Opinion
20-CV-6982 (LGS) (JLC)
09-24-2021
LIVING THE DREAM FILMS, INC., Plaintiff, v. ALORIS ENTERTAINMENT, LLC and JOHN SANTILLI, Defendants.
To the Honorable Lorna G. Schofield, United States District Judge:
REPORT AND RECOMMENDATION
JAMES L. COTT, United States Magistrate Judge.
Plaintiff Living the Dream Films, Inc. brought this action against Defendants Aloris Entertainment, LLC and John Santilh seeking, inter alia, monetary relief for claims under the Securities Exchange Act and related common law claims, including fraud, fraud in the inducement, and breach of contract. On January 28, 2021, the Court entered a default judgment in its favor. The case was subsequently referred to me to conduct an inquest into damages. For the reasons set forth below, I recommend that Defendants be held jointly and severally liable for $200,000 in damages, prejudgment interest at a rate of 9% per annum, post-judgment interest pursuant to 28 U.S.C. § 1961, and $12,816 in attorney's fees and costs.
I. BACKGROUND
A. Facts
The following facts, which are drawn from a review of plaintiff s pleadings, affidavits, and submissions related to this inquest, "are deemed established for the purpose of determining the damages to which [it is] entitled." Salazar v. 203 Lena Inc., No. 16-CV-7743 (VB) (JLC), 2020 WL 5627118, at *l (S.D.N.Y. Sept. 18, 2020) (citing City of New York v. Mickalis Pawn Shop, LLC, 645 F.3d 114, 137 (2d Cir. 2011)), adopted by 2020 WL 6257158 (Oct. 23, 2020).
Plaintiff Living the Dream Films, Inc. ("Living the Dream") is a New York corporation doing business in New York. Complaint, ("Compl."), Dkt. No. 1, ¶ Declaration of Raymond Bouderau dated February 23, 2021 ("Bouderau Decl."), Dkt. No. 37-1, ¶ 1. Raymond Bouderau is the President of Living the Dream. Compl. ¶ 7; Bouderau Decl. ¶ 7. Defendants are Aloris Entertainment, LLC ("Aloris"), a Rhode Island limited liability company doing business in Rhode Island, and John Santilli ("Santilli"), the manager of Aloris and an individual domiciled in Rhode Island (collectively, "Defendants"). Id. ¶¶ 2-3; Bouderau Decl. Ex. A, Dkt. No. 37-2.
As the Bouderau Declaration tracks the Complaint virtually verbatim, paragraph by paragraph, the Court cites them interchangeably.
In or about October 2017, Defendants solicited Living the Dream to purchase a 5% membership interest in Aloris. Id. ¶ 7. During this solicitation, Defendants represented that Aloris' sole asset was a 22.1% Class A share ownership in Mike's Mobile Detailing LLC ("Mike's"), a joint venture that produces the Las Vegas show "Magic Mike Live Las Vegas." Id. ¶ 8. Defendants claimed that if Living the Dream invested in Aloris, it would receive from Santilli a 5% membership interest and 5% of any quarterly distribution payments (after deductions for account maintenance fees) arising out of Aloris' 22.1% Class A shares in Mike's. Id. Defendants also represented that Aloris would provide a full accounting and grant audit rights to Living the Dream on a quarterly basis, and that the operating agreement between Aloris and Mike's would be amended to reflect those obligations. Id. Defendants also claimed that Mike's had a five-year lease at the Hard Rock Casino in Las Vegas, which commenced on April 21, 2017, and stated that Mike's was in negotiations to extend the lease. Id.
As part of its subsequent due diligence, Living the Dream reviewed: (1) certain sales reports for Mike's; (2) an August 2, 2016 operating agreement between Aloris and Mike's confirming that Aloris owned 22.1% of Class A shares of Mike's; (3) a "comfort" letter from an attorney confirming the same; and (4) a distribution report which indicated that, on or about July 21, 2017, Aloris received a $297,793.80 distribution payment from Mike's. Id. ¶ 9. On November 29, 2017, in response to due diligence requests, Santilli emailed Living the Dream and Bouderau and stated that Aloris had no existing operating agreement, and confirmed that he was the owner of Aloris. Id. ¶ 10.
On November 30, 2017, the parties executed a Term Sheet memorializing the parties' representations and obligations with respect to Living the Dream's investment. Id. ¶ 11; see also Bouderau Decl. Ex. A. On December 1, 2017, fulfilling its contractual obligation, Living the Dream wired $200,000 to Aloris. Bouderau Decl. ¶ 12; Bouderau Decl. Ex B, Dkt. No. 37-3. However, Living the Dream never received an amended operating agreement reflecting Defendants' obligations and did not receive any profits or required accounting reports. Bouderau Decl. ¶¶ 14-16.
B. Procedural History
On August 27, 2020, Living the Dream filed its complaint alleging that (1) it had not received any profits from Defendants; (2) it had not received an amended operating agreement from Defendants; (3) it had not received any accounting from Defendants; and (4) Defendants had failed to disclose the true value of the Class A shares that they owned or that material disputes existed that might render the shares worthless. Compl. ¶¶ 14-17. The Complaint includes claims for relief against Defendants, jointly and severally, for violations of Section 10(b) of the Securities Exchange Act of 1934 and its implementing regulation, Rule 10b-5 (count one) (¶¶ 19-31); violations of Section 20(a) of the Securities Exchange Act of 1934 (count two) (¶¶ 32-36); fraud in the inducement (count three) (¶¶ 37-44); fraud (count four) (¶¶ 45-50); and breach of contract (count five) (¶¶ 51-57).
After multiple case management conferences were rescheduled due to Defendants' nonappearance, the Court entered a default judgment in favor of Living the Dream on January 28, 2021. Dkt. No. 35. On the same date, this case was referred to me for a damages inquest. Dkt. No. 34. On January 29, 2021, 1 issued an order directing Living the Dream to file proposed findings of fact and conclusions of law tying its damages figures to its legal claims. Dkt. No. 36. On February 23, 2021, Living the Dream submitted its proposed findings of fact and conclusions of law. Dkt. No. 37.
On March 30, 2021, Santilli was indicted in the Central District of California. Dkt. No. 39-1 ("Santilli indictment"). The indictment charges Santilli with committing securities fraud regarding the sale of Aloris' ownership interest in Mike's. Supplemental Declaration of Raymond J. Markovich dated May 6, 2021, Dkt. No. 39. Living the Dream brought the Santilli indictment to the Court's attention on May 6, 2021. Id. On May 14, 2021, at the Court's direction, Living the Dream submitted supplemental proposed findings of fact and conclusions of law explaining the relevance of the Santilli indictment to the inquest and providing legal authority to support its request for damages. Dkt. Nos. 42 & 43.
In its inquest papers, Living the Dream requests the following:
(1) compensatory damages in the amount of $200,000 on all of its claims;
(2) compensatory damages in the amount of $60,000 on its breach of contract claim and its securities fraud claims; and (3) punitive damages in the amount of $260,000 on its fraud claims, for a total award of damages in the amount of $520,000. Dkt. No. 43 at 6-7. Additionally, Living the Dream requests an award of attorney's fees and costs in the amount of $15,920 and post-judgment interest. Dkt. No. 43 at 10.
