Young v. Rosenberg
Filing
27
OPINION & ORDER re: 25 REPORT AND RECOMMENDATIONS: This Court has reviewed the Report and Recommendation of Magistrate Judge Debra Freeman dated July 11, 2017 (the "Report"). (ECF No. 25.) The Report recommends an award of compensatory d amages in connection with Plaintiff Nicole Young's breach of contract claim against Defendant Bradley Rosenberg in the amount of $8,864.00; pre-judgment interest of $2,995.92 accrued from October 1, 2012 to June 29, 2016; and pre-judgm ent interest to be calculated by the Clerk of Court at a rate of 9% per annum from June 30, 2016 until the date that a final judgment in this action is entered. No objections to the Report were filed. Accordingly, this Court declines to accept the Magistrate Judge's Report and Recommendation. For the foregoing reasons, the Clerk of Court is directed to enter judgment in the amount of $13,812.40, plus pre-judgment interest accrued at nine percent per annum between June 30, 2016 an d the date that final judgment is entered. Post-judgment interest is also awarded, with the total amount to be calculated from the date final judgment is entered until the date Rosenberg satisfies the judgment. The Clerk of Court is directed to calcu late post-judgment "from the date of the entry of the judgment, at a rate equal to the weekly average 1-year constant maturity Treasury yield, as published by the Board of Governors of the Federal Reserve System for the calendar week preceding the date of judgment." 28 U.S.C. § 1961. The Clerk of Court is directed to mark this case as closed. (Signed by Judge William H. Pauley, III on 8/1/2017) (jwh)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
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:
NICOLE E. YOUNG,
:
Plaintiff,
:
-against:
BRADLEY ROSENBERG,
:
Defendant.
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14cv9377
OPINION & ORDER
WILLIAM H. PAULEY III, United States District Judge:
This Court has reviewed the Report and Recommendation of Magistrate Judge
Debra Freeman dated July 11, 2017 (the “Report”). (ECF No. 25.) The Report recommends an
award of compensatory damages in connection with Plaintiff Nicole Young’s breach of contract
claim against Defendant Bradley Rosenberg in the amount of $8,864.00; pre-judgment interest of
$2,995.92 accrued from October 1, 2012 to June 29, 2016; and pre-judgment interest to be
calculated by the Clerk of Court at a rate of 9% per annum from June 30, 2016 until the date that
a final judgment in this action is entered. No objections to the Report were filed. Nevertheless,
for the following reasons, this Court declines to adopt the Report.
The Report provides a thoughtful analysis of expectation damages, the customary
measure of damages in breach of contract cases. Expectation damages are “based on the injured
party’s expectation interest” and “intended to give [her] the benefit of [her] bargain by awarding
[her] a sum of money that will, to the extent possible, put [her] in as good a position as [she]
would have been in had the contract been performed.” Waxman v. Envipco Pick Up &
Processing Servs., Inc., 2006 WL 236818, at *4 (S.D.N.Y. Jan. 17, 2006). But under certain
circumstances, “a plaintiff may be entitled to elect between damages representing the benefit of
the bargain made—expectation damages—and damages representing an undoing of the bargain
altogether—restitution damages.” Waxman, 2006 WL 236818, at *4.
Restitution damages “are sometimes awarded in cases of total breach or
repudiation, allowing the non-breaching party to claim restitution damages in order to be restored
to [her] original position.” Mazzei v. Money Store, 308 F.R.D. 92, 105 (S.D.N.Y. 2015). This
measure of damages does not account for “the loss in the value to [plaintiff] of the other party’s
performance, but rather receives the value of the benefit conferred to the other party.” Waxman,
2006 WL 236818, at *4 (citing Restatement (Second) of Contracts § 347(a); Bausch & Lomb,
Inc. v. Bressler, 977 F.2d 720 (2d Cir. 1992)). Because a restitution award does not provide the
plaintiff with what was due her under the contract, but rather seeks to restore “the reasonable
value of any benefit conferred upon the defendant by the plaintiff, it is not governed by the terms
of the parties’ agreement.” Bausch & Lomb, 977 F.2d at 730. The decision to award restitution
lies within the discretion of this Court. Mazzei, 308 F.R.D. at 105.
The Report recommends awarding damages in the amount of $8,864, a sum less
than the $10,324 that Young paid Rosenberg under the contract. In the ordinary breach of
contract case, expectation damages arising from an agreement to purchase stock would factor in
the risk that the stock’s value may drop and result in a net loss to the plaintiff. That appears to
have been the case here, where both Facebook’s IPO stock price (valued at $38.23) and the strike
price offered by Rosenberg (valued at $25.81) dropped to an average price of $22.16 by October
1, 2012, the date used to calculate damages in the Report.
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But that would be an odd result in a case that smacks of fraud. 1 Taking all of
Young’s allegations as true, Rosenberg never intended to wire the fair market value of the
securities back to Young and instead misappropriated the funds for his own benefit. (See, e.g,
Complaint (“Compl.”), ECF No. 2, at ¶¶ 30, 33, 52, 69; Proposed Findings of Fact and
Conclusions of Law Concerning Damages (“Proposed Findings of Fact”), ECF No. 24, at ¶ 6.)
Rosenberg’s actions, in essence, amounted to a “total breach” of the contract.
