The opinion of the court was delivered by: Spatt, District Judge
Presently before the Court are objections to a Report and Recommendation of United States Magistrate Judge A. Kathleen Tomlinson dated February 16, 2012 addressing the calculation of damages in the above-captioned litigation between the Plaintiffs Juniper Entertainment Inc., and Juniper Services, Inc. ("Juniper" or "the Plaintiffs") and the Defendants Michael Calderhead and James Calderhead ("the Defendants"). For the reasons set forth below, the Court adopts in part and declines to adopt in part Judge Tomlinson's Report.
The facts and procedural history of this case have been exhaustively recounted in: (1) Judge Tomlinson's Report and Recommendation dated August 17, 2007 on the Plaintiffs' preliminary injunction motion ("Preliminary Injunction Report") (Docket Entry # 16); (2) this Courts' order dated September 19, 2007, adopting in its entirety the Preliminary Injunction Report (Docket Entry # 31); and (3) Judge Tomlinson's Report and Recommendation dated February 16, 2012, on the Plaintiffs' motion for a default judgment ("the Report") (Docket Entry # 125). Thus, the Court assumes the parties familiarity with the facts and procedural history of this case and will only briefly summarize the information pertinent to the instant motion.
The Defendant James Calderhead was employed by Juniper as an executive pursuant to an employment agreement executed in February 2005. During his employment, James Calderhead identified New Wave Communication Inc. ("New Wave"), as a potential acquisition target for Juniper. At that time, James Calderhead's brother, the Defendant Michael Calderhead, owned a substantial interest in New Wave. In late 2005, Juniper purchased New Wave pursuant to a Stock Exchange Agreement (the "Agreement").
James Calderhead became the president of New Wave and Michael Calderhead was employed by Juniper as a New Wave executive. Michael Calderhead signed the Agreement. Pursuant to the Agreement's restrictive covenant, Michael Calderhead, as a seller of New Wave, agreed that during his employment he would not induce employees to leave their employment or induce customers to terminate their services with New Wave. Michael Calderhead further agreed not to aid any competitor of the Plaintiff or hire any of the Plaintiffs' employees within one year of their employment with Juniper. Further, Michael Calderhead agreed not to induce any clients to transact business with competitors. On January 17, 2007, ten months after the close of the sale, Michael Calderhead informed the Plaintiff that he intended to resign. However, he remained at New Wave until March 2007. On May 27, 2007, the Plaintiff terminated James Calderhead's employment.
On June 15, 2007, the Plaintiffs filed the complaint in this action alleging that: (1) Michael Calderhead breached a stock exchange agreement; (2) James Calderhead breached an employment agreement; and (3) both Defendants breached their fiduciary duties to the Plaintiffs.
According to the Plaintiffs, in violation of their respective agreements, the Calderheads: (1) formed and operated a competitor company to New Wave called Communications Infrastructure, Inc. ("CII") while they were still employed by New Wave; (2) misappropriated confidential client information to lure clients away from New Wave; and (3) induced employees to leave New Wave and join CII.
The Plaintiffs immediately sought an order preliminarily enjoining the Calderheads from directly or indirectly competing with New Wave by soliciting its clients or inducing its employees to leave. The Court referred the preliminary injunction to Judge Tomlinson, who, following a hearing, issued the 86-page Preliminary Injunction Report recommending that a preliminary injunction be issued enjoining Michael Calderhead from: (1) disclosing any of the trade secrets or confidential information of Juniper/New Wave; and (2) soliciting, directly or indirectly any of Juniper/New Wave's customers whose names and contact information appeared on a Juniper/New Wave customer list. Judge Tomlinson further recommended against granting a preliminary injunction against James Calderhead based on her finding that the Plaintiffs had failed to offer any proof that James Calderhead was working for CII. On September 19, 2007, the Court adopted the Preliminary Injunction Report in its entirety.
B. The Defendants' Default
The Defendants initially appeared pro se, but shortly after the commencement of the lawsuit retained the law firm of Bracken, Margolin & Besunder, LLP. On June 24, 2008, the Court granted Bracken, Margolin & Besunder, LLP's motion to withdraw as counsel. Subsequently, the Defendants again proceeded pro se until January 5, 2010, when they retained the counsel of Jonathan L. Stein, Esq. On July 29, 2010, the Court granted a motion by Mr. Stein to withdraw as counsel, and directed him to serve a notice by personal service on the Defendants advising them that if they failed to either appear pro se or through counsel within thirty days of receiving said notice, the Court would entertain a motion to enter a default against them.
Mr. Stein served this notice on the Defendants at their last known addresses on July 30, 2010. After no appearance was made, on March 1, 2011, the Plaintiffs moved for a default judgment against the Defendants pursuant to Federal Rule of Civil Procedure 55(b)(2). Subsequently, on April 11, 2011, the Court entered a default against the Defendants and referred the matter ...