Opinion
00 Civ. 9167 (RMB)(FM)
November 15, 2002
REPORT AND RECOMMENDATION TO THE HONORABLE RICHARD M. BERMAN
I. Introduction
Plaintiff Nuera Communications, Inc. ("Nuera") originally brought this diversity contract action against defendants Telron Communications USA, Inc., f/k/a Phone-n-Phone USA, Inc., f/k/a Phone-n-Phone LLC ("Telron"), Phone-n-Phone (Bermuda) Ltd. ("Bermuda"), and Eliyahu Kelman ("Kelman") to recover damages for goods sold and delivered and associated labor and service charges. After the defendants failed to answer the complaint, Your Honor entered a default judgment on December 5, 2001 against defendants Telron and Kelman and ordered that the action be discontinued as against Bermuda because Nuera had been unable to serve Bermuda within the required time. (See Docket No. 7). Thereafter, the matter was referred to me to determine damages.
By order dated February 26, 2002, I directed Nuera to serve papers setting forth its damages by March 29, 2002, with defendant Telron to respond by April 12, 2002. (See Docket No. 8). Because that order inadvertently failed to mention Kelman, I issued a second order, dated September 9, 2002, which required him to submit any opposing papers by September 23, 2002. (See Docket No. 10). Although Nuera's papers were timely filed, neither defendant filed any opposition papers.
I noted, after a preliminary review of the inquest papers, that Nuera had not established that Telron was a successor to Bermuda and therefore liable for Bermuda's contractual undertakings. I similarly concluded that there had not been an adequate showing that Kelman was Telron's guarantor. Recognizing that this might have been the result of an incomplete submission, rather than an inability to establish Telron's liability, I issued a further order, dated September 23, 2002, which permitted Nuera to supplement its prior prior papers within ten days. (See Docket No. 11). The only additional documentation that Nuera submitted was the affirmation of Linda Gates, Esq., one of its attorneys, who has no personal knowledge of the relevant facts. (See Docket No. 12).
As set forth below, after reviewing the complaint and Nuera's inquest papers, as supplemented, I recommend that Nuera be awarded damages against defendant Kelman only in the amount of $381,193.31, consisting of an award of $301,600 for goods sold and delivered, $62.713.79 for services rendered, pre-judgment interest in the amount of $16,729.52, and $150 in taxable costs.
II. Facts
In light of the defendants' default, Nuera's well-pleaded allegations concerning issues other than damages must be accepted as true. See Cotton v. Slone, 4 F.3d 176, 181 (2d Cir. 1993); Greyhound Exhibitgroup, Inc. v. E.L.U.L. Realty Corp., 973 F.2d 155, 158 (2d Cir. 1992); Time Warner Cable of New York City v. Barnes, 13 F. Supp.2d 543, 547 (S.D.N.Y. 1998); Cablevision Sys. New York City Corp. v. Lokshin, 980 F. Supp. 107, 111 (E.D.N.Y. 1997).
Additionally, although a plaintiff seeking to recover damages against a defaulting defendant must prove its claim through the submission of evidence, the Court need not hold a hearing as long as it has (i) determined the proper rule for calculating damages on the claim, see Credit Lyonnais Secs. (USA), Inc. v. Alcantara, 183 F.3d 151, 155 (2d Cir. 1999), and (ii) the plaintiff's evidence establishes, with reasonable certainty, the basis for the damages specified in the default judgment. See Transatlantic Marine Claims Agency, Inc. v. Ace Shipping Corp., 109 F.3d 105, 111 (2d Cir. 1997); Fustok v. ContiCommodity Servs., Inc., 873 F.2d 38, 40 (2d Cir. 1989); see also Tamarin v. Adam Caterers, Inc., 13 F.3d 51, 53-54 (2d Cir. 1993) (inquest on damages without hearing improper where based upon "single affidavit only partially based upon real numbers").
In this case, on the basis of the complaint and Nuera's inquest papers, I find that the facts are as follows:
Nuera is a corporation engaged in the business of providing telecommunications products and services to telecommunications providers. (Affidavit of Michael R. Rinehart, sworn to on Apr. 10, 2002 ("Rinehart Aff."), at ¶ 2). Pursuant to a written contract, dated January 17, 2000, Nuera sold and delivered telecommunications equipment to Bermuda for an agreed price of $603,200. (Compl. ¶¶ 6, 7 Ex. A; Rinehart Aff. Ex. 4). Bermuda paid Nuera one-half of the contract price up front, but despite its acceptance of the goods, has never paid Nuera the $301,600 balance. (Compl. ¶¶ 8-9 Ex. B; Rinehart Aff. ¶ 3).
Notwithstanding Mr. Rinehart's contention that this contract was entered into with Telron, the exhibits attached to his affidavit plainly show that Bermuda was the purchaser. (Compare Rinehart Aff. ¶ 3 with id. Exs. 4-5).
