The opinion of the court was delivered by: Gold, S., U.S.M.J.
Plaintiffs, an Irish corporation and several individual investors, allege that they are owners of stock certificates in Life Energy and Technology Holdings, Inc. ("LETH") and that defendant committed the common law tort of conversion of their LETH shares. More specifically, the corporate plaintiff alleges that LETH refused to issue a replacement certificate after its certificate was lost or stolen. The individual investors contend that they were promised shares of LETH in exchange for their investments, but never received the shares to which they were entitled.
Approximately one month after plaintiffs filed this lawsuit, LETH changed its name to Global Environmental Energy Corp. and reincorporated in the Bahamas ("GEEC Bahamas"). After a hearing on the issue, I held that LETH is now known as GEEC Bahamas, directed the Clerk of the Court to amend the caption accordingly, and granted plaintiffs' motions for entry of default against GEEC Bahamas after it failed to appear in this litigation. Docket Entry 62.
Once found to be in default, a defendant is deemed to have admitted all of the well- pleaded allegations in the complaint pertaining to liability. See Greyhound Exhibitgroup, Inc., v. E.L.U.L. Realty Corp., 973 F.2d 155, 158 (2d Cir. 1992), cert. denied, 506 U.S. 1080, 113 S.Ct. 1049 (1993); Montcalm Pub. Corp. v. Ryan, 807 F. Supp. 975, 977 (S.D.N.Y. 1992). A court, however, retains the discretion to determine whether a final default judgment is appropriate. Enron Oil Corp. v. Diakuhara, 10 F.3d 90, 95 (2d Cir. 1993). Even after a defendant has defaulted, "[a] plaintiff must . . . establish that on the law it is entitled to the relief it seeks, given the facts as established by the default." U.S. v. Ponte, 246 F. Supp. 2d 74, 76 (D. Me. 2003) (citation omitted). See also Au Bon Pain Corp. v. Artect, Inc., 653 F.2d 61, 65 (2d Cir. 1981) (recognizing the court's authority, even after default, to determine whether plaintiff has stated a cause of action).
First, I must address two preliminary issues: 1) the number of individuals seeking damages and 2) the statute of limitations. In addition to the individuals named in the complaint, plaintiffs seek damages for Claire Moore, Declan Maguire, Deirdre Maguire, Grainne Maguire, and Roisin Maguire, alleging that they, like the named plaintiffs, were promised LETH stock for their investments. Pl. Mem. pp. 6-7. Plaintiffs argue that Seamus Maguire, one of the named plaintiffs, is the assignee of the claims for these individuals who are his children. Pl. Mem. p. 6; Seamus Maguire Decl. ¶ 2. The complaint, however, does not name these individuals as plaintiffs or allege any assignment of their claims. Accordingly, I must deny plaintiffs' application for damages on behalf of Claire Moore, Declan Maguire, Deirdre Maguire, Grainne Maguire, and Roisin Maguire. See Fed. R. Civ. P. 54(c) ("A judgment in default shall not be different in kind from or exceed in amount that prayed for in the demand for judgment"). Additionally, I am dismissing the claims of Patrick Lagan, a named plaintiff, from this lawsuit. Patrick Lagan moved to voluntarily dismiss his claim for damages on May 31, 2006, but then he subsequently withdrew his motion. Docket Entries 66, 67, 91. Patrick Lagan, however, failed to submit any application for damages. Accordingly, I deem his claim abandoned and it is dismissed with prejudice for failure to prosecute.
Next, I note that the defendant may have had a meritorious limitations defense with respect to a number of the plaintiffs. The statute of limitations for conversion is three years.
