Opinion
No. 01 Civ. 11262 (KMW) (AJP)
October 15, 2003
REPORT AND RECOMMENDATION
To the Honorable Kimba M. Wood, United States District Judge: On September 23, 2003, Judge Wood entered a default judgment and on September 25, 2003, referred this case to me for an inquest on damages. (Dkt. No. 30: 9/23/03 Order; Dkt. No. 31: 9/25/03 Order.) For the reasons set forth below, the Court should enter judgment against defendant The HealthExchange, Inc. ("THEO") for damages of $1,065,500 ($875,000 plus contractual late fees of $190,500).
FACTS
"Where, as here, 'the court determines that defendant is in default, the factual allegations of the complaint, except those relating to the amount of damages, will be taken as true.'" Chen v. Jenna Lane. Inc., 30 F. Supp.2d 622, 623 (S.D.N.Y. 1998) (Carter, D.J. Peck, M.J.) (quoting 10A C. Wright, A. Miller M. Kane, Federal Practice Procedure: Civil 3d § 2688 at 58-59 (3d ed. 1998)).
Accord, e.g., Trustees of the Elevator Div. Ret. Benefit Plan v. Premier Elevator Co., 03 Civ. 2703, 2003 WL 22127912 at *1 (S.D.N.Y. Sept. 16, 2003)(Peck, M.J.); Cablevision Svs. New York City Corp. v. Torres. 02 Civ. 7602, 2003 WL 22078938 at *3 (S.D.N.Y. Sept. 9, 2003) (Peck, M. J.): Eastern Freight Ways v. Eastern Motor Freight. 02 Civ. 3138, 2003 WL 21540382 at *1 (S.D.N.Y. July 9, 2003) (Peck, M.J.), report rec. adopted as modified on other grounds. 2003 WL21921270 (S.D.N.Y. Aug 11, 2003): Schruefer v. Winthorpe Grant. Inc., 99 Civ. 9365, 2003 WL 21511157 at *1 (S.D.N.Y. July 2, 2003) (Peck, M.J.); Joy Lud Distribs. Int'l. Inc. v. Contini. 00 Civ. 5011, 2003 WL 554616 at *1 (S.D.N.Y. Feb. 28, 2003)(Peck, M.J.); Rolex Watch U.S.A. Inc. v. Brown. 01 Civ. 9155, 2002 WL 1226863 at *1 (S.D.N.Y. June 5, 2002) (Peck, M.J.); King Vision Pay-Per-View Corp. v. Drencia Rest. Corp., 01 Civ. 9777, 2002 WL 1000284 at *1 (S.D.N.Y. May 15, 2002) (Peck, M.J.); Ainbinder v. Bernice Mining Contracting. Inc., 01 Civ. 2492, 2002 WL 461576 at *2 (S.D.N.Y. Mar. 26, 2002) (Peck, M. J.); Sterling Nat'l Bank v. A-1 Hotels Int'l. Inc., 00 Civ. 7352, 2002 WL 461574 at *3 (S.D.N.Y. Mar 26, 2002) (Peck, M.J.); King Vision Pay-Per-View Corp. v. Papacito Lidia Luncheonette. Inc., 01 Civ. 7575, 2001 WL 1558269 at *1 (S.D.N.Y. Dec. 6, 2001) (Peck, M.J.); Trustees of the Pension Welfare Funds of the Moving Picture Mach. Operators Union. Local 306 v. Gordon's Film Co. (New York) Int'l Inc., 00 Civ. 8452, 2001 WL 1415145 at *1 (S.D.N.Y. Nov. 13, 2001) (Peck, M.J.); Coast To Coast Fabrics. Inc. v. Tracy Evans. Ltd., 00 Civ. 4417, 2001 WL 5037 at *1 (S.D.N.Y. Jan. 2, 2001) (Peck, M.J.); Starbucks Corp. v. Morgan. 99 Civ. 1404, 2000 WL 949665 at *1 (S.D.N.Y. July 11, 2000) (Peck, M.J.); King Vision Pay-Per-View. Ltd, v. New Paradise Rest. 99 Civ. 10020, 2000 WL 378053 at *1 (S.D.N.Y. Apr. 11, 2000) (Peck, M.J.); Independent Nat'1 Distrib., Inc. v. Black Rain Communications. Inc., 94 Civ. 8464, 1996 WL 238401 at *2 (S.D.N.Y. Apr. 4, 1996) (Keenan, D.J. Peck, M.J.).
