Usdan v. Dunn Paper Company

• Decision Date: 04 March 1975
• Docket Number: No. 74-C-981.,74-C-981.
• Citation: 392 F. Supp. 953
• Parties: David USDAN, Plaintiff, v. DUNN PAPER COMPANY, Defendant.
• Court: U.S. District Court — Eastern District of New York

392 F. Supp. 953

David USDAN, Plaintiff, v. DUNN PAPER COMPANY, Defendant.

No. 74-C-981.

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

March 4, 1975.

COPYRIGHT MATERIAL OMITTED

Martin, Bloom & Van de Walle by James Sawyer, Great Neck, N. Y., for plaintiff.

Reavis & McGrath by Andrew C. Freedman, New York City, for defendant.

MEMORANDUM AND ORDER

COSTANTINO, District Judge.

This is a motion, brought on by an Order to Show Cause, for (a) an order pursuant to Rule 64, Fed.R.Civ.P. vacating an ex parte order of attachment granted to plaintiff by the Supreme Court, Nassau County, and any levy thereunder; and (b) an order pursuant to 28 U.S.C. § 1404(a) transferring this action to the United States District Court, Eastern District of Michigan.

The underlying action was originally brought in state court by plaintiff, a New York resident. He claims damages in excess of $48,000 for defendant's alleged breach of a contract which provided for payment of commissions to him for his work as defendant's sales representative. Defendant, a foreign corporation, removed the case to this court.

A. Motion to Vacate

Defendant contends that the order of attachment should be vacated for either of two reasons: (1) Plaintiff's allegations are insufficient to warrant an order of attachment; or (2) the order is unnecessary to plaintiff's security.

(1) Sufficiency of Plaintiff's Allegations

Defendant contends that plaintiff's allegations of damages are insufficient to warrant the order of attachment. Under Rule 64, Fed.R.Civ.P., plaintiff may employ the provisional remedies, including attachment, under the circumstances and in the manner provided by the law of the state in which the district court is located. Here, attachment is available to the plaintiff only under the circumstances and in the manner provided by New York law, Glaser v. North American Uranium and Oil Corp., 222 F.2d 552 (2d Cir. 1955); Worldwide Carriers, Ltd. v. Aris Steamship Co., 312 F.Supp. 172 (S.D.N.Y.1970).

Where there is an unliquidated claim, evidentiary facts must be presented in the affidavits sufficient to form a basis for the computation of damages, see Valentine Dolls, Inc. v. McMillan, 25 Misc.2d 551, 202 N.Y.S.2d 620 (Sup.Ct., Kings Co. 1960). In determining the sufficiency of plaintiff's allegations, the court must consider the evidentiary facts set forth in the affidavit which plaintiff submitted to this court as well as the affidavit submitted to the state court; this is true because under New York law upon a motion to vacate the court must give the plaintiff a reasonable opportunity to correct any defect in his original affidavit, N.Y.C. P.L.R. § 6223; Stines v. Hertz Corp., 42 Misc.2d 443, 248 N.Y.S.2d 242 (Sup.Ct., Kings Co. 1964), reversed on other grounds, 22 A.D.2d 823, 254 N.Y.S.2d 903 (1964), aff'd, 16 N.Y.2d 605, 261 N.Y.S.2d 59, 209 N.E.2d 105 (1965).

In his first cause of action, plaintiff alleges that he is entitled to damages equal to the commissions which he could reasonably be expected to have earned during the approximately eight months between the time of defendant's breach and termination of the initial term of the agreement; in addition, he alleges that pursuant to the terms of the agreement he is entitled to severance pay in an amount equal to fourteen months of commissions, based on the average amount of commissions per month. The total amount of commissions earned by plaintiff during the period in which he was employed by defendant, between July 1, 1968 and November 19, 1970, may be derived from the schedule of commissions and statements of account annexed to plaintiff's July 18, 1974 affidavit; the total amount of commissions earned was $48,076.42. His average monthly commission of $1,717.015 is computed by dividing $48,076.42 by 28, the number of months plaintiff worked for defendant. Damages under the first cause of action are computed by multiplying the average monthly commission by 14 (six months severance pay plus eight months lost commissions). The resulting sum is $24,038.21. Plaintiff's affidavit dated July 18, 1974 indicates that an amended complaint claiming damages in this sum, which differs by a small amount from the sum claimed in the original complaint, will be served on defendant. In view of the foregoing, as to the first cause of action there is no merit to defendant's contention that plaintiff's damage claim is too indefinite to warrant the order of attachment.

In addition to the damage issue, defendant raises the broader question of the sufficiency of plaintiff's allegations. As to the first cause of action, plaintiff's allegations are sufficient to withstand defendant's motion.

