Choice Hotels International, Inc. v. Patel et al

Filing 11

MEMORANDUM OPINION. Signed by Judge Theodore D. Chuang on 10/30/2017. (kw2s, Deputy Clerk)

UNITED STATES DISTRICT COURT
DISTRICT OF MARYLAND

CHOICE HOTELS INTERNATIONAL,

INC.,

Plaintiff,
v.
Civil Action No. TDC-17-1260
FALGUNI K. PATEL and
MINESH J. PATEL,
Defendants.

MEMORANDUM OPINION
On May 8, 2017, Plaintiff Choice Hotels International, Inc. ("Choice Hotels") filed an
Application to Confirm Arbitration Award against Defendants Falguni K. Patel and Minesh J.
Patel.

The award at issue was based on Defendants' alleged breach of a franchise agreement

between the parties ("the Franchise Agreement"), specifically the failure of Defendants to pay
required royalties and other fees. Although Defendants were notified of arbitration proceedings
relating to the alleged breach of contract, they did not present any evidence or participate in the
arbitration proceedings.

On January 5, 2017, the arbitrator awarded Choice Hotels a total of

$104,599.37 in damages, comprised of contractually specified franchise fees, interest, liquidated
damages, and arbitration expenses.
Minesh Patel was served with the Application on May 17, 2017.

Falguni Patel was

served on June 15, 2017. No Defendant has filed a response to the Application.

On July 25,

2017, Choice Hotels filed a Motion for Clerk's Entry of Default and a Motion for Default
Judgment against all Defendants.

The Clerk entered an Order of Default on August 1, 2017.

Although Defendants were served with the Motion for Default Judgment, to date, no Defendant

has 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 for Default Judgment is GRANTED.
DISCUSSION
In the Motion for Default Judgment, 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.8tandard
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 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,
Falguni Patel and Minesh Patel are citizens of Texas.

In addition, the amount in

controversy is greater than the $75,000 jurisdictional minimum under 28 U.S.C.
The Federal ArbitrationAct

("FAA"), 9 U.S.C.

2

SS

S

1332.

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.

S

controversy

9. Here, the Franchise Agreement contains an arbitration clause that states that "any
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."
Appl. Ex. 1, ECF NO.1-I.

Franchise Agreement ~ 21,

Choice Hotels filed its application to confirm the award within one

year oftne 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
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
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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 oflaw, 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 royalties and other fees due under the
Agreement.

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 of the
Motion, they have failed to file an Answer to Choice Hotels' 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 Default Judgment

to the extent it seeks confirmation of the arbitrator's award of $104,599.37.

Choice Hotels also

asks to be awarded $400.00 in costs, the filing fee for this action, which the Court will grant. See
Fed. R. Civ. P. 54(d)(1).
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.

S

1961(a) (2012) ("Interest shall be allowed on any monetary judgment in a

civil case recovered in a district court.").

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CONCLUSION
For the foregoing reasons, Choice Hotels' Motion for Default Judgment, ECF No.8,
GRANTED.

is

The Court therefore confirms the arbitration award, enters judgment in favor of

Choice Hotels and against Defendants in the amount of $104,599.37, which shall accrue postjudgment interest as specified by statute, and awards $400.00 in costs. A separate Order shall
Issue.

Date: October 30, 2017

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