Opinion
20-CV-03504 (JPC)(SN)
01-09-2023
GLOBAL EXPORT MARKETING CO. LTD., Plaintiff, v. ABDELRAHMAN A. ABBAR TRADING CO., Defendant.
HONORABLE JOHN P. CRONAN
REPORT AND RECCOMENDATION
SARAH NETBURN UNITED STATES MAGISTRATE JUDGE
Plaintiff, Global Export Marketing Co. LTD, sued Abdelrahman A. Abbar Trading Co. after it allegedly failed to pay a balance owed to Plaintiff under contract. To date, Defendant has not appeared in this action, and Plaintiff has moved for default judgment. The Honorable Alison J. Nathan, then presiding, referred the matter to me for a Report and Recommendation. I find that Defendant is liable for breach of contract and recommend that Plaintiff's motion be GRANTED and Plaintiff be awarded judgment equivalent to 2,234,449.51 Saudi riyal (“SAR”).
“In [a] diversity action, New York law determines the applicable currency-conversion rate.” Rienzi & Sons, Inc. v. Puglisi, 638 Fed.Appx. 87, 92 (2d Cir. 2016). “[A] court shall render or enter a judgment or decree in the foreign currency of the underlying obligation [which] shall be converted into currency of the United States at the rate of exchange prevailing on the date of entry of the judgment or decree.” N.Y. Judiciary Law §27(b).
BACKGROUND
The following facts are derived from Plaintiff's Complaint. Plaintiff is a New York corporation and distributor of grocery products and associated goods. Defendant is a Saudi Arabian corporation that imports and distributes goods therein. On May 7, 2015, the parties entered into an agreement (the “Contract”) under which Defendant was entitled to import and distribute certain goods supplied by Plaintiff in accordance with a pricing schedule. On May 9, 2017, the Contract's term ended, but Defendant had not paid the full balance owed under it. On June 12, 2017, the parties entered into a subsequent agreement (the “Balance Agreement”) in acknowledgment of the balance owed Plaintiff and allowing Defendant to pay that balance in 48 monthly installments concluding in August 2021.
Defendant timely furnished the first two payments in October and November 2017, but made no payments thereafter. The parties remained in communication until at least June 2019, but to date no additional payments have been made. Plaintiff commenced this action on May 5, 2020, alleging that Defendant breached the Contract between the parties by failing to pay Plaintiff the balance owed.
In a series of letters to the Court beginning on August 24, 2020, Plaintiff documented its efforts to serve Defendant within the Kingdom of Saudi Arabia (“KSA”). See ECF Nos. 13, 15, 17, 19, 21, 23, 26, 28, 30, 33, 35. On October 14, 2021, Plaintiff wrote to the Court reporting that it had, via local counsel in KSA, effected service on Defendant. See ECF No. 37. On February 28, 2022, Plaintiff filed an affidavit of service, see ECF No. 42, and on March 1, 2022, the Clerk of Court issued a certificate of default. On March 21, 2022, Plaintiff filed its motion for default judgment.
DISCUSSION
I. Legal Standard for Default Judgment
Obtaining a default judgment is a two-step process. The first step is entry of default, constituting “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). The second step, entry of default judgment, “converts the defendant's admission of liability into a final judgment . . . and awards the plaintiff any relief which the court decides it is entitled, to the extent permitted by Rule 54(c).” Id.
The Court may enter default judgment if a party fails to plead or otherwise defend against the action. See Fed.R.Civ.P. 55(b)(2); see, e.g., FTC v. 1263523 Ontario, Inc., 205 F.Supp.2d 205, 208 (S.D.N.Y. 2002). There is a strong preference, however, that disputes be resolved on the merits. See Enron Oil Corp. v. Diakuhara, 10 F.3d 90, 95 (2d Cir. 1993); see also Gill v. Stolow, 240 F.2d 669, 670 (2d Cir. 1957) (“[G]eneral principles cannot justify denial of a party's fair day in court except upon a serious showing of willful default.”). Therefore, to determine if entering default judgment is an appropriate exercise of its discretion, the Court may consider: (a) if the defaulting conduct was willful; (b) if the defaulting party has a meritorious defense to the plaintiff's claims; and (c) the degree of prejudice suffered by the plaintiff if the Court denied its motion. See Joseph v. HDMJ Restaurant, Inc., No. 09-cv-00240 (JS)(AKT), 2013 WL 4811225, at *4 (E.D.N.Y. Sept. 9, 2013) (citing Mason Tenders Dist. Council v. Duce Const. Corp., No. 02-cv-09044 (LTS)(GWG), 2003 WL 1960584, at *2 (S.D.N.Y. Apr. 25, 2003)). In reviewing a default judgment motion, the Court must accept a plaintiff's factual allegations and draw all reasonable inferences in its favor. See Finkel v. Romanowicz, 577 F.3d 79, 84 (2d Cir. 2009) (citation omitted).
