REPORT AND RECOMMENDATION

GABRIEL W. GORENSTEIN, Magistrate Judge.

Plaintiffs, "foreign business entit[ies]," Unique Lotus Gems ("Unique Lotus") and Gemdiam brought this action against defendants Gholian Enterprises Inc. ("Gholian Enterprises"), Farid Gholian a/k/a Rob Gholian, and Aharon Akush to recover $551,689.09. See Complaint, filed Nov. 19, 2018 (Docket #1) ("Compl."). The defendants have defaulted and the only remaining issue is the amount of damages Unique Lotus and Gemdiam are due.

I. BACKGROUND

On November 19, 2018, plaintiffs filed a complaint against defendants alleging fraud and aiding and abetting fraud, among other claims. See Compl. ¶¶ 61-71. Plaintiffs alleged that Gholian Enterprises was the alter ego of Gholian and Akush, thereby entitling plaintiffs to hold Gholian and Akush liable for plaintiffs' claims against Gholian Enterprises. Id. ¶¶ 144-152. Plaintiffs also alleged Gholian and Akush perpetrated a civil conspiracy. Id. ¶ 72-76.

In addition to the fraud claims, Unique Lotus Gems brought claims against Gholian Enterprises for (1) breach of contract, (2) price of goods sold and delivered under New York Uniform Commercial Code §§ 2-709 and 2-710, and (3) unjust enrichment. Id. ¶¶ 77-104. Unique Lotus Gems alleged breach of contract, id. ¶¶ 105-08, and promissory estoppel, id. ¶¶ 109-15, against Akush. Gemdiam also brought claims for (1) breach of contract, (2) price of goods sold and delivered under New York Uniform Commercial Code §§ 2-709 and 2-710, and (3) unjust enrichment against Gholian Enterprises. Id. ¶ 116-39. Gemdiam also alleged breach of contract against Akush. Id. ¶ 140-43.

Gholian Enterprises was served three times, twice by mail — on December 14 and 21, 2018 — and once on November 29, 2018, at the New York Department of State, which was a designated agent for service. Affidavits of Service, filed December 17 and 21, 2018 (Docket ## 9, 10, 11). Akush was served on March 11, 2019. Affidavit of Service, filed March 15, 2019 (Docket # 27). Gholian was served on December 5, 2018. Affidavit of Service, filed December 14, 2018 (Docket # 8).

On May 15, 2019, Judge Torres issued an "Order to Show Cause for Default Judgment," ordering plaintiffs to serve a copy of their motion for default judgment, supporting papers, and the Order to Show Cause on defendants by May 29, 2019; instructing defendants to file answering papers, if any, by June 5, 2019; and instructing defendants to appear at a conference to be held on June 19, 2019. Order to Show Cause for Default Judgment, filed May 15, 2019 (Docket # 38). Plaintiffs filed affidavits of service on May 22, 23, and 30, 2019 (Docket ## 39, 40, 41, 42). On June 19, 2019, Judge Torres referred the matter to the undersigned for an inquest.

II. FACTS RELATING TO LIABILITY AND DAMAGES

In light of defendants' default, plaintiffs' properly pleaded allegations in the complaint, except those related to damages, are accepted as true. See, e.g., City of N.Y. v. Mickalis Pawn Shop, LLC, 645 F.3d 114, 137 (2d Cir. 2011) ("It is an `ancient common law axiom' that a defendant who defaults thereby admits all `well-pleaded' factual allegations contained in the complaint.") (quoting Vt. Teddy Bear Co., Inc. v. 1-800 Beargram Co., 373 F.3d 241, 246 (2d Cir. 2004)); Finkel v. Romanowicz, 577 F.3d 79, 84 (2d Cir. 2009) ("In light of [defendant's] default, a court is required to accept all . . . factual allegations as true and draw all reasonable inferences in [plaintiff's] favor." (citation omitted)). Thus, the Court's findings of fact are based on the allegations in the plaintiffs' complaint regarding liability and the admissible evidence contained in its submissions regarding damages.

As for damages, plaintiffs bear the burden of establishing their entitlement to the amount sought. See Greyhound Exhibitgroup, Inc. v. E.L.U.L. Realty Corp., 973 F.2d 155, 158-60 (2d Cir. 1992); accord Trs. of Local 813 Ins. Tr. Fund v. Rogan Bros. Sanitation Inc., 2018 WL 1587058, at *5 (S.D.N.Y. Mar. 28, 2018). In the case of a default where the defendant has never appeared, "a court may base its determination of damages solely on the plaintiff's submissions." Trs. of Local 813 Ins. Tr. Fund, 2018 WL 1587058, at *5 (citing Fustok v. ContiCommodity Servs., Inc., 873 F.2d 40 (2d Cir. 1989). While a court must "take the necessary steps to establish damages with reasonable certainty," Transatlantic Marine Claims Agency, Inc. v. Ace Shipping Corp., 109 F.3d 105, 111 (2d Cir. 1997), a court need not hold a hearing "as long as it ensure[s] that there [is] a basis for the damages specified in a default judgment," Fustok, 873 F.2d at 40; accord Action S.A. v. Marc Rich & Co., Inc., 951 F.2d 504, 508 (2d Cir. 1991). Plaintiffs' submissions include affidavits and documentary evidence.1 Because these submissions provide a sufficient basis for an award of damages, no evidentiary hearing is required.

