Henning v. Arya

[4] UNITED STATES DISTRICT COURT [5] DISTRICT OF NEVADA [6] * * * [7] JESSICA HENNING, Case No. 2:14-cv-00979-RFB-NJK [8] Plaintiff/Counter-Defendant, ORDER [9] v. [10] CHEERAG B. ARYA, [11] Defendant/Counter Claimant. [13] I. INTRODUCTION [14] Before the Court is Plaintiff Jessica Henning’s Motion for Default Judgment and Motion [15] to Seal. For the following reasons, the Court grants the Motion for Default Judgment in part and [16] denies the Motion for Default Judgment in part, and grants the Motion to Seal. [18] II. BACKGROUND [19] The Court incorporates the background section herein from its previous orders, ECF Nos. [20] 137, 163, 186, and 210 and emphasizes the following: [21] Henning sued Arya in May 2014 in state court, alleging multiple state law claims.1 ECF [22] No. 41-1. Arya removed the matter to this Court and then moved to dismiss the initial Complaint [23] for lack of jurisdiction. ECF Nos. 1, 50. Before the initial Motion to Dismiss was resolved, [24] Henning filed a First Amended Complaint on October 30, 2014 based on the Court denying [25] Henning’s Motion to proceed anonymously and granting Henning’s motion to unseal the initial [26] Complaint. ECF Nos. 67 (Court’s Order on Motions), 70 (Amended Complaint). [27] 28 1 Henning also sued additional defendants, all of whom have been dismissed from this matter. ECF Nos. 83, 89, 137. [1] The Court then held a hearing on the initial Motion to Dismiss on September 22, 2015. [2] ECF No. 89. The Court denied the motion as it related to Arya and allowed for jurisdictional [3] discovery. ECF No. 89. The Court followed its oral ruling with a written order on July 26, 2016 [4] (“July 2016 Order”), in which the Court ordered Henning to strike specific derogatory language [5] from the Amended Complaint. ECF No. 137. The Court also ordered Henning to file a Second [6] Amended Complaint within fourteen days. Id. [7] However, after jurisdictional discovery closed, Arya moved to dismiss the matter again. [8] ECF No. 130. The Court entertained oral arguments on the renewed Motion to Dismiss on August [9] 3, 2016. ECF No. 139. The Court concluded the hearing by ordering Henning to refrain from [10] filing a Second Amended Complaint until after the renewed Motion to Dismiss was resolved. Id. [11] The Court issued its order on the renewed Motion to Dismiss on September 30, 2017 and [12] a subsequent written order on July 1, 2018 (July 2018 Order”), dismissing all claims but Claim [13] Seventeen (Fraudulent Misrepresentation) and Claim Eighteen (Conversion). ECF Nos. 143, 163. [14] The Court then held a status conference on July 9, 2018. ECF No. 164. During the status [15] conference, the Court emphasized that the surviving claims were limited according to its July 2018 [16] Order but clarified that the claims could potentially be related to other information. ECF No. 166 [17] at 3–5. The Court also gave Henning two weeks to file the Second Amended Complaint. Id. [18] Henning filed her Second Amended Complaint on July 23, 2018. ECF No. 167; see also [19] ECF No. 168 (Errata to Second Amended Complaint). Arya moved to strike and dismiss the [20] Amended Complaint. ECF Nos. 169, 170. The Court denied and granted the motion to strike in [21] part and denied the motion to dismiss. ECF No. 186. Arya filed his Answer and asserted a [22] counterclaim against Henning on January 14, 2019. ECF No. 191. On April 17, 2019, the Court [23] granted a motion to withdraw all attorneys of record as to Arya. ECF No. 206. Henning moved to [24] strike Arya’s answer on May 9, 2019. ECF No. 207. No opposition was filed. On April 12, 2020 [25] the Court granted Henning’s motion to strike Defendant Cheerag B. Arya’s Answers and [26] Counterclaim, ECF Nos. 155, 191, in their entirety, finding that Arya willfully and repeatedly [27] avoided being available for his deposition, which was rescheduled three times to accommodate [28] him. ECF No. 210. The Court’s order, which was delivered to the address on file for defendant, [1] was returned as undeliverable on May 15, 2020. ECF No. 211. [2] Henning moved for entry of clerk’s default on July 14, 2020, ECF No. 216, and the clerk’s [3] entry of default was entered on July 30, 2020. ECF No. 217. On September 14, 2021, Henning [4] moved for default judgment. ECF No. 222. On September 28, 2022, the Court denied Henning's [5] motion for default judgment without prejudice. ECF No. 