Opinion
16-CV-06418 (JPO)(SN)
06-10-2019
YIWU LIZHISHA ACCESSORIES CO., LTD., et al., Plaintiffs, v. JJAMZ, INC., et al., Defendants.
REPORT AND RECOMMENDATION SARAH NETBURN, United States Magistrate Judge.
To the Honorable J. PAUL OETKEN, United States District Judge:
Plaintiffs Yiwu Lizhisha Accessories Co., Ltd. ("Lisa") and Hong Kong Lizhisha Jewelry Co., Limited (collectively, "Plaintiffs") sue Defendant JJamz, Inc. ("JJamz") and its successor company, Defendant Punch Fashions, LLC ("Punch") (collectively "Defendants") to collect outstanding debts. After Plaintiffs moved for summary judgment, the Honorable J. Paul Oetken found that JJamz was liable for an account stated and that Punch had assumed JJamz's obligation to pay the account. Judge Oetken then referred the matter to me for an inquest into damages. In support of their request for damages, Plaintiffs filed their proposed findings of fact and conclusions of law (the "Proposed Findings") along with supporting documentation. Defendants submitted no opposition.
After reviewing Plaintiffs' submissions, I recommend: (1) entering a judgment of $494,832 for which Defendants JJamz and Punch are jointly and severally liable; (2) entering judgment of $21,134.99 for which only Defendant JJamz is liable; and (3) awarding prejudgment interest of 9% per year, pursuant to N.Y. CPLR § 5001.
BACKGROUND
Plaintiff Lisa is a Chinese corporation that manufactures and exports jewelry. Am. Compl. ¶ 2 (ECF No. 9). Plaintiff Hong Kong Lizhisha Jewelry Co., Limited acts as Lisa's marketing and sales agent. Id. ¶ 3.
Defendant JJamz is a jewelry wholesaler. Id. ¶ 12. Starting in 2011, JJamz began ordering products from Plaintiffs. Proposed Findings ¶ 2 (ECF No. 41). After JJamz placed an order, Plaintiffs would accept the order by sending an invoice and shipping the order. Proposed Findings ¶ 3. JJamz was obligated to pay each invoice within 30 days of the shipment date. Id.; see also Geiger Decl. ¶¶ 3-4 (ECF No. 26).
From 2012 through 2014, JJamz failed to pay sixty-five invoices in full. Proposed Findings ¶ 5. JJamz did not dispute the invoices or the amounts due. Proposed Findings ¶ 6; see also He Affidavit ¶¶ 2-3 (ECF No. 41-1). Instead, JJamz repeatedly reassured Plaintiffs that the outstanding balance would be paid. See generally ECF Nos. 9-2, 9-3, 9-4, 9-5. On several occasions, JJamz paid off individual invoices in part or in full. See ECF Nos. 9-2 at 4, 9-4 at 5.
In December 2014, JJamz entered into a Contribution Agreement with Defendant Punch. Proposed Findings ¶ 8. Under the terms of the agreement, JJamz transferred most of its assets, business, and liabilities to Punch. Id.; see also Geiger Decl. ¶¶ 12-13. JJamz advised Plaintiffs that Punch had assumed the liabilities in January 2015. See ECF No. 9-5.
Plaintiffs filed suit in August 2016. See ECF No. 1. After the close of discovery, Plaintiffs moved for summary judgment. See ECF No. 24. Punch opposed the motion, arguing that it had been fraudulently induced into assuming JJamz's obligations. See ECF No. 29. JJamz filed no opposition. Judge Oetken granted Plaintiffs' motion, finding that JJamz was liable for an account stated under New York law, and that Punch had assumed those obligations under the terms of the contribution agreement. See ECF No. 39. Judge Oetken then referred the case to me for an inquest into damages. Id.
DISCUSSION
Because Judge Oetken granted summary judgment, this inquest is limited to a review of whether Plaintiffs have presented sufficient evidence to enable the Court to ascertain damages with reasonable certainty. See N.Y. Dist. Council of Carpenters Pension Fund v. Perimeter Interiors, Inc., 657 F. Supp. 2d 410, 422 (S.D.N.Y. 2009) (holding, on inquest conducted after grant of summary judgment, that damages must be ascertainable to a reasonable certainty). The burden is on Plaintiffs to prove those damages to the Court. See House v. Kent Worldwide Mach. Works, Inc., 359 F. App'x 206, 207 (2d Cir. 2010) (summary order) ("[T]he district court cannot simply rely on the plaintiff's statement of damages; there must be a basis upon which the court may establish damages with reasonable certainty."); Lenard v. Design Studio, 889 F. Supp. 2d 518, 527 (S.D.N.Y. 2012) ("Where, on a damages inquest, a plaintiff fails to demonstrate its damages to a reasonable certainty, the court should decline to award any damages, even though liability has been established through default."). If the documentary evidence is sufficient, Plaintiffs may prove those damages without a hearing. See Transatlantic Marine Claims Agency, Inc. v. Ace Shipping Corp., 109 F.3d 105, 111 (2d Cir. 1997).
