Opinion
No. 05 CV 3648 (GBD).
January 5, 2006
MEMORANDUM DECISION AND ORDER
On August 18, 2005, this Court entered a default judgment for plaintiff against defendants. This action was thereafter referred to Chief Magistrate Judge Andrew J. Peck for an inquest on damages. On the magistrate judge's order, plaintiff filed additional papers in support of his inquest request.
Chief Magistrate Judge Peck issued a Report and Recommendation ("Report") in which he recommended that the Court grant judgment against defendants, jointly and severally, in favor of plaintiff for the amount sought in the complaint $1,153,545 (inclusive of prejudgment interest), plus $290 in costs. In his Report, Chief Magistrate Judge Peck advised the parties that failure to file timely objections to the Report would constitute a waiver of those objections.
Plaintiff filed a timely objection to the Report.
Upon a de novo review, the Court adopts the Report and accordingly, enters judgment in favor of the plaintiff in an amount consistent with the Report.
When timely objection has been made to a magistrate judge's report, the district judge is required to "make a de novo determination . . . of any portion of the magistrate's disposition to which specific written objection has been made. . . ." Fed.R.Civ.P. 72(b) (2005); see also 28 U.S.C. § 636(b)(1)(C) (2005). The district judge is not required to conduct a de novo hearing on the matter. United States v. Raddatz, 447 U.S. 667, 676 (1980). "It is sufficient that the district court 'arrive at its own, independent conclusion about those portions of the magistrate's report to which objection is made. . . ."' Nelson v. Smith, 618 F.Supp. 1186, 1189-90 (S.D.N.Y. 1985) (quoting Hernandez v. Estelle, 711 F.2d 619, 620 (5th Cir. 1983)). Thus, the district court is obligated to "exercise . . . sound judicial discretion with respect to whether reliance should be placed on [the magistrate judge's] findings."American Express Int'l Banking Corp. v. Sabet, 512 F.Supp. 472, 473 (S.D.N.Y. 1981), aff'd, 697 F.2d 287 (2d Cir. 1982). The district judge may then accept, reject, or modify, in whole or in part, the findings or recommendations of the magistrate judge, receive further evidence, or recommit the matter to the magistrate judge with additional instructions. See Fed.R.Civ.P. 72(b); 28 U.S.C. § 636(b)(1)(C).
The referring district judge may accept the portions of the magistrate judge's report and recommendation to which no specific written objections are made provided there is no clear error on the face of the record. Nelson v. Smith, 618 F. Supp. 1186, 1189 (S.D.N.Y. 1985); see also Heisler v. Kralik, 981 F. Supp. 830, 835 (S.D.N.Y. 1997), aff'd 164 F.3d 618 (2d Cir. 1998). With respect to those portions of the Report to which there were no objections, the Court finds that the record is not facially erroneous. Accordingly, the Court adopts those portions of the Report to which no objection has been filed.
Plaintiff objects to the recommendation that the principal plus interest be limited to the amount demanded in the complaint. Plaintiff contends hat he is entitled to pre-judgment interest calculated in accordance with N.Y.C.P.L.R. 5001 et seq, or alternatively, the actual loan interest incurred by plaintiff through the date of inquest. Plaintiff argues that defendants received adequate notice to satisfy the policy considerations behind Rule 54(c) because the complaint reserved for the plaintiff the right to seek "such other and further relief which this Court deems just and proper." Plaintiff argues that the Court should award actual interest through the date of inquest. Alternatively, plaintiff argues that the Court should award interest calculated using New York's statutory prejudgment interest rate. See N.Y.C.P.L.R. 5001.
Plaintiff further argues that even if the Court does not find that the complaint gave the defendants adequate notice to comply with the policy considerations behind Rule 54(c), the inquest procedure gave the defendants the additional opportunity to object. Plaintiff argues that by defaulting on the inquest, the defendants lost all claims of lack of notice of the additional interest calculations submitted by the plaintiff.
The allegations of the complaint and plaintiff's inquest affidavit establishes that the defendants borrowed money from plaintiff. Plaintiff's affidavit further establishes the outstanding balance of the loan in August 1997, when defendants stopped making repayments, thus breaching the loan agreement, was $751,510.41.
The Court need not decide which of plaintiff's proposed interest rates to use because the principal plus interest under either method exceed the ad damnum clause in the complaint. Rule 54(c) of the Federal Rules of Civil Procedure provides that "a judgment by default shall not be different in kind from or exceed in amount that prayed for in the demand for judgment." The complaint seeks damages of $1,153,545. The Court must therefore "cap" the plaintiff's damage award at $1,153,545.
Chief Magistrate Judge Peck referred to the appropriate explanation of Professors Wright and Miller:
The first sentence of Rule 54(c) states that a judgment by default is limited to the relief demanded in the complaint. The theory of this provision is that the defending party should be able to decide on the basis of the relief requested in the original pleading whether to expend the time, effort, and money necessary to defend the action. It would be fundamentally unfair to have the complaint lead defendant to believe that only a certain type and dimension of relief was being sought and then, should defendant attempt to limit the scope and size of the potential judgment by not appearing or otherwise defaulting, allow the court to give a different type of relief or a larger damage award . . . In sum, then, a default judgment may not extend to matters outside the issues raised by the pleadings or beyond the scope of the relief demanded. A judgment in a default case that awards relief that either is more than or different in kind from that requested originally is null and void and defendant may attack it collaterally in another proceeding.Pacific Westeel, Inc. v. DR Installation, 01 Civ. 0293, 2003 WL 2235912 at *2 (S.D.N.Y. Oct. 17, 2003) (quoting 10 Wright, Miller Kane, Federal Practice Procedure: Civil 3d § 2663 (1998) (footnotes omitted).
Accordingly, judgment for the plaintiff is hereby entered against the defendants, jointly and severally, for the amount sought in the complaint, $1,153,545 (inclusive of prejudgment interest) plus $290 in costs.
SO ORDERED: