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Rescuecom Corp v. Jonathan Chumley; and Osi Consulting

July 14, 2011

RESCUECOM CORP., PLAINTIFF/COUNTER-DEFENDANT,
v.
JONATHAN CHUMLEY; AND OSI CONSULTING, LLC, DEFENDANTS/COUNTER-CLAIMANTS,



The opinion of the court was delivered by: Hon. Glenn T. Suddaby, United States District Judge

MEMORANDUM-DECISION and ORDER

Currently before the Court in this breach-of-contract action, filed by Rescuecom Corporation ("Plaintiff") against Jonathan Chumley ("Defendant Chumley") and OSI Consulting, LLC ("Defendant OSI"), is Plaintiff's motion for summary judgment with regard to damages on its breach-of-contract claim and its request for attorney's fees. (Dkt. Nos. 135, 136, 138.) For the reasons set forth below, Plaintiff is awarded damages in the amount of $20,297.78 on its breach-of-contract claim, and attorney's fees in the amount of $5,074.45.

I. RELEVANT BACKGROUND

On or about June 8, 2007, Plaintiff filed this breach-of-contract action against Defendants in Supreme Court for Onondaga County. (Dkt. No. 1, Attach. 2 [Plf.'s Compl.].) On or about July 3, 2007, Defendants removed this action to this Court. (Dkt. No. 1, Attach. 1 [Defs.' Notice of Removal].)

On August 3, 2009, Plaintiff filed a motion for summary judgment. (Dkt. No. 70.) In that motion, Plaintiff argued that it is entitled to summary judgment on its breach-of-contract claim, and stipulated damages in the amount of $54,975.08. (Id.)

On March 28, 2011, the Court issued a Decision and Order ("March Order") that, among other things, granted in part, denied in part, and reserved decision in part on, Plaintiff's motion for summary judgment. (Dkt. No. 134.) More specifically, the Court granted Plaintiff's motion for summary judgment on the issue of liability, denied Plaintiff's motion for summary judgment on the issue of the enforceability of the stipulated damages provision, and reserved decision on Plaintiff's motion for summary judgment on the issue of the total amount of damages owed (because Plaintiff's motion did not sufficiently request, or establish, such an amount). (Id.)

It bears noting that, with regard to the issue of stipulated damages, the Court made the following three findings: (1) the dollar amount that Plaintiff sought to recover as stipulated damages, i.e., $54,975.00, did not appear to bear a reasonable relationship to the pecuniary harm that Plaintiff most likely suffered as a result of Defendants' breach because it appeared that Plaintiff "was, and is, able to service at least some of the same clients that Defendants previously serviced, in the aftermath of Defendants' termination";*fn1 (2) the parties appeared to have possessed unequal bargaining power at the time the Franchise Agreement was executed;*fn2 and (3) the stipulated damages provision was not symmetrical. (Id. at 22-24.) In addition, with regard to the issue of actual damages, the Court made the following two observations: (1) while Plaintiff would be entitled to recover actual damages suffered as a result of the termination of the franchise relationship, the entitlement was conditioned on Plaintiff demonstrating that it mitigated its damages; and (2) "actual damages for the entire length of the Franchise Agreement may be unreasonable." (Id.)

As a result, the Court ordered Plaintiff to file a supplemental memorandum of law and any additional affidavits and exhibits necessary detailing its damages on its breach-of-contract claim on or before April 28, 2011. (Id.) The Court further ordered Defendant Chumley to file a response to Plaintiff's supplemental submissions on or before May 28, 2011. (Id.)

On April 28, 2011, Plaintiff filed a supplemental memorandum of law in support of its motion for damages, as well as two supporting affidavits, each containing attached exhibits. (Dkt. Nos. 135, 136, 138.) Defendant did not file a response to Plaintiff's supplemental submissions. (See generally Docket Sheet.)

II. ANALYSIS

A. Damages

In support of its request for damages, Plaintiff has filed two affidavits, each with attached exhibits, and a memorandum of law. (Dkt. Nos. 135, 136, 138.) Plaintiff's request for a specific damage amount is not contained in its memorandum of law, which discusses only the issue of mitigation of damages. (Dkt. No. 138.) Rather, Plaintiff's request for a specific damage amount is contained in the affidavit of Plaintiff's CEO, David Milman. (Dkt. No. 136.) More specifically, in that affidavit, Mr. Milman requests (1) $5,393.84 for unpaid amounts owed at the time of termination, (2) $2,665.00 for prepayments paid to Defendant Chumley by customers for whom he never performed services (and to whom Plaintiff is now liable), and (3) $64,803.50 for lost future royalty payments. (Dkt. No. 136.)

Before the Court analyzes the record evidence offered to support these three types of damages, the Court must make two observations regarding Mr. Milman's affidavit. First, portions of the affidavit are inconsistent with record evidence previously submitted by Plaintiff. For example, the record evidence previously submitted by Plaintiff demonstrated that the average monthly royalty fee payment to be applied in calculating Plaintiff's damages for lost royalties was $1,099.50. (See Dkt. No. 134 [citing record evidence establishing this amount].) However, in his affidavit, Mr. Milman states that the monthly royalty fee amount that the Court should apply is $1,319.42. (Dkt. No. 136.)*fn3

Second, Mr. Milman's affidavit contains improper legal argument, in violation of Local Rule 7.1(a)(2). For example, Mr. Milman argues that the Court should find the "absolute minimum" amount of Plaintiff's lost royalties to be $1,319.42 because (1) this is the five month average royalty payment that Plaintiff received when Defendant Chumley was a franchisee, and (2) "new businesses [such as Defendants' franchise in 2006] tend to earn less revenue in their early months and even years of operation, and . . . [t]herefore, it is likely that [Defendant] ...


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