Source: http://ny.findacase.com/research/wfrmDocViewer.aspx/xq/fac.20180309_0000818.SNY.htm/qx
Timestamp: 2019-04-21 18:18:14+00:00

Document:
FindACase | Euro Pacific Capital Inc. v. Bohai Pharmaceuticals Group, Inc.
Euro Pacific Capital Inc. v. Bohai Pharmaceuticals Group, Inc.
BOHAI PHARMACEUTICALS GROUP, INC., Defendant.
James L. Cott, United States Magistrate Judge.
On April 15, 2016, the Court entered default in this breach of contract action in favor of plaintiff Euro Pacific Capital, Inc., individually and in its capacity as investor representative and attorney-in-fact for numerous individual investors, against Defendant Bohai Pharmaceuticals Group, Inc. The case was subsequently referred to me to conduct an inquest into damages. For the reasons set forth below, I recommend granting Euro Pacific's request for $6, 843, 549 in damages, as well as prejudgment interest on that award at a rate of 9% per annum beginning April 5, 2016 and continuing until the date of entry of judgment. I also recommend that Euro Pacific be awarded $107, 194.40 in attorneys' fees, and $9, 793.87 in costs.
The following facts, which are drawn from a review of Euro Pacific's pleadings and supported by its submissions related to this inquest, are deemed established for the purpose of determining the damages to which it is entitled. See, e.g., Finkel v. Romanowicz, 577 F.3d 79, 84 (2d Cir. 2009) (“In light of [defendant's] default, a court is required to accept all of [plaintiff's] factual allegations as true and draw all reasonable inferences in its favor [.]”) (citing Au Bon Pain Corp. v. Artect, Inc., 653 F.2d 61, 65 (2d Cir. 1981)).
Euro Pacific is an investment company incorporated under the laws of California with its principal place of business in Connecticut. Supp. Chema Aff. ¶ 6. Bohai is a Nevada company with its principal place of business in China. Supp. Chema Aff. ¶ 4. Bohai produces, manufactures, and distributes herbal pharmaceuticals. Supp. Chema Aff. ¶ 5.
On or about January 5, 2010, a group of 124 investors represented by Euro Pacific invested $11, 100, 000.00 in Bohai. Supp. Chema Aff. ¶¶ 2, 8; Compl. ¶ 12. The investment was carried out through the purchase of promissory notes (the “Notes”). Compl. ¶ 11. In exchange for $2.00, investors were issued a $2.00 convertible note (a “Note”), with each Note to be repaid in full by January 5, 2012 with 8% annual interest. Id. ¶¶ 11, 15; Supp. Chema Aff. ¶ 13; Supp. Chema Aff. Ex. 4 (Note). Euro Pacific also entered into a Securities Purchase Agreement with Bohai, which governed the purchase of the Notes. Compl. ¶ 19; Supp. Chema Aff. Ex. 3 (Securities Purchase Agreement). The Securities Purchase Agreement was also signed by each investor. Supp. Chema Aff. ¶ 9; Supp. Chema Aff. Ex. 10 (signed pages).
On or about December 28, 2011, a week before the Notes' original maturity date, Euro Pacific and Bohai amended the Notes, extending the maturity date to April 5, 2012 and increasing the interest rate to 12%. Supp. Chema Aff. ¶ 13; Supp. Chema Aff. Ex. 12 (first amendment to Notes). Over the course of the next two and a half years, Euro Pacific and Bohai agreed to four more amendments, each extending the maturity date and maintaining an interest rate of 12%. Supp. Chema Aff. ¶¶ 14-17; Supp. Chema Aff. Ex. 13-16 (second, third, fourth, and fifth amendments to Notes). The maturity date set by the fifth and final amendment was April 5, 2016. Supp. Chema Aff. ¶ 17; Supp. Chema Aff. Ex. 16 (providing April 5, 2016 date).
Between April 2012 and March 2014, Bohai made ten payments on the Notes, totaling $4, 284, 049, which were first applied to the interest and then to the principal. Supp. Chema Aff. ¶¶ 20-21. However, after March 2014, Bohai stopped making payments on the Notes. Supp. Chema Aff. ¶¶ 20-22. As of the maturity date of April 5, 2016, a total of $6, 843, 549 was due to the noteholders, comprised of $4, 987, 021 in outstanding principal and $1, 856, 528 in unpaid interest. Supp. Chema Aff. ¶ 26; Chema Decl. ¶¶ 7-8 (citing to Supp. Chema Aff. Ex. 18 at 4) (tables listing outstanding principal and unpaid interest owed to noteholders as of maturity date).
On June 8, 2015, Euro Pacific filed this breach of contract action against Bohai. Compl. ¶¶ 40-72. Bohai initially appeared with counsel and engaged in motion practice. October 26 Order at 1. Subsequently, however, the Court granted Bohai's attorney's motion to withdraw. Id. at 2. Bohai having failed to answer or otherwise make an appearance following the withdrawal of its counsel, the Court entered default judgment against it on April 15, 2016. Id.
Almost nine months later, Euro Pacific moved for an inquest on damages. Motion for Inquest, dated January 13, 2017 (Dkt. No. 44). In its motion, Euro Pacific sought damages of $8, 677, 552.46 for the outstanding principal and unpaid interest on the Notes, as well as attorneys' fees and costs of $147, 174.30. Id. at 4. Following a referral to conduct an inquest, I recommended that the Court deny the requests for monetary damages and attorneys' fees and costs without prejudice to renewal, on the grounds that Euro Pacific had not submitted sufficient evidence to establish compensatory damages with reasonable certainty and had failed to establish that the requested attorneys' fees and costs were reasonable. Euro Pac. Capital, Inc., 2017 WL 3208036, at *8-14.
