The Loop Production v. Capital Connections LLC et al
Filing
41
MEMORANDUM OPINION AND ORDER: For the foregoing reasons, Plaintiff's motion for a default judgment is granted on all counts except count five, breach of contract, upon which Plaintiff cannot recover. The Moving Defendants' motion to vacate the clerk's entry of default is denied and the Moving Defendants' motion to dismiss is denied. The initial pretrial conference, scheduled for June 15, 2011, is adjourned. Plaintiff is directed to file a statement with the Court by June 20, 2011, indicating whether its claims against the unserved Defendants, the ABC Corporations, and John Doe Defendants should be dismissed without prejudice and whether judgment should be entered against the Defaulting Defendants. The Defaulting Defendan ts shall respond to this statement by July 5, 2011. Plaintiff shall have until July 12, 2011, to file a reply. Courtesy copies must be provided for chambers contemporaneously with filing. The Clerk of Court is respectfully directed to terminate docket entry numbers 24 and 28. (Signed by Judge Laura Taylor Swain on 6/6/2011) (jfe) (Main Document 41 replaced on 6/6/2011) (jfe).
UNITED STATES DISTRICT COlRT
SOUTHERN DISTRICT OF NEW YORK
-------------------------------------------------------x
THE LOOP PRODUCTION,
Plaintiff,
-v-
No. 10 Civ. 3058 (LTS) (MHD)
CAPITAL CONNECTIONS LLC et aI.,
Defendants.
-------------------------------------------------------x
MEMORANDUM OPINION AND ORDER
In this action, Plaintiff The Loop Production ("Plaintiff') asserts claims pursuant
to the Racketeer Influenced Conupt Organization Act ("RICO"), 18 U.S.c. §§ 1961
seq., and
New York State common law doctrines against Defendants Capital Connections LLC, Escobar
Entertainment, Inc., and various individuals who are allegedly agents of the institutional
defendants (collectively, "Defendants"). The Court has jurisdiction over this action under 28
U.S.c. §§ 1331 and 1332.
On October 26, 2010, Plaintiff moved for default judgments against Defendants
Capital Connections LLC, Escobar Entertainment, Inc., Durburt O'Neal Brandon, Jr., Melvin
Breeden, and Alisha E. Harris (the "Defaulting Defendants"). On November 9,2010, Defendants
Capital Connections LLC and Brandon (the "Moving Defendants") moved to (1) vacate the Clerk
of Court's order of default pursuant to Federal Rule of Civil Procedure 55(c) and (2) dismiss the
complaint under Federal Rule ofCiviJ Procedure 12(b)(6). For the following reasons, the
Moving Defendants' motion to vacate the entry of default is denied, the Moving Defendants'
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motion to dismiss the Complaint is denied, and Plaintiff's motion for a default judgment is
granted.
BACKGROUND
The following material allegations of Plaintiff's Complaint and uncontroverted
declarations are deemed established under Federal Rule of Civil Procedure 8(b)(6) for the
purposes of the instant default judgment motion practice due to the Defaulting Defendants'
failure to respond to the Complaint or otherwise proffer an alternate set of facts.
Plaintiff's Initial Contact with Defendants
On or about October 13,2009, Plaintiff visited Defendant Capital Connections
LLC's website to find an artist to perfonn at an event in Taiwan on December 31,2009. (CompI.
'1 33.)
The website represented that Capital Connections, doing business as Capital Connections
Agency ("CCA"), was "the largest booking agency in the United States" and listed famous
personalities including Barack Obama, Michelle Obama, Bill Gates, Oprah Winfrey, Tiger
Woods, Venus Williams, and Britney Spears among its clientele. (Id.
~~
25-28.) Plaintiff then
contacted Defendant Brandon, CCA's President, via email to inquire about booking a recording
artist for a perfonnance at Plaintiff's New Year's Eve party. (CompI.
