CDBD Holdings, Inc. v. Slavutsky

Background

CDBD Holdings, Inc. sought to recover amounts owed under a November 7, 2017 Promissory Note and Security Agreement. D&D Funding II, LLC had made approximately 80 advances to Elizabeth Slavutsky and eight restaurant businesses: Yes Food LLC doing business as Blue Dog Café; Angelic Foods Inc. doing business as Blue Dog Kitchen Bar; Blue Dog Café at Le Parker Meridien Inc.; Healthy Haven Inc. doing business as Blue Dog Commissary; Lavender Kale LLC; Pear Squared LLC; Violet Pear Squared LLC; and Purple Coconut LLC. The agreement consolidated advances with an aggregate principal amount of $5,859,500.00, and CDBD later received D&D’s rights under the note documents.

The agreement required interest at 7% annually and increased the rate to 10% after an event of default. The borrowers’ obligations were joint, several, and unconditional. The agreement also provided collateral, and Elizabeth Slavutsky and Yanna Slavutsky signed related pledge and guaranty documents. In a 2018 Forbearance Agreement, the borrowers acknowledged that they were in default, that the debt had been accelerated, and that default interest had been accruing. After additional events triggered the end of the forbearance period, D&D demanded payment or turnover of collateral. The defendants did neither.

CDBD filed this action in January 2023 and asserted claims for breach of contract, replevin, temporary and permanent injunctions, and declaratory judgment. The defendants initially participated in the case. Their attorney later received permission to withdraw, and the court gave the defendants time to obtain new counsel or, for the individual defendants, appear without a lawyer. None of the defendants did so, and the clerk entered certificates of default against all defendants.

Default-judgment motion

CDBD moved for a default judgment on its breach-of-contract claim against Elizabeth Slavutsky and the eight restaurant businesses. It did not seek default judgment against Yanna Slavutsky and did not seek judgment on its other claims. The motion was unopposed.

Under Federal Rule of Civil Procedure 55, default judgment involves two steps: entry of a default when a party fails to defend, followed by a court judgment awarding relief. A default generally treats the complaint’s well-pleaded factual allegations as admitted, but it does not automatically establish damages. The court must determine whether the allegations state a valid claim and whether the requested damages are supported by admissible evidence with reasonable certainty.

Court’s analysis

The court concluded that CDBD adequately alleged the elements of a breach-of-contract claim under New York law: a contract, performance by the plaintiff, the defendants’ failure to perform, and resulting damages. The complaint and attached documents showed the note agreements, D&D’s advances, the borrowers’ acknowledged default, the failure to repay after demand, and CDBD’s assignment of D&D’s rights.

The court also concluded that the damages were supported by sworn evidence and detailed spreadsheets, so no damages hearing was required. It accepted an unpaid principal balance of $5,905,869.00, including additional 2018 advances and an accounting credit. It awarded $288,569.37 in interest at 7% through November 16, 2017, and $4,311,614.06 in default interest at 10% from November 17, 2017 through March 14, 2025.

Disposition

The court GRANTED CDBD’s motion for default judgment against Elizabeth Slavutsky and the eight named restaurant businesses. It ordered a joint-and-several judgment of $10,506,052.43 on the breach-of-contract claim, plus post-judgment interest at the federal rate under 28 U.S.C. § 1961. The court ordered the clerk to enter judgment, DISMISS any remaining claims, and close the case.