Sales v. Republic of Uganda, 90 Civ. 3972 (CSH).

• Decision Date: 09 July 1993
• Docket Number: No. 90 Civ. 3972 (CSH).,90 Civ. 3972 (CSH).
• Parties: Christopher SALES and Carol Sales, Plaintiffs, v. REPUBLIC OF UGANDA and Applo K. Kironde, as Ambassador and Permanent Representative of Uganda to the United Nations, Defendants.
• Court: U.S. District Court — Southern District of New York

828 F. Supp. 1032

Christopher SALES and Carol Sales, Plaintiffs, v. REPUBLIC OF UGANDA and Applo K. Kironde, as Ambassador and Permanent Representative of Uganda to the United Nations, Defendants.

No. 90 Civ. 3972 (CSH).

United States District Court, S.D. New York.

July 9, 1993.

COPYRIGHT MATERIAL OMITTED

Darrell K. Fennell, Fennell & Minkoff, and Mark Krassner, Cohen & Krassner, New York City, for plaintiffs.

Jeffrey H. Hirsch, Sheft & Sheft, New York City, for defendants.

MEMORANDUM OPINION AND ORDER

HAIGHT, District Judge:

In a Memorandum Opinion and Order dated December 28, 1992, familiarity with which is assumed, the Court granted defendants' motion to vacate a default judgment previously obtained by plaintiffs, on condition that defendants post security in the amount of damages found by Magistrate Judge Grubin after an inquest, together with interest.

On April 5, 1993 Judge Grubin filed her Report and Recommendation. The inquest into damages had commenced within the context of the default judgment previously entered by this Court. Judge Grubin's initial responsibility was to conduct an evidentiary hearing and report on the amount of the plaintiffs' damages, so that judgment in a sum certain could enter in plaintiff's favor. That mission was altered by this Court's December 28, 1992 opinion conditionally setting aside the default judgment. Following that opinion, the function of Judge Grubin's recommendation was to fix the amount of the security upon which vacatur of the default judgment would be conditioned.

In a comprehensive opinion Judge Grubin has calculated plaintiffs' damages, and accordingly the amount of security defendants would be required to post, at $2,137,245.26. Judge Grubin reviewed the factual and expert opinion testimony, accepted some of that testimony, but rejected other aspects of the plaintiffs' proof. It is apparent that plaintiff Christopher Sales, injured in a fall from a ladder while working at the Ugandan Mission in New York, suffered grievous, crippling, painful and permanent injuries.

The case is now before the Court on defendants' objections to Judge Grubin's Report and Recommendation; and on defendants' motion for reconsideration of this Court's December 28, 1992 Opinion, insofar as it required defendants to post security. Defendants revert to that subject again in their objections to Judge Grubin's report.

Plaintiffs' defend Judge Grubin's Report and Recommendation, and contend that defendants must give security in the amount of the damages which she calculated.

Judge Grubin's Report and Recommendation does not furnish an appropriate vehicle for defendants to revisit the propriety of this Court's direction that defendants post security to vacate the default. That was not an issue which I referred to the Magistrate Judge, and she perforce accepted my ruling as the law of the case.

However, the defendants did file a timely motion for reconsideration on the security issue following this Court's December 28, 1992 opinion, the time for briefing and filing of formal papers having been extended by stipulation of the parties.

It is also fair to say that, the giving of security having been first raised by this Court sua sponte in the December 28, 1992 Opinion at slip op. 10, the present procedural posture of the case is that of cross-motions: defendants moving by way of reargument to do away with the requirement of posting security, and plaintiffs cross-moving for the posting of security in the amount of $2,137,245.26, determined by Judge Grubin to represent plaintiff's recoverable damages.

With respect to defendants' objections to the amount of damages determined by Judge Grubin, I reject the objections and approve the amount, substantially for the reasons set forth in Judge Grubin's careful analysis. Defendants' objections are for the most part conclusory and without support in any authority.

Thus defendants contend that the awards for Christopher Sales' loss of earnings and Carol Sales' derivative claim are "excessive under the circumstances," without saying why that is so or suggesting a different figure. While it is true that the award to Christopher Sales for pain and suffering is in a range generally involving more severe injuries, as Judge Grubin recognized in her opinion at slip op. 24, the amount is not so great as to shock the conscience of a reviewing court. Judge Grubin had the opportunity of observing plaintiff Christopher Sales and forming an opinion as to the extent of his suffering, past, present and future, which given the nature of his injuries is undoubtedly severe.