II. DISCUSSION
A. Legal Standards
1. Damages May Only Be Awarded on the Well-Pleaded Allegations of the Complaint
"Where a defendant has defaulted, the court is required to accept all of the plaintiffs factual allegations as true and draw all reasonable inferences in the plaintiffs favor, . . . but it is also required to determine whether the plaintiffs allegations establish [the defendant's] liability as a matter of law." Related Companies, L.P. v. Ruthling, No. 17-CV-4175 (JSR) (DF), 2019 WL 10947100, at *3 (S.D.N.Y. July 23, 2019) (internal quotation and alteration omitted) (quoting Finkel v. Romanowicz, 577 F.3d 79, 84 (2d Cir. 2009)). "In other words, as a defendant's default only establishes its liability based on the well-pleaded allegations of the complaint, the court must still scrutinize the plaintiffs pleading and find the claims sufficiently pleaded." Id. (citing Galeana v. Lemongrass on Broadway Corp., 120 F.Supp.3d 306, 313 (S.D.N.Y. 2014)). Thus, if the "complaint fails to state a cognizable claim, a plaintiff may not recover even upon defendant's default." Bolivar v. FIT Int'l Grp. Corp., No. 12-CV-781 (PGG) (DF), 2017 WL 11473766, at *13 (S.D.N.Y. Mar. 16, 2017), adopted by 2019 WL 4565067 (Sept. 20, 2019) (internal quotation marks omitted) (citing Allstate Ins. Co. v. Afanasyev, No. 12-CV-2423 (JBW) (CLP), 2016 WL 1156769, at *6 (E.D.N.Y Feb. 11, 2016), adopted by 2016 WL 1189284 (Mar. 22, 2016)).
2. Damages Must Be Established with Reasonable Certainty
"[A]lthough a 'default judgment entered on well-pleaded allegations in a complaint establishes a defendant's liability,' it does not reach the issue of damages." Id. (quoting Bambu Sales, Inc. v. Ozak Trading, Inc., 58 F.3d 849, 854 (2d Cir. 1995) and citing Ferri v. Berkowitz, 561 Fed.Appx. 64, 65 (2d Cir. 2014)). "A plaintiff must therefore substantiate its claims for damages with admissible evidence to prove the extent of those damages." Id. (citing Hounddog Prod., L.L.C. v. Empire Film Grp., Inc., 826 F.Supp.2d 619, 627 (S.D.N.Y. 2011)).
"While the Court must 'take the necessary steps to establish damages with reasonable certainty,' the Court need not hold a hearing 'as long as it ensures that there is a basis for the damages specified in the default judgment.'" Idir v. La Calle TV, LLC, No. 19-CV-6251 (JGK), 2020 WL 4016425, at *2 (S.D.N.Y. July 15, 2020) (alteration omitted) (quoting Transatlantic Marine Claims Agency, Inc. v. Ace Shipping Corp., 109 F.3d 105, 111 (2d Cir. 1997) and Fustok v. ContiCommodity Servs., Inc., 873 F.2d 38, 40 (2d Cir. 1989), respectively). Because Living the Dream's submissions have not been contested and "they provide all the information necessary to determine [its] damages," the Court concludes that a hearing is unnecessary. Id. In addition, "no party in this case has requested a hearing on damages." Id. A plaintiff may support claimed damages through "a sworn affidavit by a person with knowledge of the relevant facts, or by documentary evidence duly authenticated by a person with knowledge." Related Companies, 2019 WL 10947100, at *3 (citations omitted). "Alternatively, evidence may be provided by a declaration made under penalty of perjury, in accordance with the requirements of 28 U.S.C. § 1746." Id. (citing Local Civ. R. 1.9(a)).
"The plaintiff also bears the burden to 'introduce sufficient evidence to establish the amount of damages with reasonable certainty.'" Bolivar, 2017 WL 11473766, at *13 (quoting RGI Brands LLC v. Cognac Brisset-Aurige, S.A.R.L., No. 12-CV-1369 (LGS) (AJP), 2013 WL 1668206, at *6 (S.D.N.Y. Apr. 18, 2013), adopted by 2013 WL 4505255 (Aug. 23, 2013)). "While a plaintiff is entitled to all reasonable inferences in its favor based upon the evidence submitted, if a plaintiff fails to demonstrate its damages to a reasonable certainty, then the court should decline to award any damages, even where liability has been established through default." Id. (internal citation omitted) (citing U.S. ex rel. Nat. Dev. & Const. Corp. v. U.S. Envtl. Universal Servs., Inc., No. 11-CV-0730 (CS), 2014 WL 4652712, at *3 (S.D.N.Y. Sept. 2, 2014) and Lenard Design Studio, 889 F.Supp.2d 518, 538 (S.D.N.Y. 2012)).
B. Analysis
1. Securities Exchange Act Claims
a. Heightened Pleading Standards
Actions alleging fraud in securities trading are subject to heightened pleading standards under both Federal Rule of Civil Procedure 9(b) and the Private Securities Litigation Reform Act ("PSLRA"). 15 U.S.C. § 78u-4; see also Rombach v. Chang, 355 F.3d 164, 170 (2d Cir. 2004) (heightened pleading standard applies to securities claims sounding in fraud). Pursuant to Rule 9(b), a plaintiff "must state with particularity the circumstances constituting fraud or mistake." Fed.R.Civ.P. 9(b); see also Novak v. Kasaks, 216 F.3d 300, 306 (2d Cir. 2000). "Accordingly, securities fraud claims based solely on 'speculation and conclusory allegations' do not suffice." In re Smith Barney Transfer Agent Litig., 884 F.Supp.2d 152, 158 (S.D.N.Y. 2012) (quoting Kalnit v. Eichler, 264 F.3d 131, 142 (2d Cir. 2001)).
Relatedly, under the PSLRA, a plaintiff basing a claim of securities fraud on misstatements and omissions must "specify each statement alleged to have been misleading, the reason or reasons why the statement is misleading, and, if an allegation regarding the statement or omission is made on information and belief. . . state with particularity all facts on which that belief is formed." 15 U.S.C. § 78u-4(b)(1)(B). Additionally, a plaintiff must "state with particularity facts giving rise to a strong inference that the defendant acted with the required state of mind" in finding liability under the securities provision in question. 15 U.S.C. § 78u-4(b)(2). See also Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308, 313 (2007) ("The PSLRA requires plaintiffs to state with particularity both the facts constituting the alleged violation, and the facts evidencing scienter, i.e., the defendant's intention to deceive, manipulate, or defraud."); Novak, 216 F.3d at 306-07.
b. Violation of Section 10(b) and Rule 10b-5
Living the Dream alleges violations of Section 10(b) of the Securities Exchange Act and its implementing regulation Rule 10b-5. Under Section 10(b) and Rule 10b-5, it is unlawful for any person, directly or indirectly, by the use of any means specified in Section 10(b) of the Exchange Act: "(a) [t]o employ any device, scheme, or artifice to defraud, (b) [t]o make any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading, or (c) [t]o engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person, in connection with the purchase or sale of any security." 17 C.F.R. § 240.10b-5; 15 U.S.C. § 78j(b).
