United States District Court, S.D. New York
EURO PACIFIC CAPITAL, INC., individually and in its capacity as investor representative and attorney-in-fact for BRUCE WALKER REVENEL, et al., Plaintiffs,
BOHAI PHARMACEUTICALS GROUP, INC., Defendant.
Honorable Victor Marrero, United States District Judge
REPORT AND RECOMMENDATION
L. Cott, United States Magistrate Judge.
April 15, 2016, the Court entered default in this breach of
contract action in favor of plaintiff Euro Pacific Capital,
Inc., individually and in its capacity as investor
representative and attorney-in-fact for numerous individual
investors, against Defendant Bohai Pharmaceuticals Group,
Inc. The case was subsequently referred to me to conduct an
inquest into damages. For the reasons set forth below, I
recommend granting Euro Pacific's request for $6, 843,
549 in damages, as well as prejudgment interest on that award
at a rate of 9% per annum beginning April 5, 2016 and
continuing until the date of entry of judgment. I also
recommend that Euro Pacific be awarded $107, 194.40 in
attorneys' fees, and $9, 793.87 in costs.
following facts, which are drawn from a review of Euro
Pacific's pleadings and supported by its submissions
related to this inquest, are deemed established for the
purpose of determining the damages to which it is entitled.
See, e.g., Finkel v. Romanowicz, 577 F.3d
79, 84 (2d Cir. 2009) (“In light of [defendant's]
default, a court is required to accept all of
[plaintiff's] factual allegations as true and draw all
reasonable inferences in its favor [.]”) (citing Au
Bon Pain Corp. v. Artect, Inc., 653 F.2d 61, 65 (2d Cir.
Pacific is an investment company incorporated under the laws
of California with its principal place of business in
Connecticut. Supp. Chema Aff. ¶ 6. Bohai is a Nevada
company with its principal place of business in China. Supp.
Chema Aff. ¶ 4. Bohai produces, manufactures, and
distributes herbal pharmaceuticals. Supp. Chema Aff. ¶
about January 5, 2010, a group of 124 investors represented
by Euro Pacific invested $11, 100, 000.00 in Bohai. Supp.
Chema Aff. ¶¶ 2, 8; Compl. ¶ 12. The
investment was carried out through the purchase of promissory
notes (the “Notes”). Compl. ¶
exchange for $2.00, investors were issued a $2.00 convertible
note (a “Note”), with each Note to be repaid in
full by January 5, 2012 with 8% annual interest. Id.
¶¶ 11, 15; Supp. Chema Aff. ¶ 13; Supp. Chema
Aff. Ex. 4 (Note). Euro Pacific also entered into a
Securities Purchase Agreement with Bohai, which governed the
purchase of the Notes. Compl. ¶ 19; Supp. Chema Aff. Ex.
3 (Securities Purchase Agreement). The Securities Purchase
Agreement was also signed by each investor. Supp. Chema Aff.
¶ 9; Supp. Chema Aff. Ex. 10 (signed pages).
about December 28, 2011, a week before the Notes'
original maturity date, Euro Pacific and Bohai amended the
Notes, extending the maturity date to April 5, 2012 and
increasing the interest rate to 12%. Supp. Chema Aff. ¶
13; Supp. Chema Aff. Ex. 12 (first amendment to Notes). Over
the course of the next two and a half years, Euro Pacific and
Bohai agreed to four more amendments, each extending the
maturity date and maintaining an interest rate of 12%. Supp.
Chema Aff. ¶¶ 14-17; Supp. Chema Aff. Ex. 13-16
(second, third, fourth, and fifth amendments to Notes). The
maturity date set by the fifth and final amendment was April
5, 2016. Supp. Chema Aff. ¶ 17; Supp. Chema Aff. Ex. 16
(providing April 5, 2016 date).
April 2012 and March 2014, Bohai made ten payments on the
Notes, totaling $4, 284, 049, which were first applied to the
interest and then to the principal. Supp. Chema Aff.
¶¶ 20-21. However, after March 2014, Bohai stopped
making payments on the Notes. Supp. Chema Aff. ¶¶
20-22. As of the maturity date of April 5, 2016, a total of
$6, 843, 549 was due to the noteholders, comprised of $4,
987, 021 in outstanding principal and $1, 856, 528 in unpaid
interest. Supp. Chema Aff. ¶ 26; Chema Decl.
¶¶ 7-8 (citing to Supp. Chema Aff. Ex. 18 at 4)
(tables listing outstanding principal and unpaid interest
owed to noteholders as of maturity date).
