Chalos & Co, P.C. v. Sram & Mram Res. Berhad
Docket Number | 23-CV-2523 (NJC)(AYS) |
Decision Date | 19 July 2024 |
Parties | CHALOS & CO, P.C., Plaintiff, v. SRAM & MRAM RESOURCES BERHAD, SRAM & MRAM TECHNOLOGIES & RESOURCES INC., and SRAM & MRAM GROUP, Defendants. |
Court | U.S. District Court — Eastern District of New York |
REPORT & RECOMMENDATION
Plaintiff Chalos & Co, P.C. (“Plaintiff” of “Chalos”) commenced this action on April 1, 2023 against defendants SRAM & MRAM Resources Berhad (“SRAM Berhad”), SRAM MRAM Technologies & Resources Inc. (“SRAM Tech”), and SRAM & MRAM Group (“SRAM Group”) (collectively “Defendants”), seeking payment for fees and costs for legal services rendered.
Presently before this Court, on referral from the Honorable Nusrat J Choudhury, is Plaintiff's motion for default judgment pursuant to Rule 55 of the Federal Rules of Civil Procedure. (See Docket Entry (“DE”) [27].) For the reasons set forth below, this Court respectfully recommends that Plaintiff's motion for default judgment be granted in part and denied in part.
Plaintiff is a professional corporation organized under the laws of the State of New York, with its principal place of business in Oyster Bay, NY, (see Compl., DE [1], ¶ 1.) Defendant SRAM Berhad is a foreign corporation organized and existing under the laws of Malaysia, with a physical address at Suite B-3A-9 Block B Level 3A, Megan Avenue 11, 12 Jalan Yap Kwan Seng, 50450 WP Kuala Lumpur, Malaysia. (Id. ¶ 2.) SRAM Tech is a corporation organized and existing under the laws of the State of Delaware, conducting business in the state of California with a physical address at 1350 Murchison Drive, Millbrae, CA 94030. (Id. ¶ 3.) Defendant SRAM Group is a foreign corporation organized and existing under the laws of the United Kingdom, with a physical address at Lomond Court, Castle Business Park, Stirling, Stirlingshire, FK9 4TU, United Kingdom. (Id. ¶ 4.)
In January 2022, Defendant SRAM Group, retained Plaintiff to provide legal services for SRAM Berhad, in a litigation matter commenced by Icure Pharmaceutical, Inc. (“Icure”) pending in the Superior Court of California, County of Los Angeles, i.e. Icure Pharmaceutical, Inc. v. Sram & Rram Resources Berhad, et al, Case No. 22CMCV00130 (“California action”). (Id. ¶ 8.) The Representation Agreement (the “Agreement”) was duly executed by SRAM Group's Chief Executive Officer Hemeleta Arumugam (“Arumugam”) and set forth the terms of Plaintiff's legal representation. (Compl, Ex. 1, DE [1-1].) The Agreement established the hourly rates billed to Defendants, as well as the obligation of Plaintiff to render the requested and necessary services. (Id.) Defendants agreed to pay $500 per hour for Michael G. Chalos and $400 per hour for senior associates in the case. (Id. at p. 2.)
Plaintiff successfully defended the California action, defeating Icure's motion for Preliminary Injunction, defeating Icure's motion for Writ of Attachment, and obtaining an Order staying the California action pending the outcome of ICC arbitration pursuant to mandatory law and jurisdiction clauses in various underlying sales contracts. (Compl. ¶¶ 12, 15.)
Pursuant to the Agreement, Defendants were invoiced on a monthly basis for services rendered. (Compl. ¶ 18.) On August 5, 2022. Plaintiff issued Invoice #14686 to Defendants, showing a total balance due to Plaintiff in the amount of $72,423.93; $21,804.60 of which being satisfied with a payment from Defendants' client trust account, and leaving a remaining balance of $50,619.33 (Id. ¶ 19; Compl. Ex. 3, DE [1-3], at p. 1-9.) On September 7, 2022, Plaintiff issued Invoice #14731 to Defendants, showing a total balance due of $120,115.65. (Compl. ¶ 20; Compl. Ex. 3 at p. 10-17.) Of that outstanding balance, $25,000 was satisfied with a payment from funds which were held in Plaintiff's Client Trust Account on behalf of Defendants. (Id.) This left a remaining balance of $95,115.65. (Id.) On October 12, 2022, Plaintiff issued Invoice # 14838 to Defendants, showing a total balance due to Plaintiff of $117,620.38. (Compl. ¶ 21; Compl. Ex. 3 at p. 18-23.) The full balance remains unsatisfied. (Id.)
On November 23, 2022, after not receiving payment for the prior invoices, Plaintiff issued a final invoice for all fees, costs, and expenses incurred through November 23, 2022. (Compl. ¶ 22; Compl. Ex. 3 at p. 24-26.) To date, the total outstanding invoices for legal fees and disbursements incurred on behalf of Defendants in the California action remains $124,163.78. (Id.)
