REPORT AND RECOMMENDATION
KEVIN NATHANIEL FOX, Magistrate Judge.
TO THE HONORABLE LORNA G. SCHOFIELD, UNITED STATES DISTRICT JUDGE
Lon Negrin ("Negrin") commenced this action seeking damages for breach of fiduciary duty, unjust enrichment, tortious interference with contract, fraud and conversion. On November 19, 2012, Negrin's motion for judgment by default was granted in an amount to be determined by inquest. Before the Court are the plaintiff's unopposed inquest submissions. The plaintiff seeks $3, 916, 917.
FACTS DEEMED ADMITTED
The following facts, based on the well-pleaded allegations, are deemed admitted by the defendant:
In 2005, Negrin founded Fusion S.A. ("Fusion"), in Nicaragua, to manufacture garments for sale in the United States. He was also a principal of Top of Production, LLC ("Top"), a company engaged in the garment production industry. Negrin acquired screen printing machinery, including four screen printers, three dryers, two forklifts, three automatic garment folders and 700 roller screens. In 2006, Negrin met Robert Kalina ("Kalina") and they discussed the possibility of Kalina's investing with Negrin to start a screen printing business in Nicaragua. Kalina owned Mobay Sportswear, Inc. ("Mobay") with David Peeler ("Peeler").
On July 12, 2006, after Kalina and Peeler visited Fusion and inspected the screen printing equipment in Nicaragua, Negrin, Kalina and Peeler entered into an agreement creating Fusion Embellishment, S.A. ("Embellishment"), with Negrin owning 50%, and Kalina and Peeler owning 25% each. To be able to operate under Nicaragua laws, Embellishment needed to obtain Free Trade Zone status. Negrin formed a division within Fusion called Fusion Embellishment ("the Embellishment Division"), so the screen printing business could operate under Fusion's Free Trade Zone status while Embellishment was waiting to obtain Free Trade Zone status. The parties memorialized their intention to proceed in this fashion by a letter agreement, dated July 12, 2006. Kalina was responsible for completing the Free Trade Zone application for the screen printing business. The Free Trade Zone status was never obtained by Embellishment.
The July 12, 2006 letter agreement required Kalina and Peeler to invest $500, 000 in the Embellishment Division for its operations. The investment would be transferred to Embellishment upon its approval, by the Nicaraguan government, to commence business through the Embellishment Division, without having secured Free Trade Zone status. The July 12, 2006 letter agreement required Negrin, through Fusion and Top, to transfer the screen printing equipment and to sublease factory space in the Fusion facility to the Embellishment Division. Kalina and Peeler invested $500, 000 in the Embellishment Division, as agreed.
In August 2006, the parties discussed the logistics of operating the Embellishment Division and Embellishment. They agreed that Kalina would be responsible for production in Nicaragua and general bookkeeping for the Embellishment Division. Negrin would be responsible for managing the Nicaraguan personnel. Peeler would be responsible for designs and sampling. Negrin and Kalina would share responsibility for marketing and budgeting. The parties also agreed that Mobay would: (1) fabricate samples and provide artwork and personnel support for certain Embellishment Division and Embellishment logistical and operational needs; (2) handle the Embellishment Division's accounting needs remotely, over the internet, from its offices in North Carolina, using QuickBooks Online; and (3) pay ink suppliers directly, and the Embellishment Division would reimburse Mobay. Moreover, Mobay would produce pre-production strike-offs for the Embellishment Division's customers using Mobay's equipment.
In 2007, Kalina and Peeler met, in New York County, with a Mobay sales representative, who also represented the Embellishment Division, and with a company called Tee Rex. Thereafter, Kalina and Peeler met with Negrin, and the parties met with Tee Rex and the representatives of a customer, T-Ink. Tee Rex agreed to send a technician to Mobay to assist with fabricating the samples that Mobay would produce on the Embellishment Division's behalf, because Mobay was not producing the samples properly. During a meeting in 2008, the parties agreed that Bill Pellegrini would act as a salesman for the Embellishment Division, in addition to performing his Mobay duties. During 2006 and 2007, Mobay was the Embellishment Division's only customer. By the Fall of 2008, the Embellishment Division started receiving orders from other customers, but its work for Mobay still comprised approximately 95% of its production.
In September 2008, without an explanation or warning, Mobay stopped placing orders with the Embellishment Division. Mobay also imposed a chargeback on the Embellishment Division without Negrin's approval. Mobay alleged that the chargeback resulted from a problem with color matching on finished garments. However, the color matching problem was caused by changes made to the Embellishment Division's ink system, by Mobay, without Negrin's consent. Prior to these changes, Mobay did not experience color match problems and accepted all goods from the Embellishment Division, without complaint. Mobay also deducted money from the Embellishment Division's account to pay unapproved expense reports, without Negrin's knowledge or consent. In addition, Mobay failed to pay the Embellishment Division for certain seconds and overruns in 2007 and 2008.
As a result of Mobay's conduct, Fusion was unable to pay rent and was served with a default notice by its landlord, who placed a lien on three pieces of Fusion's equipment as security for the rent owed. Without Negrin's knowledge, Kalina and Peeler met with Fusion's landlord in Nicaragua, after which the landlord placed liens on the entire content of Fusion's factory, including equipment, raw materials and finished goods belonging to Fusion and Top.
The production and screen printing equipment used by the Embellishment Division, owned in part by Top and in part by Fusion, had been appraised in April 2008. However, the appraiser appointed subsequently by a Nicaraguan court valued the content of the facility, including the raw materials, equipment, certain finished goods and work in process at a significantly lower amount. The court-appointed appraiser is the son of a partner in the entity that was Fusion's landlord. Based on this low appraisal, an auction was held, on January 21, 2009, to liquidate the content of the Fusion facility. Kalina and Peeler were aware of the scheduled auction, but neither they nor Fusion's landlord or the court informed Negrin, Fusion or Top of the auction. Kalina's attorney, acting on Kalina's behalf, was the only bidder at the January 21, 2009 auction, and he purchased the entire content of the factory for an amount representing the amount due to the landlord for unpaid rent. Without Negrin's knowledge, Kalina and Peeler signed a new lease with the landlord and sought to have Fusion and the Embellishment Division evicted from the premises. Negrin, Fusion and Top never received an eviction notice. Kalina informed Fusion's plant manager that Fusion was out-of-business and that Kalina would be opening a new business, in two weeks, at that location. Kalina offered the existing Fusion employees jobs ...