AIM GROUP INCORPORATED et al v. CWW INC et al

Filing 70

ORDER. The magistrate judge's 68 report and recommendation is adopted in part and rejected in part, and incorporated by reference in part, consistent with this order, and the Motion for Default Judgment (docs. 57 & [64 ]) is GRANTED. AIM Group Inc. and Granite Group International, Inc. are awarded damages in the amount of $1,336,393.68, plus prejudgment interest at the rates set forth in Florida law beginning November 4, 2010, to be determined on the date o f judgment; punitive damages in the amount of $250,000; and attorneys fees in an amount yet to be determined. Plaintiffs shall have fourteen (14) days to file proof of attorneys' fees. Signed by CHIEF JUDGE M CASEY RODGERS on November 28, 2012. (Miscellaneous Deadline - by 12/12/2012.) (kvg)

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IN THE UNITED STATES DISTRICT COURT FOR THE
NORTHERN DISTRICT OF FLORIDA
PENSACOLA DIVISION
THE AIM GROUP INC. and
GRANITE GROUP INTERNATIONAL,
INC.,
Plaintiffs,
v.

Case No. 3:11cv258/MCR/CJK

CWW, INC. and
RONALD NEWCOMB,
Defendants.
____________________________/
ORDER
Upon consideration of the Report and Recommendation of the Magistrate Judge
filed on August 31, 2012, pursuant to 28 U.S.C. § 636(b)(1)(B), and after reviewing the
Recommendation and the record,1 the Recommendation is adopted in part and rejected
in part as follows.
1.

The findings articulated in the magistrate judge’s report and recommendation

with regard to the appropriateness of a default judgment are adopted and incorporated by
reference in this order.
2.

The court disagrees in part with the damages calculation set forth in the

recommendation. Although the court agrees that the benefit-of-the-bargain measure of
damages is appropriate in this instance, as concluded in the recommendation, see Gregg
v. U.S. Indus., Inc., 887 F.2d 1462, 1466 (11th Cir. 1989), the court disagrees with the
magistrate judge’s finding of lost profits in the amount of $1,700,000, because this amount
is not based on any record evidence established with reasonable certainty but is simply

1

The parties were given an opportunity to file objections, but no tim ely objections were filed. Mail
sent to Defendant Ronald Newcom b was returned as undeliverable.

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stated in the prayer for relief of the second amended complaint.2 Absent supporting
evidence in the record, the court cannot rely on this amount as the measure of lost profits
under a benefit-of-the-bargain analysis. See Massey-Ferguson, Inc. v. Santa Rosa Tractor
Co., 415 So. 2d 865, 867 (Fla. 1st DCA 1982) (stating lost future profits are allowed as a
measure of damages if they “can be established with reasonable certainty” by some
measurable standard or data); see also James Crystal Licenses, LLC v. Infinity Radio, Inc.,
43 So. 3d 68, 73 (Fla. 4th DCA 2010) (stating “an award of lost profits cannot be based on
mere speculation or conjecture” but must be shown by competent evidence “sufficient to
satisfy the mind of a prudent, impartial person as to the amount.”) (internal marks omitted).
The court finds that the declaration of CEO Mark Barati presents the correct method of
calculation to determine the profit lost from the bargain, and it is based on competent
evidence; however, the court also finds that Barati overstates the amount of tonnage
guaranteed by the contract, and thus his calculation overstates the lost benefit of the
bargain.3 The contract expressly warranted that the seller was the owner of the barges,
that the tonnage available for salvage from the barges ranged from 8,000 to 12,000 tons,
and stated if a minimum of 8,000 tons was not obtained from the barges, the seller would
replace the barges from his own inventory or refund a portion of the purchase price (equal
to $100 per ton up to the 8,000 ton minimum). CEO Barati calculated the lost benefit of
the bargain using the maximum possible tonnage under the contract (12,000 tons) instead
of the minimum guaranteed (8,000 tons), which the court finds overstated the amount of
damages. The court, however, accepts Barati’s testimony on the resale value of steel at
the time, the amount of costs expended, and the entire cost of the salvage under a contract
with Inland Towing Marine. Using these figures and the minimum guaranteed amount of

