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Plus Enterprises LLC v. Sun Trading International, LLC

United States District Court, S.D. New York

November 29, 2017

PLUS ENTERPRISES LLC d/b/a PLUS FUNDING GROUP, Plaintiff,
v.
SUN TRADING INTERNATIONAL, LLC, SPECTRA WORLDWIDE, LLC, DEBRA SANDS, and GLENN SANDS, Defendants.

          HONORABLE VINCENT L. BRICCETTI, UNITED STATES DISTRICT JUDGE

          REPORT AND RECOMMENDATION

          PAUL E. DAVISON UNITED STATES MAGISTRATE JUDGE

         I. INTRODUCTION

         On November 18, 2016, Plaintiff Plus Enterprises LLC doing business as Plus Funding Group ("Plaintiff or "Plus Enterprises") commenced this action against Defendants Debra Sands, Spectra Worldwide, LLC ("Spectra"), Sun Trading International, LLC ("Sun Trading"), and Glenn Sands (collectively, "Defendants"), Dkt. 1 (Complaint ("Compl, ")), seeking damages for Defendants' breach of the factoring and security contract ("Factoring Agreement"), breach of the Continuing Guaranty, account stated, and constructive trust claims. Dkt, 1, The operative complaint was filed on December 2, 2016 ("Am. Comp."). Dkt. 8. Defendants did not respond. On February 8, 2017, Plaintiff filed its request to enter a default judgment against Defendants. Dkt. 18. On February 15, 2017, Defendants' default was certified by the Clerk of the Court. Dkt. 20. On April 11, 2017, the Court ordered Defendants to show cause for why a default judgment should not be entered. Dkt. 21. On May 9, 2017, the Court entered a default judgment against Defendants, Dkt. 26, and referred the matter to me for a damages inquest. Dkt. 25.

         Presently before me are Plaintiffs proposed findings of fact and conclusions of law, ("P. Mem."), and accompanying exhibits. Dkt. 32. Defendants did not respond to this submission. Plaintiff seeks $246, 391.56 from Defendants in compensatory damages as well as attorneys' fees and costs. P. Mem. at 7.

         Having completed the inquest, and for the reasons set forth below, I respectfully recommend that the Court enter judgment against Defendants Sun Trading and Debra Sands only in the total amount of $202, 566.44. This award consists of $186, 587.64 for Plaintiffs unreimbursed advances on Defendant Sun Trading's invoices, $14, 564.50 in attorneys' fees, and $1, 414.30 in costs.

         II. THE INQUEST

         On May 9, 2016, 1 issued a Scheduling Order for Damages Inquest, Dkt. 27, ("Scheduling Order"), directing Plaintiff to file and serve proposed findings of fact and proposed conclusions of law, and providing time for Defendant to file and serve a response thereto. The Scheduling Order further provided:

The Court hereby notifies the parties that it may conduct this inquest based solely upon the written submissions of the parties. See Fustok v. ContiCommodity Servs., Inc., 873 F.2d 38, 40 (2d Cir. 1989). To the extent that any party seeks an evidentiary healing on the issue of damages (or other monetary relief), such party must set forth in its submission the reason why the inquest should not be conducted based upon the written submissions alone, including a description of what witnesses would be called to testify at a hearing and the nature of the evidence that would be submitted.

Id.

         On July 7, 2017, Plaintiff filed its Proposed Findings of fact and conclusions of law, affidavits, and accompanying exhibits. Dkt. 32. Plaintiff did not request an evidentiary hearing. Defendant did not respond.

         A. Plaintiffs Amended Complaint and Inquest Submission

         The following facts are drawn from my review of Plaintiffs amended complaint and supported by Plaintiffs inquest submissions and are deemed established for the purpose of determining Plaintiffs damage award.

