Opinion
1:19-cv-01371 (AT) (SDA)
08-15-2019
De Lage Landen Financial Services, Inc., Plaintiff, v. Universal Wilde, Inc., Defendant.
REPORT AND RECOMMENDATION STEWART D. AARON, UNITED STATES MAGISTRATE JUDGE.
TO THE HONORABLE ANALISA TORRES, UNITED STATES DISTRICT JUDGE:
By Order dated June 20, 2019, the Court granted Plaintiff's motion for a default judgment (ECF No. 31), and referred this case to me for an inquest on damages. (ECF No. 32.) For the reasons set forth below, I recommend that the Court enter judgment against Defendants in the damages amounts set forth below, along with pre-judgment interest calculated as specified.
BACKGROUND
A. Established Facts as a Result of Defendants' Default
The facts set forth below are drawn from Plaintiff's Complaint. In light of Defendants' default, the Court accepts Plaintiff's allegations as true, except for those pertaining to damages. See, e.g., Finkel v. Romanowicz, 577 F.3d 79, 84 (2d Cir. 2009).
Plaintiff De Lage Landen Financial Services, Inc. ("Plaintiff") is a Michigan corporation that conducts business in the Commonwealth of Pennsylvania and has a principal place of business at 1111 Old Eagle School Road, Wayne, Pennsylvania 19087. (Compl., ECF No. 1, ¶ 1.) Defendant Universal Wilde, Inc. ("Defendant") is a Massachusetts corporation with a principal place of business at 26 Dartmouth Street, Suite 1, Westwood, Massachusetts 02090. (Id. ¶ 2.)
This case concerns the breach of lease agreements, as described below.
1. Agreement 25355582
On July 13, 2015, Defendant entered into Lease Agreement No. 25355582 ("Agreement 25355582") with Cisco Systems Capital Corporation ("Cisco") for the lease of certain computer equipment, software and accessories. (Compl. ¶ 5; Agreement 253555832, Ex. A to Compl., ECF No. 1-1.) Agreement 25355582 provides that Cisco may sell, assign or transfer Agreement 25355582 without notice to Defendant. (See Agreement 25355582, ¶ 4.) On August 26, 2015, Cisco assigned Agreement 25355582 to Plaintiff. (Compl. ¶ 7; Confirmation of Assignment, Ex. B to Compl., ECF No. 1-2.) Under the terms of Agreement 25355582, Defendant agreed to make thirty-six (36) monthly payments of $962.78, plus applicable taxes to Plaintiff. (Agreement 25355582, p. 1.) Defendant also agreed to pay a late charge of five percent (5%) of any payment that was not paid when due. (Id. ¶ 1.)
Defendant agreed to pay Plaintiff a fee of $99.95 to reimburse Plaintiff for its expenses for preparing financing statements, along with all other documentation costs, and all ongoing administration costs. (Agreement 25355582, ¶ 1.) Defendant is in default under Agreement 25355582 if, among other things, it fails to make any payment when due and/or if it breaches any other obligation under Agreement 25355582 or any other agreement it holds with Plaintiff. (Id. ¶ 8.) In the event of default, Plaintiff has the right to accelerate the balance due, repossess and sell the equipment and apply the proceeds of the sale to the balance. (Id.) Additionally, in the event of default, Plaintiff may recover from Defendant 18% interest per annum on any unpaid balance, as well as its costs of collection and enforcement of Agreement 25355582, including Plaintiff's reasonable attorneys' fees. (Id.)
On August 24, 2015, Defendant signed a Delivery and Acceptance Certification certifying that Defendant had received and accepted the equipment leased under Agreement 25355582. (See Agreement 25355582, p. 3.) On May 2, 2016, Defendant entered into a Coterminous Equipment Addendum (the "Addendum") under Agreement No. 25355582 with Cisco for the lease of additional computer equipment, software and accessories. (Id., p. 4.) The Addendum incorporates the terms and conditions of Agreement 25355582, including, but not limited to, Cisco's right to sell, assign, and transfer the Addendum without notice to Defendant. (See Addendum ¶ 8; Agreement 25355582 ¶ 4.) Pursuant to the Addendum, Plaintiff agreed to make additional twenty-eight (28) monthly payments of $474.48 to Plaintiff. (Agreement 25355582, p. 5.) On May 2, 2016, Defendant signed a Delivery and Acceptance Certification certifying that Defendant had received and accepted the equipment leased under the Addendum. (Id., p. 6.)
