3d 488, 492 (S.D.N.Y. 2013) (dismissing sua sponte breach of contract claim premised on same factual predicates as anticipatory repudiation claim). Bell's anticipatory repudiation claims are premised on the same factual predicate as his breach-of-contract claims. Recovery under both claims would therefore be duplicative. I therefore assess Plaintiff's damages under solely his breach-of-contract claims.
B. Plaintiff's Damages for Breach of Contract
In Count One, which is based on a breach of the First Agreement, Bell seeks $95,580 in liquidated damages. Id. at 44. In Counts Two and Three, which are based on breaches of the First and Second Agreements, Bell seeks for each count $60,580 in compensatory damages, $18,520 in consequential damages, and $575 in incidental damages. Id. at 44-45. In Counts Four and Five, based on breaches of the Third and Fourth Agreements, Bell seeks $35,580 in liquidated damages. Id. at 45. In Counts Six, Eight and Nine, for breach of the Fifth, Sixth, and Seventh Agreements, Bell seeks $75,580 in liquidated damages. Id. In Count Seven, for breach of the Fifth Agreement, Bell Seeks $60,080 in compensatory damages, $15,300 in consequential damages, and $575 in incidental damages. Id. In Count Ten, for breach of the Seventh Agreement, Bell seeks $20,080 in compensatory damages, $4,320 in consequential damages, and $575 in incidental damages. Id. And, in Count Eleven, for breach of the Eighth Agreement, Bell seeks $100,080 in compensatory damages, $18,520 in consequential damages, and $575 in incidental damages. Id. at 45-46.
1. Compensatory Damages
Bell seeks compensatory damages for breach of the First, Second, Fifth, Seventh, and Eighth Agreements. See Compl, at 44-46; see also ECF No. 166 (“Aff. in Support of Monetary Damages”) at ¶¶ 15-16, 18-19, 24-25, 29-30, 32-33. For the breaches of the First, Fifth, and Seventh Agreements, Bell alleges two breaches by Defendants, based on their failure to pay the fees for procurement of two cars. See Compl. at ¶¶ 145, 156, 191, 202, 219, 230. For the Second and Eighth Agreements, Bell seeks compensatory damages only for a single breach by Defendants, pertaining to their failure to perform as it relates to the second car. Id. at ¶¶ 167, 242.
Under New York Law, damages for breach of contract are “normally limited to the amount necessary to put the plaintiff in the same economic position plaintiff would have occupied had the breaching party performed the contract.” 3947 Austin Boulevard Assocs., LLC v. M.K.D. Cap. Corp., No. 04-CV-8596 (NRB), 2007 WL 1575265, at *2 (S.D.N.Y. May 30, 2007) (citing Topps Co., Inc. v. Cadbury Stani S.A.I.C., 380 F.Supp.2d 250, 261 (S.D.N.Y. 2005)). Compensatory damages can “consist of: (1) restitution interest, which represents any benefit which the non-breach party bestowed upon the breaching party; (2) reliance interest, which represents any detriment which the non-breaching party suffered due to its reliance on the agreement; and (3) expectation interest, which represents any gain the non-breaching party would have realized from the contract but for the breach.” Id. “Under New York law, the normal measure of damages for breach of contract is expectation damages.” Paragon Digit. Lifestyle Inc. v. Adaptive Micro-Ware, Inc., 20-CV-4725 (JMF), 2022 WL 4383999, at *8 (S.D.N.Y. Sept. 22, 2022) (quoting McKinley Allsopp, Inc. v. Jetborne Int'l, Inc., 89-CV-1489 (PNL), 1990 WL 138959, at *8 (S.D.N.Y. Sept. 19, 1990)).
For the First, Second, Fifth, Seventh, and Eighth Agreements, Bell seeks compensatory damages equal to the fee he was to receive under those agreements, as well as a portion of each car's “sales price.” See Aff. in Support of Monetary Damages at ¶¶ 17, 20, 26, 31, 34. However, each of the relevant agreements provides that the “sales price” was to be paid by EEC and Koss to the car dealer, not Bell. Compl. at Exs. 20 at ¶ 4, Ex. 21 at ¶ 4, Ex. 24 at ¶ 4, Ex. 26 at ¶ 4, Ex. 27 at ¶ 4. In other words, Bell was never entitled under the agreements to the “sales price” even if Koss and EEC had performed as required. Further, Bell admits that he never purchased the specified cars from the car dealers, see id. ¶¶ 154, 163, 200, 229, 238, and thus would not have lost the “sales prices” after Defendants' breached the agreements. Bell's compensatory damages should thus be limited to the specific fee he was entitled to receive under each agreement for securing the specific cars.
