AETREX WORLDWIDE, INC. v. SOURCING FOR YOU LIMITED et al

Filing 90

OPINION. Signed by Judge Claire C. Cecchi on 3/26/2019. (dam, )

NOT FOR PUBLICATION

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW JERSEY

AETREX WORLDWIDE, NC.,

Civ. No. 14-02504 (CCC)

Plaintiff,

OPINION

V.

SOURCING FOR YOU LIMITED, et al.,
Defendants.

CECCHI, District Judge.

This matter comes before the Court on the motion of Plaintiff Aetrex Worldwide, Inc.
(“Aetrex’ or “Plaintiff’) for default judgment against Defendants Sourcing For You Limited and
Sourcing for You Consulting, Ltd. (collectively, “Sourcing” or “Defendants”), pursuant to Federal
Rule of Civil Procedure 55(b)(2). (ECF No. 89.) Plaintiff filed the Complaint in this action on
April 17, 2014. (ECF No. 1.) Defendants were served with the Summons and Complaint on May
10, 2014, (ECF No. 8), and Defendants’ Answer did not contest service of process. (ECF No. 11.)
On May 26, 2016, Magistrate Judge Clark recommended that Defendants’ failure to retain counsel
required the Answer to be stricken, Defendants’ counterclaim to be dismissed, and default
judgment entered.

(ECF No. 63). The Court adopted the Recommendation and Report on

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November 27, 2017. (ECF No. 83.) Pursuant to federal Rule of Civil Procedure 55(a), the Clerk
entered a Default against Defendants on November 17, 2017.
The Court has subject matter jurisdiction over this case under 2$ U.S .C.

§

1332, as Plaintiff

is a New Jersey corporation with its principal place of business in New Jersey and Defendants are
corporations organized and existing under the laws of Hong Kong and Canada, and the amount in
controversy exceeds $75,000.00. (Compi.

¶J

17-18, 20.) This Court has personal jurisdiction

over Defendants based on Defendants’ business activities within New Jersey, contacts with Aetrex
in New Jersey, and entry into a contract with a New Jersey corporation under New Jersey law.
See ACP GP v. United Home Care, Inc., No. 18-8786, 2018 WL 4693969, at *5 (D.N.J. Oct. 1,
201$) (“Where a party purposefully avails himself of the laws of New Jersey by entering an
agreement with a New Jersey company whose effects would be felt in New Jersey, a court located
in New Jersey may properly exercise personal jurisdiction over him.”) (citing Lebel v. Everglades
Marina, Inc., 115 N.J. 317, 328-29 (1989)). Additionally, Defendants have consented to personal
jurisdiction in thiscase. (Compi.

¶ 22, Answer ¶ 22.)

Though “the entry of a default judgment is largely a matter of judicial discretion,” the
Court must determine that Plaintiff has stated a sufficient cause of action, accepting the factual
allegations in the complaint, except those relating to the amount of damages, as true. Chanel, Inc.
v. Gordashevsky, 558 F. Supp. 2d 532, 535-36 (D.N.J. 200$) (citing Comdyne I, Inc. v. Corbin,
908 f.2d 1142, 1149 (3d Cir. 1990)). In addition, “[b]efore imposing the extreme sanction of
default, district courts must make explicit factual findings as to: (1) whether the party subject to
default has a meritorious defense, (2) the prejudice suffered by the party seeking default, and
(3) the culpability of the party subject to default.” Doug Brady, Inc. v. N.J. Bldg. Laborers
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Statewide Funds, 250 F.R.D. 171, 177 (D.N.J. 2008) (citing Emcasco Ins. Co. v. Sambrick, 834
F.2d 71, 74 (3d Cir. 1987)).
In this case, the Court finds that the facts set forth in the Complaint, the motion for default
judgment, and the attached exhibits merit the entry of a default judgment. Plaintiff brings causes
of action for breach of contract, breach of the implied covenant of good faith and fair dealing, and
unjust enrichment against Defendants. The elements of a breach of contract claim are: “a valid
contract, that the defendant failed to perform his obligations under the contract and that the
plaintiff sustained damages as a result.” Peck v. Donovan, 565 Fed. Appx. 66, 70 (3d Cir. 2012)
(quoting Murphy v. Implicito, 392 N.J. Super. 245, 265 (App. Div. 2007). Plaintiff alleges that
Aetrex and Sourcing entered into a supply contract on March 14, 2008 (the “Supply Agreement”),
and later agreed to extend the Supply Agreement until May31, 2013. (Compl. ¶ 35-36.) Plaintiff
alleges that Sourcing breached the Supply Agreement by marketing, selling, promoting, and
supplying Beats orthotics, and by violating the confidentiality agreement incorporated
by
reference into the Supply Agreement. (Id. at ¶J 94-96.) Plaintiff alleges that Defendants’ breach
of the Supply Agreement resulted in damages, including the loss of sales and customers, damage
to customer relationships, and harm to its reputation. (Id. at ¶J 98-99.) Accepting the allegations
in the Complaint as true, Plaintiff has made out a claim for breach of contract.
To state a claim for breach of the implied covenant of good faith and fair dealing a plaintiff
must allege that “the opposing party acted in bad faith or with a malicious motive.

.