For the reasons discussed below, I find that Plaintiffs have offered sufficient documentary evidence to ascertain damages with reasonable certainty without the need for a hearing.
I. Damages against Defendant JJamz
Plaintiffs ask the court to enter judgment against JJamz for the unpaid balances of 65 invoices, which amount to $515,966.99. See Proposed Findings ¶¶ 5, 10. In support of that request, they have filed an affidavit from Qingsong He, Plaintiffs' general manager, who attests that JJamz incurred those debts from 2012 to 2014 without any objection or dispute. See He Aff. ¶ 2-3 (ECF No. 41-1). They have also attached copies of the 65 invoices. See ECF No. 41-2. Those invoices, summarized below in Appendix A, confirm JJamz's unpaid balance of $515,966.99. See id. This evidence is sufficient to show with reasonable certainty that JJamz owes Plaintiffs $515,966.99. See Plus Enters. LLC v. Sun Trading Int'l, LLC, No. 18-CV-8987 (VB), 2017 U.S. Dist. LEXIS 197293, at *9 (S.D.N.Y. Nov. 29, 2017) (awarding damages documented by substantially identical evidence after inquest), adopted by, 2017 U.S. Dist. LEXIS 206704 (Dec. 15, 2017).
Punch's assumption of the unpaid balances does not diminish Plaintiffs' ability to seek recovery from JJamz. Under New York Law, when "duties are delegated . . . the delegant's obligation does not end." Holland v. Fahnestock & Co., 210 F.R.D. 487, 498 (S.D.N.Y. 2002) (quoting Contemporary Mission, Inc. v. Famous Music Corp., 557 F.2d 918, 924 (2d Cir. 1977)), adopted by, 210 F.R.D. 487, 488 (2002). A party can absolve itself of the duty to complete performance with a novation, but to "establish a novation, there must be a clear and definite intention on the part of all the concerned parties that such is the purpose of the agreement." Id. Because JJamz has offered no evidence or claim of a novation, it remains liable for the full amount of the account stated. See Ventricelli v. DeGennaro, 633 N.Y.S.2d 315, 316 (App. Div. 1995), leave to appeal denied, 641 N.Y.S.2d 829 (N.Y. 1996) (affirming judgment because the party asserting the defense failed to satisfy its burden of proving a novation).
II. Damages against Defendant Punch
Plaintiffs also ask the Court to enter judgment against Punch for $515,966.99, arguing that Punch assumed liability for the unpaid invoices. See Proposed Findings ¶¶ 8, 11. Plaintiffs' evidence, however, shows that Defendant Punch only assumed $494,832 of JJamz's unpaid invoices. Under the terms of the contribution agreement, Punch assumed and agreed "to pay, perform, and discharge when due the . . . trade accounts payable set forth on Schedule 3(i)." Contribution and Assignment Agreement § 3 (ECF No. 26-5). Schedule 3(i) in turn identifies $494,832.00 past due payables owed by JJamz. See ECF No. 26-6 at 20. There is no evidence that Punch ever assumed an obligation to pay more than that amount. See Proposed Findings ¶ 9 (acknowledging that the line item in Schedule3(i) is for $494,832).
Without that evidence, Defendant Punch can be held liable only for the $494,832 identified in the schedule to the contribution agreement. See Toyota Tsusho Am., Inc. v. Kaye Ref. Corp., 650691/2013, 2016 N.Y. Misc. LEXIS 2416 (N.Y. Sup. Ct. June 27, 2016) (citing Union Chelsea Nat'l Bank v. PGA Marketing Ltd., 561 N.Y.S.2d 174 (N.Y. App. Div. 1990)) ("[C]ontinuation of the Guaranty does not mean that the Guarantor assumes new debts . . . to which it has not consented . . . . [because] courts have found otherwise only where the guarantor expressly agrees to act as surety for any new indebtedness."). Plaintiffs offer no argument to the contrary. See Proposed Findings ¶¶ 8-9, 11. For that reason, I recommend entering judgment against Punch only for the $494,832 included in Schedule 3(i) to the agreement.
