Busrel Inc. v. Dotton

• Decision Date: 01 November 2022
• Docket Number: 1:20-cv-01767
• Parties: BUSREL INC., Plaintiff, v. JULIE DOTTON; KRP HOLDINGS, LLC; SBM HOLDINGS, LLC; JONATHAN CANNON; SEAN GAUTHIER; NEW ENGLAND DEVELOPMENT CORP.; MONTROSE CAPITAL, LLC. Defendants.
• Court: U.S. District Court — Western District of New York

BUSREL INC., Plaintiff,
v.
JULIE DOTTON; KRP HOLDINGS, LLC; SBM HOLDINGS, LLC; JONATHAN CANNON; SEAN GAUTHIER; NEW ENGLAND DEVELOPMENT CORP.; MONTROSE CAPITAL, LLC. Defendants.

No. 1:20-cv-01767

United States District Court, W.D. New York

November 1, 2022

ORDER GRANTING PL AINTIFF' S MOTION FOR DEFAULT JUDGMENT AGAINST DEFENDANTS JULIE DOTTON AND KRP HOLDINGS, LLC AND AWARDING DAMAGES (Doc. 88)

Christina Reiss District Judge United States District Court

Plaintiff Busrel Inc. (“Plaintiff') brings this action against Julie Dotton (“Ms. Dotton”), KRP Holdings, LLC (“KRP”), SBM Holdings, LLC (“SBM”), Jonathan Cannon (“Mr. Cannon”), Sean Gauthier (“Mr. Gauthier”), New England Development Corp. (“NEDC”), and Montrose Capital, LLC (“Montrose Capital”) (collectively, “Defendants”), alleging that Defendants improperly retained $7,950,000 of Plaintiff s payment after Plaintiff and KRP agreed to cancel a contract whereby KRP would supply Plaintiff with personal protective equipment (“PPE”). On May 4, 2022, this court entered a default against Defendants Ms. Dotton and KRP pursuant to Federal Rules of Civil Procedure 37 and 55(a). (Doc. 79.)

Pending before the court are Plaintiffs motion for default judgment against Ms. Dotton and KRP pursuant to Federal Rule of Civil Procedure 55(b)(2) and its request for

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attorney's fees and costs pursuant to Federal Rule of Civil Procedure 37.^[1] (Doc. 88.) On August 2, 2022, the court held an evidentiary hearing on Plaintiff s motion before taking the matter under advisement. Neither Ms. Dotton nor KRP appeared at the hearing.

Plaintiff is represented by Judith A. Archer, Esq., Abigail Fay Schwarz, Esq., and Victoria Vance Corder, Esq. Defendants Ms. Dotton and KRP are self-represented.

I. Findings of Fact.

Plaintiff is a Canadian company incorporated under the laws of the province of Quebec with its principal place of business in Montreal, Canada. KRP is a limited liability company incorporated under the laws of New York with its principal place of business in Buffalo, New York. At all relevant times, Ms. Dotton was the President of KRP.

Plaintiff was an official provider of PPE to the Canadian provinces of Quebec and Alberta during the COVID-19 pandemic. In April 2020, Andrew Moar and Mr. Gauthier introduced Nicolas Giguere, an independent sales agent for Plaintiff, to Ms. Dotton of KRP for the purposes of procuring PPE. Mr. Gauthier held himself out to Plaintiff as KRP's head of logistics.

Thereafter, Mr. Giguere and Ms. Dotton exchanged text messages, emails, and calls to discuss the PPE, Ms. Dotton's suppliers, and price quotes. During conversations in early April 2020, Ms. Dotton represented that she could procure large amounts of PPE for Plaintiff‘‘due to her unique connectionsf[.]” (Doc 88-25 at 9.) Specifically, Ms. Dotton represented that she had a special relationship with a supplier in China that owned over one thousand companies and was state-owned, implying that Plaintiff would have access to a reliable supply of quality PPE if it purchased the PPE through Ms. Dotton and KRP. In an email exchange and by telephone with Plaintiff, Ms. Dotton made the following representations: “Our supplier is state owned. So we have no issue getting materials out”; “[our] China partner owns the factories state owned. He owns over 1000 companies”; and “[t]hey will not take any orders from anyone else you will have multiple plants direct for

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you.” (Doc. 87 at 4, ¶ 16). Mr. Giguere confirmed, “OK so all the factory controlled] by [the] Ch[i]nese government and you know them?” and Ms. Dotton responded, “Yes . .. The owner is supplying me and my group.” (Doc. 88-13 at 3-4.)

Ms. Dotton represented to Mr. Giguere that her prices were not as low as othei suppliers because her supply came from state-owned factories in China but reassured him that her relationships were legitimate. She wrote:

We won't be able to do as cheap because government raised raw materials and they are controlling price now. It's not a horrible increase . . . The gentleman we are working with in China worked for President George W[.] [B]ush. He . wants us to come through for people so he is PUSHING this because of our friendship. That's what you get the price you get. This is why we really can come through at those levels

Id., at 4, 8.

Ms. Dotton's representations regarding Chinese factories and her connections to them were false and were part of a scheme to induce Plaintiff to enter into a multi-million-dollar contract to purchase PPE, which Ms. Dotton could not deliver and never intended to deliver.