223. [6] Although the Court found “a legal basis to enter a default judgment based upon the [7] Motion,” it also found that the information regarding Henning’s damages related to the loss of [8] income and loans from third parties due to her inability to work after the alleged abuse was [9] insufficiently detailed. Id. Henning had failed to provide verified documentation showing which [10] deposits to her bank accounts represent which gifts or loans from third parties and had similarly [11] failed to compare her earnings reports before and after the alleged seven-year period she did not [12] work because of the alleged abuse. Id. The Court gave Henning leave to refile her motion in 45 [13] days and instructed Henning to provide verified information to support her damages request for [14] each of her claims for relief. Id. On November 10, 2022, Henning filed a renewed motion for [15] default judgment. ECF No. 224. On November 14, 2022, Henning filed a motion for leave to file [16] under seal Exhibit 5 (IRS tax return documents) to her renewed motion for default judgment. ECF [17] No. 234. [19] III. DISCUSSION [20] A. Motion for Default Judgment [21] The granting of a default judgment is a two-step process directed by Rule 55 of the Federal [22] Rules of Civil Procedure. Eitel v. McCool, 782 F.2d 1470, 1471 (9th Cir. 1986). The first step is [23] an entry of default, which must be made by the clerk following a showing, by affidavit or [24] otherwise, that the party against whom the judgment is sought “has failed to plead or otherwise [25] defend.” Fed. R. Civ. P. 55(a). [26] The second step is entry of a default judgment under Rule 55(b), either the clerk enters [27] judgment (only where the plaintiff's claim is for a certain sum or where a sum can be made certain [28] by computation), see Fed. R. Civ. P. 55(b)(1), or the party must apply to the Court for default [1] judgment, see Fed. R. Civ. P. 55(b)(2). Factors which a court, in its discretion, may consider in [2] deciding whether to grant a default judgment include: (1) the possibility of prejudice to the [3] plaintiff, (2) the merits of the substantive claims, (3) the sufficiency of the complaint, (4) the [4] amount of money at stake, (5) the possibility of a dispute of material fact, (6) whether the default [5] was due to excusable neglect, and (7) the Federal Rules' strong policy in favor of deciding cases [6] on the merits. Eitel, 782 F.2d at 1471-72 . [7] If an entry of default is made, the court accepts all well-pleaded factual allegations in the [8] complaint as true; however, conclusions of law and allegations of fact that are not well-pleaded [9] will not be deemed admitted by the defaulted party. DirecTV, Inc. v. Hoa Huynh, 503 F.3d 847 , [10] 854 (9th Cir. 2007). Additionally, the Court does not accept factual allegations relating to the [11] amount of damages as true. Geddes v. United Fin. Grp., 559 F.2d 557 , 560 (9th Cir. 1977). Default [12] establishes a party's liability, but not the amount of damages claimed in the pleading. Id. [13] In considering the seven Eitel factors, the Court finds that default judgment against [14] Defendant Arya is warranted. [15] The first and sixth factors favor granting default judgment because Arya failed to defend [16] or appear at all in this matter since April 2019. Arya's failure to appear for over four years [17] prejudices Henning by preventing her from recovering the value of the property that Arya [18] wrongfully converted as well as the loss of income and the value of the loans that Henning received [19] from third parties to maintain her residence/housing and well-being during this period. Further, [20] Arya’s failure to appear for four years demonstrates the lack of excusable neglect. And while the [21] seventh factor generally counsels against the granting of default judgment, Arya’s failure to appear [22] prevents the Court from determining the claims on their merits. [23] The Court next examines the merits of the substantive claims and sufficiency of the [24] Complaint. Henning seeks default judgment for Claim Seventeen (Fraudulent Misrepresentation) [25] and Claim Eighteen (Conversion). The Court finds that the second and third Eitel factors, the [26] merits of the substantive claims and the sufficiency of the complaint, respectively, favor judgment [27] for Henning. [28] /// [1] i. Fraudulent Misrepresentation [2] “Under Nevada law, [a plaintiff] has