Bell v. Pham et al

Filing 66

ORDER:...Since liquidated damages are the basis for satisfying the jurisdictional amount requirement, and there is no basis for damages in this amount, Bell has failed to satisfy the requirements for diversity jurisdiction. Accordingly, the action must be, and is, DISMISSED. The Clerk of the Court is directed to close this case. SO ORDERED. (Signed by Judge Paul A. Crotty on January 4, 2012) Copies Mailed By Chambers. (mov)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
-----------------------------------------------------x
RENZER BELL

USDC SDNY
DOCUMENT
ELECTRONICALLY FILED
DOC #: _________________
DATE FILED: January 4, 2012

:
Plaintiff,

:

09 Civ. 1699 (PAC) (RLE)

:

ORDER

JOHN PHAM, and TRUNG PHAM,
:
Defendants.
:
-----------------------------------------------------x
HONORABLE PAUL A. CROTTY, United States District Judge:
On October 18, 2011, the Court directed plaintiff Renzer Bell ( ”) to submit his
“Bell
liquidated damage calculations, showing both probable loss and any actual damage caused by the
alleged breach of Bell’s contract with John Pham and Trung Pham (
“defendants Bell was given
”).
10 days, until October 28, 2011, to comply. (See 10/18/2011 Tr. pg 2; and pg 7).
Consistent with what has happened previously, the Court did not receive Bell’s papers on
October 28, 2011. Ten days after the deadline, on November 7, 2011, defendants’ counsel sent an
e-mail, noting that Bell had not submitted his liquidated damage calculations. Bell responded
that he“had the requisite documents mailed to the Court by the due date.
”
He did not submit any proof of service, or any other proof that he complied with the
Court’s order. Instead, nine days later, November 16, 2011, the Court received a document
entitled“Supplemental Affidavit Pursuant To Court Order ( Aff consisting of 15 pages and 76
” “ ”),
paragraphs. It bore a handwritten notation on page 1: “Duplicate Copy and page 15 appears to
”;
be a photocopy which states: “Affirmed on the 28th day of October, 2011 signed by Bell.
”

Notwithstanding the Court’s doubts as to the timeliness of Bell’s submission, and the
complete absence of proof of compliance with the Court’s Order of October 18, 2011, the Court
will consider Bell’s affidavit.
His affidavit does not come close to satisfying the Court’s directive. Bell cites to the
U.C.C. which allows the parties to provide for multiple remedies for breach of contract,
including liquidated damages; claims that the liquidated damage provisions of the contract were
well known to the defendants; asserts that defendants never objected to the contract term for
liquidated damage; maintains that the contract provides that the liquidated damages are not a
penalty; states that defendants are sophisticated business people, who were represented by
counsel; and finally that defendants are liars.
None of these arguments is relevant, however. The issue is not whether there can be
liquidated damages, but whether they are appropriate in amount sought here, given the facts of
the underlying car purchase and resale transaction. The Court’s concern is that the approximately
$88,000 claimed as liquidated damage is also the basis for the jurisdictional amount in this
diversity action. If the liquidated damages are unreasonable or inappropriate in amount, the
Court may be without jurisdiction.
The Court notes that Bell’s business is obtaining “
new or concept automobiles whose
demand will likely outstrip the supply. (Aff para. 7). The transaction at issue here called for
”
Bell to acquire a 2008 Lexus (Model LX570) and sell it to defendants at the Manufacturer’s
Suggested Retail Price (MSRP plus $4080. Bell was also able to obtain the car at a discount of
“
”),
$3,500 to the MSRP. This would be a fair approximation of the damages caused by any breach
of the agreement between Bell and defendants. Bell described the $7,580 as his“Loss Profits
From Disputed Transaction. (Aff para 48).
”

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In paragraph 47 of his affidavit, Bell sets forth his “
Estimate Approximating Damages.
”
The total amount of damage is approximately $169,000, but Bell reduces the amount. “[B]earing
in mind the commercial realities of a potentially deepening economic contraction, the Plaintiff
reduced the calculation arrived at using its risk matrix (i.e., the approximate $169,000) by thirty
(30) percent in the interest of good commercial relations with the defendants and in the interest
of airing (sic) on the side conservativeness (sic). (Aff para. 74). Bell seeks $88,380 in liquidated
”
damages, which is not a 30% discount, but rather a 47% discount. Nonetheless, the claim of
$169,000, even with a 47% discount, is wildly disproportionate to any reasonable claim of
liquidated damages or harm done by defendants’ alleged breach.
Since Bell functioned as a middleman or broker, he may have had a loss of $7,580, due to
the alleged breach (i.e., the mark up of $4,080 to the MSRP, plus the $3,500 discount to MSRP
Bell was able to obtain from the dealer before reselling to the defendants). Where does the
additional $162,000 in claimed damages (before the 47% discount) come from? Bell asserts the
following items:
Loss of Anticipated Deposit