8, 2015, Euro Pacific filed this breach of contract action
against Bohai. Compl. ¶¶ 40-72. Bohai initially appeared
with counsel and engaged in motion practice. October 26 Order
at 1. Subsequently, however, the Court granted Bohai's
attorney's motion to withdraw. Id. at 2. Bohai
having failed to answer or otherwise make an appearance
following the withdrawal of its counsel, the Court entered
default judgment against it on April 15, 2016. Id.
nine months later, Euro Pacific moved for an inquest on
damages. Motion for Inquest, dated January 13, 2017 (Dkt. No.
44). In its
motion, Euro Pacific sought damages of $8, 677, 552.46 for
the outstanding principal and unpaid interest on the Notes,
as well as attorneys' fees and costs of $147, 174.30.
Id. at 4. Following a referral to conduct an
inquest, I recommended that the Court deny the requests for
monetary damages and attorneys' fees and costs without
prejudice to renewal, on the grounds that Euro Pacific had
not submitted sufficient evidence to establish compensatory
damages with reasonable certainty and had failed to establish
that the requested attorneys' fees and costs were
reasonable. Euro Pac. Capital, Inc., 2017 WL
3208036, at *8-14.
receiving two extensions, see Dkt. Nos. 55 & 58,
on October 11, 2017, Euro Pacific timely filed its objections
to my Initial Report. Objections (Dkt. No. 59). In support of
its objections, Euro Pacific submitted a supplemental
affidavit from Chema and a supplemental affirmation from
October 26, 2017, the Court agreed that, based on the record
before it, compensatory damages and attorneys' fees and
costs should be denied. October 26 Order at 5-6. The Court
then directed that I receive into evidence Chema's
supplemental affidavit and Graff's supplemental
affirmation with accompanying exhibits, reconsider the
inquest motion upon the new record, and issue a revised
Report and Recommendation. Id. at 7. Upon review of
Chema's supplemental affidavit, I found that it did not
provide a sufficient basis upon which to determine damages
for interest with reasonable certainty, and ordered a further
submission. Order, dated Feb. 13, 2018, Dkt. No. 66.
Accordingly, on February 16, 2018, Euro Pacific filed a
declaration of Peter Chema to address the Court's
Pacific seeks an award of $6, 843, 549-which is the amount of
outstanding principal and unpaid interest due to the
investors on the date of the Notes' maturity-as well as
prejudgment interest on that award, $136, 578.50 in
attorneys' fees, and $9, 793.87 in costs.
Breach of Contract Damages
when a default judgment is warranted based on a party's
failure to defend, the allegations in the complaint with
respect to the amount of the damages are not deemed true. The
district court must instead conduct an inquiry in order to
ascertain the amount of damages with reasonable
certainty.” Am. Jewish Comm. v. Berman, No.
15-CV-5983 (LAK) (JLC), 2016 WL 3365313, at *3 (S.D.N.Y. June
15, 2016) (quoting Credit Lyonnais Sec. (USA), Inc. v.
Alcantara, 183 F.3d 151, 155 (2d Cir. 1999)),
adopted by, 2016 WL 4532201 (S.D.N.Y. Aug. 29,
2016). A plaintiff “bears the burden of establishing
its entitlement to recovery and thus must substantiate its
claim with evidence to prove the extent of its
damages.” Id. at *3 (alterations omitted)
(quoting Dunn v. Advanced Credit Recovery Inc., No.
11-CV-4023 (PAE) (JLC), 2012 WL 676350, at *2 (S.D.N.Y. Mar.
1, 2012)). “[A] plaintiff must submit sufficient
evidence, in the form of detailed affidavits and other
documentary materials to enable the district court to
‘establish damages with reasonable
certainty.'” Nat'l Photo Grp., LLC v.
Bigstar Entm't, Inc., No. 13-CV- 5467 (VSB) (JLC),
2014 WL 1396543, at *2 (S.D.N.Y. Apr. 11, 2014) (quoting
Transatlantic Marine Claims Agency, Inc. v. Ace Shipping
Corp., 109 F.3d 105, 111 (2d Cir. 1997)) (internal
citations omitted), adopted by, 2014 WL 5051275
(S.D.N.Y. Oct. 8, 2014); see also Fed. R. Civ. P.
