Opinion
INDEX NO. 651165/2018
07-31-2020
SPECIAL MATERIALS COMPANY, Plaintiff, v. BIO-CHEM AMERICA, INC., Defendant.
NYSCEF DOC. NO. 28 Decision and Order ORDER OF THE SUPREME COURT, NEW YORK COUNTY: PART 81R
By decision and order of the Honorable Tanya R. Kennedy dated March 13, 2019, the issue of the amount of money damages due and owing to plaintiff by defendant, was referred for assignment to a Special Referee to hear and determine.
The court granted a motion made by plaintiff for leave to enter a default judgment against defendant pursuant to CPLR 3215, without opposition, and referred the instant matter.
The instant matter was assigned to the undersigned Special Referee on May 29, 2019, at which time only plaintiff appeared. Appearances were as follows: For Plaintiff,
Joseph B. Weiner, Esq.
Olshan, Frome, Wolosky, LLP
1325 Avenue of the Americas
New York, N.Y. 10019 For Defendant (Default),
Bio-Chem America, Inc.
c/o Legal Inc. Corporate Services Inc.
2035 Sunset Lake Road, Suite B-2
Newark, DE 19702
An inquest in the instant matter was held on May 29, 2019.
Findings of Fact
(1) Plaintiff Special Materials Company ('SMC") is a global marketer and producer of special chemicals. SMC was formed in 1996 by Adam Feldman ("Feldman"), the company's CEO and majority shareholder. Defendant Bio-Chem America, Inc. ("Bio-Chem") is an affiliate of a Chinese company known as Dalian Bio-Chem Company Limited ('Dalian"). (2) In or about 2009, SMC became involved with "biocides," a class of products that are used in the treatment of water in order to prevent the build-up of bacteria, fungus and mold. Sometime prior to the commencement of the instant action, SMC and Bio-Chem entered into a Limited Liability Company Agreement (the "Agreement"), whereby the parties agreed to form and become "members" of a Delaware limited liability company known as "DBSM, LLC" for the purpose of "conducting" business. "Dalian Member" was also a party to the Agreement. The parties also entered into a 'Services Agreement," a "Distribution Agreement" and a "Facilities Agreement." (3) SMC and Bio-Chem agreed in "Schedule A" of the Agreement that SMC would hold a 40% interest in DBSM, LLC and that Bio-Chem would hold a 60% interest in the company. The parties agreed in "Schedule B" of the Agreement that the companies would be involved in "products" as identified in the parties' Distribution and Facilities Agreements. (4) The parties further agreed in 'Schedule C" of the Agreement that in order to facilitate DBSM, LLC being able to sell products in US markets, a Environmental Protection Agency ("EPA") registration would be transferred from Dalian to DBSM, LLC "when conditions permits." It was also agreed by the parties that the EPA registration would "always" be owned by Dalian and that in the event DBSM, LLC dissolved, the EPA registration would be returned to Dalian. (5) Dalian failed to transfer the EPA registration to DBSM, LLC and SMC suffered financial loss due to this failure.
A copy of this document was admitted into evidence as Plaintiff's Exhibit#1
it must be noted that copies of these agreements were not offered into evidence by plaintiff.
Conclusions of Law
(1) The Special Referee's query is limited by the scope of the instant matter (see, Marshall v. Pappas, 143 AD2d 979 [2nd Dept. 1998]-[The referee is controlled by the Order of Reference, and must comply with the directions therein]; Volk v. Volk, 254 AD2d 274 [2nd Dept. 1998]).
(2) In the determination of the referenced issue, the referee is to consider the character, demeanor and interest of the witnesses. As the trier of fact, the referee determines whether or not the testimony is colored intentionally or unintentionally by those factors (see, Lauria v. Lauria, 187 AD2d 888, 889 [3rd Dept. 1992]).
(3) Although the witness may have an interest in the outcome of the litigation (see, Coleman v. New York Tr. Auth., 41 AD2d 812, affirmed 37 NY2d 137 [1975]), which Is highly material in assessing the credibility of the witness (see 65 NY Jur., Witnesses, 71, pp. 233-2340, it does not mean that the witness has not told the truth (see, Calandra v. Norwood, 83 AD2d 650, 651 [2nd Dept. 1981]; Dobro v. Village of Sloane, 48 AD2d 243, 247-248, appeal dismissed 37 NY2d 804 [1975]-[it is widely accepted that whether a witness has a personal interest in the outcome of the litigation is a factor that must be considered in order to adequately perform the unique duty of weighing the evidence and assessing the credibility of witnesses]).
(4) As the trier of fact, the referee has the liberty to disbelieve the testimony of a witness even though it is not otherwise impeached or contradicted (see, Dominquez v. Manhattan & Bronx Surface Tr. Operating Auth., 46 NY2d 528, 534 [1979]-[issues of credibility are for the trier of fact]).
