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The L. Warner Companies, Inc. v. Born To Play Agency, EIRL

United States District Court, D. Maryland

April 25, 2019

THE L. WARNER COMPANIES, INC., et al., Plaintiffs,
v.
BORN TO PLAY AGENCY, EIRL, et al., Defendants.

          REPORT AND RECOMMENDATION

          Beth P. Gesner Chief United States Magistrate Judge.

         The above-referenced case was referred to the undersigned to review plaintiffs' Motion for Default Judgment and to make recommendations concerning damages, pursuant to 28 U.S.C. § 636 and Local Rules 301 and 302. (ECF No. 17.) Currently pending is plaintiffs' Motion for Default Judgment (“Motion”) (ECF No. 12). Plaintiffs have also submitted a Supplemental Brief in Support of Plaintiffs' Motion for Entry of Default Judgment (“Supplemental Brief”) (ECF No. 19) and an Additional Supplemental Brief in Support of Plaintiffs' Motion for a Default Judgment (“Second Supplemental Brief”) (ECF No. 23). Defendants have not filed any response. No hearing is necessary. See Fed.R.Civ.P. 55(b)(2); Loc. R. 105.6. For the reasons discussed below, I respectfully recommend that plaintiffs' Motion (ECF No. 12) be GRANTED in part and DENIED in part and that relief be awarded as set forth herein.

         I. PROCEDURAL BACKGROUND

         Plaintiffs The L. Warner Companies, Inc. (“TWC”) and TWC Baseball Holdings, LLC (“TWCBH”) (collectively, “plaintiffs”) filed their Complaint against defendants Born to Play Agency, EIRL (“Born to Play”) and Edgar Robinson Mercedes (“Mercedes”) (collectively, “defendants”) on June 1, 2018. (ECF No. 1). Defendants were served with process on July 16, 2018. (ECF No. 7). Neither defendant has responded to the Complaint. Accordingly, the Clerk of Court entered an Order of Default against defendants on September 11, 2018. (ECF No. 11).

         Plaintiffs filed the pending Motion on October 4, 2018. (ECF No. 12). On December 19, 2018, I requested further information about the applicable law and damages from plaintiffs. (ECF No. 18). Plaintiffs filed a Supplemental Brief in support of their Motion on January 25, 2019. (ECF No. 19). On March 20, 2019, I asked plaintiffs to submit a statement of fees and costs along with an affidavit from counsel in support of their request for attorneys' fees and evidence in support of their request for prejudgment interest. (ECF No. 22). Plaintiffs filed a Second Supplemental Brief in support of their Motion on April 4, 2019. (ECF No. 23).

         II. PLAINTIFF'S FACTUAL ALLEGATIONS

         A common set of facts supports each of the causes of action set forth in plaintiff's Complaint. (ECF No. 1.) By virtue of the clerk's entry of default, the court accepts as true the well-pleaded factual allegations in the complaint as to liability. See Ryan v. Homecomings Fin. Network, 253 F.3d 778, 780-81 (4th Cir. 2001).

         TWC is a full service financial benefit and sports management consulting firm. (ECF No. 1 at ¶ 12). TWCBH is a sister company of TWC that provides sports management and entertainment consulting and advisory services. (Id. at ¶ 13). Both plaintiffs are owned by Lee W. Warner (“Warner”), who also serves as CEO and Chairman of both companies. (Id. at ¶ 14). In the fall of 2013, Warner met defendant Mercedes, the principal and owner of Born to Play, a baseball training club (“Club”) located in the Dominican Republic that develops athletes (“Club Athletes”) and places Club Athletes with Major League Baseball (“MLB”) teams. (Id. at ¶¶ 15- 17). In April of 2014, Mercedes offered Warner an opportunity to gain access to his Club Athletes in exchange for a $100, 000 loan collateralized by Mercedes' future earnings and personally guaranteed by Mercedes. (Id. at ¶ 18).

         On June 18, 2014, TWCBH entered into a Consulting Agreement with defendants and agreed to advance $100, 000 to defendants in the form of a loan to cover Club expenses. (Id. at ¶¶ 19-20). In exchange, defendants granted a right of first refusal to TWCBH to be “the exclusive worldwide professional and marketing agency for Club Athletes, including but not limited to for Major League Baseball.” (Id. at ¶ 21). Defendants also agreed that they would not “sell, transfer, assign or otherwise utilize the Player Rights/Club Athletes without the prior written consent of TWCBH.” (Id. at ¶ 23). TWCBH would also receive compensation for each player that signed with Born to Play during the term of the agreement or twenty-four months after the expiration of the term. (Id. at ¶ 25). TWCBH would receive accrued commissions on a monthly basis “as long as commissions are earned.” (Id.) Finally, defendants agreed that, during the term of the Consulting Agreement and for one year following the termination or expiration of the agreement, they would not interfere with any client of TWCBH arising from the parties' relationship under the Consulting Agreement. (Id. at ¶ 26). On June 18, 2014, TWC entered into an ancillary Referral Fee Agreement with Born to Play that set forth the percentage allocation between the parties for all fees received directly from Club Athletes. (ECF No. 12-2 at 6).