2

Additionally, the prayer for relief did not request $1,700,000 as lost profits. The second am ended
com plaint requested: (a) dam ages for lost profits in an am ount in excess of $800,000; (b) paym ent of all
econom ic losses, com pensatory, consequential or incidental dam ages in an am ount in excess of $1,700,000;
(c) an award of costs and reasonable attorneys’ fees as allowed in the contract; (d) an award of punitive
dam ages; and (e) pre- and post-judgm ent interest. (Doc. 35).
3

CEO Barati’s calculation begins with 12,000 tons of salvaged steel m ultiplied by the price per ton.
(doc. 64-1, at 3).
Case No: 3:11cv258/MCR/CJK

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salvageable steel, the lost profit from the benefit-of-the-bargain calculation is as follows:

8,000 tons x $462/ton=$3,696,000 gross revenues,
Minus $100/ton as the agreed price of the barges, or $800,000 contract price,
Minus total costs expended for vendors and employees, $487,606.32,
Minus cost of salvage, $134/ton x 8,000 tons, or $1,072,000,
For a total lost benefit-of-the-bargain of $1,336,393.68.
[$3,696,000 - $800,000 - $487,606.32 - $1,072,000 = $1,336,393.68]
Additionally, although the magistrate judge recommends awarding the amount paid
on the contract as well as the lost benefit of the bargain, the court concludes that this
would unjustly enrich the plaintiffs by placing the plaintiffs in a better position than they
would have been in had the deal transpired as agreed. The cost of the entire contract is
already taken into account in the determination of lost profits or the benefit of the bargain
because it would have been necessary for the plaintiffs to pay the full contract price in
order to have realized the profits or benefit of the bargain lost through the defendants’
fraud and breach.4 The court adopts the finding that plaintiffs are entitled to prejudgment
interest on the award from the date of the contract at the rates established by Florida law.5
The court adopts the finding that a punitive damages award in the amount of
$250,000 is appropriate. The award is supported by the evidence and is not excessive.
Therefore, the plaintiffs are entitled to benefit-of-the-bargain damages in the amount of
$1,336,393.68, plus prejudgment interest at the rates set forth in Florida law beginning
November 4, 2010, and punitive damages the amount of $250,000.
3.

The court adopts the recommendation that the plaintiffs are entitled to an

4

Alternatively, the court could award the plaintiffs out-of-pocket expenses, which would perm it
recovery of the $500,000 paid on the contract and $487,606.32 in costs expended, for a total of $987,606.32.
Notwithstanding, the court has determ ined that it is appropriate to award the plaintiffs the benefit of the
bargain, but no m ore is required to m ake the plaintiffs whole. See Minotty v. Baudo, 42 So. 3d 824, 835 (Fla.
4th DCA 2010) (“An injured party m ay recover either the out-of-pocket loss or the benefit of the bargain loss.").
5

The applicable interest rates are 6% from Novem ber 4, 2010, through Septem ber 30, 2011, and
4.75% from October 1, 2011 through the date of judgm ent.
Case No: 3:11cv258/MCR/CJK

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award of attorneys’ fees pursuant to the contract. However, the court finds no record
support for an award in the amount of $13,390, other than CEO Barati’s bare statement
that the court should award this amount. A portion of this claimed amount is admittedly a
mere estimate. The record does not yet contain the evidence required under this court’s
local rule. See N.D. Fla. Loc. R. 54.1(E). Plaintiffs shall have fourteen (14) days to file the
proof required for an award of attorneys’ fees, and final judgment with the calculation of
prejudgment interest will be entered at that time.
Accordingly,
1.

The magistrate judge's report and recommendation is adopted in part and

rejected in part, and incorporated by reference in part, consistent with this order, and the
Motion for Default Judgment (docs. 57 & 64) is GRANTED.
2.

AIM Group Inc. and Granite Group International, Inc. are awarded damages

in the amount of $1,336,393.68, plus prejudgment interest at the rates set forth in Florida
law beginning November 4, 2010, to be determined on the date of judgment; punitive
damages in the amount of $250,000; and attorneys’ fees in an amount yet to be
determined.
3.

Plaintiffs shall have fourteen (14) days to file proof of attorneys’ fees.

DONE AND ORDERED this 28th day of November, 2012.

M. Casey Rodgers
M. CASEY RODGERS
CHIEF UNITED STATES DISTRICT JUDGE

Case No: 3:11cv258/MCR/CJK