~
33; Declaration of
Durbert Brandon in Support of Motion to Dismiss ("Brandon Decl.") ~ 1.) On or about
November 4,2009, Brandon responded and identified several recording artists, including Nelly,
Ja Rule, and Bobby Brown, whom CCA could make available for Plaintiff's New Year's Eve
event. (Id.
ti 34.)
Plaintiff's agent then spoke via telephone with Brandon and Defendant
Breeden to discuss retaining the services of Nelly for the New Year's Eve perfonnance. (Id.
~
35.) During the conversation, and in subsequent phone calls, both Brandon and Breeden claimed
I.OOP.l'RODl:CTIONMTD. WPD
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that CCA represented Nelly and had the authority to retain him for Plaintiffs performance. Q..Q.,)
Brandon then sent a contract (the "Contract") to Plaintiffs agent, requesting advance payment of
S40,OOO
the entire fee to secure Nelly for the event. (Id. ~r 36.)
On or about November 11, 2009, Plaintiffreceived a copy of the Contract from
CCA signed by Defendant Harris on behalf of CCA. Q..Q., ~ 37). The Contract indicated that
Harris was working out ofCCA's "East Coast Office," located at an undisclosed street address in
New York, New York, with a zip code of 10019. (Id.
~
38; Brandon Decl. Ex. A.) The Contract
contained a choice oflaw provision stating that New York law would govern the parties'
agreement. (CompI.
~
39.) The Contract further provided that any dispute arising under the
contract would be subject to arbitration in New York, New York. (Brandon Dec!.
A ~ 18.)
On or about November 12,2009, David Hsia executed the Contract on behalf of
Plaintiff and faxed it to CCA. (Compl.
~
40.) On the same day, an agent of Plaintiff spoke with
Defendants Brandon and Breeden. (Id.) They acknowledged receipt ofthe Contract and
confirmed that CCA would retain Nelly to perform at Plaintiffs New Year's Eve event so long
as Plaintiff wired $40,000 to CCA within 36-48 hours. (Id.) Within twelve hours of Brandon's
and Breedon' s request, Plaintiff successfully wired $40,000 to CCA' s bank account in North
Carolina. (Id. ~ 41.)
Defendants' Inability to Produce Nelly and Plaintiffs Demand for a Refund
On or about November 16, 2009, Defendant Brandon contacted Plaintiff, stating
that CCA had not received the wire transfer. (ld.,r 45.) Brandon further stated that, because of
Plaintiffs inability to transfer the funds to CCA, CCA would not arrange for Nelly to perform on
New Year's Eve. (Id.) Plaintiff contacted CCA's bank and confirmed that the funds had in fact
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been deposited in CCA's account. (Id. ~ 46.) Plaintiff then emailed CCA, stating that the
transaction had gone through successfully on November 12, 2009, and providing the serial
number verifying the wire transfer. (Id.)
The next day, Defendant Brandon emailed Plaintiffwith a changed story. He
stated that CCA had, in fact, received the wire transfer but, because CCA received the transfer a
day late - on November 12 instead of November 11
Plaintiff had breached the parties'
agreement. (Id.,r 47.) Brandon stated that CCA would keep the $40,000 already wired by
Plaintiff unless Plaintiff agreed to use the funds as partial payment towards booking another
perforn1er, Ja Rule, instead of Nelly. (Id. ~ 49.) Plaintiff knew that CCA's representation that it
could hire Ja Rule was false because Plaintiff had already booked Ja Rule for its New Year's Eve
event through another agent. (Id.,r 51.)
On or about November 18, 2009, Plaintiffs attorneys contacted Defendant
Brandon demanding a refund from CCA. (Id. ~ 52.) On or about November 19,2009, CCA
responded, claiming that Plaintiff had breached the parties' agreement. (Id. ~ 53.) During the
next four months, Plaintiff and its attorneys sent several emails and letters to CCA's agents
requesting a refund. (Id.
'If 54.)
Plaintiff forwarded copies of the correspondence to Nelly's true
manager. (Id.'1 55.) Nelly's manager informed Plaintiff that Nelly and his agents had never
heard of CCA and that CCA did not have the authority to book Nelly.
ilih ~ 56.)
