7-Eleven, Inc. v. ETWA Enterprise, Inc. et al

Filing 30

MEMORANDUM OPINION (c/m 6/12/13 to Defendants ETWA Enterprise, Inc. and Elias Tefera c/o 4225 Medallion Drive, Silver Spring, MD 20904 sat). Signed by Chief Judge Deborah K. Chasanow on 6/12/13. (sat, Chambers)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MARYLAND
:
7-ELEVEN, INC.
:
v.

:

Civil Action No. DKC 12-3336

:
ETWA ENTERPRISE, INC., et al.
:
MEMORANDUM OPINION
Presently pending and ready for resolution in this contract
dispute is a motion for default judgment filed by Plaintiff 7Eleven, Inc.

(ECF Nos. 27, 28).1

The relevant issues have been

briefed and the court now rules pursuant to Local Rule 105.6, no
hearing being deemed necessary.

For the reasons that follow,

the motion will be granted in part and denied in part.
I.

Background
Plaintiff commenced this action on November 14, 2012, by

filing a complaint against ETWA Enterprise, Inc. (“ETWA”), and
its principal, Elias Tefera.

According to the complaint, on or

about January 16, 2003, Mr. Tefera entered into franchise and
security agreements with 7-Eleven, which granted him the right
to operate a 7-Eleven store in Lanham, Maryland, and to use
associated trademarks.

Several years later, Mr. Tefera assigned

the franchise agreement to ETWA and executed a guaranty in which
1

Plaintiff separately filed its motion (ECF No. 27) and
memorandum and exhibits (ECF No. 28).

he

“personally

and

unconditionally”

guaranteed

ETWA’s

debts,

liabilities, and obligations under the franchise agreement, as
well as any attorneys’ fees and costs incurred by 7-Eleven in
enforcing the agreements.

(ECF No. 1 ¶ 19).

The franchise agreement required Defendants, inter alia, to
maintain a minimum net worth in the store of $15,000 at all
times,

which

statements
further

was

to

reporting

provided

be

demonstrated

assets

that

if

and

by

monthly

liabilities.

Defendants

failed

The
to

financial
agreement

maintain

the

required net worth, 7-Eleven had the right, after giving notice
and an opportunity to cure, to terminate the franchise.

Upon

termination, Defendants were required to “[p]eaceably surrender
the Store and 7-Eleven Equipment[;] . . . transfer to [7-Eleven]
the Final Inventory[; and] . . . [t]ransfer [to 7-Eleven] the
Receipts,
money

Cash

order

supplies[.]”

Register

blanks,

Fund[s],

bank

prepaid

drafts,

(Id. at ¶ 28).

lottery

Operating
tickets

Expenses,
and

Store

Defendants further agreed to cease

using all 7-Eleven marks in the event of termination.
Starting in early 2011, Defendants consistently failed to
maintain the required minimum net worth of $15,000.

Plaintiff

sent numerous notices of material breach and provided multiple
opportunities to cure.
themselves

of

these

Defendants, however, failed to avail
opportunities

increasingly deeper in debt.

and

the

franchise

grew

As of October 2012, the store’s
2

net worth was “negative $239,417.15, or $254,417.15 below the
$15,000 minimum [n]et [w]orth ETWA must maintain under . . . the
[f]ranchise [a]greement.”
12,

2012,

material

7-Eleven
breach,

(Id. at ¶ 32).

hand-delivered

identifying

a

to

On or about October

Defendants

number

of

a

notice

required

of

deposits

Defendants had failed to make and advising that if the default
was

not

cured

within

three

business

days,

the

franchise

agreement would be terminated and Defendants would be required
to relinquish possession of the store.
When Defendants failed to cure their numerous breaches, 7Eleven dispatched personnel to begin conducting an audit of the
store’s

inventory

on

October

26,

2012.

Upon

Mr.

Tefera’s

arrival on that date, Plaintiff’s representatives explained that
they were taking possession of the store and offered him the
opportunity

to

sell

ETWA’s

interest

to

a

third-party.

Mr.

Tefera declined this offer and refused to permit 7-Eleven to
take possession after the audit was complete.
Eleven

withdrew

Defendants

all

continued

financing
to

operate

and
the

payroll
store

with

Thereafter, 7support,
very

but

limited

resources.
The complaint alleged breach of the franchise and security
agreements,

breach

of

guaranty,

trademark

infringement,

unfair competition under federal and Maryland law.

3

and

Plaintiff

sought preliminary and permanent injunctive relief, unspecified
monetary damages, and attorneys’ fees and costs.
Concomitantly with the complaint, Plaintiff filed a motion
for

temporary

restraining

order

and

preliminary

injunction.