the burden of proving each and every element of his [3] fraudulent misrepresentation claim by clear and convincing evidence: (1) A false representation [4] made by the defendant; (2) defendant's knowledge or belief that its representation was false or that [5] defendant has an insufficient basis of information for making the representation; (3) defendant [6] intended to induce plaintiff to act or refrain from acting upon the misrepresentation; and (4) [7] damage to the plaintiff as a result of relying on the misrepresentation.” Barmettler v. Reno Air, [8] Inc., 114 Nev. 441 , 956 P.2d 1382, 1386 (Nev. 1998). “Fraud is never presumed; it must be clearly [9] and satisfactorily proved.” Havas v. Alger, 85 Nev. 627 , 461 P.2d 857, 860 (Nev. 1969). [10] Henning’s claim for fraudulent misrepresentation alleges multiple false representations [11] made by Arya. For example, Henning alleges that on May 1, 2013, Arya asked to spend more time [12] with Henning. When Henning expressed concern about losing money from not working, Arya [13] stated he would hire Henning to work for his company. On or about September 10, 2013, Henning [14] allegedly agreed to travel from Nevada to Dubai to meet Arya at his request. Prior to her travels, [15] Arya sent Henning an employment contract for JBF RAK, LLC. Although Henning was reluctant [16] to reconcile, she agreed to meet Arya because of his material misrepresentations about her future [17] employment at JBF RAK, LLC. On at least five separate occasions, Arya sent emails or text [18] messages to Henning, apologizing for his alcohol abuse, promising to take specific actions to [19] address his alcoholism, and promising to refrain from drinking in the future. Henning alleges that [20] Arya made such representations with the belief that they were false, and with the intention to [21] induce her to leave the United States and move to Dubai. Henning alleges that she reconciled with [22] Arya, left her real estate company, and moved to Dubai in reliance on these misrepresentations. [23] Arya’s conduct did not conform to the representations he made. For example, Arya did not [24] fulfill the terms of the employment contract, so Henning did not become an employee of JBK [25] RAK, LLC. Additionally, on or about September 25, 2013, as a result of Arya's excessive alcohol [26] consumption, contrary to his prior representations, Henning was forced to leave her room in Arya’s [27] Dubai apartment. Construing these allegations as true, these facts demonstrate that, each time [28] Henning returned to Nevada after promises to her were not realized, Arya would apologize and [1] state that he would refrain from misconduct, but would later resume the misconduct in [2] contradiction to the representations made once he enticed Henning out of the jurisdiction. [3] Henning has suffered significant harm because of her reliance on these misrepresentations. [4] She has been diagnosed by a Board-Certified Psychiatrist with post-traumatic stress disorder [5] (“PTSD”) due to Arya’s abusive behavior. And as a result of her PTSD, Henning was unable to [6] operate her company Status International Real Estate. Inc. at full capacity for six years. She has [7] also gone into significant debt because of the funds she has had to borrow from third parties during [8] this period of reduced employment and unemployment. [9] The Court finds, accepting these supported allegations as true, that there are sufficient facts [10] to support a finding in favor of Plaintiff Henning against Defendant Arya on the fraudulent [11] misrepresentation claim. [12] ii. Conversion [13] In Nevada, conversion is defined as “a distinct act of dominion wrongfully exerted over [14] personal property in denial of, or inconsistent with, title or rights therein or in derogation, exclusion [15] or defiance of such rights.” Edwards v. Emperor's Garden Rest., 122 Nev. 317 , 130 P.3d 1280 , [16] 1287 (Nev. 2006). [17] Henning alleges that Arya enticed Henning to leave the safety and stability of Nevada with [18] a gift, or multiple gifts, or promises of a gift; provided her with such gifts once she agreed to travel [19] abroad to see him, either immediately before or during her arrival to another country; and then [20] took those gifts from Henning or otherwise interfered with her possession of them. Henning alleges [21] that Arya gifted and later interfered with her possession of eighty-four gifts, including