Capitalkeys, LLC v. Democratic Republic of Congo

Case 1:15-cv-02079-KBJ-RMM Document 27 Filed 11/21/16 Page 1 of 30
UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
CAPITALKEYS, LLC
Plaintiff,
Case No. 15-02079 (KBJ-AK)
v.
DEMOCRATIC REPUBLIC OF
CONGO, et al.,
Defendants.
REPORT AND RECOMMENDATION
Plaintiff CapitalKeys, LLC (“Plaintiff” or “CapitalKeys”) seeks entry of Default
Judgment against the Democratic Republic of Congo (“Congo”) and the Central Bank of the
Democratic Republic of the Congo (“Central Bank”) (collectively, “Defendants”) in Plaintiff’s
Motion for Entry of Default Judgment Against All Defendants and Memorandum of Law in
Support thereof [24] (collectively, “Motion”). United States District Judge Ketanji B. Jackson
referred the Motion to the undersigned for a Report and Recommendation. (See June 14, 2016
Minute Order.) On September 16, 2016, the undersigned held an evidentiary hearing
(“Hearing”) on the matter. Upon consideration of the record, the pleadings, the testimony given
at the hearing, and for the reasons set forth below, the undersigned recommends that the Court
issue a Default Judgment in favor of Plaintiff against the defaulting Defendants and award
damages in part.
I. BACKGROUND
A. Contract Dispute
This case arises out of a contract dispute. Plaintiff is a public affairs firm based in
Washington, D.C. (Plaintiff’s Amended Complaint “Compl.” [11] ¶ 5; Declaration of Adam
1
Case 1:15-cv-02079-KBJ-RMM Document 27 Filed 11/21/16 Page 2 of 30
Falkoff “Falkoff Decl.” Ex. A [24-30] at 2.)1 Defendants, the Congo2 and the Central Bank,
spent six months negotiating with Plaintiff before entering into a verbal agreement in or around
February 2013 to retain Plaintiff’s government relations and strategic communication services.
(See Compl. ¶¶ 12, 16; Falkoff Decl. [24-29] ¶ 2.)
In March 2013, the Congo made “a good faith payment of $600,000 as consideration for
the Retainer Agreement.” (Falkoff Decl. ¶ 3, Falkoff Decl. Ex. B [24-31] at 2.) The following
month, authorized representatives of the Central Bank traveled to Plaintiff’s office in
Washington, D.C. to formally execute the parties’ agreement. (See Compl. ¶ 14; Falkoff Decl. ¶
4.) Specifically, Plaintiff and Defendants agreed to a five-year term during which Plaintiff
would provide its services to the Congo and the Central Bank in exchange for a one-time
payment of $16,002,000, due upon signing the Retainer Agreement. (See Falkoff Decl. ¶¶ 6–7,
Ex. A at 5.) This amount, plus the $600,000 that Defendants already paid, equaled the entire
sum that Defendants agreed to pay Plaintiff for its services. (Falkoff Decl. Ex. A at 5; Falkoff
Decl. Ex. B at 2.)
Acting as an agent for the Congo, the Governor of the Central Bank, Mr. Jean-Claude
Masangu Mulongo, signed the written agreement after he received authorization from the
President of the Congo. (See Compl. ¶ 17; Falkoff Decl. ¶¶ 2, 8; Falkoff Decl. Ex. A at 7.) The
Congo was therefore bound by the Retainer Agreement as well, and both Defendants were aware
of this fact. (Compl. ¶¶ 12, 17; Falkoff Decl. ¶¶ 2, 4–5, 8; Mot. 11.) Additionally, the parties
1
For purposes of this Report and Recommendation, the page numbers cited are the ECF page numbers found on the
top right corner of each page of the Motion, Declaration of Adam Falkoff, Declaration of W. Todd Miller, and
exhibits.
2
Throughout this Report and Recommendation, any mention of the Congo is in reference to the Democratic
Republic of the Congo, not the Republic of the Congo—both of which are countries in Africa.
2
Case 1:15-cv-02079-KBJ-RMM Document 27 Filed 11/21/16 Page 3 of 30
understood that the Congo would direct and control Plaintiff’s obligations under their agreement.
(Falkoff Decl. ¶ 4.)
Upon signing the contract, Defendants did not make the agreed-upon payment during
their visit to Washington, D.C. (Mot. 12; Falkoff Decl. ¶ 9.) Instead, they promised that
“payment would be made shortly.” (Compl. ¶ 18; Mot. 12; Falkoff Decl. ¶ 9.) Due to
Defendants’ promise of payment, Plaintiff began providing its services and also assisting
Defendants with “extra things . . . not in the contract,” such as recommending talking points to
the Governor of the Central Bank in order for the Government of the Congo to ultimately secure
a $225,000,000 disbursement from the International Monetary Fund. (Hearing Transcript
“Hearing Tr.” [26] 39:16–23, 40:1–17 (Sept. 16, 2016); see Compl. ¶¶ 19–22; Falkoff Decl. ¶¶
10–13.)
From June through August 2013, Defendants made weekly promises that payment was
imminent, but to no avail. (See Compl. ¶ 23; Falkoff Decl. ¶ 14.) During this time, Defendants
also sent a delegation to Plaintiff’s office in Washington, D.C. and provided additional
assurances that, upon the delegation’s return to the Congo, Plaintiff would receive the full
payment of $16,002,000. (See Compl. ¶ 25; Falkoff Decl. ¶ 16.) Defendants again failed to pay
and, instead, continued to assure Plaintiff that payment was forthcoming. (See Compl. ¶¶ 25–26;
Falkoff Decl. ¶¶ 16–17.)
Nevertheless, Plaintiff spent the following year providing its services to Defendants. (See
Falkoff Decl. ¶¶ 18–20; Mot. 12.) These services included “elevating the global image of the
Congo and assisting the Central Bank in modernizing their internal infrastructure.” (Compl. ¶ 27;
see Falkoff Decl. ¶ 18.) Despite having not received a single payment since the parties executed
the contract, Plaintiff continued performing its obligations under the agreement because
3
Case 1:15-cv-02079-KBJ-RMM Document 27 Filed 11/21/16 Page 4 of 30
Defendants repeatedly promised to make payment and “because [Plaintiff] could not withdraw
from these projects without consequence given the nature of Plaintiff’s work.” (Mot. 12; see
Falkoff Decl. ¶ 34.)
On or around April 2014, about a full year after payment became due, Plaintiff received a
letter, dated December 2013, from the President of the Congo. (See Falkoff Decl. ¶ 22; Mot. 13.)
In the letter, the President of the Congo thanked Plaintiff for its services and stated that, upon
receipt and confirmation of the letter, the Congo would send another delegation to Washington,
D.C. to make the full payment. (Id.) Plaintiff promptly contacted the Congo and confirmed
receipt of the letter, but Plaintiff did not receive any payment. (See Compl. ¶ 32; Falkoff Decl.,
Ex. C. [24-32] at 2; Mot. 13.)
The Congo subsequently promised full payment after receiving a “positive progress
report” from another visiting delegation. (Falkoff Decl. ¶¶ 24–25.) During the Washington, D.C.
visit, the delegates prepared a report “stating that operations were successful and thriving.”
(Falkoff Decl. ¶ 26.) The President of the Congo instructed the head delegate to return to the
Congo at the end of the week with the progress report. (Compl. ¶ 36; Falkoff Decl. ¶ 27; Mot.
13.) Instead, the delegate spent an additional week in the United States visiting his daughter,
which allegedly insulted the President of the Congo. (See Compl. ¶¶ 36–37; Falkoff Decl. ¶ 27;
Mot. 13.) As a result, the President of the Congo refused to review the delegation’s report or
make payment. (See Compl. ¶ 37; Falkoff Decl. ¶ 28; Mot. 13.)