A. Facts Relating to Liability

Plaintiffs are Hong Kong entities in the business of selling precious gem stones. Compl. ¶¶ 1-2, 7. Sunil Jain ("Sunil") owns Unique Lotus, id. ¶ 13, and Arun Jain ("Arun") owns Gemdiam, id. ¶ 45. Defendants import precious gem stones and sell them in the United States. Id. ¶ 3-5, 8. Gholian and Akush are "shareholders, directors, officers and/or managers of Gholian Enterprises." Id. ¶ 9.

1. Unique Lotus's Interactions with Defendants

In April 2016, Gholian and Akush went to Unique Lotus's Hong Kong office and selected three sapphires ("April Sapphires") which they took on consignment on behalf of Gholian Enterprises. Id. ¶ 11. Two days later they returned to purchase the sapphires for $30,030 on behalf of Gholian Enterprises. Id. ¶ 12. Gholian and Akush left two post-dated checks as security for the payment. Id. Gholian had signed the checks and Unique Lotus's invoice of the transaction. Id. In late June 2016, Gholian and Akush returned to Unique Lotus's office and purchased two more sapphires ("June Sapphires") for $32,904 on behalf of Gholian Enterprises and left three post-dated checks as security for payment. Id. ¶ 13. Gholian signed the post-dated checks and Akush signed the invoice. Id. They informed Sunil that they would pay for the April Sapphires in a few days. Id. The next day, Gholian and Akush returned and paid half the purchase price of the April Sapphires in cash and took back one of the post-dated checks. Id. ¶ 14. They returned the following day and paid the other half of the purchase price for the April Sapphires and took back the remaining post-dated check. Id. ¶ 15.

In August 2016, Gholian and Akush went to Unique Lotus's office and arranged to purchase a 16.32 carat sapphire ("16.32C Sapphire") for $46,512 on behalf of Gholian Enterprises with three post-dated checks. Id. ¶ 16. Again, Gholian signed the checks and Akush signed the invoice. Id. Akush told Sunil that he would return the 16.32C Sapphire at the September Hong Kong Jewellery & Gem Fair 2016 ("Hong Kong Fair"), which was scheduled for the following month, if his United States customer did not want the stone. Id. ¶ 17. At the same time, Gholian and Akush took four sapphires and two emeralds, valued at $101,052, on consignment ("August Consignment Stones") for Gholian Enterprises. Id. ¶ 18. Akush signed an "On Trust" memorandum which stated:

Id.

At the Hong Kong Fair, Gholian and Akush visited Unique Lotus's booth with a third man, Mike. Id. ¶ 19. Akush informed Sunil that he would pay for the 16.32C Sapphire in a few days (though he never did so). Id. Gholian and Akush also arranged to purchase additional emeralds and a 12.52 carat sapphire ("12.52C Sapphire") for a total price of $104,066. Id. ¶ 20. Gholian signed the invoice for the emeralds and Akush signed the invoice for the 12.52C Sapphire. Id. Gholian signed post-dated checks to cover the purchase price for all the stones. Id. Akush also took five more stones, worth $98,262 ("September Consignment Stones"), on consignment and again signed an "On Trust" memorandum. Id. ¶ 21. Akush told Sunil that "he would settle with him concerning the consigned stones the next day." Id. Akush failed to do so. Id.

On September 18, 2016, Gholian paid Unique Lotus a partial cash payment for the June Sapphires. Id. ¶ 22. The payment covered the first post-dated check that had been given to Unique Lotus on June 27, 2016. Id. In early October 2016, Unique Lotus cashed the second post-dated check for the June Sapphires, but the check was returned unpaid because of insufficient funds and Unique Lotus was charged $32.29 by its bank. Id. ¶ 23. Unique Lotus then contacted Gholian and Akush to request payment from Gholian Enterprises and subsequently received two wire transfers: on October 28, 2016, for $10,981.60; and on November 11, 2016, for $9,981.60. Id. ¶ 24. This was the last time Unique Lotus received payment from Gholian Enterprises. Id.

In late January 2017, Sunil received several phone calls from Akush and Mike during which Sunil was informed that the 12.52C Sapphire and five stones from the August and September Consignment Stones, with a total value of $86,648, were pawned by the son of a Gholian Enterprises customer. Id. ¶ 25. We will refer to these as the "Pawned Consignment Stones." Sunil was not told the customer's name or the name of the pawn shop, just that the customer was in Florida. Id. Akush and Mike did tell Sunil that the 12.52C Sapphire and Pawned Consignment Stones could be redeemed for $60,000. Id. ¶ 26. He was later told that the 12.52C Sapphire was unavailable but that the Pawned Consignment Stones could be redeemed for $40,000. Id. Akush urged Sunil to pay, saying he would reimburse Unique Lotus for the payment. Id. Sunil agreed to pay, id., and at the International Gem & Jewelry Show in Tucson, Arizona held from January 28 through February 5, 2017 ("Tuscon Show"), id. ¶ 25, Akush brought the Pawned Consignment Stones to Unique Lotus's booth for Sunil to inspect, id. ¶ 27. After inspecting the stones, Sunil placed them in a plastic bag that remained in Akush's custody. Id.

