Opinion
22-CV-4074 (LLS) (JLC)
11-29-2022
CREATIVE GLASSWARE INDUSTRIAL CO. LTD., Plaintiff, v. LIFESTYLE INTERNATIONAL LLC, Defendant.
To the Honorable Louis L. Stanton, United States District Judge:
REPORT & RECOMMENDATION
JAMES L. COTT UNITED STATES MAGISTRATE JUDGE
In this breach of contract case, a certificate of default was entered against Defendant Lifestyle International LLC on June 22, 2022. Plaintiff Creative Glassware Industrial Co., Ltd., moved for a default judgment on July 13, 2022. The case was then referred to me to determine liability and to conduct an inquest into damages. For the reasons stated below, Creative Glassware Industrial Co., Ltd.'s motion should be granted, but it should not be awarded any damages or attorney's fees. However, it should be awarded its costs. Finally, its request that Lifestyle International LLC be directed to take possession of the goods in question should be denied.
I. BACKGROUND
A. Procedural History
On May 18, 2022, Creative Glassware Industrial Co., Ltd. (“Plaintiff”) filed a complaint against Lifestyle International LLC (“Defendant”). Complaint dated May 18, 2022 (“Compl.”), Dkt. No. 1. Plaintiff asserted a single cause of action for breach of contract based on its allegations that Defendant had failed to make full payment pursuant to two purchase orders. Id. ¶¶ 22-27. Defendant was served on May 23, 2022. Dkt. No. 10. Defendant did not file an answer or otherwise appear in this action. Accordingly, a certificate of default was entered against it on June 22, 2022. Dkt. No. 15.
On July 13, 2022, Plaintiff moved for a default judgment. Motion for Default Judgment, Dkt. No. 20; Memorandum of Law (“Pl. Mem.”); Affidavit of Routing Men dated July 11, 2022 (“Men Aff.”), Dkt. No. 21; Proposed Default Judgment, Dkt. No. 23. On August 19, 2022, without any action having been taken on the motion, the case was referred to me to conduct an Inquest into Damages after Default. Dkt. No. 24. By order dated August 23, 2022, I directed Plaintiff to make any additional submissions relating to the inquest by September 6, 2022. Dkt. No. 25. On September 6, 2022, Plaintiff filed an Affirmation of Routing Men in Support of Request for Attorney's Fees (“Second Men Aff.”), Dkt. No. 26, and a Statement of Damages (“Stmt.”), Dkt. No. 27. That same day Plaintiff also filed an Affidavit of Service. Dkt. No. 28.
B. Factual Background
The following facts, which are drawn from the complaint and supported by Plaintiff's submissions related to this inquest, are deemed established for the purpose of determining the damages to which Plaintiff is entitled. See, e.g., Sills Cummis & Gross P.C. v. Dusange-Hayer, No. 19-CV-7463 (PGG) (SDA), 2020 WL 6561650, at *1, n.1 (S.D.N.Y. Aug. 14, 2020) (citing Finkel v. Romanowicz, 577 F.3d 79, 84 (2d Cir. 2009)), adopted by 2020 WL 5253516 (Sept. 3, 2020).
Plaintiff is a manufacturer of glassware with its principal place of business in Shenzhen, China. Compl. ¶¶ 1-2. Defendant is a limited liability company organized under the laws of, and with its principal place of business in, the state of New York. Id. ¶ 3. On November 2, 2021, an employee of Defendant emailed Plaintiff “expressing Defendant's intention to order” glass food containers. Id. ¶ 7. This transaction was reflected in two purchase orders and the goods were shipped through four shipments from China to the United States. Id. ¶ 8. The parties agreed to the following payment schedule: “20% deposit, 20% before shipment, then 60% against [the Bill of Lading] Copy.” Id. ¶ 12. Plaintiff received full payment for one shipment and subsequently arranged for the delivery of the three remaining shipments. Id. ¶¶ 9-10.