.

to deny the

party some benefit of the bargain originally intended by the parties, even if that benefit was not an
express provision of the contract.” Summit. Transp. Corp v. Hess Energy Mktg., No. 14-5119,
2019 WL 430863, at *12 (D.N.J. Feb. 1, 2019) (quoting Yapak, LLC v. Mass. Bay Ins. Co., 2009
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WL 3366464, at *2 (D.NJ. Oct. 16, 2009). Plaintiff has alleged that Defendants acted maliciously
and with the intent to cause harm to Plaintiff, and that Defendants’ acts deprived Plaintiff of the
benefits of its bargain and fruits of the Supply Agreement, resulting in damages. (Compl.

¶J 102-

106.) Accepting the allegations in the Complaint as true, Plaintiff has made out a claim for breach
of the implied covenant of good faith and fair dealing.
The elements of an unjust enrichment claim are: “(1) the defendant received a benefit from
the plaintiff, (2) that the retention of the benefit would be unjust; and (3) that the plaintiff expected
remuneration from the defendant at the time it performed or conferred a benefit.” PNY Techs.,
Inc. v. Salhi, No. 12-4916, 2018 WL 1087496, at *2 (D.N.J. Feb. 28, 2018) (citing VRG Corp. v.
GKN Realty Corp., 641 A.2d 519, 526 (N.J. 1994) and In re K—Dur Antitrust Litig., 338 F. Supp.
2d 517, 544 (D.N.J. 2004)). Plaintiff alleges that Defendants misused Plaintiffs confidential
information and wrongfully obtained a benefit at Plaintiffs expense by selling competing orthotics
and diverting Plaintiffs sales to Defendants. (Compl.

¶J

108-111.) Accepting the allegations in

the Complaint as true, Plaintiff has made out a claim for unjust enrichment.

.‘

Further, given that Defendants have failed to retain counsel, the Court finds no basis for
Defendants to claim a meritorious defense. Defendants have refused to retain counsel and have
indicated that they will not do so despite the Court’s explanation that corporate defendants cannot
defend a case without counsel. (ECF No. 63; ECF No. $3.) Plaintiff has been prejudiced by
Defendants’ failure to retain counsel and defend this case because Plaintiff has incurred additional
costs, has been unable to move forward with the case, and has been delayed in receiving relief.
See Malik v. Hannah, 661 F. $upp. 2d 485, 490-9 1 (D.N.J. 2009). Therefore, the Court finds that
default judgment is proper at this time.
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The allegations in Plaintiffs Complaint regarding damages are not treated as true upon
entry of a default judgment. Bds. of irs. of Operating Eng’rs Local $25 Welfare fund v. Robert
Silagy Landscaping, Inc., No. 06-1795, 2006 WL 3308578, at *3 (D.N.J. Nov. 13, 2006). A court
may conduct hearings to determine the amount of damages or may decline to hold such hearings,
“particularly where the amount claimed [is] capable of ascertainment from definite figures
at **3..4 (internal quotations

contained in the documentary evidence or in detailed affidavits.”
omitted).

In this case, Plaintiff has submitted exhibits and affidavits detailing the damages

requested here. In support of its lost sales damages, Plaintiff attached as an exhibit an email
showing that Defendant ordered 30,000 pairs of Beats orthotics, (ECF No. 89-2 at 46), and an
affidavit from Larry Schwartz, Chief Executive Officer of Aetrex, stating that Aetrex’s profits
were $17.57 for each pair of Lynco orthotics sold. (Id. at 9.) Based on these figures, Plaintiff
claims damages for lost sales of Lynco orthotics in the amount of $527,100. (ECF No. 89 at 13.)’
Plaintiff also claims damages for attorneys’ fees and litigation costs incurred due to Defendants’
breach of the Supply Agreement. The Supply Agreement contains an indemnification section
holding, in part, that Sourcing “agrees to indemnify.

.

.

Aetrex.

.

.

from and against all losses,

damages, fines, penalties, third-party claims, claims, demands, imposts, lawsuits, liabilities, costs
and expenses, of whatever form or nature, including reasonable attorneys fees, which it incurs as
a result of any acts or omissions of Sourcing.. including, but not limited to.. breach of any
.

.

A party may assert claims for breach of contract and unjust enrichment, but may not
recover under both theories of injury. See MK Strategies, LLC v. Ann Taylor Stores
Corp., 567 F. Supp. 2d 729, 735 n.12 (D.N.J. 2008). Plaintiff is seeking damages for sales
lost due to Defendants’ breach of the Supply Agreement and unjust enrichment. The Court
awards damages in the alternative on these claims, as recovery under both claims is
prohibited.
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•

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provision of this Agreement.” (ECF No. 89-2 at 17-18.) In the affidavit of Larry Schwartz,
Plaintiff declares that Aetrex has incurred attorneys’ fees and costs of $215,586 in connection with
this case.2 (ECF No. 89 at 13.) Adding these attorneys’ fees and costs to Plaintiffs lost sales
damages, Plaintiffs damages are $742,686. This court finds that Plaintiff has provided adequate
proof of its damages through the detailed affidavits and exhibits accompanying its motion for
default judgment.
For the reasons described herein, Plaintiffs motion for default judgment is hereby granted.
Default judgment shall be entered, and Defendant shall be ordered to pay damages in the amount
of $742,686. An appropriate Order accompanies this Opinion.

DATED:

,2019

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

2Plaintiff seeks additional attorneys’ fees and court costs in the amount of $249,361.43 in
connection with a separate lawsuit, Aetrex Worldwide, Inc. v. Burten Leather and
findings, Inc. d/b/aJ Burten Distribution. At present, the Court does not address those fees
and costs here. Plaintiff may submit further materials to explain why attorneys’ fees and
court costs incurred in the separate Burten action should be awarded in this proceeding.
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