While the Report analyzes damages based on Young’s request for “the Fair
Market Value (FMV) of the 400 Facebook shares” in connection with her breach of contract
claim (Proposed Findings of Fact at ¶ 16), the analysis should have accounted for restitution as
an acceptable form of damages. Xpedior Creditor Trust v. Credit Suisse First Boston (USA)
Inc., 341 F. Supp. 2d 258, 271 (S.D.N.Y. 2004) (“Any of expectation, reliance or restitution
damages may be appropriate, bearing in mind that Plaintiff must prove any claimed damages
were caused by Defendant’s breach to a reasonable degree of certainty.”) (emphasis original).
“Under New York law, restitution damages are available as an equitable remedy
for repudiation or total breach of contract.” Summit Props. Intern., LLC v. Ladies Professional
Golf Ass’n, 2010 WL 4983179, at *4 (S.D.N.Y. Dec. 6, 2010); Tech. Express, Inc. v. FTF Bus.
Sys. Corp., 2000 WL 1877020, at *6 (S.D.N.Y. Dec. 26, 2000). Restitution appears to be the
appropriate measure of relief where, as here, the doctrine is “premised upon the equitable
principle that a person who has been unjustly enriched at the expense of another is required to
make restitution to the other.” Bausch & Lomb, 977 F.2d at 729. Once the defendant has been
deemed liable for total breach, the plaintiff may recover “the reasonable value of services
1
Indeed, the Report separately finds Rosenberg liable under both Young’s common law fraud and Section
10(b) securities fraud claims. (See Report and Recommendation at 15 n.6, 21.)
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rendered, goods delivered, or property conveyed less the reasonable value of any counterperformance received by [her].” Bausch & Lomb, 977 F.2d at 730; Atlantis Info. Tech., GmbH
v. CA, Inc., 2011 WL 4543252, at *9 (E.D.N.Y. Sept. 28, 2011). Moreover, because “restitution
looks to the reasonable value of any benefit conferred upon the defendant by the plaintiff,” it is
“available even if the plaintiff would have lost money on the contract if it had been fully
performed.” Bausch & Lomb, 977 F.2d at 730. That appears to be the case here, where Young
would have received Facebook shares at a value less than the amount for which they were
purchased if Rosenberg performed under the contract.
The fundamental purpose of restitution is “to prevent unjust enrichment.”
Restatement (Second) of Contracts § 344. On the face of the Complaint, it is unclear what
Rosenberg did with the money Young sent him. While the money was intended to purchase
Facebook stock, the Complaint does not allege whether Rosenberg purchased the stock and kept
it for himself, or whether he simply used the funds for another purpose. It is also unclear
whether Rosenberg held onto the stock only to watch it grow in value over the years to Young’s
detriment. (See, e.g., Report and Recommendation at 21 n.11; Compl. at ¶¶ 33, 69.) What is
clear is that Rosenberg benefited at Young’s expense. (Compl. at ¶ 39; Proposed Findings of
Fact at ¶ 5.) Equally obvious is that Young received nothing in return for wiring the money, and
now stands to lose money based on the damages recommended by the Report. In this Court’s
view, that would amount to an inequitable result.
Accordingly, Young is entitled to restitution in the amount of $10,324 plus prejudgment interest. Pre-judgment interest, re-calculated based on the revised damages figure,
accrued at a daily rate of $2.55. It is unclear when the breach occurred, but the Magistrate
Judge’s use of October 1, 2012 is reasonable, and this Court adopts it for purposes of calculating
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pre-judgment interest. Thus, from October 1, 2012 until June 29, 2016, the date of Young’s
inquest submission, the total pre-judgment interest is $3,488.40. Therefore, Young is entitled to
damages in the amount of $13,812.40 in addition to the pre-judgment interest accruing between
June 30, 2016 and the date on which final judgment is entered.
Moreover, while the Report declined to grant post-judgment interest on the basis
that “final judgment [had] not yet been entered,” Young is entitled to it. (Report and
Recommendation at 17 n.9.) Post-judgment interest should be calculated “from the date of the
entry of the judgment, at a rate equal to the weekly average 1-year constant maturity Treasury
yield, as published by the Board of Governors of the Federal Reserve System for the calendar
week preceding the date of judgment” until Rosenberg tenders payment. 28 U.S.C. § 1961.
CONCLUSION
Accordingly, this Court declines to accept the Magistrate Judge’s Report and
Recommendation. For the foregoing reasons, the Clerk of Court is directed to enter judgment in
the amount of $13,812.40, plus pre-judgment interest accrued at nine percent per annum between
June 30, 2016 and the date that final judgment is entered.
Post-judgment interest is also awarded, with the total amount to be calculated
from the date final judgment is entered until the date Rosenberg satisfies the judgment. The
Clerk of Court is directed to calculate post-judgment “from the date of the entry of the judgment,
at a rate equal to the weekly average 1-year constant maturity Treasury yield, as published by the
Board of Governors of the Federal Reserve System for the calendar week preceding the date of
judgment.” 28 U.S.C. § 1961.
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The Clerk of Court is directed to mark this case as closed.
Dated: August 1, 2017
New York, New York
SO ORDERED:
_______________________________
WILLIAM H. PAULEY III
U.S.D.J.
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