After the Tuscon show, Akush called Sunil to arrange for the redemption of the Pawned Consignment Stones. Id. ¶ 28. Sunil and David Shuffman, an attorney Sunil had arranged to accompany him, met an unidentified man on the street in Manhattan's jewelry district. Id. The man took Sunil and Shuffman to a nearby office and were joined by another unidentified man. Id. The men produced the stones in the plastic bag, Sunil inspected them, and then Sunil paid the $40,000. Id. ¶ 29. The men refused to write a receipt and urged Sunil and Shuffman "to take the stones and leave." Id. The $40,000 was never reimbursed. Id. ¶ 30.

On February 16, 2017, Gholian, Akush, and a third man met with Sunil and Shuffman at Shuffman's law office where they executed an agreement in which Gholian Enterprises acknowledged a debt of $303,062 to Unique Lotus ("February Agreement"). Id. ¶ 31. The February Agreement called for monthly payments from Gholian Enterprises to Shuffman. Id. ¶ 32. Accordingly, Gholian signed thirteen post-dated checks, to be drawn from Gholian Enterprises' Citibank account. Id. Sunil returned the previous post-dated checks. Id. When Shuffman deposited the first check, it was returned unpaid because the account holder stopped payment. Id. ¶ 33. Shuffman then sent a letter to Gholian stating that Gholian Enterprises was in default of the February Agreement and gave Gholian ten days to cure. Id. ¶ 34. Gholian Enterprises did not cure, did not make further payments, and did not return any of the stones. Id. ¶ 34.

2. Gemdaim's Interactions with Defendants

Meanwhile, in early August 2016, a Gemdiam employee met Akush in Hong Kong and Akush expressed an interest in doing business with Gemdiam. Id. ¶ 36. On August 15, 2016, Gholian and Akush visited Gemdaim's office in Hong Kong and purchased an emerald for $15,953 on behalf of Gholian Enterprises, leaving a post-dated check as security. Id. ¶ 37. Akush signed the invoice. Id. On September 13, 2016, Gholian and Akush again went to Gemdiam's office and paid the purchase price of the emerald in cash and took back the check. Id. ¶ 38. They also arranged to purchase two more emeralds ("September Emeralds"), for a total price of $92,644, on behalf of Gholian Enterprises and left post-dated checks as security. Id. ¶ 39. Again, Akush signed the invoice. Id.

On December 22, 2016, Akush returned to Gemdiam's office and paid half the purchase price of the September Emeralds in cash ($46,322) and took back one of the checks. Id. ¶ 40. Akush also arranged to purchase a 11.86 carat emerald ("11.86C Emerald") for $237,200 on behalf of Gholian Enterprises, leaving post-dated checks signed by Akush to be drawn from Gholian Enterprises' Citibank account, and signed the invoice. Id. ¶ 41. Finally, Akush took two emeralds on consignment ("December Emeralds"), valued at $83,030, for Gholian Enterprises and signed a "Receipt & Bailment Note" which stated: "Received the above goods from GEMDIAM on trust and bailment. These goods are returnable and remain the property of `GEMDIAM' unless paid for and I/WE are responsible for the loss or damage of the goods due to any cause whatsoever." Id. ¶ 42. Though Gemdiam apparently did not know it at the time, Gholian Enterprises shortly thereafter consigned the 11.86C Emerald to Gold 7 of Miami LLC ("Gold 7") for less than it was purchased from Gemdiam. Id. ¶ 44.

At Arun's request, Akush returned one of the December Emeralds to Gemdaim on January 25, 2017, by delivering the stone to the office of GemWave, Inc. ("GemWave") in New York, which is owned by Arun's brother-in-law, Paresh Jain. Id. ¶ 45. At the Tuscon Show, Akush met with Arun and told him that Gholian Enterprises would purchase the other December Emerald for $48,600. Id. ¶ 46. Akush gave Arun three post-dated checks signed by Akush to be drawn from Gholian Enterprises' Citibank account. Id.

On February 6, 2017, Arun met Akush in GemWave's office and Arun asked for the balance for the September Emeralds. Id. ¶ 48. Akush told Arun that the September Emeralds had been given to a customer whose son pawned them but did not disclose the name of the customer or the address of the pawn shop. Id. Akush did tell Arun that the September Emeralds could be redeemed for $63,000. Id. Arun refused and the amount was then reduced to $52,000. Id. Arun paid $52,000 to Akush, who then returned the September Emeralds to Gemdiam. Id.

Arun also asked about payment for the 11.86C Emerald. Id. ¶ 50. Akush warned Arun not to cash the checks given to Gemdiam because there were insufficient funds in the Citibank account. Id. Akush assured Arun that payment would be forthcoming for the 11.86C Emerald but did not disclose that the emerald had been consigned to Gold 7 at a lower price than Gholian Enterprises was required to pay Gemdiam. Id.

