Opinion
No. 04-CV-9930 (RO).
June 30, 2005
MEMORANDUM AND ORDER
Plaintiffs Michael and Michele Nathel filed this action in December of 2004 against defendants Evan Misshula and Sane Capital, an investment advisory company of which Misshula was President and owner. The complaint alleges (1) violations of Section 17(a) and 10(b) of the Securities Exchange Act, (2) breach of fiduciary duty, (3) fraud, (4) and breach of contract. According to the complaint, Misshula fraudulently induced plaintiffs to invest $250,000.00 in a hedge fund in January of 2000. In a January 11, 2003 letter he represented that it had increased to a value of $312,458.30. In July of 2004, plaintiffs sought to liquidate their investment, and defendant Misshula stated in a letter that the investment had grown to over $446,000.00 which was segregated and free from risk. In that July 17, 2004 letter, Misshula expressly agreed in writing to repay the investment in the amount of $446,147.00 no later than September 30, 2004 and to pay $1,000 dollars a day for every day the payment was thereafter late. No payments were ever made. One check was sent in the amount of $25,000.00, and bounced on August 12, 2004. Another check was immediately sent to plaintiffs, but with the direction not to deposit it until notified it was good. Plaintiffs allege the funds were never invested, but were instead fraudulently converted for defendants' own purpose.
According to the clerk's certificate, defendant Evan Misshula was personally served on January 4, 2005. As of April 4, 2005, defendant had not filed an answer or otherwise moved. Plaintiffs then moved for an entry of default judgment in the amount of $1,000,000.00 with interest at 9%, amounting to $1,040,930.51 plus costs and disbursements of $411.70.
This Court entered a default judgment and held an inquest on the issue of damages on April 18, 2005. The plaintiffs claim to have been "damaged in an amount to be determined at trial but, in any event, in an amount not less than One Million Dollars." See ¶ 47. Defendants claim plaintiffs' counsel has no basis for stating the sum sought "is justly due and owing." Tucker Affirmation, ¶ 6.
Damages may be awarded in this instance on the theory of fraud or breach of contract, the former of which the Court awards damages on. In the letter of July 17, 2004, defendant expressly acknowledged and signed in writing to repay the investment in the amount of $446,147.00. This claim, whether or not fraudulent, was made to induce the plaintiff's into keeping their money with defendant for another two and half months. Therefore, as to the second cause of action, I award damages of $446,147.00, plus 9% interest (starting from September 30, 2004 to present) and costs ($411.70), totaling $468,460.47. As to the fourth cause of action, I award $250,000 (not to be cumulated), plus 9% interest (starting from January 7, 2000), and costs ($411.70), totaling $373,576.08.
I decline to award punitive damages. Judgment is entered for $468,460.47.
So Ordered.