On January 12, 2022, Plaintiff emailed Defendant after it failed to provide the 20% deposit for the remaining three containers and Defendant responded that the payment would be made the following week. Id. ¶ 11. However, Defendant failed to pay and between January 12, 2022 and May 11, 2022, Plaintiff and Defendant engaged in multiple conversations regarding Defendant's lack of payment, of both the 20% deposit and the remaining payments for all four shipments. Id. ¶¶ 11-19. In the meantime, the shipments were sent from China to Los Angeles and arrived at the Port of Los Angeles on or about March 1, 2022. Id. ¶ 16. As a result of Defendant's failure to pay, the shipments remained at the Port and demurrage and other charges began to accrue daily. Id. ¶ 20.
According to Plaintiff, the purchase orders constituted a valid and enforceable contract of which Defendant is in breach. Id. ¶¶ 22, 25. As a result of Defendant's breach, Plaintiff seeks $197,627.20, which includes the amount due pursuant to the purchase orders, consequential and incidental damages, plus interest, attorney's fees, and costs. Pl. Mem. at 1. In addition, Plaintiff requests that the Court direct Defendant to take possession of the shipments from the Port. Pl. Mem. at 10.
This number is the sum of the amount due to Plaintiff under the contract ($71,587.20) and Plaintiff's calculations of consequential and incidental damages ($126,040). Pl. Mem. at 1.
II. DISCUSSION
A. Legal Standards
1. Liability
Where a defendant has defaulted, a court is still “required to determine whether the [plaintiff's] allegations establish [the defendant's] liability as a matter of law.” Related Comps., L.P. v. Ruthling, No. 17-CV-4175 (JSR) (DF), 2019 WL 10947100, at *3 (S.D.N.Y. July 23, 2019) (quoting Finkel, 577 F.3d at 84); see also Cont'l Indus. Grp. v. Altunkilic, 788 Fed.Appx. 37, 40 (2d Cir. 2019) (“A district court is empowered to evaluate the sufficiency of allegations before awarding damages in a default judgment.”). “Thus, if the ‘complaint fails to state a cognizable claim, a plaintiff may not recover even upon defendant's default.'” Living the Dream Films, Inc. v. Aloris Entm't, LLC, & John Santilli, No. 20-CV-6982 (LGS) (JLC), 2021 WL 4342700, at *3 (S.D.N.Y. Sept. 24, 2021) (quoting 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)), adopted by 2021 WL 5822233 (Dec. 7, 2021). Because a liability finding was not made as part of the entry of the default judgment, the Court will analyze as a threshold matter whether Plaintiff has a viable breach of contract claim under New York law before considering the issue of damages.
2. Damages
“Even when a default judgment is warranted based on a party's failure to defend, the allegations in the complaint with respect to the amount of the damages are not deemed true. The district court must instead conduct an inquiry in order to ascertain the amount of damages with reasonable certainty.” Am. Jewish Comm. v. Berman, No. 15-CV-5983 (LAK) (JLC), 2016 WL 3365313, at *3 (S.D.N.Y. June 15, 2016) (quoting Credit Lyonnais Sec. (USA), Inc. v. Alcantara, 183 F.3d 151, 155 (2d Cir. 1999), adopted by 2016 WL 4532201 (Aug. 29, 2016). A plaintiff “bears the burden of establishing its entitlement to recovery and thus must substantiate its claim with evidence to prove the extent of its damages.” Id. at *2 (cleaned up). “To establish damages upon default, a plaintiff must demonstrate that the ‘compensation sought relate[s] to the damages that naturally flow from the injuries pleaded.'” Id. at *3 (quoting Greyhound Exhibitgroup, Inc. v. E.L.U.L. Realty Corp., 973 F.2d 155, 159 (2d Cir. 1992)). “[A] plaintiff must submit sufficient evidence, in the form of detailed affidavits and other documentary materials . . . to enable the district court to ‘establish damages with reasonable certainty.'” Nat'l Photo Grp., LLC v. Bigstar Entm't, Inc., No. 13-CV-5467 (VSB) (JLC), 2014 WL 1396543, at *2 (S.D.N.Y. Apr. 11, 2014) (quoting Transatlantic Marine Claims Agency, Inc. v. Ace Shipping Corp., 109 F.3d 105, 111 (2d Cir. 1997)), adopted by 2014 WL 5051275 (Oct. 8, 2014); see also Fed.R.Civ.P. 55(b)(2).
