Default Judgment Granted, Inadequate Proof Of Damages Requires Referral To Referee

Posted: August 29, 2025 / Written by: Jeffrey M. Eilender, Thomas A. Kissane, Samuel L. Butt, Joshua Wurtzel, Channing J. Turner / Categories Breach of Contract, Damages, Default Judgment

Default Judgment Granted, Inadequate Proof Of Damages Requires Referral To Referee

On June 30, 2025, Justice Andrea Masley granted plaintiffs’ unopposed motion for entry of a default judgment against a corporate defendant that had failed to replace its withdrawn counsel, but declined to enter judgment fixing damages as plaintiffs’ proof was insufficient. The court therefore referred the damages issue to a referee for a hearing. The case is Rhythm Energy, Inc. v. V3 Capital Group, LLC, Index No. 653122/2023:

In support of their claims for a declaratory judgment and breach of contract, plaintiffs submit the affidavit of Predrag Popovic, plaintiffs’ founder and CEO, who affirms the existence of a funding agreement between the parties, plaintiffs’ performance under the agreement, the V3 Defendants’ breach, and damages incurred, including a contractual right to attorneys’ fees. . . . Popovic also affirms that, upon termination of the parties’ funding agreement, the V3 Defendants were obligated to release any liens on plaintiffs’ property. . . . Plaintiffs needed the liens released in order to obtain other financing. . . . The V3 Defendants refused to release the liens unless plaintiffs entered into an agreement to release all claims against the V3 Defendants. . . . Thus, plaintiffs were forced to enter a general release in order to obtain funding from other sources to protect their business. . . .

While plaintiffs have sufficiently submitted proof that the V3 Defendants breached the funding agreement and that the general release was obtained under duress, voiding such, they have not submitted sufficient proof of the amount of damages owed. Thus, this issue, as well as the determination of the amount of reasonable attorneys’ fees owed, is referred to a Special Referee.

Slip op., pp. 2-3.

Contact the Commercial Division Blog Committee at commercialdivisionblog@schlamstone.com if you or a client have questions concerning contract claims or the determination of damages in the context of default judgment