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Skaff v. Progress International, LLC

United States District Court, S.D. New York

March 4, 2014

DANIEL SKAFF, an individual, solely in his capacity as Stockholders' Representative, Plaintiff,
v.
PROGRESS INTERNATIONAL, LLC, Defendant.

OPINION AND ORDER ADOPTING REPORT AND RECOMMENDATION

KATHERINE POLK FAILLA, District Judge.

On March 7, 2013, this Court entered a default judgment against defendant Progress International, LLC ("Progress" or "Defendant"), and referred the matter to the Honorable Frank Maas, United States Magistrate Judge, for an inquest and a Report and Recommendation as to damages.

Pending before the Court is the Report and Recommendation of Judge Maas, dated October 21, 2013 (Dkt. #29; hereinafter, the "Report"). In the Report, Judge Maas recommends that Plaintiff Daniel Skaff ("Skaff" or "Plaintiff"), acting on behalf of the former shareholders of Vivaro Corporation ("Vivaro"), be awarded: (i) $4, 005, 000.00 in compensatory damages; (ii) prejudgment interest on each of the defaulted installment payments that comprised that figure, calculated at the rate of 5.75% per annum from the installment due date; (iii) postjudgment interest on that figure from March 7, 2013, calculated at the rate set forth in Title 28, United States Code, Section 1961(a); and (iv) attorney's fees and expenses in the amount of $53, 976.64. Judge Maas further recommends that the Court appoint a receiver and require that Defendant execute any documents and take any other steps necessary to enforce Plaintiff's contractual rights. ( Id. ).

On November 7, 2013, Plaintiff timely filed a limited objection to the Report, requesting that the Court expressly state that the damages award recommended in the Report is "without prejudice to Plaintiff bringing a separate action against Progress for any and all additional amounts owed by Progress after April 29, 2013...." (Dkt. #30 at 2). For the reasons set forth in the remainder of this Opinion, the Court grants Plaintiff's request, and otherwise adopts the Report in its entirety.

BACKGROUND[1]

A. The Relevant Agreements and Defendant's Payment Obligations

The relevant facts underlying this action are set forth in the Report. Only those facts pertinent to resolving Plaintiff's objection to the Report are recited here.

In June 2010, Plaintiff, Vivaro, Defendant, and a subsidiary of Defendant ("Sub A") entered into an Agreement and Plan of Merger, dated June 18, 2010, (the "Merger Agreement"), pursuant to which Sub A merged into Vivaro, which, in turn, would become a wholly-owned subsidiary of Defendant. (Compl. ¶ 7). As consideration for the merger, Defendant agreed to pay Plaintiff and other Vivaro shareholders certain sums of money by installments, as set forth in the Merger Agreement. (Skaff Decl. ¶ 7; Merger Agreement § 2.01(b)). The Merger Agreement was subsequently amended through addenda, with the Third Addendum, dated as of March 30, 2012, being the operative addenda. (Skaff Decl. ¶ 8). As relevant here, pursuant to the Third Addendum, Defendant is required to remit the following principal and interest payments to Plaintiff after December 2012: (i) $750, 000 on April 30, 2013; (ii) $600, 000 on October 31, 2013; and (iii) $1, 369, 432 on April 30, 2014. (Third Addendum at 2).[2] In the event of default, the Merger Agreement and addenda thereto do not contain an acceleration provision.

The Merger Agreement provides that it "shall be governed by, and construed in accordance with, the laws of the State of Delaware." (Merger Agreement § 10.07). Both the First Addendum, dated as of December 20, 2010, and the Second Addendum, dated as of July 8, 2011, contain a supplemental choice of law provision requiring that, "[e]xcept as otherwise expressly provided in the merger agreement[, ]" the First Addendum and Second Addendum "shall be governed by, and construed and enforced in accordance with, the laws of the state of New York." (First Addendum ¶ 6; Second Addendum ¶ 6). In contrast, the Third Addendum does not include any choice of law provision.

B. Procedural History

On December 12, 2012, Plaintiff filed the instant action, alleging claims for breach of contract and requesting compensatory relief and specific performance. (Dkt. #1). On December 18, 2012, Plaintiff filed an amended complaint for the sole purpose of submitting certain exhibits in support of his claims. (Dkt. #2; Skaff Decl. ¶ 17). Defendant was served with the summons, complaint, and amended complaint on December 19, 2012. (Dkt. #3).

Because Defendant failed to timely respond or otherwise move with respect to the amended complaint, on January 14, 2013, Plaintiff requested that the Clerk of Court enter default in this matter against Defendant. (Dkt. #4). On January 30, 2013, the Clerk of Court entered a Certificate of Default against Defendant (Dkt. #6), and on February 19, 2013, Plaintiff moved for entry of a default judgment (Dkt. #13).

On March 4, 2013, the Court held a hearing on Plaintiff's motion for a default judgment at which neither Defendant nor its counsel appeared at the appointed time or for 30 minutes thereafter. (Dkt. #16). On that same day, the Honorable Jed S. Rakoff, the District Judge to whom the matter was then assigned, granted Plaintiff's motion for default judgment and referred the matter to Judge Maas for an inquest on damages. ( Id. ).

In connection with resolving the inquest on damages, Judge Maas directed that, on or before April 29, 2013, Plaintiff submit an inquest memorandum, accompanied by supporting affidavits and exhibits, setting forth proof of damages, together with proposed findings of fact and conclusions of law. (Dkt. #22). Judge Maas further ordered Defendant to serve and file any opposing memoranda, affidavits, and exhibits, as well as any alternative findings of fact and conclusions of law, by May ...


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