“Under New York law, [which applies here,] a successful plaintiff in a breach of contract action is entitled to damages in the amount necessary to put the plaintiff in the same economic position [it] would have been in had the defendant fulfilled [its] contract.” Am. Jewish Comm., 2016 WL 3365313, at *5 (cleaned up). “Where damages are susceptible to simple mathematical calculation and the plaintiff provides a ‘sufficient basis from which to evaluate the fairness' of the requested damages, no evidentiary hearing is necessary.” Euro Pac. Capital Inc. v. Bohai Pharm. Grp., Inc., No. 15-CV-4410 (VM), 2018 WL 1596192, at *5 (S.D.N.Y. Mar. 28, 2018) (quoting Am. Jewish Comm., 2016 WL 3365313, at *4).
B. Analysis
1. Liability
The complaint asserted a single claim for breach of contract. As a result of the alleged breach, Plaintiff seeks compensatory damages, late payment fees, interest, and consequential and incidental damages. In this case, the Court applies New York law because it sits in diversity. See, e.g., Bos. Sci. Corp. v. N.Y. Ctr. for Specialty Surgery, No. 14-CV-6170 (RRM) (SGM), 2015 WL 13227994, at *2 (E.D.N.Y. Aug. 31, 2015), adopted by 2016 WL 8711378 (Jan. 29, 2016). “To state a claim for breach of contract under New York law, a plaintiff must allege (1) the existence of an agreement, (2) adequate performance of the contract by the plaintiff, (3) breach of contract by the defendant, and (4) damages.” Hudson & Broad, Inc. v. J.C. Penney Corp., 553 Fed.Appx. 37, 38-39 (2d Cir. 2014) (cleaned up).
First, Plaintiff has alleged that the two specified purchase orders comprised a “valid and enforceable contract.” Compl. ¶ 22. In support of its allegations that an enforceable contract exists, Plaintiff attached as Exhibits A and B to its memorandum of law two “sales contracts” on its letterhead, and two purchase orders on Defendant's letterhead. Pl. Mem., Ex. A, B (Dkt. Nos. 20-2, 20-3).Neither the purchase orders nor the sales contracts are signed by either Plaintiff or Defendant. Id., Ex. A at 3, 5, Ex. B at 2, 4. Under New York Law, the Statute of Frauds requires that “a contract for the sale of goods for the price of $500 or more is not enforceable by way of action or defense unless there is some writing sufficient to indicate that a contract for sale has been made between the parties and signed by the party against whom enforcement is sought.” N.Y. U.C.C. § 2-201(1). An exception to this rule provides:
Plaintiff's counsel should have submitted these documents as attachments to his affidavit (or even better, to an affidavit from someone at Creative Glassware Industrial Co., Ltd.), rather than simply attaching them to the memorandum of law, as it is well-settled that “[a]n attorney's unsworn statements in a brief are not evidence.” Kulhawik v. Holder, 571 F.3d 296, 298 (2d Cir. 2009). Nonetheless, the information provided in these documents should be credited at this time to avoid additional delay. See, e.g., Canaveral v. Midtown Diner NYC, Inc., No. 19-CV-635 (GBD) (JLC), 2019 WL 4195194, at *8 n.9 (S.D.N.Y. Sept. 5, 2019), adopted by 2019 WL 6170058 (Nov. 19, 2019).
