Century Metal Recycling, Pvt. Ltd. v. Dacon Logistics, LLC et al

Filing 22

ORDER (see attached) - Counsel for Plaintiff are directed to forward to the Court forthwith a fully executed copy of the shipment contract upon which this action is based. Counsel for Plaintiff are also directed to include in their next submission a discussion of the Plaintiff's efforts or intentions to enforce the November 12, 2013 (Docket No. 12-09) Federal Maritime Commission Order, the details of which are discussed within this Order, and to obtain payment of the reparations specified therein. All appropriate responses to this Order shall be filed by counsel for Plaintiff on or before Friday, January 24, 2014. Signed by Judge Charles S. Haight, Jr. on 1/13/14.(Hornstein, A)

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF CONNECTICUT
CENTURY METAL RECYCLING, PVT.
LTD,
Plaintiff,

3:13-cv-00093 (CSH)

v.
DACON LOGISTICS, LLC, AND DAVID
H. LARR,
Defendants.

ORDER

HAIGHT, Senior District Judge:
I.

INTRODUCTION
Plaintiff Century Metal Recycling, Pvt. Ltd. (hereinafter "Plaintiff" or "Century Metal")

commenced this action against Defendants Dacon Locistics, LLC and David H. Larr (hereinafter
"Defendants") on January 18, 2013. Plaintiff's action was brought to recover damages caused,
allegedly, by breaches of the terms of a shipping contract. Plaintiff's Complaint contains seven
counts: (1) breach of contract - failure to deliver containers into Plaintiff's custody; (2) breach of
contract - implied covenant of good faith and fair dealing; (3) fraud; (4) unity of interest, i.e., that
Defendant Dacon is Defendant Larr's alter ego; (5) statutory theft under C.G.S.A. § 52-564; (6)
unjust enrichment; and (7) conversion. Defendants have failed to answer, otherwise respond, or even
appear in this action. An Order granting Plaintiff's Motion for a Default Entry in accordance with
Fed. R. Civ. P. 55(a) was entered on February 19, 2013. See [Doc. 10]. Prior to issuing any further
orders in this action, however, the Court sua sponte raised the question of its subject matter
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jurisdiction in three separate Orders, [Doc. 15], [Doc. 18], and [Doc. 20]. Having thoroughly
reviewed Plaintiff's response to the last of these Court Orders, filed on December 27, 2013, i.e.,
[Doc. 21], the Court is now satisfied that diversity exists in this action.
Plaintiff has moved for default judgment and a hearing in damages, [Doc. 11], supplementing
such motion with an affidavit from Rajiv Kaushal, Vice President of Century Metal, [Doc. 12]
which, along with six accompanying exhibits contained within two docket entities, [Doc. 13] and
[Doc. 14], identify the basis for the damages sought. Mr. Kaushal avers that Plaintiff paid
Defendants $60,500 for services which it did not receive, and that, due to Defendant Dacons' failure
to pay ocean freight carriers which had transported Plaintiff's metal to India, as it had contracted to
do in July of 2012, "Plaintiff was forced to pay" $329,423.71 in total for "detention fees and ground
rent charges to have the thirty containers it contracted with Dacon to ship to be released into
[Plaintiff's] custody in India." [Doc. 12] at ¶¶ 5-13. Accordingly, Plaintiff seeks actual damages of
$329,423.71.1 Given that, as Plaintiff states, Plainitff's "remaining ... damages are not reducible to
a sum certain," Plaintiff "respectfully moves this Court for a hearing in damages," to review "the
damages claims made against [Defendants] in [Plaintiff's] [C]omplaint." [Doc. 11] at 3.
As noted supra, the Defendants in this case have defaulted entirely. Neither Defendant has
appeared through counsel. Neither Defendant has answered the Plaintiff's Complaint. The
Defendants' defaults have been entered by the Clerk of the Court pursuant to Rule 55(a). Plaintiff
now seeks a judgment by default against Dacon Logistics and against Larr. That aspect of the case
is governed by Rule 55(b).