During an April 2017, conversation about payment for the 11.86C Emerald, Akush informed Arun that the emerald had been pawned but could be recovered for $160,000. Id. ¶ 51. Arun refused to pay and insisted on payment from Gholian Enterprises for the stone. Id. However, during the Las Vegas Antique Watch & Jewelry Show that was held from June 5 to June 8, 2017 ("Vegas Show"), Arun met with Akush and someone from Gold 7 at Gold 7's booth. Id. ¶ 52. Arun agreed that Gemdiam would pay $120,000 for the 11.86C Emerald. Id. Arun inspected the stone and the Gold 7 employee kept it in a plastic bag until payment. Id. At the Vegas Show, Arun complained to Akush about Gemdiam's losses due to transactions with Gholian. Id. ¶ 53. Akush informed Arun that he would write multiple $20,000 checks to be drawn on a bank in Hong Kong to pay off Gholian Enterprise's debts to Gemdiam. Id.

On June 12, 2017, Arun instructed GemWave to wire $120,000 to Gold 7 and Akush went to GemWave's office with a Gold 7 representative to deliver the 11.86C Emerald. Id. ¶ 54. Akush also gave Arun twelve $20,000 post-dated checks, signed by Akush, to be drawn from Gholian Enterprises' account at China Citic Bank International Limited.2 Id. When Gemdiam deposited the first of the checks, it was returned unpaid because the account was closed. Id. ¶ 55. Arun then tried to contact Akush but received no response. Id. ¶ 56. Gholian Enterprises has not paid Gemdiam since December 22, 2016, and has not reimbursed Gemdiam for the payment to redeem the 11.86C Emerald. Id. ¶ 59.

3. Gholian Enterprises Lawsuit Against Gold 7

On November 16, 2018, Gholian Enterprises commenced a lawsuit against Gold 7 in the Circuit Court of the Eleventh Judicial Circuit, in and for Miami-Dade County, Florida. Id. ¶ 57. Gholian Enterprises alleged that (1) "it consigned the 11.86 carat Emerald to Gold 7 at a price of $180,000;" (2) "due to fluctuations in the emerald market, Gold 7 was only able to sell the emerald to the original third party, for One Hundred Twenty Thousand dollars;" and (3) Gold 7 did not pay any of the $120,000 to Gholian Enterprises. Id. (alterations omitted) In a motion to dismiss, Gold 7 asserted that the price for the 11.86C Emerald was $120,000, which was paid to Gholian Enterprises. Id. ¶ 58. The allegations of Gold 7 are significant because they show that Gholian Enterprises falsely told the plaintiffs that the 11.86C Emerald had been pawned when in fact Gholian Enterprises had made an arrangement to sell it to Gold 7 and, according to Gold 7, had in fact been paid for it.

B. Claimed Damages

Unique Lotus claims damages totaling $304,217.09. Id. ¶ A, O; Proposed Findings of Fact and Conclusion of Law, filed July 11, 2019 (Docket # 48) ("Proposed Findings") ¶¶ 24, 28, 105; see Sunil Decl. ¶ 24. Gemdiam claims damages totaling $293,794. Compl. ¶¶ A, O; Proposed Findings ¶¶ 27-28, 105. Plaintiffs also seek punitive damages based on the fraud claims, see Compl. ¶¶ 71, 76, A, B; Proposed Findings ¶¶ 93-95; pre-judgment interest, see Compl. ¶ P; Proposed Findings ¶ ¶ 96-101; and costs, see Compl. ¶ Q; Proposed Findings ¶¶ 102-104.

II. DISCUSSION

Plaintiffs make claims of fraud, aiding and abetting fraud, civil conspiracy, breach of contract, price of goods, unjust enrichment, account stated, and promissory estoppel. See generally Compl.; see also Proposed Findings ¶ 35. Each claim seeks essentially the same damages. See Compl. ¶¶ 70-71, 75-76, 82, 88, 94, 99, 104, 108, 115, 121, 127, 133, 139, 143, 152. However, damages for fraud cannot include lost profits. See, e.g., Connaughton v. Chipotle Mexican Grill, Inc., 29 N.Y.3d 137, 142 (2017) ("[T]here can be no recovery of profits which would have been realized in the absence of fraud.") (quoting Lama Holding Co. v. Smith Barney Inc., 88 N.Y.2d 413, 421 (1996))). Lost profits are a permissible form of contract damages, however, see, e.g., Ashland Mgmt., Inc. v. Janien, 82 N.Y.2d 395, 403 (1993), and plaintiffs seek to recover such lost profits, see, e.g., Proposed Findings ¶ 25. Separately, plaintiffs seek punitive damages for fraud, Compl. ¶ 71, which are not recoverable in a claim for breach of contract, see N.Y. Univ. v. Contiential Ins. Co., 87 N.Y.2d 308, 316 (1995) (When a claim for punitive damages arises from breach of contract, "defendant's conduct must be actionable as an independent tort"). "[A] plaintiff seeking compensation for the same injury under different legal theories is of course only entitled to one recovery." Indu Craft, Inc. v. Bank of Baroda, 47 F.3d 490, 497 (2d Cir. 1995). Thus, we will address only the claims for breach of contract and for fraud, inasmuch as these claims encompass all damages to which plaintiffs would be entitled.