         On June 20, 2014, plaintiffs wired $100, 000 to a bank account in the Dominican Republic beneficially owned by Mercedes. (ECF No. 1 at ¶ 28). From late 2014 until the summer of 2016, Mercedes represented to Warner that neither Mercedes nor Born to Play received sufficient funds to repay the loan or accrued commissions. (Id. at ¶ 29). In mid-2015, Mercedes informed Warner that he was expecting a large payment from a player, Yuniel Ramirez Arrieta (“Arrieta”), who had been signed to the Miami Marlins. (Id. at ¶ 32). Mercedes later informed Warner that Arrieta had only received half of his expected signing bonus. (Id.) Warner relied on Mercedes' representations that defendants would fulfill their obligations, but that they required more time to secure funds, and, on May 5, 2015, TWCBH renewed the Consulting Agreement. (Id. at ¶ 33). TWCBH renewed the Agreement again on May 5, 2016. (Id. at ¶ 35).

         Plaintiffs later learned that, contrary to Mercedes' representations, Mercedes was personally involved in signing multiple Club Athletes to MLB teams, including Yoenis Cespedes in a trade to the New York Mets, Arrieta to the Miami Marlins, Luis Roberto Moirán to the Chicago White Sox, Hector Mendoza to the St. Louis Cardinals, Elian Rodriguez, and Jose Betances. (Id. at ¶ 36). Defendants did not obtain plaintiffs consent for any of these actions. (Id. at ¶ 38). TWCBH did not receive any commissions from defendants or repayment of the loan. (Id. at ¶¶ 25, 40).

         III. LEGAL STANDARD FOR ENTRY OF DEFAULT JUDGMENT

         In reviewing a motion for default judgment, the court accepts as true the well-pleaded factual allegations in the complaint as to liability. Ryan v. Homecomings Fin. Network, 253 F.3d 778, 780-81 (4th Cir. 2001). It remains for the court, however, to determine whether these unchallenged factual allegations constitute a legitimate cause of action. Id. If the court determines that liability is established, the court must then determine the appropriate amount of damages. Id. The court does not accept factual allegations regarding damages as true, but rather must make an independent determination regarding such allegations. See, e.g., Int'l Painters & Allied Trades Indus. Pension Fund v. Capital Restoration & Painting Co., 919 F.Supp.2d 680, 684 (D. Md. 2013) (citing S.E.C. v. Lawbaugh, 359 F.Supp.2d 418, 421 (D. Md. 2005)).

         “While the court may conduct an evidentiary hearing to determine damages, it is not required to do so; it may rely instead on affidavits or documentary evidence in the record to determine the appropriate sum.” Id. (citing Monge v. Portofino Ristorante, 751 F.Supp.2d 789, 794-95 (D. Md. 2010) (collecting cases); 10A Charles A. Wright, Arthur R. Miller & Mary Kay Kane, Federal Practice and Procedure § 2688 (3d ed. Supp. 2010)).

         A. Defendants' Liability

         In their Complaint, plaintiffs set forth seven causes of action against defendants: (1) common law fraud/fraud in the inducement; (2) breach of contract; (3) intentional breach of the implied covenant of good faith and fair dealing; (4) repayment of the loan; (5) unjust enrichment; (6) tortious interference with prospective business relationships; and (7) accounting. (ECF No. 1 at 10-17). Plaintiffs now seek $100, 000 in compensatory damages and $100, 000 in liquidated damages, along with interest, costs and attorneys' fees on their breach of contract claim. (ECF No. 19 at 4). Alternatively, plaintiffs ask for $100, 000 in compensatory damages and $300, 000 in punitive damages for their fraud claim. (Id.)

         In their Motion, plaintiffs cited to Maryland state law in support of their fraud, breach of contract, and unjust enrichment claims. (ECF No. 12-2 at 9-13). Section 8 of the Consulting Agreement, entitled “Governing Law, ” states, however, that “This Agreement shall be construed and enforced in accordance with the laws of the Dominican Republic, without regard to the conflict of laws or choice of law provisions.”[1] (ECF No. 1-2 at 4). Accordingly, I asked plaintiffs to provide relevant case law in support of their claims from the Dominican Republic and, if plaintiffs maintained that Maryland law governed the case, to provide case law in support of that position. (ECF No. 18 at 1). In their Supplemental Brief, plaintiffs provided authority from the Dominican Republic in support of their breach of contract claim and did not dispute that the laws of the Dominican Republic govern the case. (ECF No. 19 at 4-5). Alternatively, plaintiffs asked for damages for fraud in the inducement, and provided Maryland authority to support their claim, but did not provide any argument or authority as to why Maryland law should govern instead of the laws of the Dominican Republic. (ECF No. 19 at 6-8).

         In support of their request for damages on their breach of contract claim, plaintiffs have provided the court with an affidavit from Oliver Peña Veras, an attorney admitted to practice law before the courts of the Dominican Republic, with over fifteen years of experience practicing commercial litigation in the Dominican Republic. (ECF No. 19-1 at 10). Mr. Veras stated that the “Dominican Republic is a civil law jurisdiction and therefore, legal practitioners and judges rely on statutory provisions such as rules and regulations, as opposed to case law for purposes of substantiating the legal basis of their arguments and form [sic] their decisions.” (ECF No. 19-1 at 11). Mr. Veras further stated that “[u]nder the laws of the Dominican Republic, an agreement is considered to be the law between the parties. Consequently, the provisions of the agreement must be enforced by the courts unless there is proof that ...


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