Defendant has failed to make the monthly payments due under Agreement 25355582 and the Addendum since April 2018. (Compl. ¶ 19.)
2. Agreement 25402066
On June 2, 2016, Defendant entered into Lease Agreement No. 25402066 ("Agreement 25402066") with Cisco for the lease of computer equipment and software. (Compl. ¶ 20; Agreement 25402066, Ex. C to Compl., ECF No. 1-3.) Agreement 25402066 provides that Cisco may sell, assign or transfer Agreement 25402066 without notice to Defendant. (See Agreement 25402066, ¶ 4.) On July 26, 2016, Cisco assigned Agreement 25402066 to Plaintiff. (Compl. ¶ 22; Confirmation of Assignment, Exhibit D to Compl., ECF No. 1-4.) Under the terms of Agreement 25402066, Defendant agreed to make sixty (60) monthly payments of $4,850.98 to Plaintiff. (Agreement 25402066, p. 1.) Defendant also agreed to pay a late charge of five percent (5%) of any payment that was not paid when due. (Id., ¶ 1.) On July 27, 2016, Defendant signed an Addendum to Agreement 25402066, pursuant to which the monthly base payment, plus sales tax, was $1039.29. (See Ex. 2 to Vendetta Decl., ECF No. 36-2, at 3-4; see also Langer Ltr., ECF No. 39.)
Defendant agreed to pay Plaintiff a fee of $99.95 to reimburse Plaintiff for its expenses for preparing financing statements, along with all other documentation costs, and all ongoing administration costs. (Agreement 25402066 ¶ 1.) Defendant is in default under Agreement 25402066 if, among other things, it fails to make any payment when due, and/or if it breaches any other obligation under Agreement 25402066 or any other agreement it holds with Plaintiff. [Id. ¶ 8.) In the event of default, Plaintiff has the right to accelerate the balance due, repossess and sell the equipment and apply the proceeds of the sale to the balance. (Id.) Additionally, in the event of default, Plaintiff may recover from Defendant 18% interest per annum on any unpaid balance, as well as its reasonable collection and legal costs. (Id.) On July 7, 2016, Defendant signed a Delivery and Acceptance Certification, certifying that Defendant had received and accepted the equipment leased under Agreement 25402066. (Agreement 25402066, p. 5.)
Defendant has failed to make the monthly payments due under Agreement 25402066 since March 2018. (Compl. ¶ 30.)
3. Agreement 25416589
On October 31, 2016, Defendant, entered into Agreement No. 25416589 ("Agreement 25416589") with Cisco for the lease of certain computer equipment and software. (Compl. ¶ 31; Agreement 25416589, Ex. E to Compl., ECF No. 1-5.) Agreement 25416589 provides that Cisco may sell, assign or transfer Agreement 25416589 without notice to Defendant. (See Agreement 25416589 ¶ 4.) On November 1, 2016, Cisco assigned Agreement 25416589 to Plaintiff. (Compl. ¶ 22; Confirmation of Assignment, Exhibit F to Compl., ECF No. 1-6.)
Under the terms of Agreement 25416589, Defendant agreed to make sixty (60) monthly payments of $4,366.55, plus applicable taxes, to Plaintiff. (Agreement 25416589, p. 1.) Defendant also agreed to pay a late charge of five percent (5%) of any payment that was not paid when due. (Id. ¶ 1.) Defendant agreed to pay Plaintiff a fee of $99.95 to reimburse Plaintiff for its expenses for preparing financing statements, along with all other documentation costs, and all ongoing administration costs. (Id.) Defendant is in default under Agreement 25416589 if, among other things, it fails to pay any payment when due, and/or if it breaches any other obligation under Agreement 25416589 or any other agreement it holds with Plaintiff. (Id. ¶ 8.) In the event of default, Plaintiff has the right to accelerate the balance due, repossess and sell the equipment and apply the proceeds of the sale to the balance. (Id.) Additionally, in the event of default, Plaintiff may recover from Defendant 18% interest per annum on any unpaid balance, as well as its reasonable collection and legal costs. (Id.) On October 31, 2016, Defendant signed a Delivery and Acceptance Certification certifying that Defendant had received and accepted the equipment leased under Agreement 25416589. (Agreement 25416589, p. 1.)
