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Rgi Brands LLC v. Cognac Brisset-Aurige, S.A.R.L.

United States District Court, Second Circuit

August 23, 2013

RGI BRANDS LLC, Plaintiff,
v.
COGNAC BRISSET-AURIGE, S.A.R.L., Defendant.

ORDER

LORNA G. SCHOFIELD, District Judge.

Plaintiff, RGI Brands LLC ("RGI"), brought this action against Defendant Cognac Brisset-Aurige, S.A.R.L. ("CBA") seeking damages for breach of the parties' distribution agreement. (Dkt. No. 1). CBA counterclaimed that RGI unlawfully registered and used CBA's trademarks in the United States. (Dkt. No. 14). Familiarity with the facts of the case is presumed.

On January 29, 2013, Magistrate Judge Andrew J. Peck, to whom this matter was referred, granted the motion to withdraw filed by CBA's counsel and warned that a corporation may not appear without counsel. (Dkt. No. 27, "January 29 Order"). On February 20, 2013, RGI filed a Motion for Default Judgment ("Motion") based on CBA's failure to obtain counsel and filed inquest papers. (Dkt. Nos. 32-35). On March 4, 2013, Judge Peck issued an additional warning that CBA may not appear except through counsel. (Dkt. No. 38). CBA failed to obtain counsel and did not file a response to the Motion.

On April 18, 2013, Judge Peck issued a Report and Recommendation ("Report") recommending that (1) judgment be entered against CBA on default; (2) CBA's counterclaims be dismissed with prejudice; and (3) RGI be awarded $57, 940 in breach of contract damages, $6, 000 in pre-judgment interest through the date of the Report (April 18, 2013) plus $14.287 per day until judgment is entered, together with post-judgment interest pursuant to 28 U.S.C. § 1961, and $1, 216 in costs. (Dkt. No. 40). RGI timely submitted objections to the Report on June 3, 2013. (Dkt. No. 42, "Objections"). CBA did not file objections and did not respond to RGI's Objections. On April 26, 2013, this case was transferred to this Court.

Having conducted a de novo review of the portions of the Report to which RGI objects, and having further reviewed the entirety of the Report, the Court adopts Judge Peck's Report in its entirety. Plaintiff's Motion for Default Judgment is granted as modified herein, and damages are awarded in the amount of $57, 940 plus interest and costs.

I. APPLICABLE LEGAL STANDARDS

A. Standard of Review

A district court reviewing a magistrate judge's report and recommendation "may accept, reject, or modify, in whole or in part, the findings or recommendations made by the magistrate judge." 28 U.S.C. § 636(b)(1)(C). The Court must make a de novo determination of those portions of the report to which timely objections are made. Id. When no objections are made, the Court may adopt the report if there is no clear error on the face of the record. See DiPilato v. 7-Eleven, Inc., 662 F.Supp.2d 333, 339 (S.D.N.Y. 2009). A decision is "clearly erroneous" when the Court, upon review of the entire record, is "left with the definite and firm conviction that a mistake has been committed." United States v. Snow, 462 F.3d 55, 72 (2d Cir. 2006) (internal quotation marks omitted).

To invoke de novo review of the magistrate judge's recommendations, a party's objections "must be specific and clearly aimed at particular findings in the magistrate judge's proposal." McDonaugh v. Astrue, 672 F.Supp.2d 542, 547 (S.D.N.Y. 2009) (internal quotation marks omitted). De novo review of a magistrate judge's report does not require the Court to conduct a de novo hearing on the underlying issues. United States v. Raddatz, 447 U.S. 667, 676 (1980). Rather, Congress intended "to permit whatever reliance a district judge, in the exercise of sound judicial discretion, chose to place on a magistrate's proposed findings and recommendations." Id.

