PNY TECHNOLOGIES, INC. v. SALHI et al

Filing 90

OPINION. Signed by Judge Claire C. Cecchi on 6/22/17. (DD, )

NOT FOR PUBLICATION
UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY
PNY TECHNOLOGIES, INC.,

Civil Action No.: 12-4916

Plaintiff,
OPINION
V.

LORENZO SALHI and SILICON VALLEY
SOLUTIONS, INC.,
Defendant.
I.

INTRODUCTION
Before the Court is the motion of Plaintiff PNY Technologies, Inc. (“PNY” or

“Plaintiff’) for default judgment against Defendant Silicon Valley Solutions, Inc. (“SVS”)
pursuant to Federal Rule of Civil Procedure 55(b)(2). ECF No. 83. This motion is decided
without oral argument pursuant to federal Rule of Civil Procedure 7$.

for the following

reasons, Plaintiffs motion is granted.
II.

BACKGROUND
This case arises out of a failed business relationship between Plaintiff PNY and

Defendants Lorenzo Saihi and his company Silicon Valley Solutions, Inc. As the facts and
procedural history are complex, the following is a brief recitation of only the facts necessary to
decide this motion. In or around 2011, PNY contemplated hiring Defendant Saihi and his team
at $VS. See Complaint (“Compl.”), ECF No. I

JJ

25-26. The parties engaged in negotiations

and appeared to have reached an agreement (the “Invoice Agreement”), whereby PNY was to
pay SVS three installments of $500,000. Id.

¶ 28-31.

onAugust 17, 2011. Id. ¶33.

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PNY made the initial $500,000 payment

On April 26, 2012, PNY sent a letter demanding repayment of the $500,000 made
pursuant to the Invoice Agreement. Id.

¶ 60.

On May 22, 2012, Saihi and SVS filed suit against

PNY, and other defendants in California state court for various claims including breach of
contract, fraud, and unjust enrichment. See ECF No. 83-1. The case was tried to a California
jury, who returned a verdict in favor of PNY on the basis that the Invoice Agreement was not
binding because there was no meeting of the minds as to its terms. Id.
PNY then filed suit in this Court on August 6, 2012. See Compl. PNY asserts, inter alia,
a claim for unjust enrichment based on SVS’s failure to return the initial $500,000 payment. See
Id. On September 26, 2016, this Court granted a motion by Lum, Drasco & Positan, LLC to
withdraw as counsel for Saihi and SVS. See ECF No. 79. This Court ordered that SVS retain
substitute counsel by November 1, 2016. See id.

To date, no new counsel has entered an

appearance on behalf of SVS. PNY filed a request for default, which was granted by this Court
on November 22, 2016. See ECF No. $2. On December 9, 2016, PNY filed the instant motion
for default judgment. ECF No. 83. Plaintiff seeks the following: (1) repayment of $500,000 for
which it alleges SVS has been unjustly enriched; (2) prejudgment interest of $49,518.20 plus
$30.82 per diem from January 1, 2017 until the date of the entry of judgment ($5,331.86),
totaling $54,850.06; and (3) an entry of post-judgment interest pursuant to 29 U.S.C.

§

1961.

See id.
III.

LEGAL STANDARD
Federal Rule of Civil Procedure 55(a) provides that default judgment may be entered

against a party that has “failed to plead or otherwise defend.” Fed. R. Civ. P. 55(a). Rule 55(b)
allows the Court to enter a judgment by default upon application of a party. The Third Circuit
has held with respect to Rule 55(a) that “[b]y its very language, the ‘or otherwise defend’ clause
is broader than the mere failure to plead.” Hoxworth v. Blinder, Robinson & Co., 980 F.2d 912,
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917 (3d Cir. 1992). The Hoxworth Court also stated that default judgment pursuant to Rule 55
may be imposed for, inter alia, failure to comply with a court’s order to retain substitute counsel.
Id. at 918. Accordingly, courts have entered default judgment as a sanction against a defendant
even where, as here, an answer has been filed. See Opta Sys. LLC v. Daewoo Electronics Am.,
483 F. Supp. 2d 400, 406 (D.N.J. 2007); Ramada Worldwide v. SB Hotel Mgmt., No. 14-2186
(WJM), 2016 WL 5030354, at *2 (D.N.J. Sept. 19, 2016).
“Both the Federal Rules of Civil Procedure and a court’s inherent authority to control its
docket empower a district court to dismiss a case as a sanction for failure to follow procedural
rules or court orders.” Knoll v. City ofAllentown, 707 F.3d 406, 409 (3d Cir. 2013). In Foulis

V.

State Farm Fire & Casualty Co., 747 f.2d 863 (3d Cir. 1984), the Third Circuit enumerated six
factors a district court must consider before it dismisses a case pursuant to such authority. The
Third Circuit has required consideration of these factors “when a district court enters a default
judgment pursuant to Rule 55(b) as a sanction for failure to plead or otherwise defend.” Knoll,
707 F.3d at 409.

