Opinion
14-cv-4132(DRH)(SIL)
02-05-2015
FEDERAL INSURANCE COMPANY, Plaintiff, v. CAC OF NY, INC. and CUTLASS INDUSTRIES, Defendants.
REPORT AND RECOMMENDATION
LOCKE, Magistrate Judge :
Presently before the Court on referral from the Honorable Denis R. Hurley for Report and Recommendation in this diversity breach of contract action is Plaintiff's motion for a default judgment. Plaintiff Federal Insurance Company ("Plaintiff") commenced this action against Defendants CAC of NY, Inc. and Cutlass Industries (collectively "Defendants") by Complaint filed on July 3, 2014, DE [1], ("Compl."). Defendants failed to answer or otherwise respond, and on September 4, 2014, Plaintiff filed a motion for a default judgment, DE [9], seeking payment of $188,636 in compensatory damages, together with prejudgment interest, and leave to file a motion for attorneys' fees and costs of the action. By electronic Order dated September 5, 2014, Judge Hurley referred the motion to the undersigned for a Report and Recommendation "as to whether plaintiff has demonstrated that the allegations in the Complaint establish the defendant's liability such that the motion for default judgment should be granted, and if so, to determine the appropriate amount of damages, costs, and/or fees, if any, to be awarded."
For the reasons set forth below, my recommendation is that Plaintiff's motion for a default judgment be granted, together with an award of damages as follows: $188,636 for compensatory damages; $30,043.96 for prejudgment interest accrued to the date Plaintiff filed the instant motion; and $46.52 in daily interest for each day after September 4, 2014 through entry of judgment. I further recommend that Plaintiff's request for leave to file a separate motion for attorneys' fees and costs be granted. Any such motion should include evidence sufficient to establish an entitlement to such fees and costs and substantiate their amount.
I. Background
The following facts are taken from the Complaint and accepted as true for the purposes of this motion. Plaintiff is an Indiana insurance company authorized to transact business in New York. See Compl. ¶ 1. Defendants are New York corporations with principal places of business in Lynbrook, New York. See id. ¶¶ 2-3. As such, the Court has diversity jurisdiction over Plaintiff's claims.
Plaintiff issued two policies for workers' compensation and employers' liability insurance (the "Policies") to Defendants. See id. ¶ 7. The terms of the Policies obligated Defendants to pay premiums in exchange for coverage thereunder. See id. ¶ 9. Under the Policies, the amount of the initial premiums was estimated based upon Defendants' anticipated payroll for the policy periods. See id. ¶¶ 10-11. Because the initial premiums were based upon estimated information, the Policies provided for an audit during the policy periods, the results of which may cause the premium amounts to increase or decrease to reflect the carrier's actual exposure. See id. ¶ 11; see also Exhibit B (Policies) to the Affidavit in Support of a Default Judgment by James C. Fitsimmons, sworn to on September 2, 2014 (the "Fitzsimmons Aff."), at Part Five, Item G (providing, in relevant part, that Defendants "will let [Plaintiff] examine and audit all your records that relate to this policy."); id. at "New York Workers Compensation October 1, 2009 Rate and Loss Cost Revision Explanatory Memorandum" (stating that "the premiums for the period of coverage commencing on or after October 1, 2011 are provisional and may be subject to upward or downward adjustment, retroactive to the effective date of the policy. [Defendants] may be required to provide an additional premium, or be entitled to a credit, if it is determined that an adjustment is necessary to meet statutory rating standards.").
On November 2, 2012 and April 15, 2013, Plaintiff conducted audits of the Policies, the results of which showed that Defendants owed additional premiums and surcharges of $188,636. See id. ¶ 12; see also Fitzsimmons Aff. Ex. C. According to Plaintiff, Defendants have failed to pay the additional premium amount, despite Plaintiff's demands. See id. ¶¶ 13-15. Plaintiff claims to have fulfilled its obligations under the Policies by providing the insurance coverage stated in the Policies. See id. ¶ 16. Based on these events, Plaintiff brought claims against Defendants for breach of contract, unjust enrichment, and account stated, seeking the principal sum of $188,636, plus interest, attorneys' fees, and costs of the action. As set forth above, Defendants never responded or otherwise moved with respect to the Complaint. The Clerk of the Court noted Defendants' Default on August 28, 2014, DE [8].
