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Gragg v. International Management Group (UK)

April 24, 2009


The opinion of the court was delivered by: Neal P. McCURN, Senior District Court Judge


Plaintiff Viet Gragg ("Gragg ") comes before the court seeking compensatory and punitive damages of $14,117,890.00 from defendant Brand DNA for injury Gragg suffered from an alleged scheme to defraud him by defendants International Management Group (UK), Inc., International Management Group Worldwide, Inc., International Management Group Artists, LLC, International Management Group (Overseas), Inc., and Brand DNA (collectively, "defendants"). A settlement was reached between Gragg and the IMG defendants on March 3, 2008, and a stipulation of dismissal with prejudice was ordered by a magistrate judge of this court on March 14, 2008 (Doc. No. 319). On July 1, 2008, this court granted a default judgment (Doc. No. 322) against Brand DNA, the only remaining defendant in this action. In that decision of the court, Gragg was directed to contact this court to arrange a date and time for a hearing on the issue of damages. The damages hearing was held on December 8, 2008, and at the end of said hearing the court reserved judgment. Based on Gragg's submissions for his motion for default judgment and the information gathered at that hearing, including a comprehensive video deposition from Gragg's accountant, the court hereby renders its decision on the damage award.


Familiarity with the procedural history and facts of this lengthy and convoluted litigation is presumed, pursuant to the numerous decisions previously rendered by this court, and only the pertinent facts necessary to resolve the issue of damages will be addressed. Plaintiff filed his original complaint against defendants on July 18, 2003 (Doc. No. 1). In his second amended complaint filed June 6, 2005, Gragg alleges four causes of action against the defendants, including Brand DNA. Gragg asserted (1) a RICO violation; (2) breach of fiduciary duty; (3) misappropriation; and (4) unfair competition. Brand DNA was personally and timely served notice of Gragg's second amended complaint (Doc. No. 129) on June 24, 2005, as evidenced by the affidavit of service attached to Gragg's motion for default judgment (Doc. No. 321-2) as Exhibit A (See also Doc. No. 162). Brand DNA failed to plead or otherwise raise a defense as provided for in the Federal Rules of Civil Procedure ("Fed. R. Civ. P."). Despite an entry of default filed by the Clerk of the Court as to Brand DNA on August 3, 2005 (Doc. No. 164), and this court's order granting Gragg's motion for default judgment on July 1, 2008, Brand DNA has not filed an appearance in this action to make a timely motion to set aside the default judgment.


A. Standard for Default Judgment

Judgment by default is one of the most severe sanctions which the court may apply, and "its use must be tempered by the careful exercise of judicial discretion to assure that its imposition is merited. However, where one party has acted in willful and deliberate disregard of reasonable and necessary court orders and the efficient administration of justice, the application of even so stringent a sanction is fully justified and should not be disturbed." Trans World Airlines, Inc. v. Hughes, 332 F.2d 602, 614 (2d Cir. 1964).

Because this is a damages award pursuant to an order granting default judgment, the court will again set forth the law governing default judgments.

Fed. R. Civ. P. Rule 55(a) states in pertinent part that "[w]hen a party against whom a judgment for affirmative relief is sought has failed to plead or otherwise defend, and that failure is shown by affidavit or otherwise, the clerk must enter the party's default." Fed. R. Civ. P. 55(a) (West 2009). "The procedural steps contemplated by the Federal Rules ... following a defendant's failure to plead or defend ... begin with the entry of a default upon a plaintiff's request." Meehan v. Snow, 652 F.2d 274, 276 (2d Cir. 1981).

"While a party's default is deemed to constitute a concession of all well pleaded allegations of liability, it is not considered an admission of damages ... Damages, which are neither susceptible of mathematical computation nor liquidated as of the default, usually must be established by the plaintiff in an evidentiary proceeding in which the defendant has the opportunity to contest the amount." Volkswagen AG v. V.W. Parts, Inc., 2009 WL 1045995 at *1 (citing Greyhound Exhibitgroup, Inc. v. E.L.U.L. Realty Corp., 973 F.2d 155, 158 (2d Cir.1992)).

In determining the award of damages in a default judgment, in a matter such as the one before the court, where the plaintiff's claim is for a sum that can be made reasonably certain by computation, the court again looks to Rule 55 of the Federal Rules, which states in pertinent part that "[t]he court may conduct hearings or make referrals ... when, to enter or effectuate judgment, it needs to: (A) conduct an accounting; (B) determine the amount of damages; (C) establish the truth of any allegation by evidence; or (D) investigate any other matter...." Fed.R.Civ.P. Rule 55(b)(2) (West 2009).

Allegations in a complaint and an affidavit of plaintiff's counsel asserting the amount of damages sustained by the plaintiff, without more, is insufficient evidence upon which to ascertain the damage award. Credit Lyonnais Securities (USA), Inc. v. Alcantara, 183 F.3d 151, 154-55 (2d Cir. 1999). "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." Id. (internal citations omitted). After a court has granted a motion for default judgment, "pursuant to Rule 55(c), the defendant has an opportunity to seek to have the default set aside." Id.

"A default judgment is a final action by the district court in the litigation one that may be appealed. In an appeal from a default judgment, the court may review both the interlocutory entry of default and the final judgment." Enron Oil Corp. v. Diakuhara, 10 F.3d 90, 95 (2d Cir. 1993). The court reiterates that Brand DNA has ...

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