Plaintiff also
contacted the true agent for Flo Rida, another recording artist who CCA claimed to represent, and
learned that CCA did not have the authority to book him either. (Id. ~ 57.)
On or about November 21, 2009, Defendant Brandon emai led Plaintiff claiming
that CCA would refund Plaintiff s payment, but could not complete the transaction because CCA
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consptracy.
Plaintiff asserts that all Defendants knowingly and willfully conspired to further
the goals of CCA and that all Defendants intended to assist and support CCA in transmitting
fraudulent representations over its website in order to defraud persons seeking to hire artists to
perform at events. (CompI.,-r,- 87-88.) Because of the Defaulting Defendants' knowing and
willful failure to respond to the Complaint, each of them is deemed pursuant to Federal Rule of
Civil Procedure 8(b)( 6) to have admitted these allegations; in any event, none of them has
proferred any facts that could frame a genuine issue as to Plaintiff s allegations of fraudulent,
conspiratorial activity accomplished through wire fraud. Plaintiff has thus met its burden of
establishing its entitlement to relief as against all ofthe Defaulting Defendants for the injury it
allegedly sustained by reason of the RICO conspiracy.
C.
Third Claim for Relief: Common Law Fraud and Fraudulent Inducement
Plaintiff asserts its third claim for relief against Defendants CCA, Brandon,
Breeden, and Harris. The elements of a fraud claim under New York law are "(1) a
misrepresentation or omission of material fact; (2) which the defendant knew to be false; (3)
which the defendant made with the intention of inducing reliance; (4) upon which the plaintiff
reasonably relied; and (5) which caused injury to the plaintiff." Amida Capital Mgmt. II, LLC v.
Cerberus Capital Mgmt., L.P., 669
Supp. 2d 430,444 (S.D.N.Y. 2009) (citation omitted).
"The elements of a claim for fraudulent inducement are similar: the defendant must have made a
misrepresentation of a material fact, that was known to be false and intended to be relied on
when made, and that the plaintiff justifiably relied on that misrepresentation to its injury." Id.
(citation omitted).
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The uncontroverted facts in the Complaint, deemed admitted under Federal Rule
of Civil Procedure 8(b)( 6) due to the Defaulting Defendants' knowing and willful failure to
respond, show that Defendants CCA, Brandon, Breeden, and Harris made numerous false
statements to Plaintiff conceming their representation of Nelly and other artists and the size and
stature of CCA. (Compl.
~
92.) The Complaint further alleges that these misrepresentations
were made knowingly and with the purpose of defrauding Plaintiff out of $40,000. (Id. '(93)
Plaintiff relied on the misrepresentations and suffered damages as a result. (Id.) Plaintiff has
therefore met its burden of establishing its entitlement to relief against CCA, Brandon, Breeden,
and Harris for common law fraud and fraudulent inducement.
D.
Fourth Claim for Relief: Aiding and Abetting Fraud
Defendant Harris is the only Defaulting Defendant against whom Plaintiff asserts
its claim of aiding and abetting fraud. A plaintiff asserting a claim of aiding and abetting fraud
must allege (1) existence of the underlying fraud; (2) the defendant's actual knowledge of the
fraud; and (3) the defendant's substantial assistance in perpetrating the fraud.
Lerner v. Fleet
Bank, N.A., 459 F.3d 273, 292 (2d Cir. 2006). "Substantial assistance occurs when a defendant
affirmatively assists, helps conceal or fails to act when required to do so, thereby enabling the
[fraud or breach of fiduciary duty] to occur." Fratemity Fund Ltd. v. Beacon Hill Asset Mgmt.,
LLC, 479 F. Supp. 2d 349, 370 (S.D.N.Y. 2007) (citations and internal quotation marks omitted)
(alteration in original). As discussed above, Plaintiff has demonstrated the existence of the
underlying fraud by Defendant Harris. The Complaint further alleges that Harris substantially
assisted the fraud by executing the Contract, thus adding to the illusion that CCA represented and
could produce Nelly for the New Year's Eve performance. (Compl.
