Free Opening Brief in Support - District Court of Delaware - Delaware

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IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF DELAWARE ROBERT D. CHRIST, Plaintiff, v. BRETT J. CORMICK and ELAN SUISSE INTERNATIONAL HOLDINGS (USA) LLC, Defendants. ELAN SUISSE LTD., Plaintiff, v. ROBERT D. CHRIST, Defendant. ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) )

C.A. No. 06-275-GMS

C.A. No. 07-60-GMS

ROBERT D. CHRIST'S OPENING MEMORANDUM OF LAW IN SUPPORT OF HIS MOTION FOR ENTRY OF DEFAULT JUDGMENT AND ATTORNEYS' FEES Robert D. Christ respectfully submits this memorandum of law in support of his motion, pursuant to Federal Rules of Civil Procedure 54(d)(2) and 55(b)(2), for entry of judgment against Brett J. Cormick, Elan Suisse International Holdings (USA) LLC ("Elan Suisse USA"), and Elan Suisse Ltd. ("Elan Suisse UK") awarding compensatory and punitive damages plus costs, interest, attorneys' fees and expenses: Background On May 8, 2008, the Court held a hearing to consider Mr. Christ's Motion for Sanctions (D.I. 115 in C.A. No. 06-275; D.I. 73 in C.A. No. 07-60). At the conclusion of that hearing, the Court granted Mr. Christ's unopposed motion and awarded default judgment in Mr. Christ's favor on his claims in Civil Action No. 06-275. See Ex. A hereto (Transcript of May 8, 2008

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Hearing) at 16. The Court further dismissed all counterclaims against Mr. Christ in Civil Action No. 06-275 as well as the claims alleged against him in Civil Action No. 07-60. See id. at 16, 19-20. On May 12, 2008, the Court entered an order implementing its rulings (D.I. 127 in C.A. No. 06-275; D.I. 83 in C.A. No. 07-60). As the Court and counsel discussed at the May 8, 2008 hearing, the only remaining issue for the Court to resolve is the amount of damages awarded to Mr. Christ in his default judgment against Mr. Cormick and Elan Suisse USA. See Ex. A at 17-19. Related to that issue is whether Mr. Christ is entitled to an award of attorneys' fees and expenses he incurred in defending against the claims brought by Elan Suisse UK, and later abandoned, in Civil Action No. 07-60. See id. at 19-20. Accordingly, Mr. Christ has moved pursuant to Rule 55(b)(2) for entry of judgment in an amount to be set by the Court. Mr. Christ respectfully requests that the Court enter judgment in the total amount set forth and discussed below. Argument In all cases where the clerk is not authorized to enter default judgment "for a sum certain," a party seeking judgment by default is required to apply to the Court. See Fed. R. Civ. P. 55(b). The Court is then authorized to conduct hearings or consider such evidence as it deems necessary to determine the appropriate amount of damages. See id.; 10 Moore's Fed. Practice § 55.30[4] (3d ed. 2007 Supp.). As the parties' counsel represented to the Court on May 8, 2008, there is no dispute that Mr. Christ is entitled to, at a minimum, an award of $250,000 to compensate him for the funds he initially wired to Mr. Cormick and which form the basis for Mr. Christ's claims. See Ex. A at 16. In addition to that sum, Mr. Christ seeks: (1) further compensatory damages flowing from the wrongs alleged in Mr. Christ's amended complaint; (2) punitive damages; (3) an award of attorneys' fees and expenses; and (4) pre-judgment interest. -2-

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I.

Compensatory Damages. The purpose of compensatory damages is to make the plaintiff whole. Calhoun v.

Yamaha Motor Corp., 216 F.3d 338, 347 (3d Cir. 2000). Therefore, compensatory damages include consequential damages for harm that "does not flow directly and immediately from the act of the party, but only some of the consequences or results of such act." Deisler v. McCormack Aggregates Co., 54 F.3d 1074, 1083 n.16 (3d Cir. 1995). In tort cases (such as Mr. Christ's fraud claim for which Mr. Cormick has been found liable in default), the measure of damages includes "those reasonably foreseeable at the time of the commission of the tortious act or omission." Zippertubing Co. v. Teleflex Inc., 757 F.2d 1401, 1412-13 (3d Cir. 1985). It is by these standards that the Court should determine the compensatory damages to which Mr. Christ is entitled. As explained below, in addition to the $250,000 that is undisputed, there are several categories of damages that Mr. Christ suffered as a proximate result of defendants' conduct and for which he should be compensated. A. Expenses Incident to Mr. Christ's "Investment."