In brief, plaintiffs seek breach of contract damages amounting to $264,217.09 for Unique Lotus and $75,472 for Gemdaim. Proposed Findings ¶¶ 81, 87, 90. On the fraud claims, Unique Lotus seeks an additional $40,000 and Gemdiam seeks an additional $172,000. Id. ¶¶ 83, 89. Both parties seek punitive damages, though they do not specify how much they seek. Id. ¶¶ 93-95.

A. Breach of Contract

To recover damages for breach of contract under New York law, a plaintiff must prove "(1) the existence of a contract, (2) the plaintiff's performance under the contract, (3) the defendant's breach of the contract, and (4) resulting damages." Palmetto Partners, L.P. v. AJW Qualified Partners, LLC, 83 A.D.3d 804, 806 (2d Dep't 2011) (citations omitted).

Plaintiffs demonstrated each element of their breach of contract claim. First, they have shown the existence of agreements, see, e.g., Compl. ¶¶ 78-79, 96, 106, 117-118, 141, and submitted invoices and consignment agreements, see, e.g., Sunil Decl. Exhibit A-C, F-G (Unique Lotus invoices); Sunil Decl. Exhibit E, H (Unique Lotus consignment agreement); Arun Decl. Exhibit A-B, D, F (Gemdiam invoices); Arun Decl. Exhibit E (Gemdiam consignment agreement).

Second, plaintiffs performed their obligations under the contracts by delivering stones to defendants. See Compl. ¶¶ 80, 119.

Third, plaintiffs have shown that defendants breached the contracts by failing to pay for the stones in full and not returning them. See e.g., id. ¶¶ 81, 98, 107, 120; see also Sunil Decl. Exhibit I (Bank statement that Gholian Enterprises' check was returned because of "insufficient funds"); Shuffman Decl. Exhibit A (Gholian Enterprises' check returned, marked "Stop Payment"), B (Gholian Enterprises' check returned because "Account Closed"); Arun Decl. Exhibit L (Gholian Enterprises' check returned because "Account Closed"). Additionally, Unique Lotus has shown that defendants breached the February Agreement by failing to make scheduled payments. See Compl. ¶¶ 33-34; see also Sunil Decl. Exhibit L (February Agreement), N (Shuffman letter to Gholian regarding default of February Agreement); Shuffman Decl. Exhibit A (Gholian Enterprises' check returned, marked "Stop payment"), B (Gholian Enterprises' check returned because "Account Closed").

Finally, plaintiffs provided sufficient evidentiary support for their claimed damages resulting from defendants' breach. Under New York law, a successful plaintiff in a breach of contract action is entitled to damages in "the amount necessary to put the plaintiff in the same economic position he would have been in had the defendant fulfilled his contract." See Indu Craft, Inc., 47 F.3d at 495 (citations omitted); see also Trans Atl. Airlines, Inc. v. Kambi Travel Int'l, 2006 WL 1317024, at *1 (S.D.N.Y. May 12, 2006). "[U]nder New York law, where the breach of contract was a failure to pay money, the plaintiff is entitled to recover the unpaid amount due under the contract plus interest." House of Diamonds v. Borgioni, LLC, 737 F.Supp.2d 162, 172 (S.D.N.Y. 2010) (citing Scavenger, Inc. v. GT Interactive Software Corp., 289 A.D.2d 58 (1st Dep't 2001)). Additionally, it is well-settled that "a party injured by a breach [of contract] is entitled to recover damages that are the `natural and probable consequence of the breach.'" APL Co. PTE Ltd. v. Blue Water Shipping U.S. Inc., 592 F.3d 108, 111 (2d Cir. 2010) (quoting Bi-Econ. Mkt., Inc. v. Harleysville Ins. Co. of N.Y., 10 N.Y.3d 187, 192 (2008)).

Here, plaintiffs seek damages based on the breach of various agreements entered into between plaintiffs and defendants and they support these claims with invoices and copies of unpaid checks. See, e.g., Sunil Decl. Exhibit I (Bank statement that Gholian Enterprises' check was returned because of "insufficient funds"); Shuffman Decl. Exhibit A (Gholian Enterprises' check returned, marked "Stop Payment"), B (Gholian Enterprises' check returned because "Account Closed"); Arun Decl. Exhibit L (Gholian Enterprises' check returned because "Account Closed"). We value these damages as explained in section II.C below.

Plaintiffs also seek to hold Akush and Gholian liable for the contracts they entered into on behalf of Gholian Enterprises. Ordinarily, "[w]here there is a disclosed principal-agent relationship and the contract relates to a matter of the agency, the agent will not be personally bound." Mencher v. Weiss, 306 N.Y. 1, 4 (1953). However, the law permits the corporate form to be disregarded — or, in common parlance,"pierced" — in some situations. In New York, "piercing the corporate veil requires a showing that: (1) the owners exercised complete domination of the corporation in respect to the transaction attacked; and (2) that such domination was used to commit a fraud or wrong against the plaintiff which resulted in plaintiff's injury." Matter of Morris v. N.Y. State Dep't of Taxation & Fin., 82 N.Y.2d 135, 141 (1993) (citations omitted); accord TNS Holdings, Inc. v. MKI Sec. Corp., 92 N.Y.2d 335, 339 (1998); Tap Holdings, LLC v. Orix Fin. Corp., 109 A.D.3d 167, 174 (1st Dep't 2013); Cobalt Partners, L.P. v. GSC Capital Corp., 97 A.D.3d 35, 40 (1st Dep't 2012).