II. Legal Standards
A. Standard of Review
Motions for default judgments are governed by Rule 55 of the Federal Rules of Civil Procedure ("Fed. R. Civ. P."), which provides for a two-step process. See Fed. R. Civ. P. 55; Priestley v. Headminder, Inc., 647 F.3d 497, 504-05 (2d Cir. 2011); Gesualdi v. Ava Shypula Testing & Inspection, Inc., CV 13-01873, 2014 U.S. Dist. LEXIS 50752, at *6-*7 (E.D.N.Y. Feb. 28, 2014) (Report and Recommendation), adopted by 2014 U.S. Dist. LEXIS 49993 (E.D.N.Y. Apr. 10, 2014). Initially, the moving party must obtain a certificate of default from the Clerk of the Court. See Fed. R. Civ. P. 55(a). Once the certificate of default is issued, the moving party may apply for entry of a default judgment. See id. Rule 55(b).
Where a default occurs, the well-pleaded factual allegations set forth in a complaint relating to liability are deemed true. See Greyhound Exhibitgroup, Inc. v. E.L. U.L. Realty Corp., 973 F.2d 155, 158 (2d Cir. 1992); Ferrara v. PJF Trucking LLC, 13-CV-7191, 2014 U.S. Dist. LEXIS 134095, at *9-*10 (E.D.N.Y. Aug. 14, 2014) (Report and Recommendation), adopted by 2014 U.S. Dist. LEXIS 133723 (E.D.N.Y. Sept. 22, 2014); Ava Shypula, 2014 U.S. Dist. LEXIS 50752 at *7; Gesualdi v. Magnolia Pro Trucking Inc., CV 11-14082, 2012 U.S. Dist. LEXIS 130203, at *5 (E.D.N.Y. Aug. 20, 2012) (Report and Recommendation), adopted by 2012 U.S. Dist. LEXIS 130211 (E.D.N.Y. Sept. 11, 2012); Joe Hand Promotions, Inc. v. El Norteno Rest. Corp., CV-06-1878, 2007 U.S. Dist. LEXIS 99935, at *4 (E.D.N.Y. Sept. 11, 2007) (Report and Recommendation), adopted by 2007 U.S. Dist. LEXIS 72789; see also Fed. R. Civ. P. 8(b)(6) ("An allegation—other than one relating to the amount of damages—is admitted if a responsive pleading is required and the allegation is not denied").
However, "just because a party is in default, the plaintiff is not entitled to a default judgment as a matter of right." Profi-Parlkiet Sp. Zoo v. Seneca Hardwoods LLC, 13 CV 4358, 2014 U.S. Dist. LEXIS 71289, at *11 (E.D.N.Y. May 23, 2014) (Report and Recommendation), adopted by 2014 U.S. Dist. LEXIS 83128 (E.D.N.Y. Jun. 18, 2014) (internal quotation omitted); see Bravado Int'l Grp. Merchandising Servs., Inc. v. Ninna, Inc., 655 F. Supp. 2d 177, 186 (E.D.N.Y. 2009). Liability is not established simply because the complaint remains unanswered. See PJF Trucking, 2014 U.S. Dist. LEXIS 134095 at *10. This is because a default does not establish those allegations which are conclusory and it does not excuse defects in the pleadings. See id.; see also Gunawan v. Sake Sushi Rest., 897 F. Supp. 2d 76, 83 (E.D.N.Y. 2012); Said v. SBS Elecs., Inc., CV 08-3067, 2010 U.S. Dist. LEXIS 31744, at *6-*7 (E.D.N.Y. Feb. 24, 2010), adopted as modified, 2010 U.S. Dist. LEXIS 144067 (E.D.N.Y. Mar. 30, 2010). Accordingly, the district court must determine whether the plaintiff's allegations establish liability as a matter of law. See City of New York v. Mickalis Pawn Shop, LLC, 645 F.3d 114, 137 (2d Cir. 2011); Ava Shylupa, 2014 U.S. Dist. LEXIS 50752 at *8.