Judge Williams conducted an ex parte telephonic hearing on the
motion for temporary restraining order on November 15, 2012.
Upon finding a strong likelihood that Plaintiff would succeed on
the merits, that irreparable injury would result if 7-Eleven
were not permitted access to the store, that the balance of
equities

tipped

decidedly

in

favor

of

Plaintiff,

and

that

emergency injunctive relief was in the public interest, Judge
Williams issued an order temporarily enjoining Defendants from
denying 7-Eleven access to the store, from failing to perform
all required bookkeeping, and from transferring or disposing of
any store assets pending further proceedings.
At the preliminary injunction hearing, held November 21,
2012, Plaintiff presented evidence of Defendants’ breaches of
the franchise agreement and continuing trademark infringement.
Mr. Tefera personally appeared, without counsel, and did not
present any material evidence in rebuttal.

At the conclusion of

the hearing, the court issued a preliminary injunction ordering
Defendants to surrender possession of the store at 3:00 p.m. on
the same date; enjoining them from using 7-Eleven marks, from
unfairly competing with 7-Eleven, or disposing of store assets;
4

and directing Defendants to deliver to 7-Eleven any and all
property bearing its trademarks.
On January 8, 2013, noting that Defendants had failed to
respond to the complaint, the court directed Plaintiff to file
and serve motions for entry of default and default judgment or
explain why such action was not appropriate.
Plaintiff

filed

judgment.

motions

for

entry

of

On February 7,

default

and

default

Defendants did not respond, and the clerk entered

default on March 5.
II.

Standard of Review
Under

Federal

Rule

of

Civil

Procedure

55(a),

“[w]hen

a

party against whom a judgment for affirmative relief is sought
has failed to plead or otherwise defend, and that failure is
shown

by

affidavit

party’s default.”

or

otherwise,

the

clerk

must

enter

the

Where a default has been previously entered

by the clerk and the complaint does not specify a certain amount
of damages, the court may enter a default judgment upon the
plaintiff’s

application

and

notice

pursuant to Fed. R.Civ.P. 55(b)(2).

to

the

defaulting

party,

A defendant’s default does

not automatically entitle the plaintiff to entry of a default
judgment; rather, that decision is left to the discretion of the
court.

See Lewis v. Lynn, 236 F.3d 766, 767 (5th Cir. 2001).

The Fourth Circuit has a “strong policy” that “cases be decided
on their merits,” Dow v. Jones, 232 F.Supp.2d 491, 494 (D.Md.
5

2002) (citing United States v. Shaffer Equip. Co., 11 F.3d 450,
453 (4th Cir. 1993)), but default judgment may be appropriate
where

a

party

is

unresponsive,

see

S.E.C.

v.

Lawbaugh,

359

F.Supp.2d 418, 421 (D.Md. 2005) (citing Jackson v. Beech, 636
F.2d 831, 836 (D.C.Cir. 1980)).
“Upon [entry of] default, the well-pled allegations in a
complaint as to liability are taken as true, but the allegations
as

to

damages

Federal

Rule

are
of

not.”

Civil

Lawbaugh,

Procedure

359

54(c)

F.Supp.2d

limits

the

at

422.

type

of

judgment that may be entered based on a party’s default: “A
default judgment must not differ in kind from, or exceed in
amount,

what

is

demanded

in

the

pleadings.”

Thus,

where

a

complaint specifies the amount of damages sought, the plaintiff
is

limited

to

entry

of

a

default

judgment

in

that

amount.

“[C]ourts have generally held that a default judgment cannot
award additional damages . . . because the defendant could not
reasonably
amount.”

have

expected

his

damages

exceed

that

“the

court

Where a complaint does not specify an
is

required

to

determination of the sum to be awarded.”
F.Supp.2d

would

In re Genesys Data Technologies, Inc., 204 F.3d 124,

132 (4th Cir. 2000).
amount,

that

15,

17

(D.D.C.

2001)

(citing

make

an

independent

Adkins v. Teseo, 180
S.E.C.

v.

Management

Dynamics, Inc., 515 F.2d 801, 814 (2nd Cir. 1975); Au Bon Pain
Corp. v. Artect, Inc., 653 F.2d 61, 65 (2nd Cir. 1981)).
6

While

the court may hold a hearing to consider evidence as to damages,
it is not required to do so; it may rely instead on “detailed
affidavits or documentary evidence to determine the appropriate
sum.”
v.

Adkins, 180 F.Supp.2d at 17 (citing United Artists Corp.

Freeman,

605

F.2d

854,

857

(5th

Cir.