Throughout 2014 and 2015, Defendants often promised they would pay the full amount
owed to Plaintiff under the Retainer Agreement, but they continued to fail in making their
payment. (See Falkoff Decl. ¶¶ 29–32; Mot. 13.) Still, Plaintiff continued providing services to
the Congo and the Central Bank with plans to “finish all pending projects as agreed upon.”
4
Case 1:15-cv-02079-KBJ-RMM Document 27 Filed 11/21/16 Page 5 of 30
(Compl. ¶ 39; Falkoff Decl. ¶ 34.) In doing so, Plaintiff depleted its own resources to cover
“substantial” costs, including salary, communication, and transportation expenses. (Compl. ¶ 40;
Falkoff Decl. ¶¶ 35–37.)
Moreover, Plaintiff asserts that its efforts to recover payment from Defendants precluded
it from accepting three additional contracts worth an estimated total of $5,016,000. (Mot. 24;
Falkoff Decl. ¶ 49.) In June and September of 2014, Plaintiff pre-negotiated two contracts for its
services, totaling $4,260,000. (See Falkoff Decl. ¶¶ 40–41.) The first contract was worth
$2,640,000, and the second contract was worth $1,620,000. (Id.) After reaching an agreement on
pricing and contract terms, however, Plaintiff “realized that, due to our efforts to seek the much
larger payment from the Congo, we would not have the time and resources to fully perform the
contract[s].” (Falkoff Decl. ¶ 40.) Plaintiff ultimately turned down the first two contracts. (See
Falkoff Decl. ¶ 44.)
In April 2015, Plaintiff scheduled a meeting in Arizona to finalize and sign a third pre-
negotiated contract, which was worth $756,000. (See Falkoff Decl. ¶ 47.) However, prior to the
meeting, Defendants contacted Adam Falkoff (“Mr. Falkoff”), President of CapitalKeys, to
inform him that another delegation was coming to Washington, D.C. to discuss payment and that
Mr. Falkoff “had to stay in Washington.” (Id.) After Mr. Falkoff explained that this would cost
him another business opportunity, Defendants assured Mr. Falkoff that the delegation would
arrive. (Id.) Mr. Falkoff therefore canceled his trip to Arizona. (Id.) Just before the delegation
was set to arrive, Defendants informed CapitalKeys that they would not be coming after all.
(Falkoff Decl. ¶ 48.) According to Plaintiff, by that time, “it was too late” for Mr. Falkoff to
travel to Arizona to sign the third contract. (Id.)
5
Case 1:15-cv-02079-KBJ-RMM Document 27 Filed 11/21/16 Page 6 of 30
In multiple attempts to collect payment over the years, Plaintiff sent nine invoices to
Defendants between May 2013 and August 2015. (See Compl. ¶ 66.) During that time,
Defendants did not challenge those bills and, instead, continued to make promises of payment
during their weekly conversations with Plaintiff. (Compl. ¶ 67; Falkoff Decl. ¶ 32.)
B. Legal Action
On December 23, 2015,3 Plaintiff filed this action against the Congo and the Central
Bank to recover the overdue payment from Defendants. (See ECF [4]; Compl. ¶¶ 42–71.)
Plaintiff alleges breach of contract, unjust enrichment in the alternative, account stated in the
alternative, and loss of business opportunities. (See Compl. ¶¶ 2, 42–71.) Specifically, Plaintiff
seeks $16,002,000 for damages under the contract, $5,016,000 for lost business opportunities, at
least $2,000,000 for prejudgment interest, and $827.60 for costs. (See Compl. ¶¶ 49, 58, 64; Mot.
22, 24–27; Falkoff Decl. ¶ 49.) That is, Plaintiff requests a Default Judgment in the amount of
$21,618,000, plus prejudgment interest and costs. (Mot. 1.)
In February 2016, the Clerk of this Court filed a Certificate of Mailing, certifying that
copies of the summonses, complaint, and notice of suit had been sent to Defendants, along with
French translations of each. (See Certificate of Mailing [15]; Declaration of W. Todd Miller
“Miller Decl.” [24-2] ¶¶ 5–6.) Shortly thereafter, Plaintiff filed returns of service for the Congo
and the Central Bank, along with proof of delivery showing that both packages were signed for.
(See Return of Service [18]; Return of Service [19]; Miller Decl. ¶ 6.)
Plaintiff indicates that based on its communication with Defendants, representatives of
each Defendant are aware of the lawsuit, and still have simply continued promising imminent
3
Plaintiff originally filed its complaint on December 1, 2015. (See ECF [1].) However, that filing was entered in
error. Plaintiff therefore filed a modified version of its complaint on December 23, 2015 and a summons was
subsequently issued. (See ECF [4].) Accordingly, the filing date of the complaint is December 23, 2015.
6
Case 1:15-cv-02079-KBJ-RMM Document 27 Filed 11/21/16 Page 7 of 30
payment without following through on their promises. (See Falkoff Decl. ¶¶ 33–34; Miller Decl.
¶¶ 7-8, Exs. U, V, W, X. [24-23]-[24-26]; Hearing Tr. 37:9–23.) Despite Defendants’ awareness
of the lawsuit, Defendants never entered an appearance in this case, so the Clerk of the Court
subsequently entered a default against Defendants on April 14, 2016 (See Clerk’s Entry of
Default [22]; Clerk’s Entry of Default [23].)
Plaintiff then filed the instant Motion for Default Judgment Against All Defendants. (See
Mot. 1.) In its Motion, Plaintiff contends that Defendants are liable for breach of contract, unjust
enrichment in the alternative, account stated in the alternative, and loss of business opportunities.
(See Mot. 7, 15–24.) Plaintiff also argues that an entry of default judgment in the amount
requested is supported by the evidence. (See Mot. 7.)
On September 16, 2016, the undersigned held an evidentiary hearing on Plaintiff’s
Motion (See July 26, 2016 Minute Order; Sept. 16, 2016 Minute Entry). During the hearing,
Plaintiff reiterated its request for damages in the amount of $21,618,000, plus prejudgment
interest and costs (See Hearing Tr. 4:3–7.) Plaintiff also introduced an exhibit of a December 1,
2015 invoice showing those amounts. (See Hearing Tr. 20:3–21.) In referring the Court to its
Motion, Plaintiff argued that its request for damages includes two elements: (1) the liquidated
damages amount of $16,002,000 and (2) the consequential or incidental damages, resulting in
lost business opportunities. (See Hearing Tr. 4:10–23.) Plaintiff noted that the liquidated
damages covered payment for subcontractors, travel, and communication. (See Hearing Tr.
12:19–25, 15:15–24.) Plaintiff also maintained that Defendants are aware of these claims. (See
Hearing Tr. 37:11–20.)
Mr. Falkoff then testified about Plaintiff’s services for Defendants, the reasons for
continuing to perform despite Defendants’ failure to pay, and the basis for Plaintiff’s lost
7
Case 1:15-cv-02079-KBJ-RMM Document 27 Filed 11/21/16 Page 8 of 30
business damages claim. He explained that Plaintiff’s services for Defendants were primarily to
help with “modernizing [the Central Bank’s] procedures and the way they did banking and
business which would in turn help the overall economy.” (Hearing Tr. 7:9–14.)
As for why Plaintiff continued to perform, Mr. Falkoff said Plaintiff relied on
Defendants’ promises of payment, articulating to the Court that what makes someone pay is the
ability to pay, reliance on the promise of payment, and the satisfaction of services. (See Hearing
Tr. 27:19–25.) He also explained that this was a services contract, not a goods contract, and that
Plaintiff could not just stop services and disrupt the Congo’s way of doing business. (See
Hearing Tr. 29:3–14.)
