United States District Court, S.D. New York
ORDER ADOPTING REPORT AND RECOMMENDATION
KATHERINE POLK FAILLA, District Judge.
On November 16, 2012, this Court entered a default judgment against Defendant Thomas Allen Bibiyan, a.k.a. Derek Levitan, and referred the matter to the Honorable Ronald L. Ellis, United States Magistrate Judge, for an inquest into damages. Pending before the Court is Judge Ellis's Report and Recommendation, dated February 13, 2014 (the "Report"). (Dkt. #20). In the Report, Judge Ellis recommends that Plaintiffs Allen Massre and Mass. Capital, LLC be awarded $11, 444.46 in damages for lost profits, and that Plaintiffs' remaining claims for damages be denied. For the reasons set forth below, the Report is adopted in full.
A. Plaintiffs' Allegations Against Defendant
The relevant facts underlying this action are set forth in the Report. Only those facts pertinent to assessing the Report are recited here.
On August 29, 2012, Plaintiffs commenced this action against Defendant Bibiyan. (Dkt. #1). Plaintiffs brought claims alleging violations of the Computer Fraud and Abuse Act, 18 U.S.C. § 1030 ("CFAA"), as well as claims under the common law of New York State for defamation, injurious falsehood, tortious interference with business relationships, and prima facie tort. ( Id. ). Plaintiffs' claims pertained to (i) Defendant's launch of two "denial of service" ("DoS") attacks on Mass. Capital's website, www.epicstockpicks.com ("Epic Stock Picks"), on January 9 and April 25, 2012 (Compl. ¶¶ 11-20), and (ii) Defendant's post of an entry (the "Massre Ripoff Report") on the Ripoff Report, a consumer reporting website, on August 6, 2012, that claimed, among other things, that Massre was facing civil and criminal charges because of his involvement in a Ponzi scheme ( id. at ¶¶ 22-25).
Plaintiffs alleged that as a result of the Massre Ripoff Report, a potential buyer of Mass. Capital decided not to purchase the company from Massre because of the content contained in that report. (Compl. ¶ 34). According to Plaintiffs, prior to withdrawing the offer, the potential buyer had submitted a letter of intent to purchase Mass. Capital for $2, 200, 000. ( Id. at ¶ 35).
Plaintiffs requested a total of $958, 982.46 in damages. This figure comprised: (i) $11, 444.46 for the estimated revenue losses to Epic Stock Picks caused by the two DoS attacks, as violations of the CFAA (Massre Aff. ¶ 31); (ii) $50, 000 in punitive damages for the DoS attacks, also in violation of the CFAA ( id. at ¶¶ 34-35); (iii) $100, 000 in damages for defamatory statements posted by Defendant on the Ripoff Report website ( id. at ¶ 69); and (iv) $797, 538 in damages for the unsuccessful sale of Mass. Capital that Plaintiffs allege was the result of Defendant's defamation ( id. at ¶ 67).
B. Procedural History
Plaintiffs commenced this action on August 29, 2012 (Dkt. #1), and filed proof of service of the Summons and Complaint on Defendant on September 21, 2012 (Dkt. #2). Defendant failed to serve and file an answer or otherwise respond to the Complaint. (Grendi Decl. ¶ 3). On October 9, 2012, Plaintiffs' counsel received a fax from Hamid Soleimanian, Esq., stating that he was representing Defendant in this action. ( Id. at ¶ 6).
On October 17, 2012, the Honorable Jed S. Rakoff, the United States District Judge then assigned to this case, held an initial conference, but Defendant failed to appear despite Defendant's counsel having notice of this conference. (Grendi Decl. ¶ 7). On October 18, 2014, Plaintiffs' counsel left a telephone message for Defendant's counsel informing him of what had occurred at the October 17 conference, and advising that Plaintiffs were moving forward with a default judgment. ( Id. at ¶ 8). Defendant's counsel did not respond to the telephone call. ( Id. ).
On October 19, 2012, Plaintiffs' counsel served Plaintiffs' Request to Enter Default of Defendant Bibiyan on Defendant's counsel (Grendi Decl. ¶ 9), and on October 25, 2012, Plaintiffs moved for entry of default against Defendant (Dkt. #8, 10). The Clerk of Court entered a Certificate of Default against Defendant on October 25, 2012. (Dkt. #11). On that next day, October 26, 2012, Plaintiffs' counsel served Defendant's counsel with a copy of the Certificate of Default issued by the Clerk, along with a letter informing Defendant's counsel that Plaintiffs would move for a default judgment returnable on November 8, 2012. (Grendi Decl. ¶ 10).
On November 7, 2012, Plaintiffs filed a Motion for Default Judgment. (Dkt. #12), and served a copy of that motion on Defendant's counsel (Grendi Decl. ¶ 12). The Court held a default judgment hearing on November 16, 2012, at which neither Defendant nor his counsel appeared. (Dkt. #16). On that same day, the Court entered a default judgment against Defendant and referred the matter to Judge Ellis for inquest on damages. ( Id. ).
On December 18, 2012, Judge Ellis held an inquest conference at which Plaintiffs' counsel, but neither Defendant nor his counsel, appeared. At the conference, Plaintiffs' counsel informed the Court that no expert had determined the value of Mass. Capital. (Report 4). The Court provided Plaintiffs with an opportunity to submit supplemental material in ...