Opinion
No. 3-04-CV-1875-G.
May 13, 2005
FINDINGS AND RECOMMENDATION OF THE UNITED STATES MAGISTRATE JUDGE
This case has been referred to U.S. Magistrate Judge Jeff Kaplan for a hearing on damages pursuant to 28 U.S.C. § 636(b)(1)(B) and an order of reference dated April 6, 2005. The findings and recommendation of the magistrate judge are as follow:
I.
On August 27, 2004, plaintiff filed suit in federal district court against Defendants Gary Reeves, Victor Noval, Joseph Medawar, Starbrand Holdings Corp. a/k/a Starbrand Holdings, L.L.C. ("StarBrand"), Calleo Gourmet Coffees, Inc. ("Calleo"), Ken Johnson, Ken Johnson and/or Calleo Gourmet Coffees, Inc. d/b/a Kicks Coffee Cafe ("Kicks"), Calleo Gourmet Coffees, L.L.C., and Sweet Lorraine Productions, Inc. ("SLP"). The gravamen of plaintiff's complaint is that defendants conspired to obtain a $175,000 loan by falsely representing that he would receive 3% of the partnership shares of StarBrand and that the money would be repaid to him pursuant to the terms of a Loan and Stock Issuance Agreement. Plaintiff never received the stock and defendants have not repaid the loan. By this suit, plaintiff seeks $175,000 in actual damages for breach of contract, fraud, and conspiracy. He also seeks exemplary damages under Tex. Civ. Prac. Rem. Code § 41.001, et seq.
Federal jurisdiction is proper because plaintiff and defendants are citizens of different states and the amount in controversy exceeds $75,000, exclusive of interest and costs. See 28 U.S.C. § 1332(a)(1).
Defendants were duly served with process but failed to answer or otherwise appear. On January 28, 2005, the court entered an interlocutory default judgment as to liability against Reeves, Noval, Medawar, StarBrand, Calleo, Johnson, and Kicks. An interlocutory default judgment was entered against SLP on March 28, 2005. The only remaining issue is the amount of money, if any, that should be awarded to plaintiff as damages.
At plaintiff's request, the claims against Calleo Gourmet Coffees, L.L.C., the only other defendant named in the complaint, were dismissed without prejudice on January 25, 2005.
II.
On May 5, 2005, the magistrate judge held an evidentiary hearing so plaintiff could prove-up his damages. Plaintiff appeared in person and through his counsel of record. Bradford Romano also testified at the hearing. After considering the evidence and the argument of counsel, the magistrate judge finds that plaintiff sustained actual economic damages in the amount of $175,000 as a proximate result of the breach of contract and tortious conduct made the basis of this suit. The magistrate judge further finds by clear and convincing evidence that the harm with respect to which plaintiff seeks recovery of exemplary damages resulted from fraud on the part of defendants. See Tex. Civ. Prac. Rem. Code § 41.003(a)(1). Therefore, plaintiff is entitled to recover two times the amount of his economic damages, or $350,000, as exemplary damages. See id. § 41.008(b)(1)(A).
In the proposed final judgment submitted to the court, plaintiff has elected to recover fraud damages and waived his breach of contract claim. Accordingly, the magistrate judge recommends that the court enter judgment in favor of plaintiff and against Defendants Gary Reeves, Victor Noval, Joseph Medawar, Starbrand Holdings Corp. a/k/a Starbrand Holdings, L.L.C., Calleo Gourmet Coffees, Inc., Ken Johnson, Ken Johnson and/or Calleo Gourmet Coffees, Inc. d/b/a Kicks Coffee Cafe, and Sweet Lorraine Productions, Inc., jointly and severally, in the following amounts:
1. Actual economic damages in the amount of $175,000;
2. Exemplary damages in the amount of $350,000;
3. Prejudgment interest at the rate of 5.75% per annum, or $16,770.80; and
4. Post-judgment interest at the prevailing legal rate.
All costs of court should be taxed against defendants, jointly and severally.
A copy of this recommendation shall be sent to all counsel and any unrepresented parties. Any party may file written objections to this recommendation by June 3, 2005. The failure to file written objections shall bar the aggrieved party from appealing the factual findings and legal conclusions of the magistrate judge that are accepted or adopted by the district court, except upon grounds of plain error or manifest injustice. See Douglass v. United Services Automobile Ass'n, 79 F.3d 1415, 1417 (5th Cir. 1996).