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Imaging v. the Digital Page

March 16, 2012




Plaintiff Imaging Financial Services, Inc., doing business as EKCC ("EKCC" or "Plaintiff") commenced this action against Defendants Digital Page, LLC ("Digital") and Eugene R. Spada ("Spada") (collectively, "Defendants") on June 8, 2011. Dkt. No. 1 ("Complaint"). Plaintiff filed a Motion for a preliminary injunction on June 10, 2011. Dkt. No. 6 ("P.I. Motion"). Plaintiff then filed a Request for entry of default against both Defendants that the Clerk of the Court granted on July 20, 2011. Dkt. Nos. 9, 10. Presently before the Court is Plaintiff's Motion for default judgment. Dkt. No. 11 ("Motion").


According to the Complaint, EKCC and Digital entered into a lease agreement on September 28, 2005, setting forth terms and conditions under which EKCC would lease Digital certain equipment. Compl. ¶ 11. Pursuant to the terms of this lease agreement, EKCC and Digital executed a payment schedule on March 31, 2009, for the lease of a specified Kodak printer ("lease equipment"). Id. ¶ 12. Digital agreed to make three monthly payments of $0.00 to EKCC, followed by 52 monthly payments of $11,062.50.*fn1 Id. The Complaint also alleges that Defendant Spada had guaranteed Digital's prompt payment and performance under these lease agreements. Id. ¶ 14.

Digital failed to make payments as required under these agreements. Id. ¶ 16. EKCC notified Digital that they were in default, and made a written demand for immediate payment on May 3, 2011. Id. ¶ 17. Despite EKCC's demand, Digital failed to pay the amount due under the agreements. Id. ¶ 19.

Plaintiff's Complaint alleges causes of action of breach of contract and breach of guaranty, and seeks injunctive relief, specific performance, replevin, money damages, attorneys' fees, costs of collection, and interest on all unpaid amounts. See Compl. Plaintiff's Motion seeks: (1) judgment against Defendants on all counts set forth in the Complaint; (2) money damages of $505,930.70; and (3) legal fees and expenses totaling $9,150.00. See Dkt. No. 11-1 ("Proposed order"). Because Defendants have failed to answer or otherwise appear in this action, Plaintiff was not required to serve notice of their Motion. See FED. R. CIV. P. 55(b)(2). Nonetheless, on September 1, 2011, Plaintiff served notice of the Motion and supporting affidavits personally on Defendant Spada, in both his individual capacity and as a representative of Digital. See Dkt. No. 12. To date, neither Digital nor Spada has appeared in this action.


A. Standard of Review

After the clerk has filed an entry of default against a party that has failed to plead or otherwise defend, a court may enter default judgment upon application of the opposing party. FED. R. CIV. P. 55(b). Default judgment is an extreme sanction, and decisions on the merits are favored. Meehan v. Snow, 652 F.2d 274, 277 (2d Cir.1981). However, default judgment is ordinarily justified when a party fails to respond after having received proper notice. See Bermudez v. Reid, 733 F.2d 18, 21 (2d Cir. 1984). After an entry of default has been entered, all of the well-pleaded allegations in a complaint pertaining to liability are deemed true. See Transatlantic Marine Claims Agency, Inc. v. Ace Shipping Corp., 109 F.3d 105, 108 (2d Cir. 1997) (recognizing that the factual allegations in the complaint, except those relating to damages, are deemed true after default).

However, a court cannot take allegations in a complaint regarding damages as true. Credit Lyonnais Sec. (USA), Inc., v. Alcantara, 183 F.3d 151, 154-155 (2d. Cir. 1999). After establishing liability, a court must conduct an inquiry to ascertain the amount of damages with reasonable certainty. Transatlantic, 109 F.3d at 111. To determine the amount of damages in the context of a default judgment, "the court may conduct such hearings or order such references as it deems necessary and proper." FED. R. CIV. P. 55(b)(2). However, "it [is] not necessary for the District Court to hold a hearing, as long as it ensured that there [is] a basis for the damages specified in the default judgment." Fustok v. ContiCommodity Serv., Inc., 873 F.2d 38, 40 (2d Cir. 1989); see Action S.A. v. Marc Rich & Co., Inc., 951 F.2d 504, 508 (2d Cir.1991) (a full evidentiary hearing was not necessary where district judge was "inundated with affidavits, evidence, and oral presentations"); Bricklayers and Allied Craftworkers Local 2, Albany, N.Y. Pension Fund v. Northeast King Construction Co., No. 1:06-CV-0806, 2009 WL 1706586, at *1 (N.D.N.Y. June 16, 2009) (Kahn, J.).

B. Defendants' Liability

As Defendants have failed to appear in this action, and as an entry of default has been made in this case, the Court deems true the relevant and well-pleaded factual allegations in Plaintiff's Complaint. "Under New York law, 'an action for breach of contract requires proof of (1) a contract; (2) performance of the contract by one party; (3) breach by the other party; and (4) damages.'" First Investors Corp. v. Liberty Mut. Ins. Co., 152 F.3d 162, 168 (2d Cir. 1998) (quoting Rexnord Holdings, Inc. v. Bidermann, 21 F.3d 522, 525 (2d Cir.1994)). Plaintiff's Complaint adequately alleges each of these elements as to Digital, see Compl. ¶¶ 11-13, 16, 47-48, 49, and the Court therefore finds that Digital is liable for breach of contract.

"In an action on a guaranty, a plaintiff can establish a prima facie case of breach by proving the existence of a contract of guaranty and the obligor's failure to pay." Merrill Lynch Commercial Fin. Corp. v. All State Envelopes Ltd., No. 09-CV-0785, 2010 WL 1177451, at *2 (E.D.N.Y. Mar. 24, 2010) (citing Valley Nat'l Bank v. Greenwich Ins. Co., 254 F. Supp. 2d 448, 454 (S.D.N.Y. 2003)). Here, Plaintiff's Complaint alleges that Spada: (1) signed a guaranty of Defendant Digital's obligations to Plaintiff under the lease agreements; and (2) failed to make ...

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