Choice Hotels International, Inc. v. Patel
Filing
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MEMORANDUM OPINION. Signed by Judge George Jarrod Hazel on 11/20/2018. (heps, Deputy Clerk)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MARYLAND
Southern Division
CHOICE HOTELS
INTERNATIONAL, INC.,
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Plaintiff,
v.
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JAYANTI K. PATEL
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Defendant.
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Case No.: GJH-18-758
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MEMORANDUM OPINION
Pursuant to Fed. R. Civ. P. 55(b), Plaintiff Choice Hotels International, Inc. (“Plaintiff”
or “Choice”) has filed a Motion for Default Judgment with a supporting affidavit. ECF No. 6. A
hearing is not necessary. For the following reasons, Plaintiff’s 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. 1 ¶ 1.1 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 Inn®.” Id.
Defendant is an Illinois resident who “based upon information, knowledge, and belief” is neither
employed nor resides in Maryland or Delaware. Id. ¶ 2. On or about November 14, 2005, Choice
entered into a Franchise Agreement with Defendant, under which Choice granted Defendant a
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These facts are taken from Plaintiff’s Application to Confirm Arbitration Award, ECF No. 1, and Plaintiff’s
Motion for Judgment by Default, ECF No. 6.
limited and revocable license to operate a hotel in Carbondale, Illinois. Id. ¶ 3. The Franchise
Agreement required Defendant to comply with Comfort Inn & Suites® Rules and Regulations.
These Rules and Regulations required Defendant to maintain a level of guest satisfaction as high
as the brand’s average, measured by a Likelihood to Recommend (LTR) score. See id. ¶ 4; ECF
No. 1-2 at 3.
Under the Franchise Agreement, if a franchisee breaches its duty to maintain the brand
average LTR, the franchisee is in default and Choice may terminate the agreement if the
franchisee fails to cure. ECF No. 1-2 at 2. If Choice terminates the agreement because a
franchisee fails to cure a default, the franchisee agrees to pay liquidated damages within thirty
days, calculated by “(i) the average monthly Gross Room Revenues during the prior 12 full
calendar months (or the shorter time that the Hotel has been in the System), multiplied by (ii) the
Royalty Fee payable in the Remaining Months, multiplied by (iii) the number of months until the
next date the franchisee could have terminated this Agreement without a penalty
("Remaining Months"), not to exceed 36 months.” See ECF No. 1-2 at 2. Further, the franchisee
owes interest on amounts not timely paid at a rate of 1.5% per month. Id. The parties’ Franchise
Agreement also 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 . . . the American Arbitration Association . . .” See ECF No. 1 ¶ 8; ECF No. 1-1.
On or about January 8, 2015, Choice sent a Notice of Default to Defendant, notifying him
of his failure to maintain the brand average LTR scores per Ru1es and Regulations. ECF No. 1 ¶
4. Per the notice, the Defendant had six months to cure the default. Id. Choice later revised the
LTR default cure deadline to September 8, 2015. Id. ¶ 5. Defendant failed to cure the breach
within the time allotted, so Choice terminated the Franchise Agreement per its terms and made
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demand for immediate payment of contractually specified fees, interest, and liquidated damages.
ECF No. 1 ¶ 6–7. Because Defendant did not pay the contractually specified fees, interest, or
liquidated damages, Choice initiated arbitration proceedings on or about April 27, 2017 with the
American Arbitration Association. Id. ¶ 8.
Arbitration proceedings were scheduled for August 31, 2017. See ECF No. 1 ¶ 11; ECF
No. 1-2 at 1. Plaintiff sent notice of the proceedings to Defendant “by regular mail, certified mail
and/or overnight FedEx delivery.” ECF No. 1 ¶ 10. “Defendant failed to appear or participate
during any proceeding.” Id. The Arbitrator determined that Defendant “was duly notified” and
entered an award in Choice’s favor against Defendant in the amount of $153,723.01. ECF No. 12 at 1, 4. The Arbitrator also ordered Defendants to reimburse Choice in the sum total of
$4650.00for “administrative fees and expenses.” ECF No. 1-2 at 4.
Choice Hotels filed an “Application to Confirm Arbitration Award” in this Court on
March 14, 2018. ECF No. 1. The Arbitrator’s ex parte award, signed by George Beckwith of the
American Arbitration Association on September 17, 2017, is attached to the Application. ECF
No. 1-2. The Court issued a summons to Defendant on March 14, 2018, and the summons was
executed on March 27, 2018. ECF No. 3–4. The Clerk made an entry of default for want of
answer against Defendant on July 20, 2018. ECF No. 8. Choice Hotels now requests that the
Court issue judgment by default against Defendant. ECF No. 6.
II.
DISCUSSION
“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.” Choice Hotels Intern., Inc. v.
Savannah Shakti Corp., DKC-11-0438, 2011 WL 5118328 at * 2 (D. Md. Oct. 25, 2011) (citing
Dow v. Jones, 232 F.Supp. 2d 491, 494 (D. Md. 2002)). When a motion for default judgment is
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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).
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. § 9. The Court must confirm the award
unless it vacates, modifies, or corrects the award under 9 U.S.C. §§ 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
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-(1) 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
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).
“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
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decision is “to determine only whether the arbitrator did his job—not 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. 1-1. “Despite duly
and properly notifying Defendant of all proceedings relating to the arbitration proceedings . . .
Defendants failed to appear or participate during any proceeding.” ECF No. 1 ¶ 10. In
accordance with the parties’ Arbitration Agreement and American Arbitration Association
Commercial Rule 31, arbitration may proceed without a party who receives due notice but fails
to participate. ECF No. 1-1 at 1. The arbitrator determined that Defendant had been duly notified
and proceeded with the hearing in his absence. Id.
The Arbitrator determined that Defendant had breached the parties’ Franchise Agreement
by failing to maintain the minimum required guest satisfaction standards as measured by the
brand average Likelihood to Recommend (LTR) score. Id. at 3–4. The Arbitrator thus rendered
an award to Choice. 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 Hotels Int’l, Inc. v. Bhupinder Mander,
No. GJH-14-3159, 2015 WL 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
be entered against the party, notwithstanding its failure to appear.” ECF No. 1-1. The parties also
agreed that “[j]udgment on the arbitration award may be entered in any court having
jurisdiction.” Id.
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III.
CONCLUSION
For the reasons explained above, Plaintiff’s Request for Judgment by Default, ECF No. 6,
will be granted. Judgment by default is entered in favor of Plaintiff Choice Hotels and against
Defendant Patel in the amount of $158,773.01, representing the Arbitrator’s award of
$153,723.01, administrative fees and expenses totaling $4650.00, and costs of the action totaling
$400.00. ECF No. 1.2 A separate Order shall issue.
Dated: November 20, 2018
/s/
George J. Hazel
United States District Judge
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In contrast to this Court’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. 1 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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