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PSG Poker, LLC v. DeRosa-Grund

August 15, 2008


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


On January 22, 2008, the Court entered summary judgment in favor of the plaintiffs, PSG Poker, LLC ("PSG Poker") and its principal member Phil Gordon ("Gordon"), and referred the matter to Magistrate Judge James C. Francis IV for an inquest as to damages. A hearing was held on May 9, 2008. Defendant Tony DeRosa-Grund ("DeRosa-Grund"), the only remaining defendant in the action, did not appear, despite having been afforded notice of the hearing. On July 12, 2008, Judge Francis issued his Report and Recommendation ("Report"), which recommends that judgment be entered in favor of the plaintiffs and against DeRosa-Grund for $340,000 in compensatory damages, $200,000 in punitive damages, and $36,266.70 in attorneys' fees, for a total of $576,266.70 (with interest to the date of judgment as described in further detail below). Neither party has submitted objections to the Report. For the following reasons, the Report's recommendations are adopted and judgment entered against the DeRosa-Grund in the amount described below.

The court "may accept, reject, or modify, in whole or in part, the findings or recommendations made by the magistrate judge." 28 U.S.C. § 636(b)(1)(C). "To accept the report and recommendations of a magistrate, to which no timely objection has been made, a district court need only satisfy itself that there is no clear error on the face of the record." Figueroa v. Riverbay Corp., No. 06 Civ. 5364(PAC), 2006 WL 3804581, at *1 (S.D.N.Y. Dec. 22, 2006) (citation omitted).

The factual background and procedural history of this action was outlined in detail in the Court's Opinion of January 22, 2008, familiarity with which is assumed. PSG Poker, LLC v. DeRosa-Grund, No. 06 Civ. 1104, 2008 WL 190055, at *1-7 (S.D.N.Y. Jan. 22, 2008) ("January 22 Opinion"). In sum, plaintiffs alleged that DeRosa-Grund breached a contract entered into with Gordon (the "December 2005 Contract"), pursuant to which Gordon -- in exchange for acting as "on-camera poker analyst" for a series of television shows to be produced by a corporation controlled by DeRosa-Grund (referred to in the January 22 Opinion as "Projo") -- was to be paid $340,000. Under the terms of the contract, $170,000 was to be paid to Gordon "within 15 business days of the execution of" the contract, with the remaining $170,000 to be paid in installments over a two-year term. As concluded in the January 22 Opinion, "[t]he evidence in the record demonstrates conclusively -- and, in fact, it is undisputed -- that the December 2005 Contract existed between the plaintiffs and DeRosa-Grund/Projo, that plaintiffs stood ready to perform under that Contract, that the $170,000 execution payment was not made, that such failure constituted a breach of the Contract, and that the breach caused damage to the plaintiffs." January 22 Opinion, 2008 WL 190055, at *7. The Court further found that "no reasonable trier of fact could conclude anything other than that Projo was a mere instrumentality or alter ego of its owner," and thus pieced the corporate veil to hold DeRosa-Grund personally liable for breach of the December 2005 Contract. Id. at *10 (citation omitted). Finally, the January 22 Opinion also granted summary judgment to the plaintiffs on their claim that DeRosa-Grund "fraudulently induce[d] Gordon to, inter alia, commence and pay for litigation to make himself available to host the ProJo poker programs; leave his job with CPS and Bravo; and -- perhaps most importantly -- put aside any opportunity he may have had to reverse the damage caused by those acts." Id. at *13.

The Report makes the following recommendations as to damages to be recovered for these claims. First, with respect to compensatory damages for the breach of contract, the Report correctly applied the rule that, "[u]nder New York law, damages for breach of contract should put the plaintiff in the same economic position he would have occupied had the breaching party performed the contract." Oscar Gruss & Son, Inc. v. Hollander, 337 F.3d 186, 196 (2d Cir. 2003). The Report therefore recommends an award for $340,000, the entire amount Gordon would have been paid under the contract had DeRosa-Grund performed.