As for the domination element, courts may consider a number of factors showing domination by an individual and disregard of the corporate form. These factors include:

Wm. Passalacqua Builders, Inc. v. Resnick Developers S., Inc., 933 F.2d 131, 139 (2d Cir. 1991).

Many of these factors exist here. It is alleged that Akush and Gholian "failed to properly maintain the corporate formalities of Gholian Enterprises," Compl. ¶ 146; "failed to sufficiently capitalize Gholian Enterprises," id. ¶ 147; "failed to strictly maintain the boundary between the assets of Gholian Enterprises and their own personal assets," id. ¶ 148; "abused the privilege of conducting business in the corporate form, and thereby perpetrated a fraud on Gholian Enterprises' creditors, including Unique Lotus and Gemdiam," id. ¶ 149; and "as a result of their complete domination . . . further abuse[d] the privilege of conducting business in the corporate form, [] to perpetrate a wrong against the plaintiffs," id. ¶ 150. As is described further below, the plaintiffs have also alleged that Gholian and Akush used their domination of the corporation to commit fraud.

Accordingly, Akush and Gholian are jointly and severally liable for Gholian Enterprises' breach of contract damages to plaintiffs. See also Curiale v. Ardra Ins. Co., Ltd., 608 N.Y.S.2d 464, 465 (1st Dep't 1994) (default judgment against corporation given collateral estoppel effect against alleged alter egos of corporation).

B. The Fraud Claim

"Under New York law, fraud requires proof of (1) a material misrepresentation or omission of a fact, (2) knowledge of that fact's falsity, (3) an intent to induce reliance, (4) justifiable reliance by the plaintiff, and (5) damages." Loreley Financing (Jersey) No. 3 Ltd. v. Wells Fargo Sec., LLC, 797 F.3d 160, 170 (2d Cir. 2015) (citing Eurycleia Partners, LP v. Seward & Kissel, LLP, 12 N.Y.3d 553, 559 (2009)). In addition, Federal Rule of Civil Procedure 9(b) places two additional burdens on plaintiffs. First, "the complaint must `(1) detail the statements (or omissions) that the plaintiff contends are fraudulent, (2) identify the speaker, (3) state where and when the statements (or omissions) were made, and (4) explain why the statements (or omissions) are fraudulent.'" Id. at 171 (quoting Eternity Global Master Fund Ltd. v. Morgan Guar. Tr. Co. of N.Y., 375 F.3d 168, 187 (2d Cir. 2004)). Second, "though mental states may be pleaded `generally,' plaintiffs must nonetheless allege facts `that give rise to a strong inference of fraudulent intent.'" Id. (quoting Lerner v. Fleet Bank, N.A., 459 F.3d 273, 290-91 (2d Cir. 2006)); see also Fed. R. Civ. P. 9(b) ("[A] party must state with particularity the circumstances constituting fraud or mistake. Malice, intent, knowledge, and other conditions of a person's mind may be alleged generally.").

While "a claim for fraud cannot be maintained where it arises out of the same facts as a breach of contract claim with the sole additional allegation that the defendant never intended to fulfill its express obligations," Ho Myung Moolsan Co. v. Manitou Mineral Water, Inc., 665 F.Supp.2d 239, 254 (S.D.N.Y. 2009) (citation and internal quotation marks omitted), such claims may be brought "where there is a fraudulent misrepresentation collateral or extraneous to the contract," Spencer Trask Software & Info. Serv. LLC v. RPost Int'l. Ltd., 383 F.Supp.2d 428, 453 (S.D.N.Y. 2003) (citation and internal quotation marks omitted). "A representation is collateral to a contract when it pertains to present facts and not promissory statement[s] of what will be done in the future." Ho Myung Moolsan Co., 665 F. Supp. 2d at 254 (alternation original) (citation and internal quotation marks omitted).

Plaintiffs demonstrated each element of their fraud claim. First, on four occasions defendants told plaintiffs that stones, which plaintiffs had consigned to defendants, were pawned by a customer's son and that plaintiffs would have to pay for their return. Compl. ¶¶ 25, 26, 48, 51. In fact, these representations were false as Gholian admitted that it sold at least one of the stones to a third party for a price less than Gholian agreed to pay Gemdiam. Comp. ¶ 44. Defendants made a series of other misrepresentations including "that the post-dated checks which they left as security for payment were good checks drawn on open bank accounts, which would have sufficient funds and be honored on or after the [sic] their respective dates." Id. ¶ 62. In fact the checks were all worthless, id. ¶¶ 10, 23, 33, 50, 55, 64, 74 — providing strong circumstantial evidence that defendants knew at the time that the checks were worthless.

