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