The factors the court must consider include: (1) the extent of the party’s

personal responsibility; (2) the prejudice to the adversary caused by the failure to follow the
court’s order; (3) a history of dilatoriness; (4) whether the conduct of the party or the attorney
was willful or in bad faith; (5) the effectiveness of sanctions other than dismissal, which entails
an analysis of alternative sanctions; and (6) the meritoriousness of the claim or defense. Foulis,
747 F.2d at 86$.
IV.

DISCUSSION
Upon consideration of the Foulis factors, the Court determines that the sanction of

entering default judgment against SVS is appropriate.
First, as to SVS’s personal responsibility, it is well-settled that a corporation cannot
represent themselves pro se and must obtain counsel in federal court. See Rowland v. Calfornia
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Men’s Colony, 506 U.S. 194, 201-02 (1993) (“It has been the law for the better part of two
centuries

.

counsel.”).

.

.

that a corporation may appear in the federal courts only through licensed

Here, SVS alone is responsible for its own failure to comply with this Court’s

September 26, 2016 Order to retain new counsel. As the Third Circuit held, default judgment is
an appropriate sanction “for failure to comply with [a Court’s] unambiguous orders to obtain
substitute counsel.” Hoxworth, 980 F.2d at 918-19; see also Ramada Worldwide, 2016 WL
5030354, at *2.
Second, Plaintiff has been prejudiced by SVS’s failure to retain corporate counsel
pursuant to this Court’s September 26, 2016 Order, because Plaintiff has incurred additional
costs, has been unable to move forward with the case, and has been delayed in receiving relief
See Malikv. Hannah, 661 F. Supp. 2d 485, 490-91 (D.N.J. 2009); Ramada Worldwide, 2016 WL
5030354, at *2.
Third, SV$ has shown a history of dilatoriness in that it ignored the Court’s September
26, 2016 Order when it failed to retain new counsel to defend this case. Further, the Court held a
status conference on November 9, 2016 in which SVS failed to appear. See ECF No. 81.
Fourth, the Court may find willfulness or bad faith where no reasonable excuse for the
conduct in question exists. See Harrington v. All American Plazas, Inc., No. 08-3 848 (JLL),
2010 WL 2710573, at *3 (D.N.J. July 7, 2010). Here, SVS has not offered any excuse regarding
its failure to obtain counsel. Co-Defendant Salhi has written to this Court explaining that as an
officer of SVS, he believes the case should be directed at SVS rather than himself personally,
and that he personally cannot afford to retain an attorney. See ECF No. $0. This letter, however,
does not offer any reasonable excuse as to SVS, and in fact indicates $alhi believes SVS is the
proper defendant in this case.

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fifth, as for alternative sanctions, Courts in this district have found that “[w]here a
defendant refuses to comply with court orders, alternative sanctions are likely to be ineffective.”
See Harrington, 2010 WL 2710573, at *3 (citing cases).
Sixth, the Court finds that there is no basis for SVS to claim a meritorious defense, as
Plaintiff has provided sufficient evidence that the Invoice Agreement was found unenforceable
because there was no meeting of the minds, and that SVS has been unjustly enriched by the
initial payment of $500,000. See ECF No. 83-1. Further, as this Court previously explained, the
remedy for a finding that there was no meeting of the minds is to restore the parties to their
original positions, including restitution to the plaintiff “in the amount by which the defendant has
been enriched.” See Big li mc, v. Dryden Advisory Group, No. 08-3567, 2009 U.S. Dist.
LEXIS, at *8293 (D.N.J. June 30, 2009).

With respect to damages, Plaintiff seeks the

following: (1) repayment of $500,000 for which it alleges SVS has been unjustly enriched; (2)
prejudgment interest in the amount of $49,518.20 plus $30.82 per diem from January 1, 2017
until the date of the entry of judgment ($5,331.86), which totals $54,850.06; and (3) an entry of
post-judgment interest pursuant to 29 U.S.C.

§

1961. See ECF No. 83-1. The Court grants

Plaintiff the following damages: damages in the amount of $500,000, as Plaintiff has provided
documentation of payment to SV$ for the same, see ECF No. 1-1 at 6; prejudgment interest in
the amount of $54,850.06 pursuant to New Jersey Court Rule 4:42-11; and post-judgment
interest pursuant to 29 U.S.C.

§

1961.

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V.

CONCLUSION

For the reasons described herein, Plaintiffs motion for default judgment is hereby
granted. Default judgment shall be entered, and SV$ is liable to Plaintiff in the amount of; (1)
$500,000 for damages; (2) $54,850.06 for prejudgment interest; and (3) post-judgment interest
pursuant to 29 U.S.C.

§ 1961. An appropriate Order and Judgment accompany this Opinion.

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Date: June 22, 2017

CLAIRE C. CECCHI, U.S.D.J.

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