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India.com, Inc. v. Dalal

December 30, 2009

INDIA.COM, INC., PLAINTIFF,
v.
SANDEEP DALAL, DEFENDANT.
SANDEEP DALAL, COUNTERCLAIM-PLAINTIFF,
v.
INDIA.COM, INC., EASYLINK SERVICES CORPORATION, AND INDIA HOLDINGS, INC., COUNTERCLAIM-DEFENDANTS.



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

OPINION & ORDER

This Opinion addresses the damages to be awarded pro se defendant/counterclaim-plaintiff Sandeep Dalal ("Dalal") pursuant to the April 28, 2009 remand from the United States Court of Appeals for the Second Circuit. On July 28, 2009, plaintiff/counterclaim-defendant India.com, Inc. ("ICI") was ordered to show cause why the amount of damages in the December 20, 2002 judgment*fn1 (the "December 2002 Judgment") should not be entered against ICI. The parties' briefing became fully submitted on December 4, 2009.*fn2 For the following reasons, the damages in the December 2002 Judgment and additional prejudgment interest are entered in favor of Dalal.

BACKGROUND

The following facts and procedural history are relevant to the damages inquiry in this long-running matter. In November 2000, EasyLink Services Corporation ("EasyLink") decided to sell its subsidiary, ICI, through a holding company, India Holdings, Inc. ("IHI").*fn3 ICI contracted with its former employee, Dalal, to assist in finding a buyer for the company. ICI and Dalal signed three agreements, the last of which was dated October 26, 2001 and was signed by Dalal and the Chairman of EasyLink and ICI (the "Third Agreement"). The Third Agreement provided that Dalal would receive a commission of 12.5 percent of the consideration paid by the buyer upon the closing of the transaction. Dalal found a buyer for ICI, namely Business India.com, Ltd. ("BI" or "Buyer"). On October 26, 2001, BI and ICI entered into a definitive Stock Purchase Agreement ("SPA"), but ICI terminated the deal on December 19 before the transaction closed.

On January 3, 2002, EasyLink, through its subsidiary ICI, filed a complaint against Dalal alleging, inter alia, breach of fiduciary duty and seeking a declaratory judgment that it did not owe Dalal a commission. Dalal filed an answer and a counterclaim and joined EasyLink and IHI. Dalal sought payment of a 12.5 percent commission based on the sale price of $8 million specified in the SPA. A bench trial was held on December 9, 2002 and an opinion was issued the same day (the "December 2002 Opinion").

The December 2002 Opinion denied EasyLink's affirmative claims on the ground that it had not presented any legal theories of recovery and had not sufficiently established facts to support recovery under any of its claims. With respect to Dalal's counterclaims, the December 2002 Opinion found that only the Third Agreement was enforceable at the time the SPA was terminated, but denied Dalal's breach of contract claim on the ground that the Third Agreement required a closing of the transaction pursuant to the SPA. The December 2002 Opinion found, however, that EasyLink had improperly terminated the SPA and was liable to Dalal because he was a third-party beneficiary of the SPA.

The December 2002 Judgment's computation of damages, i.e., the amount Dalal would have earned as a commission, was based on the amounts that the Buyer was to pay EasyLink pursuant to the SPA on the following dates: (1) $250,000 on January 31, 2002; (2) $1,000,000 in stock issued on July 31, 2002; (3) $500,000 on October 26, 2002; (4) $1,000,000 on April 26, 2003; and $5,250,000 on October 26, 2003.*fn4 Because the parties failed to introduce sufficient evidence at trial on the value of the stock component of the consideration to be paid for ICI, the $1 million in stock was discounted by fifty percent such that the July 31, 2002 payment was valued at $500,000. Applying Dalal's commission rate of 12.5 percent, and discounting the two payments that were to be made in 2003 to the present value, the amount of damages totaled $926,343. In addition, Dalal was awarded prejudgment interest of $5,021 for a total judgment of $931,364.*fn5

EasyLink filed a motion pursuant to Rule 59, Fed. R. Civ. P., to amend the December 2002 Judgment. EasyLink's motion was granted and a declaratory judgment that it did not owe Dalal a commission was entered in its favor. See India.com v. Dalal, No. 02 Civ. 111(DLC), 2003 WL 359293, at *4 (S.D.N.Y. Feb. 20, 2003) (the "February 2003 Opinion"). Dalal, in turn, filed a Rule 59 motion to reinstate the December 2002 Judgment, which was granted on September 10, 2003. See India.com v. Dalal, No. 02 Civ. 111(DLC), 2003 WL 22093475, at *7-8 (S.D.N.Y. Sept. 10, 2003) (the "September 2003 Opinion").

EasyLink appealed the December 2002 Judgment and Dalal cross-appealed. On June 20, 2005, the Second Circuit reversed the December 2002 Judgment and set aside the damages award, finding that the SPA barred recovery by third-party beneficiaries. See India.com, Inc. v. Dalal, 412 F.3d 315, 322 (2d Cir. 2005). The Second Circuit remanded for further proceedings to determine whether EasyLink, in bad faith, caused the sale of ICI not to close for the purpose of depriving Dalal of a commission pursuant to the Third Agreement. Id. at 324. On remand, the parties were advised that they were confined to the trial record as it stood at the time of trial. Finding that Dalal had not proved at trial that EasyLink terminated the SPA for the express purpose of denying Dalal a commission, see India.com v. Dalal, No. 02 Civ. 111(DLC), 2006 WL 1000398, at *2 (S.D.N.Y. Apr. 18, 2006), judgment was entered in favor of EasyLink on April 26, 2006 (the "April 2006 Judgment").

Dalal appealed the April 2006 Judgment. In an unpublished opinion dated April 28, 2009, the Second Circuit reversed the April 2006 Judgment. See India.com, Inc. v. Dalal, 324 Fed.Appx. 59 (2d Cir. 2009). The court found that EasyLink breached its duty of good faith and fair dealing under the Third Agreement with Dalal by wrongfully terminating the SPA. Id. at 62. Even though the sale of ICI did not close, and closure was a condition to Dalal receiving a commission under the Third Agreement, the court held that Dalal could nonetheless recover. Id. The action was remanded to enter judgment in favor of Dalal and to set damages. Id. The mandate issued on July 21, 2009.

DISCUSSION

EasyLink attacks the December 2002 Judgment by arguing that it is not liable to Dalal. If it is liable, EasyLink argues that certain adjustments to the damages calculation in the December 2002 Judgment are warranted. EasyLink also objects to Dalal's request for additional prejudgment interest, attorneys' fees, and taxing of costs. EasyLink's arguments concerning its liability are addressed first.

1. EasyLink's Liability

EasyLink first attempts to evade liability altogether by arguing: (1) that ICI's corporate veil has not been pierced with respect to the Third Agreement to reach and hold liable its parent company, EasyLink; and (2) because Dalal did not prove at trial that he produced a ready, willing and able buyer, he is not entitled to damages. Both arguments are beyond the scope of the remand ...


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