In the First Agreement, EEC and Koss agreed to pay Bell $4,580 if he procured the specified car. See Compl. at Ex. 20 at ¶ 1. Additionally, Bell exercised his right to procure a second car and was thus entitled to receive the $4,580 fee as it related to the second car. Id. at ¶ 152. Therefore, for Defendants' breach of the First Agreement, Bell should be awarded $9,160 in compensatory damages.
In the Second Agreement, EEC and Koss agreed to pay Bell $580. Id. at Ex. 21 at ¶ 1. Therefore, Bell should be awarded $580 in compensatory damages for breach by Defendants of the Second Agreement.
In the Fifth Agreement, EEC and Koss agreed to pay Bell $1,580. Id. at Ex. 24 at ¶ 1. Bell also exercised his right to procure a second car and was thus entitled to receive the $1,580 fee as it related to the second car. Id. at ¶ 198. Bell should therefore be awarded $3,160 in compensatory damages for Defendants' breach of the Fifth Agreement.
In the Seventh Agreement, EEC and Koss agreed to pay Bell $4,580. Id. at Ex. 26 at ¶ 1. Bell also exercised his right to procure a second car and was thus entitled to receive the $4,580 fee for the second car. Id. at ¶ 226. Bell should therefore be awarded $9,160 in compensatory damages for Defendants' breach of the Seventh Agreement.
Lastly, for the Eighth Agreement, EEC and Koss agreed to pay Bell $20,580. Id. at Ex. 27 at ¶ 1. Bell should therefore be awarded $20,580 in compensatory damages for Defendants' breach of the Eighth Agreement.
In total, I recommend awarding Bell $42,640 in compensatory damages for the First, Second, Fifth, Seventh, and Eighth Agreements.
2. Consequential Damages
Bell also seeks consequential damages in Count Two for breach of the First Agreement, Count Three for breach of the Second Agreement, Count Seven for breach of the Fifth Agreement, Count Ten for breach of the Seventh Agreement, and Count Eleven for breach of the Eighth Agreement. See Compl, at 44-46; Aff. in Support of Monetary Damages at ¶¶ 16, 19, 25, 30, 33. He seeks $18,520 in consequential damages under Counts Two, Three, and Eleven, respectively, and $4,320 in consequential damages under Count Ten. Compl. at 45-46. The consequential damages Bell seeks for all stem from Bell's exercise of his right to procure a second car under the relevant agreements. See Id. at 44-46.
“Under New York law, two types of damages may be pled in contract cases: (1) general damages and (2) consequential damages.” PNC Bank, Nat. Ass'n v. Wolsters Kluwer Fin. Servs., Inc., 73 F.Supp.3d 358, 370 (S.D.N.Y. 2014). Consequential damages “seek to compensate a plaintiff for additional losses (other than the value of the promised performance) that are incurred as a result of the defendant's breach.” Schonfeld v. Hilliard, 218 F.3d 164, 176 (2d Cir. 2000). To obtain consequential damages, “a plaintiff must demonstrate that the parties contemplated those special damages as the probable result of the breach at the time of or prior to contracting.” Aristocrat Leisure Ltd. v. Deutsche Bank Tr. Co. Ams., 618 F.Supp.2d 280, 292 (S.D.N.Y. 2009) (citing Kenford Co. v. County of Erie, 73 N.Y.2d 312, 319 (1989)). “The Court looks to ‘the reasonable contemplation of the parties, the nature, purpose and particular circumstances of the contract known by the parties . . . as well as what liability the defendant fairly may be supposed to have assumed consciously, or to have warranted the plaintiff reasonably to suppose that it assumed, when the contract was made.'” Id. at 302-03 (citing Kenford, 73 N.Y.2d at 319).
General damages are a type of compensatory damages. See Nwachukwu v. Chemical Bank, 96-CV-5118 (KMW), 1997 WL 441941, at *2 (S.D.N.Y. Aug. 6, 1997).
There is some dispute among courts as to whether consequential damages are available under New York law for a breach-of-contract claim. Compare Hales v. HSBC Bank USA, N.A., 07-CV-0514 (BSJ)(AJP), 2008 WL 11435681, at *5 (S.D.N.Y. June 10, 2008) (“New York common law does not allow recovery of consequential or incidental damages for a breach of a contractual obligation to make payment”); with Bi-Economy Mkt., Inc. v. Harleysville Ins. Co. of N.Y., 10 N.Y.3d 187, 192 (2008) (“Special, or consequential damages, which do not so directly flow from the breach, are also recoverable in limited circumstances”) (internal quotation marks omitted). However, the Court need not resolve that dispute here because Bell has not adequately shown his entitlement to such damages in any case.