On or about December 21, 1999, Nuera entered into a professional services agreement with "Phone-N-Phone," which I take to be another name for Bermuda. (Compl. Ex. C; Rinehart Aff. Ex. 6). Pursuant to that agreement, Nuera provided telecommunications services to Bermuda between February 9 and August 3, 2000, for which it rendered monthly statements totaling $62,713.79. (Comp. ¶¶ 16-18 Ex. D). Bermuda never contested those statements, but nevertheless has failed to pay Nuera the agreed amount for its services. (Compl. ¶ 18).
While the services contract states that the agreement is between Nuera and an entity referred to as "Phone-N-Phone," the address listed for Phone-N-Phone in the contract is the same as Bermuda's, and all the invoices for services are addressed to Bermuda. (See Rinehart Aff. Ex. 6-7).
In his affidavit, Mr. Rinehart indicates that Nuera seeks to recover $63,588.79 for these services. The invoices attached to the complaint, however, do not support the additional $875 that he requests.
To induce Nuera to grant open account payment terms to Bermuda, Eliyahu Kelman, the Chief Executive Officer of Bermuda, executed and delivered a personal guaranty of payment to Nuera on or about January 27, 2000. (Compl. ¶ 27 Ex. E; Rinehart Aff. Ex. 4). In his guaranty, Kelman absolutely and unconditionally guaranteed the full and prompt payment of any sums owed to Nuera by Bermuda and its successors and assigns. (Id.).
III. Discussion
A. Telecommunications Equipment
Nuera seeks to recover the balance outstanding with respect to the equipment supplied to Bermuda under two established legal theories: "goods sold and delivered" and "account stated." Under New York law, the first of these theories permits a seller to recover its contract price upon a showing that the goods were ordered, received, and accepted by a purchaser who did not subsequently reject them within a reasonable period of time. See Shokai Far East Ltd. v. Energy Conservation Sys., Inc., 628 F. Supp. 1462, 1466 (S.D.N.Y. 1986); Mount Vernon Mills, Inc. v. Murphy Textile Mills, 148 A.D.2d 389, 390, 539 N.Y.S.2d 334, 335 (1st Dep't 1989); N.Y. U.C.C. §§ 2-602(1), 2-703(e), 2-709(1)(a) (McKinney 2001). To establish an account stated, a seller must show that the parties agreed to an account based upon prior transactions between them. See LeBoeuf, Lamb, Greene MacRae, L.L.P. v. Worsham, 185 F.3d 61, 64 (2d Cir. 1999). Such an agreement may be implied if the "party receiving a statement of account keeps it without objecting to it within a reasonable time." Chisholm-Ryder Co., Inc. v. Sommer Sommer, 70 A.D.2d 429, 431, 421 N.Y.S.2d 455, 457 (4th Dep't 1979).
In this case, after making a down payment, Bermuda agreed to pay an additional $301,600 to Nuera. The goods were received and accepted, but Bermuda has not paid the balance, despite having never contested the adequacy of the goods or the accuracy of the statements that Nuera periodically sent to Bermuda in an effort to recover the outstanding balance. Nuera therefore has established that it is entitled to recover $301,600 for the telecommunications equipment sold to Bermuda.
B. Professional Services
Nuera also has established that it rendered services to Bermuda which were valued at $62,713.79. Moreover, Nuera rendered monthly bills to Bermuda for these services. Inasmuch as Bermuda has never contested the accuracy of those statements, Nuera is entitled to recover $62,713.79 from Bermuda for these professional services.
C. Prejudgment Interest
Nuera is entitled to pre-judgment interest. Under Sections 5001 and 5002 of the New York Civil Practice and Rules ("CPLR"), the party prevailing in a breach of contract action is entitled to prejudgment interest from the date that the breach occurred until the date of final judgment. If the contract provides a rate at which interest is to be calculated, then the contractual rate, rather than the statutory rate of nine percent per year as set forth in CPLR Section 5004, governs. See Williamson Co., Inc. v. Colby Engraving Rubber Plate Corp., 98 Misc.2d 134, 135-36, 413 N.Y.S.2d 580, 581-82 (1979) (prejudgment interest following defendant's default in payments to plaintiff for goods sold and delivered is to be calculated at contract rate); Astoria Fed. Sav. and Loan Ass'n v. Rambalakos, 49 A.D.2d 715, 716, 372 N.Y.S.2d 689, 690 (2d Dep't 1975) (contract rate, rather than statutory rate, applies after maturity and before judgment).
On its equipment claim, Nuera suggests that prejudgment interest should be calculated at a contractual rate of 1.5% per annum, commencing on March 1, 2000, which is thirty days after its original invoice date. (Rinehart Aff. ¶ 1; Compl. ¶ 10). Although I am unable to find any documentary support for this rate, it is substantially lower than the rate authorized by statute. Accordingly, the defendants are benefitted by its application. Pursuant to the lower rate, the per diem interest rate is $12.39 ($301,600 X 0.015 ÷ 365).