N.Y. C.P.L.R. § 214(3). Plaintiffs filed their complaint on July 15, 2004. In their application for damages, though, many of the plaintiffs allege that their shares were converted in March or May of 2001, which would mean that their claims would be time-barred.*fn1 See Pl. Mem. pp. 5-8. The Second Circuit, however, disfavors sua sponte dismissal due to a statute of limitations bar because a limitations defense may be waived and does not deprive a court of jurisdiction. Davis v. Bryan, 810 F.2d 42, 44 (2d Cir. 1987) ("If a defendant fails to assert the statute of limitations defense, the district court ordinarily should not raise it sua sponte."); see also Day v. McDonough, __ U.S. __, 126 S.Ct. 1675, 1681 (2006) ("A statute of limitations defense . . . is not 'jurisdictional,' hence courts are under no obligation to raise the time bar sua sponte.") (citations omitted). Moreover, GEEC Bahamas should have been aware of the potential defense through service of the plaintiffs' papers on the default judgment, through the participation in this litigation of the related Delaware corporate entity, and through its predecessor LETH, which also participated in this litigation. GEEC Bahamas failed to file any answer or otherwise appear in this lawsuit, despite its notice of it, and I therefore deem any statute of limitations defense abandoned. Thus, I will proceed to address the merits of plaintiffs' claims.
Plaintiffs have established the elements of liability required to state a common law claim of conversion. Under New York law, conversion is committed "when a defendant exercises unauthorized dominion over personal property in interference with a plaintiff's legal title or superior right of possession." LoPresti v. Terwilliger, 126 F.3d 34, 41 (2d Cir. 1997), quoting Rolls Royce Motor Cars, Inc. v. Schudroff, 929 F. Supp. 117, 124 (S.D.N.Y. 1996). Conversion also occurs when a defendant, who originally possessed the property lawfully, refuses to turn over the property after it is demanded by plaintiff. See White v. City of Mount Vernon, 221 A.D.2d 345, 346, 633 N.Y.S.2d 369 (2d Dep't 1995).
With respect to Agamede Limited ("Agamede"), plaintiffs allege that LETH "refused to provide [a] requested replacement stock certificate" to Agamede, even though Agamede was the rightful owner of 300,000 shares of LETH when Agamede's certificate was stolen or lost. Compl. ¶¶ 10, 11. The individual investor plaintiffs allege that they were promised shares of LETH stock in exchange for their investment in a company known as Life Energy Technology Holdings, Ltd. ("LETH-Ireland"). Compl. ¶ 21. LETH-Ireland used the funds it raised from plaintiffs to merge with an American company, Healthpak, Inc., which then changed its name to LETH. Compl. ¶¶ 4-5. Five investors contend that they never received any LETH share certificates.*fn2 Compl. ¶ 23. Eight investors allege that they received LETH stock certificates but that the certificates were issued in the name of Eden Development Limited ("Eden"), a corporation unrelated to plaintiffs, and that defendant refused to reissue the certificates in plaintiffs' names.*fn3 Compl. ¶ 24. Lastly, one plaintiff, Gerard Slowey, alleges that he originally received a stock certificate issued in the name of Eden, but he eventually received a certificate in his own name. Compl. ¶¶ 32, 34. All but two of the individual investors have provided documentation of their investment in LETH and right to ownership of LETH shares.*fn4 These allegations sufficiently establish the tort of conversion and thus defendant's liability to plaintiffs.
Although the allegations of a complaint pertaining to liability are deemed admitted upon entry of a default judgment, allegations relating to damages are not. See Greyhound Exhibitgroup, 973 F.2d at 158. Rather, claims for damages generally must be established in an evidentiary proceeding at which the plaintiff establishes the basis for the amount of damages and the defendant is afforded the opportunity to contest the amount claimed. Id.; Transatlantic Marine Claims Agency, Inc. v. Ace Shipping Corp., Div. of Ace Young Inc.,109 F.3d 105, 111 (2d Cir. 1997); Fustok v. ContiCommodity Services, Inc., 873 F.2d 38, 40 (2d Cir. 1989). A court may make this determination based upon evidence presented at a hearing or upon a review of detailed affidavits and documentary evidence. See FED. R. CIV. P. 55(b)(2); Action S.A. v. Marc ...