United States District Court, E.D. New York
OPINION AND ORDER
GERSHON UNITED STATES DISTRICT JUDGE.
LG Capital Funding, LLC ("LG Capital"), a New York
corporation with its principal place of business in Brooklyn,
New York, brings this action against Defendant Vapor Group,
Inc. ("Vapor Group"), a publically traded Florida
corporation with its principal place of business in Miami,
Florida. Plaintiff alleges claims for breach of contract and
unjust enrichment, and it seeks costs, expenses, and
attorneys' fees. Pursuant to Rule 56 of the Federal Rules
of Civil Procedure, plaintiff now moves for partial summary
judgment on its claim for breach of contract. For the reasons
set forth below, plaintiffs motion is granted in part and
denied in part.
as otherwise noted, the facts are undisputed for purposes of
this motion. On October 8, 2014, LG Capital and Vapor Group
entered into a Securities Purchase Agreement ("SPA
1"), whereby Vapor Group issued to LG Capital a
convertible redeemable promissory note with a face value of
$115, 500 ("Note 1"), annual interest rate of 8%,
and maturation date of October 8, 2015. Note 1 carried with
it a 10% original issue discount such that its purchase price
was $105, 000. On October 8, 2014, Dror Svorai, then Chief
Executive Officer of Vapor Group, executed a Disbursement
Authorization instructing LG Capital to wire $100, 000 to
Vapor Group and $5, 000 to New Venture Attorneys P.C. for
legal services provided in connection with SPA 1 and Note 1.
On October 14, 2014, LG Capital wired the funds to Vapor
Group pursuant to the Disbursement Authorization, and Vapor
Group accepted the $100, 000 as satisfaction of Note 1.
11, 2015, LG Capital and Vapor Group entered into a second
Securities Purchase Agreement ("SPA 2"), which
provided for the issuance of an 8% convertible redeemable
promissory note ("Note 2") with face value of $35,
000 and maturation date of May 11, 2016. That same day,
Svorai executed another Disbursement Authorization
instructing LG Capital to wire $33, 250 to Vapor Group and
$1, 750 to New Venture Attorneys P.C. for legal services
provided in connection with SPA 2 and Note 2. On May 14,
2015, LG Capital wired the funds pursuant to the Disbursement
Authorization, and Vapor Group accepted the $33, 250 as
satisfaction of Note 2.
interest rate on the face of each note is 8%. (Ex. D. to
Lerman Decl. at 1; Ex. H to Lerman Decl. at 1). Notes 1 and 2
also both provide for various Events of Default, and both
state that "[u]pon an Event of Default, interest shall
accrue at a default interest rate of 24% per annum, or if
such rate is usurious or not permitted by current law, then
at the highest rate of interest permitted by law." (Ex.
D. to Lerman Decl. at 5; Ex. H. to Lerman Decl. at 5). Thus,
upon the occurrence of an Event of Default, the 8% interest
rate jumps to 24%.
and 2 also provide LG Capital with an option to convert
portions of each Note's principal face amount and accrued
interest into shares of Vapor Group common stock. Pursuant to
this option, on April 21, 2015, LG Capital converted $8, 000
of principal and $331 of accrued interest on Note 1 into
Vapor Group common stock, leaving a principal balance of
$107, 500 on Note 1. On May 4, 2015, it again exercised its
conversion rights under Note 1, converting $17, 500 of
principal and $774.79 of accrued interest into Vapor Group
common stock. LG Capital claims that this leaves a balance of
$90, 000 on Note 1, but Vapor Group disputes this figure to
the extent it does not account for the undisbursed 10% issue
discount. That is, Vapor Group argues that the balance on
Note 1 following the conversions to common stock is actually
less than $90, 000 because the original loan paid out under
Note 1 was subject to the 10% original issue discount so that
it was 10% (or $10, 500) less than Note 1 's original
face value, which was $115, 500.
21, 2015, Vapor Group became delinquent in its filing with
the Securities and Exchange Commission ("SEC") for
its failure to file a Quarterly Report; this constituted an
Event of Default under Note 1. Default interest of 24% thus
began to accrue on May 21, 2015 on Note I, and default
interest began to accrue on Note 2 by virtue of a
cross-default provision in Note 1. On October 8, 2015, Note 1
reached maturity and became due and payable. On May 11, 2016,
Note 2 reached maturity and became due and payable. Apart
from the conversion of the principal value and accrued
interest of Note 1 to common stock as discussed above, Vapor
Group has not made any payment to LG Capital under either
Notes 1 or 2 as of the date of the filing of the papers for
Summary Judgment Standard
is entitled to summary judgment if "there is no genuine
dispute as to any material fact and the movant is entitled to
judgment as a matter of law." Fed.R.Civ.P. 56(a);
Celotex Corp. v. Catrett, All U.S. 317, 322 (1986).
Only disputes relating to material facts-i.e., "facts
that might affect the outcome of the suit under the governing
law"-will properly preclude the entry of summary
judgment. Anderson v. Liberty Lobby, Inc., All U.S.
242, 248 (1986). An issue of fact is "genuine" if
"the evidence is such that a reasonable jury could
return a verdict for the nonmoving party." Id.
moving party bears the burden of demonstrating "the
absence of a genuine issue of material fact."
Celotex, All U.S. at 323. Once the moving party has
asserted facts showing that the non-movant's claims
cannot be sustained, the nonmoving party must "come
forward with specific facts showing that there is a genuine
issue for trial." Matsushita Electric Ind. Co., LTD.
v. Zenith Radio Corp., 475 U.S. 574, 587 (1986)
(internal quotation marks omitted).
determining whether to grant summary judgment, the court must
"construe all evidence in the light most favorable to
the nonmoving party, drawing all inferences and resolving all
ambiguities in its favor." Dickerson v.
Napolitano, 604 F.3d 732, 740 (2d Cir. 2010). However,
the mere existence of a scintilla of evidence in support of
the non-moving party's position will be insufficient;
there must be evidence on which the jury could reasonably
find for the non-moving party. Anderson, All U.S. at