Regarding Plaintiff’s claim for lost business damages, Mr. Falkoff spoke about the three
pre-negotiated contracts. (See Hearing Tr. 21:20–25, 22:1–2.) He testified that Plaintiff turned
down those contracts because Plaintiff’s attempts to collect payment from Defendants was as if
Plaintiff took on another client. (See Hearing Tr. 25:15–18.) For the third contract in particular,
Mr. Falkoff did not believe anyone else would be as effective in meeting with the visiting
delegation because he had the closest relationship with Defendants. (See Hearing Tr. 23:1–21.)
Mr. Falkoff further explained that Plaintiff called Defendants about twice per week and
sometimes sent an invoice by mail, costing time and money. (See Hearing Tr. 38:4–12.) He also
explained Plaintiff’s interest in maintaining its good reputation and not “spread[ing] ourselves
too thin” by taking on too many clients while trying to collect payment from Defendants.
(Hearing Tr. 44:5–9.)
The hearing concluded with Plaintiff explaining that the $16,002,000 amount is owed to
Plaintiff regardless of the services or work Plaintiff performed; it is a liquidated amount that
parties agreed to pay upon signing the Retainer Agreement. (See Hearing Tr. 48:10–25.)
8
Case 1:15-cv-02079-KBJ-RMM Document 27 Filed 11/21/16 Page 9 of 30
II. JURISDICTION
A. Subject Matter Jurisdiction
The Foreign Sovereign Immunities Act (“FSIA” or “Act”) vests this Court with original
jurisdiction over actions against foreign states, so long as the foreign state is not entitled to
immunity under the Act’s relevant provisions. See 28 U.S.C. § 1330(a). A foreign state is
defined under the FSIA to include any political subdivision of the state, or an agency or
instrumentality of the state. See 28 U.S.C. § 1603(a). If the entity is an agency or instrumentality
of the state, the Plaintiff must demonstrate that the agency or instrumentality is a “separate legal”
entity from and an “organ” of the foreign state or, alternatively, that a foreign state or its political
subdivision holds a majority ownership interest. 28 U.S.C. § 1603(b). The Plaintiff must also
show that the agency or instrumentality of the state is neither a citizen of any state in the United
States nor originated under the laws of a third country. Id.Although foreign states are, by default, immune from suit under 28 U.S.C. § 1604, the
FSIA provides several exceptions to immunity that, if met, subject the foreign state to suit. 28
U.S.C. §§ 1605, 1607. Plaintiff points to two such exceptions, arguing that Defendants fall
under either one. (See Mot. 9, 10 n.1.) Under the first exception, a foreign state is not immune
from this Court’s jurisdiction if it has waived immunity, either explicitly or by implication. See
28 U.S.C. § 1605(a)(1). Alternatively, a foreign state may be subject to suit if the activity upon
which the action is based is commercial in nature and occurs inside the United States. See 28
U.S.C. § 1605(a)(2).
Defendants in this action are both foreign states under the FSIA. Congo is itself a foreign
state, thus qualifying under 28 U.S.C. § 1603(a). (See Compl. ¶ 7.) The Central Bank may be
characterized as an agency or instrumentality of the Congo, as it is evidently a separate legal
9
Case 1:15-cv-02079-KBJ-RMM Document 27 Filed 11/21/16 Page 10 of 30
entity, but acts “as the agent and alter ego of Congo,” thus arguably qualifying as an organ of the
foreign state. (Compl. ¶ 14.)
Plaintiff asserts that Defendants have implicitly waived their immunity from suit in a
manner sufficient under Section 1605(a)(1). (See Mot. 9–10.) This Court has held that a choice
of law clause, in which the foreign state agrees that the contract will be governed by the law of a
particular country, is sufficient to establish an implicit waiver of immunity. See Marlowe v.
Argentine Naval Comm’n, 604 F. Supp. 703, 708–09 (D.D.C. 1985); Ghawanmeh v. Islamic
Saudi Academy, 672 F. Supp. 2d 3, 9 (D.D.C. 2009) (noting that “there can be no more obvious
and implicit waiver of sovereign immunity than the sovereign’s express intent to subject itself to
the jurisdiction of a foreign court as demonstrated by a choice of law clause within a contract.”).
Defendants in this suit signed a contract, stating that “[t]his Agreement will be governed
by the laws of the District of Columbia without regard to principles of conflicts of law and a
court in said place shall be the exclusive location for any suit or proceeding relating to this
Agreement.” (Falkoff Decl. Ex. A at 7.) Having consented to subject their contractual dealings
with Plaintiff to United States law, Defendants have implicitly waived their sovereign immunity
under 28 U.S.C. § 1605(a)(1).
Alternatively, immunity may be waived under the theory of commercial activity upon
which the action is based. See 28 U.S.C. § 1605(a)(2). A qualifying activity includes either a
“commercial activity carried on in the United States by the foreign state,” or “an act performed
in the United States in connection with a commercial activity of the foreign state.” Id. For
example, “[c]ontracts for services are generally considered commercial activities when entered
into in the United States.” Kettey v. Saudi Ministry of Educ., 53 F. Supp. 3d 40, 50 (D.D.C.
2014).
10
Case 1:15-cv-02079-KBJ-RMM Document 27 Filed 11/21/16 Page 11 of 30
Authorized representatives from the Congo traveled to Plaintiff’s office in Washington,
D.C. to “formalize the parties’ agreement in writing.” (Mot. 10 n.1; see also Compl. ¶ 14.) The
contract at issue here was both executed and performed within the United States and thus falls
within the first category of a qualifying commercial activity. (See Compl. ¶ 14–19.) As
Plaintiff’s claim is based upon this activity, immunity may alternatively be waived under 28
U.S.C. § 1605(a)(2).
B. Personal Jurisdiction
The FSIA also vests this Court with personal jurisdiction over a foreign state for any
claim over which this Court also has subject matter jurisdiction, provided that service was
properly made pursuant to 28 U.S.C. § 1608. See 28 U.S.C. § 1330(b).
Section 1608(a)(3), governing service upon the Congo, requires that the Clerk of the
Court send a copy of the summons, complaint, and notice to the head of the ministry of foreign
affairs, along with a translation of each into the foreign state’s official language. Plaintiff duly
submitted copies and translations of each required document to the Clerk of this Court in
February 2016. (See Certificate of Clerk [15]; Return of Service [18].) The Clerk sent these
documents to Raymond Tshibanda, the head of the Congo’s Ministry of Foreign Affairs, and
later received confirmation that the package had been signed for. (See Mot. 8.) Thus, service
upon Congo was compliant with the requirements under Section 1608(a)(3).
Section 1608(b)(3)(B), governing service upon the Central Bank, requires the same
documents and translations to be sent directly to the agency or instrumentality to be served.
Service was identically effectuated upon the Central Bank, whose representative also signed for
the package. (See Certificate of Clerk [15]; Return of Service [19].) Thus, service upon the
Central Bank was equally compliant with the requirements under Section 1608(b)(3)(B).
11
Case 1:15-cv-02079-KBJ-RMM Document 27 Filed 11/21/16 Page 12 of 30
Service upon both Defendants was proper under Section 1608, and therefore this Court
has personal jurisdiction over Defendants under Section 1330(b).
III. CHOICE OF LAW
Generally, an FSIA defendant “is subject under the FSIA to federal common law for
determining the amount of damages a plaintiff can recover.” Hill v. Republic of Iraq, 328 F.3d
680, 684 (D.C. Cir. 2003). However, the parties to this suit entered an agreement stipulating that
the contract “will be governed by the laws of the District of Columbia without regard to
principles of conflicts of law and a court in said place shall be the exclusive location for any suit
or proceeding relating to this Agreement. ” (Falkoff Decl. Ex. A at 7.)