Courts consider three factors when determining whether to grant a default judgment: (i) whether the defendant's default was willful; (ii) whether the defendant has a meritorious defense; and (iii) the level of prejudice to the non-defaulting party if the motion is denied. See PJF Trucking, 2014 U.S. Dist. LEXIS 134095 at *10-*11; Magnolia Pro Trucking, 2012 U.S. Dist. LEXIS 130203 at *6; Reliance Commc'ns LLC v. Retail Store Ventures, Inc., CV 12-2067, 2013 U.S. Dist. LEXIS 111112, at *6-*7 (E.D.N.Y. Aug. 7, 2013) (Report and Recommendation), adopted by 2013 U.S. Dist. LEXIS 125557 (E.D.N.Y. Aug. 29, 2013). The decision whether to grant a default judgment rests with the sound discretion of the district court. See Shah v. New York State Dep't of Civil Serv., 168 F.3d 610, 615 (2d Cir. 1999); Ainbinder v. Money Ctr. Fin. Grp., Inc., 10-CV-5270, 2014 U.S. Dist. LEXIS 39788, at *7 (E.D.N.Y. Mar. 24, 2014).
In the event that liability is established, the Court must ascertain damages with "reasonable certainty." Credit Lyonnais Sec., Inc. v. Alcantara, 183 F.3d 151, 155 (2d Cir. 1999); see Gesualdi v. Tapia Trucking LLC, 11-CV-4174, 2012 U.S. Dist. LEXIS 186663, at *4 (E.D.N.Y. Oct. 15, 2012) (Report and Recommendation), adopted by 2013 U.S. Dist. LEXIS 31739 (E.D.N.Y. Mar. 6, 2013). The inquest can be held by affidavit, without a hearing, so long as the Court endeavors to ensure that there is a basis for the damages specified in the default judgment. See Transatlantic Marine Claims Agency, Inc. v. Ace Shipping Corp., 109 F.3d 105, 111 (2d Cir. 1997); Tapia Trucking, 2012 U.S. Dist. LEXIS 186663 at *4-*5.
B. Applicable Law
The inquiry begins with whether the factual allegations set forth in the Complaint, which are now taken as true, establish liability. See, e.g., PJF Trucking, 2014 U.S. Dist. LEXIS 134095 at *13 ("Although Defendant's default constitutes an admission of all factual allegations in the Complaint as they relate to liability, Plaintiffs must nevertheless demonstrate that the uncontested allegations set forth valid claims"). Plaintiff has asserted common law claims for breach of contract, unjust enrichment, and account stated.
i. Choice of Law
As an initial matter, the Court must determine what law should be applied to these claims. See D'Amato v. Five Star Reporting, Inc., 12-cv-3395, 2015 U.S. Dist. LEXIS 6000, at *22-*23 (E.D.N.Y. Jan. 17, 2015). The Court notes that the Complaint does not allege violations of a particular state's laws, and Plaintiff did not submit a Memorandum of Law or other legal argument as to which state's laws govern its claims. Furthermore, as a result of their failure to answer or respond to the Complaint, Defendants have not advocated for the application of a particular state's laws. Thus, since "neither party has offered a choice-of-laws analysis to determine which state law should apply to the claims in th[e] case," the choice-of-law rules of New York govern. See Comprehensive Habilitation Servs. v. Commerce Funding Corp., 05 Civ. 9640, 2009 U.S. Dist. LEXIS 30386, at *30 (S.D.N.Y. Apr. 7, 2009) (noting that a district court sitting in diversity jurisdiction applies the choice-of-law rules of the state in which it sits (citations omitted)). Under New York law, "the parties' manifested intentions to have an agreement governed by the law of a particular jurisdiction are honored." Freedman v. Chemical Constr. Co., 372 N.E.2d 12, 15, 43 N.Y.2d 260, 264 n.* (1977); see also Comprehensive Habilitation Servs., 2009 U.S. Dist. LEXIS at *30-*31 (collecting cases).
Here, although the Policies do not contain explicit choice-of-law provisions, they each include various riders and endorsements which incorporate relevant provisions of New York state law and make them a part of the contracts. See generally Fitzsimmons Aff. Ex. B. This, coupled with the fact that Plaintiff (the party whose incorporation in Indiana creates the complete diversity forming the jurisdictional predicate for this action) filed the case in New York, is sufficient to demonstrate to this Court that the parties intended for their agreements to be governed by New York law. Cf. Restatement, Conflict of Laws 2d, § 187 Cmt. c (explaining that the parties to a contract "may incorporate into the contract by reference extrinsic material which may, among other things, be the provisions of some foreign law. In such instances, the forum will apply the applicable provisions of the law of the designated state in order to effectuate the intentions of the parties.").
