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Note: As a supplier of heavy machinery parts to shipping companies in the Middle East, Maritime Group Co. (Seller/Applicant) received three orders for Caterpillar tractor parts from a customer in Egypt. To fulfill the orders, Seller/Applicant engaged Entrac, Inc. (Supplier/Beneficiary) to provide the goods while the customer “arrange[d] delivery of the parts from [Supplier/Beneficiary]’s warehouse in New Jersey to Egypt.” Seller/Applicant also “facilitated the opening of three irrevocable letters of credit” issued by an Egyptian bank in favor of Supplier/Beneficiary. Although Supplier/Beneficiary represented that it had shipped all of the ordered goods, Seller/Applicant and its customer learned upon arrival that some parts were missing. Supplier/Beneficiary, however, had made presentations on the LCs, which were honored.

After Supplier/Beneficiary acknowledged that it had not shipped all of the parts, it agreed to refund USD 66,000 to Seller/Applicant and its customer. Supplier/Beneficiary, however, never tendered the refund which Seller/Applicant alleged caused further economic harm due to lost business with its customer. Thereafter, Seller/Applicant sued Supplier/Beneficiary for, among other claims, breach of contract. In lieu of further litigation, the parties reached a structured settlement and Supplier/Beneficiary’s president and CEO signed an Affidavit of Confession of Judgment. The affidavit provided that if Supplier/Beneficiary were to default on the settlement agreement, Supplier/Beneficiary consented to an enforcement judgment for the balance owed “plus an amount equal to the balance due as a penalty for defaulting.” The trial court approved the settlement and expressly retained jurisdiction to enforce it. Subsequently, Supplier/Beneficiary made its first of three settlement payments and later cured its untimely second payment. Supplier/Beneficiary, however, was late on its third and final payment and ultimately defaulted on the remaining USD 30,000. Accordingly, Seller/Applicant moved for an order pursuant to the Confession of Judgment seeking USD 60,000. When Supplier/Beneficiary failed to timely respond to Seller/Applicant’s motion, the United States District Court for the Southern District of New York, Parker, J., granted Seller/Applicant’s motion.

Having presided over the settlement conference, the Judge noted that Supplier/Beneficiary entered into the agreement “knowingly and voluntarily”. Moreover, Supplier/Beneficiary had been represented by “competent and experienced counsel”. The Judge noted there was “no doubt” that Supplier/Beneficiary was in default of the settlement agreement and that its Affidavit of Confession of Judgment was valid under New York law because it authorized the entry of judgment of a stated sum, stated the facts from which the debt arose and provided that the confessed sum was or would become justly due. As Supplier/Beneficiary failed to timely respond to the motion, the Judge granted Seller/Applicant’s motion and requested the clerk to enter a judgment in favor of Seller/Applicant for USD 60,000.

[MJK]

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