Contractual choice of law provisions are enforceable as long as there is no compelling or
countervailing reason making enforcement unreasonable. Milanovich v. Costa Crociere, S.P.A.,
954 F.2d 763, 766–67 (D.C. Cir. 1992); cf. M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1,
10–15 (1972) (addressing the enforceability of a forum-selection clause in a contract); see also
Restatement (Second) of Choice of Laws § 187 (1971). Choice of law provisions may be found
unreasonable if (1) fraud or overreaching induced their formation; (2) the plaintiff is then
deprived of his or her day in court; (3) the unfair nature of the chosen law may deprive the
plaintiff of a remedy; or (3) their enforcement would conflict with the forum state’s strong public
policy. Allen v. Lloyd’s of London, 94 F.3d 923, 928 (4th Cir. 1996); Cf. M/S Bremen, 407 U.S.
at 12; see also Restatement (Second) of Choice of Laws § 187 (1971).
These concerns are not at issue here. There have been no allegations of fraud or
overreaching, deprivation of rights under District of Columbia state law, or arguments for why
public policy dictates using federal common law. Moreover, Plaintiff regularly cites to District
of Columbia state statutes and common law in support of its argument. (See Mot. 15–27.)
12
Case 1:15-cv-02079-KBJ-RMM Document 27 Filed 11/21/16 Page 13 of 30
Accordingly, the law of the District of Columbia should be applied in determining Defendants’
liability and Plaintiff’s entitlement to damages.
However, in determining whether this Court may ultimately enter a default judgment, the
Federal Rules of Civil Procedure and the FSIA govern. Cf. Estate of Botvin ex rel. Ellis v.
Islamic Republic of Iran, 772 F. Supp. 2d 218, 227 (D.D.C. 2011) (applying the Federal Rules
and FSIA provisions to the Court’s legal standard for default judgment and standards of proof,
even though Israeli law governed both liability and damages); see also Reed v. Islamic Republic
of Iran, 439 F. Supp. 2d 53, 59–60, 65 (D.D.C. 2006) (applying the Federal Rules and FSIA
provisions to the Court’s legal standard for default judgment, even though Massachusetts state
law governed liability).
IV. LEGAL STANDARD
Under Federal Rule of Civil Procedure 55(a), the Clerk of the Court must enter a party’s
default “[w]hen a party against whom a judgment for affirmative relief is sought has failed to
plead or otherwise defend, and that failure is shown by affidavit or otherwise.” FED. R. CIV. P.
55(a). Pursuant to Rule 55(b), after the Clerk of the Court has entered a default, a court may,
upon the plaintiff’s application and notice to the defaulting party, enter a default judgment. FED.
R. CIV. P. 55(b)(2). “The determination of whether default judgment is appropriate is committed
to the discretion of the trial court.” Int’l Painters & Allied Trades Indus. Pension Fund v. Auxier
Drywall, LLC, 531 F. Supp. 2d 56, 57 (D.D.C. 2008) (citing Jackson v. Beech, 636 F.2d 831, 836
(D.C. Cir. 1980)). The standard for default judgment is satisfied where the defendant makes no
request to set aside the default and no suggestion that it has a meritorious defense. J.D. Holdings,
LLC v. BD Ventures, LLC, 766 F. Supp. 2d 109, 113 (D.D.C. 2011) (citing Int’l Painters &
13
Case 1:15-cv-02079-KBJ-RMM Document 27 Filed 11/21/16 Page 14 of 30
Allied Trades Indus. Pension Fund v. Auxier Drywall, LLC, 531 F. Supp. 2d 56, 57 (D.D.C.
2008).
Following the entry of default by the Clerk of the Court, the “defaulting defendant is
deemed to admit every well-pleaded allegation in the complaint.” Fanning v. Hotel Mgmt.
Advisors-Troy, LLC, 282 F.R.D. 280, 283 (D.D.C. 2012) (quoting Int’l Painters & Allied Trades
Indus. Pension Fund v. R.W. Amrine Drywall Co., 239 F. Supp. 2d 26, 30 (D.D.C. 2002)). While
a default is an admission of the facts cited in a complaint, it is “not an absolute confession by the
defendant of his liability and of the plaintiff’s right to recover.” Jackson v. Corr. Corp. of Am.,
564 F. Supp. 2d 22, 26–27 (D.D.C. 2008). Moreover, under the Foreign Sovereign Immunities
Act (“FSIA”), Plaintiff must “establish[] his claim or right to relief by evidence satisfactory to
the court” in order for the Court to enter judgment against a defaulting party. 28 U.S.C. §
1608(e). Thus, it remains for the Court to determine whether the unchallenged factual
allegations constitute a legitimate cause of action.
If liability is established, the court is still “required to make an independent determination
of the sum to be awarded unless the amount of damages is certain.” Robinson v. Ergo Solutions,
LLC, 4 F. Supp. 3d 171, 178 (D.D.C. 2014) (quoting Int’l Painters & Allied Trades Indus.
Pension Fund v. R.W. Amrine Drywall Co., 239 F. Supp. 2d 26, 30 (D.D.C. 2002)). Therefore,
an “FSIA default winner must prove damages in the same manner and to the same extent as any
other default winner.” Hill, 328 F.3d at 683–84 (internal citations omitted).
To this end, the Court may hold an evidentiary hearing to conduct an accounting,
determine the amount of damages, establish the truth of any allegation, or investigate any other
matter. FED. R. CIV. P. 55(b)(2). “[D]amages cannot be awarded on the basis of mere speculation
or guesswork . . .” Hill, 328 F.3d at 684 (internal citations omitted). The Court, however, “has
14
Case 1:15-cv-02079-KBJ-RMM Document 27 Filed 11/21/16 Page 15 of 30
considerable latitude in determining the amount of damages.” Boland v. Elite Terrazzo Flooring,
Inc., 763 F. Supp. 2d 64, 67 (D.D.C. 2011); see also Luna v. A.E. Eng’g Servs., LLC, 938 A.2d
744, 749 n.19 (D.C. 2007) (allowing the trial court considerable discretion in determining the
reasonableness of the requested damages).
V. ANALYSIS
A. Liability for Breach of Contract
In order to prove Defendants’ liability for breach of contract, Plaintiff must establish “(1)
a valid contract between the parties; (2) an obligation or duty arising out of the contract; (3) a
breach of that duty; and (4) damages caused by breach.” Francis v. Rehman, 110 A.3d 615, 620
(D.C. 2015) (quoting Tsintolas Realty Co. v. Mendez, 984 A.2d 181, 187 (D.C. 2009)). Under
this standard, Plaintiff’s allegations, taken as true, establish that Defendants breached their
contractual obligations.
First, Plaintiff must demonstrate “mutual assent of the parties to all the essential terms of
the contract.” Duffy v. Duffy, 881 A.2d 630, 633 (D.C. 2005). The contract in this case was
“accepted and agreed to” by Jean-Claude Masangu Mulongo, the Governor of the Central Bank.
(Falkoff Decl. Ex. A at 7; see Compl. ¶ 17.) For reasons set forth below, the undersigned is
persuaded that the Central Bank and the Congo assented to the agreement’s essential terms.
