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Current Developments in the Commercial Divisions of the
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Posted: October 1, 2015

Damages Awarded on Default Judgment Slashed by Second Department

On September 30, 2015, the Second Department issued a decision in Vested Business Brokers, Ltd. v. Ragone, 2015 NY Slip Op. 07022, reducing the damages awarded by a default judgment.

In Vested Business Brokers, the Second Department affirmed a default judgment entered against the defendants, holding that the defendants had “failed to proffer a reasonable excuse for their default,” but reduced the damages awarded by the trial court after an inquest as excessive, explaining:

[T]his Court may consider whether excessive damages were awarded. An unwarranted and excessive award after inquest will not be sustained, as to do otherwise would be tantamount to granting the plaintiffs an open season at the expense of a defaulting defendant.

Here, the damages awarded consisted of $350,000 for lost commissions, $500,000 for future damages, and $250,000 for punitive damages. There was no proof of future damages, and that award was duplicative of the award of injunctive relief.

Punitive damages are generally not recoverable in an action to recover damages for breach of contract, unless the breach of contract also involves a fraud evincing a high degree of moral turpitude, and demonstrating such wanton dishonesty as to imply a criminal indifference to civil obligations, and where the conduct is aimed at the public generally. The evidence adduced at the inquest did not establish grounds to award punitive damages.

With respect to lost commissions, [the plaintiff] argued at the inquest that it established $225,000 in lost commissions based on the sales that were testified to before the court. Nevertheless, the court awarded $350,000 for lost commissions. Our review of that evidence adduced at the inquest indicates that an award of $150,000 constitutes reasonable compensation for lost commissions, based upon 10% of the specific sales established by the testimony of [the plaintiff’s] witnesses at the inquest.

(Internal quotations and citations omitted). One point to be taken from this decision is the importance of fully proving your case (including damages) even when there is no opposition. You still have to prove your case to the court.

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