Between merchants if within a reasonable time a writing in confirmation of the contract and sufficient against the sender is received and the party receiving it has reason to know its contents, it satisfies the [Statute of Frauds] requirements . . . against such party unless written notice of objection to its contents is given within ten days after it is received.Id. § 2-201(2). Further, courts in this Circuit have found on multiple occasions that “the lack of a signature . . . is not fatal to [a] plaintiff's breach of contract claim.” See, e.g., Chuzhou Jincheng Metal Work Co. v. AT-SAF Inc., No. 20-CV-745 (LDH) (RLM), 2020 WL 13581669, at *7 (E.D.N.Y. Aug. 20, 2020) (citations omitted); see also Bos. Sci. Corp., 2015 WL 13227994, at *2 n.1. A contract that fails to satisfy New York's Statute of Frauds but which is otherwise valid is enforceable, “with respect to goods for which payment has been made and accepted or which have been received and accepted.” Chuzhou Jincheng Metal Work Co., 2020 WL 13581669, at *7 (citations omitted). In Boston Scientific Corp., for example, the plaintiff who was alleging a breach of contract did not provide a copy of the signed contract nor did the invoices which the plaintiff provided as evidence have signatures. 2015 WL 13227994, at *2 n.1. Nonetheless, the court there found the existence of a contract because the invoices demonstrated that “goods were delivered and accepted, and one payment was successfully made.” Id.
Here, as in Boston Scientific Corp., taking Plaintiff's well-pleaded allegations as true, along with the sales contracts and purchase orders, it appears that the parties entered into a contract. Although the sales contracts and purchase orders are unsigned, Plaintiff has alleged that it sent out four shipments and Defendant paid in full for one of them. Compl. ¶¶ 9-10. Thus, as in Boston Scientific Corp., “[t]hese facts are sufficient to establish the existence of a binding agreement even if no document has been presented.” Boston Scientific Corp., 2015 WL 13227994, at *2 n.1.
Second, Plaintiff has sufficiently pleaded the remaining elements of a breach of contract claim. Plaintiff alleges that the goods were shipped from China to Los Angeles and the purchase orders demonstrate as much, thus satisfying Plaintiff's performance. Compl. ¶¶ 8-9; Pl. Mem. at 2. In addition, Plaintiff has alleged that it has received no further payment beyond payment for the first shipment from Defendant, thus demonstrating a breach. Compl. ¶ 9. Finally, Plaintiff alleges damages as a result of Defendant's failure to pay. Compl. ¶ 26; Pl. Mem. at 3. “Having alleged each element . . ., [Plaintiff] has established its claim for breach of contract under New York Law.” Chuzhou Jincheng Metal Work Co., 2020 WL 13581669, at *8. Accordingly, Plaintiff has stated a cognizable cause of action and its motion for a default judgment should be granted.
2. Breach of Contract Damages
Although Plaintiff has sufficiently pleaded a cause of action, it has not provided a sufficient evidentiary basis for the Court to recommend an award of damages. A damages award must have “an evidentiary basis” from “evidence presented at a hearing or upon a review of detailed affidavits and documentary evidence.” Citizens Bank, N.A. v. Krolak, No. 19-CV-223 (DNH), 2019 WL 3304556, at *3 (N.D.N.Y. July 23, 2019) (citing Cement & Concrete Workers Dist. Council Welfare Fund v. Metro Found. Contractors Inc., 699 F.3d 230, 234 (2d Cir. 2012)). It is left to the Court's discretion to determine when a hearing is necessary. See, e.g., Tamarin v. Adam Caterers, Inc., 13 F.3d 51, 54 (2d Cir. 1993) (“Rule 55(b)(2) and relevant case law give district judges much discretion in determining when it is ‘necessary and proper' to hold an inquest on damages.”). Here, where the damages are “susceptible to simple mathematical calculation,” a hearing should not be necessary. Euro Pac. Capital Inc., 2018 WL 1596192, at *5.
In support of its application for an award of damages, Plaintiff relies only on the following: the affirmation of its attorney, who does not set forth the basis for his personal knowledge of the damages in question; unauthenticated invoices from Plaintiff to Defendant; unauthenticated purchase orders from Defendant to Plaintiff; unauthenticated documents titled “Master Pack Shipping Mark Details;” and purported screenshots of a conversation between one of Plaintiffs employees and Defendant. See Men Aff; Second Men Aff, Pl. Mem., Ex. A and Ex. B; Stmt., Ex. A. None of these documents provides a sufficient evidentiary basis to support an award of damages.