II. Default Judgment Against Defendant Is Appropriate
A. The Willfulness of Defendant's Defaulting Conduct
A defendant's default is willful if the defendant was properly served yet failed to appear, answer, or otherwise respond to the complaint. See, e.g., Action S.A. v. Marc Rich & Co., Inc., 951 F.2d 504, 507-08 (2d Cir. 1991) (finding willfulness where the defendant failed to appear for fear of being indicted); see also S.E.C. v. Breed, No. 01-cv-7798 (CSH), 2004 WL 1824358, at *8-9 (S.D.N.Y. Aug. 13, 2004) (finding willfulness where the defendant was properly served but answered two weeks after the due date); Westmark Dev. Corp. v. Century Sur. Co., 199 F.R.D. 491, 496 (W.D.N.Y. 2011) (finding willfulness where the defendant neglected to respond to the third-party complaint, among other things).
Federal Rule of Civil Procedure 4(h) states that a foreign corporation not within any judicial district of the U.S. must be served “in any manner prescribed by rule 4(f).” Rule 4(f) allows for service “by any internationally agreed means . . . such as those authorized by the Hague Convention” or in the absence thereof “by a method that is reasonable calculated to give notice” including “as prescribed by the foreign country's law for service in that country in an action in its courts of general jurisdiction[.]” Fed.R.Civ.P. 4(f)(2)(A).
Saudi Arabia is not a party to the Hague Service Convention. Ehrenfeld v. Salim a Bin Mahfouz, No. 04-cv-9641 (RCC), 2005 WL 696769, at *2 (S.D.N.Y. Mar. 23, 2005) (“Plaintiff does not have the option of utilizing the service means authorized by the Hague Convention because Saudi Arabia is not a party to that treaty.”); see also Status Table: Convention of 15 November 1965 on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters, https://www.hcch.net/en/instruments/conventions/status-table/?cid=17 (last visited Dec. 23, 2022). Therefore, to be proper, service on Defendant must have been by a method reasonably calculated to give notice, including those prescribed by KSA's law. See Fed.R.Civ.P. 4(f)(2)(A).
“A process server's sworn statement of service creates a presumption that service has been effectuated.” De Curtis v. Ferrandina, 529 Fed.Appx. 85, 86 (2d Cir. 2013) (citing Old Republic Ins. Co. v. Pac. Fin. Servs. of Am., Inc., 301 F.3d 54, 57 (2d Cir.2002)).
Consistent with Rule 4(f)(2)(A), Plaintiff retained local counsel to facilitate proper service under KSA law. Local counsel provided a sworn affidavit that service was properly executed under KSA law. See ECF No. 42. Plaintiff is thus entitled to a presumption that service was effectuated and Defendant was properly served with the Complaint. Yet Defendant has still not appeared, answered, or otherwise responded. Accordingly, I find that its default was willful.
B. The Absence of Any Meritorious Defense to the Well-Pleaded Complaint
A meritorious defense need not be a defense that ultimately prevails-it simply must be legally sound and require a determination by the fact finder. See American Alliance Ins. Co., Ltd. v. Eagle Ins. Co., 92 F.3d 57, 61 (2d Cir. 1996). The party claiming such a defense must present “some evidence beyond conclusory denials.” See Berrocal v. Sheet Music Now, Inc., No. 19-cv-5123 (ALC), 2020 WL 4570339, at *3 (S.D.N.Y. Aug. 7, 2020) (quoting Enron Oil Corp. v. Diakuhara, 10 F.3d 90, 98 (2d. Cir. 1993). The Court is unable to evaluate any possible meritorious defense, however, if the defendant does not answer or otherwise respond to the complaint, weighing in favor of default judgment. See Joseph v. HDM Restaurant, Inc., 970 F.Supp.2d 131, 143 (E.D.N.Y. 2013). “Indeed, where a defendant has presented no defense to the court, the allegations in a plaintiff's complaint are deemed admitted.” Id.; see Fed.R.Civ.P. 8(b).