"Though the text of the Securities Exchange Act does not provide for a private cause of action for § 10(b) violations, the Court has found a right of action implied in the words of the statute and its implementing regulation." Stoneridge Inv. Partners, LLC v. Sci.-Atlanta, Inc., 552 U.S. 148, 157 (2008) (citing Superintendent of Ins. of N.Y.v. Bankers Life & Casualty Co., 404 U.S. 6, 13 n.9 (1971)). To establish a claim under Section 10(b) of the Exchange Act and Rule 10b-5, a plaintiff must allege: "(1) a material misrepresentation or omission by the defendant; (2) scienter; (3) a connection between the misrepresentation or omission and the purchase or sale of a security; (4) reliance upon the misrepresentation or omission; (5) economic loss; and (6) loss causation." Erica P. John Fund, Inc. v. Halliburton Co., 563 U.S. 804, 809-10 (2011) (internal quotes omitted).
"The veracity of a statement or omission is measured not by its literal truth, but by its ability to accurately inform rather than mislead prospective buyers." Operating Local 649 Annuity Trust Fund, 595 F.3d 86, 92 (2d Cir. 2010). For instance, "although literally accurate," statements "can become, through their context and manner of presentation, devices which mislead investors" and thus run afoul of Section 10(b) and Rule 10b-5. Deng v. Gramercy Park Group LLC, No. 12-CV-7803 (DLC) (JLC), 2014 WL 1016853, at *7 (S.D.N.Y. Mar. 14, 2014) (quoting McMahan & Co. v. Wherehouse Entm't Inc., 900 F.2d 576, 579 (2d Cir. 1990)), adopted by 2014 WL 4996255 (Oct. 7, 2014). The Supreme Court has also articulated a materiality requirement, whereby there must be "a substantial likelihood that a reasonable shareholder would consider [the statement] important in deciding how to [act]." Basic Inc. v. Levinson, 485 U.S. 224, 231-32 (1988) (requiring "a substantial likelihood that the disclosure of the omitted fact would have been viewed by the reasonable investor as having significantly altered the 'total mix' of information made available") (quoting TSC Industries, Inc. v. Northway, Inc., 426 U.S. 438, 449 (1976)).
In addition to materiality, a plaintiff must show both reliance and loss causation. See Wilamowsky v. Take-Two Interactive Software Inc., 818 F.Supp.2d 744, 751 (S.D.N.Y. 2011). To establish reliance, "a plaintiff must demonstrate that 'but for the claimed misrepresentations or omissions, the plaintiff would not have entered into the detrimental securities transaction' that led to the loss." In re Puda Coal Sec. Inc. et al. Litig., No. 11-CV-2598 (DLC) (HBP), 2017 WL 65325 at *9 (S.D.N.Y. Jan. 6, 2017) (quoting ATSI Commc'ns, Inc. v. Shaar Fund, Ltd., 493 F.3d 87, 106 (2d Cir. 2007)), adopted sub nom. In re Puda Coal Sec. Inc., No. 11-CV-2598 (DLC), 2017 WL 511834 (Feb. 8, 2017). "Reliance by the plaintiff upon the defendant's deceptive acts is an essential element of the § 10(b) private cause of action." Stoneridge Investment Partners, LLC, 552 U.S. at 159. "This is because proof of reliance ensures that there is a proper 'connection between a defendant's misrepresentation and a plaintiffs injury.'" Halliburton Co., 563 U.S. at 810 (quoting Basic Inc. 485 U.S. at 243). A plaintiff can establish reliance by demonstrating that it was "aware of a company's statement and engaged in a relevant transaction . . . based on that specific misrepresentation." Id.
Loss causation, on the other hand, is the "causal link between the alleged misconduct and the economic harm ultimately suffered by the plaintiff." Emergent Capital Inv. Mgmt., LLC v. Stonepath Group Inc., 343 F.3d 189, 197 (2d Cir. 2003); see also Merrill Lynch & Co. Inc. v. Allegheny Energy, Inc., 500 F.3d 171, 183 (2d Cir. 2007) ("[A] fraud plaintiff must show that he acted on the basis of the fraud and suffered pecuniary loss as a result of so acting.") (citing Dura Pharm. Inc. v. Broudo, 544 U.S. 336, 343-45 (2005)). "[T]o establish loss causation; a plaintiff must allege . . . that the subject of the fraudulent statement or omission was the cause of the actual loss suffered." Lentell v. Merrill Lynch & Co., Inc., 396 F.3d 161, 173 (2d Cir. 2005) (analogizing loss causation with tort law concept of proximate cause and requiring "both that the loss be foreseeable and that the loss be caused by the materialization of the concealed risk") (citation omitted); see also Suez Equity Investors, L.P. v. Toronto-Dominion Bank, 250 F.3d 87, 95 (2d Cir. 2001).
There are several methods by which a plaintiff may demonstrate loss causation. Where the relationship between investment loss and the misinformation is "sufficiently direct," asserting a claim of loss causation is straightforward. Lentell, 396 F.3d at 174. Alternatively, under the concept of "materialization of risk," loss causation may also be established "[w]here the alleged misstatement conceals a condition or event which then occurs and causes the plaintiffs loss." In re Initial Pub. Offering Sec. Litig., 544 F.Supp.2d 277, 289 (S.D.N.Y. 2008). Finally, in order to establish that the defendant acted with scienter, a plaintiff is required to "allege facts that give rise to a strong inference of fraudulent intent." Novak, 216 F.3d at 307; see also Tellabs, 551 U.S. at 314 ("[Under the PSLRA] an inference of scienter must be more than merely plausible or reasonable - it must be cogent and at least as compelling as any opposing inference of nonfraudulent intent."). "An inference of scienter can be supported: '(a) by alleging facts to show that defendants had both motive and opportunity to commit fraud, or (b) by alleging facts that constitute strong circumstantial evidence of conscious misbehavior or recklessness.'" In re Puda Coal Sec. Inc., 2017 WL 65325 at *9 (quoting Novak, 216 F.3d at 307). "As to the first prong, '[i]n order to raise a strong inference of scienter through "motive and opportunity" to defraud, Plaintiffs must allege that' the Defendants 'benefited in some concrete and personal way from the purported fraud.'" Haw. Structural Ironworkers Pension Tr. Fund v. AMC Entm't Holdings, Inc., 422 F.Supp.3d 821, 848 (S.D.N.Y. 2019) (quoting ECA, Local 134 IBEW Joint Pension Tr. of Chi. v. JPMorgan Chase Co., 553 F.3d 187, 198 (2d Cir. 2009)). Regarding the second prong, the Second Circuit has identified two scenarios where circumstantial evidence gives rise to an inference of scienter: (1) "where the complaint sufficiently alleges that the defendants . . . 'knew facts or had access to information suggesting that their public statements were not accurate, '" and (2) where "it is sufficiently alleged that Defendants 'failed to check information they had a duty to monitor.'" Id. at 849 (quoting Novak, 216 F.3d at 311).
