Choice Hotels International, Inc. v. Arch Hospitality, Inc. et al
Filing
9
MEMORANDUM OPINION. Signed by Judge Paula Xinis on 10/5/2018. (heps, Deputy Clerk)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MARYLAND
CHOICE HOTELS INTERNATIONAL, INC. *
Plaintiff
*
v.
*
ARCH HOSPITALITY, INC., et al.
*
Defendants
Civil Action No. 18-PX-1449
*
*****
MEMORANDUM OPINION
Pending before the Court is Plaintiff Choice Hotels International, Inc.’s (“Choice” or
“Plaintiff”) Application to Confirm Arbitration Award, ECF No. 1, and Motion for Default
Judgment, ECF No. 6. For the following reasons, Choice’s request for this Court to enter default
judgment in the amount of $108,670.77 is GRANTED.
I.
Background
On May 18, 2018, Choice filed an Application to Confirm Arbitration Award, ECF No.
1, after having obtained a judgment against Defendants Arch Hospitality, Inc. and Rashmikant
Patel (collectively, “Defendants”) in arbitration proceedings. Choice and Defendants had
entered into a franchise agreement in the State of Maryland, on or about June 30, 2010, that
provided for arbitration as its dispute resolution mechanism for breach of the agreement. ECF
No. 1-1. Choice initiated arbitration proceedings that neither Defendant attended. ECF No. 1-2.
On January 28, 2018, an “Ex Parte Award of Arbitrator” issued in the amount of $108,670.77,
representing $51,528.77 in unpaid franchise fees and related fees, $18,435.60 in interest,
$34.350.40 in liquidated damages, $1,356 in arbitrator compensation and $3,000 in
administrative expenses. ECF No. 1-2.
Arch Hospitality, Inc. and Rashmikant Patel were properly served on June 1, 2018. ECF
Nos. 4-1, -2. Defendants failed to respond to Choice’s Motion or otherwise contest Choice’s
claims. Choice then moved for Entry of Default and Default Judgment, ECF Nos. 5, 6.
Defendants did not respond to these motions, and the Clerk entered default on August 20, 2018.
ECF No. 8.
II.
Standard of Review
Pursuant to Federal Rule of Civil Procedure 55(a), “[w]hen a party against whom a
judgment for affirmative relief is sought has failed to plead or otherwise defend, and that failure
is shown by affidavit or otherwise, the clerk must enter the party’s default.” Fed. R. Civ. P.
55(a). Thereafter, the court may enter default judgment at the plaintiff’s request and with notice
to the defaulting party. Fed. R. Civ. P. 55(b)(2). Plaintiff, however, is not automatically entitled
to default judgment simply because the defendant has not responded. Rather, entry of default
judgment is left to the sound discretion of the court. See, e.g., Choice Hotels International, Inc.
v. Ja I Shree Navdurga, LLC, DKC 11-2893, 2012 WL 5995248, at *1 (D. Md. Nov. 29, 2012);
see also Choice Hotels International, Inc. v. Austin Area Hospitality, Inc., TDC 15-0516, 2015
WL 6123523, at *1 (D. Md. Oct. 14, 2015). Although the United States Court of Appeals for the
Fourth Circuit has announced a “strong policy” in favor of deciding cases on their merits, United
States v. Schaffer Equip. Co., 11 F.3d 450, 453 (4th Cir. 1993), a default judgment may be
appropriate when a party is unresponsive. S.E.C. v. Lawbaugh, 359 F. Supp. 2d 418, 421 (D.
Md. 2005) (citing Jackson v. Beech, 636 F.2d 831, 836 (D.C. Cir. 1980)).
III.
Analysis
A plaintiff moving for default judgment “must show that it is entitled to confirmation of
the arbitration award as a matter of law.” Choice, 2012 WL 5995248, at *2 (collecting cases).
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The Federal Arbitration Act, 9 U.S.C. § 9, provides that “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[.]” Here, Plaintiff filed
its motion for confirmation within one year. Section 9 further provides that this Court must grant
the order unless the award is modified, vacated or corrected pursuant to sections 10 and 11 of the
same Act. Id.
Review of an arbitration award is “severely circumscribed” because to allow for a more
expansive review 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.” Apex
Plumbing Supply, Inc. v. U.S. Supply Co., Inc., 142 F.3d 188, 193 (4th Cir. 1998) (citation
omitted). Accordingly, this Court may vacate an arbitration award based on one of the grounds
enumerated in the Federal Arbitration Act or if the arbitrator acted in manifest disregard of law.
Id. Neither are at issue here.
Rather, the arbitration clause in the franchise agreement specifically provides for final
and binding arbitration regarding any “controversy or claim arising out of or relating to” the
franchise agreement. ECF No. 1-1 at 2. Although Choice’s motions do not expressly identify
where arbitration was held, the Franchise Agreement makes plain that it would take place in
Maryland. ECF No. 1-1 at 2; see also Plaintiff’s Application to Confirm Arbitration Award,
ECF No. 1 at 3 (“The arbitration was conducted in accordance with the terms of the parties’
Arbitration Agreement[.]”). The parties are also diverse, and the amount of the arbitration award
for which the Plaintiff seeks confirmation exceeds the jurisdictional minimum for diversity
jurisdiction in this Court. See 28 U.S.C. § 1332(a). The pleadings before this Court, therefore,
demonstrate that the arbitration award can and should be confirmed.
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The arbitrator awarded Plaintiff $108,670.77, which was comprised of $51,528.77 in
unpaid franchise fees and related fees, $18,435.60 in interest, $34.350.40 in liquidated damages,
$1,356 in arbitrator compensation and $3,000 in administrative expenses. ECF No. 1-2.
Plaintiff requests entry of a default judgment in that amount, “plus post-judgment interest until
paid and $400 for the costs of this action.” ECF No. 6. The Court grants entry of $108,670.77
plus $400 in costs. As for post-judgment interest, “the court need not specifically grant an award
of post-judgment interest because Plaintiff is entitled to recover such interest by operation of
law.” Choice, 2012 WL 5995248, at *3; see 28 U.S.C. § 1961(a) (“Interest shall be allowed on
any money judgment in a civil case recovered in a district court.”). Plaintiff has demonstrated
that it is entitled to the remaining requested award and a default judgment in that amount will be
entered.
IV.
Conclusion
For the above-stated reasons, Plaintiff Choice’s motion for default judgment is granted.
A separate order will follow.
10/5/2018
Date
/S/
Paula Xinis
United States District Judge
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