1979));

see

also

Laborers’ District Council Pension, et al. v. E.G.S., Inc., Civ.
No. WDQ–09–3174, 2010 WL 1568595, at *3 (D.Md. Apr. 16, 2010)
(“[O]n
without

default
a

judgment,

hearing

if

the

Court

the

may

record

only

award

supports

damages

the

damages

requested.”).
III. Analysis
Taking

as

true

the

well-pleaded

allegations

of

the

complaint, as the court must upon entry of default, Plaintiff
has

established

Defendants’

liability

franchise and guaranty agreements.2

for

breach

of

the

Plaintiff seeks as damages a

total award of $282,141.00, which it asserts “is fixed and owing
under the Franchise Agreement and Guaranty between the parties,”
as well as a “a permanent injunction awarding permanent control
of the Store to 7-Eleven” and an award of attorneys’ fees and
costs in the amount of $51,908.75.

2

(ECF No. 27, at 1-2).

Plaintiff does not seek default judgment on its trademark
infringement and unfair competition claims, and asks that those
counts be dismissed without prejudice.
(ECF No. 27, at 1).
That request will be granted.
7

In support of its request for damages, Plaintiff submits
the declaration of Brian Padgett, 7-Eleven’s senior director of
merchandise accounting and compliance.
his

declaration

a

“financial

Mr. Padgett attaches to

summary”

of

Defendants’

store,

dated January 10, 2013, which “organizes, summarizes, and makes
calculations

based

upon

information

that

ETWA

registers at the Store report to 7-Eleven.”
3).

and

the

cash

(ECF No. 28-1, at

The financial summary reflects that, as of the end of 2012,

the net worth of Defendants’ store was $282,141.42 less than the
required minimum net worth of $15,000.

(Id. at 207).

Mr.

Padgett avers that this amount “includes, but is not limited to,
deposits that ETWA failed to make, unauthorized cash draws and
advances that ETWA received, and the gross profits due to 7Eleven under the terms of the Franchise agreement.”

(Id. at 4).

The declaration does not specifically point to any contractual
provision entitling Plaintiff to recover this amount, but the
attached

franchise

termination,

any

agreement

unpaid

balance

provides
on

that,

Defendants’

following
account

is

“immediately due and payable” (ECF No. 28-1, at 38), and Mr.
Tefera’s guaranty “personally and unconditionally guarantees to
7-Eleven . . . full and prompt payment when due of any and all
indebtedness and liabilities” (id. at 186).

Thus, Plaintiff has

established entitlement to a default judgment in the amount of
$282,141.00.
8

Insofar as the complaint seeks injunctive relief related to
only the trademark infringement and unfair competition claims,
which

Plaintiff

now

seeks

to

dismiss,

its

request

permanent injunction would appear to be moot.

for

a

Nevertheless,

Plaintiff is clearly entitled to terminate Defendants’ franchise
and

take

permanent

custody

of

the

store

due

to

breach of the franchise and guaranty agreements.

Defendants’
As Plaintiff

observes, “this relief is expressly anticipated by the Franchise
Agreement” (ECF No. 28, at 5), and a declaration to that effect
would be equitable and in the public interest.
that

no

prejudice

preliminary

could

injunction

inure

will

to

expire

Considering also

Defendants
upon

and

entry

that

of

a

the
final

judgment, Plaintiff is entitled to limited declaratory relief.
Plaintiff’s request for attorneys’ fees and costs must be
denied, however.

Plaintiff seeks a total award of legal fees in

the amount of $51,908.75, submitting in support the declaration
of attorney Rhett E. Petcher.

Mr. Petcher asserts that, to

date, his firm has “expended 87.4 hours at the rates ranging
from $260 to $585 per hour” on this litigation, with fees and
costs totaling $35,995.50.
estimates

that

the

firm

(ECF No. 28-2 ¶ 3).
“shall

expend

(and

has,

He further
in

part,

expended but not yet billed) approximately 30 hours in pursuit
of [] post-judgment enforcement efforts at an average rate of
$450

per

hour,

which

equates

to
9

an

additional

$13,500

in

anticipated
attaches

to

fees
his

and

costs.”

declaration

(Id.

at

summaries

¶

of

4).

Mr.

billing

Petcher

statements,

which reflect the hours billed by a number of attorneys, with
associated amounts, and a list of costs consisting of, inter
alia,

fees

associated

with

electronic

research,

copy

transcript requests, postage, and messenger services.

work,

He cites

as the basis of this request the guaranty agreement, in which
Mr.

Tefera

“agrees

to

pay

.

.