Here, Living the Dream's allegations fail to meet the heightened standard of Rule 9(b) of the Federal Rules of Civil Procedure. In order to comply with Rule 9(b), a plaintiff seeking to state a claim under Section 10(b) and Rule 10b-5 must: "(1) specify the statements that the plaintiff contends were fraudulent, (2) identify the speaker, (3) state where and when the statements were made, and (4) explain why the statements were fraudulent." Mills v. Polar Molecular Corp., 12 F.3d 1170, 1175 (2d Cir. 1993). In its Complaint and inquest papers, Living the Dream alleges only that Aloris and Santilli "made various untrue statements of material facts and/or omitted to state material facts necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading," Compl. ¶ 20; Bouderau Decl. ¶ 20. Living the Dream further alleges that Defendants failed to disclose that (1) they "had a material dispute and/or pending litigation and/or arbitration with Mike's and/or a third-party concerning Mike's and/or Aloris which jeopardized the value of the Securities and/or rendered them worthless[, ]" and (2) one or more of the representations in the Term Sheet were false. Compl. ¶¶ 17, 22-23; Bouderau Deck, ¶¶ 17, 22-23.
Citing the Santilli indictment, Living the Dream also argues in its inquest papers that Defendants conducted a scheme to mislead investors by selling 3, 500, 000 Class A Shares even though Defendants knew that Santilli (through Aloris) only controlled 1, 875, 000 Class A Shares in Mike's. Dkt. No. 43 at 7. However, Living the Dream provides no additional facts about this scheme and fails to reconcile this allegation with the allegation that it conducted due diligence to confirm that Aloris owned a 22.1% interest in Mike's. Compl. ¶ 9.
However, Living the Dream does not specify, either in its Complaint or its inquest papers, the statements that it contends were fraudulent, and instead merely lists a series of representations Defendants made. Compl. ¶ 8; Bouderau Decl. ¶ 8. Living the Dream also fails to state where or when these representations were communicated and to link any of these allegedly inaccurate representations to particular speakers. Mills, 12 F.3d at 1175 ("Rule 9(b) is not satisfied where the complaint vaguely attributes the alleged fraudulent statements to 'defendants'").
Moreover, Living the Dream merely states that "one or more representations were false" but fails to identify which of Defendants' representations or other statements were false or explain why those representations were misleading. Compl. ¶ 23; Bouderau Decl. ¶ 23; see Gao v. Yang, No. 20-CV-7285 (JPO), 2021 WL 3406327, at *2 (S.D.N.Y. Aug. 4, 2021) (investor plaintiffs securities fraud allegations did not fulfill PSLRA requirement to "specify each statement alleged to have been misleading [and] the reason or reasons why the statement is misleading . . . ."). With respect to scienter, Living the Dream alleges only that Defendants "had actual knowledge of materially false and misleading statements," but provides no additional facts supporting a strong inference of conscious misbehavior or recklessness. Compl. ¶ 28; see, e.g., In re Livent, Inc. Noteholders Sec. Litig., 151 F.Supp.2d 371, 433 (S.D.N.Y. 2001) ("reckless conduct in a § 10(b) claim 'represents an extreme departure from the standards of ordinary care. . . to the extent that the danger was either known to the defendant or so obvious that the defendant must have been aware of it'").
For all these reasons, Living the Dream has failed to adequately plead a violation of Section 10(b) and Rule 10b-5.
c. Violation of Section 20(a)
Under Section 20(a), "[e]very person who, directly, or indirectly, controls any person liable under any provision of this chapter or of any rule or regulation thereunder shall also be liable jointly and severally with and to the same extent as such controlled person to any person to whom such controlled person is liable . . . unless the controlling person acted in good faith and did not directly or indirectly induce the act or acts constituting the violation or cause of action." 15 U.S.C. § 78t(a). To state a claim under Section 20(a) of the Securities Exchange Act, a plaintiff must allege the following elements: "(1) a primary violation of Section 10(b) by the controlled person and (2) control of the primary violator by the defendant." In re Puda Coal Sec. Inc., 2017 WL 65325 at *IO; see also In re Dynagas LNG Partners LP Sec. Litig., 504 F.Supp.3d 289, 325 (S.D.N.Y. 2020). The control person claims under Section 20(a) asserted against Santilli are premised on a primary violation of Section 10(b) by Aloris. Compl. ¶¶ 33-35. Because Living the Dream failed to adequately plead a primary violation under Section 10(b), there is no basis upon which any Section 20(a) claim might be predicated. See, e.g., Cheng v. Canada Goose Holdings Inc., No. 19-CV-8204 (VSB), 2021 WL 3077469, at *I2 (S.D.N.Y. July 19, 2021) (dismissing Section 20(a) claim when plaintiff failed to adequately plead primary violation under Section 10(b)).
Because Living the Dream has failed to adequately plead a securities fraud claim, it is not entitled to any damages for those claims.
2. Common Law Claims
In addition to the damages for its federal securities fraud claims, Living the Dream seeks compensatory damages of $200,000 for all its common law claims, punitive damages of $260,000 for its fraud and fraudulent inducement claims, and $60,000 in lost profit damages for its breach of contract claim. Dkt. No. 43 at 6-7. As an initial matter, each of Living the Dream's claims "arise from the same fraudulent conduct and allege the same injury . . . and Plaintiffs are not. . . entitled to duplicative damages arising from the same conduct and same injury." Bolivar, 2017 WL 11473766, at *14 n.ll (citing Phelan v. Local 305 of United Ass'n of Journeymen, 973 F.2d 1050, 1063 (2d Cir. 1992) ("A plaintiff may not recover twice for the same injury."); see also, e.g., Am. Transit Ins. Co. v. Bilyk, 514 F.Supp.3d 463, 475 (E.D.N.Y. 2021) ("Because plaintiffs motion for default judgment is granted as to its common law fraud claims, the motion as to the unjust enrichment claims is denied as duplicative."); Sole v. Knoedler Gallery, LLC, No. 12-CV-2313 (PGG) (HBP), 2016 WL 5417880, at *9 n.7. (S.D.N.Y. July 21, 2016) (plaintiffs not entitled to recover on both common law fraud claim and overlapping federal claim because such recovery would be duplicative), adopted by 2016 WL 5468298 (S.D.N.Y. Sept. 28, 2016). Moreover, Living the Dream has failed to adequately plead its fraud and fraud in the inducement claims.
a. Fraud and Fraud in the Inducement
i. Elements of the Claim
"Under New York law, to state a claim for fraud, a plaintiff must demonstrate (1) a misrepresentation or omission of material fact; (2) which the defendant knew to be false; (3) which the defendant made with the intention of inducing reliance; (4) upon which the plaintiff reasonably relied; and (5) which caused injury to the plaintiff." Bolivar, 2017 WL 1143766, at *14 (quoting Wynn v. AC Rochester, 273 F.3d 153, 156 (2d Cir. 2001)). The elements of fraudulent inducement are: "(i) a representation of material fact; (ii) which was untrue; (hi) which was known to be untrue or made with reckless disregard for the truth; (iv) which was offered to deceive another or induce him to act, and (v) which that other party relied on to its injury." Aetna Cas. & Sur. Co. v. Aniero Concrete Co., 404 F.3d 566, 580 (2d Cir. 2005) (citations omitted).