Defendant has failed to make the monthly payments due under Agreement 25416589 since March 2018. (Compl. ¶ 41.) B. Procedural History
Plaintiff filed its Complaint on February 13, 2019 seeking damages for breach of the aforementioned contracts. (See Compl. ¶¶ 42-56.) After having been served with a copy of the Complaint (ECF No. 8), the Defendant failed to answer. On April 11, 2019, the Clerk of Court entered a Certificate of Default against Defendant. (ECF No. 16.) On May 9, 2019, the Court ordered Defendant to show cause as to why a default judgment should not be entered. (ECF No. 21.) The Order to Show Cause hearing was held on June 20, 2019, but Defendant failed to appear. (See ECF No. 30.) By Order dated June 20, 2019, the Court entered a default against Defendant and referred this case to me for an inquest on damages. (Id.)
Following a telephone conference, by Order dated June 26, 2019, I directed Defendant to file inquest submissions, including a sworn affidavit or declaration in support of its damages and case law in support of its request for late charges and 18% interest. (6/26/19 Order, ECF No. 34.) Plaintiff timely made its required submissions. (See ECF Nos. 35-37.).) Defendant has not responded.
DISCUSSION
I. Legal Standards
"Even when a default judgment is warranted based on a party's failure to defend, the allegations in the complaint with respect to the amount of the damages are not deemed true. The district court must instead conduct an inquiry in order to ascertain the amount of damages with reasonable certainty." Am. Jewish Comm. v. Berman, No. 15-CV-05983 (LAK) (JLC), 2016 WL 3365313, at *3 (S.D.N.Y. June 15, 2016) (quoting Credit Lyonnais Sec. (USA), Inc. v. Alcantara, 183 F.3d 151, 155 (2d Cir. 1999)), adopted by, 2016 WL 4532201 (S.D.N.Y. Aug. 29, 2016). A plaintiff "bears the burden of establishing its entitlement to recovery and thus must substantiate its claim with evidence to prove the extent of its damages." Id. at *3 (alterations and citation omitted).
Although the Court may hold a hearing to assess damages, a hearing is not required where, as here, a sufficient basis on which to make a calculation exists. See Fed. R. Civ. P. 55(b)(2); see also Bricklayers & Allied Craftworkers Local 2, Albany, N.Y. Pension Fund v. Moulton Masonry & Const., LLC, 779 F.3d 182, 189 (2d Cir. 2015) (quoting Action S.A. v. Marc Rich & Co., 951 F.2d 504, 508 (2d Cir. 1991)). Here, I rely on Plaintiff's sworn declarations to determine whether the requested damages are appropriate.
"Under New York law, a successful plaintiff in a breach of contract action is entitled to damages in the 'amount necessary to put the plaintiff in the same economic position he would have been in had the defendant fulfilled his contract.'" Am. Jewish Comm., 2016 WL 3365313, at *5 (quoting Scholastic, Inc. v. Snap TV, Inc., No. 09-CV-04349 (GBD) (GWG), 2011 WL 1330246, at *3 (S.D.N.Y. Apr. 8, 2011)). In breach of contract actions "the nonbreaching party may recover general damages which are the natural and probable consequence of the breach." Bi-Economy Market, Inc. v. Harleysville Ins. Co. of New York, 10 N.Y.3d 187 (2008).
New York law is properly applied here since New York law governs the agreements. (See Exs. A, C & E to Compl. ¶ 9.)
Among other damages, Plaintiff seeks late fees and interest at 18% under each of the breached agreements. These forms of damages have been awarded by courts in this Circuit upon a default judgment being entered against a defendant. See, e.g., Amusement Industry, Inc. v. Stern, No. 07-CV-11586 (LAK), 2017 WL 57851, at *1 (S.D.N.Y. 2017) (awarding $3,205.48 per day in interest on default judgment); Bank of America, N.A. v. Brooklyn Carpet Exchange, Inc., No. 15-CV-05981 (LGS) (DF), 2016 WL 8674686, at *6 (S.D.N.Y. 2016) (awarding damages representing unpaid interest "until the date that a final judgment awarding damages is entered in this action."); Medical Economics Co., Inc. v. Healthexchange, Inc., No. 01-CV-11262 (KMW) (AJP), 2003 WL 22346391, at *2 (S.D.N.Y. 2003) (awarding $190,500 in late fees upon default judgment); Investment Fund 2 LLC v. Anthony for Estate of Hubbard-Watson, No. 17-CV-01220 (DRH) (SIL), 2018 WL 4017584, at *1 (E.D.N.Y. 2018) (awarding interest and late fees to plaintiff in default judgment proceeding); Trustees of Local 813 Ins. Trust Fund v. Freedom Demolition Inc., No. 13-CV-02701 (NGG) (SMG), 2014 WL 5305983, at *8 (E.D.N.Y. 2014) (granting damages upon default judgment including interest at 18%); Ferrara v. Cab II Enterprises, Inc., No. 09-CV-01311 (SLT) (SMG), 2011 WL 1253741, at *2 (E.D.N.Y. 2011) (same).