Notably, Plaintiff has now had two opportunities to submit evidentiary support for its damages claims: first in support of its motion for a default judgment, and now as part of this inquest proceeding. The Court, of course, could continue to request submissions from Plaintiff, but that would preclude finality in this case. Inquests are not intended to be open-ended so that a plaintiff can continue to submit materials until it gets it right. See, e.g., Cont'l Indus. Grp., Inc. v. Altunkilic, No. 14-CV-790 (AT) (JLC), 2018 WL 1508566, at *3 (S.D.N.Y. Mar. 27, 2018) (in inquest submission, “[p]laintiff should have provided everything it had. The Report and Recommendation process does not permit ‘parties to undertake trial runs of their motion, adding to the record in bits and pieces depending upon the rulings or recommendation they received.'” (citing Hynes v. Squillace, 143 F.3d 653, 656 (2d Cir. 1998)), aff'd in part, vacated in part, on other grounds, 788 Fed.Appx. 37 (2d Cir. 2019).
In Citizens Bank, N.A., for example, the court found that where a plaintiff had only provided “unauthenticated” documents and an attorney affirmation that did not “set forth the basis for any personal knowledge of the damages in question,” there was no evidentiary basis for damages. 2019 WL 3304556, at *3 (citing E. Reg'l Med. Ctr., Inc. v. Fry, No. 18-CV-396 (BKS) (TWD), 2018 WL 5266873, at *3 (N.D.N.Y. Oct. 23, 2018) (attorney affidavit deemed insufficient to establish plaintiffs' damages and entitlement to recovery and requiring submission of affidavit from employee with personal knowledge of basis for amounts sought)). Thus, the request for damages should be denied given the inadequate record before the Court.
Plaintiff also requests pre- and post- judgment interest. Pl. Mem. at 7-8. Because the Court recommends denying Plaintiff a damages award, it does not assess Plaintiff's request for interest.
3. Request for Order That Defendant Take Possession
Plaintiff also seeks an order directing Defendant to take possession of the shipping containers that remain in the Port of Los Angeles. Pl. Mem. at 10. In support of its request, Plaintiff cites Danielson v. Local 275, Laborers Int'l Union of N. Am., in which the Second Circuit observed that “[i]rreparable injury is suffered where monetary damages are difficult to ascertain or are inadequate.” Pl. Mem. at 10 (citing to Danielson v. Local 275, Laborers Int'l Union of N. Am., 479 F.2d 1033, 1037 (2d Cir. 1973)). Plaintiff argues that such an order is necessary because the containers that remain at the Port of Los Angeles are incurring demurrage over time. Id. However, as with Plaintiff's request for damages, this contention that money damages are inadequate is not supported by any documentary evidence. See, e.g., Billion Tower Int'l, LLC v. MDCT Corp., No. 08-CV-4185 (LAK) (JLC), 2010 WL 5536513, at *12 (S.D.N.Y. Dec. 10, 2010), adopted by 2011 WL 43458 (Jan. 6, 2011). Moreover, “the factual record has not been sufficiently developed to warrant such relief.” Id.; see also Sadowski v. Primera Plana NY, Inc., No. 18-CV-10072 (GBD) (OTW), 2019 WL 8362165, at *1 n.1 (S.D.N.Y. Oct. 16, 2019) (if plaintiff had requested injunctive relief, it would have been denied for lack of evidentiary support), adopted by 2021 WL 5910407 (Dec. 14, 2021). Accordingly, the request for an order directing Defendant to take possession of the shipping containers should be denied as well.
It is also unclear from the record if the shipping containers do in fact remain at the Port of Los Angeles. Plaintiff's Statement of Damages provides that the “goods were released by the Port to [an] unknown party on July 18, 19, and 22.” Stmt. at 2; Stmt., Ex. B. If that is true, then Plaintiff's damages would be mathematically discernible, and the request should be denied on this basis as well.