Second, the circumstances make plain that defendants knew that these representations were false. See, e.g., id. ¶ 23 (checks returned for insufficient funds), id. ¶ 24 (after a check was unpaid for insufficient funds, defendants sent wire transfer payments), id. ¶ 32 (defendants wrote new checks to replace old ones), id. ¶ 50 (Akush admits bank account did not have sufficient funds to cover checks), id. ¶ 53 (defendants wrote new checks to cover old checks), id. ¶¶ 57-58 (Gholian Enterprises admits in an unrelated lawsuit regarding the 11.86C Emerald that funds Gemdaim paid to get the pawned stone returned was supposed to be paid to Gholian Enterprises), id. ¶ 64 (defendants knew accounts could not cover checks), id. ¶ 65 (defendants knew the stones were not pawned and did not need to be redeemed).

Third, the circumstances easily support the inference that defendants intended to defraud plaintiffs, given their repeated use of bad checks, see id. ¶¶ 23, 32, 50, 53, 64, and their false statements regarding the disposition of the stones, see id. ¶¶ 57-58, 65.

Fourth, plaintiffs relied on defendants' misrepresentations because the defendants' misrepresentations caused plaintiffs to provide defendants with additional stones and to redeem other stones that had been "pawned." See Compl. ¶¶ 10, 26-29, 48, 54, 63.

Finally, plaintiffs have collectively handed over $212,000 as a result of defendants' pawnshop scheme. Compl. ¶¶ 26 (Unique Lotus agreed to pay $40,000), 48 (Gemdiam agreed to pay $52,000), 52 (Gemdiam agreed to pay $120,000).3

In addition, all defendants are jointly and severally liable for the fraud. "[A] corporate officer who participates in the commission of a tort may be held individually liable, regardless of whether the officer acted on behalf of the corporation in the course of official duties and regardless of whether the corporate veil is pierced." Peguero v. 601 Realty Corp., 58 A.D.3d 556, 558 (1st Dep't 2009) (emphasis in original) (quoting Espinosa v. Rand, 24 A.D.3d 102, 102 (1st Dep't 2005)); see also Polonetsky v. Better Homes Depot, Inc., 97 N.Y.2d 46, 55 (2001) (recognizing personal liability of a corporate officer in actions for fraud). Thus, Gholian and Akush are personally liable even though they acted on behalf of Gholian Enterprises. Gholian Enterprises is liable for the fraud of its agents — Gholian and Akush — who were acting within their authority to buy gems for Gholian Enterprises. See, e.g., Alder v. Helman, 169 A.D.2d 925, 926 (3d Dep't 1991) ("A principal is liable for the fraudulent acts of his agent committed within the scope of authority").

C. Actual Damages

Plaintiffs provided evidence that, as a result of defendants' actions, they incurred actual damages totaling $551,689.09. See Sunil Decl. ¶ 21 (a $304,217.09 loss to Unique Lotus); Arun Decl. ¶ 27 (a $247,472 loss to Gemdiam); see also Proposed Findings ¶¶ 28, 92, 105.

Unique Lotus has shown total losses of $422,828.79 attributable to defendants as follows: the defendants' obtaining two sapphires in June 2016, the defendants' obtaining the 16.32C Sapphire in August 2016, the August 2016 consignment of four sapphires and two emeralds to defendants, the defendants' obtaining two emeralds and a 12.52C Sapphire in September 2016, the September 2016 consignment of five stones, a bank fee assessed in October 2016 because of defendants' bad check, and the redemption price of the Pawned Consignment Stones. See Sunil Decl. ¶¶ 6, 8, 9, 11, 13, 15-17, 22, Exhibits C-J; Shuffman Decl. ¶¶ 3-5. Defendants, however are entitled to $118,611.70 in credits as follows: cash paid on September 18, 2016; funds wired on October 28 and November 11, 2016; and the value of the Pawned Consignment Stones. See Sunil Decl. ¶¶ 12, 14, 15, 23, Exhibits E, H, K.

The total is reflected in the following chart:

See Sunil Decl. ¶ 24.

Gemdaim has shown losses as a result of transactions with defendants totaling $293,794 as follows: the difference between the amount Gemdaim paid to redeem the September Emeralds and Gholian Enterprises' partial payment for the stones; Gemdiam's lost profit from the consignment of the September Emeralds to Gholian Enterprises; the $120,000 Gemdiam paid to redeem the 11.86C Emerald; Gemdiam's lost profit from the consignment of the 11.86C Emerald to Gholian Enterprises; and the purchase price of the emerald consigned in December 2016 and purchased in January 2017. See Arun Decl. ¶¶ 7, 8, 9, 10, 14, 15, 16, 17, 18, 23, 26, 27, Exhibits B, D, E, F, H, I, J, M. Defendants are entitled to a credit of $46,322 for the payment to Gemdaim on December 22, 2016. See Arun Decl. ¶¶ 8, 17, 27, Exhibit B. The total is reflected in the following chart:

See Arun Decl. ¶ 28.

D. Punitive Damages

Punitive damages are available where the plaintiff demonstrates a defendant's wrongdoing "evinces a high degree of moral turpitude and demonstrates such wanton dishonesty." Ross v. Louise Wise Serv., Inc., 8 N.Y.3d 478, 489 (2007) (alterations omitted) (quoting Walker v. Sheldon, 10 N.Y.2d 401, 405 (1961)). The Court believes the standard of "wanton dishonesty" has been met in that defendants repeatedly concocted a story about a customer's son pawning gems given to defendants on consignment, essentially holding plaintiffs' gems for ransom, and intentionally wrote dozens of bad checks. Plaintiffs should each be awarded $25,000 in punitive damages.