Plaintiff's Complaint alleges that Defendant made only two of the 48 payments it had agreed to under the Balance Agreement, acknowledged its delinquency in communications to Plaintiff, and has to date failed to make any further payments. See ECF No. 1 at 4-5. These allegations, taken as true, constitute breach of contract. Because Defendant failed to appear, answer, or otherwise defend against the allegations, I find that Defendant has not presented and does not have a meritorious defense.
C. Plaintiff Will Be Prejudiced Without a Default Judgment
Denying a default judgment can substantially prejudice a plaintiff if it has “no additional steps available to secure relief.” Bridge Oil Ltd. v. Emerald Reefer Lines, LLC, No. 06-cv-14226 (RLC)(RLE), 2008 WL 5560868, at *2 (S.D.N.Y. Oct. 27, 2008).
Here, Defendant failed to answer or otherwise appear for more than two years, requiring Plaintiff to expend time and resources to prosecute its case in Defendant's absence, including extensive efforts to properly effect service within KSA. Default judgment is the only remaining step for Plaintiff to secure relief. Thus, I find that failing to provide default judgment would substantially prejudice Plaintiff.
Accordingly, because I find that Defendant's default was willful, that it lacks a meritorious defense to Plaintiff's allegations, and that Plaintiff will be substantially prejudiced if default judgment is not granted, I find that default judgment is an appropriate exercise of the Court's discretion. As such, I recommend that the Court enter default judgment against Defendant.
III. Plaintiff's Proposed Relief
A. Standard for Determining Default Damages
Although default may be deemed “a concession of all well-pleaded allegations of liability, it is not considered an admission of damages.” See Cement & Concrete Workers Dist. Welfare Fund v. Metro Found. Contractors, Inc., 699 F.3d 230, 234 (2d Cir. 2012) (quoting Greyhound Exhibitgroup, Inc. v. E.L.U.L. Realty Corp., 973 F.2d 155, 158 (2d Cir. 1992)). Where the plaintiff's well-pleaded facts are sufficient to state a claim upon which relief can be granted, the only remaining issue is to determine whether the plaintiff has provided adequate support for its requested relief. See 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)).
Accordingly, “[a] plaintiff seeking to recover damages against a defaulting defendant must prove its claim though the submission of evidence . . . .” Malletier v. Carducci Leather Fashions, Inc., 648 F.Supp.2d. 501, 503 (S.D.N.Y. 2009). A court may determine the amount a plaintiff is entitled to recover, if any, without holding a hearing as long as the court determines the proper rule for calculating damages, and the plaintiff's evidence establishes the basis for the damages “with reasonable certainty.” Id. (citing Credit Lyonnais Sec. (USA), Inc., 183 F.3d at 155, and Transatlantic Marine Claims Agency, Inc. v. Ace Shipping Corp., Div. of Ace Young Inc., 109 F.3d 105, 111 (2d Cir. 1997)); Tyrrell-Miller, 678 F.Supp.2d at 121 (citing Langenberg v. Sofair, No. 03-cv-08339 (KMK)(FM), 2006 WL 3518197, at *1 (S.D.N.Y. Dec. 7, 2006)).
B. Plaintiff's Requested Relief Is Appropriate and Supported Through Documentary Evidence
Plaintiff seeks damages in an amount equivalent to 2,234,449.51 SAR. Plaintiff has provided evidence to establish the basis for its damages in the form of the Contract and the Balance Agreement. See ECF No. 52-3 at 5-10, 17-18. The Balance Agreement provides that at its execution Defendant owed Plaintiff 2,334,449.51 SAR, to be paid in 47 monthly installments of 50,000 SAR plus a final 34,449.51 SAR payment. Id. at 17-18. Plaintiff alleges that before its breach, Defendant made the first two installment payments, leaving a balance of 2,234,449.51 SAR.
Accordingly, because the evidence supports Plaintiff's damages calculation, and because Defendant, by failing to appear, did not refute or provide a reason for the Court to question this calculation, I recommend that the Court find Defendant liable in an amount equivalent to 2,234,449.51 SAR.
CONCLUSION
For the foregoing reasons, I recommend that the Court GRANT Plaintiff's motion for Default Judgment.
NOTICE OF PROCEDURE FOR FILING OBJECTIONS TO THIS REPORT AND RECOMMENDATION
The parties shall have fourteen days from the 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 shall be filed with the Clerk of the Court, with courtesy copies delivered to the chambers of the Honorable John P. Cronan, at the United States Courthouse, 500 Pearl Street, New York, New York 10007, and to any opposing parties. 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 Cronan. The failure to file these timely objections will result in a waiver of those objections for purposes of appeal. 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).