Plaintiff notes that under District of Columbia law, an agency relationship exists if there
is “evidence of the parties’ consent to establish a principal-agent relationship” and “evidence that
the activities of the agent are subject to the principal’s control.” Jackson v. Loews Washington
Cinemas, Inc., 944 A.2d 1088, 1097 (D.C. 2008) (quoting Henderson v. Charles E. Smith Mgmt.,
Inc., 567 A.2d 59, 62 (D.C. 1989)). As evidence of consent, the Central Bank executed the
contract under direct authorization from the President of Congo. (See Compl. ¶ 17, Falkoff Decl.
15
Case 1:15-cv-02079-KBJ-RMM Document 27 Filed 11/21/16 Page 16 of 30
¶ 8.) According to Plaintiff’s complaint, negotiation discussions prior to the contract’s execution
indicated that the Central Bank’s assent was dependent on the Congo’s authorization, that the
Congo would be equally bound by the agreement, and that all contract obligations would be
performed “under the control and at the direction of Congo.” (Compl. ¶ 14; Falkoff Decl. ¶ 4–5.)
As further evidence of a principal-agent relationship, Defendants’ conduct since the
parties came to an agreement has similarly reflected this understanding. The first and only
payment made by Defendants was ordered by the Office of the President of the Congo, and then
executed by wire transfer from the Central Bank. (See Compl. ¶ 13, Ex. B at 2; Falkoff Decl. ¶
3.) Thereafter, in June 2013, a delegate from the Congo visited Plaintiff’s office. (Compl. ¶ 25.)
Another delegate was sent by the President of the Congo in April 2014 and was thereafter
ordered to report directly to the President. (Compl. ¶ 33–37; Falkoff Decl. ¶ 27.) Indeed, most
assurances regarding payment came directly from the Congo and the President’s Office, rather
than from the Central Bank. (See Falkoff Decl. ¶ 17.) Moreover, the Congo, not the Central
Bank, sent letters thanking Plaintiff for its services, requested updates and progress reports, and
benefitted almost exclusively from Plaintiff’s performance. (See Compl. ¶¶ 31, 34; Falkoff Decl.
¶ 13, 19, 22–26, Ex. C; Mot. 18.)
In short, the undersigned believes both the Congo and the Central Bank consented to
establishing a principal-agent relationship and the Central Bank’s activities appear to be subject
to the Congo’s substantial control. As such, there is sufficient evidence in Plaintiff’s complaint
to establish a valid contract to which all parties assented.
Second, the parties’ Retainer Agreement, indeed, placed Defendants under an obligation
to compensate Plaintiff for its government relations and communication services in the
16
Case 1:15-cv-02079-KBJ-RMM Document 27 Filed 11/21/16 Page 17 of 30
remaining amount of $16,002,000, due upon the agreement’s execution. (See Compl. ¶ 16, Ex.
A.)
Third, except for the one-time payment of $600,000 made prior to the formalized
agreement, Defendants have failed to make any part of the remaining $16,002,000 payment since
signing the agreement on April 18, 2013. (See Compl. ¶¶ 13–14, 18, Ex. B.) This is despite
Plaintiff’s repeated attempts at collection and Defendants’ apparent knowledge of the
outstanding debt. (See Compl. ¶¶ 23, 26, 66.) As such, the undersigned concludes that
Defendants have been in breach of their obligation to pay $16,002,000 since April 18, 2013,
which is when the contract was executed and Defendants’ payment became due. (See Compl. ¶
14, Ex. A.)
Fourth, Plaintiff “has been deprived of the use of the money withheld” and has incurred
damages as a result of Defendants’ breach. Bragdon v. Twenty-Five Twelve Assocs. Ltd. P’ship,
856 A.2d 1165, 1171 (D.C. 2004) (quoting District of Columbia v. Pierce Assocs., Inc., 527 A.2d
306, 311 (D.C. 1987)). Pursuant to the contract, Plaintiff is owed liquidated damages, which is
the remaining $16,002,000 Defendants had to pay, regardless of the services Plaintiff provided.
(See Hearing Tr. 48:10–25.) Based on the unchallenged facts, the undersigned believes Plaintiff
has satisfied all four elements in establishing Defendants’ liability for breach of contract. 4
B. Damages
Finding Defendants liable for breach of contract, the undersigned turns to the question of
damages. In Plaintiff’s Motion for Default Judgment, Plaintiff requests compensatory damages,
prejudgment interest, and costs. (See Mot. 22–27.) Specifically, Plaintiff first seeks liquidated
damages and damages for lost business, making up its compensatory damages claim of
4
Finding the Defendants liable for breach of contract, the undersigned does not find it necessary to analyze
Plaintiff’s alternative claims of unjust enrichment and account stated.
17
Case 1:15-cv-02079-KBJ-RMM Document 27 Filed 11/21/16 Page 18 of 30
$21,618,000. (See Mot. 1, 7, 21.) Second, Plaintiff contends that the Court should award
prejudgment interest based on both its liquidated damages and lost business claims. (See Mot.
25–27.) Finally, regarding costs, Plaintiff requests $827.60 for the court filing fee and for its
service of process expenses. (Mot. 27; Miller Decl. ¶ 10.) Each of these damages claims will be
addressed in turn.
1. Compensatory Damages
To support its request for compensatory damages, Plaintiff submitted several exhibits,
including the parties’ Retainer Agreement and an invoice from Plaintiff to Defendants for the
initial $600,000 payment. (See Falkoff Decl. Ex. A, Ex. B.) Plaintiff also submitted a declaration
from Mr. Falkoff, describing, among other things, the many times Defendants have demonstrated
their awareness of both the debt and the lawsuit, as well as their intention to pay the full amount
owed to Plaintiff. (See Falkoff Decl. ¶¶ 9, 14, 17, 25, 30–32, 34.) Plaintiff divides its claim for
compensatory damages into two subcategories: (1) liquidated damages and (2) lost business
damages. For the reasons set forth below, the undersigned recommends awarding liquidated
damages and denying lost business damages.
a. Liquidated Damages
Having established a valid contract and Defendants’ breach thereof, Plaintiff is entitled to
the remaining amount owed. See Vector Realty Grp., Inc. v. 711 Fourteenth St., Inc., 659 A.2d
230, 234 n.8 (D.C. 1994). Plaintiff argues that the remaining $16,002,000 Defendants owe
Plaintiff is a liquidated debt. (See Mot 25–26.) A liquidated debt “is one which at the time it
arose . . . was an easily ascertainable sum certain.” Dist. Cablevision Ltd. P’ship v. Bassin, 828
A.2d 714, 731 (D.C. 2003) (internal quotation marks omitted) (quoting Dist. of Columbia v.
Pierce Assocs. Inc., 527 A.2d 306, 311 (D.C. 1987)).
18
Case 1:15-cv-02079-KBJ-RMM Document 27 Filed 11/21/16 Page 19 of 30
There can be little doubt that when Defendants breached their agreement with
CapitalKeys on April 18, 2013, they incurred an easily ascertainable debt of $16,002,000. (See
Falkoff Decl. Ex. A at 5.) In fact, the agreement, the invoice, and all the correspondence
between Plaintiff and Defendants reflect that same amount. (See Falkoff Decl. Ex. A, Ex. B.)
Moreover, the contract clearly states that the sum is “due upon signing.” (Falkoff Decl. Ex. A at
5.) Despite Plaintiff’s continued prompting and mailing of several invoices, Defendants have not
made any portion of this payment to date. (See Compl. ¶ 66; Falkoff Decl. ¶¶ 9, 14, 17, 25, 30–
32, 34, Ex. B.) Thus, this is an action to recover a liquidated debt, and there is sufficient
evidentiary basis for awarding the $16,002,000 Plaintiff demands under the agreement.
b. Damages for Loss of Business Opportunities
As for Plaintiff’s claim for loss of business opportunities, Plaintiff submitted the
declaration of Mr. Falkoff, detailing the three pre-negotiated contracts Plaintiff contends it was
unable to accept due to Defendants’ breach. (See Falkoff Decl. ¶¶ 39–50.) Plaintiff is careful to
note that the lost business damages did not arise because of its duties under the contract with
Defendants. (See Falkoff Decl. ¶ 39; Mot. 23–24.) Rather, Plaintiff claims its efforts to recover
payment from Defendants prevented it from ultimately accepting these three contracts. (See
Falkoff Decl. ¶¶ 39–41, 47–48.) Plaintiff maintains that because of “using extensive time and
resources in seeking the much larger amount due from Defendants,” Plaintiff had to forgo its
other business opportunities. (Mot. 23.) The undersigned, however, is not convinced.