$ 3,500

Loss from Car Dealer Legal Action Pursuant to UCC 2-708

20,400

Loss Pursuant to Car Dealer Charge-Back Suit for Exportation

27,900

Legal Fees Claimed as Damages by Car Dealer

15,000

Legal Fees to Defend Suit

10,000

Loss Opportunity to Reinvest Profits from Subject Transaction

49,000

Loss Opportunity to do Business with Car Dealer

15,160

Loss Opportunity from Time Invested in the Instant Action

20,000

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Costs and Disbursements to File Suit against Defendants

617

(Aff para 48).
None of this parade of horribles occurred, of course; and none was likely to occur; they
are simply numbers without any meaning. Liquidated damages may be appropriate, if
reasonable in amount, and made in consideration of the actual or anticipated harm caused by the
breach. Bell’s calculations are at the polar opposite of the requirements for appropriate liquidated
damages: they are unreasonable and do not reflect either actual or anticipated harm. An
examination of several asserted bases for liquidated damages demonstrate how far away Bell is
from any fair measure of liquidated damages.
The largest item, $49,000, is for the“
Loss Opportunity to Reinvest Profits from Subject
Transaction. Bell calculates that defendants’ breach of contract causes a“
”
Loss Profits From
Disputed Transaction of $7,580, but then speculates that he would reinvest that amount to earn
”
an even greater return:
“ That the Plaintiff deliberated over whether the reinvested
60)
profits would represent one deposit on a more expensive
automobile such as Ferrari, Lamborghini, Bentley, or Aston Martin
or a less expensive automobile such as a Porsche, BMW, or
Mercedes.
61) That the difference in manufacturer is key given that the
opportunity to sell the higher priced marques for a more substantial
premium above MSRP could be less probable due to the more
limited production however the premium would be higher than on
the less expensive marques once a transaction was completed.
62) That the permutations for this figure are numerous given that
the $7,580.00 could represent the deposit on seven (7) BMWs, two
(2) BMWs and one (1) Porsche or Aston Martin, or one (1)
Lamborghini.
63) That by way of example not meant to be exhaustive, it is much
easier to make a $25,000.00 profit on a Lamborghini or Ferrari
than it is on a BMW or Porsche.
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64) That the other consideration was over what time frame would
the damages for loss opportunity on the reinvest (sic) of profits be
calculated.
65) That the Plaintiff determined the period should be two (2)
years based upon a flat rate of return and not an annualized rate of
return.
66) That based upon previous examples such as Exhibit A above,
and chastened by the economy during 2008, and the new
introductions of exotic luxury cars scheduled, the Plaintiff arrived
at the figure of $49,000.00.1 (Aff para 60-66)
”
In other words, had the transaction at issue here been completed, Bell would have made
$7,580, which he would have reinvested by making similar deposits on other vehicles and
reselling them at a price above MSRP, while he had obtained the vehicles at a discount to the
MSRP. No one can imagine a better example of consequential damages which cannot be
allowed, even if Bell calls them liquidated damages.
Further, it is apparent that Bell’s calculation was not on his mind at the time of the
contract with the defendants. It is a made up, post facto rationalization, an attempt to justify
liquidated damages amount. But liquidated damages are not intended to cover speculation on
how proceeds from a failed transaction might be utilized.
Bell speculates that he might have lost a legal action by the car dealer. But there is no
indication that the car dealer ever sued; and in any event, the dealer’s potential damages are well
shy of the $20,400 in Bell’s wildly inflated measure. Similarly, Bell’s projection of a car dealer’s
loss of $27,900 is beyond speculation; it is a fantasy based on conjecture. This claim is made
based on the postulation that if the Lexus“was exported, the dealer“might be charged back its
”
”
profit on the Lexus sale and lose an allocation of one car which would expose Bell to damages “if

1

Exhibit A is a transaction which is a complete stranger to the transaction at issue here. Bell maintains that he
earned a 15,000 percent rate of return. This figure is calculated based on a deposit of $500 for a $75,000 Corvette.

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