1

The Court notes that the actual amounts paid by Plaintiff were in rupees and not in

dollars.
2

In Finkel v. Romanowicz, 577 F.3d 79, 81 n. 1 (2d Cir. 2009), the Second Circuit said of a
similarly defaulting defendant: "Romanowicz failed to oppose the Joint Board's suit and is therefore
deemed to have admitted all well-pleaded allegations in the complaint pertaining to liability." The
Court of Appeals expanded on that proposition at 577 F.3d 83 n. 6:
Although a court accepts as true all well pleaded allegations against
a defaulting defendant for purposes of determining liability, a default
is not an admission of damages, which must be established in a
separate evidentiary proceeding. Even where a party has defaulted,
it may still contest the amount of damages awarded to a plaintiff. In
this case, no evidentiary hearing was necessary because the Joint
Board did not ask for one but instead submitted documentary
evidence of damages. Neither Whiffen nor Romanowicz [the
corporate and individual defendants respectively] submitted any
response in opposition.
In the text of its Finkel opinion, the Second Circuit said this:
In light of Romanowicz's default, a court is required to accept all of
the Joint Board's factual allegations as true and draw all reasonable
inferences in its favor, see Au Bon Pain Corp. v. Artect, Inc., 653
F.2d 61, 65 (2d Cir. 1981) (noting that, where a party moves for a
default judgment after another party's default, the moving party is
"entitled to all reasonable inferences from the evidence offered"), but
it is also required to determine whether the Joint Board's allegations
establish Romanowicz's liability as a matter of law, see id. ("[A]
district court retains discretion under [Federal Rule of Civil
Procedure] 55(b)(2) once a default is determined to require proof of
necessary facts and need not agree that the alleged facts constitute a
valid cause of action . . . .").
In the case at bar, Plaintiff's several pleaded claims arise out of Defendants' alleged breach
of a relatively uncomplicated commercial contract. The first sentence of ¶ 1 of the Complaint
alleges: "This is an action by Century Metal to recover damages from Defendant Dacon for Dacon's
breaches of the terms of a shipping contract. Under the terms of the contract, Dacon was to arrange
shipment of a total of thirty (30) containers of aluminum from the United States to India, to pay
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freight charges to the carrier, and to ensure that the containers are delivered to Century Metal on
arrival without any extra charges." The contract is further described in ¶ 9, which alleges: "In July
and August of 2012, Century Metal entered into a contract with Dacon to ship containers carrying
the aluminum the United States to India." The Complaint alleges a total failure by Dacon to perform
its contractual obligations. The 30 aluminum containers were lifted at United States ports and
transported by ocean vessels to the designated port of discharge in India, but Dacon failed to pay the
carriers their freight charges for that transportation, with the predictable result that the carriers
refused to release the containers from a costly detention in India until someone paid their freight
charges. In the event, Plaintiff obtained release of the containers only after it settled and paid the
carriers' charges and paid the detention costs – both expenditures being the obligations of Dacon
under the contract. The resulting damages to Plaintiff are alleged to be "in excess of $360,244."
Complaint, ¶ 28.
Given the Defendants' default in responding to the Complaint, I accept the Complaint's wellpleaded factual allegations in respect of Defendants' asserted liability. But the Second Circuit's
holding in Finkel requires me to determine Defendants' "liability as a matter of law" or, as stated
otherwise, this Court retains jurisdiction under Rule 52(b)(2) to determine whether "the alleged facts
constitute a valid cause of action." Those responsibilities inevitably lead to a consideration of which
law governs this contract and Defendants' performance (or lack of it). In the case at bar, as has now
been confirmed, this Court's subject matter jurisdiction is based on diversity of citizenship. "[A]
federal court exercising diversity jurisdiction over a state-law claim must apply the choice-of-law
rules of the state in which that court sits to determine the rules of decision that would apply if the
suit were brought in state court." Liberty Synergistics Inc. v. Microflo Ltd., 718 F.3d 138, 151 (2d
4

