Renaissance Search Partners v. Renaissance Limited L.L.C. et al
Filing
80
OPINION & ORDER... The Clerk of Court is directed to enter a default judgment against Miller equal to the sum of (1) $91,062 in compensatory damages, with prejudgment interest, at the rate of nine percent per annum, from January 1, 2013; and (2) $45,531 in punitive damages. For purposes of this judgment, any payment by Millers co-defendants to plaintiff pursuant to the Settlement Agreement shall constitute payment by Miller to plaintiff of compensatory damages in the same amount. Such payments will not affect Millers obligation to pay punitive damages. The Clerk of Court shall close this case. (Signed by Judge Denise L. Cote on 10/1/2014) (gr)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
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RENAISSANCE SEARCH PARTNERS,
:
:
Plaintiff,
:
:
-v:
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RENAISSANCE LIMITED LLC, et al.,
:
:
Defendants.
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12cv5638 (DLC)
OPINION & ORDER
APPEARANCES:
For plaintiff:
James A. DeFelice
SARNO & DeFELICE, LLC
235 W. 23rd St., 5th Fl.
New York, NY 10011
DENISE COTE, District Judge:
On February 3, 2014, a default was entered against
defendant Darryl Miller (“Miller”) and the above-captioned
action was referred to Magistrate Judge Netburn for an inquest
concerning damages.
On July 3, 2014, Judge Netburn issued a
Report and Recommendation (“Report”) recommending that plaintiff
be awarded no damages.
For the following reasons, the plaintiff
is awarded compensatory and punitive damages.
BACKGROUND
The facts that follow are drawn from the complaint and
plaintiff’s submissions in support of its request for damages
and injunctive relief.
Plaintiff Renaissance Search Partners
(“Renaissance Search”) is an executive search firm founded by
three principals, Andrea Henderson (“Henderson”), Tony Brown
(“Brown”), and Miller, that was to be managed in accordance with
an operating agreement executed on July 15, 2010.
Each
principal took a one-third ownership interest in Renaissance
Search.
Plaintiff alleges that Miller violated that agreement
by creating a new executive search firm, Renaissance Limited LLC
(“Renaissance Limited”), in May 2011, with defendants Colin
Cumberbatch (“Cumberbatch”) and Robert McCloud (“McCloud”).
In July 2010, Renaissance Search had business relationships
and placement contracts with 16 clients, including
PriceWaterhouseCoopers LLC, Deutsche Bank, and Revlon.
In 2011,
Miller appropriated Renaissance Search’s private client list for
Renaissance Limited and misrepresented to certain current and
potential clients that Renaissance Search was now doing business
as Renaissance Limited.
In particular, Renaissance Search had a contract with
Pershing, a division of Bank of New York, Mellon.
Purporting to
act under that contract, Miller placed an executive with
Pershing and instructed Pershing to pay the commission to
Renaissance Limited (the “Pershing Commission”).
so.
Pershing did
On September 8, 2011, Renaissance Search was in the process
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of placing two executives with Pershing and its corporate
parent.
On September 22, 2011, Henderson informed Pershing of
Miller’s misrepresentations, and on November 14, 2011, advised
Pershing that payment of the Pershing Commission was still due
to Renaissance Search.
Renaissance Search’s relationship with
Bank of New York, Mellon was damaged and Renaissance Search has
not performed further work for that client.
The amount of the Pershing Commission is uncertain.
In the
Complaint, plaintiff alleges the Pershing Commission was “at
least $25,000.”
In Henderson’s affidavit submitted in support
of plaintiff’s proposed damages findings, however, Henderson
states that “Miller earned a commission of $30,000.00 for
placing an employee with Pershing.”
Henderson’s affidavit does
not reveal the source of this information, or aver that its
statements are made on the basis of personal knowledge.
According to its income tax returns, Renaissance Search
earned $94,750 in gross income its 2010 tax year and $91,062 in
net income.
In 2011, the year in which the Pershing Commission
was paid to Miller, Renaissance Search earned $77,475 in gross
income and $60,912 in net income.
Renaissance Search earned no
income in 2012.
On behalf of Renaissance Search, Miller had contracted with
third-party Go Daddy to host Renaissance Search’s website and
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email.
