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JDF Capital Inc v. Apptigo International, Inc.

United States District Court, S.D. New York

May 8, 2018

JDF CAPITAL INC., Plaintiff,
v.
APPTIGO INTERNATIONAL, INC., Defendant.

          THE HONORABLE VERNON S. BRODERICK, UNITED STATES DISTRICT JUDGE.

          REPORT AND RECOMMENDATION

          KATHARINE H. PARKER United States Magistrate Judge

         Plaintiff JDF Capital Inc. commenced this action against Defendant Apptigo International, Inc. for breach of contract or, in the alternative, unjust enrichment. The Complaint seeks an award of damages pursuant to a promissory note executed by the parties, as well as costs, expenses, attorneys' fees, and interest. Upon Plaintiff's application and in light of Defendant's failure to appear in or otherwise defend against this action, on November 17, 2017, the Honorable Vernon S. Broderick granted Plaintiff's motion for a default judgment. The matter was then referred to the undersigned for an inquest on damages.

         For the reasons stated below, I recommend that the Court enter judgment for Plaintiff in the amount of $107, 011.33 for Defendant's breach of contract. I further recommend that the Court award $10, 880.00 in attorneys' fees and $1, 351.49 in costs.

         BACKGROUND

         It is well-settled that, in light of Defendant's default, Plaintiff's allegations, with the exception of those related to damages, are accepted as true. See Finkel v. Romanowicz, 577 F.3d 79, 84 (2d Cir. 2009) (citing Au Bon Pain Corp. v. Artect, Inc., 653 F.2d 61, 65 (2d Cir. 1981)). Accordingly, the following facts are established as a result of Defendant's default:

• On or about May 22, 2015, Plaintiff and Defendant executed a securities purchase agreement (the “Purchase Agreement”) by which Plaintiff agreed to purchase from Defendant certain convertible promissory note(s). (Doc. No. 1, Complaint (“Compl.”) ¶¶ 6-7.)
• Contemporaneous with the execution of the Purchase Agreement, the parties executed a promissory note (the “Note”) with a maximum face value of $110, 000 and a minimum face value of $55, 000. (Compl. ¶ 11.)
• Under the terms of the Note, Plaintiff possessed a right to convert “any outstanding Principal Amount of [the] Note plus accrued interest . . . into a number of fully paid and nonassessable shares of [Defendant's] Common Stock equal to the quotient of the elected outstanding Principal Amount of the Note divided by the [applicable] Conversion Price as described in” the Note. (Compl. ¶ 20.)
• On two occasions (February 17, 2016 and March 28, 2016), Plaintiff sought to convert certain portions of the then-outstanding balance of the Note into shares of Defendant's Common Stock, and Defendant honored Plaintiff's requests without incident. (Compl. ¶¶ 36-40.)
• On April 11, 2016, however, Plaintiff again sought to convert certain portions of the then-outstanding balance of the Note into shares of Defendant's Common Stock, and Defendant failed to honor Plaintiff's request. (Compl. ¶¶ 41-43.)
• On May 26, 2016 (the “Maturity Date”), the Note's principal balance as well as all outstanding interest accrued thereupon became due and owing. (Compl. ¶ 18.) As of the date that Plaintiff filed its Complaint, Defendant had made no effort to pay any of the outstanding amount due and owing to Plaintiff. (Compl. ¶ 60.)
• On June 28, 2016, Plaintiff submitted a default notice to Defendant setting forth the default status of the Note and demanding payment of all outstanding funds due thereunder. (Compl. ¶ 54.)

         DISCUSSION

         I. Conduct Of Hearing And Proof Of Damages

         Under Rule 55 of the Federal Rules of Civil Procedure, a court may, in order to effectuate a default judgment, “conduct hearings . . . to determine the amount of damages.” Fed.R.Civ.P. 55(b)(2). Plaintiffs bear the burden of establishing their entitlement to recovery and thus must substantiate their claims with evidence to prove the extent of their damages. See Greyhound Exhibitgroup, Inc. v. E.L.U.L. Realty Corp., 973 F.2d 155, 158 (2d Cir. 1992). This Court, after holding a telephone conference in this matter on January 31, 2018, issued a briefing schedule and scheduled a damages inquest hearing for March 12, 2018, directing Plaintiff to serve Defendant with notice of the same. Plaintiff filed papers supporting its request for damages, including a memorandum of law and a declaration from counsel attaching, inter alia, the relevant contracts as well as documentation of fees and costs incurred in this action. These papers also were served on Defendant. On March 12, 2018, a damages inquest hearing was held. Defendant neither appeared at the hearing nor submitted any written opposition to Plaintiff's request for damages. Accordingly, the Court will evaluate Plaintiff's damages application without input from Defendant.

         II. Damages For Breach Of Contract

         Plaintiff seeks damages pursuant to Sections 2.2, 3.7, and 3.3 of the Note stemming from Defendant's breach and/or default under the Note. To establish a breach of contract under New York law, [1] Plaintiff must demonstrate (1) the existence of a contract, (2) Plaintiff's performance, (3) Defendant's breach, and (4) resulting damages. See, e.g., Terwilliger, 206 F.3d at 245-46. Each of these requirements is satisfied here. The well-pleaded allegations of Plaintiff's Complaint demonstrate that valid contracts existed between the parties, that Plaintiff performed under the contracts in all material respects, that Defendant breached the contracts by, among other things, ...


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