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615 Building Company LLC v. Rudnick

United States District Court, S.D. New York

July 31, 2015



GEORGE B. DANIELS, District Judge.

Plaintiff 615 Building Company LLC brought this action against Defendant Andrew Rudnick for breach of contract. Plaintiff alleges that the Defendant personally guaranteed to Plaintiff "the full and prompt payment ofrent" for a certain tenancy, "including, but not limited to, the fixed annual rent, additional rent and any and all other sums and charges, payable by [the t]enant." (Compl. ¶¶ 10-11, ECF No. 1; see Pl.'s Mem. Exs. D & F, ECF No. 14.) Upon the tenant's continuing failure to pay rent, Plaintiff secured a judgment against the tenant and subsequently proceeded against the Defendant for contract damages and attorneys' fees. ( See Compl. ¶¶ 13-16, 25-41.) On July 8, 2013, this Court entered default judgment for Plaintiff against Defendant, the Defendant having never responded to the Summons and Complaint. (ECF No. 10.) This Court then referred the case to Magistrate Judge Ronald L. Ellis for an inquest on damages. Magistrate Judge Ellis issued a Report and Recommendation ("Report") recommending an award to Plaintiff of $846, 054.91 in damages and $24, 196.17 in attorneys' fees and costs. (ECF No. 21.)

Relevant Facts

Plaintiff is the landlord of a building located at 800-B Fifth A venue, New York, New York, the lease of which was guaranteed by Defendant. (Pl.'s Mem. ¶¶ 10, 13-14.) Pursuant to a June 2010 amendment to the lease agreement, the annual rent was $561, 103.20 (or $46, 758.60 per month), plus adjustments in accordance with the Consumer Price Index ("CPI"). ( Id. Ex. E ¶ 3.) Upon the tenant's default in the payment ofrent, and with 10 days' written notice, the lease provided that Plaintiff could "re-enter the demised premises[, ]... dispossess [thet]enant by summary proceedings or otherwise, ... and hold the premises as if this lease had not been made." ( Id. Ex. A ¶ 17.) On January 20, 2014, Plaintiff re-let the premises to Manhattan Orthopedic & Sports Medicine Group, PC ("Manhattan Orthopedic") on a short-term basis (until January 19, 2015) for a fee of $50, 000 per month. (Pl.'s October 8, 2014 Letter at 2, ECF No. 20.)

Standard of Review

This Court may accept, reject, or modify, in whole or in part, the findings set forth in the Report. 28 U.S.C. § 636(b)(1)(C). When there are objections to the Report, the Court must make a de nova determination of those portions of the Report to which objections are made. Id.; see also Rivera v. Barnhart, 423 F.Supp.2d 271, 273 (S.D.N.Y. 2006). The district judge may also receive further evidence or recommit the matter to the magistrate judge with instructions. See Fed.R.Civ.P. 72(b); 28 U.S.C. § 636(b)(l)(C). The Court need not conduct a de nova hearing on the matter. See United States v. Raddatz, 447 U.S. 667, 675-76 (1980). Rather, it is sufficient that the Court "arrive at its own, independent conclusion" regarding those portions of the Report to which objections were made. Nelson v. Smith, 618 F.Supp. 1186, 1189-90 (S.D.N.Y. 1985) (quoting Hernandez v. Estelle, 711F.2d619, 620 (5th Cir. 1983)). When no party files objections to a Report, the Court may adopt the Report if "there is no clear error on the face of the record." Adee Motor Cars, LLC v. Amato, 388 F.Supp.2d 250, 253 (S.D.N.Y. 2005) (quotation omitted).

Magistrate Judge Ellis advised the parties that failure to file timely objections to the Report would constitute a waiver of those objections on appeal. (Report at 13-14; see also 28 U.S.C. § 636(b)(l); Fed.R.Civ.P. 72(b)). No party objected to the Report. This Court adopts the analysis recommended in Magistrate Judge Eiiis's Report in part, and awards the Plaintiff $886, 669.40[1] in damages and $24, 196.17 in attorneys' fees and costs.

Contract Damages

Magistrate Judge Ellis recommended that the Plaintiff receive $610, 687.46 for arrears from July 1, 2011 through September 30, 2013. (Report at 7; see Pl.'s Mem. Ex. K.) This amount includes rent at a fixed rate of $46, 758.60 per month from July 1, 2011 through September 30, 2013 ($1, 262, 482.20); CPI adjustments over these twenty-seven months ($66, 002.03); legal fees incurred to litigate against the defaulting tenant ($8, 030.20); costs incurred to remove trash and/or abandoned items from the premises ($3, 816.79); minus credits consisting of the tenant's security deposit (-$174, 705.20) and the tenant's payments in varying amounts from July 1, 2011 through July 30, 2012 (-$602, 305.02). ( Id. ) Totaling these amounts, this Court finds that Plaintiff is entitled to recover $563, 321 in arrears:

Rent $1, 262, 482.20 Consumer Price Index $66, 002.03 Legal $8, 030.20 Rubbish $3, 816.79 Credits ($174, 705.20) Payments ($602, 305.02) ________________________________________________________ Total $563, 321

Plaintiff also seeks liquidated damages under the terms of the lease for "the rent and additional rent that would have become due... for the balance of the Lease term ending on October 31, 2015, totaling $1, 248, 279.25." (Pl.'s Supp. Mem. ¶ 86, ECF No. 18; see Pl.'s Mem. Ex. K.) Magistrate Judge Ellis properly determined that Plaintiff's decision to re-let the premises to Manhattan Orthopedic beginning on January 20, 2014 released the tenant-and therefore the Defendant-from liability for rent after this date.[2] ( See Report at 8); see also Holy Props. Ltd., L.P. v. Kenneth Cole Prods., Inc., 87 N.Y.2d 130, 134 (1995) (emphasis added) (noting that a landlord "could accept the tenant's surrender, reenter the premises and relet them for its own account thereby releasing the tenant from further liability for rent").

However, Magistrate Judge Ellis did not recommend that Plaintiff be reimbursed for the costs incurred to re-let the premises. ( See Report at 8.) In New York, although a landlord's decision to re-enter and re-let the premises releases the tenant from further liability for rent, "[t]ermination of the lease in that manner... does not relieve defendants of liability incurred prior to the surrender, and thus, defendants are liable for the accrued rent and other sums under the lease, including reletting costs and attorney's fees." See Nicholas A. Cutaia, Inc. v. Buyer's Bazaar, Inc., 637 N.Y.S.2d 857, 859 (4th Dep't 1996). Magistrate Judge Ellis further included the date of January 20, 2014 in the calculation of prorated rent due, even though Manhattan Orthopedic's tenancy began on this date. ( See Report at 8 n. 7; Pl.'s October 8, 2014 Letter at 2.) Defendant is therefore liable for liquidated damages from October 1, 2013 through January 19, 2014 in the amount of $180, 396.49[3], plus $87, 030.59[4] for the expenses Plaintiff incurred during this time period to keep the premises in good order and prepare for their re-letting.[5] As a result, the Plaintiff is entitled to a total award of $267, 427.08 in liquidated damages.

Adding the arrears ($563, 321) and liquidated damages ($267, 427.08), Plaintiff is entitled to contract damages ...

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