RDW Capital v. BE Industries, Inc.

Background

RDW Capital, Inc. sued BE Industries, Inc., NAC Drive Systems, Inc., Swiss Heights Engineering, S.A., BE North America, Corp., Bellelli USA, LLC, Bellelli Engineering, S.P.A., Antonio Monesi, and Filippo Puglisi. RDW alleged breach of contract, fraud in the inducement, fraudulent misrepresentation, and unjust enrichment under the court’s diversity jurisdiction.

RDW alleged that it agreed to purchase slightly more than 1.5 million shares of NAC Global Technologies, Inc., now known as BE Industries, Inc., for $1.5 million. The defendants entered into related security, guarantee, and collateral-assignment agreements. RDW alleged that the defendants breached those agreements by failing to complete an audit of Swiss Heights, failing to file a registration statement and have it declared effective by the Securities and Exchange Commission, and failing to make a required $150,000 redemption payment or later payments.

The defendants did not answer the complaint or otherwise appear. Certificates of default were issued against the defendants other than Swiss Heights and Bellelli Engineering. The opinion states that Swiss Heights had been dissolved and that Bellelli Engineering was in active bankruptcy in Italy. RDW moved for default judgment against the other six defendants.

Legal standard

A defendant who fails to defend is in default and is treated as admitting the complaint’s well-pleaded factual allegations for purposes of liability. The court may enter default judgment if those allegations establish legal liability. Damages, however, are not automatically treated as admitted; the court must determine the amount with reasonable certainty.

Court’s analysis

The court applied New York law, which governed the agreements. It found that RDW adequately alleged the existence of the contracts, its own performance, the defendants’ failure to perform, and resulting damages. The guarantee agreements also supported liability against the individual and corporate defendants.

The court did not address RDW’s fraud and unjust-enrichment claims because RDW sought damages solely based on its initial investment, and those damages were fully encompassed by the breach-of-contract claim.

The court determined that RDW was entitled to $1,500,000. It treated the $1,520,000 amount stated in RDW’s motion as a typographical error because the complaint and Securities Purchase Agreement showed a $1,500,000 investment.

Ruling

Judge Oetken granted RDW’s motion for default judgment. The court directed entry of judgment for $1,500,000 against BE Industries, Inc., NAC Drive Systems, Inc., BE North America, Corp., Bellilli USA LLC, Antonio Monesi, and Filippo Puglisi. The court also directed RDW, by January 21, 2020, either to file a status letter explaining how it proposed to proceed against Swiss Heights Engineering, S.A. and Bellilli Engineering, S.P.A., or to file a voluntary dismissal of those defendants under Federal Rule of Civil Procedure 41(a)(1)(A)(i).