Streets v. Mangena

Background

Theodosia Billie Streets sued Daniel Mangena, also known as Lindani Mangena, and Dreamer HQ Inc. The complaint asserted fraud, fraudulent inducement, breach of contract, and unjust enrichment. The report and recommendation focuses on Streets’s request for a default judgment based on fraudulent inducement under New York law.

Streets alleged that Mangena promoted an investment program called “Financial Freedom in a Box.” He allegedly promised that the program would generate passive income through businesses selling products such as books and pet food. Streets and Dreamer HQ entered into an agreement under which Dreamer HQ promised to secure income streams producing at least $60,000 in annual net income.

Streets invested $20,000 of her own money. She also obtained credit cards after being told that Mangena and the defendants would use the resulting funds for the program and pay the balances before introductory interest periods ended. Mangena charged $119,500 to those cards, which Streets paid when the defendants did not. Streets also paid $1,390 in card fees. She later learned, according to her declaration, that no underlying income streams or online businesses had been created.

Procedural History

Mangena and Dreamer HQ initially appeared through counsel and filed an answer. After discovery began, they did not respond to Streets’s discovery requests or make required disclosures. Their lawyer later withdrew from representing both defendants. The court warned Mangena that failing to comply with court orders could lead to a default judgment, and it gave Dreamer HQ time to obtain new counsel.

Dreamer HQ did not obtain counsel, and the Clerk of Court issued a certificate of default against it. Mangena also failed to comply with a discovery order and failed to appear at a telephone conference. Magistrate Judge Stewart D. Aaron recommended striking Mangena’s answer and entering a certificate of default; Judge Analisa Torres adopted that recommendation, and the Clerk later issued the certificate of default against Mangena.

Streets then moved for a default judgment. The defendants did not respond to that motion or to a later filing concerning attorneys’ fees. Because the defendants defaulted, the report treated Streets’s factual allegations as established except for the amount of damages, which Streets still had to prove with evidence.

Analysis and Recommended Disposition

The report concludes that Streets adequately established fraudulent inducement against Mangena. It states that Mangena made false statements about the expected income streams, intended Streets to rely on them, and that Streets relied on them by investing money and authorizing the use of her credit-card accounts. The report recommends $140,890 in compensatory damages: $20,000 for Streets’s investment, $119,500 for credit-card charges, and $1,390 for credit-card fees.

The report also recommends prejudgment interest at nine percent per year under New York law, calculated from September 17, 2022, through the date judgment is entered. It recommends punitive damages because it finds Mangena’s conduct sufficiently reprehensible, including the alleged similar conduct involving five other people and his prior conduct in the United Kingdom. But it recommends punitive damages of $281,780—twice the compensatory damages—not the four-times amount Streets requested.

The report further concludes that Dreamer HQ should be jointly and severally liable with Mangena. Joint and several liability would allow Streets to seek the awarded damages from either defendant, subject to the limits of the judgment. The report relies on New York’s reverse veil-piercing doctrine and concludes that Mangena dominated Dreamer HQ and used it in the alleged fraud.

The report recommends denying Streets’s request for $13,924.15 in attorneys’ fees. It explains that New York generally does not permit a prevailing party to recover attorneys’ fees unless an agreement, statute, or court rule allows them. Although courts may award fees as a sanction for clear bad faith, the report concludes that the record did not show the required harassment, delay, or other improper purpose. It recommends awarding $405 for the filing fee but no other costs because Streets did not itemize or substantiate them.

Recommended Result and Next Step

Magistrate Judge Stewart D. Aaron recommends that Judge Analisa Torres enter judgment for Streets against Mangena and Dreamer HQ, jointly and severally, for $140,890 in compensatory damages, $281,780 in punitive damages, nine-percent prejudgment interest from September 17, 2022, and $405 in costs. The document is a report and recommendation, not a final judgment by Judge Torres. The notice states that the parties have fourteen days after service to file objections.