(5) The parties must establish by a fair preponderance of the credible evidence that the claims they are making are true (see, Spangenberg v. Chaloupka, 229 AD2d 482, 483 [3rd Dept. 1996]). The evidence must be relevant and have the tendency to make the existence of any fact more probable than it would be without the evidence (see, Epstein & Wessenberger, New York Evidence 1996/1997 Courtroom Manual 1996, Chap. 3-1, at 35; People v. Lewis, 69 NY2d 321, 325 [1987]-[evidence is relevant if it has any tendency in reason to prove any material fact]). Evidence which is "evenly balanced' is insufficient
to overcome the burden of any presumption (see, Rinaldi & Sons, Inc. v. Wells Fargo Alarm Services, Inc., 39 NY2d 191, 196 [1976]).
(6) It is well-settled that a written agreement that is complete, clear and unambiguous on its face must be enforced according to the plain meaning of its terms (see, Morales v. Rotino, 27 AD3d 433, 435 [3rd Dept. 2006]).
(7) Damages for breach of contract must not be speculative, must be generally foreseeable, and within the contemplation of contracting parties (see, Dinicur v. Groff Studios Corp., 257 AD2d 218, 223 [1st Dept. 1999]). Damages awarded in breach of contract cases are intended to return the parties to the point at which the breach arose, and to place the non-breaching party in as good a position as it would have been had the contract been performed (see, Brushton-Moira Cent. School Dist. v. Fred H. Thomas Associates, P.C., 91 NY2d 256, 261 [1998]).
Analysis
(1) I have considered all of the relevant evidence, and I find that SMC has established, by a preponderance of the evidence, that it is entitled to an award of damages against defendant in the total amount of $10,411,598.00 (see, Spangenberg v. Chaloupka, supra). (2) Specifically, I find that Feldman testified credibly that he is the founder, CEO and majority shareholder in SMC, and that in 2009, SMC got involved in biocides (see, Lauria v. Lauria, supra). I also find that Feldman testified credibly that prior to entering into the Agreement, he and "Chairman Liu" of Dalian, negotiated the terms of such agreement (.id). (3) I find that Feldman also testified credibly that he and Chairman Liu created a spread sheet, which included charts, that outlined the profits the parties would realize based upon certain projections and that such projections could be "aggressive" or "conservative" (.id). (4) I further find that Feldman testified credibly that it was decided that SMC would sell an "active" product and a 'formulated" product under the terms of the Agreement (.id). I find that Feldman testified credibly that the parties projected that 2,000 tons of the 'active" product would be sold yearly at a price of $36.1 a kilo and that 5,000 tons of the 'formulated" product would be sold yearly at a price of $1.20 a kilo for an annual profit in the amounts of $2,442,444.00 and $2,763,355.00, respectively (.id). I find that Feldman also testified credibly that under the terms of the Agreement, DBSM, LLC was to operate perpetually, but that the parties assumed that the company would be in operation for at least 5 years (.id). I find that Feldman testified credibly that SMC performed its obligations under the terms of the Agreement by providing Bio-Chem with financial records, introducing it to key customers, and in other important ways (.id). (5) I find that Feldman testified credibly that the EPA registration was required in order to successfully market products and that SMC's sales were a fraction of what had been projected due to Dalian's failure to provide the EPA registration to DBSM, LLC (.id). (6) As such, I find the evidence supports an award in damages to SMC to be paid by Bio-Chem in the amount of $10,411,598.00, representing the amount of $2,442,444.00 in projected annual profits for SMC's "active' product, plus the amount of $2,763,355.00 in projected annual profits for SMC's 'formulated" product for a total in projected annual profits in the amount of $5,205,799.00; multiplied by SMC'S 40% in DBSM, LLC, equaling the amount of $2,082,319.60; multiplied by 5 years (see, Dinicur v. Groff Studios Corp., Brushton-Moira Cent. School Dist. v. Fred H. Thomas Associates, P.C., supra).
A copy of these charts were admitted into evidence as Plaintiff's Exhibit#2.
A copy of a summary of a calculation of damages suffered by SMC was admitted into evidence as Plaintiff's Exhibit#3. Additionally, counsel for SMC submitted an affirmation in further support of SMC's claim
Conclusion
Upon consideration of the evidence presented, the considered credibility to be afforded the witness, and review of all documents admitted into evidence, I find that SMC is entitled to an award in damages against Bio-Chem in the total amount of $10,411,598.00.
ORDERED that the clerk of the court is directed to enter a judgment in favor of Special Materials Company and against Bio-Chem America, Inc. in the amount of $10,411,598.00;
ORDERED that interest on the judgment shall be calculated at the statutory rate, together with costs and disbursements, to be taxed by the Clerk upon submission on an appropriate bill of costs.
The foregoing constitutes the decision and order of the court. Date: July 31, 2020.
/s/_________
Lancelot B. Hewitt,
Special Referee Enter:
/s/_________
Clerk of the County