Ema Financial, LLC v. Flitways Technology, Inc.

Background

EMA Financial, LLC brought claims against Flitways Technology, Inc. and Miro Zecevic, with the claims against Flitways involving New York contract and tort theories and federal securities-fraud claims. The dispute arose from contracts covering financial-market transactions in 2018 and 2019, including two promissory notes and several amendments and related agreements.

EMA alleged that those agreements required Flitways to deliver specified amounts of Flitways common stock. EMA sought specific performance—an order requiring Flitways to carry out its contractual obligations—as well as damages for breach of contract. EMA also alleged securities fraud under the Securities Exchange Act of 1934 and sought additional damages. EMA further alleged that Flitways had assumed certain payment obligations connected to a settlement involving another defendant.

Flitways did not participate in the case for three years. The Clerk entered a certificate of default against Flitways on December 14, 2022. EMA then moved for default judgment and served the motion papers on Flitways. After the Court gave Flitways additional time to appear and respond, Flitways had neither appeared nor responded as of June 8, 2023.

Court’s analysis

The Court explained that a party is in default when it fails to plead or otherwise defend. A default generally means that the court accepts the opposing party’s well-pleaded factual allegations as true, but the court must still decide whether those allegations establish liability as a matter of law.

The Court concluded that EMA’s well-pleaded allegations established Flitways’ liability, damages, and entitlement to other relief as a matter of law. The Court therefore granted EMA’s motion for default judgment.

Relief ordered

The judgment against Flitways requires it to specifically perform the relevant agreements, including the First Note and First SPA, Second Note and Second SPA, and First and Second Transfer Agent Agreements. Flitways must immediately deliver to EMA the common-stock shares required by each submitted Notice of Conversion, increase the share reserve, provide any necessary resolutions, and take the steps required by the agreements to enable EMA to sell the shares publicly without restriction.

For claims enforcing the first promissory note, Flitways must pay EMA $167,978.22, plus interest of $63.20 per day calculated from December 14, 2022, through entry of judgment. For claims enforcing the second promissory note, Flitways must pay $450,499.27, plus interest of $169.50 per day calculated from December 14, 2022, through the date of judgment.

Flitways must also pay $124,700.77 in restitution for claims related to the prior settlement and other costs that Flitways assumed or that were assigned to it. In addition, Flitways must pay EMA $79,671.31 in attorney’s fees and costs. The Court retained jurisdiction to enforce the order and directed the Clerk to enter judgment and close EMA’s motion.