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

Filing 12

MEMORANDUM OPINION. Signed by Judge Theodore D. Chuang on 1/24/2017. (ah4s, Deputy Clerk)

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UNITED STATES DISTRICT COURT DISTRICT OF MARYLAND CHOICE HOTELS INTERNATIONAL, INC., Plaintiff, v. Civil Action No. TDC-16-2258 RAJ, INC., and NUTAN BHAKTA, Defendants. MEMORANDUM OPINION On June 21, 2016, Choice Hotels International, Inc. ("Choice Hotels") filed an Application to Confirm Arbitration Award against Raj, Inc. and Nutan Bhakta (collectively, "Defendants").) The award was based on Defendants' alleged breach of a franchise agreement between the parties ("the Franchise Agreement"), specifically, Defendants' failure to pay various fees due under its terms. The arbitrator awarded Choice Hotels a total of $132,198.13, comprised of fees, interest, liquidated damages, and arbitration expenses. Defendants did not present any evidence or participate in the arbitration hearing. Defendants were served with the Application on July 29, 2016. On September 8, 2016, Choice Hotels filed a Motion for Clerk's Entry of Default and a Motion for Judgment by Default against Defendants. The Clerk entered a default against Defendants on September 28, 2016. Although Defendants were served with the Motion for Judgment by Default, to date, they have not responded to it, or to any other filing in this case. The Application also named Amit Bhakta as a defendant. dismissed without prejudice as to Amit Bhakta. The Motion is now ripe for On July 29, 2016, this case was disposition, and the Court finds that no hearing is necessary. See D. Md. Local R. 105.6. For the reasons set forth below, the Motion is GRANTED. DISCUSSION In the Motion for Judgment by Default, Choice Hotels asserts that Defendants have failed to file a timely responsive pleading to its Application. Thus, Choice Hotels argues that it is entitled to default judgment against Defendants in the amount of the arbitration award 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 (D. Md. 2005). 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 F.3d 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 arbitration award, the plaintiff must show that it is entitled to confirmation of the arbitration award 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. S 1332. Maryland. Choice Hotels is a Delaware corporation with its headquarters located in Rockville, In the Motion for Judgment by Default, Choice Hotels asserts that Raj, Inc. is a Kansas corporation with its principal place of business in Kansas and that Bhakta is a citizen of 2 Kansas? In addition, the amount in controversy minimum under 28 U.S.c. S IS greater than the $75,000 jurisdictional 1332. The Federal Arbitration Act ("FAA"), 9 U.S.C. SS 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. Id. S 9. Here, the Franchise Agreement contains an arbitration clause that states that "any 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 ,-r 22, Appl. Ex. 2, ECF No. 1-3. Choice Hotels filed its Application to Confirm Arbitration Award within one year of the arbitrator's decision. The award was rendered in the State of Maryland. 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 frustrate the purpose of having arbitration at all-the quick resolution of disputes and the avoidance of the expense and delay associated with litigation." us. Supply Apex Plumbing Supply, Inc. v. 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 The Court directs that in the future, Choice Hotels must include allegations regarding the specific citizenship of the parties in the Complaint or Application itself. Failure to do so may result in dismissal of the Complaint or Application. 2 3 dispute within the scope of the arbitration clause, federal courts may vacate an arbitration award only upon a showing of one of the grounds manifest disregard of law. 'Id. set forth in the FAA, or if the arbitrator acted in 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'parf' ofthearbitrator~;' (3) "the 'arbitrators were guilty of misconduct" by whiCh ~'therights of any party have been prejudiced"; Of (4) "the arbitratorS 9 exceeded their powefs:"'9,U.S.C. . J i.. ~, '; 10(a)~ A misinterpretation ofa 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 Hotels alleges, and the arbitrator awarded damages for, a breach of the parties' Franchise Agreement, specifically, a failure to pay franchise fees. 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 I Defendants were served in this case and received notice of the Motion, they have failed to file an . Answer to Choice Hotels's 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 U.S.C. S 10(a). Accordingly, the Court will grant the Motion for Judgment by Default to the extent it seeks confirmation of the arbitrator's award of $132,198.13. Choice Hotels 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)(l). 4 To the extent that Choice Hotels also requests post-judgment interest for the time period following this Court's grant of default judgment, Choice Hotels is entitled by statute to such post-judgment interest as calculated under federal law, so the Court need not specifically award it. See 28 U.S.C. 91961(a) ("Interest shall be allowed on any monetary judgment in a civil case recovered in a district court."). CONCLUSION For the foregoing reasons, Choice Hotels's Motion for Judgment by Default, ECF No. 10, is GRANTED. The Court therefore confirms the arbitration award, enters judgment in favor of Choice Hotels and against Raj, Inc. and Nutan Bhakta in the amount of$132,198.13, which shall accrue post-judgment interest as specified by statute, and awards $400.00 in costs. A separate Order shall. issue. Date: January 24,2017 - THEODORE D. C United States Distric 5

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