Since the default judgment was entered on December 5, 2001, Nuera is entitled to prejudgment interest for a period of 644 days, or a total of $7979.16, on its equipment claim.
Turning to the professional services claim, at the 9% statutory rate, prejudgment interest on the $62,713.79 balance is payable at the per diem rate of $15.46 ($62,713.79 X 0.09 ÷ 365). When "damages were incurred at various times," that interest must, however, be "computed upon each item from the date it was incurred or upon all of the damages from a single reasonable intermediate date." See N.Y. C.P.L.R. § 5001(b) (McKinney 2001). The court has "wide discretion" in determining the reasonable date from which to award prejudgment interest. See Conway v. Icahn Co., 16 F.3d 504, 512 (2d Cir. 1994); cf. City of New York v. Coastal Oil New York, Inc., 2000 WL 648365, *2 (S.D.N.Y. May 18, 2000) (Patterson, J.) (setting reasonable intermediate date as April 15, 1993, where plaintiff had overpaid for deliveries between October 19, 1992 and October 30, 1993); Oy Saimaa Lines Logistics Ltd. v. Mozaica-New York, Inc., 193 F.R.D. 87, 91 (E.D.N.Y. 2000) (calculating prejudgment interest from the midpoint of the outstanding invoices).
In this case, Nuera rendered eight invoices to Bermuda for professional services which are dated between March 2 and August 3, 2000. The midpoint between these dates is May 18, 2000. Accordingly, for a period of 566 days, Nuera is entitled to prejudgment interest in the amount of $8,750.36.
D. Taxable Costs
Nuera also seeks to recover as taxable costs the $150 fee for filing this action. Rule 54(d) of the Federal Rules of Civil Procedure provides, insofar as relevant, that "costs other than attorneys' fees shall be allowed as of course to the prevailing party unless the court otherwise directs." These "costs" include only those taxable costs set forth in 28 U.S.C. § 1920. See Crawford Fitting Co. v. J.T. Gibbons, Inc., 482 U.S. 437, 441, 107 S.Ct. 2494, 2497, 96 L.Ed.2d 385 (1987); Whitfield v. Scully, 241 F.3d 264, 269 (2d Cir. 2001). The filing fee, which is enumerated in the statute, consequently is taxable as a cost of this action. See 28 U.S.C. § 1920(1); Local Civ.R. 54.1(c)(10).
Nuera should therefore be awarded a total of $150 as a taxable cost.
E. Liable Parties
1. Kelman
But for the dismissal of Bermuda from this action, Nuera would have been entitled to recover a total of $381,193.31, plus post-judgment interest, from Bermuda.
By virtue of his absolute and unconditional guaranty, Kelman is liable to Nuera for all dam ages arising out of Bermuda's contractual default, including court costs. Accordingly, judgment should be entered against Kelman in the amount of $381,193.31.
2. Telron
The paperwork initially submitted by Nuera in support of its damages claim did not contain any documentation suggesting that Telron was a successor to Bermuda and therefore liable for its debts. Additionally, when Nuera was given an opportunity to supplement the record, it submitted no additional documentation, arguing instead that the default judgment is "res judicata" as to Telron. (See Suppl. Affirm. of Linda Gates, Esq., dated October 3, 2002, at ¶ 9). Nuera, however, still had an obligation to establish the amount of Telron's alleged indebtedness. Since Nuera has failed to show that Telron is a successor to Bermuda, it is not entitled to any damages against Telron.
IV. Conclusion
Nuera should be awarded judgment against defendant Eliayahu Kelman in the amount of $381,193.31, consisting of $301,600 for goods sold and delivered, $62,713.79 for professional services provided, $16,729.52 in prejudgment interest, and $150 in taxable costs. To the extent that Nuera seeks a similar award against Telron, its request should be denied.
V. Notice of Procedure for Filing of Objections to this Report and Recommendation
The parties are hereby directed that if they have any objections to this Report and Recommendation, they must, within ten (10) days from today, make them in writing, file them with the Clerk of the Court, and send copies to the chambers of the Honorable Richard M. Berman, United States District Judge, at the United States Courthouse, 40 Centre Street, New York, N.Y. 10007, to the chambers of the undersigned, at the United States Courthouse, 500 Pearl Street, New York, N.Y. 10007, and to any opposing parties. See 28 U.S.C. § 636(b)(1); Fed.R.Civ.P. 6(a), 6(e), 72(b). Any requests for an extension of time for filing objections must be directed to Judge Berman. Any failure to file timely objections will result in a waiver of those objections for purposes of appeal. See Thomas v. Arn, 474 U.S. 140, 106 S.Ct. 466, 88 L.Ed.2d 435 (1985); 28 U.S.C. § 636(b)(1); Fed.R.Civ.P. 6(a), 6(e), 72(b).