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 RAVENEL, et al., Plaintiffs,
BOHAI PHARMACEUTICALS GROUP, INC., Defendant.
Euro Pacific Capital Inc. ("Euro Pacific"),
individually and in its capacity as investor representative
and attorney-in-fact for numerous individual investors,
brought this action against Bohai Pharmaceuticals Group, Inc.
("Bohai") asserting causes of action for breach of
contract, breach of covenant, and breach of the implied
covenant of good faith and fair dealing. ("First
Amended Complaint, " see Dkt. No. 13.)
Order dated April 15, 2016, the Court entered a default
judgment against Bohai (see Dkt. No. 42) and
subsequently referred the case to Magistrate Judge James Cott
for an inquest on damages (see Dkt. No. 48). Upon
reviewing Euro Pacific's inquest submissions, Magistrate
Judge Cott recommended that this Court deny Euro
Pacific's motion for damages without prejudice to renewal
with respect to the requests for money damages and
attorneys' fees and costs. ("Initial Report, "
see Dkt. No. 53.)
October 11, 2017, Euro Pacific filed objections to the
Initial Report (see Dkt. No. 59), and on October 26,
2017, the Court returned the matter to Magistrate Judge Cott
with instructions to: (1) receive into evidence the
Affirmation of David Graff (Dkt. No. 60) and the Affidavit of
Peter Chema dated October 11, 2017, with accompanying
exhibits (Dkt. Nos. 61, 61-1-61-21); (2) reconsider Euro
Pacific's motion for an inquest into damages, upon review
of the additional evidence; and (3) provide the Court with an
updated Report and Recommendation. (See Dkt. No.
62.) On February 13, 2018, Magistrate Judge Cott ordered Euro
Pacific to file a further submission, and Euro Pacific
complied. (See Dkt. Nos. 66, 67.)
Judge Cott issued a revised Report and Recommendation on
March 9, 2018 ("Revised Report, " see Dkt.
No. 68), a copy of which is attached and incorporated herein,
recommending that this Court grant 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.
Magistrate Judge Cott also recommended that Euro Pacific be
awarded $107, 194.40 in attorneys' fees, and $9, 793.87
in costs. Objections to the Revised Report were due by March
23, 2018. No objections were filed.
district court evaluating a Magistrate Judge's report may
adopt those portions of the report to which no
"specific, written objection" is made, as long as
the factual and legal bases supporting the findings and
conclusions set forth in those sections are not clearly
erroneous or contrary to law. Fed.R.Civ.P. 72(b); see
also Thomas v. Arn, 474 U.S. 140, 149 (1985); Greene
v. WCI Holdings Corp., 956 F.Supp. 509, 513 (S.D.N.Y.
1997). The Court is not required to review any portion of a
Magistrate Judge's report that is not the subject of an
objection. See Thomas, 474 U.S. at 149. A district
judge may accept, set aside, or modify, in whole or in part,
the findings and recommendations of the Magistrate Judge as
to such matters. See Fed.R.Civ.P. 72(b); DeLuca
v. Lord, 858 F.Supp. 1330, 1345 (S.D.N.Y. 1994).
review of the Revised Report and applicable legal
authorities, the Court concludes that the findings,
reasoning, and legal support for the recommendations made in
the Revised Report are not clearly erroneous or contrary to
law and are thus warranted. Accordingly, for substantially
the reasons set forth in the Revised Report, the Court adopts
the Revised Report's factual and legal analyses and
determinations, as well as its substantive recommendations,
in their entirety as the Court's ruling on Euro
Pacific's underlying motion for an inquest on damages.
it is hereby
that the Revised Report and Recommendation of Magistrate
Judge James Cott dated March 9, 2018 (Dkt. No. 68) is adopted
in its entirety, and the application of plaintiff Euro
Pacific Capital Inc. ("Euro Pacific"), individually
and in its capacity as investor representative and
attorney-in-fact for numerous individual investors, for an
award of damages is GRANTED; and it is
that the Clerk of Court is directed to enter judgment in
favor of Euro Pacific and against defendant Bohai
Pharmaceuticals Group, Inc. 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, in addition to $107, 194.4 0 in
attorneys' fees, and $9, 793.87 in costs. The Clerk of
Court is further directed to terminate all pending motions
and close this case.
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 [plaintiffs] 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. 1981)).
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. ¶
In 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.
nine months later, Euro Pacific moved for an inquest on
damages. Motion for Inquest, dated January 13, 2017 (Dkt. No.
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 ...