Pursuant to the Term Sheet, New York law applies. See Bouderau Decl. Ex. A at 2. Moreover, Living the Dream cites to New York law in its inquest papers, and in the absence of any opposition from Defendants, the Court will apply New York law in considering Living the Dream's common law claims. See, e.g., Related Companies, L.P., 2019 WL 10947100, at *10 ("Where a moving party cites the law of a particular state in support of its claims, and the adverse party does not oppose the motion, the adverse party's 'silence on the choice-of-law questions' may be understood to 'constitute implied consent. . . sufficient to establish choice of law.'") (quoting Travelers Cas. And Surety Co. of America v. Gold, Scollar, Moshan, PLLC, No. 14-CV-10196 (DF), 2018 WL 1508573, at *7 (S.D.N.Y Mar. 14, 2018)).
As discussed above, pursuant to Rule 9(b), a plaintiff who alleges a fraud claim "must state with particularity the circumstances constituting fraud or mistake." Fed.R.Civ.P. 9(b). In order to comply with Rule 9(b), the "complaint must: (1) specify the statements that the plaintiff contends were fraudulent, (2) identify the speaker, (3) state where and when the statements were made, and (4) explain why the statements were fraudulent." Aquino by Convergent Distrib. of Texas, LLC v. Alexander Capital, LP, No. 21-CV-1355 (JSR), 2021 WL 3185533, at *12 (S.D.N.Y. July 27, 2021) (quoting Lemer v. Fleet Bank, N.A., 459 F.3d 273, 290 (2d Cir. 2006)). In addition, a plaintiff must also "allege facts that give rise to a strong inference of fraudulent intent." Id.
As with its federal securities fraud claims, Living the Dream has not adequately pled fraud or fraud in the inducement because it fails to (1) specify the statements that it contends were fraudulent; (2) link the alleged fraudulent statements to particular speakers; (3) identify where and when the statements were made; and (4) explain why the statements were fraudulent.
ii. Damages
Living the Dream seeks $200,000 in compensatory damages and $260,000 in punitive damages for its fraud and fraudulent inducement claims. Bouderau Decl. ¶¶ 44, 50; Dkt. No. 43 at 6-7. However, because Living the Dream has failed to adequately plead its fraud claims, it is not entitled to any damages with respect to those claims. Thus, Living the Dream is not entitled to the punitive damages it has requested either (but for the sake of completeness, the Court will reach the issue in this Report). "Under New York law, punitive damages are not a separate cause of action," but are instead "inextricably linked to the underlying cause of action." Levi v. Commonwealth Land Title Ins. Co., No. 09-CV-8012 (SHS), 2013 WL 5708402, at *10 (S.D.N.Y. Oct. 21, 2013) (quoting Greenbaum v. Svenska Handelsbanken, N.Y., 979 F.Supp. 973, 982 (S.D.N.Y. 1997) on reconsideration sub nom. Greenbaum v. Handlesbanken, 26 F.Supp.2d 649 (S.D.N.Y. 1998). "Punitive damages are not to compensate the injured party but rather to punish the tortfeasor and to deter this wrongdoer and others similarly situated from indulging in the same conduct in the future." Id. (quoting Ross v. Louise Wise Servs., Inc., 8 N.Y.3d 478, 489 (2007). However, "[s]uch damages are 'refused in the ordinary fraud and deceit case.'" Id. (quoting Walker v. Sheldon, 10 N.Y.2d 401, 405 (1961) (internal quotations omitted)).
It is well-established that a plaintiff seeking punitive damages must show "(1) that he was a victim of an independent tort; and (2) that the defendant's tortious conduct 'evinced a high degree of moral turpitude and . . . wanton dishonesty, '" Id. (quoting Walker, 10 N.Y.2d at 405). In addition, courts in this district have found that a plaintiff seeking punitive damages in an action for fraud must allege "that the fraud was upon the general public, that is, aimed at the public generally" Au v. Carryl, No. 14-CV-5223 (LGS) (JCF), 2015 WL 10792003, at *7 (S.D.N.Y. Aug. 6, 2015), adopted by 2015 WL 6741824 (Nov. 4, 2015); see also Levi, 2013 WL 5708402, at *10.
The Court acknowledges that "there is some division within the Appellate Divisions as well as within the U.S. district courts as to" whether, when seeking punitive damages for a fraud claim, a plaintiff must demonstrate that the fraud was aimed at the public generally. Levi, 2013 WL 5708402, at *10. In its inquest papers, Living the Dream also acknowledges this division. Dkt. No. 42 at 1-3. In the Court's view, because the purpose of punitive damages is to "deter this wrongdoer and others similarly situated from indulging in the same conduct in the future[, ]" the better position is that the fraud must be aimed at the general public in order for punitive damages to be awarded. Levi, 2013 WL 5708402, at *10.
Here, Living the Dream attempts to establish that Defendants' conduct was sufficiently egregious and aimed at the public generally by submitting a copy of the Santilli indictment charging similar conduct as Living the Dream alleges in this case (albeit directed at a group of victims that does not include Living the Dream). Dkt. No. 43 at 7-8; Dkt. No. 39-1. However, while the indictment demonstrates that Defendants' purported fraud may have affected several victims, there is no indication that their actions "were so far-reaching as to have been 'aimed at the public generally."' Levi, 2013 WL 5708402, at *ll (quoting Walker, 10 N.Y.2d at 405). At most, the indictment shows that Defendants' scheme only affected several individuals or entities who were interested in purchasing membership interests in Aloris, and punitive damages are therefore inappropriate. Dkt. No. 43 at 8. See also Levi, 2013 WL 5708402, at *ll (plaintiff not entitled to punitive damages on fraud claim because, despite defendant's indictment and criminal conviction, plaintiffs could only show that "the affected were a handful of individuals . . . interested in purchasing a single property . . . .").