The Policies include the following documents: (i) New York Workers' Compensation October 1, 2011 Loss Cost Revision Explanatory Memorandum; (ii) Notice to New York Workers' Compensation Policyholders of Security Fund Surcharge; (iii) New York Limit of Liability Endorsement; (iv) New York Construction Classification Premium Adjustment Program Explanatory Endorsement; (v) Warning for failure to report injuries under New York Workers' Compensation Law § 110; and (vi) New York Workers' Compensation Deductible Disclosure Notice and Selection Form. In addition, General Section, Item C of the Policies defines "Workers Compensation Law" as "the workers or workmen's compensation law and occupational disease law of each state or territory named in Item 3.A. of the Information Page." On both Policies, the only state listed in Item 3.A. is New York.
ii. Breach of Contract
Under New York law, "[t]he elements of a breach of contract claim include the existence of a contract, the plaintiff's performance thereunder, the defendant's breach thereof, and resulting damages." Katehis v. Sovereign Assoc., Inc., 44 Misc. 3d 1220(A) (Sup. Ct. N.Y. Co., Aug. 11, 2014) (citing Harris v. Seward Park Housing Corp., 79 A.D.3d 425, 426, 913 N.Y.S.2d 161, 162 (1st Dep't 2010); Morris v. 702 E. Fifth St. HDFC, 46 A.D.3d 478, 479, 850 N.Y.S.2d 6 (1st Dep't 2007)).
iii. Unjust Enrichment
The concept of unjust enrichment "has been distilled into three elements," namely, "(1) that defendant was enriched; (2) that the enrichment was at plaintiff's expense; and (3) it is against equity and good conscience to permit defendant to retain what is sought to be recovered." Bd. of Mgrs. of the Marbury Club Condominium v. Marbury Corners, LLC, 2012 N.Y. Misc. LEXIS 6632 at *23 (Sup. Ct. Westchester Co., Nov. 8, 2012) (citing Mandarin Trading Ltd. v. Wildenstein, 944 N.E.2d 1104, 1110, 16 N.Y.3d 173, 182 (2011)). "However, an action to recover for unjust enrichment sounds in restitution or quasi-contract and rests on the equitable principal that a person shall not be allowed to enrich himself unjustly at the expense of another." Id. at *23-*24 (citations omitted). "Because the theory of unjust enrichment lies as a quasi-contract claim, where the parties executed a valid and enforceable written contract governing a particular subject matter, recovery on a theory of unjust enrichment for events arising out of that subject matter is ordinarily precluded." Id. at *24 (citations omitted).
iv. Account Stated
Finally, " '[a]n account stated is an agreement between parties to an account based upon prior transactions between them with respect to the correctness of the account items and balance due.' " Erdman Anthony & Assoc. v. Barkstrom, 298 A.D.2d 981, 982, 747 N.Y.S.2d 670, 671 (4th Dep't 2002) (citations omitted). "An account stated assumes the existence of some indebtedness between the parties, or an express agreement to treat the statement as an account stated." D & A Structural Contrs. Inc. v. Unger, 25 Misc. 3d 1211(A), 901 N.Y.S.2d 898 (Sup. Ct. Nassau Co., Aug. 20, 2009) (citing Barkstrom, 298 A.D.2d at 982, 747 N.Y.S.2d at 671). "An essential element of an account stated is an agreement with respect to the amount of the balance due." Id. (citation omitted). However, as with unjust enrichment, a claim for an account stated arising out of events already the subject of a valid and enforceable contract will be precluded. See Martin H. Bauman Assoc., Inc. v. H & M Int'l Transport, Inc., 171 A.D.2d 479, 485, 567 N.Y.S.2d 404, 408-09 (1st Dep't 1991) ("If the plaintiff can prove an enforceable contract, then it will be able to recover under the first cause of action [for breach of contract]. However, . . . a claim for an account stated may not be utilized simply as another means to attempt to collect under a disputed contract.").