III. Apportionment of Damages between Defendants
Although Plaintiffs do not address how damages should be apportioned between Defendants, the Court should hold them jointly and severally liable for the portion of the account stated assumed by Punch. There is no evidence that Plaintiffs ever excused JJamz of its obligation to pay the invoices. That makes JJamz and Punch joint obligors to Plaintiffs. See, e.g., Holland, 210 F.R.D. at 498 ("Fahnestock nevertheless remains a co-obligor with The Pullman Group and Pullman LLC under the Engagement Letter because Fahnestock was never released from liability."). As joint obligors, they are jointly and severally liable for the assumed debt. See NYKCool A.B. v. Pac. Fruit Inc., No. 10 CIV. 3867 (LAK), 2011 WL 3666579, at *3 n.7 (S.D.N.Y. Aug. 9, 2011), ("[J]oint obligors are jointly and severally liable, and the plaintiff can recover the full amount of the damages to which he is entitled from any one of the joint obligors."), subsequently aff'd, 507 F. App'x 83 (2d Cir. 2013); see also Taylor Woodrow PLC v. Blitman, 603 F. Supp. 1152, 1156 (S.D.N.Y. 1985) ("It is the law of New York that an obligee may proceed against either joint obligor and that a judgment against one shall not discharge the other.").
Thus, I recommend entering judgment against Punch and JJamz jointly and severally for the $494,832 that Punch assumed. As for the remaining $21,134.99 of the account stated that Punch did not assume, JJamz should be the sole entity liable for that amount.
$515,966.99 - $494,832.00 = $21,134.99.
IV. Prejudgment Interest
Plaintiffs also ask for prejudgment interest. See Proposed Findings ¶ 12. I recommend granting that request.
In diversity actions, awards of prejudgment interest are substantive issues governed by state law. See Schwimmer v. Allstate Ins. Co., 176 F.3d 648, 650 (2d Cir. 1999) (citation omitted). New York law provides that interest "shall be recovered upon a sum awarded because of a breach of performance of a contract." N.Y. CPLR § 5001. This interest is "recoverable as of right." Trademark Research Corp. v. Maxwell Online, Inc., 995 F.2d 326, 342 (2d Cir. 1993). New York law provides for a prejudgment interest rate of 9% per year, accruing "from the earliest ascertainable date the cause of action existed, except that interest upon damages incurred thereafter shall be computed from the date incurred. Where such damages were incurred at various times, interest shall be computed upon each item from the date it was incurred or upon all of the damages from a single reasonable intermediate date." N.Y. CPLR § 5001(b); see also Israel v. Benefit Concepts New York, Inc., 9 F. App'x 43, 45 (2d Cir. 2001) (summary order) (failing to utilize a single reasonable intermediate date or to calculate from each date damages were incurred "affords the plaintiff a windfall, and hence penalizes the defendant, in contravention of the compensatory purpose of [CPLR] 5001") (citation omitted). Courts have wide discretion to determine a reasonable intermediate date from which to award prejudgment interest. Conway v. Icahn & Co., 16 F.3d 504, 512 (2d Cir. 1994).
Plaintiffs ask the Court to calculate interest from an intermediate date of January 2, 2014. I agree that this is the appropriate intermediate date. Thus, I recommend awarding: (1) interest accruing on the principal amount of $494,832.00 for which Defendants are jointly and severally liable; and (2) interest accruing on the principal amount of $21,134.99 for which Defendant JJamz is solely liable. This interest should accrue at the statutory rate of 9% per year from the date of January 2, 2014 through the date that judgment is entered by the Court.
Payment for the oldest invoice, which was shipped on December 31, 2012, was due January 30, 2013. See ECF No. 42-1 at 3. Payment for the most recent invoice, which was shipped on November 6, 2014, was due on December 6, 2014. See ECF No. 42-1 at 150. 675 days elapsed from January 30, 2013, to December 6, 2014, meaning that January 2, 2014, is the exact intermediate date between the two overdue payments.
CONCLUSION
I recommend entering the following judgment against Defendants: (1) Defendants JJamz and Punch should be held jointly and severally liable for $494,832.00; (2) Defendant JJamz should be held solely liable for $21,134.99; and (3) interest on both amounts should accrue at the rate of 9% per year from January 2, 2014, through the entry of judgment. DATED: June 10, 2019
New York, New York
/s/_________
SARAH NETBURN
United States Magistrate Judge
* * *
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 J. Paul Oetken at Thurgood Marshall Courthouse, 40 Foley Square, 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 Oetken. 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).
