Choice Hotels International, Inc. v. Harikrishna, Inc et al

Filing 12

MEMORANDUM OPINION. Signed by Judge George Jarrod Hazel on 9/19/2016. (aos, Deputy Clerk)

FILED
~JJ.s...WSTRICT COURT

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IN THE UNITED STATES DISTRICT \Vf~,tI~lT
FOR THE DISTRICT OF MARYLAND
SOllt!leTII Division

OF MARYLAND

lDlb SEP I q P 4: 25

CHOICE HOTELS
INTERNA T10NAL, INC.,

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CLEfH\'S O'FIC:.

AT GRE:EN~~L"
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I3Y_

Plaintiff,

v.
HARIKRISHNA,

INC.

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Defendant.

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Case No.: GJH-15-03528

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MEMORANDUM

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OPINION

Pursuant to Fed. R. Civ. P. 55(b), Plaintiff Choice Hotels International, Inc. ("Plaintiff"
or "Choice") has tiled a Motion for Default Judgment, with a supporting affidavit, as to
Defendant Harikrishna, Inc. ("Defendant" or "Harikrishna, Inc."). ECF NO.7. A hearing is not
necessary in this case. See Loc. R. 105.6 (D. Md.). For the reasons that follow, Plaintiffs Motion
for Default Judgment will be granted.
I.

BACKGROUND

Choice is a "publicly-traded company incorporated under the laws of the State of
Delaware, with principal headquarters in Rockville, Maryland." ECF No. I I ~ I.' Choice is
"primarily in the business of franchising hotels domestically and internationally ... including but
not limited to the trade and brand marks, names and systems associated with Quality [nn@." Id.
Defendant is "based upon information, knowledge and belieC a limited liability company
organized under the laws of the State of Nebraska, with principal place of business located in
All facts herein are taken from PlaintifT"s Application to Confirm Arbitration Award, ECF No. I, and PlaintifT"s
Supplemental Motion for Judgment by Default. ECF No. II.
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Nebraska." Id. ~ 2. On or about December 28, 2010, Choice entered into a Franchise Agreement
with Defendant, under which Choice granted Defendant a limited and revocable license to
operate a Quality Inn hotel in Omaha. Nebraska. Id. ~ 4. The parties' Franchise Agreement
contained an arbitration clause, stating in relevant part that "any controversy or claim arising out
of or relating to this Agreement ... will be sent to final and binding arbitration before either the
American Arbitration Association, J.A.M.S., or National Arbitration Forum ... " See ECF No. 15. In Plaintiffs

Supplemental Motion for Default Judgment, Plaintiff states:
During the term of the Franchise Agreement, Defendants
transferred the Hotel to a new owner without Choice's prior
consent in violation of Section 9(d) of the Franchise Agreement.
Such action constituted material default of the terms of the
Franchise Agreement, and, accordingly, on or about May 1,2012,
Choice terminated the Franchise Agreement in accordance with
Section 10 of the Franchise Agreement.

Id. ~ 5.
On or about January 29, 2015, Choice initiated arbitration proceedings against Defendant
with the American Arbitration Association, Case No.: 01-15-0002-5413, "seeking resolution of
its dispute with Defendants." Id. ~ 7. "Specifically, Choice claimed that Defendant materially
breached the parties' Franchise Agreement and owed Choice damages and costs incurred as a
result of Defendant's breach." /d.
Arbitration proceedings were scheduled for August 13,2015. See ECF No. 7.1 ~ 3; ECF
No. 1-4. Plaintiff sent notice of the proceedings to Defendants at their last known address "by
regular mail, certified mail and/or overnight Fed Ex delivery." ECF No. 11 ~ 9. "Defendants
failed to appear or participate during any proceeding." /d. The Arbitrator determined that
"Defendant had received due and proper notice of all proceedings in accordance with AAA's
Commercial Rules, the Franchise Agreement, and Maryland law" and entered an award in

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Choice's favor against Defendant in the amount of$171,360.00.

ECF No. 11 ~ 11; ECF No. 1-4.

The Arbitrator also ordered Defendants to reimburse Choice in the sum total of $7,778.20 for
"administrative fees and expenses" and "compensation and expenses of the arbitrator."
ECF No. 1-4.
Choice Hotels liIed an "Application to Confirm Arbitration Award" in this Court on
November 20. 2015. ECF No. I. The "Ex Parte Award of Arbitrator," signed by John Connolly
of the American Arbitration Association on August 13,2015, is attached to the Application. ECF
No. 1-4. Choice Hotels named Harikrishna, Inc. and Mahendra Patel as defendants. ECF No. 1.
The court issued summons to Defendants on November 24, 2015, and the summons were
returned as executed on December 14,2015. ECF No.3; ECF NO.4. Plaintiff stipulated to the
dismissal of Defendant Patel, and Patel was terminated as a party on December 14,2015. See
ECF NO.5. The Clerk made an entry of default for want of answer against Harikrishna, Inc. on
March 30, 2016. ECF NO.9. Choice Hotels now requests that the Court issue judgment by
default against Harikrishna, Inc. ECF NO.7.
II.

DISCUSSION
A. Motion for Default

"A defendant's default does not automatically entitle the plaintiff to entry ofa default
judgment; rather, that decision is left to the discretion of the court." Choice Hotels Intern .. Inc. v.
Savannah Shakti Corp., DKC-II-0438,

2011 WL 5118328 at • 2 (D. Md. Oct. 25, 20 II ) (citing

Dow v. Jones, 232 F.Supp. 2d 491, 494 (D. Md. 2002)). When a motion for default judgment is
based on an arbitration award, the plaintiff "must show that it is entitled to confirmation of the
award as a matter of law." Id. (citations and internal quotation marks omitted).