Prior to making his "investment," Mr. Christ incurred additional expenses as a direct result of Mr. Cormick's fraud. For example, Mr. Christ spent $5,000 in travel expenses in order to meet with Mr. Cormick and representatives of BNP Paribas in London in early March 2004. See Affidavit of Robert D. Christ, dated May 30, 2008 ("Christ Aff.") ¶ 4. This meeting was called at Mr. Cormick's insistence and was intended by Mr. Cormick to induce Mr. Christ to "invest" with Mr. Cormick's business venture. Mr. Christ also spent $225.00 on a durable Pelican hard case which Mr. Cormick needed to transport embroidered "Elan Suisse" shirts (also purchased at Mr. Christ's expense) to Zimbabwe in an effort to promote the purported business. See id.

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In 2004, when Mr. Christ reasonably believed, in reliance on Mr. Cormick's fraudulent statements, that he was working with Mr. Cormick toward launching the Elan Suisse business, he personally incurred $4,000 in communications expenses related to that venture. See Christ Aff. ¶ 5. At the same time, Mr. Christ also devoted significant amounts of time to Elan Suisse that he otherwise would have spent earning revenues for his underwater robotic exploration business, SeaTrepid. Based on Mr. Christ's then-current billing rate ($1,125 per day), he lost $315,000 in revenues in 2004 by spending 280 days working on the Elan Suisse business which later turned out to be fraudulent and illusory. See id. ¶ 6. B. Expenses Relating to Mr. Christ's Investigation of Mr. Cormick and Elan Suisse.

Once Mr. Christ realized that he had been defrauded by Mr. Cormick, he undertook nearly four years of investigation into Mr. Cormick, his past and other victims of his fraudulent scams. This investigation not only was a reasonable consequence of defendants' actions, it also formed the basis for the claims alleged in this action ­ claims for which Mr. Cormick ultimately conceded liability. Specifically, Mr. Christ estimates that he has spent the equivalent of 400 working days investigating Mr. Cormick and supporting his legal claims against him, time which otherwise could have been spent on SeaTrepid business. See Christ Aff. ¶ 8. Therefore, based on Mr. Christ's current billing rate of $1,475 per day, defendants' actions have cost Mr. Christ $590,000 in lost income. See id. Mr. Christ also incurred $4,500 in expenses for traveling to the United Kingdom in June 2007 in order to interview fellow victims of Mr. Cormick and further his investigation. See id.

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II.

Punitive Damages. When considering tort or breach of contract claims, federal courts look to applicable state

law to determine whether and to what extent to award punitive damages. See, e.g., Fineman v. Armstrong World Indus., Inc., 980 F.2d 171, 196 (3d Cir. 1992); Sterner v. Wesley College, Inc., 747 F. Supp. 263, 268-70 (D. Del. 1990). Under Delaware law, an award of punitive damages is appropriate in cases of "particularly reprehensible" conduct where a defendant acted recklessly or was motivated by malice or fraud. Jardel Co. v. Hughes, 523 A.2d 518, 529 (Del. 1987). Accord 2600 Woodley Rd. Joint Venture v. ITT Sheraton Corp., 2002 U.S. Dist. LEXIS 439, at *12 (D. Del. Jan. 10, 2002), aff'd in part, rev'd in part on other grounds, 2004 U.S. App. LEXIS 10230 (3d Cir. May 25, 2004). Punitive damages may be awarded for breach of contract claims if a defendant's misconduct was "wanton and willful." American Original Corp. v. Legend, Inc., 652 F. Supp. 962, 969 (D. Del. 1986). There can be little question that punitive damages should be awarded here, where Mr. Cormick has, by his default, admitted to liability for intentionally and maliciously defrauding Mr. Christ. After he had misappropriated $250,000 from Mr. Christ, Mr. Cormick then agreed to repay those funds to Mr. Christ but intentionally breached that contract (even having Mr. Christ search his bank account for the promised funds which were never sent). Mr. Cormick's misconduct then was compounded by four years of obstruction, during which time Mr. Cormick deliberately and continually threw up roadblocks in legal proceedings pending in two countries in an effort to hinder Mr. Christ's legal efforts at reclaiming Mr. Cormick's ill-gotten gains. The last of these roadblocks was Mr. Cormick's refusal to submit to a deposition in this litigation, an act of defiance that ultimately led to the Court's entry of default. In sum, Mr. Cormick's wanton and willful misconduct justifies an award of punitive damages, which Mr. Christ respectfully requests in an amount to be set by the Court. -5-

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III.

