Choice Hotels International, Inc. v. Patel et al

Filing 26

MEMORANDUM OPINION. Signed by Judge Theodore D. Chuang on 5/30/2017. (c/m 5/30/2017 aos, Deputy Clerk)

UNITED STATES DISTRICT COURT
DISTRICT OF MARYLAND

CHOICE HOTELS INTERNATIONAL,

INC.,

Plaintiff,
v.
Civil Action No. TDC-15-2968
ASHOK PATEL and
BIRJU PATEL,
Defendants.

MEMORANDUM

OPINION

On September 30, 2015, Choice Hotels International, Inc. ("Choice") filed an Application
to Confirm Arbitration Award against Defendants.
2016 based on Choice's

This Court dismissed the action on May 11,

failure to articulate the jurisdictional

basis for the Application and

reopened the case on August 18, 2016 upon Choice's Motion for Reconsideration.
31, 2016, Choice filed an Amended

Application

to Confirm Arbitration

On August

Award against

Defendants.
The award at issue is based on Defendants'

alleged breach of a franchise agreement

between the parties ("the Franchise Agreement"), specifically Defendants' failure to commence
construction of a hotel in Virginia Beach, Virginia within 18 months of the date on which the
Franchise Agreement was executed. On April 16,2015, the arbitrator awarded Choice a total of
$134,917.50,
expenses.

comprised

of liquidated damages, accumulated

interest, fees, and arbitration

The award also includes interest on the liquidated damages and accumulated interest

amount "at the rate of 1.5% per month or portion of a month" until paid. Award 2, Appl. Ex. 1,

ECF No. 1-4; Am. Appl. ,-r 15, ECF No. 19.

Defendants did not present any evidence: or

participate in the arbitration proceedings.
Defendants were served with the Application to Confirm Arbitration Award on or about
November 10,2015 and the Amended Application on or about August 31, 2016, but they have
not filed any response to either Application.

On February 2, 2017, Choice filed an Amended

Request for Entry of Default and an Amended Request for Judgment by Default ("the Motion")
against Defendants. The Clerk entered a default against Defendants on February 13,2017.
Although Defendants were served with the Motion, to date, they have not responded to it
or to any other filing in this case. The Motion is now ripe for disposition, and the Court finds no
hearing necessary.

See D. Md. Local R. 105.6. For the reasons set forth below, the Motion is

granted.
DISCUSSION
In the Motion, Choice asserts that Defendants have failed to file a timely responsive
pleading to its Amended Application.

Thus, Choice argues that it is entitled to default judgment

against Defendants in the amount of the arbitration award, post-judgment interest, and costs.
I.

Legal Standard
Under Federal Rule of Civil Procedure 55(b)(2), a default judgment after an entry of

default is left to the discretion of the court. s.E.C v. Lawbaugh, 359 F. Supp. 2d 418,421
Md. 2005).

(D.

Although the United States Court of Appeals for the Fourth Circuit recognizes a

"strong policy that cases be decided on their merits," United States v. Shaffer Equip. Co., 11 FJd
450, 453 (4th Cir. 1993), a default judgment may be appropriate when a party is unresponsive,
Lawbaugh, 359 F. Supp. 2d at 422-23 (citing Jackson v. Beech, 636 F.2d 831,836

(D.C. Cir.

1980)). When default judgment is sought with respect to an application for confirmation of an

2

arbitration award, the plaintiff must show that it is entitled to confirmation as a matter of law.
See D.H Blair & Co. v. Gottdiener, 462 F.3d 95, 109-10 (2d Cir. 2006).
II.

The Arbitration Award
The Court is satisfied that it has diversity jurisdiction over this case pursuant to 28 U.S.C.