B. Damages

"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." Cement & Concrete Workers Dist. Council Welfare Fund, Pension Fund, Annuity Fund, Educ. & Training Fund & Other Funds v. Metro Found. Contractors, Inc., 699 F.3d 230, 234 (2d Cir. 2012) (internal quotation marks omitted). "There must be an evidentiary basis for the damages sought by plaintiff, and a district court may determine there is sufficient evidence either based upon evidence presented at a hearing or upon a review of detailed affidavits and documentary evidence." Id. Damages may not be awarded based solely on a plaintiff's statement as to the amount of damages; rather, there must be a basis upon which the court may determine the amount of damages with "reasonable certainty." Credit Lyonnais Sec. (USA), Inc. v. Alcantara, 183 F.3d 151, 155 (2d Cir. 1999); see also Transatlantic Marine Claims Agency, Inc. v. Ace Shipping Corp., 109 F.3d 105, 111 (2d Cir. 1997) (noting that the court "should take the necessary steps to establish damages with reasonable certainty"). "Where, on a damages inquest, a plaintiff fails to demonstrate its damages to a reasonable certainty, the court should decline to award any damages, even though liability has been established through default." Lenard v. Design Studio, 889 F.Supp.2d 518, 527 (S.D.N.Y. 2012). While Rule 55(b)(2) provides that a court may hold a hearing to determine the amount of damages to be awarded on a default, the decision to hold a hearing is within the discretion of the district court. Fustok v. ContiCommodity Servs., Inc., 873 F.2d 38, 40 (2d Cir. 1989).

Damages for breach of contract are determined by calculating "the amount necessary to put the plaintiff in the same economic position he would have been in had the defendant fulfilled his contract." Indu Craft, Inc. v. Bank of' Baroda, 47 F.3d 490, 495 (2d Cir. 1995) (internal quotation marks omitted). Alternatively, the court may allow a plaintiff to recover "expenses of preparation and of part performance, as well as other foreseeable expenses incurred in reliance upon the contract." Bausch & Lomb, Inc. v. Bressler, 977 F.2d 720, 729 (2d Cir. 1992) (internal quotation marks omitted).

"To recover lost profits damages for breach of contract under New York law, a plaintiff must make three showings: 1) the damages were caused by the breach; 2) the damages are provable with reasonable certainty; and 3) the damages were within the contemplation of the parties at the time of contract." Atias v. Sedrish, 133 F.Appx. 759, 760 (2d Cir. 2005) (citing Ashland Mgmt. Inc. v. Janien, 82 N.Y.2d 395, 404, 624 N.E.2d 1007 (1993)).

II. DISCUSSION

Neither party has objected to Judge Peck's recommendation that default judgment be entered against CBA and that CBA's counterclaims be dismissed with prejudice. RGI objects to the Report only with respect to the amount of damages to be awarded. In the Motion, RGI seeks $944, 937.03 in total damages. In the Report, Judge Peck recommended that RGI be awarded $57, 941.86, consisting of $20, 161.87 of damages related to Container 1 and $37, 779.99 of damages related to Container 6. Judge Peck also recommended that RGI be awarded interest and costs but no attorneys' fees.

In the Objections, RGI seeks reduced total damages in the amount of at least $558, 664.46, in addition to treble damages, attorneys' fees and costs. RGI specifically objects to Judge Peck's Report only with respect to the amount of damages related to Container 1, Container 5, the balance of advanced payments, lost profits, promotional expenses and overcharges for the purchase of raw materials. The Court considers each of RGI's objections in turn.

A. Damages

1. Damages Related to Container 1

In the Motion, RGI seeks $29, 177 in damages for the four pallets of duty-paid defective products received in Container 1 that CBA never repaired or replaced and the warehousing expenses associated with storing those defective products. Judge Peck concluded that RGI's evidentiary proffer established with reasonable certainty that RGI suffered $20, 161 in damages for the duty-paid defective products in Container 1, representing the value of four pallets of products, or 2, 880 750 milliliter bottles. (Report at 20). Judge Peck concluded that RGI was not entitled to damages for warehousing costs because it failed to submit evidence of those expenses. (Report at 17-20).

In its Objections, RGI seeks the reduced amount of $28, 577.07 in damages related to the duty-paid defective products from Container 1, including (a) $20, 161 for the value of the duty-paid defective products, as recommended by Judge Peck; (b) $6, 163.20 for the duty (excise tax) paid on those products; and (c) $2, 232 for the cost of warehousing the products. RGI also seeks, for the first ...


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