Choice Hotels International, Inc. v. Khan et al
Filing
10
MEMORANDUM OPINION (c/m to Defendant Muhammad Khan 2/26/18 sat). Signed by Judge Deborah K. Chasanow on 2/26/2018. (sat, Chambers)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MARYLAND
:
CHOICE HOTELS INTERNATIONAL,
INC.
:
v.
:
Civil Action No. DKC 17-3572
:
MUHAMMAD KHAN, et al.
:
MEMORANDUM OPINION
Presently
application
Muhammad
pending
to
Khan
confirm
(ECF
No.
and
ready
for
arbitration
1)
and
resolution
award
motions
for
against
clerk’s
are
an
Defendant
entry
of
default (ECF No. 7) and default judgment (ECF No. 8) as to
Defendant Khan, filed by Plaintiff Choice Hotels International,
Inc. (“Plaintiff”).
The issues have been briefed, and the court
now rules, no hearing being deemed necessary.
Local Rule 105.6.
For the following reasons, the motions will be granted.
I.
Background
Plaintiff commenced this action on December 1, 2017, by
filing an application to confirm an arbitration award against
Defendant Khan and Abdus Salam.
dismissed
2018.
as
(ECF
arbitrator,”
a
Defendant,
No.
dated
(ECF No. 1).
without
prejudice,
6).
The
attached
August
31,
2017,
Mr. Salam was
on
January
“ex-parte
recites
award
11,
of
that
Plaintiff
established by a preponderance of the evidence that:
Defendant
Khan, Mr. Salam, and Frontier Hotels Inc. materially defaulted
on the franchise agreement, entered into on November 20, 2008;
the agreement was properly terminated; and Plaintiff incurred
damages under the franchise agreement for unpaid royalty fees
and liquidated damages.1
(ECF No. 1-3, at 1-2).
The arbitrator
ordered Defendant Khan, Mr. Salam, and Frontier Hotels Inc. to
pay,
jointly
and
severally,
the
total
sum
of
$307,118.85
(consisting of $63,501.52 for unpaid royalty fees, $24,162.38 in
interest, $214,704.95 for unpaid liquidated damages, and $4,750
for
administrative
thirty
days
of
fees
the
and
date
arbitrator
of
the
compensation)
award.2
(Id.
at
within
2-3).
Plaintiff’s application requests entry of a judgment in favor of
Plaintiff
and
against
Defendant
Khan
in
the
amount
of
$307,118.85, plus post-judgment interest until paid, and $400.00
for the costs of this action.
(ECF No. 1, at 6).
Plaintiff filed a return of service on January 11, 2018,
indicating
that
December 30, 2017.
Defendant
Khan
(ECF No. 4-1).
was
served
personally
on
On January 29, Plaintiff
1
Plaintiff did not name Frontier Hotels Inc. as a defendant
in this action.
2
The arbitration award indicates that Defendant Khan, Mr.
Salam, and Frontier Hotels Inc. failed to participate in
arbitration after due notice.
(ECF No. 1-3, at 1).
The
arbitration clause in the parties’ franchise agreement provides,
“If any party fails to appear at any properly noticed
arbitration proceeding, an award may be entered against the
party, notwithstanding its failure to appear.”
(ECF No. 1-2 ¶
21).
2
filed the pending motions for entry of default (ECF No. 7) and
default judgement (ECF No. 8).
Defendant Khan has not responded
to these motions.
II.
Motion for Entry of Default
Pursuant
to
Fed.R.Civ.P.
55(a),
“[w]hen
a
party
against
whom a judgment for affirmative relief is sought has failed to
plead
or
otherwise
defend,
entered by the court.”
that
a
enter
shown
default
the
by
Although this rule refers to entry of default by the
well-established
must
is
default.”
is
clerk
failure
or
“it
the
that
affidavit
clerk,
otherwise,
and
party's
also
may
be
Breuer Elec. Mfg. Co. v. Toronado Sys.
of Am., Inc., 687 F.2d 182, 185 (7th Cir. 1982).
Defendant Khan was served personally on December 30, 2017.
(ECF No. 4-1).
He was required to respond within twenty-one
days after service and has failed to do so or otherwise defend
this
action.
Accordingly,
Plaintiff’s
motion
for
entry
of
default as to Defendant Khan will be granted.
III.
Motion for Default Judgment
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.
F.Supp.2d 491, 494 (D.Md. 2002).
See Dow v. Jones, 232
The United States Court of
Appeals for the Fourth Circuit has a “strong policy” that “cases
be decided on their merits,” United States v. Shaffer Equip.