E. Pre-Judgment Interest

Plaintiffs also seek prejudgment interest of 9% pursuant to N.Y. C.P.L.R. §§ 5001, 5002, 5004. See Proposed Findings ¶ 96-97. In a diversity case such as this one, "state law governs the award of prejudgment interest." Schipani v. McLeod, 541 F.3d 158, 164-65 (2d Cir. 2008) (citing Baker v. Dorfman, 239 F.3d 415, 425 (2d Cir. 2000)). Under section 5001(b), "interest upon damages" is computed not based on the date of the accrual of the action but rather "from the date incurred." Section 5001(b) further provides that "[w]here such damages were incurred at various times, interest shall be computed upon each item from the date it was incurred or upon all of the damages from a single reasonable intermediate date."

1. Unique Lotus

The last payment Unique Lotus received from defendants was on November 11, 2016. See Compl. ¶ 24; Sunil Decl. ¶ 14, Exhibit K. Only the first transaction, from April 2016, was paid in full. Compl. ¶ 14. Defendants owe plaintiffs some amount of money for all interactions from June 2016 to February 2017. Because November 11, 2016, was the last date of payment and is an appropriate "intermediate date" between June 2016 and February 2017, see N.Y. C.P.L.R. § 5001(b), prejudgment interest should be calculated from November 12, 2016.

For the award of $304,217.09, prejudgment interest accrues at the rate of $75.01 per day (($304,217.09/365)*9%) from November 12, 2016, until the date of judgment.

2. Gemdiam

The last payment Gemdiam received from defendants was on December 22, 2016. See Compl. ¶ 40; Arun Decl. ¶¶ 8-11, 25, Exhibit B. At that point, defendants had only paid the first transaction, occurring on August 15, 2016, in full, see Compl.¶¶ 37, 38, and half of the September 13, 2016, transaction, see id. ¶¶ 39-40. Gemdiam continued to engage in transactions with the defendants until June 12, 2017. See id. ¶¶ 52-54. An appropriate "intermediate date," N.Y. C.P.L.R. § 5001(b), from which to calculate prejudgment interest is therefore February 14, 2017.

For the award of $247,472, prejudgment interest accrues at the rate of $61.02 per day (($247,472/365)*9%) from February 14, 2017, until the date of judgment.

F. Costs

Plaintiffs seek costs in bringing this action, but do not specify what costs and in what amount. See Compl. ¶ Q; Proposed Findings ¶¶ 102-04. The Court takes judicial notice of the filing fee. See Whitehead v. Mix Unit, LLC, 2019 WL 384446, at *6 (S.D.N.Y. Jan. 31) (Court took judicial notice of filing fee on inquest when there was no documentation to support the request for costs.) adopted by 2019 WL 1746007 (S.D.N.Y. April 18, 2019). Accordingly, $400 for the cost of filing the action (Docket # 1) is awarded as well, to be split between the two plaintiffs.

III. TOTAL OF SUMS AWARDED

Unique Lotus is awarded $304,217 in compensatory damages, $25,000 in punitive damages, and $200 in costs for a total of $329,417, not including interest. Gemdiam is awarded $247,427 in compensatory damages, $25,000 in punitive damages, and $200 in costs for a total of $272,627, not including interest.

IV. CONCLUSION

Plaintiffs' motion for a default judgment (Docket # 35) should be granted, and judgment should be entered as follows:

(1) Unique Lotus Gems should be awarded a judgment against Gholian Enterprises Inc., Farid Gholian a/k/a Rob Gholian, and Aharon Akush, jointly and severally in the amount of $329,417 plus pre-judgment interest of $75.01 per day from November 12, 2016, until the date judgment is entered; and

(2) Gemdiam should be awarded a judgment against Gholian Enterprises Inc., Farid Gholian a/k/a Rob Gholian, and Aharon Akush, jointly and severally in the amount of $272,627 plus pre-judgment interest of $61.02 per day from February 14, 2017, until the date judgment is entered.

PROCEDURE FOR FILING OBJECTIONS TO THIS REPORT AND RECOMMENDATION

Pursuant to 28 U.S.C. § 636(b)(1) and Rule 72(b) of the Federal Rules of Civil Procedure, the parties have fourteen (14) days (including weekends and holidays) from service of this Report and Recommendation to file any objections. See also Fed. R. Civ. P. 6(a), (b), (d). A party may respond to any objections within 14 days after being served. Any objections and responses shall be filed with the Clerk of the Court, with copies sent to the Hon. Analisa Torres at 500 Pearl Street, New York, New York 10007. Any request for an extension of time to file objections or responses must be directed to Judge Torres. If a party fails to file timely objections, that party will not be permitted to raise any objections to this Report and Recommendation on appeal. See 28 U.S.C. § 636(b)(1); Fed. R. Civ. P. 72; Fed. R. Civ. P. 6(a), (b), (d); Thomas v. Arn, 474 U.S. 140 (1985); Wagner & Wagner, LLP v. Atkinson, Haskins,