III. Discussion
A. Common Law Liability
Here, Plaintiff's allegations, together with the uncontested facts before the Court, establish liability for breach of contract as a matter of law. See Bricklayers Ins. & Welfare Fund v. Verse Inc., 12-CV-4271, 2013 U.S. Dist. LEXIS 130102, at *8 (E.D.N.Y. Aug. 20, 2013) (Report and Recommendation), adopted by 2013 U.S. Dist. LEXIS 129732 (E.D.N.Y. Sept. 11, 2013). Specifically, the evidence demonstrates that the parties entered into two contracts of insurance which explicitly provided that "the premiums for the period of coverage . . . are provisional and may be subject to upward or downward adjustment, retroactive to the effective date of the policy. [Defendants] may be required to provide an additional premium, or be entitled to a credit, if it is determined that an adjustment is necessary to meet statutory rating standards." See Fitzsimmons Aff. Ex. B at "New York Workers Compensation October 1, 2009 Rate and Loss Cost Revision Explanatory Memorandum." The evidence further establishes that, consistent with the terns of the Policies, Plaintiff conducted audits of the Defendants' records on November 2, 2012 and April 15, 2013. See Fitzsimmons Aff. ¶ 7 and Exhibit C, at Part Five, Item G (authorizing audits of Defendants' records). The undisputed testimony of Plaintiff's representative is that those audits "produced additional premiums and surcharges of $188,636 owed by Defendants to Plaintiff," which Defendants have not paid despite Plaintiff's demands that they do so. Id. ¶¶ 7-9. Accordingly, the Court concludes that Plaintiff has sufficiently established a basis for liability for breach of contract under New York law.
Insofar as the Court finds a basis for liability for breach of contract, it also necessarily finds that Plaintiff's additional bases for recovery sounding in unjust enrichment and account stated are precluded. Indeed, as the factual allegations underpinning each of these claims are the same, and the Court finds Plaintiff has proven the existence of a valid and enforceable contract governing the subject matter thereof, the unjust enrichment and account stated causes of action are impermissibly duplicative. See Bd. of Mgrs. of the Marbury Club Condominium, 2012 N.Y. Misc. LEXIS 6632 at *23; Martin H. Bauman Assoc., Inc., 171 A.D.2d at 485, 567 N.Y.S.2d at 408-09.
B. Default Judgment Factors
Having concluded that there is a basis for liability, the Court turns to the relevant factors outlined above, namely, willfulness, the existence of a meritorious defense, and prejudice, to determine whether, under the circumstances, entry of a default judgment is appropriate.
i. Willfulness
"When a defendant is continually and 'entirely unresponsive,' defendant's failure to respond is considered willful." See PJF Trucking, 2014 U.S. Dist. LEXIS 134095 at *12 (citations omitted) (finding that the defendant's failure to respond to the Complaint "sufficiently demonstrate[d] willfulness."). Here, Plaintiff alleges that it "issued invoices and/or demands for the[] additional premiums and surcharges in a timely fashion" but that "Defendants failed and refused to remit [the] payment." Fitzsimmons Aff. ¶¶ 8-9. In addition, the record contains affidavits of service demonstrating that Defendants were served with the Summons and Complaint on July 31, 2014. See Exhibit A to the Affirmation in Support of Motion for Clerk's Default by Evan Yablonsky, Esq., dated August 27, 2014, [DE 7-1, 7-2]. Defendants did not answer or otherwise respond to the Complaint, and did not seek an extension of time to respond. Finally, Plaintiff submits an Affirmation of Service, DE [9], establishing that Defendants were served with the instant motion for default judgment and accompanying papers. Defendants did not submit opposition to the motion or request an extension of time to do so. Accordingly, the Court finds Defendants' conduct willful.
ii. Meritorious Defense
Next, the Court is unable to determine whether Defendants have a meritorious defense because they have failed to raise any defense in this matter. See PJF Trucking, 2014 WL 4725494 at *7 (citing Empire State Carpenters Welfare v. Darken Architectural Wood, No. 11 Civ. 46, 2012 WL 194075 *3 (E.D.N.Y. Jan. 17, 2012)). Accordingly, and because the Complaint adequately alleges liability, this factor weighs in favor of granting Plaintiff's motion.
iii. Prejudice
The last factor to consider is prejudice to Plaintiff in the event the motion is denied. A denial of the motion would be prejudicial to Plaintiff because there is no other method by which it can obtain relief from the Court. See Builders Dist. Council Welfare, Pension, Annuity and Apprenticeship, Skill Improvement and Safety Funds v. JREM Const. Corp., No. 12 Civ. 3877, 2013 WL 61873 *4 (E.D.N.Y. Jan. 28, 2013). Accordingly, denying the motion would prejudice Plaintiff by effectively leaving it without recourse.