3
Co., 11 F.3d 450, 453 (4th Cir. 1993), “but default judgment may
be
appropriate
because
of
an
when
[]
the
adversary
unresponsive
process
party,”
SEC
has
v.
been
halted
Lawbaugh,
359
F.Supp.2d 418, 421 (D.Md. 2005).
Upon
entry
of
default,
the
well-pled
allegations
in
a
complaint as to liability are taken as true, but the allegations
as to damages are not.
Id. at 422.
Fed.R.Civ.P. 54(c) limits
the 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 have expected that his damages would exceed
that amount.”
In re Genesys Data Techs., Inc., 204 F.3d 124,
132 (4th Cir. 2000).
Plaintiff’s
application
for
confirmation
of
arbitration
award and motion for default judgment both request entry of
judgment in the amount of $307,118.85, together with interest at
the post-judgment rate until paid, plus $400.00 for the costs of
this action.
specifically
(ECF Nos. 1, at 6; 8 ¶ 3).
grant
an
award
of
The court need not
post-judgment
interest
as
Plaintiff is entitled to recover such interest by operation of
4
law.
See 28 U.S.C. § 1961(a) (“Interest shall be allowed on any
money judgment in a civil case recovered in a district court.”).
Where
default
application
for
judgment
is
confirmation
of
sought
an
with
respect
arbitration
to
award,
an
the
petitioner “must show that it is entitled to confirmation of the
arbitration award as a matter of law.”
Arruarana,
2011
WL
2748722,
at
*2
United Cmty. Bank v.
(W.D.N.C.
July
13,
2011)
(citing D.H. Blair & Co. v. Gottdiener, 462 F.3d 95, 109–10 (2d
Cir. 2006); McColl Partners, LLC v. DME Holdings, LLC, 2011 WL
971575, at *1 (W.D.N.C. Mar. 17, 2011)).
As set forth in 9
U.S.C. § 9:
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.
The
arbitration
clause
in
the
parties’
franchise
agreement
provides, in part, that “any controversy or claim arising out of
or relating to this Agreement, or the breach of this Agreement,
. . . will be sent to final and binding arbitration,” and that
5
“[j]udgment on the arbitration award may be entered in any court
having jurisdiction.”
(ECF No. 1-2 ¶ 21).
Pursuant to the
arbitration clause, arbitration occurred in and a judgment was
awarded in the state of Maryland.
(ECF Nos. 1-2 ¶ 21; 1 ¶ 11).
Thus, Plaintiff properly filed its application with this court
within
one
year
confirming
the
after
award
the
must
award
be
was
and
an
unless
granted
made,
order
the
award
is
vacated, modified, or corrected.
Section
10
of
the
Federal
Arbitration
Act
allows
for
vacatur of an award:
(1)
where
the
award
was
procured
corruption, fraud, or undue means;
by
(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 prejudiced; or
(4) where the arbitrators exceeded their
powers, or so imperfectly executed them that
a mutual, final, and definite award upon the
subject matter submitted was not made.
9
U.S.C.
§
10(a).
Additionally,
the
court
may
vacate
an
arbitration award “if the arbiter acted in manifest disregard of
law.”
F.3d
Apex Plumbing Supply, Inc. v. U.S. Supply Co., Inc., 142
188,
193
(4th
Cir.
1998).
6
The
scope
of
review
of
an
arbitrator’s award is strictly limited to avoid frustrating the
fundamental
purpose
resolution
and
proceedings
–
of
arbitration
avoidance
and
the
of
the
burden
–
i.e.,
expense
of
quick
and
proof
delay
is
dispute
court
the
on
of
party
challenging the award to clearly establish one of the grounds
for vacating the award.
Jih v. Long & Foster Real Estate, Inc.,
800 F.Supp. 312, 317 (D.Md. 1992).
By failing to answer or otherwise respond to Plaintiff’s
application, Defendant Khan has not demonstrated any ground for
vacating
the
award.
The
arbitrator
issued
the
award
after
finding Plaintiff’s motion for judgment to be supported by the
parties’
franchise
termination,
a
agreement,
statement
of
notices
account,
of
default,
and
liquidated damages pursuant to the agreement.
2).
of
computation
a
notice
of
(ECF No. 1-3, at
There is no evident reason why the award should not be
confirmed.
confirmation
Accordingly,
of
the
Plaintiff’s
arbitration
award
application
is
granted,
for
and
Plaintiff’s motion for entry of a default judgment in the amount
of $307,118.85, together with interest at the post-judgment rate
until paid, plus costs of $400.00 will be granted.
/s/
DEBORAH K. CHASANOW
United States District Judge
7
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