Moreover, Living the Dream acknowledges that "the conviction rate for federal indictments is currently well over 90%." Dkt. No. 43 at 8. As a result, Santilli may suffer some form of punishment for his conduct, thus further rendering a punitive damages award unnecessary for the purposes of punishment and deterrence. See, e.g., Levi, 2013 WL 5708402, at *ll (denying punitive damages award because defendant "suffered punishment . . . through his criminal conviction and the sentence of incarceration").
b. Breach of Contract
i. Elements of the Claim
"To prevail on a breach of contract claim under New York law, a plaintiff must prove: (i) a contract; (ii) performance of the contract by one party; (iii) breach by the other party; and (iv) damages." Aquino by Convergent Dist. of Texas LLC, 2021 WL 3185533, at *I4 (quoting Terwilliger v. Terwilliger, 206 F.3d 240, 245-46 (2d Cir. 2000)).
ii. Liability
Living the Dream alleges that it entered into a contractual agreement with Defendants on November 30, 2017, and that pursuant to that agreement, it was to wire $200,000 to Defendants in exchange for 5% of Defendants' membership interest in Mike's. Compl. ¶¶ 11-12; Bouderau Decl. Ex. A. Moreover, according to the agreement, Living the Dream was to receive distributions from Defendants on a quarterly basis. Compl. ¶¶ 8, 12; Bouderau Decl. ¶ 12. In accordance with its obligations, Living the Dream wired the funds to Defendants on December 1, 2017. Compl. ¶ 12; Bouderau Decl. Ex B. Defendants neither provided the distributions promised to Living the Dream, nor returned its $200,000 investment, causing Living the Dream to suffer damages in this amount. Compl. ¶¶ 14-16, 57; Bouderau Decl. ¶¶ 14-16, 57. These allegations plainly suffice to establish Defendants' liabihty on its breach of contract claim. See, e.g., LG Capital Funding, LLC v. Stragenics, Inc., No. 17-CV-4295 (AJN), 2018 WL 3579102, at *2 (S.D.N.Y. July 25, 2018) ("plain language" of agreements "clearly estabhsh proof of the contractual obligations between the parties" and therefore defendant's failure to pay in accordance with agreements constitutes breach of contract).
iii. Damages
In addition to $200,000 in compensatory damages to which it is entitled for its breach of contract claim, Living the Dream also requests lost profits damages of $60,000. Compl. ¶ 57; Dkt. No. 43 at 6. However, restitution is a more appropriate form of damages in this case. Xpedior Creditor Trust v. Credit Suisse First Boston (USA) Inc., 341 F.Supp.2d 258, 271 (S.D.N.Y. 2004) ("Any of expectation, reliance, or restitution damages may be appropriate, bearing in mind that Plaintiff must prove any claimed damages were caused by Defendant's breach to a reasonable degree of certainty."). A plaintiff can only recover lost profits in a breach of contract action when it can establish "both the existence and amount of such damages with reasonable certainty." Schonfeld v. Hilliard, 218 F.3d 164, 172 (2d Cir. 2000) (citing Kenford Co. v. County of Erie, 67 N.Y.2d 257, 261 (1986)). "Although lost profits need not be proven with 'mathematical precision,' they must be 'capable of measurement based upon known reliable factors without undue speculation.'" Id. (quoting Ashland Mgt. Inc. v. Janien, 82 N.Y.2d 395, 403 (1993)). Moreover, "evidence of lost profits from a new business venture receives greater scrutiny because there is no track record upon which to base an estimate." Id. (quoting Kenford, 67 N.Y.2d at 261). In those situations, "[projections of future profits based upon 'a multitude of assumptions' that require 'speculation and conjecture' and few known factors do not provide the requisite certainty.'" Id. (quoting Kenford, 67 N.Y.2d at 262).
Here, Living the Dream cannot calculate its lost profits with the requisite certainty and without undue speculation. To calculate its lost profits, Living the Dream uses the Distribution Report from July 21, 2017 showing Aloris received $297,793.80 from its 22.1% Class A Shares in Mike's. Dkt. No. 43 at 6; Affirmation of Raymond J. Markovich dated February 23, 2021 ("Markovich Aff") Ex. 1, Dkt. No. 37-5. However, using that Distribution Report to calculate the lost profits is entirely speculative because it was likely the first quarterly distribution after the commencement of the "Magic Mike Live Las Vegas" show, given that the lease started on April 21, 2017. Compl. ¶ 8; Bouderau Decl. ¶ 8. There are no allegations regarding any subsequent distributions Aloris received. Therefore, there is an insufficient basis to calculate or predict the amount of profits Living the Dream would have received from its investment.
Furthermore, the date from which Living the Dream would be entitled to any profits is unclear. "[I]n a breach of contract case, damages are calculated at the time of the breach." Boyce v. Soundview Tech. Grp., Inc., 464 F.3d 376, 384 (2d Cir. 2006). "This rule applies equally to cases where the alleged breach involves the failure of one party to deliver shares of stock to the other party." Maxim Grp. LLC v. Life Partners Holdings, Inc., 690 F.Supp.2d 293, 299 (S.D.N.Y. 2010) (collecting cases). In such cases, the date of the breach is the date that defendant rejects plaintiffs request for transference of stock, or the date on which defendant promises to deliver the stock, but fails to do so. See e.g., Maxim Grp. LLC, 690 F.Supp.2d at 300; Aristocrat Leisure Ltd. v. Deutsche Bank Trust Co. Am., 618 F.Supp.2d 280, 294 (S.D.N.Y. 2009) (damages "should be calculated from the date that the nonbreaching party expected to receive the benefit of the contract," and "the most obvious date on which [defendant] breached the Indenture [was] when [defendant] refused to deliver the shares to the Bondholders after the Bondholders completed the necessary steps to convert their bonds").
In this case, Living the Dream does not specify an exact date upon which it was to receive its distribution from Aloris, nor does it specify a date upon which it demanded immediate payment of the distributions. Although Living the Dream assumes that Defendants' breach occurred 3.23 years ago, it does not provide any explanation or calculation for presuming that date of breach. Dkt No. 37 at 2; Dkt No. 43 at 6. In addition, Living the Dream's lost profits calculation speculates as to "increased profitability" and does not consider the deductions of account maintenance fees by Aloris as stipulated in the Term Sheet. Dkt. No. 43 at 6. For these reasons, restitution is a more appropriate form of damages in this case.
"Under New York law, restitution damages are available as an equitable remedy for repudiation or total breach of contract." Summit Props. Intern., LLC v. Ladies Professional Golf Ass'n, No. 07-CV-10407 (LBS), 2010 WL 4983179, at *3 (S.D.N.Y. Dec. 6, 2000). Restitution damages are guided by the equitable principle stipulating that "[a] person who has been unjustly enriched at the expense of another is required to make restitution to the other." Allianz Global Inv. GmbH v. Bank of Am. Corp., No. 18-CV-10364 (LGS) (SA), 2021 WL 3192814, at *8 (July 28, 2021) (quoting Restatement (Third) of Restitution § 1 (2021)). "Upon a demonstration that a defendant is liable for material breach, the plaintiff may recover 'the reasonable value of services rendered, goods delivered, or property conveyed less the reasonable value of any counter-performance received by him."' Bausch & Lomb v. Bressler, 977 F.2d 720, 729 (2d Cir. 1992) (quoting J. Calamari & J. Perdlo, Contracts § 15-4, at 651 (3d ed. 1987)).
Under a restitution theory, Living the Dream is entitled to recover only the $200,000 it paid to Defendants. Moreover, because Living the Dream alleges that Defendants failed to perform, there is no deduction for counter-performance.