Plaintiff's damage claim under his second cause of action is computed in a very different manner than that under the first cause of action. For his second cause of action plaintiff contends that he is entitled to commissions on defendant's alleged sales to Frye Copysystems, Inc., a customer which he allegedly procured for defendant after Frye had ceased doing business with defendant. Plaintiff's affidavit asserts that unidentified representatives of Frye informed him when he first contacted Frye that Frye could "probably" use one hundred tons per month of defendant's one time carbonizing tissue paper. The one hundred ton figure is used, together with prevailing market prices, to arrive at a commission figure which plaintiff claims he would have earned under the breached contract. To this figure, plaintiff adds a six months severance compensation claim (also based on the one hundred tons per month figure) to arrive at a figure of $70,000. On the basis of this figure, plaintiff "conservatively estimated" his damages at $25,000. It is well settled that plaintiff must present "evidence of damages of sufficient certainty and definiteness" to warrant an attachment, Valentine Dolls, Inc. v. McMillan, 25 Misc.2d 551, 202 N. Y.S.2d 620 (Sup.Ct., Kings Co. 1960). In a claim for an unliquidated sum, plaintiff's allegations as to damages must be more than a "mere matter of speculation," Story v. Arthur, 35 Misc. 244, 71 N.Y.S. 776 (Sup.Ct., Sp. Term, 1901); see Gitlin v. Stone, 262 F.Supp. 500 (S.D.N.Y.1967). Plaintiff concedes that he does not know the extent of defendant's sales to Frye. Indeed, there is no evidence in the record indicating that defendant made any sales to Frye beyond those for which plaintiff received commissions. Giving plaintiff the benefit of all inferences that can be made from the facts set forth in the record, the allegations as to damages under the second cause of action still must be deemed speculative.

In view of the foregoing, plaintiff's allegations of damages pursuant to his second cause of action are held insufficient to support the order of attachment. The amount attached should be reduced to $24,038.21, the amended damage claim under the first cause of action, together with probable interest, costs, and sheriff's fees and expenses.

(2) Necessity of Order of Attachment to Plaintiff's Security

The burden is on defendant to support its claim that attachment is unnecessary to the security of plaintiff, Kend v. Chroma-Glo, Inc., 51 F.R.D. 547 (D.Minn.1970), aff'd 478 F.2d 198 (8th Cir. 1973); Marklin v. Drew Properties Corp., 280 F.Supp. 176 (S.D.N.Y.1967); Hydromar Corp. v. Construction Aggregates Corp., 32 A.D.2d 794, 300 N.Y.S.2d 797 (1st Dep't 1969). Defendant asserts that the order of attachment should be vacated as unnecessary to plaintiff's security because defendant has made an appearance in this action. But the appearance of a non-resident defendant does not require that the attachment be vacated, Gitlin v. Stone, 262 F. Supp. 500, 501 (S.D.N.Y.1967).

To support its contention that the order of attachment is unnecessary, defendant includes in its motion papers the consolidated financial statement of its parent corporation, but not its own financial statement. The financial statement of the parent is insufficient to provide security to plaintiff. Defendant's refusal to supply documentary evidence of its own financial condition for the public record is attributed to the extreme competition in its field. It has offered to provide documentary evidence of its financial status solely to this court for in camera inspection. This offer is unsatisfactory. Defendant's financial statement would not be truly helpful to this court unless plaintiff has an opportunity to evaluate the statement and show, if circumstances warrant, why the statement fails to establish that the attachment order is unnecessary to plaintiff's security. The court concludes that defendant has failed to establish that the attachment is not necessary to plaintiff's security.

(3) Due Process

Mindful of the recent decision of Sugar v. Curtis Circulation Co., 383 F.Supp. 643 (S.D.N.Y.1974), the court directed the parties to submit briefs on the question of whether the order of attachment issued in this case violated defendant's right to due process. The Sugar decision held that N.Y.C.P.L.R. §§ 6201(4), (5), and (8) and § 6211 violated the Due Process Clause of the Fourteenth Amendment "to the extent that a New York defendant has no meaningful opportunity to vacate an order of attachment granted ex parte and without prior notice." 383 F.Supp. at 650. The issue in the instant case is whether an order of attachment which conferred quasi in rem jurisdiction over a foreign corporation violated the Due Process Clause because it was issued ex parte, without prior notice or opportunity for a hearing.

An analysis of several Supreme Court decisions is helpful in resolving this issue. In Ownbey v. Morgan, 256 U.S. 94, 41 S.Ct. 433, 65 L.Ed. 837 (1920), the Court held that a nonresident defendant's right to due process was not violated by a state statute which provided, inter alia, for issuing an order of attachment ex parte against the property of a nonresident defendant without notice or a hearing. The Court stated, "a property owner...