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Under the Federal Arbitration Act, a court may confirm an arbitration award "[i]f the
parties in their agreement have agreed that a judgment of the court shall be entered upon the
award made pursuant to the arbitration .. :' 9 U.S.C.

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9. The Court must confirm the award

unless it vacates, modifies, or corrects the award under 9 U.S.c.

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10 or 11. Id. "Federal courts

may vacate an arbitration award only upon a showing of one of the grounds listed in the Federal
Arbitration Act, or if the arbitrator acted in manifest disregard of law." Apex Plumbing Supply v.

u.s.

Supply Co., Inc., 142 F.3d 188, 193 (4th Cir. 1998). The situations permitting a court to

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vacate an arbitration award are found at 9 U.S.c.

10(a), which provides:

In any of the following cases the United States court in and for the
district wherein the award was made may make an order vacating
the award upon the application of any party to the arbitration-(l) where the award was procured by corruption, fraud, or undue
means;

(2) where there was evident partiality or corruption in the
arbitrators, or either of them;
(3) where the arbitrators were guilty of misconduct in refusing to
postpone the hearing, upon sufficient cause shown, or in refusing
to hear evidence pertinent and material to the controversy; or of
any other misbehavior by which the rights of any party have been
prej udiced; or
(4) where the arbitrators exceeded their powers, or so imperlectly
executed them that a mutual, final, and delinite award upon the
subject matter submitted was not made.
9 U.S.c.

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10(a).

"The exceptions to confirmation of awards are strictly limited to avoid frustrating the
fundamental purpose of arbitration, i.e., quick dispute resolution and avoidance of the expense
and delay of court proceedings:'

Jih v. Long & Foster Real Estate, Inc., 800 F.Supp. 312, 317

(D. Md. 1992) (citations omitted).

In essence, the Court's role in reviewing an arbitrator's

decision is "to determine only whether the arbitrator did his job-not

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whether he did it well,

correctly, or reasonably, but simply whether he did it." Wachovia Securities, LLC v. Brand, 671
F,3d 472, 478 (4th Cir. 2012) (citations and internal quotation marks omitted),
Here, Choice Hotels' claims were properly before the American Arbitration Association
under the arbitration clause of the parties' Franchise Agreement, See ECF No. 1-5. "Despite duly
and properly notifying Defendant of all proceedings relating to the arbitration proceedings ...
Defendants tailed to appear or participate during any proceeding." ECF No. 11 ~ 9. As Choice
notes in its Supplemental Motion for Default Judgment:
[l]n accordance with the parties' Arbitration Agreement, AAA
Commercial Rule 31, which states in relevant part that "the
arbitration may proceed in the absence of any party or
representative who, alter due notice, fails to be present .. .", the
Arbitrator conducted an in-person final evidentiary hearing, at
Choice's headquarters, wherein Choice presented documentary
evidence and witness testimony in support of its demand.

Id. ~ 10.
"After considering the evidence presented and AAA's record, the arbitrator determined
and ruled that Defendant had received due and proper notice of all proceedings in accordance
with AAA's Commercial Rules, the Franchise Agreement, and Maryland law ... " ECF No. 11 ~
11 ; see ECF No. 1-4. The Arbitrator determined that Defendant had breached the parties'
Franchise Agreement. ECF No. I I ~ II. Therefore, Arbitrator "rendered his award ... in the
State of Maryland, in accordance with the Commercial Rules of the AAA, the parties' Franchise
Agreement and laws of the State of Maryland on August 13,2015." Id.
The Court finds no reason in the record to question the validity of the Franchise
Agreement or the conduct of the Arbitrator. See Choice Holels InI'l, Inc. v. Bhupinder Mander,
No. GJH-14-3159, 2015 WI. 1880277, at *4 (D. Md. Apr. 22, 2015). Further, the parties agreed
that "[i]f any party fails to appear at any properly noticed arbitration proceeding, an award may

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be entered against the party, notwithstanding its failure to appear." See ECF No. 1-5. The parties
also agreed that "[j]udgment on the arbitration award may be entered in any court having
jurisdiction." See id.
III.

CONCLUSION

For the reasons explained above, Plaintiffs Request for Judgment by Default, ECF NO.7,
will be granted. Judgment by default is entered in favor of Plaintiff Choice Hotels and against
Defendant Harikrishna, Inc. in the amount of $179,538.20, representing the Arbitrator's award of
$171,360.00, administrative fees and expenses totaling $4650.00, compensation and expenses of
the Arbitrator totaling $3,128.20, and costs of the action totaling $400.00. ECF No. 1-4; ECF No.
1.2 A separate Order shall issue.

Dated: September~,

2016
George J. Hazel
United States District Judge

In contrast to this Coun's decision in Choice Hotels Int'l. Inc. v. Bhupinder Mander, No. GJH-14-3159, 2015 WL
1880277, at *4 (D. Md. Apr. 22, 2015), Choice Hotels requested "costs of the action" in their original Application to
Confirm Arbitration Award, ECF No. I at 2. Therefore, the default judgment does not "differ in kind from, or
exceed in amount, what is demanded in the pleadings." See Fed. R. Civ. P. 54(c).

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