Bell points to “defendants' failure, or refusal to perform their contractual obligation” to tender payment for the second car as his basis for an entitlement to consequential damages. See Aff. in Support of Monetary Damages at ¶¶ 16, 19, 25, 30, 33. The complaint states that “but for” Defendants' failure to abide by the terms of the contract as it related to the second car, Bell would have completed a transaction for a second automobile pursuant to the agreements. See Compl. ¶¶ 155, 163, 200, 210, 228. The amount in consequential damages Bell seeks, however, does not match the amount of the fees he was owed under the relevant contracts for procuring a second car. See Compl, at 44-46, Exs. 20 at ¶ 1, Ex. 21 at ¶ 1, Ex. 24 at ¶ 1, Ex. 26 at ¶ 1, Ex. 27 at ¶ 1. And, Bell does not include any other evidence to substantiate his request for the amount of consequential damages sought from Defendants.
Consequently, I do not recommend awarding Bell any amount of consequential damages.
3. Incidental Damages
Bell also seeks incidental damages in Count Two for breach of the First Agreement, Count Three for breach of the Second Agreement, Count Seven for breach of the Fifth Agreement, Count Ten for breach of the Seventh Agreement, and Count Eleven for breach of the Eighth Agreement. See Compl, at 44-46; see also Aff. in Support of Monetary Damages at ¶¶ 1516, 18-19, 24-25, 29-30, 32-33. He seeks $575 in incidental damages for each count. Compl. at 44-46.
Bell has not provided any support to substantiate the $575 in incidental damages sought. It is Bell's burden to establish the amount of damages requested to a reasonable degree of certainty and Bell has failed to do that here. Stokes v. MilkChocolateNYC LLC, 22-CV-6786 (PAE) (RWL), 2023 WL 4447073 at *4 (S.D.N.Y. July 11, 2023) (“Once liability is determined, the plaintiff bears the burden of establishing an amount of damages with reasonable certainty.”). Bell has not submitted receipts or other documents to support the $575 requested in incidental damages. See Sack v. Lawton, No. 01-CV-285 (SHS), 2003 WL 22682043, at *5 (S.D.N.Y. Aug. 28, 2003) (denying award of incidental damages where plaintiffs had not submitted “documentation describing the types of charges or out-of-pocket expenses to which they were subject as a result of the breach”).
To the extent Bell is also attempting to recover incidental damages under the Uniform Commercial Code (“UCC”), see, e.g., Compl. at 44-46, Bell should not be awarded such damages for the same reason: he has not submitted any evidence regarding the existence and extent of any incidental damages. “A seller, on the buyer's breach, is entitled to incidental damages, including ‘any commercially reasonable charges, expenses or commissions incurred in stopping delivery, in the transportation, care and custody of goods after the buyer's breach, in connection with return or resale of the goods or otherwise resulting from the breach.'” S&S Textiles Int'l v. Steve Weave, Inc., 00-CV-8391 (DLC), 2002 WL 1837999, at *9 (S.D.N.Y. Aug. 12, 2002) (quoting N.Y. U.C.C. § 2-710) (italics in original omitted). As is clear from the complaint, Bell never obtained possession of the various cars. See Compl. ¶¶ 154, 163, 200, 228, 237. He thus would not have incurred any expenses related to transportation or storage of the cars. Moreover, Bell has not submitted any documentary evidence showing that he incurred any commercially reasonable expenses because of the breach by Defendants. As such, I do not recommend any award of incidental damages.
4. Liquidated Damages
Bell seeks liquidated damages for breach of the First, Third, Fourth, Fifth, Sixth, and Seventh Agreements. See Aff. in Support of Monetary Damages ¶¶ 14, 21-23, 27-28. Each of those agreements contains a liquidated damages clause. See Compl. at Ex. 20 at ¶ 9, Ex. 22 at ¶ 9, Ex. 23 at ¶ 9, Ex. 24 at ¶ 9, Ex. 25 at ¶ 9, Ex. 26 at ¶ 9. For the Third, Fourth, and Sixth Agreements, liquidated damages are the only damages requested by Bell; He does not ask for compensatory damages for breach of those agreements.