While I reject certain objections defendants make to Judge Grubin's calculations, I agree with defendants that interest should not run from September 30, 1991, the date of entry of default against the defendants. The default related to liability only, with the amount of damages (upon which interest may then be calculated) to be determined subsequently. 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, the question is governed by New York law. See Adams v. Lindblad Travel, Inc., 730 F.2d 89, 93 (2d Cir.1984). The New York rule on personal injury claims is that "no interest at all may be awarded until at least a verdict (in a jury trial) or a decision (in a bench trial) is rendered." Siegel, Practice Commentaries, N.Y.CPLR § 5002 (McKinney's 1992). In the case at bar, Judge Grubin's Report and Recommendation following inquest is the functional equivalent of a verdict or decision setting forth the amount of plaintiffs' damages. The awarding of interest prior to that time is contrary to New York law. The amount involved is approximately $266,000. Accordingly, the calculation of plaintiffs' damages for the purpose of posting of security will be reduced by that amount, from $2,137,245.26 to $1,871,245.26.

I now turn to defendants' motion to be relieved of the necessity of posting security. Because this Court added that condition sua sponte, the parties had not briefed the issue prior to the December 28, 1992 opinion. Accordingly the usual strictures on motions for reargument contained in Civil Rule 3(j) of this Court may be relaxed. I have considered the question de novo.

This Court's order directing the posting of security as a condition for vacatur of the default judgment was based on First Fidelity Bank, N.A. v. The Government of Antigua and Barbuda—Permanent Mission, 877 F.2d 189, 196 (2d Cir.1989). That case arose out of a loan to pay for the renovation of Antigua's Permanent Mission to the United States in New York. Antigua, like the Republic of Uganda in the case at bar, is a foreign state. Actions in United States Courts against foreign states are governed by the Foreign Sovereign Immunities Act ("FSIA"), 28 U.S.C. § 1330, 1602-1611.

In First Fidelity the plaintiff bank filed suit in this Court to recover the balance owing on the loan, and served the Government of Antigua in accordance with the provisions of the FSIA. Antigua did not answer the complaint, although it conceded that it was properly served. The circumstances are the same in the case at bar. Plaintiff Christopher Sales having been injured on the premises of the Permanent Mission of Uganda to the United Nations, counsel for plaintiffs in April 1991 caused the Clerk of the Court to send notice of the action as proscribed by the FSIA to the Government of Uganda at its capitol city of Kampala. Uganda has never denied that it was properly served.

In the First Fidelity case, Antigua did not answer the complaint. The bank obtained a default judgment. The then ambassador of Antigua to the United Nations thereupon entered into an acknowledgement of debt and settlement agreement. Upon default of the payments called for by the settlement agreement, the plaintiff bank attached bank accounts of Antigua's Permanent Mission in New York and its embassy in Washington, D.C. These steps prompted the Government of Antigua to take its first direct action. Antigua moved in the district court to dismiss the bank's complaint for lack of subject-matter jurisdiction, on the ground that the then Ambassador lacked the authority to bind his Government to the loan or to the settlement agreement. Those contentions, if correct, would permit Antigua to defend on the ground of sovereign immunity from suit. On the other hand, as the Second Circuit observed, if Antigua was simply "trying to renege on a loan by disowning its agent who borrowed the money," then "the FSIA's commercial activity exception would strip Antigua of its sovereign immunity, and the district court would have subject matter jurisdiction. The default judgment would be valid, and the consent order would be enforceable." 877 F.2d at 195-96.

In these circumstances, the Second Circuit held that the district court should have granted Antigua's motion to set aside the default under Rule 60(b)(6), the catch-all provision permitting consideration of "any other reason justifying relief from the operation of the judgment." Stressing that "courts go to great lengths to avoid default judgments against foreign sovereigns or to permit those judgments to be set aside," and that "the fusion of substantive and jurisdictional issues also militates in favor of settling aside the default judgment" against Antigua, the Second Circuit set aside the default and permitted Antigua to defend on the merits, in an effort to establish its sovereign immunity.

However, the Second Circuit went on to say:

At the same time, First Fidelity's rights must be protected, for there is some evidence that Antigua responded to this lawsuit only when First Fidelity began to grasp its assets. Rule 60(b) provides for relief "upon such terms as are just."

Id. at 196.

Accordingly the court of appeals vacated the default judgment and remanded to the district court for further proceedings "on the condition that Antigua post a...