Living the Dream also alleges that Aloris and Santilli are jointly and severally liable with respect to the breach of contract claim. Compl. ¶ 57. Because each of the Defendants acted in concert to produce a single injury, they should be held jointly and severally liable for any damages awarded to Living the Dream. See, e.g., In re Refco Inc. Securities Litig., Nos. 08-CV-3065 & 08-CV-3086 (JSR), 2014 WL 2514719, at *4 (S.D.N.Y. May 2, 2014) (citing Ravo v. Rogatnick, 70 N.Y.2d 305, 309 (1987) ("When two or more tort-feasors act concurrently or in concert to produce a single injury, they may be held jointly and severally liable.")); see also Todtman, Nachamie, Spizz & Johns, P.C. v. Ashraf, 241 F.R.D. 451, 457 (S.D.N.Y. 2007) (entering judgment against corporate entity defendant and individual defendant jointly and severally on breach of contract claim).
3. Prejudgment & Post-judgment Interest
In addition, Living the Dream is also entitled to prejudgment interest on its breach of contract damages as a matter of right. See N.Y. C.P.L.R. § 5001(a) ("Interest shall be recovered upon a sum awarded because of a breach of performance of a contract" (emphasis added)). "Under New York law, 'a plaintiff who prevails on a claim for breach of contract is entitled to prejudgment interest as a matter of right.'" Midwood Junction v. Puerto del Sol Int'l Inv., S.A., No. 15-CV-5181 (RA) (SN), 2016 WL 8905357, at *4 (S.D.N.Y. Dec. 5, 2016) (quoting U.S. Naval Inst. v. Charter Comm'ns, Inc., 936 F.2d 692, 698 (2d Cir. 1991)), adopted as modified by 2017 WL 1857248 (May 4, 2017). The applicable statutory interest rate is nine percent per annum, N.Y.C.P.L.R. § 5004, and this statutory interest may be "computed from the earliest ascertainable date the cause of action existed," Id. § 5001(b). In this case, "damages were incurred at various times" due to Defendants' ongoing failure to issue quarterly distribution payments and provide accounting and audit rights to Living the Dream, and therefore, "the Court may fix a 'single reasonable intermediate date' for the calculation of [prejudgment interest]." Fleisig v. ED&FMan Capital Markets, Inc., No. 19-CV-8217 (DLC), 2021 WL 2678675, at *I3 (S.D.N.Y. June 30, 2021) (quoting N.Y.C.P.L.R. § 5001(b)). Therefore, the Court should award prejudgment interest from April 14, 2019 - the approximate midpoint date between the parties' execution of the Term Sheet and the filing of the Complaint - through the date judgment is entered.
Moreover, as discussed above, Living the Dream has not provided any proposed date of breach. Although Living the Dream assumes that Defendants' breach occurred 3.23 years ago, it does not provide any explanation or calculation for presuming that date of breach and has not provided sufficient information for the Court to determine the date of breach. Dkt No. 37 at 2; Dkt No. 43 at 6.
The parties executed the Term Sheet on November 30, 2017, Compl. ¶ 11, and the Complaint was filed on August 27, 2020.
Living the Dream should also be awarded post-judgment interest, as it requests in its inquest papers. Dkt. No. 43 at 10. In a diversity case, post-judgment interest is mandated by federal law. See 28 U.S.C. § 1961(a) ("Interest shall be allowed on any money judgment in a civil case recovered in a district court."); see also Schipani v. McLeod, 541 F.3d 158, 165 (2d Cir. 2008) ("postjudgment interest is governed by federal statute" in diversity case). As this civil case was filed in federal district court, Living the Dream is "entitled to post-judgment interest on all money awards as a matter of right." See, e.g., Tacuri v. Nithin Constr. Co., No. 14-CV-2908 (CBA) (RER), 2015 WL 790060, at *I2 (E.D.N.Y. Feb. 24, 2015) (citing cases).
4. Attorney's Fees and Costs
Lastly, Living the Dream seeks $15,920 in attorney's fees and costs, pursuant to the Term Sheet provision that "the prevailing party in any action or proceeding shall be entitled to receive its reasonable attorneys' fees and costs from the non-prevailing party." Bouderau Decl. Ex. A at 2; see also Dkt. No. 43 at 9. Federal courts will enforce contractual provisions requiring one party to pay another's legal fees and costs in the event of a breach so long as they are reasonable. CARCO GROUP, Inc. v. Maconachy, 718 F.3d 72, 86 (2d Cir. 2013) (citing F.H. Krear & Co. v. Nineteen Named Trustees, 810 F.2d 1250, 1263 (2d Cir. 1987)); see also Wells Fargo Bank N.W., N.A. v. Taca International Airlines, S.A., 315 F.Supp.2d 347, 353 (S.D.N.Y. 2003). The inquiry into reasonableness in the context of attorney's fees centers on the lodestar, or "the product of a reasonable hourly rate and the reasonable number of hours required by the case." Millea v. Metro-North R.R., 658 F.3d 154, 166 (2d Cir. 2011) (the lodestar creates a "presumptively reasonable fee") (quoting Arbor Hill Concerned Citizens Neighborhood Ass'n v. Cnty. of Albany, 522 F.3d 182, 183 (2d Cir. 2008)); see also Perdue v. Kenny A. ex rel. Winn, 559 U.S. 542, 552-53 (2010). While "the lodestar is not always conclusive [, ] its presumptive reasonability means that" district courts must "calculate it as a starting point" in determining attorneys' fees, Millea, 658 F.3d at 166, departing from it if necessary "to reflect consideration of any case-specific circumstances." Laboratorios Rivas, SRL v. Ugly & Beauty, Inc., No. 11-CV-5980 (RA) (JLC), 2013 WL 5977440, at *I3 (S.D.N.Y. Nov. 12, 2013), adopted by 2014 WL 112397 (Jan. 8, 2014).
"The reasonable hourly rate is the rate a paying client would be willing to pay" and "a reasonable, paying client wishes to spend the minimum necessary to litigate the case effectively." Arbor Hill, 522 F.3d at 190. Determining whether an hourly rate is reasonable involves comparison to prevailing market rates "for similar services by lawyers of reasonably comparable skill, experience and reputation." Gierlinger v. Gleason, 160 F.3d 858, 882 (2d Cir. 1998) (quoting Blum v. Stenson, 465 U.S. 886, 896 n.ll (1984)); see also Reiter v. MTA New York City Transit Auth., 457 F.3d 224, 232 (2d Cir. 2006). The Court looks to the prevailing community rates in the district in which it sits. Reiter, 457 F.3d at 232.
As for the number of hours for which an award is sought, the court must consider "whether, at the time the work was performed, a reasonable attorney would have engaged in similar time expenditures." Deng, 2014 WL 1016853, at *I2 (quoting Grant v. Martinez, 973 F.2d 96, 99 (2d Cir. 1992). Claimed hours that are "excessive, redundant or otherwise unnecessary" may be reduced. Hensley v. Eckerhart, 461 U.S. 424, 434 (1983); accord Quaratino v. Tiffany & Co., 166 F.3d 422, 426 n.6 (2d Cir. 1999).