The 18% interest imposed under the subject agreements is below the 25% limit set in the New York criminal usury statute. See N.Y. Penal Law § 190.40. The New York civil usury rate of 16% does not apply to corporations. See N.Y. Gen. Oblig. Law § 5-521(3); Hillair Capital Investments, L.P. v. Integrated Freight Corp., 963 F. Supp. 2d 336, 339 (S.D.N.Y. 2013).
II. Application
The Court has reviewed the calculations contained in the Declaration submitted by Plaintiff in order to determine the amount necessary to put Plaintiff in the same economic position it would have been in had the Defendant fulfilled its contracts. (See Vendetta Decl., ECF No. 36.) The amounts due under each of the lease agreements is as follows:
A. Agreement 25355582
The principal amount due under Agreement 25355582 is $9,097.28. (See Vendetta Decl. ¶ 12, line 19.) In addition, prejudgment interest is due at the rate of 18% per annum from the September 13, 2018 date of default until the date that judgment is entered. (Id., line 21.)
B. Addendum to Agreement 25355582
The principal amount due under the Addendum to Agreement 25355582 is $3,461.01. (See Vendetta Decl. ¶ 13, line 19.) In addition, prejudgment interest is due at the rate of 18% per annum from the September 13, 2018 date of default until the date that judgment is entered. (Id., line 21.)
C. Agreement 25402066
The principal amount due under Agreement 25402066 is $43,761.93. (See Vendetta Decl. ¶ 14, line 19.) In addition, prejudgment interest is due at the rate of 18% per annum from the February 2, 2019 date of default until the date that judgment is entered. (Id., line 21.)
D. Agreement 25416589
The principal amount due under Agreement 25416589 is $212,760.18. (See Vendetta Decl. ¶ 15, line 19.) In addition, prejudgment interest is due at the rate of 18% per annum from the August 30, 2018 date of default until the date that judgment is entered. (Id., line 21.)
CONCLUSION
For the foregoing reasons, I recommend that the Court enter judgment against Defendants as follows:
1. Damages under Agreement 25355582 in the amount of $9,097.28, plus prejudgment interest at the rate of 18% per annum from September 13, 2018 to the date that judgment is entered;
2. Damages under the Addendum to Agreement 25355582 in the amount of $3,461.01, plus prejudgment interest at the rate of 18% per annum from September 13, 2018 to the date that judgment is entered;
3. Damages under Agreement 25402066 in the amount of $43,761.93, plus prejudgment interest at the rate of 18% per annum from February 2, 2019 to the date that judgment is entered; and
4. Damages under Agreement 25416589 in the amount of $212,760.18, plus prejudgment interest at the rate of 18% per annum from August 30, 2018 to the date that judgment is entered.DATED: New York, New York
August 15, 2019
/s/ _________
STEWART D. AARON
United States Magistrate Judge
* * *
NOTICE OF PROCEDURE FOR FILING OBJECTIONS TO THIS REPORT AND RECOMMENDATION
The parties shall have fourteen (14) days (including weekends and holidays) from service of this Report and Recommendation to file written objections pursuant to 28 U.S.C. § 636(b)(1) and Rule 72(b) of the Federal Rules of Civil Procedure. See also Fed. R. Civ. P. 6(a), (d) (adding three additional days when service is made under Fed. R. Civ. P. 5(b)(2)(C), (D) or (F)). A party may respond to another party's objections within fourteen days after being served with a copy. Fed. R. Civ. P. 72(b)(2). Such objections, and any response to objections, shall be filed with the Clerk of the Court. See 28 U.S.C. § 636(b)(1); Fed. R. Civ. P. 6(a), 6(d), 72(b). Any requests for an extension of time for filing objections must be addressed to Judge Torres.
THE FAILURE TO OBJECT WITHIN FOURTEEN (14) DAYS WILL RESULT IN A WAIVER OF OBJECTIONS AND WILL PRECLUDE APPELLATE REVIEW. See 28 U.S.C. § 636(b)(1); Fed. R. Civ. P. 6(a), 6(d), 72(b); Thomas v. Arn, 474 U.S. 140 (1985).
Chambers shall mail copies of this Report and Recommendation to the Defendant at the address set forth in ECF No. 37.