Under District of Columbia law, “[t]he doctrine of avoidable consequences, also known
as the duty to mitigate damages, bars recovery for losses suffered by a non-breaching party . . .
that could have been avoided by reasonable effort and without risk of substantial loss or injury.”
Trs. of Univ. of Dist. of Columbia v. Vossoughi, 963 A.2d 1162, 1178 (D.C. 2009) (internal
quotation marks omitted) (quoting Edward M. Crough, Inc. v. Dep’t of Gen. Servs. of D.C., 572
19
Case 1:15-cv-02079-KBJ-RMM Document 27 Filed 11/21/16 Page 20 of 30
A.2d 457, 466 (D.C. 1990)). This doctrine “comes into play after a legal wrong has occurred, but
while some damages may still be averted, and bars recovery only for such damages.” Vossoughi,
963 A.2d at 1178 (emphasis in original). As such, “if some of these damages could reasonably
have been avoided by the plaintiff, then the doctrine of avoidable consequences prevents the
avoidable damages from being added to the amount of damages recoverable.” Foster v. George
Washington Univ. Med. Ctr., 738 A.2d 791, 795 n.6 (D.C. 1999) (quoting McCord v. Green, 362
A.2d 720, 725–26 (D.C. 1976)).
Plaintiff could have avoided these damages by performing on the three pre-negotiated
contracts. The first contract, in June 2014, was negotiated between CapitalKeys and the Congo
for services unrelated to the contract at issue in this action. (See Falkoff Decl. ¶ 40.) The
President of the Congo wanted Plaintiff to help with his re-election campaign. (Hearing Tr.
21:22–23.) The parties settled on a monthly price of $110,000 for a 24-month period and had
also agreed that the full amount of $2,640,000 would be due up front. (See Falkoff Decl. ¶ 40.)
The contract was ultimately not executed because, after these comprehensive negotiations,
Plaintiff “realized that, due to our efforts to seek the much larger payment from the Congo, we
would not have the time and resources to fully perform the contract.” (Id.)
The second contract, in September 2014, was negotiated between CapitalKeys and Sierra
Leone, with the parties agreeing to a payment of $1,620,000, also due up front. (See Falkoff
Decl. ¶ 41.) In exchange for the payment, Plaintiff would help with an event in London that
would ultimately help drive investment into Sierra Leone. (Hearing Tr. 21:23–25, 22:1–2.) Just
as with the first contract, CapitalKeys turned down this 36-month contract after negotiations had
concluded, again citing the “immense efforts” it was expending on seeking payment from
Defendants. (See Falkoff Decl. ¶¶ 41, 43–44.)
20
Case 1:15-cv-02079-KBJ-RMM Document 27 Filed 11/21/16 Page 21 of 30
The third contract was negotiated in April 2015 between CapitalKeys and a mining
company in Arizona. (See Falkoff Decl. ¶¶ 47–48.) As before, the parties settled on a seemingly
comprehensive set of terms and agreed to a one time up-front payment of $756,000 for services
rendered over an 18-month period. (See Falkoff Decl. ¶ 47.) Mr. Falkoff scheduled a meeting in
Arizona to finalize the agreement, but he later cancelled this meeting because he was informed
that a delegation from the Congo would be coming to see Plaintiff at the same time. (Id.) On the
day before the delegation was set to arrive, however, the Congo informed Mr. Falkoff that the
delegation would not be coming. (See Falkoff Decl. ¶ 48.) According to Mr. Falkoff, “it was too
late to meet with the mining company,” and Plaintiff was thus ultimately unable to accept this
contract. (Id.)
After reviewing evidence relating to these three contracts, the undersigned concludes
there is insufficient evidentiary basis for awarding the $5,016,000 Plaintiff demands for loss of
business opportunities.
First, Plaintiff has not provided the Court with copies of the three pre-negotiated
contracts or any other documents illustrating Plaintiff’s lost business damages involving the three
contracts. Instead, during the evidentiary hearing, Plaintiff pointed the Court to the declaration
given by Mr. Falkoff as evidence of the three contracts. (See Hearing Tr. 42:24–25, 43:1–15.)
Without more evidence, such as copies of the contracts or any other proof of the negotiations
behind the set prices and duration of the work, the Court would be taking part in “mere
speculation or guesswork” without having even a reasonable estimate of data. Havilah Real
Prop. Servs., LLC v. VLK, LLC, 108 A.3d 334, 352 (D.C. 2015).
Second, even if Defendants had provided more evidence of the three pre-negotiated
contracts, the undersigned believes Plaintiff’s lost business opportunities were reasonably
21
Case 1:15-cv-02079-KBJ-RMM Document 27 Filed 11/21/16 Page 22 of 30
avoidable since Plaintiff could have ceased its performance immediately after Defendants failed
to pay Plaintiff upon signing the Retainer Agreement on April 18, 2013. However, Plaintiff
argues that this was a services contract and not a goods contract, so it could not just stop its
performance and disrupt Defendants’ way of doing business. (See Hearing Tr. 11:11–22.) The
undersigned does not believe the distinction between a goods contract and a services contract
plays any importance here. In fact, the parties’ agreement contains a provision, stating that
“[f]ailure by Client to pay subsequent professional service and expense fees, if required by this
agreement and according to the schedule outlined above, will result in suspension of work by CK
for Client.” (Falkoff Decl. Ex. A at 5.)
Moreover, at the time of the first contract in June 2014, about fourteen months had
elapsed since Defendants’ failure to pay in April 2013, arguably amounting to a material or even
total breach of the agreement on Defendants’ part. (See Falkoff Decl. ¶¶ 1, 40); see also, e.g.,
3511 13th St., LLC v. Lewis, 993 A.2d 590, 592 (D.C. 2010); Siegel v. Banker, 486 A.2d 1163,
1165 (D.C. 1984) (“[T]he failure by one of the parties to perform his part of the obligation within
the time prescribed discharges the other from all liability under the contract.”). During these
fourteen months, Defendants repeatedly assured Plaintiff that payment was forthcoming and
repeatedly failed to follow through with these promises. (See Falkoff Decl. ¶¶ 9, 14, 16–17, 22–
32, 34.) Yet, according to the contract, it was when Defendants failed to make the initial
payment that Plaintiff should have ceased its performance.
Even if Defendants’ immediate failure to pay in April 2013 had not alarmed Plaintiff, and
even if their repeated empty promises over the course of the following year had not given
Plaintiff pause, Defendants’ multiple self-imposed conditions on Defendants’ existing
performance obligation—such as the need for a positive progress report— should have indicated
22
Case 1:15-cv-02079-KBJ-RMM Document 27 Filed 11/21/16 Page 23 of 30
that payment was neither imminent nor certain. See generally Sisco v. GSA Nat’l Capital Fed.
Credit Union, 689 A.2d 52, 57 n.5 (D.C. 1997) (citing the fundamental principle that a “promise
to perform pre-existing duties [is] not sufficient consideration to alter obligation”). Instead, by
its own admission, Plaintiff continued “putting faith in the continued promises and reassurances
of representatives of the Congo that payment was imminent.” (Falkoff Decl. ¶ 51.)
