Ema Financial, LLC v. Joey New York, Inc.

Nature of the Order

This is a post-trial briefing order. After a trial day held on August 17, 2021, the court directed the parties to address specified legal and factual questions in briefs due September 3, 2021. The order itself does not resolve those questions or state a final damages amount.

Issues Identified by the Court

The court asked the parties to address:

- Contract damages: What provisions of the convertible-note contracts permitted Ema Financial to earn money through conversions and sales of Joey New York, Inc. stock beyond the loan amount and agreed interest? The court also asked how Ema Financial’s damages position could be reconciled with New York’s rule that breach-of-contract damages should place the nonbreaching party in the position it would have occupied if the contract had been performed, without providing a windfall. - Insolvency: The parties were asked to define “insolvent,” identify whether and when any corporate entities were insolvent, and explain the possible legal consequences if Ema Financial knew—or knew or should have known—that Joey New York, Inc. or other corporate defendants were insolvent or unable to repay the loans promptly when the convertible-note agreements were made. - Constructive fraudulent conveyance: The court asked about the significance of testimony that individual defendants invested substantial amounts in the corporate entities while also transferring money from corporate accounts to personal accounts. It separately asked about Richard Roer’s and Richard Chancis’s testimony that transfers to personal accounts were used to reinvest in the business, pay business expenses charged to personal credit cards, or transfer money to other corporate entities. If liability were established, the court also asked whether the individual defendants’ personal loans or investments should be considered in calculating damages. - Multiple damages theories: Assuming Ema Financial prevailed on all claims, the court asked whether damages would be additive or whether awarding separate damages for each theory could result in double counting or an unfair windfall. The question excluded punitive damages. - Record evidence: The parties were directed to identify evidence of corporate expenses during two periods: February 7, 2017 through May 12, 2017, and May 12, 2017 through the date the Second Note went into default. - Liquidated damages and note conversion: The court asked whether Ema Financial was seeking liquidated damages, the amount sought, and the basis for that request. It also asked what it means for a note to be “entirely converted” under the allegations that Ema Financial could repeatedly convert portions of the notes, sell the shares, and continue converting until each note was fully converted. - Use of loan proceeds: Regarding an allegation that Joey Chancis and representatives misrepresented that the funds would finance the expansion of storefront Botox and beauty clinics in Florida, New York, and California, the court requested evidence supporting both that the defendants did not use the funds for that purpose and that they did use them for that purpose. - Attorney’s fees and costs: The court noted its prior September 22, 2019 opinion and order granting summary judgment on liability for Ema Financial’s costs and expenses, including reasonable attorney’s fees, related to the breach-of-contract and breach-of-guaranty claims. It asked what evidence Ema Financial presented at trial about the amount of fees and costs and whether the court could consider evidence not submitted at trial. - Exact damages request: Ema Financial was directed to provide the exact number and breakdown of the damages it sought, together with the justification for that request.

Disposition

The court ordered the parties to provide the requested legal analysis, factual support, and record citations in their post-trial briefing. The order did not grant or deny the remaining claims, determine liability on the issues discussed, or award damages.