When the Go Daddy contract expired on June 1, 2012,
Miller refused to renew it, leading to a suspension of
Renaissance Search’s website and email.
On May 25, 2011, Renaissance Limited launched a website
that is similar in many respects to Renaissance Search’s
website, both in its appearance and in the verbatim copying of
certain text.
That afternoon, Renaissance Limited’s website
designer, Dianna Rogers (“Rogers”), sent an email to Miller and
McCloud stating that “the home page is up along with the other
pages that say Under Construction.”
Rogers writes, “let’s
discuss content for the rest of the site so we can get it
finished.
Would you like me to take the info from the other
Renaissance site and change it a little, or take bits and pieces
from similar sites and reword?”
On September 8, 2011, Henderson sent McCloud a cease and
desist letter concerning the use of the name “Renaissance
Limited” and Renaissance Limited’s website.
The letter advises
of Miller’s conduct, and it charges that Renaissance Limited’s
name was chosen to lead clients to confuse it with Renaissance
Search and that its website makes “unauthorized use of
[Henderson’s] copyrightable work” in Renaissance Search’s
website.
Henderson demanded that Renaissance Limited’s
“[c]opyright and [t]rademark [i]nfringement” cease within one
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week.
Renaissance Limited continued operating under that name
and its website remained up.
Plaintiff consequently filed this action on July 24, 2012.
Plaintiff’s complaint (the “Complaint”) includes claims against
Miller, among others, for tortious interference with contract,
copyright infringement, trademark infringement, unjust
enrichment, breach of contract, and breach of fiduciary duty.
On November 27, 2012, Judge Netburn held a settlement
conference, where plaintiff and defendants other than Miller
reached an agreement to settle this case requiring defendants to
pay plaintiff $75,000, dissolve Renaissance Limited, and
henceforth conduct business under a new name (the “Settlement
Agreement”).
Counsel for defendants, including Miller, was
present at the conference, and McCloud and Cumberbatch appeared
by telephone.
On August 5, 2013, plaintiff filed a motion to
enforce that agreement against all defendants, including Miller.
Plaintiff’s motion was referred to Judge Netburn, and on October
15, 2013 she issued a Report and Recommendation advising that
the motion be granted as to the other defendants and denied as
to Miller.
As to Miller, Judge Netburn recommended that default
be entered against him for failure to defend this action, as he
had failed to comply with a court order directing him to attend
the settlement conference and failed to oppose plaintiff’s
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motion to enforce the Settlement Agreement.
On December 13,
2013, this Court entered an Order that enforced the Settlement
Agreement against defendants other than Miller and required full
payment by January 17, 2014, but “decline[d] . . . to enter an
immediate default as to Miller.”
Instead, the Court issued an
Order to Show Cause that “g[a]ve Miller a final opportunity to
continue defending this action.”
That Order to Show Cause set a
hearing date of January 9, 2014.
By letter of January 8, Miller’s then counsel, Ravinder
Bhalla (“Bhalla”) wrote the Court to advise that he “was
completely unaware, until th[at] morning,” of the December 13
Order to Show Cause.
to January 24.
The Court adjourned the January 9 hearing
At the January 24 hearing, Bhalla appeared and
advised the Court that Miller wished to change counsel.
The
Court issued a January 27 Order setting a new hearing date of
February 7 that advised that “[a] failure to appear by Mr.
Miller or his new counsel, will result in the entry of a default
against him and an inquest for a determination of damages.”
Bhalla served this Order on Miller on January 28.
appeared for Miller at the February 7 hearing.
No one
Accordingly, a
default was entered against Miller on February 10 and this case
was referred to Judge Netburn for an inquest to determine
damages.
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Plaintiff submitted proposed findings of fact and
conclusions of law on April 29, 2014 (“Proposed Findings”).
Plaintiff requested damages in the amount of $131,112.50 for
lost profits, trebled to $393,337.50 due to Miller’s willful
trademark infringement, as well as statutory damages of $150,000
for willful copyright infringement.
Plaintiff also requested a
permanent injunction against Miller barring future trademark and
copyright infringement.