Attorneys' Fees. Under its inherent equitable powers, the Court may award attorneys' fees when an

opposing party has conducted litigation "in bad faith, vexatiously, wantonly, or for oppressive reasons." Chambers v. NASCO, Inc., 501 U.S. 32, 45-46 (1991). Here, Mr. Cormick's conduct in defending against Mr. Christ's claims ­ as well as asserting baseless counterclaims against Mr. Christ ­ has been nothing but an exercise in bad faith. First, when Mr. Christ originally filed suit in South Africa, Mr. Cormick contested that forum's personal jurisdiction by claiming that the challenged conduct did not take place there. See Christ Aff. ¶ 9. Later, in the litigation before this Court, Mr. Cormick took the complete opposite position, arguing that his presence in South Africa required that South African law be applied to certain of the parties' claims. See Op. Mem. in Support of Motion to Determine Applicable Law (D.I. 52 in C.A. No. 06-275). Unfortunately, this was not the only time Mr. Cormick was untruthful to this and other tribunals. When Elan Suisse Ltd. (at Mr. Cormick's direction) filed its own action against Mr. Christ in Pennsylvania ­ an action which Judge Pratter of the Eastern District of Pennsylvania already has found was filed in a bad faith attempt to avoid this Court's jurisdiction, see Elan Suisse Ltd. v. Christ, 2006 WL 3838237, at *4 n.13 (E.D. Pa. Dec. 29, 2006) ­ it alleged that it was a South African corporation. At oral argument before the U.S. District Court for the Eastern District of Pennsylvania, counsel for Elan Suisse Ltd. confirmed that it was, in fact, Elan Suisse (Pty) Ltd., the South African corporation that was a defendant before this Court. See id. at *3. Once that action was transferred to this Court, however, Mr. Cormick abruptly changed course, arguing instead ­ contrary to the admissions of his counsel and his own pleadings ­ that Elan Suisse Ltd. was domiciled in the United Kingdom. See Mem. in Opp. to Motion to Consolidate Actions (D.I. 20 in C.A. No. 07-60). As Mr. Christ later pointed out, however, Mr. Cormick has twice sought to dissolve that British entity, an act that would render its claims a nullity. It was -6-

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for these reasons, as well as Elan Suisse Ltd.'s voluntary dismissal of its entirely baseless Lanham Act claims in the face of Mr. Christ's motion for judgment on the pleadings, that Mr. Christ previously requested that the Court award his fees expended in defending against Elan Suisse Ltd.'s frivolous claims, a request that remains pending before the Court. See Reply Br. in Support of Motion for Judgment on the Pleadings (D.I. 42 in C.A. No. 07-60). At a minimum, therefore, Mr. Christ should be awarded $40,661.46 to compensate him for the fees and expenses incurred in connection with Civil Action No. 07-60. See Christ Aff. ¶ 13. Mr. Cormick's bad faith has not been limited to that single action, however. In fact, Mr. Cormick's entire strategy in defending against Mr. Christ's allegations ­ whether in South Africa or in this Court ­ appears to have been to avoid resolution of the merits at all costs, by whatever procedural means necessary. As discussed above, Mr. Cormick convinced a South African court that it lacked personal jurisdiction over him, through factual arguments which were inconsistent with statements he later made to this Court under oath. Mr. Cormick then unsuccessfully moved to be dismissed from this action on personal jurisdiction grounds. Once this Court denied that motion and subjected Mr. Cormick to its jurisdiction, Mr. Cormick finally was faced with confronting discovery into his fraudulent conduct. Mr. Cormick's subsequent attempts to evade that discovery through a series of ever-changing excuses were well-documented in Mr. Christ's motion for sanctions, which the Court granted in awarding a default against Mr. Cormick. The fact that Mr. Cormick then completely abandoned his defense of this action, and ceased all communications with his counsel, confirms that he never intended to try the merits of Mr. Christ's claims. Instead, Mr. Cormick strung out adjudication of Mr. Christ's allegations as long as possible, while at the same time wasting this Court's time and resources, for more than two years. Once it became clear that he could no longer delay giving a deposition under oath,

