338 F. Supp. 3d 326
S.D. Ill.2018Background
- In Aug. 2015 5Barz sold Blue Citi a Convertible Redeemable Note: $110,000 face, purchased for $100,000, 10% interest, conversion option into common stock at a 60% discount to a 20‑day low, and 3 business days to deliver shares after notice; failure to deliver is an Event of Default triggering 24% default interest and attorneys' fees.
- Blue Citi issued a Notice of Conversion on Dec. 30, 2015 seeking conversion of $83,600 into 1,857,777 shares; 5Barz failed to timely deliver the shares.
- Parties then entered a Settlement Agreement (paying $168,065 in installments); 5Barz paid roughly $84,033 (one cash installment and three share deliveries) and then defaulted on the Settlement Agreement.
- Blue Citi sued; the Court previously granted specific performance and ordered 5Barz to deliver the shares, and awarded certain fees. 5Barz later delivered shares pursuant to that order (on Sept. 1, 2017).
- In the present motions: Blue Citi seeks summary judgment on breach-of-contract damages, prejudgment interest, and fees; 5Barz seeks to vacate the prior order under Rule 60(b)(4) and a judgment on the pleadings arguing the Note is criminally usurious and void.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Validity of the Note / Usury defense | Note is valid; usury inapplicable | Note is criminally usurious and therefore void ab initio (effective rate >25%) | Note is not criminally usurious; 5Barz waived usury defense and Rule 60(b)(4) relief is improper; cross‑motions denied |
| Whether Blue Citi is entitled to damages for breach | Yes; difference in value between timely delivery and actual delivery ($180,204.36) | Plaintiff already received value via Settlement payments and court-ordered conversion; thus no additional damages | Blue Citi entitled to damages of $180,204.36; prior payments did not make plaintiff whole because Settlement Agreement was executory and partially breached |
| Measure and timing of prejudgment interest | Prejudgment interest at contract default rate (24%) from date of breach (3 business days after notice) | Dispute over when breach occurred and whether higher interest applies; argues usury bars relief | Awarded prejudgment interest at 24% from Jan. 6, 2016 (date breach accrued) through opinion date: $116,950.00 |
| Attorneys' fees and expenses | Contract entitles plaintiff to reasonable fees; requests $5,837.12 for ~15.4 hours at $375/hr and expenses | Challenges reasonableness of rate and hours (points to lower rate billed elsewhere) | Fees and expenses awarded in full: $5,837.12 (court finds $375/hr and billed hours reasonable) |
Key Cases Cited
- United Student Aid Funds, Inc. v. Espinosa, 559 U.S. 260 (Rule 60(b)(4) relief limited to judgments that are void for jurisdictional or due‑process defects)
- Celotex Corp. v. Catrett, 477 U.S. 317 (summary judgment standards)
- Tractebel Energy Mktg., Inc. v. AEP Power Mktg., Inc., 487 F.3d 89 (New York law permits reasonable estimation of damages)
- NML Capital, Ltd. v. Republic of Argentina, 621 F.3d 230 (state law governs prejudgment interest in diversity cases; contract rate controls when specified)
- Hensley v. Eckerhart, 461 U.S. 424 (fee applicant must document hours and rates; lodestar principles)
- Goldberger v. Integrated Res., Inc., 209 F.3d 43 (district court discretion in determining reasonable attorneys' fees)