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Interco Products Corp. v. Procesos Mecanicos Espanoles S.L.

March 28, 2006

INTERCO PRODUCTS CORPORATION, PLAINTIFF,
v.
PROCESOS MECANICOS ESPANOLES S.L., DEFENDANT.



The opinion of the court was delivered by: Hurley, District Judge

MEMORANDUM & ORDER

On September 12, 2005, this Court granted the motion by Plaintiff Interco Products Corporation ("Plaintiff") for an entry of default judgment against Defendant Procesos Mecanicos Espanoles S.L. ("Defendant"), and referred the case to Magistrate Judge Arlene Rosario Lindsay, pursuant to 28 U.S.C. § 636(b)(3), for a report and recommendation as to damages and attorney's fees. On March 3, 2006, Judge Lindsay issued a Report and Recommendation (the "Report") that Plaintiff be awarded $0.00 in attorney's fees and costs and $534,135.00 in damages. Presently before the Court are Plaintiff's objections to the Report, which were timely filed. Defendant did not submit any objections.

I. Standard of Review

Federal Rule of Civil Procedure 72(b) provides that when a magistrate judge issues a report and recommendation on a matter "dispositive of a claim or defense of a party," the district court judge shall make a de novo determination of any portion of the magistrate judge's disposition to which specific written objection has been made. Fed. R. of Civ. P. 72(b). Accordingly, the Court applies de novo review to those portions of the Report to which objections were raised. See id. The Court reviews those portions to which no objections have been filed for clear error. See, e.g., Kenneth Jay Lane, Inc. v. Heavenly, Inc., No. 03 CV 2132, 2006 WL 728407, at *1 (S.D.N.Y. Mar. 21, 2006).

II. Plaintiff's Claims for Damages

A. Background

Defendant is a Spanish manufacturer of WEBER-brand carburetors and other automobile replacement parts. Plaintiff has been distributing Defendant's WEBER-brand carburetors in North America since 2001. In order to meet the needs of its customers and to account for lead-time, Plaintiff's general practice has been to maintain a six-month supply of carburetors in its inventory at all times.

On May 2, 2002, Plaintiff and Defendant entered into a Distribution Agreement which granted Plaintiff the exclusive right to distribute Defendant's WEBER-brand products within North America, including WEBER-brand carburetors. Pursuant to the Distribution Agreement, for the years 2002 through 2004, Defendant agreed to supply, and Plaintiff agreed to buy, the following number of WEBER-brand carburetors for resale by Plaintiff within North America: 2002 -- 29,000 units 2003 -- 36,000 units 2004 -- 36,000 units (Pl.'s Objections, Ex. 2 ¶ C.) By its own terms, the Agreement "continue[d] in force for an initial term expiring [D]ecember 31 of 2005, unless sooner terminated in accordance with the provisions in this Article." (Id. ¶ F.a.)

In or about May 2002, Plaintiff began ordering WEBER-brand carburetors from Defendant pursuant to the terms of the Distribution Agreement and Defendant delivered those carburetors to Plaintiff. At that time, Plaintiff already had WEBER-brand carburetors in stock from its purchases prior to the Distribution Agreement. During 2002, Plaintiff sold 27,696 of Defendant's WEBER-brand carburetors.

Defendant continued to deliver carburetors to Plaintiff in 2003, however, many of Plaintiff's orders were either delayed or never delivered. Plaintiff offers proof that during the second half of 2003 and the first half of 2004, Plaintiff placed orders for more than 15,000 carburetors that were never delivered by Defendant. Nevertheless, Plaintiff continued to sell WEBER-brand carburetors from its remaining inventory, which had been ordered in 2003 and prior years. In 2003, Plaintiff sold 31,190 WEBER-brand carburetors.

As of June 2004, Defendant ceased supplying any of the WEBER-brand carburetors ordered by Plaintiff. Despite Plaintiff's repeated requests, Defendant has failed to supply any additional carburetors to Plaintiff since June 2004. Plaintiff continued selling carburetors from its remaining inventory, which had been ordered from Defendant in 2003 and prior years. In 2004, Plaintiff sold 19,269 of Defendant's carburetors and in 2005, Plaintiff sold 5,241 of Defendant's carburetors. Plaintiff asserts that had Defendant provided it with the number of carburetors it was required to supply under the Distribution Agreement, Plaintiff could have sold that number in 2004 and 2005. Since Defendant has not filed an answer, that assertion remains uncontroverted.

On December 12, 2005, Plaintiff initiated this action, seeking a permanent injunction as well as damages for breach of contract. Despite being timely served, Defendant never responded to the Complaint. This Court entered a default judgment against Defendant on September 12, 2005 and referred the matter to Judge Lindsay for a Report and Recommendation as to damages and attorney's fees.

Plaintiff requested damages in the amount of $2,526,180.74, together with costs and interest. Specifically, Plaintiff contended that it was entitled to recover damages for lost profits of $676,053.00 for 2004 and lost profits of $1,559,817.00 for 2005. Plaintiff also sought consequential damages in the form of good will, including lost customers, damage to its ...


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