Phoenix Fashion, Inc. v. Saadia Group LLC

Background

Phoenix Fashion, Inc. alleged that the corporate defendants purchased and received apparel but failed to pay for it. On December 1, 2022, Phoenix and the corporate defendants entered into a forbearance agreement under which the defendants reaffirmed an obligation to pay $959,588.72 and agreed to pay for existing and future orders within 30 days of receiving the goods. On the same day, Yakoub N. Saadia, also identified in the complaint by several other names including Jack Saadia, signed an unconditional limited personal guaranty covering the corporate defendants’ obligations.

Phoenix alleged that the corporate defendants failed to make the required payments and owed $3,111,221.77 for goods shipped and received. Phoenix also alleged that the defendants ordered an additional $1,235,068.22 in goods that were not shipped because they refused to confirm payment. Phoenix demanded payment from Saadia under the guaranty, but he did not pay.

After Phoenix filed an amended complaint naming additional defendants, no defendant answered it. The court entered certificates of default. Several defendants moved to set aside their defaults, but the court conditioned relief on posting a $3,022,209 bond by September 27, 2024. They did not post the bond or request an extension, so the court denied their motion to set aside default.

Claims and Liability

Phoenix asserted three claims: breach of the forbearance agreement against the corporate defendants, breach of the guaranty against Saadia, and intentional misrepresentation against the defendants.

The court held that the amended complaint adequately established liability for breach of the forbearance agreement. Phoenix alleged the agreement, its own performance, the defendants’ failure to pay within 30 days, and resulting damages. The court also held that Phoenix adequately established Saadia’s liability for breach of the guaranty because Phoenix alleged the guaranty, the underlying unpaid debt, and Saadia’s failure to pay after demand.

The court did not grant default judgment on the intentional-misrepresentation claim. The claim was based on alleged promises in the forbearance agreement and guaranty that the defendants supposedly made without intending to honor them. The court held that when a party merely misrepresents its intent to perform a contract, the proper claim is breach of contract rather than a separate fraud claim.

Damages, Interest, and Costs

Phoenix sought $4,346,289.99 for goods ordered and produced. It supported that amount with an affidavit from its chief financial officer, purchase orders, invoices, and delivery records. Because the defendants did not contest the damages or request a damages hearing, the court found the amount substantiated with reasonable certainty and determined that no hearing was necessary.

The court held that Phoenix was entitled to statutory interest at nine percent per year beginning December 20, 2022, the date of the breach. Phoenix also sought $5,037.93 in costs, but the court denied that part of the motion because Phoenix had not provided documentation supporting the amount. The court stated that Phoenix could file and serve a renewed motion for costs by October 25, 2024.

Disposition

The court’s conclusion states that the motion for default judgment against all defendants was GRANTED IN PART and DENIED IN PART. The court directed the clerk not to enter judgment at that time, pending Phoenix’s renewed motion regarding costs. If Phoenix did not file that motion, or informed the court it would not pursue costs, the court would enter judgment for $4,346,289.99 plus nine-percent annual interest from December 20, 2022.