Source: http://ny.findacase.com/research/wfrmDocViewer.aspx/xq/fac.20180726_0001207.ENY.htm/qx
Timestamp: 2019-04-21 18:15:43+00:00

Document:
FindACase | LG Capital Funding, LLC v. M Line Holdings, Inc.
LG Capital Funding, LLC v. M Line Holdings, Inc.
M LINE HOLDINGS, INC., Defendant.
The Court reviews any portion of Magistrate Judge Mann's R&R that has been objected to under a de novo standard of review. See Fed. R. Civ. P. 72(b)(1), (3); 28 U.S.C. § 636(b)(1)(C). As to the balance of the R&R, “the district court need only satisfy itself that there is no clear error on the face of the record.” Estate of Ellington ex rel. Ellington v. Harbrew Imps. Ltd., 812 F.Supp.2d 186, 189 (E.D.N.Y. 2011) (quoting Urena v. New York, 160 F.Supp.2d 606, 609-10 (S.D.N.Y. 2001)) (internal quotation marks and citations omitted).
For the reasons set forth below, the Court adopts Magistrate Judge Mann's thorough and well-reasoned opinion in full.
I. The Court's Independent Obligation to Ensure the Appropriateness of Damages.
As a threshold matter, the Court rejects Plaintiff's argument that it should not address the appropriateness of liquidated damages where the party against whom those damages are to be assessed is in default. (See Objection, at *9-10.) The Court has an independent obligation to determine whether damages to be awarded are appropriate. This role does not change simply because one party is in default. “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.” Credit Lyonnais Sec. (USA), Inc. v. Alcantara, 183 F.3d 151, 155 (2d Cir. 1999) (internal citations omitted). Indeed, “[c]ourts should take great care in entering default judgment, ensuring if at all possible that both parties have their cases judged on the merits.” Liberty Mut. Ins. Co. v. Fast Lane Car Serv., Inc., 681 F.Supp.2d 340, 346 (E.D.N.Y. 2010); see also Transatlantic Marine Claims Agency, Inc. v. Ace Shipping Corp., Div. of Ace Young Inc., 109 F.3d 105, 111 (2d Cir. 1997) (reversing and remanding where district court simply accepted the non-defaulting parties statement of damages because “[t]his did not satisfy the court's obligation to ensure that the damages were appropriate”).
II. Liquidated Damages Clauses Are Upheld Unless They Constitute a Penalty.
To find a liquidated damages clause enforceable, a court must determine: first, that the amount of actual loss is difficult or impossible to estimate precisely; and second, that the liquidated damages sought bear a “reasonable proportion to the probable loss.” Leasing Serv. Corp. v. Justice, 673 F.2d 70, 73 (2d Cir. 1982). Magistrate Judge Mann found that the liquidated damages clause at issue here failed to satisfy both of these standards. The Court agrees.

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