4. Attorney's Fees
Plaintiff is not entitled to attorney's fees, as “a plaintiff who prevails on a breach of contract claim is generally not entitled to attorneys' fees.” Time Inc. Retail v. Newsways Servs., Inc., No. 16-CV-9479 (VSB) (JLC), 2018 WL 316995, at *5 (S.D.N.Y. Jan. 8, 2018) (citations omitted), adopted by 2018 WL 2332067 (May 22, 2018). Plaintiff requests that the Court apply an exception to this rule reserved for “a successful party when his opponent has acted in bad faith, vexatiously, wantonly, or for oppressive reasons.” Stmt. at 1 (citing to F.D. Rich Co. v. United States for the Use of Indus. Lumber Co., Inc., 417 U.S. 116, 129 (1974)). Plaintiff details Defendant's conduct during the course of their business transaction as evidence of Defendant's “bad faith.” “[H]owever, ‘[t]he appropriate focus for the court in applying the bad-faith exception . . . is the conduct of the party in instigating or maintaining the litigation.” U.S. ex rel. Nat. Dev. & Const. Corp. v. U.S. Env't Universal Servs., Inc., No. 11-CV-730 (CS), 2014 WL 4652712, at *8 (S.D.N.Y. Sept. 2, 2014) (quoting Kerin v. U.S. Postal Serv., 218 F.3d 185, 195 (2d Cir. 2000) (citation omitted)). Thus, whatever Defendant's conduct was towards Plaintiff in the transaction in question, because it was “entirely unrelated to the process of litigation,” it “may not form the sole basis of a bad faith fee award.” Id. (citation omitted).
Additionally, Plaintiff has not presented any evidence to demonstrate that the contract in question included a term that obligated Defendant to pay Plaintiff's attorney's fees in the event any litigation was to ensue. See, e.g., Lenard v. Design Studio, 889 F.Supp.2d 518, 537 (S.D.N.Y. 2012) (no attorney's fees if no contractual or statutory provision warrants such an award). Accordingly, the request for attorney's fees should be denied.
5. Costs
Plaintiff requests $562 in costs for filing and process server fees. Men Aff. ¶ 9.“Fee awards normally include those reasonable out-of-pocket expenses incurred by the attorney and which are normally charged fee-paying clients.” Tr. of N.Y.C. Dist. Council of Carpenters Pension Fund, Welfare Fund, Annuity Fund v. B&L Moving & Installation, Inc., No. 16-CV-4734 (GBD) (JLC), 2017 WL 4277175, at *8 (S.D.N.Y. Sept. 26, 2017) (cleaned up), adopted by 2018 WL 705316 (Feb. 5, 2018). However, “the requesting party must substantiate the request for costs.” Guo v. Tommy's Sushi, Inc., No. 14-CV-3964 (PAE), 2016 WL 452319, at *3 (S.D.N.Y. Feb. 5, 2016). Here, attached to Plaintiff's statement of damages are documents that support its requests for costs. See Stmt. Ex. C (filing fee receipt), Stmt. Ex. D (process server receipt).
Specifically, these costs consist of a $402 filing fee and a $160 service fee. Men Aff. ¶ 9.
As other courts have ruled, “[c]osts for shipping, filing fees, process servers, and litigation support are routinely recoverable.” Bank of Am., N.A. v. Brooklyn Carpet Exch., Inc., No. 15-CV-5981 (LGS) (DF), 2016 WL 8674686, at *11 (S.D.N.Y. May 13, 2016) (collecting cases), adopted by 2016 WL 3566237 (June 27, 2016). Accordingly, Plaintiff should be awarded $562 in costs.
III. CONCLUSION
For the foregoing reasons, Plaintiff's motion for a default judgment should be granted, but it should not be awarded damages or attorney's fees. Its request for $562 in costs should be granted. Finally, Plaintiff's request for a court order directing Defendant to take possession of the goods in question should be denied.
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 Louis L. Stanton, United States Courthouse, 500 Pearl Street, New York, NY 10007. Any requests for an extension of time for filing objections must be directed to Judge Stanton.
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.C., 596 F.3d 84, 92 (2d Cir. 2010).