Court has previously determined that New York law applies,
“[u]nder New York law, a successful plaintiff in a
breach of contract action is entitled to damages in the
‘amount necessary to put the plaintiff in the same
economic position he would have been in had the defendant
fulfilled his contract.'” Am. Jewish
Comm., 2016 WL 3365313, at *5 (quoting Scholastic,
Inc. v. Snap TV, Inc., No. 09-CV-4349 (GBD) (GWG), 2011
WL 1330246, at *3 (S.D.N.Y. Apr. 8, 2011)). Where damages are
susceptible to simple mathematical calculation and the
plaintiff provides a “sufficient basis from which to
evaluate the fairness” of the requested damages, no
evidentiary hearing is necessary. Id. at *4.
Pacific having satisfactorily pled each of the elements of a
cause of action for breach of contract in its complaint,
Euro Pac. Capital, Inc., 2017 WL 3208036, at *7, I
focus on the sufficiency of the “evidence, in the form
of detailed affidavits and other documentary materials to
enable the [ ] court to ‘establish damages with
reasonable certainty.'” Nat'l Photo,
2014 WL 1396543, at *2 (quoting Transatlantic, 109
F.3d at 111) (internal citation omitted).
that the supplemental Chema Affidavit and its accompanying
exhibits provide sufficient evidence to establish damages
with reasonable certainty. Euro Pacific has provided a copy
of the Securities Purchase Agreement that has been executed
by representatives of both parties,  a list of the investors who signed
the Securities Purchase Agreement, and copies of each
investor's executed signature page. Supp. Chema Aff. Ex.
3 at 38-41 & Ex. 10. Euro Pacific has also submitted a
copy of the original Note and a copy of each amendment, as
well as a list of investors that indicates how many Notes
each investor purchased. Supp. Chema Aff. Ex. 3 at 38-41
& Exs. 4, 12-16. Euro Pacific has supplied Chema's
sworn statement that Bohai made no payments after March 2014
and still owes $4, 987, 021 in outstanding principal and an
additional amount in unpaid interest. Supp. Chema Aff.
¶¶ 20, 26; Ex. 18 (updated outstanding principal
and unpaid interest). Euro Pacific has also provided a table
indicating how much outstanding principal and unpaid interest
were due to each investor as of the Notes' maturity date,
for a total of $4, 987, 021 in outstanding principal and $1,
856, 528 in unpaid interest. Supp. Chema Aff. Ex.
Pacific's evidence-in particular, Chema's
supplemental affidavit, to which the Security Purchase
Agreement, list of investors, executed signature pages, a
Note, amendments to the Notes, and a table of outstanding
principal and unpaid interest are attached-is sufficient to
enable the Court to establish with reasonable certainty that
the investors on whose behalf Euro Pacific seeks to recover
made an investment through a series of promissory notes and
that a total of $6, 843, 549 in outstanding principal and
unpaid interest on the Notes came due on April 5, 2016 and
was never paid. See, e.g., Putnam Bridge Funding
III LLC v. Jenkins, No. 16-CV-7012 (AT) (DF), 2017 WL
3267934, at *6 (S.D.N.Y. July 10, 2017) (finding, in breach
of contract action, that plaintiff's submission of
promissory note as well as corroborating correspondence and
financial records established with reasonable certainty that
plaintiff was entitled to recover unpaid principal due under
promissory note), adopted by, 2017 WL 3267752
(S.D.N.Y. July 31, 2017); Scharnikow v. Siracuse,
No. 15-CV-6991 (DRH) (SIL), 2016 WL 7480360, at *5 (E.D.N.Y.
Dec. 6, 2016) (finding, in breach of contract action, that
plaintiff's submission of affidavit, correspondence, and
financial records met burden of proving damages sought for
principal and interest due under promissory notes),
adopted by, 2016 WL 7480364 (E.D.N.Y. Dec. 29,
2016); Customers Bank v. Anmi, Inc., No. 11-CV-7992
(AJN), 2014 WL 842577, at *6 (S.D.N.Y. Mar. 3, 2014)
(adopting report and recommendation finding, in breach of
contract action, that plaintiff's submission of
promissory note, uncontested affidavit and financial records
entitled plaintiff to recover damages for outstanding
principal due under promissory note).
in order to “put the plaintiff in the same economic
position [it] would have been in had the defendant fulfilled
[its] contract, ” Am. Jewish Comm., 2016 WL
3365313, at *5, Euro Pacific is entitled to damages in the
amount of $6, 843, 549, comprised of $4, 987, 021 in
outstanding principal and $1, 856, 528 in accrued, unpaid
interest pursuant to the terms of the Notes.