The complaint asserts that defendant THEO is in breach of a contract that was entered into on or around April 19, 2001. (Dkt. No. 1: Compl. ¶¶ 1, 8.) The contract obliged plaintiff Medical Economics to create and host a "Co-branded Bridge Page" on the Center Watch web site enabling Center Watch users to link to the THEO website and THEO users to link to Center Watch's website. (Compl. Ex. A: Contract §§ 1-2.) The agreement also granted to defendant THEO a limited license to certain specific intellectual property belonging to Center Watch. (Compl. Ex. A: Contract §§ 4-5.) The agreement obliged THEO to, inter alia, pay Center Watch $500,000 during each year of the two year contract, with payments to be made as follows: $50,000 in the first quarter, $150,000 in each of the second through fourth quarters, and quarterly payments of $125,000 during the second year. (Compl. Ex. A: Contract §§ 8.1, 10.1, 10.2.) Plaintiff Medical Economics alleges that defendant THEO is in breach of contract for failing to pay $75,000 of the $150,000 second quarter payment invoiced in July 2001 and for failing to pay any of the $150,000 third quarter payment invoiced in October 2001. (Dkt. No. 29: Rubins Aff. ¶¶ 6-7; Compl. ¶¶ 17-30.) Plaintiff Medical Economics also asserts that, because defendant THEO is in default, plaintiff Medical Economics also is due the additional payments that were to be made under the remainder of the contract. (Rubins Aff. ¶ 8; Compl. ¶¶ 42, 44, 47-53.) Thus, plaintiff Medical Economics claims as damages the $875,000 balance due under the contract. (Rubins Aff. ¶ 9.) Finally, plaintiff Medical Economics seeks late fees of one and a half percent per month, as provided for in the agreement. (Rubins Aff. ¶ 10; Compl. ¶ 43 Ex. A: Contract § 10.3.) Judge Wood granted plaintiff Medical Economics a default judgment against defendant THEO and referred the matter to me for an inquest. (Dkt. Nos. 30-31: 9/23/03 9/25/03 Orders.) By Order dated September 25, 2003, this Court directed defendant THEO to appear by counsel and to submit papers by October 3, 2003 opposing plaintiff Medical Economic's inquest damages. (Dkt. No. 32: 9/25/03 Order.) Defendant THEO signed a return receipt for the Order. Nevertheless, the deadlines passed, and the Court has not received any submissions from defendant THEO.
Center Watch is a division of plaintiff Medical Economics. (Compl. Ex. A: Contract at p. 1.)
ANALYSIS
The Second Circuit has approved the holding of an inquest by affidavit, without an in-person court hearing, "'as long as [the Court has] ensured that there was a basis for the damages specified in the default judgment.'" Transatlantic Marine Claims Agency. Inc. v. Ace Shipping Corp., 109 F.3d 105, 111 (2d Cir. 1997) (quoting Fustok v. ContiCommodity Servs., Inc., 873 F.2d 38, 40 (2d Cir. 1989)).As damages, plaintiff Medical Economics seeks the amount that would have been paid had the contract been performed ($875,000) plus the late fees provided for in the contract. (See page 3 above.) In support, plaintiff Medical Economics submitted a copy of the original contract, which outlines the payment schedule over the life of the contract (Compl. Ex. A: Contract §§ 10.1, 10.2), copies of the invoices to THEO documenting the payments due and not paid during the second and third quarter (Compl. Exs. B-C), and a table calculating the late payments owed to it by defendant THEO pursuant to the contractual one and a half percent monthly late fee. (Rubins Aff. Ex. C.) Due to an apparent miscalculation, plaintiffs counsel sought only $14,018.84 in late fees, calculating the late fee based on an annual (rather than monthly) rate of one and a half percent. (Rubins Aff. ¶¶ 10-11 Ex. C.) Plaintiff Medical Economics should not lose out because of such a calculation error by its counsel. See e.g., Trustees of the Pension Welfare Funds of the Moving Picture Machine Operators Union v. Gordon's Film Co., 00 Civ. 8452, 2001 WL 1415145 at *2 n. 5 (S.D.N.Y. Nov. 13, 2001) (Peck, MJ.). The properly calculated late fees are $190,500:
Compare, e.g., Ainbinder v. Bernice Mining Contracting. Inc., 01 Civ. 2497, 2002 WL 461576 at *3 (S.D.N.Y. Mar. 26, 2002) (Peck, MJ.) (quoting Fed.R.Civ.P. 54(c) and Wright Miller's treatise for proposition that default judgment amount cannot exceed amount sought in the complaint). Here, plaintiff Medical Economies' complaint sought the monthly late fee payments but did not calculate the amount sought for such fees.
CONCLUSION
For the reasons set forth above, the Court should award plaintiff Medical Economics judgment against defendant for $875,000 in contractual damages plus contractual late fees of $190,500 for a total of $1,065,500.FILING OF 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 shall have ten (10) days from service of this Report to file written objections. See also Fed.R.Civ.P. 6. Such objections (and any responses to objections) shall be filed with the Clerk of the Court, with courtesy copies delivered to the chambers of the Honorable Kimba M. Wood, 500 Pearl Street, Room 1610, and to my chambers, 500 Pearl Street, Room 1370. Any requests for an extension of time for filing objections must be directed to Judge Wood. Failure to file objections will result in a waiver of those objections for purposes of appeal. Thomas v. Arn. 474 U.S. 140, 106 S.Ct. 466 (1985): IUE AFL-CIO Pension Fund v. Herrmann. 9 F.3d 1049, 1054 (2d Cir. 1993), cert. denied. 513 U.S. 822, 115 S.Ct. 86 (1994); Roldan v. Racette. 984 F.2d 85, 89 (2d Cir. 1993); Frank v. Johnson. 968 F.2d 298, 300 (2d Cir.), cert. denied. 506 U.S. 1038, 113 S.Ct. 825 (1992); Small v. Secretary of Health Human Servs., 892 F.2d 15, 16 (2d Cir. 1989); Wesolek v.CanadairLtd., 838 F.2d 55, 57-59 (2d Cir. 1988); McCarthy v. Manson. 714 F.2d 234, 237-38 (2d Cir. 1983); 28 U.S.C. § 636(b)(1); Fed.R.Civ.P. 72, 6(a), 6(e).