Elevation Health LLC v. BQC Global Supply Inc.

Background

Elevation Health brought the case based on diversity jurisdiction. It alleged that it contracted to purchase 100,000 BinaxNOW COVID-19 test kits, paid the defendants, and never received the kits or a promised reimbursement. The amended complaint asserted breach of contract against BQC Global Supply Inc. and Brandon Wong; breach of guaranty and promissory estoppel against Jacob Burbas; and civil conspiracy, conversion, unjust enrichment, fraud, and promissory estoppel claims against various defendants.

Elevation Health voluntarily dismissed BQC Global Supply Inc., doing business as BQ Supplies, and Jing Jing He. The court approved that dismissal and treated all claims against those defendants as moot. The remaining defendants—Brandon Wong, Alyssa Reyes, and Jacob Burbas—did not answer or otherwise appear after being served.

Default-judgment standard

The court reviewed Elevation Health’s motion under Federal Rule of Civil Procedure 55(b). It considered whether the defaults were willful, whether the defendants had a potentially meritorious defense, and whether refusing default judgment would prejudice Elevation Health. The court found that the relevant factors favored Elevation Health because service had been shown, the answer deadlines had expired, and the defendants had not appeared to contest the motion.

A default concedes the complaint’s factual allegations, but the court still must decide whether those allegations establish legal liability. The court accepted the factual allegations as true, except allegations concerning damages. The parties’ briefing assumed that New York law applied, and the court applied New York law.

Claims on which default judgment was entered

The court entered default judgment on Elevation Health’s breach-of-contract claim against Wong. Under New York law, that claim requires allegations of a contract, the plaintiff’s performance, the defendant’s failure to perform, and resulting damages. The court found that Elevation Health alleged each element by claiming that it entered the test-kit contract, paid as required, did not receive the kits or reimbursement, and suffered damages.

The court also entered default judgment on Elevation Health’s breach-of-guaranty claim against Burbas. A guaranty claim requires an unconditional guaranty, an underlying debt, and the guarantor’s failure to perform. The court found sufficient allegations that Burbas personally guaranteed that the defendants could provide the test kits and later said he would take direct responsibility for delivery.

Claims on which default judgment was denied

The court denied default judgment on the unjust-enrichment and conversion claims because both were duplicative of the contract claim. The alleged unjust enrichment arose from the same failure to deliver the contracted-for kits, and the conversion claim did not identify a wrong distinct from the contractual obligations.

The court also concluded that Burbas’s promissory-estoppel claim failed because an enforceable contract existed. Under the court’s explanation, promissory estoppel cannot be used when the plaintiff is seeking recovery under an existing enforceable contract.

The fraud claim failed for two reasons. First, the allegations did not identify any statements made by Reyes, much less the details required for a fraud claim. Second, as to all defendants, the fraud allegations duplicated the contract claim because they concerned alleged misrepresentations about performing the contract, and Elevation Health did not allege separate losses such as lost business opportunities.

The civil-conspiracy claim also failed. New York law does not recognize civil conspiracy as an independent tort. To the extent the claim was based on breach of contract, it duplicated that claim; to the extent it was based on fraud or another tort, the complaint did not adequately allege an underlying tort.

Disposition

The court entered a default judgment in favor of Elevation Health on the breach-of-contract and breach-of-guaranty claims and denied default judgment as to the other claims. It referred the case to United States Magistrate Judge Jennifer Willis for an inquest into damages on the claims receiving default judgment. The court also directed Elevation Health to serve the order on each defendant and file proof of service.