On July 3, 2014, Judge Netburn issued a Report recommending
that plaintiff be awarded no damages and denied the injunctive
relief it seeks.
Judge Netburn found that the Complaint states
a claim for breach of contract, tortious interference with
Renaissance Search’s contract with Pershing, breach of fiduciary
duty, and trademark infringement.
Judge Netburn held that
Miller was not liable for unjust enrichment, finding that claim
duplicative of the tortious interference and breach of fiduciary
duty claims; was not liable for tortious interference with
plaintiff’s contract with Go Daddy, because the contract had
expired when plaintiff Miller wrongfully refused to renew it;
and was not liable for copyright infringement, as plaintiff did
not allege or submit any evidence that it owns a registered
copyright in the work at issue.
The Report recommends that plaintiff not be awarded
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damages, as plaintiff “fails to submit evidence capable of
establishing with reasonable certainty the basis for the[]
alleged damages.”
Judge Netburn recognized that plaintiff might
be entitled to damages in the amount of the Pershing Commission
on its tortious interference and breach of fiduciary duty
claims, but found that this amount is uncertain.
As noted
above, the Complaint alleges it was “at least $25,000”;
Henderson, in her affidavit submitted with the Proposed
Findings, states it was $30,000, but does not establish any
basis for her purported knowledge.
evidence concerning this commission.
Plaintiff offers no other
Accordingly, Judge Netburn
found that “plaintiff has failed to prove damages with
reasonable certainty with respect to Miller’s conduct involving
the Pershing contract or misrepresenting Renaissance Limited as
a successor to Renaissance Search.”
Judge Netburn also rejected plaintiff’s calculation of lost
profits.
Plaintiff proposed a finding of $101,112.50 in lost
profits in 2012.
Plaintiff calculated that figure by averaging
its 2010 income and its 2011 income (with 2011 increased by
$30,000 attributed to the Pershing contract) and subtracting its
actual income in 2012 ($0).
Judge Netburn held that
“plaintiff’s methodology of using the average of past annual
earnings and claiming that this amount was lost in 2012 as a
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combined result of all the facts alleged in four distinct claims
is flawed and injects too much speculation to satisfy the
‘reasonable certainty’ standard.”
Finally, the Report recommended that no punitive damages or
injunctive relief be granted.
The Report notes that plaintiff
did not request nominal damages, and that without an award of
actual or nominal damages, punitive damages cannot be granted
under New York law.
And Judge Netburn found that the requested
injunction would be inappropriate where plaintiff failed to
request this relief in its Complaint.
On July 18, plaintiff filed objections (the “Objections”)
to the Report.
Plaintiff “agrees with the R&R as to liability,”
but objects to the Report on three grounds: (1) the evidence
supports an award of $131,112.50 for lost profits; (2) in the
alternative, the Court should award plaintiff $25,000 for the
Pershing Commission, because Miller has admitted that allegation
in the Complaint; or (3) in the alternative, plaintiff should be
entitled to a hearing or jury trial on actual and punitive
damages as the evidence of Miller’s profits is in the possession
of Miller or third parties.
DISCUSSION
When considering a magistrate judge’s report, a district
court “may accept, reject, or modify, in whole or in part, the
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findings or recommendations made by the magistrate judge.”
U.S.C. § 636(b)(1)(C).
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A district court is to “make a de novo
determination of those portions of the report or specified
proposed findings or recommendations to which objection is
made.”
Id.
To accept those portions of the report to which no
timely objection has been made, “a district court need only
satisfy itself that there is no clear error on the face of the
record.”
Skaff v. Progress Int’l, LLC, 12 Civ. 9045 (KPF), 2014
WL 856521, at *3 (S.D.N.Y. Mar. 4, 2014) (citation omitted).
Plaintiff’s Objections are limited.
As noted above,
plaintiff does not object to Judge Netburn’s conclusions
regarding liability.
Nor does plaintiff object to Judge
Netburn’s holding that trebling of damages is inappropriate and
that an injunction should not issue.
As there is no clear error
on the face of the record as to these conclusions, the Report is
adopted insofar as it concerns Miller’s liability, and insofar
as it rejects trebling of damages and the issuance of an
injunction, for the reasons stated therein.