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'I~
37, 102-03.) IIarris, due
19
to her default, has failed to proffer any facts indicating otherwise and thus is deemed to admit
these allegations as true pursuant to Federal Rule of Civil Procedure 8(b)(6). Consequently,
Plaintiff has met its burden of establishing its entitlement to relief against Harris for aiding and
abetting fraud.
E.
Fifth Claim for Relief: Breach of Contract
Plaintiff asserts its breach of contract claim against Defendant CCA only. As
explained above, the Court adopts Plaintiff's uncontroverted allegations that the Contract is void.
This is not a case in which Plaintiff could allege both fraud and breach of contract. Cf. Merrill
Lynch & Co. Inc. v. Allegheny Energy, Inc, 500 F.3d 171, 183-84 (2d Cir. 2(07) (discussing
parallel fraud and breach of contract actions). Therefore, Plaintiff is not entitled to a default
judgment on its breach of contract claim.
F.
Sixth Cause of Action: Conversion
Plaintiff asserts its conversion claim against Defendants CCA, Brandon, Breeden,
and Harris. "The common law cause of action for conversion in New Yark is defined as the
unauthorized assumption and exercise of the right of ownership over goods belonging to another
to the exclusion of the owner's rights." Dover v. Assemi, No. 08-cv-1337, 2009 WL 2870645, at
*5 n.15 (S.D.N.Y. Aug. 5,2(09) (citations and internal quotation marks omitted). Here, Plaintiff
has alleged that the $40,000 it wired to CCA rightfully belonged to Plaintiff. (Compi. '11112.)
The Complaint claims that CCA intentionally retained and exercised control over the money
without permission. (Id. '1'1 113-14.) Upon information and belief, Plaintiff asserts that CCA
distributed that money to, among others, Defendants Brandon, Breeden, and Harris. iliL'II115.)
Therefore, assuming the facts alleged in the Complaint to be true due to those Defendants'
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default, the Court finds that Plaintiff has met its burden of demonstrating its entitlement to
judgment by default on its conversion claim against CCA, Brandon, Breeden, and Harris.
Upon the entry ofa party's default, a court should accept "as true all of the factual
allegations of the complaint, except those relating to damages." Au Bon Pain Corp. v. Artect,
653 F.2d 61, 65 (2d Cir. 1981). Any award of damages must be established by the
prevailing party "unless the amount is liquidated or susceptible of mathematical computation."
Flaks v. Koegel, 504 F.2d 702, 707 (2d Cir. 1974). However, a court need not conduct a hearing
to detem1ine damages, so long as it has "ensured that there was a basis for the damages specified
in the default jUdgment." Transatlantic Marine Claims Agency, Inc. v. Ace Shipping Corp., 109
F.3d 105, 111 (2d Cir. 1997). A plaintiff prevailing on a civil RICO theory "shall recover
threefold the damages he sustains and the cost of the suit[.]" 18 U.S.C.A. § 1964(c) (West
2011).
Plaintiff detennined that its New Year's Eve party with Nelly as one if its featured
perfonners would generate profits of$222,500. (Hsia Decl. ,: 37.) This estimate accounts for
revenue from projected ticket sales, liquor and food sales, sales of VIP booths, and sponsorships,
and expenses including perfonnance fees, artist accommodations, and operation costs. (Id.
~~
25-30.) Plaintiff alleges that far fewer people attended the party because Nelly was not going to
perfonn and, as a result, the event only generated $34,000 of profits, $188,500 less than what
they had expected to earn. (Id.
~i
55.) Plaintiff claims total damages of $228,500, which
represents the $40,000 wire transfer that was never refunded and $188,500 oflost profits. (Id. ~
57.) The Defaulting Defendants have not contested the amount or calculation of this claim.
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Therefore, the Court finds that Plaintiff has met its burden of proving that it has sustained
damages by reason of the Defaulting Defendants' fraudulent activity, including the alleged RICO
violations.