Cir. 2013) (citations omitted). Choice of law questions arise in this case because it appears from the
allegations of the Complaint that Plaintiff, which owns a commercial facility in Connecticut, entered
into a contract with a New Jersey entity for the ocean shipment of goods from United States ports
to ports in India. Plaintiff attached to its Complaint as exhibits a profusion of invoices and bills of
lading generated by the contract, together with increasingly acerbic exchanges of e-mails generated
by Defendants' failures to perform their contractual obligations. Unaccountably, however, Plaintiff
does not attach to its pleading a copy of the contract upon which suit is based. As a result, the
present record does not inform the Court with respect to factors relevant to choice-of-law analysis,
such as where and by whom the contract was executed, and whether the contract contains any
choice-of-law provisions. Those particular questions are illustrative only.
The Court must be furnished with a copy of the contract in suit before Plaintiff's motion for
a default judgment can be further considered or granted. That is so, notwithstanding the fact that the
Complaint's allegations describe Defendants' total breaches of an uncomplicated contract in a manner
that, one may reasonably suppose, give rise to a common law claim for breach of contract under the
law of any State of the Union (I express no view with respect to the law of India). There are
situations where no further choice-of-law analysis is required; compare Au Bon Pain Corp. v. Artect,
Inc., 653 F.2d 61, 65 n. 1 (2d Cir. 1981) ("There is some question whether Michigan or New York
law controls this action, although the district court made no reference to this question and neither
party raises it on appeal. It is, however, unnecessary to decide the issue since we believe ABP could
recover either under Mich.Comp.Laws § 570.151 or under either state's common law of fraud.").
However, the present Plaintiff couples claims for simple breach of contract with counts for breach
of an implied covenant of good faith and fair dealing; alter ego liability as to Defendant Larr; and
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statutory theft in violation of Conn. Gen Stat. § 52-564. It is explicit or implicit in these theories of
liability that under Connecticut choice-of-law principles, Connecticut substantive law furnishes the
rules of decision. This Court must resolve the choice-of-law question in this case; it must do so
under Rule 55(b)(2) before referring the case to a Magistrate Judge for a hearing as to damages; and
it cannot do so without being shown a copy of the contract in suit.
Accordingly, counsel for Plaintiff are directed to forward to the Court forthwith a fully
executed copy of the shipment contract upon which this action is based.
In addition, counsel are directed to address the following circumstance. The Court's
independent inquiry discloses that on October 19, 2012, Century Metal Recycling Pvt. Ltd., also the
named Plaintiff in the case at bar, filed a complaint against Dacon Logistics and others with the
Federal Maritime Commission ("FMC"). That complaint alleged the same basic facts pleaded in the
case at bar, and asserted that the Respondents's conduct violated section 10(d)(1) of the Shipping Act
of 1984, 46 U.S.C. § 41102(c). An FMC Administrative Law Judge held that Respondent Dacon
violated that section of the Act, and awarded reparations to Century Metal and against Dacon in the
amount of $323,663.71. On appeal of that decision to the full Commission, the FMC issued an
Order served on November 12, 2013 (Docket No. 12-09) which affirmed the Administrative Law
Judge's decision.2 The amount of reparations the FMC ordered Dacon to pay to Plaintiff, based upon
2

The FMC panel consisted of five individuals: the Chairman of the FMC and four
Commissioners. Two Commissioners dissented from the result, reasoning that though Dacon
"may in breach pf a contractual term of the applicable bills of lading for failure to pay for the
ocean transportation which resulted in the detention charges," and "notwithstanding any such
potential cause of action that might be recognized in an appropriate court of law, the facts
presented in this case do not begin to address the requisite elements of a section 10(d)(1) claim."
Dissent of Commissioner Khouri. That section of the Act provides that no ocean freight
forwarder (such as Dacon) "may fail to establish, observe, and enforce just and reasonable
regulations and practices relating to or connected with receiving, handling, storing or delivering
6

the same facts as those alleged in the instant case, appear to track the losses and damages prayed for
in the Complaint before this Court.
Statutory liability and liability at law proceed from different bases, see note 2, and there is
no present suggestion that the FMC Order has any preclusive effect in the case at bar. But it seems
clear enough that this Court would not allow Plaintiff a double recovery: that is to say, recovery of
"reparations" in the stated amount in the FMC proceeding, and also recovery of "damages" in a like
amount in this case. In these circumstances, counsel for Plaintiff are directed to include in their next
submission a discussion of the Plaintiff's efforts or intentions to enforce the FMC Order and to obtain
payment of the reparations specified therein.
Plaintiff shall file all appropriate responses to this Order on or before Friday, January 24,
2014.
It is SO ORDERED.

Dated: New Haven, Connecticut
January 13, 2014
/s/ Charles S. Haight, Jr.
Charles S. Haight, Jr.
Senior United States District Judge

property." One court has held that "behavior such as fraud and negligence does not come within
the ambit of the Act." Johnson Products Co., Inc. v. M/V La Molinara, 619 F.Supp. 764, 766
(S.D.N.Y. 1985) Lumbard, Ct. J.). In the FMC proceeding involving Century Metal and Dacon,
the majority of the Commission panel concluded that Dacon's wrongful conduct did fall within
the ambit of the Act.
7