I.
Lost Profits
Where “plaintiff’s claim is for a sum certain or a sum that
can be made certain by computation,” and plaintiff submits “an
affidavit showing the amount due,” the Clerk of Court must enter
judgment for that amount.
Fed. R. Civ. P. 55(b)(1).
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Otherwise,
plaintiff must apply to the district court, which may refer the
matter to a magistrate judge for an inquest on damages.
Civ. P. 55(b)(2).
Fed. R.
For “while a party’s default is deemed to
constitute a concession of all well pleaded allegations of
liability, it is not considered an admission of damages.”
Cement & Concrete Workers Dist. Council Welfare Fund v. Metro
Found. Contractors Inc., 699 F.3d 230, 234 (2d Cir. 2012)
(citation omitted).
Damages for lost profits may only be awarded where the
“amount of such damages [are established] with reasonable
certainty.”
2000).
Schonfeld v. Hilliard, 218 F.3d 164, 172 (2d Cir.
“Although lost profits need not be proven with
mathematical precision, they must be capable of measurement
based upon known reliable factors without undue speculation.”
Id. (citation omitted).
Evidence will support an award for lost
profits where the figure is a “just and reasonable inference,”
as opposed to “speculation or guesswork.”
Autowest, Inc. v.
Peugeot, Inc., 434 F.2d 556, 566 (2d Cir. 1970) (quoting Bigelow
v. RKO Radio Pictures, Inc., 327 U.S. 251, 264 (1946)).
“When a difficulty faced in calculating damages is
attributable to the defendant’s misconduct, some uncertainty may
be tolerated,” Whitney v. Citibank, N.A., 782 F.2d 1106, 1118
(2d Cir. 1986), provided that “the existence of damage is
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certain, and the only uncertainty is as to its amount.”
Schonfeld, 218 F.3d at 174 (citation omitted).
“Hard evidence
of a claimant’s earning history may surely be an aid to proof of
lost profits,” but “in many cases, the most probative evidence
of lost profits may well be . . . direct evidence of earnings
specifically diverted from a claimant by culpable conduct of
another.”
Am. Fed. Grp., Ltd. v. Rothenberg, 136 F.3d 897, 913
(2d Cir. 1998); see also Autowest, Inc. v. Peugeot, Inc., 434
F.2d 556, 567 (2d Cir. 1970) (affirming damages award to a new
franchisee based on “disinterested projections resting on
reasonable and debatable assumptions, the actual sales
experience of plaintiff’s successor, [and] the sales record of
comparable [businesses]”).
Taking the Pershing Commission first, plaintiff has failed
to establish a basis for finding the amount paid to Renaissance
Limited was either $25,000 or $30,000.
of Rule 55(b) is unavailing.
Plaintiff’s invocation
Rule 55(b)(1) permits the Clerk of
Court to enter judgment “for a sum certain or a sum that can be
made certain by computation” after plaintiff submits “an
affidavit showing the amount due.”
Here, Henderson’s affidavit
claims $30,000, but does not appear to be based on personal
knowledge, and plaintiff has abandoned its claim to that amount.
Instead, plaintiff now seeks the $25,000 alleged in the
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Complaint, arguing that Miller conceded the Commission was “at
least $25,000” when he defaulted.
Because “a party’s default
. . . is not considered an admission of damages,” plaintiff’s
argument fails.
Cement & Concrete Workers, 699 F.3d at 234
(citation omitted).
Plaintiff’s prior earnings, however, do establish a basis
for an award of $91,062 on plaintiff’s claim for breach of
fiduciary duty.
In tax year 2010, the only year Miller did not
interfere with plaintiff’s business, Renaissance Search earned
net income of $91,062.
In 2011, the year Miller misappropriated
the Pershing Commission, plaintiff earned net income of $60,912.
In 2012, following the damage done to plaintiff’s client
relationships, plaintiff earned nothing.
Plaintiff proposes
that $30,000 for the Pershing Commission should be added to its
2011 gross income, resulting in an adjusted 2011 gross income of
$107,475.
Plaintiff then proposes that this figure be averaged
with its 2010 gross income to calculate an average yearly gross
income of $101,112.25.
