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Commercial Division Blog

Current Developments in the Commercial Divisions of the
New York State Courts by Schlam Stone & Dolan LLP
Posted: October 5, 2019

Default Judgment Denied Due to Failure to Prove Damages; Plaintiff Allowed to Take Discovery and Renew Motion

On September 27, 2019, Justice Schecter of the New York County Commercial Division issued a decision in W. & M. Operating, L.L.C. v. Bakhshi, 2019 NY Slip Op. 32865(U), denying default judgment due to a lack of proof of damages but allowing the plaintiff to take discovery and renew the motion, explaining:

Porco, however, has not made a sufficient showing of merit on the other claims for fraudulent conveyance and breach of contract, which are based on the LDH Defendants’ improper distributions from the Company while it was insolvent and when it had not paid its rent–an express violation of section 4.1 of the shareholders agreement. Porco seeks to set aside conveyances from the Company to the third party defendants but does not assert how much was conveyed or should be set aside.

While the allegation that distributions were paid is deemed admitted due to the LDH Defendants’ default, Porco does not submit any proof of the amount of the distributions and without any proof there can be no award. The court recognizes that Porco was unable to obtain discovery from the LDH Defendants due to their default. If Porco lacks the requisite proof, Porco may issue subpoenas (which, if necessary, the court will enforce upon a proper motion to compel and which should be niade by order to show cause). Porco may renew his motion for a default judgment on these claims upon submission of sufficient proof.

(Internal citations omitted).

If you are served with a complaint and fail timely to answer, the court can enter judgment against you: a default judgment. Contact Schlam Stone & Dolan partner John Lundin at jlundin@schlamstone.com if you or a client have questions regarding whether you have been properly served or if a default judgment has been entered against you.

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