Daly v. McFarland

CourtDistrict Court, S.D. New York
DecidedDecember 11, 2020
Docket1:17-cv-03461
StatusUnknown

This text of Daly v. McFarland (Daly v. McFarland) is published on Counsel Stack Legal Research, covering District Court, S.D. New York primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Daly v. McFarland, (S.D.N.Y. 2020).

Opinion

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK -----------------------------------------------------------x IN RE: FYRE FESTIVAL LITIGATION 17-cv-3296 (PKC) 17-cv-3461 (PKC)

OPINION AND ORDER

-----------------------------------------------------------x

CASTEL, U.S.D.J. Plaintiff Daniel Jung moves for the entry of default judgment against defendant William McFarland, and to certify a world-wide class of “[a]ll persons who purchased tickets to and/or made travel arrangements in connection with Fyre Festival” pursuant to Rule 23, Fed. R. Civ. P. Jung asserts that he and the members of the putative class were injured by fraudulent statements of Fyre Media, Inc. (“Fyre Media”) promoting the Fyre Festival as a luxurious event with premium accommodations, fine cuisine, amenities, and performing artists. He further asserts that McFarland directed and caused these statements to be made. For the reasons explained herein, the motion for the entry of default judgment will be denied but the Court will conduct an inquest into certain matters pertaining to the fraud claims. The motion for class certification will be denied. BACKGROUND The allegations in this case are well described in this Court’s Opinion and Order of July 10, 2019 (Doc 90 (“MTD Opinion”))1 granting the motions of Grant Margolin and Jeffrey Atkins to dismiss the Second Consolidated Amended Complaint (“SCAC”), and in its Opinion and Order of November 7, 2019 (Doc 105) denying plaintiffs’ motions for

1 It is reported as In re Fyre Festival Litig., 399 F. Supp. 3d 203 (S.D.N.Y. 2019). reconsideration of the dismissal of Margolin and for leave to further amend their complaint.2 For this reason, only a brief description of the facts follows.

The SCAC purported to allege against McFarland, Atkins and Margolin claims of fraud, negligent misrepresentation, negligence, gross negligence, inducement of breach of contract, unjust enrichment, and state statutory claims under the laws of New York, N.Y. Gen. Bus. Law § 349, California, Cal. Bus. & Prof. Code §§ 17200 et seq., 17500 et seq., Cal. Civil Code § 1750 et seq., Colorado, Col. Rev. Stat. § 6-1-102(6) et seq., and Illinois, Ill. Comp. Stat. §§ 505 et seq., 510/2 et seq. The seven named plaintiffs are ticket buyers and/or attendees of the Fyre Festival who allege that McFarland was the founder, owner, director, and CEO of Fyre Media, Inc., the company planning and overseeing Fyre Festival since December 2016. (SCAC ¶¶ 3–6.) The crux of Plaintiffs’ allegations is that McFarland directed the promotion and

marketing of Fyre Festival as a luxury music festival through social media accounts, promoters, and websites, claiming that attendees would be provided with amenities such as “morning yoga and guided meditation on the beach” or “local seafood, Bahamian-style sushi and even a pig roast” when in reality he knew that the Festival would be a “colossal failure that would place the lives of attendees in danger for weeks if not months in advance.” (Id. ¶¶ 6, 48–52.) Plaintiffs seek damages for their costs in purchasing tickets and arranging travel to the remote island where the festival was to be held, as well as damages resulting from the chaos that took place once arriving on the island.

2 It is reported on Westlaw as In re Fyre Festival Litig., 2019 WL 5799762 (S.D.N.Y. Nov. 7, 2019). DEFAULT JUDGMENT Curiously, only Daniel Jung, but not the other six individuals represented by the

same counsel, move for a default judgment. (Doc 114 (“P. Mem.”) at 5 (“Plaintiff and Proposed Class Representative Daniel Jung respectfully submits this Memorandum of Law in support of his Motion . . . for Default Judgment.”)). Mr. Jung, who does not claim to be an attorney, purports to move on behalf of his co-plaintiffs. The apparent hope was that the Court would certify a class with Mr. Jung as class representative before considering the default motion. The Court will treat the motion for a default as if made by all seven named plaintiffs who are represented by common counsel.

McFarland was served with a summons and the first complaint on May 15, 2017. (Doc 6.) He has not appeared in this action. Plaintiffs amended their complaint on June 25, 2018. (Doc 56.) McFarland was served the SCAC on January 31, 2020. (Doc 106.) The Clerk issued a Certificate of Default as to McFarland with respect to the SCAC on March 26, 2020. (Doc 109.) Thereafter, plaintiff Jung moved the Court for entry of a default judgment. Rule 55(b)(2), Fed. R.Civ. P.3

The Court has discretion on a motion for entry of a default judgment to accept the allegations of the complaint as true and draw all reasonable inferences in favor of the party seeking the default judgment. See, e.g., Vera v. Banco Bilbao Vizcaya Argentaria, S.A., 946 F.3d 120, 135 (2d Cir. 2019); Au Bon Pain Corp. v. Artect, Inc., 653 F.2d 61, 65 (2d Cir. 1981). Also “a district court has discretion under Rule 55(b)(2) once a default is determined to require

3 Plaintiff seeks no relief on this motion against Fyre Media, who has not appeared in this action. proof of necessary facts and need not agree that the alleged facts constitute a valid cause of action.” Id.

The Court accepts as true that McFarland controlled Fyre Media, which created and posted promotional videos, created a website, and enlisted celebrities to promote the festival with claims of high-end food, music, and lodging. (SCAC ¶¶ 30, 46–57, 67.) These advertisements and promotions continued even though McFarland allegedly knew that the festival would not be anything like these high-end representations. (Id. ¶¶ 78–94.) Principally for reasons stated in the Court’s July 10, 2019 Opinion and Order, the motion for a default judgment against McFarland will be denied on the claims for negligent misrepresentation, inducement of breach of contract, negligence and gross negligence and violation of New York General Business Law. A default judgment on the negligent

misrepresentation claim is denied because the SCAC does not allege “a special relationship of trust or confidence between the parties.” DynCorp v. GTE Corp., 215 F. Supp. 2d 308, 329 (S.D.N.Y. 2002); (MTD Opinion at 20.). A default judgment on the inducement of breach of contract claim is denied because the SCAC allegations do not make the requisite showing of a cause-and-effect relationship between the actions taken by McFarland and Fyre Media’s nonperformance of its contractual duties. See RSM Prod. Corp. v. Fridman, 643 F. Supp. 2d 382, 410 (S.D.N.Y. 2009), aff’d, 387 F. App’x 72 (2010); (MTD Opinion at 24.). A default judgment on the claims for negligence and gross negligence is denied because the alleged duty is not distinct from the contractual duties that are alleged, which are the subject of the contract claims and negligent misrepresentation claim. (MTD Opinion at 22–23.) A default judgment on

the unjust enrichment claim is denied because the claim is duplicative of plaintiffs’ tort and contract claims. See TheECheck.com, LLC v. NEMC Fin. Servs. Group Inc., 16-cv-8722, 2017 WL 2627912, at *4 (S.D.N.Y. June 16, 2017) (Castel, J); (MTD Opinion at 25.). A default judgment on the New York General Business Law claim is denied because the SCAC does not allege sufficient New York ties to the alleged deception.

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Daly v. McFarland, Counsel Stack Legal Research, https://law.counselstack.com/opinion/daly-v-mcfarland-nysd-2020.