Yet net income (profit), rather than
gross income, is the relevant figure here.
And because the
amount of the Pershing Commission has not been established, the
Court discards the 2011 net income and looks to 2010 net income
for a reliable estimate of the 2012 profit lost due to Miller’s
misconduct: $91,062.
Plaintiff is also entitled to prejudgment
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interest on these damages from January 1, 2013, the first day
following Renaissance Search’s 2012 tax year, at a rate of nine
percent per annum.
See N.Y. C.P.L.R. § 5001.
As set forth
below, Miller’s payment to plaintiff of these compensatory
damages is to be offset by any amounts paid to plaintiff by the
other defendants pursuant to the Settlement Agreement.
II.
Punitive Damages
Under New York law, punitive damages may be awarded “in
fraud and deceit cases where the defendant’s conduct evinced a
high degree of moral turpitude and demonstrated such wanton
dishonesty as to imply a criminal indifference to civil
obligations.”
Evans v. Ottimo, 469 F.3d 278, 283 (2d Cir. 2006)
(citation omitted).
“The misconduct must be exceptional, as
when the wrongdoer has acted maliciously, wantonly, or with a
recklessness that betokens an improper motive or vindictiveness
or has engaged in outrageous or oppressive intentional
misconduct . . . .”
Ross v. Louise Wise Servs., Inc., 836
N.Y.S.2d 509, 516 (2007) (citation omitted).
“[I]nfliction of
economic injury, especially when done intentionally through
affirmative acts of misconduct can warrant a substantial
penalty.”
Motorola Credit Corp. v. Uzan, 509 F.3d 74, 87 (2d
Cir. 2007) (quoting BMW of N. Am. v. Gore, 517 U.S. 559, 576
(1996)).
To ensure an award accords with the Due Process
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Clause, courts are to be guided by “(1) the degree of
reprehensibility of the defendant’s conduct, (2) the ratio of
punitive damages to the actual harm inflicted, and (3) the
difference between this remedy and the civil penalties
authorized or imposed in comparable cases.”
Stampf v. Long
Island R.R. Co., 761 F.3d 192, 209 (2d Cir. 2014) (citation
omitted).
Punitive damages are appropriate here in connection with
Miller’s breach of fiduciary duty.
Miller founded Renaissance
Search with Henderson and Brown in July 2010.
Less than one
year later, Miller had created Renaissance Limited, a firm with
a name chosen to fool Renaissance Search’s clients into
believing -- as Miller misrepresented -- that Renaissance
Limited was the same entity.
Miller then misappropriated
Renaissance Search’s private client list, contacting its clients
and even performing work and receiving payment under Renaissance
Search’s contract with Pershing.
Unsurprisingly, Miller’s
conduct poisoned Renaissance Search’s relationship with some of
these clients, including Pershing.
Miller went so far as to
copy sections of Renaissance Search’s website for his new
company and then cause Renaissance Search’s website to be taken
down.
Miller’s wanton betrayal of his former business partners
and his gross misuse of his position of trust in Renaissance
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Search, as well as his attempt to defraud public companies in
order to rob Renaissance Search of promised business and good
will, warrant the imposition of punitive damages here equal to
one-half of the compensatory damages awarded to Renaissance
Search for Miller’s breach: $45,531.
Cf. Motorola, 509 F.3d at
87 (affirming award of approximately one-half compensatory
damages where defendants fraudulently obtained loans from
plaintiff corporations).
CONCLUSION
The Clerk of Court is directed to enter a default judgment
against Miller equal to the sum of (1) $91,062 in compensatory
damages, with prejudgment interest, at the rate of nine percent
per annum, from January 1, 2013; and (2) $45,531 in punitive
damages.
For purposes of this judgment, any payment by Miller’s
co-defendants to plaintiff pursuant to the Settlement Agreement
shall constitute payment by Miller to plaintiff of compensatory
damages in the same amount. Such payments will not affect
Miller’s obligation to pay punitive damages.
The Clerk of Court
shall close this case.
SO ORDERED:
Dated:
New York, New York
October 1, 2014
________________________________
DENISE COTE
United States District Judge
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