An attorney "who applies for court-ordered compensation in this Circuit . . . must document the application with contemporaneous time records . . . specif[ying], for each attorney, the date, the hours expended, and the nature of the work done." New York State Ass'n for Retarded Children, Inc. v. Carey, 111 F.2d 1136, 1148 (2d Cir. 1983). At all times, "the burden is on the fee applicant to produce satisfactory evidence - in addition to the attorney's own affidavits - that the requested rates are in line with those prevailing in the community for similar services." Blum, 465 U.S. at 896 n.ll. However, "[t]he Court may also rely on its own familiarity with prevailing rates in its district to determine a reasonable rate." Laboratorios Rivas, SRL, 2013 WL 5977440, at *I4 (citing Townsend v. Benjamin Enters., 679 F.3d 41, 59 (2d Cir. 2012); Miele v. New York State Teamsters Conference Pension & Ret. Fund, 831 F.2d 407, 409 (2d Cir. 1987)). Ultimately, the district court's discretion to set a fee award is broad. Hensley, 461 U.S. at 437; Matusick v. Erie Cty. Water Auth., 757 F.3d 31, 64 (2d Cir. 2014) ("We afford a district court considerable discretion in determining what constitutes reasonable attorney's fees in a given case, mindful of the court's superior understanding of the litigation and . . . what essentially are factual matters.") (quoting Barfield v. N.Y.C. Health & Hosps. Corp., 537 F.3d 132, 151 (2d Cir. 2008)).
Here, Living the Dream's attorney, Raymond Markovich, has presented a precise calculation of the hours spent in representing Living the Dream in this action. Markovich Aff. Ex. 2, Dkt. No. 37-6. Living the Dream seeks a rate of $400 for Markovich, who has been practicing for 28 years. Id. This hourly rate is within the range of what courts in this district have awarded to attorneys with similar experience. See, e.g., Villalta v. JS Barkats, P.L.L.C, No. 16-CV-2772 (RA) (RWL), 2021 WL 2458699 at *2l (S.D.N.Y. Apr. 16, 2021), ($400 hourly rate for managing partner in inquest was reasonable), adopted by 2021 WL 2458023 (June 16, 2021); Bank of Am., N.A. v. Brooklyn Carpet Exch., Inc., No. 15-CV-5981 (LGS) (DF), 2016 WL 8674686, at *7-8 (S.D.N.Y. May 13, 2016) (hourly rate of $300 to $310 reasonable for attorneys who had graduated at least 12 years prior to beginning work on breach of contract action), adopted by 2016 WL 3566237 (S.D.N.Y. June 27, 2016).
Markovich's affirmation provides no further information regarding his practice or experience. See Markovich Aff, Dkt. No. 37-4.
In assessing the number of hours for which compensation should be awarded, "[t]he court's role is not to determine whether the number of hours worked by [plaintiffs] attorney [] represents the most efficient use of resources, but rather whether the number is reasonable." Antetokounmpo v. Searcy, No. 20-CV-5055 (JGK) (KHP), 2021 WL 3233417, at *6 (S.D.N.Y. May 20, 2021) (quoting In, re Arbitration Between P.M.I. Trading Ltd. v. Farstad Oil, 160 F.Supp.2d 613, 616 (S.D.N.Y. 2001)), adopted by 2021 WL 3233005 (June 23, 2021). Markovich spent 38.8 hours on this case. Markovich Aff. Ex. 2, Dkt. No. 37-6. This number of hours expended is slightly higher than what courts in this district have found reasonable in a relatively straightforward action where the defendant has defaulted. HTV Indus., Inc. v. Agarwal, 317 F.Supp.3d 707, 724-25 (S.D.N.Y. 2018), as amended (June 18, 2018) (35.6 hours claimed in "a relatively straightforward contract claim" in which defendant defaulted warranted 25 percent reduction in fees); Customers Bank v. Anmi, Inc., No. 11-CV-07992 (AJN), 2014 WL 842577, at *IO (S.D.N.Y. Mar. 3, 2014) (20.6 hours found reasonable in action arising from default on promissory note where defendant defaulted); Diamant v. Dynasty Diamond & Jewelry Grp. Corp., No. 04-CV-3844 (GBD) (DF), 2006 WL 728802, at *5 (S.D.N.Y. Mar. 20, 2006) (18.91 hours spent on breach of contract case in which defendant defaulted found reasonable). Therefore, a modest reduction of 20% of hours expended (from 38.8 to 31.04 hours) is warranted in this case. In so recommending, the Court specifically takes note of the seven hours Markovich apparently spent researching, drafting, and serving the Proposed Findings of Fact and Conclusions of Law. Markovich Aff. Ex. 2, Dkt. No. 37-6. Living the Dream's Proposed Findings of Fact was essentially a condensed version of its complaint and contained virtually no legal authority tying its proposed damages figures to the legal claims for which liability had been established. Given this scant submission, the seven hours billed for this purpose was excessive.
Living the Dream has not submitted any attorney time records for work performed after February 23, 2021, including time spent preparing the Supplemental Declaration of Raymond J. Markovich dated May 6, 2021 (Dkt. No. 39) and the Supplemental Proposed Findings of Fact and Conclusions of Law (Dkt. No. 43).
With these modifications and using the lodestar method, Living the Dream should be awarded $12,816 in attorney's fees and costs - $12,416 for attorney's fees (31.04 hours x $400 per hour) and $400 for the S.D.N.Y. filing fee.
III. CONCLUSION
For all of the foregoing reasons, I recommend that Living the Dream be awarded $200,000 in contract damages, plus prejudgment interest on that award at a rate of 9% per annum and post-judgment interest as described above against Defendants jointly and severally. In addition, I recommend that the Court award Living the Dream $12,816 for its attorney's fees and costs.
PROCEDURE FOR FILING OBJECTIONS
Pursuant to 28 U.S.C. § 636(b)(1) and Rule 72(b) of the Federal Rules of Civil Procedure, the parties shall have fourteen (14) days from service of this Report to file written objections. See also Fed. R. Civ. P. 6. Such objections, and any responses to such objections, shall be filed with the Clerk of Court, with courtesy copies delivered to the chambers of the Honorable Lorna G. Schofield, United States Courthouse, 40 Foley Square, New York, NY 10007. Any requests for an extension of time for filing objections must be directed to Judge Schofield.
FAILURE TO FILE OBJECTIONS WITHIN FOURTEEN (14) DAYS WILL RESULT IN A WAIVER OF OBJECTIONS AND WILL PRECLUDE APPELLATE REVIEW. 28 U.S.C. § 636(b)(1); Fed.R.Civ.P. 72. See Thomas v. Arn, 474 U.S. 140 (1985); Wagner & Wagner, LLP v. Atkinson, Haskins, Nellis, Brittingham, Gladd & Carwile, P.O., 596 F.3d 84, 92 (2d Cir. 2010).