         Plaintiff and Defendant Sun Trading entered into the Factoring Agreement on December 9, 2014 for an initial term for twelve months. Am. Comp., ¶¶ 16-19; P. Mem. at 3 (citing Factoring Agreement). The Factoring Agreement provided for its automatic renewal for successive six month periods. Am. Comp,, ¶¶ 16-19; P. Mem., ¶¶ 15, 18 (citing Factoring Agreement). Under the Factoring Agreement, Plaintiff provided Defendant Sun Trading funding by purchasing Defendant Sun Trading's unpaid invoices. In exchange for the funding from Plaintiff, Defendant Sun Trading agreed to (i) reimburse Plaintiffs advances in the event Defendant Sun Trading's debts were not collectable, (ii) pay fees on Plaintiffs advances, and (iii) cover Plaintiffs attorneys' fees, costs and disbursements expended to recover any unreimbursed advances. Am. Comp. ¶¶ 20, 21. In addition, Defendant Debra Sands provided a Continuing Guaranty on December 9, 2014, whereby she personally guaranteed Defendant Sun Trading's payment obligations.[1] P. Mem., ¶ 16; Am. Comp., ¶ 27.

         The Factoring Agreement provided that Defendant Sun Trading would submit a Schedule of Invoices, and actual invoices to Plaintiff seeking up to 80% of the face value of the receivables listed. Plaintiff would then provide an advance on those invoices. The Advance Rate of "[u]p to 80% [was] in Purchaser's [Plaintiffs] discretion" and Plaintiff was permitted to "in its sole credit and business judgment, without notice to [Sun Trading], advance any percentage of the Face Amount less than the indicated Advance Rate." P. Mem., ¶¶ 19-22 (citing Factoring Agreement §3 [Definitions] and § 2.1.4). In other words, Plaintiff had discretion to decide whether to advance any money, and how much money to advance on Defendant Sun Trading's invoices. Id. (citing Factoring Agreement, §§ 2.1.1-2, 1.4).

         From December 2014 through September 2016, Plaintiff made advances on Defendant Sun Trading invoices and purchase orders. P. Mem., ¶¶ 23-24. Plaintiffs inquest submission identifies the following advances made to Defendant Sun Trading that remain unreimbursed, ("Purchased Accounts"): (i) $25, 000 on Invoice #023 for $72, 000 billed to Ross Stores, Inc.; (ii) $4, 490.84 on Invoice #030 for $5, 644.80 billed to Gabriel Bros., Inc.; (hi) $20, 160 on Invoice #031 for $25, 000 billed to Beall's Outlet; (iv) $126, 000 on four invoices for a total of $183, 141 billed to Ross Stores, Inc.; and (v) $10, 936.80 on an unnumbered invoice for $13, 702.25 billed to Ross Stores, Inc. P. Mem., ¶¶ 14-28. All of the aforementioned invoices went unpaid for . more than 90 days, which, under the Factoring Agreement, triggered Defendant Sun Trading's contractual obligation to repurchase the invoices from Plaintiff. Factoring Agreement, § 24. Defendant Sun Trading did not fulfill its contractual obligation.

         In its inquest submission, Plaintiff requests $246, 391.56 in damages, which includes $186, 587.64 as reimbursement for its advances on Defendant Sun Trading's invoices, $21, 552.96 in "Accrued Fees, " and $38, 250.96 in "Earned Fees." P. Mem., ¶¶ 43-44. Plaintiffs inquest submission further requests varying amounts in attorneys' fees, and $1, 414.30 in costs. P. Mem., ¶ 45 (citing Habas Decl., [2] ¶ 33).

         III. LEGAL STANDARD

         It is well settled that, when a defendant defaults, the court must accept all of Plaintiff s allegations as true, except those pertaining to damages, Fed.R.Civ.P. 8(b)(6); see, e.g, Finkel v. Romanowicz, 577 F.3d 79, 84 (2d Cir. 2009). Proof of damages must be based upon admissible, authenticated evidence. House v. Kent Worldwide Machine Works, Inc., 359 Fed.Appx. 206, 207-08 (2d Cir. 2010) (summary order). Plaintiff "bears the burden of establishing her entitlement to recovery and thus must substantiate her claim with evidence to prove the extent of damages." Dunn v. Advanced Credit Recovery Inc., No. 11 Civ. 4023, 2012 U.S. Dist. LEXIS 27205, at *2 (S.D.N.Y. Mar. 1, 2012), adopted by, 2012 U.S. Dist. LEXIS 47129 (S.D.N.Y. Apr. 3, 2012) (citing Greyhound Exhibitgroup, Inc. v. E.L. U.L. Realty Corp., 973 F.2d 155, 158 (2d Cir. 1992)).