It is well established that “[p]arties to a contract have the right to agree to [liquidated damages] clauses, provided that the clause is neither unconscionable nor contrary to public policy.” Truck Rent-A-Center, Inc. v. Puritan Farms 2nd, Inc., 41 N.Y.2d 420, 424 (1977). Under New York law, a liquidated damages clause “is contrary to public policy when its purpose is not to compensate the injured party for the breach, but rather to impose a penalty on the breaching party by requiring payment of a sum of money grossly disproportionate to the amount of actual damages.” Bristol Inv. Fund, Inc. v. Carnegie Int'l. Corp., 310 F.Supp.2d 556, 566 (S.D.N.Y. 2003) (citations and internal quotation marks omitted). “Liquidated damages are not penalties if they bear a reasonable proportion to the probable loss and the amount of actual loss is incapable or difficult of precise estimation.” World Gold Trust Servs., LLC v. GoldCoin Devs. Group LP, No. 20-CV-4667 (JGK), 2021 WL 4134681, at *3 (S.D.N.Y. Sept. 10, 2021); see also Wechsler v. Hunt Health Sys., Ltd., 330 F.Supp.2d 383, 413 (S.D.N.Y. 2004). “[A]ny doubt with respect to whether the relevant provision is an unenforceable penalty or a permissible liquidated damages clause should be resolved in favor of a construction which holds that the provision is a penalty.” Bristol Inv. Fund, Inc., 310 F.Supp.2d at 566.
The First Agreement has a liquidated damages amount of $95,580. See Compl. Ex. 20 at ¶ 9. Had Defendants not breached Bell stood to earn only $4,580. Id. ¶ 1. It is plain that the liquidated damages amount in the contract is grossly disproportionate to amount of Bell's loss from the breach. See Bell v. Ebadat, 08-CV-8965 (RJS), 2009 WL 1803835, at *3-5 (S.D.N.Y. June 16, 2009) (finding that a liquidated damages clause of $88,380 was grossly disproportionate to plaintiff's $316 in losses resulting from the breach). Indeed, the amount of liquidated damages is more than 20 times greater than the amount Bell would have earned under the agreement had Defendants not breached. Simply put, the large amount of liquidated damages in the First Agreement was not intended to compensate Bell for Defendants' breach.
Bell also seeks liquidated damages for breaches of the Third, Fourth, Fifth, Sixth, and Seventh Agreements. Under the Third Agreement, Bell would have earned $1,580 if Defendants had not breached the contract. See Compl. Ex. 22 at ¶ 1. The liquidated damages clause in the Third Agreement provides for a liquidated damages amount of $35,580. See Compl. Ex. 22 at ¶ 9. That amount, too, is grossly disproportionate to the $1,580 Bell stood to earn. The liquidated damages clause is therefore an unenforceable penalty.
Under the Fourth Agreement, Bell would have earned $4,580 had Defendants not breached, and the liquidated damages clause would award him with $35,580. See Compl. Ex. 23 at ¶¶ 1, 9. Similarly, under the Fifth Agreement, Bell would have earned $1,580 had Defendants not breached, and the liquidated damages clause would award him with $75,580. See Compl. Ex. 24 at ¶¶ 1, 9. Under the Sixth and Seventh Agreements, Bell would have earned $4,580 under each contract had Defendants performed, and the liquidated damages clause in each contract would award him $75,580. See Compl. Ex. 25 at ¶¶ 1, 9, Ex. 26 at ¶¶ 1, 9. All of these liquidated damages clauses impose an unenforceable penalty because the amounts that would be awarded are grossly disproportionate to the amounts Bell stood to earn from full performance by Defendants under each agreement.
Each of the eight contracts contain a clause stating that the liquidated damages clause is not a penalty. Specifically, the agreements all state that EEC and Koss “further agrees, warrants, and affirms that the aforementioned liquidated damages payment to [Bell] does not represent a penalty.” Compl., Exs. 20-27 at ¶ 9. Although the parties expressly indicated that the liquidated damages clause in each agreement was not a penalty, the grossly disproportionate nature of the liquidated damages amount when compared to Bell's actual damages “provides sufficient evidence that the purpose of the [liquidated damages clauses] was not to provide a reasonable estimate for compensation” of Bells' damages, but rather, was intended to penalize for a breach of the agreements. See N. Shipping Funds I, LLC v. Icon Cap. Corp., 998 F.Supp.2d 301, 336 (S.D.N.Y. 2014) (disregarding clause indicating that liquidated damages were not a penalty where amount of liquidated damages were not a “reasonable estimate for compensation” of nonbreaching party's damages); cf. Truck Rent-A-Center, Inc., 41 N.Y.2d 420, 425 (1977) (“In interpreting a provision fixing damages, it is not material whether the parties themselves have chosen to call the provision one for ‘liquidated damages,' as in this case, or have styled it as a penalty.”).
