Living The Dream Films, Inc. v. Aloris Entertainment, LLC

Background

On January 28, 2021, the court entered default judgment for Living the Dream Films, Inc. on claims under the Securities Exchange Act and on claims for fraud, fraud in the inducement, and breach of contract against Aloris Entertainment, LLC and John Santilli. The matter was referred to Magistrate Judge James Cott for an inquest to determine damages.

The plaintiff submitted proposed findings and supporting briefing. The defendants did not submit opposing materials. Judge Cott recommended awarding $200,000 in compensatory and restitution damages on the breach-of-contract claim, nine-percent annual prejudgment interest, post-judgment interest under 28 U.S.C. § 1961, and $12,816 in reasonable attorney’s fees and costs.

The Report and Recommendation also concluded that the Securities Exchange Act fraud claims and the New York common-law fraud and fraud-in-the-inducement claims were not adequately pleaded and therefore could not support liability or damages after the defendants’ default. The plaintiff filed objections.

Court’s Analysis

The court reviewed the plaintiff’s general objections to the fraud-claim analysis for clear error rather than conducting a fresh review. The court stated that a party must make specific objections to particular findings to obtain fresh review of those findings.

The court agreed that the securities-fraud claims did not identify specific fraudulent statements as required by the Private Securities Litigation Reform Act. It also agreed that the common-law fraud claims did not satisfy Federal Rule of Civil Procedure 9(b), which requires a complaint alleging fraud to identify the allegedly fraudulent statements, their speaker, where and when they were made, and why they were fraudulent. Because those claims were not adequately pleaded, the court held that no damages could be awarded on them. The court therefore did not reach the plaintiff’s separate objection concerning punitive damages.

The court also rejected the plaintiff’s argument that prejudgment interest should begin on November 30, 2017, when the parties executed the term sheet. It found that the alleged contract breaches and resulting damages occurred at various times when the defendants failed to make required quarterly distributions or return the plaintiff’s $200,000 investment. Because the record did not establish when the initial breach occurred, the court agreed that April 14, 2019, was a reasonable intermediate date for calculating prejudgment interest.

The court found no clear error in the recommendation to award $12,816 in attorney’s fees and costs. The plaintiff’s objection to the reduction from its requested $15,920 did not provide specific arguments or legal authority.

Disposition

The court adopted the Report and Recommendation and overruled the plaintiff’s objections. It awarded the plaintiff $200,000 in compensatory and restitution damages, $12,816 in reasonable attorney’s fees and costs, and nine-percent annual prejudgment interest on the $200,000 from April 14, 2019, through entry of judgment. The Clerk was directed to calculate the prejudgment interest. The defendants were jointly and severally liable for those amounts, and post-judgment interest would apply if the amounts became delinquent.

The court denied the plaintiff’s request to supplement its attorney’s-fee request and denied the request to serve a supplemental brief. The Clerk was directed to enter judgment and close the case.