Based on the foregoing, the Court concludes that a default judgment is appropriate.
C. Damages
The final question before the Court is whether to award damages and in what amount. See Cement and Concrete Workers Dist. Council Welfare Fund, Pension Fund, Annuity Fund Educ. and Training Fund and Other Funds, 669 F.3d 230, 234 (2d Cir. 2012) (stating that plaintiff must still prove damages); Team Air Express, Inc. v. A. Heffco Techs., Inc., 06 CV 2742, 2008 U.S. Dist. LEXIS 59892, at *9-*10 (E.D.N.Y. Aug. 6, 2008) (Report and Recommendation), adopted by 2008 U.S. Dist. LEXIS 87083 (E.D.N.Y. Oct. 24, 2008) ("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." (internal quotation marks and citation omitted)). Accordingly, the Court must assess whether Plaintiff has produced sufficient evidence of the damages it seeks. See PJF Trucking, 2014 WL 4725494 at *10; Gutman v. Klein, No. 03 Civ. 1570, 2010 WL 4975593 *1 (E.D.N.Y. Aug. 19, 2010).
The Court has discretion to determine whether an evidentiary hearing is necessary to determine damages not susceptible of simple mathematical calculation. See Fed. R. Civ. P. 55(b)(2); In re Crazy Eddie Sec. Litig., 948 F. Supp. 1154, 1160 (E.D.N.Y. 1995) (citations omitted). "As long as there is a 'sufficient basis from which to evaluate the fairness' of the sum awarded, a court may rely upon detailed affidavits and documentary evidence to determine damages." Id. (quoting Action S.A. v. Marc Rich & Co., 951 F.2d 504, 508 (2d Cir. 1991)). "By the same token, the moving party bears the burden of providing a reasonable basis for determination of damages and should not be awarded damages if the evidence is not adequate." Id. (citing Au Bon Pain Corp. v. Artect, Inc., 653 F.2d 61, 65 (2d Cir. 1981)); Sullivan v. Marble Unique Corp., 10 CV 3582, 2011 U.S. Dist. LEXIS 129867, at *9 (E.D.N.Y. Aug. 30, 2011) (Report and Recommendation), adopted by 2011 U.S. Dist. LEXIS 127847 (E.D.N.Y. Nov. 4, 2011) ("On a motion for default judgment, a plaintiff has the burden to prove damages to the Court with a 'reasonable certainty' " (quoting Credit Lyonnais Secs., 183 F.3d at 154-55)).
i. Compensatory Damages
" 'The general rule for measuring damages for breach of contract has long been settled. It is the amount necessary to put the plaintiff in the same economic position he would have been in had the Defendant fulfilled his contract.' " Blue Moon Media Group, Inc. v. Field, CV 08-1000, 2011 U.S. Dist. LEXIS 108066, at *8-*9 (E.D.N.Y. Apr. 11, 2011) (Report and Recommendation), adopted by 2011 U.S. Dist. LEXIS 102263 (E.D.N.Y. Sept. 12, 2011) (quoting Indu Craft, Inc. v. Bank of Baroda, 47 F.3d 490, 495 (2d Cir. 1995)). Here, Plaintiff alleges compensatory damages in the form of "additional premiums and surcharges" under the Policies, totaling $188,636. See Compl. ¶¶ 21, 25, 29; Fitzsimmons Aff. ¶ 7. Though Plaintiff does not explicitly indicate how that figure was calculated, this Court's review of the documentation provided by Plaintiff sets forth a clear basis for arriving at that amount. Specifically, Policy number 00 004 4727139 (effective May 6, 2011-May 6, 2012) indicates that the total estimated premium was $91,986. See id. Ex. B at Information Page. However, the proof of Plaintiff's audit for that period indicates actual exposure of $251,684. See id. Ex. C. The difference between these sums creates a $159,698 shortfall in the amount paid by Defendants to Plaintiff.
Similarly, Policy number 01 004 4727139 (effective May 6, 2012-May 6, 2013) indicates that the total estimated premium was $97,997. See id. Ex. B at Information Page. However, the proof of Plaintiff's audit for that period indicates actual exposure of $126,935. See id. Ex. C. The difference between these sums creates a $28,938 shortfall in the amount paid by Defendants to Plaintiff.