Third, Plaintiff’s claim that it did not have time to perform on any other contracts while it
was attempting to collect payment from Defendants lacks support. Plaintiff contends that the
amount of time and resources it spent prevented Plaintiff from performing other work because it
was as if Plaintiff had taken on another client in trying to get Defendants to make payment. (See
Falkoff Decl. ¶¶ 36–46; Hearing Tr. 25:14–24.) However, Plaintiff’s accounts regarding its
efforts are inconsistent. Plaintiff said “[i]t was a daily effort to communicate with [Defendants]
and figure out what was going on over there as to why there was a delay in our payment.”
(Hearing Tr. 25:22–24) (emphasis added). Contrary to that, Mr. Falkoff stated that “[Plaintiff]
speak[s] with them probably twice a week,” costing about $50 a week to call over there and take
on this “continuous separate project.” (Hearing Tr. 38: 4–12.) If Plaintiff has to send an invoice,
it would do that as well.5 (Id.)
Yet, Plaintiff found the time to pre-negotiate each of the three contracts, and even
formalized their payment structure. (See Falkoff Decl. ¶ 39–41, 47.) All three of the negotiations
for these contracts occurred during the same time period Plaintiff was attempting to collect its
overdue payment from Defendants. (See Falkoff Decl. ¶¶ 39–49.) Therefore, the undersigned is
not convinced that Plaintiff was not able to perform on these contracts.
5
Plaintiff did not send an invoice every week but, rather, sent a total of nine invoices between May 12, 2013 and
August 5, 2015. (Compl. ¶ 66.) Similar to the telephone calls, sending invoices to Defendants was also not a daily
effort.
23
Case 1:15-cv-02079-KBJ-RMM Document 27 Filed 11/21/16 Page 24 of 30
Fourth, regarding the third pre-negotiated contract, it is possible Plaintiff had other
options besides cancelling Mr. Falkoff’s meeting in Arizona and waiting in Washington, D.C. for
the delegation to arrive.6 After Defendants assured Plaintiff that a delegation would arrive, Mr.
Falkoff admittedly “canceled [his] trip to Tucson because receiving the overdue payment . . . was
more important to [their] business than a much smaller contract.” (Falkoff Decl. ¶ 47.) Mr.
Falkoff claims that, once the delegation informed Plaintiff that they were no longer coming, it
was “too late” to go to Arizona and meet with the mining company. (Falkoff Decl. ¶ 48.) Mr.
Falkoff contends that, as a result, Plaintiff lost the contract. (Mot. 14.)
However, Plaintiff’s suggestion that not showing up to the meeting resulted in the
complete dissolution of the pre-negotiated contract is troublesome. After all, Plaintiff and the
mining company participated in negotiations and subsequently decided on a comprehensive set
of terms whereby Plaintiff would assist the mining company with governmental affairs over an
18-month period in exchange for an up-front payment of $756,000. (Falkoff Decl. ¶ 47.)
Following their oral agreement, Mr. Falkoff scheduled a trip to Tucson, Arizona to meet with the
mining company’s chief executive officer and sign the contract. (Id.) That is, all that was left to
do in order to finalize the contract, worth almost three quarters of a million dollars, was to find
the time to go to Arizona and sign the agreement.
Despite Defendants alerting Plaintiff the day before their scheduled arrival that they were
no longer visiting, it is hard to believe Plaintiff had no other option for executing the contract
with the mining company when everything but the signing of the contract was already finished.
6
Plaintiff did not sufficiently explain why Mr. Falkoff could not delegate authority for another person to attend the
meeting in Arizona or, alternatively, for another person to meet with the visiting delegation. (Hearing Tr. 15:2–25,
16:1–23, 17:4–19, 22:3–25, 23:1–21, 24:3–25, 25:1–10; see also Falkoff Decl. ¶¶ 47–48.) Instead, Mr. Falkoff
stated that he decided to take a “calculated risk” in staying in Washington, D.C. to meet with the delegation, but he
did not answer the Court’s question of why someone else could not go to Arizona to finalize the other contract.
(Hearing Tr. 22:23–25, 23:1–21.)
24
Case 1:15-cv-02079-KBJ-RMM Document 27 Filed 11/21/16 Page 25 of 30
It is also not clear to the undersigned why Plaintiff could not authorize another person to travel to
Arizona to sign the agreement or why, alternatively, Mr. Falkoff could not find another day or
another flight in order to both welcome the delegation and go to Arizona. Given the importance
Plaintiff places on its reputation, it is difficult to understand why Plaintiff knowingly, and
admittedly, jeopardized its pre-negotiated contract with the mining company when it could have
made efforts to meet with the visiting delegation and with the mining company. (See Hearing Tr.
24:10–19.) Regardless of its reasoning, Plaintiff cannot then allege Defendants are responsible
for Plaintiff’s inaction with the third contract.
The undersigned believes it was unreasonable for Plaintiff to continue efforts to collect
payment and accrue damages at the expense of accepting existing pre-negotiated contracts.
Moreover, the undersigned is not convinced that Plaintiff’s efforts to secure payment were so
taxing that they prevented Plaintiff from performing contracts that Mr. Falkoff is “confident” it
would have otherwise been able to perform. (Falkoff Decl. ¶ 42.) Plaintiff has not sufficiently
proven that, were it not occupied with placing phone calls and sending invoices to Defendants, it
surely would have had the time required to perform under these contracts. (See Falkoff Decl. ¶
37.) The alleged lost business from the three contracts was thus not only reasonably avoidable,
but the very existence of the loss is uncertain. As this Court may not award damages “based on
mere speculation or guesswork,” the undersigned does not recommend awarding Plaintiff
damages for loss of business opportunities. Havilah Real Prop. Servs., LLC at 108 A.3d 352.
2. Prejudgment Interest
Prejudgment interest is “an element of complete compensation to a creditor for the loss of
use of money that a debtor wrongfully withholds.” Dist. Cablevision Ltd. P’ship v. Bassin, 828
25
Case 1:15-cv-02079-KBJ-RMM Document 27 Filed 11/21/16 Page 26 of 30
A.2d 714, 732 (D.C. 2003) (internal quotation marks omitted) (quoting Riggs Nat’l Bank of
Washington, D.C. v. Dist. of Columbia, 581 A.2d 1229, 1253 (D.C. 1990)).
Under D.C. Code § 15–108, Plaintiff is entitled to recover prejudgment interest in an
action to recover a liquidated debt,7 if interest is payable by contract, law, or usage. See Bassin,
828 A.2d at 731. However, district courts have wide discretion in terms of awarding
prejudgment interest. See Burke v. Groover, Christie & Merritt, P.C., 26 A.3d 292, 304–05
(D.C. 2011); see also Fed. Mktg. Co. v. Virginia Impression Products Co., Inc., 823 A.2d 513,
531–33 (D.C. 2003); Riggs, 581 A.2d at 1256; House of Wines, Inc. v. Sumter, 510 A.2d 492,
499 (D.C. 1986). Here, Plaintiff seeks prejudgment interest for its liquidated damages, as well as
for its damages relating to loss of business opportunities.
a. Prejudgment Interest on Liquidated Damages
Plaintiff argues that prejudgment interest should be awarded based on custom and usage.
(See Mot. 25.) Both this Court and District of Columbia courts have noted that in breach of
contract cases, “it is indeed customary to pay interest on funds that are withheld and not paid
when due.” Bragdon, 856 A.2d at 1172 (citations omitted); see also Bassin, 828 A.2d at 731.
