Elevation Health LLC v. Sun Group Partners LLC

Background

Elevation Health LLC and Sun Group Partners LLC entered into a promissory note. Under the note, Sun Group agreed to pay $500,000 in principal and a $250,000 exit fee by October 28, 2022. The note also provided for 4% annual interest on unpaid principal through the maturity date, 6% annual default interest on unpaid amounts after the maturity date, and reasonable attorney’s fees and costs for collection.

According to the opinion, Sun Group did not make the required payments. Elevation Health filed a breach-of-contract lawsuit on November 30, 2022. The court entered default judgment against Sun Group on liability on October 24, 2023, and referred the case to Magistrate Judge Valerie Figueredo to determine damages.

Report and Recommendation

Judge Figueredo recommended awarding Elevation Health $862,426.67 in damages for breach of contract and interest on the unpaid principal, post-judgment interest under 28 U.S.C. § 1961, and $8,464 in reasonable attorney’s fees and costs. Neither party objected to the recommendation. The district court therefore reviewed it for clear error, meaning an obvious mistake apparent from the record.

Court’s Analysis

The court agreed that the principal was $500,000 and that 4% annual interest applied from May 4, 2022, when the note was executed, through October 28, 2022, the maturity date. Using 177 days and a simple-interest calculation, the court determined that this interest was $9,698.63, rather than the $9,646.50 stated in the report.

The resulting contract damages were $759,698.63: $500,000 in principal, $250,000 for the exit fee, and $9,698.63 in interest. The court also concluded that the note required 6% annual default interest on that amount beginning October 29, 2022. It calculated default interest through February 24, 2025 as $106,024.79 and stated that the interest would continue until all amounts were paid.

The court did not award additional pre-judgment interest because the parties agreed Delaware law governed the contract, the note did not provide for additional pre-judgment interest, and Elevation Health offered no other basis for seeking it. The court awarded post-judgment interest under 28 U.S.C. § 1961 and adopted the recommendation for $8,062 in attorney’s fees and $402 in costs.

Disposition

Judge Paul A. Engelmayer adopted the Report and Recommendation, with the interest-calculation correction. The court held that Elevation Health was entitled to collect from Sun Group $759,698.63 in breach-of-contract damages, 6% annual default interest, post-judgment interest under 28 U.S.C. § 1961, and $8,464 in reasonable attorney’s fees and costs. The opinion also states that the parties’ failure to object waived appellate review of the recommendation.