On April 14, 2020, in reliance on Ms. Dotton's representations, Plaintiff entered into a contract with Ms. Dotton and KRP to purchase two million NIOSH N95 masks and ten million SMS 3, 3-piy masks in exchange for payment of $8,200,000 USD (the “Bill of Sale”). (Doc. 88-14.) The Bill of Sale required that all PPE purchased be certified by the Food and Drug Administration and Conformite Europeenne and that all Surgical Type 3 masks have bacterial filtration and particulate filtration equal to or more than 98%/160 MMHG fluid resistance/D.P less or equal 5.0 MMHG/Inflammability Class 1.

On April 15, 2020, in connection with the Bill of Sale, the parties entered into an escrow agreement (the “Escrow Agreement”) whereby Plaintiff would send $8,200,000 to an Escrow Agent who would “disburse the Deposit from the Escrow Account as directed by Seller immediately following Escrow Agent's receipt of the Deposit.” (Doc. 88-15 at 3.) Before wiring money to the Escrow Agent, Mr. Giguere asked Ms. Dotton to confirm the quantity of PPE she could deliver by April 17, 2020. She replied, Until I

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have money I will not have a schedule.” (Doc. 87 at 5, ¶ 22) (internal quotation marks omitted). Mr. Giguere responded in writing, “on it with the wire you'll have it I promise[] in a couple of minutes.” Id. (internal quotation marks omitted). Ms. Dotton replied, “No one will move without money []” and insisted on “100 percent prepayment” for Plaintiff s PPE order. Id. (internal quotation marks omitted).

In reliance upon Ms. Dotton's representations and promises, Plaintiff wired $8,200,000 USD to the Escrow Agent on April 15, 2020. On April 17, 2020, the Escrow Agent released the $8,200,000 USD payment to a Citibank account in Albertson, New York owned by SBM, a limited liability company, pursuant to Ms. Dotton's instructions. SBM is not a party to the Bill of Sale or the Escrow Agreement. Ms. Dotton did not inform Plaintiff that its money was released to SBM, which later represented to Plaintiff that it was Ms. Dotton's and KRP's financial advisor.^[2]

After Plaintiff wired the $8,200,000 USD payment to the Escrow Agent, Ms. Dotton wrote to Mr. Giguere, “Okay tell me exactly what you need [t]o shangai fri or sat for emergency.” Id. at 7, ¶ 29 (internal quotation marks omitted). Fie responded, “I paid for 2 million NIOSH and 10 million[] 3[-]ply before 17h [April 17] Friday.” Id. (third alteration in original) (internal quotation marks omitted).

Instead of providing a delivery schedule for the PPE set forth in the Bill of Sale, KRP wrote to Mr. Giguere: “Hello do you want the 20 or do you want more. Let me know.” Id. at 7, ¶ 30. Mr. Giguere responded on April 16, 2020: “No we want to have the schedule delivery for what has been paid and for the kn95 [a product for which Busrel was considering purchasing but had not yet placed an order] we need the full procurement sheet to move forward.” (Doc. 87 at 7, ¶ 30) (alteration in original) (internal quotation marks omitted). Ms. Dotton responded with a delivery schedule for the masks, stating, “Here is what I can do. I can do 30 million first shipment arrives Tuesday Wednesday then every 2-3 days and you will have full order within 7 days. I'll give it to

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you no extra money but next order we have to do .31 [meaning 31 cents per mask].Deal?” Id. at 7, ¶ 31 (alteration in original) (internal quotation marks omitted). Mr. Giguere responded, “Deal type 3. Approved. .31 next one?” id. at 8, ¶ 31, and Ms. Dotton responded, “Yes. 50m,” and “Your mask[s] will start coming Wednesday.” Id. (internal quotation marks omitted).

Mr. Giguere attempted to confirm the origin of the masks, asking, “[do the] 3 [-]ply come from [C]hina or [M]exico?” Id. at 8, ¶ 32 (internal quotation marks omitted). Ms. Dotton responded, “Both[,]” but “it will be China first.” Id. (internal quotation marks omitted).

On April 18, 2020, while awaiting the first delivery of masks, Mr. Giguere asked Ms. Dotton if she could provide “another 50 million” 3-ply masks within seven days in addition to the thirty million she had agreed to deliver. (Doc. 87 at 8, ¶ 33) (internal quotation marks omitted). Ms. Dotton wrote, “I can have 30 million to either site for Canada [i]n 10 days.” Id. (internal quotation marks omitted). This statement contradicted her earlier statement that she could deliver thirty million masks within seven days.

On or before April 18, 2020, Ms. Dotton provided another delivery schedule for the thirty million 3-ply masks, delivering ten million each on April 22, April 27, and April 30. Mr. Giguere asked Ms. Dotton to confirm that she would be able to procure the thirty million masks for which Plaintiff had previously paid. Ms. Dotton responded, Yes but it's going to be more,” id. at 8, ¶ 36 (internal quotation marks omitted), indicating that the price had increased. She claimed that she could only provide masks at the previously negotiated price if Plaintiff paid for a three-month supply up front. Mr. Giguere responded, “We agreed for 30 million[] [.]28 [cents a mask] and 50 millionf] .31 [cents a mask],” and told her, “It wasn't in your proposal the 3 months in advance.” Id. (third and fifth alteration in original) (internal quotation marks omitted).

Ms. Dotton and Mr. Giguere continued to negotiate a price for a second...