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Mr. Cormick simply gave up and consented to a default rather than challenge Mr. Christ's allegations ­ or pursue the counterclaims he brought against Mr. Christ. Nonetheless, there can be no doubt that Mr. Cormick will continue his deliberate strategy of evasion, given the statement to his counsel that he facetiously wishes Mr. Christ "good luck trying to collect" any judgment awarded by the Court. Ex. A at 14. These actions epitomize the very type of bad faith litigation for which the Court is authorized to award fee-shifting under its inherent powers. Viewing it differently, Mr. Cormick would have been subject to a default judgment for $250,000 had he never appeared in response to Mr. Christ's original complaint more than two years ago. Instead, he undertook a lengthy campaign of delay and obfuscation designed solely to drive up Mr. Christ's legal costs. Awarding Mr. Christ no more than $250,000 now would effectively justify and reward Mr. Cormick for this conduct. Accordingly, Mr. Christ respectfully requests that any judgment against Mr. Cormick, Elan Suisse USA and Elan Suisse UK include the fees and expenses he incurred in connection with his South African litigation ($43,233.31) as well as those incurred in connection with the two actions in this Court ($275,756.74). These fees and expenses are itemized in Mr. Christ's affidavit submitted herewith. See Christ Aff. ¶¶ 9, 13. IV. Pre-Judgment Interest. Under applicable Delaware law, pre-judgment interest is awarded on damages in tort cases where the injury consists of depriving the plaintiff of "property having definite or ascertainable value." Miller v. Newsweek, Inc., 675 F. Supp. 872, 876-77 (D. Del. 1987). Here, default has been entered against defendants on Mr. Christ's claim for fraud, in which Mr. Christ alleges that defendants deprived him of, at a minimum, $250,000. See Am. Compl. ¶¶ 30-33. Therefore, even if the Court awards Mr. Christ nothing more than his original $250,000 investment, that amount is clearly ascertainable and Mr. Christ should be awarded pre-judgment -8-

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interest in order to compensate him for the lost value of that sum over time. Any additional damages awarded by the Court will be similarly ascertainable and subject to pre-judgment interest. In accordance with 6 Del. C. § 2301, that interest should be awarded at the legal rate ­ i.e., five percent over the Federal Reserve discount rate as of March 16, 2004, the date on which Mr. Christ completed his $250,000 payment to Mr. Cormick.1

1 Attached hereto as Exhibit B is a spreadsheet, downloaded from the Federal Reserve Discount

Window's website (www.frbdiscountwindow.org), which indicates that the primary discount rate in March 2004 was 2.00%. The applicable legal rate of pre-judgment interest therefore would be 7.00%.

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Conclusion For the foregoing reasons, Mr. Christ respectfully requests that the Court enter judgment against Mr. Cormick, Elan Suisse USA and Elan Suisse UK and award him damages and reasonable attorneys' fees and expenses in the amounts summarized below, plus pre-judgment interest: Original "Investment" Damages Incident to the "Investment" Travel Expenses Communications Expenses Pelican Hard Case Lost Revenues Damages From Subsequent Investigation Lost Revenues Travel Expenses Attorneys' Fees & Expenses ­ South Africa Attorneys' Fees & Expenses ­ United States C.A. No. 06-275 C.A. No. 07-60 TOTAL $235,095.28 $40,661.46 $1,487,715.05 (plus punitive damages as set by the Court) $590,000.00 $4,500.00 $43,233.31 $5,000.00 $4,000.00 $225.00 $315,000.00 $250,000.00

REED SMITH LLP /s/ Thad J. Bracegirdle Thad J. Bracegirdle (No. 3691) 1201 Market Street, Suite 1500 Wilmington, Delaware 19801 (302) 778-7500 Attorneys for Robert D. Christ Dated: May 30, 2008

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IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF DELAWARE ROBERT D. CHRIST, Plaintiff, v. BRETT J. CORMICK and ELAN SUISSE INTERNATIONAL HOLDINGS (USA), Defendants. ELAN SUISSE LTD., Plaintiff, v. ROBERT D. CHRIST, Defendant. ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) )

C.A. No. 06-275-GMS

C.A. No. 07-60-GMS

CERTIFICATE OF SERVICE I, Thad J. Bracegirdle, hereby certify that on May 30, 2008, I caused a true and correct copy of the foregoing Robert D. Christ's Opening Memorandum of Law in Support of His Motion for Entry of Default Judgment and Attorneys' Fees to be served on the counsel listed below, electronically via CM/ECF: David L. Finger, Esquire Finger & Slanina, P.A. One Commerce Center, Suite 725 1201 North Orange Street Wilmington, DE 19801-1155 Dated: May 30, 2008 _/s/ Thad J. Bracegirdle_________________ Thad J. Bracegirdle (No. 3691)

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