diamond [22] earrings, a Rolex watch, two Frank Muller watches, a Hermes watch, a 7.52-carat yellow diamond [23] ring, two Audemars Piguet watches, a 5-carat diamond ring, a 7-carat diamond ring, and numerous [24] other items which are fully listed in the expert gemologist report. ECF No. 231-1. Henning alleges [25] that Arya represented that these items belonged to Henning. Yet each of these gifts were later taken [26] by Arya. [27] The Court finds, accepting these supported allegations as true, there are sufficient facts to [28] support a finding in favor of Plaintiff Henning against Defendant Arya on the conversion claim. [1] iii. Misrepresentations and Conversion of the Ferrari [2] Henning also alleges that Defendant Arya gifted her a Ferrari 575 SuperAmerica. Arya [3] instructed Henning to ship it to Berlinetta Motorcars. Henning alleges she has not seen the Ferrari [4] since she shipped it. However, the claims related to the Ferrari were dismissed by the Court. [5] Therefore, the Court denies Plaintiff’s request for default judgment on the misrepresentation and [6] conversion of the Ferrari 575 SuperAmerica. [7] iv. Damages [8] If an entry of default is made, the Court accepts all well-pleaded factual allegations in the [9] complaint as true. DirecTV, Inc., 503 F.3d at 854 . The Court does not accept factual allegations [10] relating to the amount of damages as true, and while default establishes a party's liability, it does [11] not establish the amount of damages claimed in the pleading. Geddes, 559 F.2d at 560. [12] Here, the Court finds that Plaintiff is entitled to $3,949,905 for the conversion of Plaintiff’s [13] property and the loss of income and loans Plaintiff accrued in order to sustain her shelter and well14 being during the period she was unable to work due as a result of Defendant’s actions. [15] 1. Conversion damages [16] Conversion is a major “interference with the right to control personal property that [17] justif[ies] requiring the actor to pay the property’s full value.” Edwards v. Emperor’s Garden Rest., [18] 122 Nev. 317 , 130 P.3d 1280, 1287 (Nev. 2006). To support her damages for the conversion of [19] property claim, Henning provides receipts, photos, and emails regarding the various gifts she [20] received from Arya. Henning also retained Charles I. Carmona, CG, ASA, a certified gemologist [21] and appraiser. Mr. Carmona appraised the value of each gift on the list of eighty-four items. In [22] total, Mr. Carmona appraised the value of all the gifts to be $6,475,488.65. However, Mr. Carmona [23] notes in his expert report that he was not able to confirm values for at least twenty-one items, [24] because he did not have any documentation or images to refer to. For example, Henning claims [25] she received an uncut diamond necklace set and a turquoise and diamond jewelry set from Arya’s [26] mother and that these are valued at $1,700,000 and $2,200,000 respectively. As to these two items, [27] Mr. Carmona writes that “without images or more detailed descriptions, it is not possible to [28] estimate values independently.” Mr. Carmona identifies 20 other items on the spreadsheet for [1] which there is no documentation, images, or receipts. [2] The Court finds that Henning has submitted credible evidence as to the items where there [3] are images, receipts, or other documentation that Mr. Carmona could use in his appraisal. [4] However, the Court does not find Mr. Carmona’s appraisals of items for which there is no [5] documentation to be sufficient. Removing these items from Henning’s claim for conversion [6] damages, the Court finds that there is evidence to support conversion damages in the amount of [7] $2,126,567 against Defendant Arya. [8] 2. Loans from third parties [9] Henning seeks $1,348,440 in damages to cover the cost of loans she had to take out because [10] she has been unable to pay for shelter as a result of her PTSD and Defendant’s abusive behavior [11] towards her. In Henning’s prior motion for default judgment, she had only supported her claims [12] for these damages with her own bank statements. These bank statements showed various deposits [13] in her account but did not reveal which of these deposits were gifts or loans from third parties. In [14] her renewed motion for default judgment, Henning obtained Declarations from two of her lenders: [15] her mother, Lenore Henning, and a friend, Khusrow Roohani. [16] Lenore