Nemesis 2 LLC v. Paladino

Background

Nemesis 2 LLC sued Pascal Salvati and others to recover money owed under an unpaid promissory note. Pure Brazilian Company, S.L. was the noteholder and had promised to repay Nemesis 2 $400,000, plus a structuring fee and interest. Salvati, Robert Paladino, and Andre Rola Cabral guaranteed the note.

The case was filed in New York state court and later removed to the Southern District of New York. Pure Brazilian did not defend the case, and the court previously entered a default judgment against it for $647,783.56. The court also previously granted summary judgment against Paladino and entered judgment for $600,000, subject to the amount remaining due under the note. Cabral’s case was dismissed as stated in the opinion’s footnote.

Nemesis 2 served Salvati in Switzerland on November 26, 2019, under the Hague Convention procedures for serving legal documents abroad. Salvati did not respond to the lawsuit. The Clerk issued a certificate of default, and Nemesis 2 moved for default judgment. Salvati later contacted the court and said he intended to attend a hearing but could not travel because of the coronavirus outbreak. The court postponed the hearing and gave him until April 4, 2020, to explain his failure to appear and oppose the motion. He submitted nothing, so the court decided the motion based on the written submissions.

Service

The court held that Nemesis 2 properly served Salvati with the summons and other initial papers at his address in Switzerland under Federal Rule of Civil Procedure 4(f)(1), which permits service abroad through internationally agreed methods such as the Hague Convention.

The court also found that Nemesis 2 properly served the default-judgment motion and supporting papers under Rule 5. The papers were mailed to Salvati’s last known address, delivered, and signed for by him. They were also sent by another mail service and emailed to two known email addresses. The court concluded that Salvati knew about the motion and had been given a fair opportunity to respond.

Liability

A default judgment may be entered when a defendant fails to defend the case and the complaint’s well-pleaded factual allegations establish liability as a matter of law. For a claim based on a guarantee, Nemesis 2 had to show that an underlying obligation remained unpaid, that Salvati guaranteed that obligation, and that he failed to pay as required by the guarantee.

The court found all three requirements satisfied. Pure Brazilian did not pay the amounts due under the note. Salvati signed a guarantee agreeing to secure Pure Brazilian’s obligations, up to an aggregate amount of $600,000. The guarantee made his obligation effective after Nemesis 2 demanded payment. Nemesis 2 demanded payment from Salvati on November 7, 2018, but he did not pay.

The court therefore found Salvati liable for breaching his guarantee and granted Nemesis 2’s motion for default judgment.

Damages and Disposition

Nemesis 2 sought $600,000, the maximum amount covered by Salvati’s guarantee. The requested amount included the $400,000 principal, interest on that principal, a $150,000 structuring fee, and interest on that fee. Nemesis 2 did not seek attorney’s fees and waived costs for purposes of entering the default judgment.

The court determined that the damages could be calculated with reasonable certainty without an evidentiary hearing. It entered, or directed the Clerk to enter, default judgment against Salvati for $600,000, jointly and severally with Pure Brazilian and Paladino. The opinion states that Nemesis 2 sought only one recovery of the amounts owed under the note. The court directed the Clerk to terminate the motion and close the case.

Judge Ronnie Abrams signed the memorandum opinion and order on May 8, 2020.