Second, the Report recommends an award of prejudgment interest at the New York statutory rate of nine percent per year, compounded annually. See N.Y. C.P.L.R. §§ 5001(a), 5004. "Under New York law, prejudgment interest is normally recoverable as a matter of right in an action at law for breach of contract. N.Y. C.P.L.R. § 5001(a) makes such interest mandatory." New England Ins. Co. v. Healthcare Underwriters Mut. Ins. Co., 352 F.3d 599, 606 (2d Cir. 2003) (citation omitted). Pursuant to N.Y. C.P.L.R. § 5001(b), the Report further recommends that, (1) with respect to the initial $170,000 payment the plaintiffs were due within fifteen business days of execution of the contract (December 17, 2005), plaintiffs are entitled to "interest at the rate of nine percent, compounded annually, accruing on the principal amount of $170,000 from January 1, 2007, through the date of judgment," and (2) with respect to the $170,000 plaintiffs were to be paid over the term of the contract (January 1, 2006 to December 31, 2007), plaintiffs are entitled to prejudgment interest running from the mid-point of the contract, January 1, 2007, to the date of judgment. See N.Y. C.P.L.R. § 5001(b) ("Where such damages were incurred at various times, interest shall be computed upon each item from the date it was incurred or upon all of the damages from a single reasonable intermediate date.").

Third, the Report recommends an award of attorneys' fees based upon a provision of the contract between the parties that provides for the award of such fees to the "prevailing party" in any "action, suit or other proceeding . . . to remedy, prevent, or obtain relief from a default in the performance by any party of such party's obligations under" the contract. As to the amount, the Report recommends an award of $36,266.70, which represents a thirty percent discount from the amount documented by the plaintiffs. The Report recommends this result in light of the "vagueness, inconsistenc[y], and other deficiencies in the billing records" submitted by the plaintiffs in support of their application. Kirsh v. Fleet Street, Ltd., 148 F.3d 149, 173 (2d Cir. 1998) (reducing requested amount by twenty percent).*fn1

Fourth, the Report recommends rejecting Gordon's claim that he should be awarded compensatory damages in connection with his fraudulent inducement claim for (1) monies he would have been paid had he not left his previous employment in order to work for DeRosa-Grund ($66,150.00), and (2) the attorneys' fees he incurred in terminating that employment ($28,717.77). The Report recommends that such damages not be awarded because doing so "would put Mr. Gordon in a better financial position than he would have been in had the contract" not been breached by DeRosa-Grund, since Gordon could not have simultaneously continued his prior employment and also worked on DeRosa-Grund's poker programs. See also Rodriguez v. Kulcsar, No. 07 Civ. 251 (DLC), 2007 WL 3120906, at *2 (S.D.N.Y. Oct. 24, 2007) ("Under New York law . . . "out-of-pocket" losses are the measure of actual damages for fraudulent inducement.").*fn2

Fifth, and finally, the Report recommends the imposition of $200,000 in punitive damages in connection with the fraudulent inducement claim.

To obtain punitive damages in ordinary tort actions, a New York plaintiff not only must show that the defendant committed a tort, but also must demonstrate the existence of "circumstances of aggravation or outrage, such as spite or 'malice,' or a fraudulent or evil motive on the part of the defendant, or such a conscious and deliberate disregard of the interests of others that the conduct may be called willful or wanton."

Carvel Corp. v. Noonan, 350 F.3d 6, 24 (2d Cir. 2003) (quoting Prozeralik v. Capital Cities Commc'ns, Inc., 82 N.Y.2d 466, 479 (1993)). In light of the record evidence of (1) DeRosa-Grund's repeated affirmative misrepresentations to Gordon, and (2) DeRosa-Grund's use of the corporate form as a "vehicle for fraud," the Report concludes that punitive damages are appropriate here. As to the amount, the Report recommends the adoption of the plaintiffs' requested amount of $200,000, which is approximately twice the amount of actual damages claimed (but not awarded) on the fraudulent inducement claim.*fn3

The Court perceives no clear error in the Report's recommendations. A judgment will therefore be entered against DeRosa-Grund in the amount recommended.


Finding no clear error in Magistrate Judge Francis's Report, the Report is adopted. The Clerk of Court shall enter judgment against defendant DeRosa-Grund for $340,000 in dompensatory damages, $200,000 in punitive damages, and $36,266.70 in attorneys' fees, for a total of $576,266.70, together with interest calculated at a rate of nine percent per year, compounded ammually, on a principle amount of $170,000 running from January 1, 2006 through the date of judgment, and also on a principle amount of $170,000 running from January 1, 2007 to the date of judgment. The Clerk of Court shall also close the case. The ...

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