After receiving two extensions, see Dkt. Nos. 55 & 58, on October 11, 2017, Euro Pacific timely filed its objections to my Initial Report. Objections (Dkt. No. 59). In support of its objections, Euro Pacific submitted a supplemental affidavit from Chema and a supplemental affirmation from Graff.
On October 26, 2017, the Court agreed that, based on the record before it, compensatory damages and attorneys' fees and costs should be denied. October 26 Order at 5-6. The Court then directed that I receive into evidence Chema's supplemental affidavit and Graff's supplemental affirmation with accompanying exhibits, reconsider the inquest motion upon the new record, and issue a revised Report and Recommendation. Id. at 7. Upon review of Chema's supplemental affidavit, I found that it did not provide a sufficient basis upon which to determine damages for interest with reasonable certainty, and ordered a further submission. Order, dated Feb. 13, 2018, Dkt. No. 66. Accordingly, on February 16, 2018, Euro Pacific filed a declaration of Peter Chema to address the Court's expressed concerns.
Euro Pacific seeks an award of $6, 843, 549-which is the amount of outstanding principal and unpaid interest due to the investors on the date of the Notes' maturity-as well as prejudgment interest on that award, $136, 578.50 in attorneys' fees, and $9, 793.87 in costs.
“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 (S.D.N.Y. 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 *3 (alterations omitted) (quoting Dunn v. Advanced Credit Recovery Inc., No. 11-CV-4023 (PAE) (JLC), 2012 WL 676350, at *2 (S.D.N.Y. Mar. 1, 2012)). “[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)) (internal citations omitted), adopted by, 2014 WL 5051275 (S.D.N.Y. Oct. 8, 2014); see also Fed. R. Civ. P. 55(b)(2).
The Court has previously determined that New York law applies,  and “[u]nder New York law, 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 he would have been in had the defendant fulfilled his contract.'” Am. Jewish Comm., 2016 WL 3365313, at *5 (quoting Scholastic, Inc. v. Snap TV, Inc., No. 09-CV-4349 (GBD) (GWG), 2011 WL 1330246, at *3 (S.D.N.Y. Apr. 8, 2011)). 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. Id. at *4.
Euro Pacific having satisfactorily pled each of the elements of a cause of action for breach of contract in its complaint, Euro Pac. Capital, Inc., 2017 WL 3208036, at *7, I focus on the sufficiency of the “evidence, in the form of detailed affidavits and other documentary materials to enable the [ ] court to ‘establish damages with reasonable certainty.'” Nat'l Photo, 2014 WL 1396543, at *2 (quoting Transatlantic, 109 F.3d at 111) (internal citation omitted).
I find that the supplemental Chema Affidavit and its accompanying exhibits provide sufficient evidence to establish damages with reasonable certainty. Euro Pacific has provided a copy of the Securities Purchase Agreement that has been executed by representatives of both parties,  a list of the investors who signed the Securities Purchase Agreement, and copies of each investor's executed signature page. Supp. Chema Aff. Ex. 3 at 38-41 & Ex. 10. Euro Pacific has also submitted a copy of the original Note and a copy of each amendment, as well as a list of investors that indicates how many Notes each investor purchased. Supp. Chema Aff. Ex. 3 at 38-41 & Exs. 4, 12-16. Euro Pacific has supplied Chema's sworn statement that Bohai made no payments after March 2014 and still owes $4, 987, 021 in outstanding principal and an additional amount in unpaid interest. Supp. Chema Aff. ¶¶ 20, 26; Ex. 18 (updated outstanding principal and unpaid interest). Euro Pacific has also provided a table indicating how much outstanding principal and unpaid interest were due to each investor as of the Notes' maturity date, for a total of $4, 987, 021 in outstanding principal and $1, 856, 528 in unpaid interest. Supp. Chema Aff. Ex. 18.
Euro Pacific's evidence-in particular, Chema's supplemental affidavit, to which the Security Purchase Agreement, list of investors, executed signature pages, a Note, amendments to the Notes, and a table of outstanding principal and unpaid interest are attached-is sufficient to enable the Court to establish with reasonable certainty that the investors on whose behalf Euro Pacific seeks to recover made an investment through a series of promissory notes and that a total of $6, 843, 549 in outstanding principal and unpaid interest on the Notes came due on April 5, 2016 and was never paid. See, e.g., Putnam Bridge Funding III LLC v. Jenkins, No. 16-CV-7012 (AT) (DF), 2017 WL 3267934, at *6 (S.D.N.Y. July 10, 2017) (finding, in breach of contract action, that plaintiff's submission of promissory note as well as corroborating correspondence and financial records established with reasonable certainty that plaintiff was entitled to recover unpaid principal due under promissory note), adopted by, 2017 WL 3267752 (S.D.N.Y. July 31, 2017); Scharnikow v. Siracuse, No. 15-CV-6991 (DRH) (SIL), 2016 WL 7480360, at *5 (E.D.N.Y. Dec. 6, 2016) (finding, in breach of contract action, that plaintiff's submission of affidavit, correspondence, and financial records met burden of proving damages sought for principal and interest due under promissory notes), adopted by, 2016 WL 7480364 (E.D.N.Y. Dec. 29, 2016); Customers Bank v. Anmi, Inc., No. 11-CV-7992 (AJN), 2014 WL 842577, at *6 (S.D.N.Y. Mar. 3, 2014) (adopting report and recommendation finding, in breach of contract action, that plaintiff's submission of promissory note, uncontested affidavit and financial records entitled plaintiff to recover damages for outstanding principal due under promissory note).
Therefore, in order 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, Euro Pacific is entitled to damages in the amount of $6, 843, 549, comprised of $4, 987, 021 in outstanding principal and $1, 856, 528 in accrued, unpaid interest pursuant to the terms of the Notes.

References: v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v.