Plaintiff also contends that “Defendants are culpable in the delay as they have
consistently insisted that they would be paying . . . in full on many, many occasions.” (Mot. 26.)
However, the undersigned does not believe this is entirely accurate. While it is indeed
customary to award prejudgment interest when a party withholds funds, it is surely not
customary for Plaintiff to delay litigation for almost two years after the other party breaches the
contract, as is what happened in this case. (See Hearing Tr. 37: 22–25.) Plaintiff explains that it
7
Although D.C. Code 15–109 also applies here, being that it is a breach of contract claim, the undersigned does not
address that Section after already recommending that Plaintiff’s compensatory damages claim be categorized as a
liquidated debt. Accordingly, the undersigned refers to D.C. Code 15–108 since that Section particularly addresses
interest on a liquidated debt.
26
Case 1:15-cv-02079-KBJ-RMM Document 27 Filed 11/21/16 Page 27 of 30
took “a lot of heartfelt searching . . . and hesitation . . . before Mr. Falkoff decided to resort to the
U.S. courts.” (Hearing Tr. 31: 22–24.) Moreover, Plaintiff claimed the decision to delay
litigation was one that Mr. Falkoff made “as a business person.” (Hearing Tr. 35:11–21.) It is
clear to the undersigned that, while the D.C. Code supports the award of prejudgment interest on
liquidated debt, this situation where Plaintiff causes unwarranted delay contradicts the intent of
the statute.
Therefore, the undersigned believes Plaintiff should receive prejudgment interest, but the
interest should begin to accrue at the time Plaintiff filed its complaint, rather than at the time
Defendants failed to pay upon signing the contract. That is, the undersigned believes “the
equities in this case do not support an award of prejudgment interest from the date of the first
violation . . . but rather favor an award beginning on a later date.” Kansas v. Colorado, 533 U.S.
1, 14 (2001); see also Gen. Motors Corp. v. Devex Corp., 461 U.S. 648, 657 (1983) (determining
“it may be appropriate to limit prejudgment interest, or perhaps even deny it altogether, where
the [plaintiff] has been responsible for undue delay in prosecuting the lawsuit”).
Further, even if Plaintiff can persuade the Court that its delay is understandable, “there is
no doubt that the interests of both [parties] would have been served if the claim had advanced
promptly after its basis became known.” Kansas, 533 U.S. at 16. Additionally, it was “uniquely
in [Plaintiff’s] power to begin the process by which those damages would be quantified.” Id.Accordingly, the undersigned believes Plaintiff is entitled to $16,002,000 in
compensatory damages. Moreover, since breach of contract cases are typically accompanied by
an award of prejudgment interest, the undersigned recommends that Plaintiff is also entitled to
prejudgment interest based on custom and usage, with the interest starting to accrue at the date
27
Case 1:15-cv-02079-KBJ-RMM Document 27 Filed 11/21/16 Page 28 of 30
the complaint was filed, rather than when the injury occurred, due to Plaintiff’s unwarranted
delay in bringing suit for the breach.
Unless fixed by contract, the rate of interest for forbearance of money under D.C. Code §
28–3302 is calculated at six percent per annum. This should be awarded as simple, rather than
compound, interest because the contract does not include any provision regarding the issue.
When the agreement is silent on the issue of awarding simple or compound interest, courts
generally do not award compound interest. See Allen v. Yates, 870 A.2d 39, 51 (D.C. 2005)
(holding that “because the parties did not provide for compound interest, interest . . . should be
calculated on the principal balance alone”); see also Rastall v. CSX Transp., Inc., 697 A.2d 46,
53 (D.C. 1997) (determining that, “[a]bsent a contractual provision, prejudgment and judgment
interest are not usually compounded”).
From December 23, 2015, when Plaintiff filed the complaint, to the present day, the
unpaid balance on the liquidated amount remains at $16,002,000. (See Mot. 22.) Defendants
thus owe $881,207.45 in prejudgment interest during this time period, calculated at six percent
per annum.8 In sum, to date, Defendants owe Plaintiff $16,002,000 for the principal, plus
$881,207.45 for interest on the unpaid balance, totaling $16,883,207.45.
b. Prejudgment Interest on Lost Business Opportunities
Plaintiff also seeks prejudgment interest on the damages for loss of business
opportunities. (See Mot. 25.) As discussed earlier, the undersigned does not believe Plaintiff is
entitled to lost business damages, so this request is moot.
However, even if the Court awards Plaintiff damages for the unexecuted contracts, the
undersigned recommends that it is improper to award prejudgment interest on the lost business
8
This is the amount of prejudgment interest through the date this Report and Recommendation was filed.
28
Case 1:15-cv-02079-KBJ-RMM Document 27 Filed 11/21/16 Page 29 of 30
damages. While the lost business perhaps constitutes an easily ascertainable sum insofar as the
contracts had been pre-negotiated for set prices, these additional damages are not a part of the
liquidated debt Plaintiff seeks to recover, as required under D.C. Code § 15-108. Moreover,
Plaintiff has not pointed to any case or otherwise demonstrated that it is customary to pay interest
on lost business damages. (See Mot. 25–27.) Rather, prejudgment interest serves to compensate
Plaintiff “for the loss of use of money that a debtor wrongfully withholds.” Bassin, 828 A.2d at
732. With its lost business claim, Plaintiff does not seek to recover money that Defendants
wrongfully withheld and is thus not entitled to prejudgment interest on the lost business
damages.
3. Costs
Plaintiff asks the Court to award $827.60 in costs, consisting of a $400.00 court filing fee
and $427.60 for service of process expenditures. (Miller Decl. ¶ 10, Ex. Z. [24-28]) Under FED.
R. CIV. P. 54(d), “costs—other than attorney's fees—should be allowed to the prevailing party.”
A party who prevails under a default judgment is equally entitled to costs incurred in the
prosecution of this action. See Limbach Co., LLC v. Ten Hoeve Bros., LLC, 126 F. Supp. 3d 105,
109–110 (D.D.C. 2015). Accordingly, the undersigned recommends that Plaintiff be awarded
those costs that qualify under 28 U.S.C. § 1920, which includes fees of the Clerk and Marshal.
VI. RECOMMENDATION
Based on consideration of the record, pleadings, exhibits entered into evidence, and the
testimony given at the hearing, the undersigned recommends that the Court issue a Default
Judgment in favor of Plaintiff CapitalKeys, LLC against Defendants Democratic Republic of
Congo and Central Bank of the Democratic Republic of the Congo. The undersigned further
recommends the Court award Plaintiff $16,002,000 in compensatory damages, $881,207.45 in
29
Case 1:15-cv-02079-KBJ-RMM Document 27 Filed 11/21/16 Page 30 of 30
prejudgment interest on the principal unpaid balance, and $827.60 for costs. Thus, the
recommended total award should be $16,884,035.05, plus any remaining prejudgment interest, at
an annual interest rate of six percent as simple interest, after the date of this Report and
Recommendation.
VII. REVIEW BY THE DISTRICT COURT
The parties are hereby advised that under the provisions of Local Rule 72.3(b) of the
United States District Court for the District of Columbia, any party who objects to the Report
and Recommendation must file a written objection thereto with the Clerk of this Court within 14
days of the party’s receipt of this Report and Recommendation. The written objections must
specifically identify the portion of the report and/or recommendation to which objection is made,
and the basis for such objections. The parties are further advised that failure to file timely
objections to the findings and recommendations set forth in this report may waive their right of
appeal from an order of the District Court that adopts such findings and recommendation. See
Thomas v. Arn, 474 U.S. 140 (1985).
DATED: _____11/21/2016_______ ____________/s/______________________
ALAN KAY
UNITED STATES MAGISTRATE JUDGE
30