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RDW Capital v. Be Industries, Inc.

United States District Court, S.D. New York

January 7, 2020

RDW CAPITAL, INC., Plaintiff,
v.
BE INDUSTRIES, INC., et al., Defendants.

          OPINION AND ORDER

          J. PAUL OETKEN, DISTRICT JUDGE.

         On September 21, 2017, Plaintiff RDW Capital, Inc. (“RDW”) filed this action alleging breach of contract, fraud in the inducement, fraudulent misrepresentation, and unjust enrichment brought pursuant to this Court's diversity jurisdiction against Defendants BE Industries, Inc., NAC Drive Systems, Inc. (“NACD”), Swiss Heights Engineering, S.A. (“Swiss Heights”), BE North America, Corp. (“BE North America”), Bellelli USA, LLC (“Bellelli USA”), Bellelli Engineering, S.P.A. (“Bellelli Engineering”), Antonio Monesi, and Filippo Puglisi. (Dkt. No. 1 (“Compl.”).) Defendants have not answered the complaint or otherwise appeared in this action. Defendant Bellelli Engineering is in an active bankruptcy in Italy. (Dkt. No. 75 ¶ 10.) And Defendant Swiss Heights has been dissolved. (Dkt. No. 75 ¶ 11.) A certificate of default has been issued as to all other Defendants. (Dkt. Nos. 36-38, 45, 50, 67.) Plaintiff now moves for default judgment under Federal Rule of Civil Procedure 55(b) against the other six defendants. (Dkt. No. 72.) For the reasons that follow, the motion is granted.

         I. Background

         For the purposes of deciding this motion, this Court accepts as true all factual allegations in RDW's complaint. See Bricklayers & Allied Craftworkers Local 2 v. Moulton Masonry & Constr., LLC, 779 F.3d 182, 187 (2d Cir. 2015) (per curiam).

         On November 4, 2016, RDW entered into a Securities Purchase Agreement with NAC Global Technologies, Inc. (“NAC Global”) (now known as Defendant BE Industries, Inc.) and Defendant NACD. (Compl. ¶ 17.) In the agreement, RDW committed to the purchase of a little over 1.5 million shares of NAC Global in exchange for $1.5 million. (Id.)

         Twelve days later, on November 16, 2016, RDW entered into a Security and Pledge Agreement with all corporate defendants whereby RDW was provided with a secured interest in all property owned and controlled by each corporate defendant. (Compl. ¶ 18.) On the same day, Defendants NACD, Bellelli Engineering, Bellelli USA, and BE North America entered into a Subsidiary Guarantee Agreement, pursuant to which each Defendant agreed to be liable to RDW for any breach of the Securities Purchase Agreement and related transaction agreements. (Compl. ¶ 19.) RDW further entered into a Validity and Performance Guarantee with Defendant Antonio Monesi in which he agreed to be personally liable for any breach of the Securities Purchase Agreement and related transaction agreements up to $1.5 million. (Compl. ¶ 20.) RDW also entered a similar Validity and Performance Guarantee with Defendant Filippo Puglisi. (Compl. ¶ 21.)

         RDW also entered into two separate collateral assignment contracts. On November 16, 2016, RDW entered into a Collateral Assignment of Receivables with NAC Global and its subsidiaries NACD, Bellelli USA, and BE North America (the “U.S. Collateral Assignment”). In that agreement, the parties assigned all rights to their receivables as collateral for all debts, liabilities, and obligations existing under the Securities Purchase Agreement, until all of their payment obligations had been paid in full. (Compl. ¶ 22.) On November 16, 2017, RDW entered into a similar Collateral Assignment of Receivables with Swiss Heights and Bellelli Engineering (the “Foreign Collateral Assignment”).

         Finally, on December 9, 2016, NAC Global filed a Certification of Designations, Preferences and Rights of the Series A Convertible Preferred Stock of NAC Global Technologies (“Certification of Designations”) with the Nevada Secretary of State. (Compl. ¶ 24.) The Certificate of Designations provided, in relevant part, that NAC Global would make monthly payments of $150, 000 to RDW beginning on May 16, 2017, until RDW's investment was repaid in full. (Id.)

         RDW alleges that Defendants breached the Securities Purchase Agreement by (1) failing to complete an audit of Swiss Heights and (2) failing to file a registration statement and have it declared effected by the SEC. (Compl. ¶ 26.) Defendants further allegedly breached the Certification of Designations by failing to pay RDW the first mandatory redemption installment payment of $150, 000 by May 16, 2017, or make any required payments thereafter. (Id.) RDW has complied with its obligations under all agreements and has not received any return on its investment. (Compl. ¶¶ 27-28.)

         Further, Defendants made allegedly “false and misleading statements” when contacted by RDW regarding Defendants' nonpayment. (Compl. ¶ 29.) Defendants have “contend[ed] they are receiving additional financing, ” and have “tout[ed] non-existent contracts to demonstrate they are receiving new revenue and are a solvent company.” (Id.) RDW alleges that these statements were “false” and “made for the sole purpose” of delaying RDW from enforcing the default provision of the agreements at issue here. (Compl. ¶ 30.)

         On September 21, 2017, RDW filed this action to recoup its investment pursuant to the various agreements. (See Compl.)

         II. Legal Standard

         When a defendant “has failed to plead or otherwise defend” a lawsuit, that defendant is in default and is deemed, for the purposes of liability, to have admitted all well-pleaded allegations in the complaint. Belizaire v. RAV Investigative & Sec. Servs. Ltd., 61 F.Supp.3d 336, 344 (S.D.N.Y. 2014) (quoting Fed.R.Civ.P. 55(a)). At that point, the plaintiff is entitled to default judgment if the complaint's allegations “establish [the defendant's] liability as a matter of law.” Id. (alteration in original) (quoting Finkel v. Romanowicz, 577 F.3d 79, 84 (2d Cir. 2009)).

         In contrast to the facts supporting liability, however, “the amount of damages” alleged in the complaint is “not deemed true” in the event of a default. Tiffany (NJ) Inc. v. Luban, 282 F.Supp.2d 123, 124 (S.D.N.Y. 2003) (quoting Credit Lyonnais Sec. (USA) v. Alcantara, 183 F.3d 151, 152 (2d Cir. 1999)). Rather, after a court has determined that entry of default judgment against a defendant on a particular claim is appropriate, the court must “conduct an inquiry in order to ascertain the amount of damages with reasonable certainty” by “determining the proper rule for calculating damages on ...


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