.

all

costs,

expenses,

and

reasonable attorneys’ fees at any time paid or incurred by [7Eleven]

in

endeavoring

to

collect

[ETWA’s]

indebtedness

and

liabilities or obtain performance of [ETWA’s] obligations[.]”
(ECF No. 28-1, at 186).
Plaintiff

has

established

entitlement

to

an

award

of

attorneys’ fees and costs against Mr. Tefera, but has failed to
demonstrate

that

the

amounts

it

seeks

are

reasonable.

In

determining the amount that constitutes a reasonable attorneys’
fee,

the

court

employs

a

hybrid

method,

which

begins

with

calculation of the lodestar amount — i.e., the product of the
reasonable

hours

expended

on

the

litigation

multiplied

by

a

reasonable hourly rate — followed by adjustment, as appropriate,
based

on

the

factors

enunciated

in

Johnson

v.

Georgia

Express, Inc., 488 F.2d 714, 717–19 (5th Cir. 1974).
court has explained:

10

Hwy.

As this

Absent circumstances warranting adjustment,
the lodestar figure represents the proper
total fee award.
Wileman v. Frank, 780
F.Supp. 1063, 1064 (D.Md. 1991) (citing Blum
v. Stenson, 465 U.S. 886, 888, 79 L.Ed.2d
891, 104 S.Ct. 1541 (1984)).
In deciding
what constitutes a “reasonable” number of
hours and rate, the district court generally
is guided by the following factors:
“(1) the time and labor expended; (2)
the novelty and difficulty of the
questions
raised;
(3)
the
skill
required to properly perform the legal
services rendered; (4) the attorney's
opportunity
costs
in
pressing
the
instant litigation; (5) the customary
fee for like work; (6) the attorney's
expectations at the outset of the
litigation; (7) the time limitations
imposed by the client or circumstances;
(8) the amount in controversy and the
results obtained; (9) the experience,
reputation and ability of the attorney;
(10) the undesirability of the case
within the legal community in which the
suit arose; (11) the nature and length
of
the
professional
relationship
between attorney and client; and (12)
attorneys'
fees
awards
in
similar
cases.”
Brodziak v. Runyon, 145 F.3d 194, 196 (4th
Cir. 1998) (quoting EEOC v. Service News
Co., 898 F.2d 958, 965 (4th Cir. 1990)
(quoting Barber v. Kimbrell’s, Inc., 577
F.2d 216, 226 n. 28 (4th Cir. 1978))).
CoStar Group, Inc. v. LoopNet, Inc., 106 F.Supp.2d 780, 787
(D.Md. 2000); see also Int’l Ass’n of Machinists & Aerospace
Workers v. Werner–Matsuda, 390 F.Supp.2d 479, 490 (D.Md. 2005).
The party seeking fees bears the burden of proving the
reasonableness of the amount sought.
11

See Robinson v. Equifax

Information Services, LLC, 560 F.3d 235, 243–44 (4th Cir. 2009).
“In addition to the attorney’s own affidavits, the fee applicant
must produce satisfactory specific evidence of the prevailing
market rates in the relevant community for the type of work for
which he seeks an award.”

In re Botero–Paramo, No. 11–1886,

2012 WL 2055005, at *8 (4th Cir. June 8, 2012) (quoting Robinson,
560 F.3d at 243) (internal marks and emphasis removed).
Here,

the

court

cannot

determine

the

lodestar

amount

because there is insufficient evidence that the hourly rates or
number of hours are reasonable.

Mr. Petcher’s declaration does

not indicate the experience level of the attorneys who worked on
the case, nor has Plaintiff presented any other evidence in
support of the reasonableness of the hourly rates, which in some
cases greatly exceed the presumptively reasonable amounts set
forth in Appendix B of the court’s Local Rules.

Moreover, the

billing summaries do not break down each item of work by task;
thus, there is no way to assess whether the work performed was
necessary

and/or

duplicative

in

any

respect.

Furthermore,

Plaintiff has not identified any authority that would entitle it
to an award of “anticipated legal fees and costs,” nor is the
court aware of any.
With respect to costs, Plaintiff seeks reimbursement for
certain items that are generally not taxable in this district,
see Guidelines for Bills of Costs § III (3d Ed. June 1, 2013),
12

and no documentation is presented in support of others.

At

present, the record supports only that Plaintiff is entitled to
reimbursement of the filing fee in the amount of $350.00.

Aside

from that amount, Plaintiff’s request for attorneys’ fees and
costs will be denied.

It will be permitted, however, to renew

its motion by filing a properly supported fee petition and bill
of costs within fourteen days.
IV.

Conclusion
For the foregoing reasons, Plaintiff’s motion for default

judgment will be granted in part and denied in part.

A separate

order will follow.

________/s/_________________
DEBORAH K. CHASANOW
United States District Judge

13