The audit was conducted for the period May 6, 2013-March 19, 2013, which is the date the policy was canceled.
Plaintiff's calculation of the estimated and actual premium amounts is undisputed. Thus, the evidence sufficiently establishes $188,636 in unpaid premiums due and owing by Defendants to Plaintiff. Accordingly, I recommend to Judge Hurley that Plaintiff be awarded damages in that amount.
ii. Prejudgment Interest
Under New York law, Plaintiff is entitled to prejudgment interest on its breach of contract claim. See, e.g., Chuchuca v. Creative Customs Cabinets Inc., 13-CV-2506, 2014 U.S. Dist. LEXIS 164846, at *48-*49 (E.D.N.Y. Nov. 25, 2014) (awarding prejudgment interest on common law breach of contract claim); Koch v. Greenberg, 14 F. Supp. 3d 247, 285 (S.D.N.Y. Mar. 31, 2014) (noting that prejudgment interest in breach of contract cases is "mandatory" under New York law); Chaman Lal Setia Exps. v. Sawhney, 00 Civ. 2838, 2002 U.S. Dist. LEXIS 14228, at *11 (S.D.N.Y. July 31, 2002) (Report and Recommendation), adopted by 2003 U.S. Dist. LEXIS 20954 (S.D.N.Y. May 28, 2003) ("Under New York law, a plaintiff who prevails on a claim for breach of contract is entitled to prejudgment interest as a matter of right." (citation and quotation marks omitted)). New York Civil Practice Law and Rules ("CPLR") § 5001 provides that "[i]nterest shall be recovered upon a sum awarded because of a breach of performance of a contract" and "shall be computed from the earliest ascertainable date the cause of action existed, except that interest upon damages incurred thereafter shall be computed from the date incurred." Such interest "shall be at the rate of nine per cent per annum, except where otherwise provided by statute." Id. § 5004.
"Because [the breach of contract] claim was brought under New York State law, and because prejudgment interest is a matter of substantive law, the New York interest rate applies to the interest sought." Adrian v. Town of Yorktown, 620 F.3d 104, 107 (2d Cir. 2010) (citing Schipani v. McLeod, 541 F.3d 158, 164-65 (2d Cir. 2008); Marfia v. T.C. Ziraat Bankasi, 147 F.3d 83, 90 (2d Cir. 1998)); see also Adams v. Lindblad Travel, Inc., 730 F.2d 89, 93-94 (2d Cir. 1983) ("Since federal jurisdiction in this case is premised on diversity and the right to interest on a cause of action qualifies as a substantive right, we must look to New York law.")
The Court thus finds that Plaintiff may recover interest at the annual statutory rate of 9% on the principal amount of $159,698 due under Policy number 00 004 4727139. The interest is calculated from "the earliest ascertainable date the cause of action existed." Under New York law, a cause of action for breach of contract accrues at the time of the breach. See Ely-Cruikshank Co. v. Bank of Montreal, 615 N.E.2d 985, 986, 81 N.Y.2d 399, 402 (1993) (citing Kassner & Co. v. City of New York, 389 N.E.2d 99, 102, 46 N.Y.2d 544, 550 (1979); Edlux Constr. Corp. v. State of New York, 252 A.D. 393, 374, 300 N.Y.S. 509 (3d Dep't 1937), aff'd, 277 N.Y. 635, 14 N.E. 197 (1938)).
Here, the breach occurred when the additional premium came due and Defendants failed to pay. According to the Premium Due Date Endorsement to the Policy, "[t]he due date for audit and retrospective premiums is the date of the billing." See Fitzsimmons Aff. Ex. B. The date of billing, as indicated on the invoice Plaintiff sent to Defendants for the additional premiums under this Policy, was November 2, 2012. See id. Ex. C. Thus, utilizing a method of calculating interest previously espoused in this district, the Court calculated accrued interest on the additional premium due under Policy number 00 004 4727139 as $26,423.98. This figure was reached by taking the number of days between the date of the breach, November 2, 2012, and the date Plaintiff filed the instant motion, September 4, 2014 (671 days) and multiplying it by the daily interest rate of $39.38 ($159,698 (principal compensatory damages) x 0.09 (yearly interest) = $14,372.82 (yearly interest) / 365 days = $39.38 per day interest). See Daniello v. PML Furniture Group of NJ, Ltd., 06-CV-5261, 2009 U.S. Dist. LEXIS 131676, at *7-*8 n.5 (E.D.N.Y. May 6, 2009) (Report and Recommendation), adopted by 2009 U.S. Dist. LEXIS 114931 (E.D.N.Y. Dec.9, 2009).