Henning asserts in her Declaration that she loaned her daughter $158,525 between [17] 2013 and 2022. Lenore Henning provides a detailed accounting of each transaction made to [18] Plaintiff along with copies of her deposits, receipts of web payments, photocopies of checks made [19] from Lenore Henning to Henning’s real estate company, and photocopies of deposit slips. She also [20] includes screenshots of Venmo Transactions and Apple Pay transactions made between Lenore [21] Henning and Plaintiff over the relevant time period. [22] Mr. Roohani states in his Declaration that he loaned Henning $1,189,916 from 201323 present. To support his Declaration, Mr. Roohani also provides a detailed accounting of each [24] transaction made to Henning between 2013-2022 along with photocopies of checks made out to [25] Plaintiff’s real estate company and deposit slips representing transactions to Plaintiff. Finally, [26] Plaintiff once again provides copies of her Chase bank statements covering the years from 201327 2022 in order to further corroborate the deposit of these loans into her bank account. [28] The Court finds that Henning has submitted credible evidence to support the damages [1] related to the cost of loans from third parties in the amount of $1,348,440. [2] 3. Loss of income [3] Henning also seeks damages for the loss of income she has endured because of her reliance [4] on Defendant’s misrepresentations. Henning’s previous Motion for Default Judgment sought [5] $990,500 in damages to cover the loss of income spanning a period of seven years (2014-2021) as [6] a result of Defendant’s misrepresentations. Henning’s only support for this claim was a 2012 and [7] 2013 tax return form which showed her income to be at $142,093 and $141,048 respectively. The [8] Court denied the request because Henning had failed to compare her earnings report before and [9] after the alleged seven-year period she did not work because of the alleged abuse. [10] In her renewed Motion for Default Judgment, Henning seeks $917,608 in lost wages for [11] the years 2014-2020. To support her request, Henning provides tax return documents for the years [12] 2012, 2013, 2014, 2015, 2016, and 2017. These tax return documents demonstrate that Henning’s [13] income dropped significantly during the relevant time. For example, Henning’s earnings decreased [14] from $141,048 in 2013 to $22,382 in 2014, zero income in 2015, $69,000 in 2016, and zero income [15] in 2017. In her Declaration, Henning also alleges she had zero income for the years of 2018, 2019, [16] and 2020. Henning states that she does not have tax return filings for these years because she did [17] not earn the minimum amount required by the IRS to file nor did she owe any special taxes. [18] The Court finds that Plaintiff has submitted credible evidence in support of her loss of [19] income damages for the years 2014-2017. However, because Henning does not provide any [20] documentation for her income from 2018-2020, the Court will grant her damages request for loss [21] of income for the years of 2014-2017—a total of $474,898. Henning is therefore entitled to [22] $1,823,338 in damages on the fraudulent misrepresentation claim. [24] In sum, the Court finds that Plaintiff Henning submitted credible evidence to support the [25] amount of damages of $3,949,905 against Defendant Arya in this case, and that it is subject to [26] calculation. See Davis v. Fendler, 650 F.2d 1154, 1161 (9th Cir. 1981). This includes $2,126,567 [27] for the conversion of Henning’s property based on the expert evaluation report, $1,348,440 to [28] cover the cost of loans she received from third parties during the time period when she was unable [1] to work as a result of Arya’s misrepresentations, and $474,898 to cover Henning’s loss of income [2] during this same time period. [3] v. Punitive Damages [4] Under NRS 42.005, a Plaintiff may recover punitive damages “where it is proven by clear [5] and convincing evidence that the defendant has been guilty of oppression, fraud or malice, express [6] or implied.” An award of exemplary or punitive damages made pursuant this section may not [7] exceed “(a) three times the amount of compensatory damages awarded to the plaintiff if the amount [8] of compensatory damages is $100,000 or more; or (b) three hundred thousand dollars if the amount [9] of compensatory damages awarded to the plaintiff is less than $100,000.” Id. Proof of bad faith, in [10] and of itself, does not establish liability for punitive damages. United Fire Insurance Company v. [11] McClelland, 105 Nev. 504 , 780 P.2d 193 (Nev. 1989). [12] Henning requests the Court award at $7,228,395 in punitive damages against Arya for his [13] fraudulent conduct. This is the fullest extent permitted under NRS 42:0005: three times the amount [14] of compensatory damages. Henning calculates these damages based on her request for $2,409,465 [15] in damages on the fraudulent misrepresentation claim. But as discussed above, the Court will only [16] grant Henning $1,823,338 on the fraudulent misrepresentation claim. The Court finds that an [17] award of punitive damages is warranted based upon Arya’s conduct outlined in this case. The facts [18] of this case establish a pattern of deception, theft, and abuse over the span of several years. This [19] conduct evinced clear malice towards Henning and resulted in her mental and physical oppression [20] by Arya. The Court thus awards $5,000,000 in punitive damages. [21] A. Judgment Interest [22] Nevada law provides “When no rate of interest is provided by contract or otherwise by law, [23] or specified in the judgment, the judgment draws interest from the time of service of the summons [24] and complaint until satisfied . . . . at a rate equal to the prime rate at the largest bank in Nevada as [25] ascertained by the commissioner of financial institutions on January 1 or July 1, as the case may [26] be, immediately preceding the date of judgment, plus 2 percent. The rate must be adjusted [27] accordingly on each January 1 and July 1 thereafter until the judgment is satisfied." Nev. Rev. Stat. [28] § 17.130(2) (emphasis added). The Court finds that prejudgment interest in this case began [1] accruing on the day that Arya was served with the summons: July 1, 2014. [2] B. Motion to Seal [3] Finally, Henning has moved for leave to file her tax return documents under seal. Courts [4] have long recognized “a general right to inspect and copy public records and documents, including [5] judicial records and documents.” Kamakana v. City & Cty. of Honolulu, 447 F.3d 1172 , 1179 (9th [6] Cir. 2006) (quoting Nixon v. Warner Commc'ns, Inc., 435 U.S. 589, 597 (1978) (quotation marks [7] omitted)). However, this right is not absolute. Id. There is a “strong presumption in favor of [8] access” to dispositive motions or their attachments, and a party seeking to seal such document [9] bears the burden of overcoming this presumption by providing a compelling and fact-based reason [10] for the document to be sealed. Id. (citations and quotation marks omitted). [11] Henning has filed a motion to seal that is unopposed. Henning argues that her IRS tax [12] return information is confidential financial information and seeks to keep all parts of her [13] company’s tax returns sealed from the public. The tax return forms contain highly detailed [14] information about Henning’s real estate company’s finances. The Court agrees that this is sensitive [15] information. Further, 26 U.S.C. § 6013 (a) provides federal tax “returns and return information [16] shall be confidential.” Henning has demonstrated compelling reasons to seal these records. [17] Accordingly, the Court grants the motion to seal. [19] IV. CONCLUSION [20] IT IS ORDERED that Plaintiff’s Motion for Default Judgment (ECF No. 224) is [21] GRANTED in part and DENIED in part. The Court enters default judgment against Defendant [22] Cheerag B. Arya for Plaintiff’s conversion and fraudulent misrepresentation claims as follows: [23] 1. For conversion damages sustained by Plaintiff in the amount of $2,126,567. [24] 2. For fraudulent misrepresentation damages sustained by Plaintiff in the amount of [25] $1,823,338. [26] 3. For prejudgment interest from the time of service of the summons and complaint, [27] July 1, 2014. [28] 4. For post-judgment interest at the statutory rate. IT IS FURTHER ORDERED that Plaintiff may file a separate briefing on the reasonable [2] attorney’s fees and costs of suit herein incurred, to be added to the judgment. [3] IT IS FURTHER ORDERED that Plaintiff's Motion for leave to file under seal Exhibit [4] 5 (ECF No. 234) is GRANTED. The Court may also order the document(s) to be unsealed in the [5] future. [7] DATED: September 30, 2023. [8] 9 mean 10 I | RICHARD F. BOULWARE, II 12 UNITED STATES DISTRICT JUDGE [28] -12-