         Plaintiff" is entitled to all reasonable inferences that can be made from the evidence that is presented in support of its damages claims. See, e.g., Au Bon Pain Corp. v. Artect, Inc., et ah, 653 F.2d 61, 65 (2d Cir. 1981). However, "the district court cannot simply rely on the Plaintiffs statement of damages; there must be a basis upon which the court may establish damages with reasonable certainty." House v. Kent Worldwide Mack Worts, Inc., 359 Fed.Appx. 206, 207 (2d Cir. 2010) (summary order) (citing Transatlantic Marine Claims Agency, Inc. v. Ace Shipping Corp., 109 F.3d 105, 111 (2d Cir. 1997)).

         Moreover, "[w]here an inquest is conducted following a default judgment, it is generally necessary for the Court to determine whether the allegations of the complaint, taken as true, are sufficient to establish the defendant's liability." Weiwei Gao v. Sidhu, No. 11 Civ. 2711, 2013 U.S. Dist. LEXIS 83446, at *6-7 (S.D.N.Y. June 12, 2013) (citing PSG Poker, LLC v. DeRosa-Grund, No. 06 Civ. 1104, 2008 U.S. Dist. LEXIS 59214, at *3 (S.D.N.Y. My 14, 2008)).

         IV. DISCUSSION

         Plaintiffs amended complaint asserted six claims, only three of which are addressed in Plaintiffs inquest submission. Plaintiff seeks damages from the Contracting Defendants for its breach of contract, or, in the alternative, for its Account Stated claim (asserted against Defendant Sun Trading, Defendant Glenn Sands, and Defendant Debra Sands) or a Constructive Trust claim (asserted against all four Defendants, including Defendant Spectra). Specifically, Plaintiff requests $246, 391.56 in reimbursements and fees, including $186, 587.64 for Plaintiffs advances on Defendant Sun Trading's invoices, $21, 552.96 in Factoring Fees for "Accrued Fees, " and $38, 250.96 in Factoring Fees for "Earned Fees" under the Factoring Agreement. P. Mem. at 7. Plaintiffs inquest submission further requests attorneys' fees, and $1, 414.30 in costs. P. Mem. at 7 (citing Habas Decl., ¶ 33).

         For the reasons that follow, I respectfully recommend that the Court award Plaintiff $186, 587.64 in damages, $14, 564.50 in attorneys' fees, and $1, 414.30 in costs (for a total of $202, 566.44).

         A. Breach of Contract Claims

          "To state a claim for breach of contract under New York law, a plaintiff must allege (1) the existence of an agreement, (2) adequate performance of the contract by the plaintiff, (3) breach of contract by the defendant, and (4) damages." Hudson & Broad, Inc. v. J.C, Penney Corp., 553 Fed.App'x. 37, 38-39 (2d Cir. 2014) (citing Harsco Corp. v. Segui, 91 F.3d 337, 348 (2dCir. 1996)).

         Plaintiff has alleged (1) the existence of an agreement, here, the Factoring Agreement, and, in the case of Debra Sands, the Personal Guaranty, (2) adequate performance of the contract by Plaintiff because it timely provided Defendant Sun Trading with advances on its invoices as contemplated by the Factoring Agreement and evidenced by the bank records and invoices in evidence, (3) the Contracting Defendants' breach of its contracts when Defendant Sun Trading failed to repurchase its invoices from Plaintiff, and (4) Plaintiffs damages because of its unreimbursed advances.

         Thus, Plaintiffs allegations are sufficiently well pleaded to establish the Contracting Defendants' liability on the breach of contract claims.

         As a result of the breach, Plaintiff seeks a total of $246, 391.56 in damages: (i) $186, 587.64 for reimbursement of its advances on Defendant Sun Trading's invoices; (ii) $21, 552.96 in "Accrued Fees"; and (iii) $38, 250.96 in "Earned Fees." P. Mem., ¶¶ 43-44.

         For the reasons discussed below, I respectfully recommend $186, 587.64 damage award from the Contracting Defendants to reimburse Plaintiff for its advances on Defendant Sun Trading's invoices. The other categories of relief requested, however, are insufficiently supported to warrant an award of damages.

         1. Defendant Sun ...


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