Based on the Defaulting Defendants' failure to contest the allegations made in the
Complaint and in Plaintiffs affidavits, the Court finds that Plaintiff has demonstrated entitlement
to a judgment as follows:
•
Claim I ~ RICO Violation: Base amount of damages $228,000. With treble damages
pursuant to 18 U.S.c. § 1964(c), damages of$684,000 jointly and severally against
Defendants Brandon and Breeden.
Claim 2
Conspiracy to Violate RICO: Base amount of damages $228,000. With treble
damages pursuant to 18 U.S.C. § 1964(c), damages of $684,000, jointly and severally
against all Defaulting Defendants.
Claim 3 . .~ Common Law Fraud and Fraudulent Inducement: $228,000, jointly and
severally against Defendants CCA, Brandon, Breeden, and Harris.
Claim 4 ~ Aiding and Abetting Fraud: $228,000 against Defendant Harris.
•
Claim 5 ~ Breach of Contract: Default judgment motion denied.
•
Claim 6
Conversion: $40,000 plus prejudgment interest against all Defaulting
Defendants.
Plaintiffs request for punitive damages is denied. l
"Punitive damages are awarded for the purpose of deterrence and retribution [and]
should only be awarded if the defendant's culpability is so reprehensible as to warrant
the imposition of damages over and above the award of compensatory damages. In
determining the degree ofreprehensibility of the defendant's conduct, the court should
consider (1) whether the harm caused was physical, as opposed to merely economic;
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In conclusion, Plaintiff is entitled to $684,000 in damages from all Defaulting
Defendants jointly and severably. Plaintiff is entitled to prejudgment interest on $40,000 of this
amount.
Attorneys' Fees
A plaintiff prevailing on a civil RICO claim is entitled to an award of "a
reasonable attorney's fee[.]" 18 U.S.c.A. § 1964(c) (West 2011). Plaintiffs counsel expended
116.4 hours working on this litigation. (Sher Decl. in Support '1 4.) Mr. Sher's regular billing
rate is $400. (ld. '15.) Mr. Sher thus asserts that his fee to Plaintiff would be $46,560. (ld.,r 6.)
The Moving Defendants do not dispute the reasonableness or amount ofMr. Sher's proposed fee.
The Court thus finds that Mr. Sher is entitled to the reasonable fee award of $46,560.
CONCLUSION
F or the foregoing reasons, Plaintiff s motion for a default judgment is granted on
all counts except count five, breach of contract, upon which Plaintiff cannot recover. The
Moving Defendants' motion to vacate the clerk's entry of default is denied and the Moving
Defendants' motion to dismiss is denied.
The initial pretrial conference, scheduled for June 15, 2011, is adjourned.
(2) whether the tortious conduct evinced an indifference to, or a reckless disregard of,
the health and safety of others; (3) whether the target of the conduct had financial
vulnerability; (4) whether the tortious conduct involved repeated actions, or was an
isolated incident; and (5) whether the harm was the result of intentional malice,
trickery, or deceit, or was a mere accident." Fagan v. AmerisourceBergen Corp., 356
F. Supp. 2d 198,220 (E.D.N.Y. 2004) (internal quotation marks and citations
omitted). The harm in this case was principally economic and Plaintiff, a company
with experience in booking performance artists, cannot be said to have been
particularly vulnerable. Additionally, the Defaulting Defendants are being assessed
treble damages under the RICO statute, and such damages meet the purposes of
retribution and deterrence.
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Plaintiff is directed to file a statement with the Court by June 20, 2011, indicating whether its
claims against the unserved Defendants, the ABC Corporations, and John Doe Defendants should
be dismissed without prejudice and whether judgment should be entered against the Defaulting
Defendants. The Defaulting Defendants shall respond to this statement by July 5, 2011. Plaintiff
shall have until July 12, 2011, to file a reply. Courtesy copies must be provided for chambers
contemporaneously with filing.
The Clerk of Court is respectfully directed to terminate docket entry numbers 24
and 28.
SO ORDERED.
Dated: New York, New York
June 6, 2011
~ORSWAlN
United States District Judge
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