Coastal Investment Partners, LLC v. DSG Global, Inc.
- P. Castel
- 1:17-cv-04427
- U.S. District Court · Southern District of New York
- 4
In Coastal Investment Partners v. DSG Global, Judge Castel granted default judgment after DSG failed to obtain counsel, awarding $1,080,481.73.
Coastal Investment Partners, LLC obtained default judgment against DSG Global, Inc.; DSG’s answer was struck and judgment was ordered for $1,080,481.73.
What happened
Coastal Investment Partners, LLC sued DSG Global, Inc. over DSG’s failure to follow the repayment and other terms of three notes. After DSG’s attorney withdrew, the court warned DSG that it had to hire new counsel or risk losing its answer and having a default judgment entered against it.
DSG did not hire another attorney, respond to the court’s order, or oppose Coastal’s motion to strike its answer and enter default judgment. Coastal submitted the notes and a declaration explaining how it calculated the damages.
Judge P. Kevin Castel found that DSG had failed to defend the case and that Coastal had established liability. The judge granted Coastal’s motion, struck DSG’s answer, and ordered judgment against DSG for $1,080,481.73.
The detailed version
- Coastal Investment Partners, LLC v. DSG Global, Inc. · No. 1:17-cv-04427
- P. Castel
- Aug. 19, 2020
Background
Coastal Investment Partners, LLC brought this action against DSG Global, Inc. Coastal’s claims arose from DSG’s alleged failure to comply with the repayment and other terms of three notes issued to Coastal. DSG initially appeared through an attorney, filed a motion to dismiss, and filed an answer.
On July 7, 2020, DSG’s attorney, Mark Basile, asked to withdraw because DSG had not paid for legal services in the action. The court allowed the withdrawal on July 14, 2020. In that order, the court warned DSG that, because it was a corporation rather than a natural person, it could appear in the case only through an attorney admitted to practice in the court. The court gave DSG 21 days to have new counsel file a notice of appearance and warned that failure to do so could result in the answer being struck, default being entered, and judgment being entered against DSG.
The order was mailed to DSG’s last known address, and Mr. Basile filed a certificate stating that he had served it. DSG did not obtain new counsel or communicate with the court. Coastal then moved to strike DSG’s answer and for default judgment. DSG did not respond to that motion.
Legal standard and analysis
A corporation may not litigate in federal court without an attorney. Under Rule 55(a) of the Federal Rules of Civil Procedure, a party may be held in default when it fails to plead or otherwise defend after receiving sufficient notice. The court found that DSG had received a clear warning about the consequences of failing to obtain counsel and had failed to defend the action. The court therefore found DSG in default.
A default does not automatically establish that the complaint states a legally valid claim. The court noted that it had previously denied DSG’s motion to dismiss for failure to state a claim. Based on that earlier ruling, the court found that Coastal had established DSG’s liability as a matter of law.
The court separately considered damages because the amount claimed is not automatically accepted merely because a defendant is in default. Coastal provided the three notes, their full text, and a declaration from Coastal member Neil Rock. The declaration gave a specific calculation for each claimed element of damages. The court found that this evidence provided a sufficient basis to determine the damages with reasonable certainty.
Ruling
The court granted Coastal’s motion to strike DSG’s answer and for default judgment. It struck DSG’s answer and stated that it would enter judgment against DSG for $1,080,481.73.
Read the full 4-page opinion on CourtListener, the free public archive maintained by the Free Law Project.