Plaintiff may also recover prejudgment interest on the principal amount of $28,938 due under Policy number 01 004 4727139. The "date of billing" for the additional premiums under this Policy was April 15, 2013. See Fitzsimmons Aff. Ex. C. Utilizing the same formula described above, the Court calculated accrued interest as $3,619.98. To reiterate, the Court took the number of days between the date of the breach, April 15, 2013, and the date Plaintiff filed the instant motion, September 4, 2014 (507 days) and multiplied it by the daily interest rate of $7.14 ($28,938 (principal compensatory damages) x 0.09 (yearly interest) = $2,604.42 (yearly interest) / 365 days = $7.14 per day interest).
As Plaintiff's compensatory damages remain outstanding, daily interest shall continue to accrue through the date of judgment. Accordingly, I recommend to Judge Hurley that Plaintiff be awarded prejudgment interest as follows: $30,043.96 in interest accrued from the respective dates each Policy was breached to the time the instant motion was filed; and $46.52 in combined daily interest for each day after September 4, 2014 until judgment is entered.
iii. Costs and Attorneys' Fees
Finally, Plaintiff concedes that it failed to provide evidence of the additional damages it seeks—namely, attorneys' fees and costs of the action—and instead requests leave to make an application for these damages at a later time. See Fitzimmons Aff. ¶ 11. "The award of attorneys' fees in diversity cases is typically 'governed by state law.' " Opulen Ventures, Inc. v. Axcessa, LLC, 12-CV-01776, 2013 U.S. Dist. LEXIS 31494, at *10-*11 (E.D.N.Y. Jan. 22, 2013) (Report and Recommendation), adopted by 2013 U.S. Dist. LEXIS 31503 (E.D.N.Y. Mar. 6, 2013) (citing Grand Union Co. v. Cord Meyer Dev. Co., 761 F.2d 141, 147 (2d Cir. 1985)). And, New York law cautions the Court not to "infer a party's intention to provide" such damages for breach of contract " 'unless the intention to do so is unmistakably clear' from the language of the contract." JP Morgan Chase, N.A. v. Tri-Lane Contr. Corp., 2011 N.Y. Misc. LEXIS 6959, at *28-*29 (Sup. Ct. N.Y. Co., Apr. 22, 2011) (quoting Hooper Assoc., Ltd. v. AGS Computers, Inc., 548 N.E.2d 903, 905, 74 N.Y.2d 487, 492 (1989)).
Here, the Court does not find a clear indication in the Policies of Defendants' intention to reimburse Plaintiff's attorneys' fees and costs, and Plaintiff does not identify one. Accordingly, Plaintiff has not satisfied its burden of providing a reasonable basis for an award. Nevertheless, Plaintiff's motion only requests leave to file a motion, not an award of fees and costs. Accordingly, I recommend that leave be granted so that Plaintiff may submit further evidence sufficient to establish an entitlement to attorneys' fees and costs, and substantiate their amount.
IV. Conclusion
In accordance with the foregoing, the undersigned recommends Plaintiff's motion for a default motion be granted and damages awarded as follows:
| Compensatory Damages | $188,636.00 | |
| Prejudgment Interest on Compensatory Damages(through filing date of default motion) | + | $30,043.96 |
| $218,679.96 | ||
|---|---|---|
| Daily Interest(Sept. 4, 2014 through Entry of Judgment) | + | $46.52/day |
I further recommend that Plaintiff's request for leave to file a motion for attorneys' fees and costs be granted.
V. Objections
A copy of this Report and Recommendation is being served on Plaintiff by electronic filing on the date below. Plaintiff is directed to serve a copy of it on Defendants and promptly file proof of serve by ECF. Any objections to this Report and Recommendation must be filed with the Clerk of the Court within fourteen (14) days of receipt of this report. Failure to file objections within the specified time waives the right to appeal the District Court's order. See 28 U.S.C. § 636(b)(1); Fed. R. Civ. P. 6(a), 72. Dated: Central Islip, New York
February 5, 2015
s/ Steven I. Locke
STEVEN I. LOCKE
United States Magistrate Judge