~ 1332. Choice is a Delaware corporation with its headquarters located in Rockville, Maryland.
Defendants are citizens of North Carolina. In addition, the amount in controversy is greater than
the $75,000 jurisdictional minimum under 28 U.S.C. ~ 1332.
The Federal Arbitration Act ("FAA"), 9 U.S.C. ~~ 1-16 (2012), provides in part that:
If the parties in their agreement have agreed that a judgment of the court shall be
entered upon the award made pursuant to the arbitration, and shall specify the
court, then at any time within one year after the award is made any party to the
arbitration may apply to the court so specified for an order confirming the award,
and thereupon the court must grant such an order unless the award is vacated,
modified, or corrected as prescribed in sections 10 and 11 of this title. If no court
is specified in the agreement of the parties, then such application may be made to
the United States court in and for the district within which such award was made.
9 U.S.C. ~ 9. Here, the Franchise Agreement contains an arbitration clause that states that ",my
controversy

or claim arising out of or relating to this Agreement,

Agreement, ...

or the breach of this

will be sent to final and binding arbitration," and that "[j]udgment on the

arbitration award may be entered in any court having jurisdiction."

Franchise Agreement ~ 22,

Appl. Ex. 2, ECF No. 1-5. The dispute relating to the failure to construct a hotel arises under the
Franchise Agreement.
arbitrator's decision.

Choice filed its application to confirm the award within one year of the
The Amended Application states that the award was rendered in the State

of Mary land. The Court is therefore satisfied that the requirements of the FAA are met, such that
it may review the arbitration award.
Judicial review of an arbitration award is "severely circumscribed,"

and, in fact, is

"among the narrowest known at law because to allow full scrutiny of such awards would
3

frustrate the purpose of having arbitration at all-the

quick resolution of disputes and the

avoidance of the expense and delay associated with litigation."

Apex Plumbing Supply, Inc. v.

Us. Supply Co., Inc., 142 F.3d 188, 193 (4th Cir. 1998) (footnote omitted). Thus, where there is
a valid contract between the parties providing for arbitration, and the arbitration resolved a
dispute within the scope of the arbitration clause, federal courts may vacate an arbitration award
only upon a showing of one of the grounds set forth in the FAA, or if the arbitrator acted in
manifest disregard of law. !d. Section 10 of the FAA limits review to the following grounds:
(1) "the award was procured by corruption, fraud, or undue means"; (2) "there was evident
partiality or misconduct"

on the part of the arbitrators; (3) "the arbitrators were guilty of

misconduct" by which "the rights of any party have been prejudiced"; or (4) "the arbitrators
exceeded their powers."

9 U.S.C.

S

10(a). A misinterpretation of a contract, or of law, does not

suffice to overturn an award. See Upshur Coals Corp. v. United Mine Workers of Am., Dist. 31,
933 F.2d 225, 229 (4th Cir. 1991). Where an arbitration award is challenged, the party opposing
the award bears the burden of proving the existence of grounds for vacating the award. Three S
Del., Inc. v. DataQuick Info. Sys., Inc., 492 F.3d 520, 527 (4th Cir. 2007).
Here, Choice alleges, and the arbitrator awarded damages for, a breach of the parties'
Franchise Agreement, specifically, a failure timely to commence construction.

As noted above,

the Franchise Agreement provides that a claim for breach of the agreement is subject to
arbitration, so the claims resolved by arbitration were within the scope of the parties' agreement.
Although Defendants were served in this case and received notice ofthe Motion, they have failed
to file an Answer to Choice's Amended Application or otherwise make

a

showing of any

grounds for vacating the arbitration award. Nor is there anything in the record to suggest that
any of the limited grounds for setting aside an arbitration award are present in this case. See 9

4

U.S.C.

S

10(a). Accordingly, the Court will grant the Motion to the extent it seeks confirmation

of the arbitrator's

award of $134,917.50.

Choice also asks to be awarded $400.00 in costs,

presumably the filing fee for this action, which the Court will grant.

See Fed. R. Civ. P.

54(d)(1).
To the extent that Choice also requests post-judgment

interest for the time period

following this Court's grant of default judgment, Choice is entitled by statute to such postjudgment interest as calculated under federal law, so the Court need not specifically award it.
See 28 U.S.C.

S

1961(a) ("Interest shall be allowed on any monetary judgment in a civil case

recovered in a district court.").
CONCLUSION
For the foregoing reasons, Choice's Motion, ECF No. 23, is GRANTED.
therefore confirms the arbitration award, enters judgment

The Court

in favor of Choice and against

Defendants in the amount of $134,917.50, which shall accrue post-judgment interest as specified
by statute, and awards $400.00 in costs. A separate Order shall issue.

Date: May 30, 2017
THEODORE D. CHU
G
United States District Ju ge

5