In light of Defendants' failure to pay, On December 6, 2022, Plaintiff filed a motion with the Superior Court of California to be relieved as counsel for SRAM Berhad. (Compl. ¶ 25.) The motion was granted on January 5, 2023.
Plaintiff commenced this action on April 1, 2023. (See Compl.) The Summons and Complaint were served upon Defendant SRAM Berhad and SRAM Group on April 12, 2023. (DE [12], [13].) On April 13, 2023, the Summons and Complaint was served upon Defendant SRAM Tech. (DE [14]). On April 27, 2023, the case was referred the EDNY Court Annexed Arbitration Program pursuant to Local Civil Rule 83.7. (DE [15].)
On May 5, 2023, SRAM Tech moved the Court dismiss the complaint against it, claiming that they were not involved in the matter in any way. (DE [16].) On May 8, 2023, Plaintiff filed a letter requesting leave to file a motion to strike SRAM Tech's motion to dismiss the complaint. (DE [17].) Plaintiff argued that SRAM Tech was not permitted to appear in the action pro se, as SRAM Tech is a corporation. (Id.) A telephone conference regarding the motions was scheduled before the undersigned for May 15, 2023. (Scheduling Order dated 05/08/2023.) Despite notice to the Defendants, SRAM Tech failed to appear for the scheduled conference. (Scheduling Order dated 05/15/2013.) As SRAM Tech failed to appear for the May 15, 2023, the undersigned clarified that in federal litigation, corporate entities must be represented by counsel and therefore, that SRAM Tech is not permitted to appear pro se. (Id.) The undersigned respectfully recommended that the District Court hold Plaintiff's pre-motion letter request in abeyance through June 16, 2023, to allow the defendant corporation to retain counsel. (Id.)
On June 14, 2023, SRAM Tech requested a court appointed attorney. (DE [21]). On July 10, 2023, the District Court denied SRAM Tech's application. (DE [22].) The Court once again noted that the “Defendant, as a corporation, cannot represent itself pro se in an action filed in federal court.” (Id.) The District Court further directed that “[i]f the Defendant does not retain counsel within 30 days of entry of this order, Plaintiff will be entitled to move for default judgment.” (Id.)
On August 15, 2023, SRAM Tech again filed a request to appear pro se. (DE [26].) On August 28, 2023, the District Court again denied SRAM Tech's request and issued an order reiterating that “a corporation cannot represent itself pro se in an action filed in federal court.” (Order dated 08/28/2023.) To date, SRAM Tech has not obtained counsel.
On July 11, 2023, Plaintiff requested that certificates of default be issued for SRAM Group and SRAM Berhad. (DE [23].) On July 19, 2023, Certificates of Default were issued for both. (DE [24].) On August 10, 2023, following SRAM Tech's failure to retain counsel within the 30-day period proscribed by the District Court, Plaintiff requested that a certificate of default be issued for SRAM Tech. (DE [25].) To date, no action has been taken on Plaintiff's application.
On November 15, 2023, Plaintiff filed the instant motion for default judgment against all three of the defendants. (DE [27].) On November 22, 2023, upon review of Plaintiff's motion, the District Court ordered Plaintiff to “immediately serve the motion and all supporting documents on defendants and provide the Court with proof of service by November 29, 2023.” (See Order dated 11/22/2023.) The District Court further ordered “plaintiff to identify legal authority showing why a default judgment is warranted against all three defendants when only defendant SRAM & MRAM Group had entered into a retainer agreement with plaintiff for legal services to defend against an action in the Superior Court of Los Angeles California by Icure Pharmaceutical for breach of contract.” (Id.) On December 5, 2023, Plaintiff filed the requested Supplemental Memorandum of Law. (DE [29].) O March 8, 2024, the motion was referred to this Court for Report and Recommendation. (See Order dated 03/08/2024.)
A defending party who fails to adequately respond to a complaint risks default. Courts are directed to engage in a two-step process for the entry of a judgment against a party who fails to defend: first, the Clerk of Court enters default, and second, a judgment is entered on the default. See City of New York v. Mickalis Pawn Shop, LLC, 645 F.3d 114, 128 (2d Cir. 2011). Rule 55(a) of the Federal Rule of Civil Procedure sets forth the first step as follows:
When a party against whom a judgment for affirmative relief is sought has failed to plead or otherwise defend, and that failure is shown by affidavit or otherwise, the clerk must enter the party's default.
Fed. R. Civ. P. 55(a). While a “typical” default is entered “because a defendant failed to file a timely answer[,] . . . a district court is also empowered to enter a default against a defendant that has failed to ‘otherwise defend.'” Mickalis Pawn Shop, 645 F.3d at 129 (citing Fed.R.Civ.P. 55(a)) (other citation and bracket omitted).
When a court enters a default judgment, it “converts the defendant's admission of liability into a final judgment that terminates...
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