APPENDIX A
Invoice No. Amount Outstanding Shipment Date ECF No. 42-1 at LSA20121231 $1,705.00 12/31/2012 3 - 4 LSA20130116-1 $1,853.00 1/16/2013 1 - 2 LSA20130116-3 $5,197.71 1/16/2013 5 - 6 LSA20130116-2 $4,188.09 1/16/2013 7 - 10 LSA20130312 $127.20 3/12/2013 11 - 12 LSA20130320-2 $163.40 3/20/2013 15 - 16 LSA20130321 $364.95 3/21/2013 13 - 14 CI-PC-LSA140423 $2,840.00 4/23/2013 88 - 89 LSA20130917 $336.03 9/17/2013 17 - 18 LSA20130923 $4,894.90 9/24/2013 19 - 20 LSA20130930 $14,884.52 9/30/2013 21 - 22 LSA20131010 $12,294.20 10/10/2013 23 - 24 LSA20131016 $15,952.70 10/16/2013 25 - 27 LSA20131030 $1,575.30 10/30/2013 30 - 31 LSA20131031 $217.60 10/31/2013 28 - 29 LSA20131218 $21,523.50 12/18/2013 34 - 35 LSA20131220 $7,198.00 12/20/2013 43- 44 LSA20131221 $72,380.94 12/21/2013 36 - 40 LSA20131226 $13,165.20 12/26/2013 45 - 46 LSA20131227-1 $2,624.00 12/27/2013 32 - 33 LSA20131227 $3,157.65 12/27/2013 58 - 59 LSA20140107 $1,176.60 1/7/2014 47 - 48 LSA20140114 $7,755.00 1/14/2014 56 - 57 LSA20140113 $988.02 1/17/2014 41 - 42 LSA20140118 $43,286.56 1/18/2014 49 - 55 CI-PC-LSA140228 $2,700.00 2/28/2014 60 - 61 CI-PC- LSA140228A $1,790.00 2/28/2014 62 - 63 10 Invoice No. Amount Outstanding Shipment Date ECF No. 42-1 at CI-PC-LSA140301 $1,424.25 3/1/2014 64 - 65 CI-PC-LSA140306 $1,701.08 3/6/2014 66 - 67 CI-PC-LSA140318 $57,876.61 3/18/2014 68 - 73 CI-PC-LSA140321 $480.00 3/21/2014 74 - 75 CI-PC-LSA140325 $4,024.00 3/25/2014 76 - 77 CI-PC-LSA140331 $2,919.00 3/31/2014 78 - 79 CI-PC-LSA140403 $1,353.28 4/3/2014 80 - 81 CI-PC-LSA140416 $2,956.70 4/16/2014 82 - 83 CI-PC-LSA140419 $211.60 4/19/2014 84 - 85 CI-PC-LSA140421 $651.00 4/21/2014 86 - 87 CI-PC-LSA140424 $1,691.50 4/24/2014 90 - 91 CI-PC- LSA140430A $6,967.10 4/30/2014 92 - 93 CI-PC- LSA140430B $31,408.33 4/30/2014 94 - 97 CI-PC-LSA140509 $4,597.08 5/9/2014 98 - 99 CI-PC- LSA140512A $33,853.83 5/12/2014 100 - 104 CI-PC- LSA140512B $2,458.10 5/12/2014 105 - 106 CI-PC-LSA140516 $3,367.00 5/16/2014 107 - 108 CI-PC-LSA140523 $9,443.85 5/23/2014 109 - 111 CI-PC-LSA140527 $7,010.54 5/27/2014 112 - 113 CI-PC-LSA140610 $7,659.72 6/10/2014 114 - 115 CI-PC-LSA140612 $3,310.95 6/12/2014 116 - 117 CI-PC-LSA140620 $11,197.10 6/20/2014 118 - 119 CI-PC-LSA140623 $2,826.60 6/23/2014 120 - 121 CI-PC-LSA140709 $304.92 7/9/2014 122 - 123 CI-PC-LSA140721 $500.34 7/21/2014 124 - 125 CI-PC-LSA140725 $284.90 7/25/2014 126 - 127 CI-PC-LSA140729 $4,477.00 7/29/2014 128 - 129 CI-PC- LSA140731 $3,354.90 7/31/2014 130 - 131 CI-PC-LSA140812 $6,488.76 8/12/2014 132 - 133 CI-PC-LSA140826 $16,748.00 8/26/2014 134 - 135 CI-PC-LSA140829 $9,225.18 8/29/2014 136 - 137 CI-PC-LSA140912 $404.80 9/12/2014 138 - 139 CI-PC-LSA140924 $2,960.00 9/24/2014 140 - 141 CI-PC-LSA140924- 2 $2,523.40 9/24/2014 142 - 143 11 Invoice No. Amount Outstanding Shipment Date ECF No. 42-1 at CI-PC-LSA140929 $16,218.00 9/29/2014 144 - 145 CI-PC-LSA141009 $1,757.50 10/9/2014 146 - 147 CI-PC-LSA141024 $5,724.00 10/24/2014 148 - 149 CI-PC-LSA141106 $1,266.00 11/6/2014 150 - 151