In sum, I recommend that Bell's request for liquidated damages for breaches of the First, Third, Fourth, Fifth, Sixth, and Seventh Agreements be denied.
Bell, however, has alleged his adequate performance and breach by Defendants of the Third, Fourth, and Sixth Agreements, see supra Section A at pp. 12-13, for which he sought only liquidated damages. Because Bell has alleged breaches of those agreements, he is entitled to compensatory damages. I thus recommend that Bell be awarded compensatory damages in the amount of $1,580 for breach of the Third Agreement, $4,580 for breach of the Fourth Agreement, and $4,580 for breach of the Sixth Agreement. Those amounts are the sums of money Defendants agreed to pay Bell for his performance under each of the respective agreements. See Compl. at p. 67, 74, 97, Ex. 22 at ¶ 1, Ex. 23 at ¶ 1, Ex. 25 at ¶ 1.
5. Pre-Judgment Interest
Bell also requests, and is entitled to, an award of prejudgment interest. Under New York law, “a plaintiff who prevails on a claim for breach of contract is entitled to prejudgment interest as a matter of right.” United States Naval Inst. v. Charter Comm'ns, Inc., 936 F.2d 692, 698 (2d Cir. 1991). Prejudgment interest in a breach-of-contract action is calculated “on a simple interest basis at the statutory rate of nine percent,” under New York C.P.L.R. § 5004. See Marfia v. T.C. Ziraat Bankasi, 147 F.3d 83, 90 (2d Cir. 1998).
Bell asserts that interest should be calculated starting from “September 18, 2013.” Compl. at 44. However, the damages incurred by Bell arose from breach of eight separate agreements over the span of over two years. In such circumstances, prejudgment interest is appropriately calculated by choosing “the midway point between the first and last dates” for the respective agreements. See G-Concept Ltd. v. A.H. Schreiber Co., No. 14-CV-6581 (JGK), 2015 WL 3767263, at *3 (S.D.N.Y. June 17, 2015) (calculating prejudgment interest in breach-of-contract action involving nonpayment of multiple invoices using the date of the first and last invoice). Bell, EEC, and Koss entered into the first agreement on May 30, 2013, and the last agreement on December 14, 2015. Compl. at Exs. 20, 27. The midway point between those two dates is September 6, 2014. Therefore, prejudgment interest should be calculated from September 6, 2014, until the date judgment is entered.
CONCLUSION
For all of the foregoing reasons, I recommend that default judgment in favor of Plaintiff Renzer Bell be entered against Defendants Exotic Euro Cars and Andrew Michael Koss with respect to each of Plaintiff's causes of action in the complaint. I further recommend that Plaintiff be awarded $53,380 in compensatory damages broken down as follows: $9,160 for breach of the First Agreement; $580 for breach of the Second Agreement; $1,580 for breach of the Third Agreement; $4,580 for breach of the Fourth Agreement; $3,160 for breach of the Fifth Agreement; $4,580 for breach of the Sixth Agreement; $9,160 for breach of the Seventh Agreement; and $20,580 for breach of the Eighth Agreement. Additionally, prejudgment interest at the statutory rate of 9% should be calculated from September 6, 2014, to the date of entry of judgment in this case. Plaintiff is directed to serve a copy of this Report and Recommendation on Defendants and file an affidavit of service on the docket by November 20, 2023.
SO ORDERED.
PROCEDURE FOR FILING OBJECTIONS TO THIS REPORT AND RECOMMENDATION
Pursuant to 28 U.S.C. § 636(b)(1) and Rule 72(b) of the Federal Rules of Civil Procedure, the parties have fourteen (14) days (including weekends and holidays) from service of this Report and Recommendation to file any objections. See also Fed.R.Civ.P. 6(a), 6(b), 6(d). A party may respond to any objections within 14 days after being served. Any objections and responses shall be filed with the Clerk of the Court. Any request for an extension of time to file objections or responses must be directed to the Honorable Analisa Torres. If a party fails to file timely objections, that party will not be permitted to raise any objections to this Report and Recommendation on appeal. See 28 U.S.C. § 636(b)(1); Fed.R.Civ.P. 72; Fed.R.Civ.P. 6(a), 6(b), 6(d); Thomas v. Arn, 474 U.S. 140 (1985); Wagner & Wagner, LLP v. Atkinson, Haskins, Nellis, Brittingham, Gladd & Carwile, P.C., 596 F.3d 84, 92 (2d Cir. 2010).