Choice Hotels International, Inc. v. Sita Corporation et al
MEMORANDUM OPINION. Signed by Judge George Jarrod Hazel on 2/16/2021. (ybs, Deputy Clerk)
Case 8:20-cv-00189-GJH Document 9 Filed 02/17/21 Page 1 of 7
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MARYLAND
SITA CORPORATION, et al.,
Case No.: GJH-20-189
In this action, Plaintiff Choice Hotels International, Inc. (“Choice Hotels”) seeks to
confirm an arbitration award pursuant to the Federal Arbitration Act, 9 U.S.C. §§ 9 and 13,
against Defendants. Pursuant to Fed. R. Civ. P. 55(b), Choice Hotels has filed a Motion for
Default Judgment with a supporting affidavit. ECF No. 8. No hearing is necessary. See Loc. R.
105.6 (D. Md. 2018). For the following reasons, Plaintiff’s Motion for Default Judgment will be
Choice Hotels 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 Hotels 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 Sita Corporation (“Sita”) is a Virginia corporation with its principal place of business
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.
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in Williamsburg, Virginia. Id. ¶ 2. Defendant Jaimin Patel owns Defendant Sita. Id. Mr. Patel is
domiciled in Virginia and, according to Plaintiff’s knowledge and belief, is neither employed nor
resides in Maryland or Delaware. Id. ¶ 3.
On April 30, 2012, Choice Hotels entered into a Franchise Agreement in Maryland with
Defendants through which Choice Hotels granted Defendants a license to operate a hotel in
Newport News, Virginia. Id. ¶ 4. The Franchise Agreement required Defendants to pay in a
timely manner, time being of the essence, specified monthly Royalty Fees, and
Marketing/Reservation/System Fees calculated as a fixed percentage of the preceding month’s
Gross Room Revenues. Id. ¶ 5.
Defendants fell behind on required monthly fee payments. Id. ¶ 6. Accordingly, on or
about April 6, 2017, and February 16, 2018, Plaintiff sent Defendants written Notices of Default,
advising that Defendants were currently in default of material obligations arising under the
payment provisions of the Franchise Agreement and providing Defendants with 10 days to cure
the default. Id. Plaintiff advised Defendants that if the default was not cured by the deadline, the
Franchise Agreement would be terminated pursuant to §10(b)(l)(a) and that Defendants would be
liable to Plaintiff for damages, including liquidated damages in accordance with §10(d)(2) of the
Franchise Agreement. Id.
Defendants did not cure the breach. Id. ¶ 7. Accordingly, Plaintiff terminated the
Franchise Agreement via written notice dated March 28, 2018, which demanded immediate
payment of contractually specified fees, interest, or liquidated damages to Plaintiff. Id. When
Defendants did not make those payments, Plaintiff initiated arbitration proceedings with the
American Arbitration Association against Defendants on or about November 18, 2018, pursuant
to the arbitration clause of the parties’ Franchise Agreement (the “Arbitration Agreement”). Id. ¶
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8. The Arbitration Agreement states 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 . . . .” Id.; ECF No. 1-2 at 1. The parties also 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. 1-2 at 1. Further, the arbitration
clause states that “[j]udgment on the arbitration award may be entered in any court having
Arbitration proceedings were scheduled for June 26, 2019. See ECF No. 1 ¶ 11; ECF No.
1-3 at 1. Plaintiff sent notice of the proceedings to Defendants “by regular mail, certified mail
and/or overnight FedEx delivery.” ECF No. 1 ¶ 10. Nonetheless, Defendants failed to appear or
participate during the arbitration proceeding. ECF No. 1 ¶ 11. The arbitrator found that due
notice was provided to all parties and entered an award in favor of Choice Hotels and against
Defendants in the amount of $132,104.41. ECF No. 1-3 at 2; see also ECF No. 1 ¶ 12–13. The
Arbitrator also ordered Defendants to reimburse Choice Hotels for $5,967.50 of administrative
fees and expenses. ECF No. 1-3 at 2.
Choice Hotels filed an “Application to Confirm Arbitration Award” in this Court on
January 22, 2020. ECF No. 1. The Arbitrator’s ex parte award, signed by Allen E. Hirschmann of
the American Arbitration Association on July 17, 2019, is attached to the Application. ECF No.
1-3. Defendant Jaimin Patel was served with summonses and a copy of the application to
confirm arbitration award on January 31, 2020. ECF No. 4-2; ECF No. 5 ¶ 1. Defendant Sita was
served with summonses and a copy of the application to confirm arbitration award on March 9,
2020. ECF No. 4-1; ECF No. 5 ¶ 2. The Clerk entered default for want of answer against
Defendants on July 29, 2020. ECF No. 8. Choice Hotels now requests that the Court issue
Case 8:20-cv-00189-GJH Document 9 Filed 02/17/21 Page 4 of 7
judgment by default against Defendants. ECF No. 6.
“When 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 notice to the defaulting party. Fed. R. Civ. P. 55(b)(2). “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.” Educ. Credit Mgmt. Corp. v. Optimum Welding, 285
F.R.D. 371, 373 (D. Md. 2012). Although “[t]he Fourth Circuit has a ‘strong policy’ that ‘cases be
decided on their merits,’” Choice Hotels Int’l, Inc. v. Savannah Shakti Corp., No. DKC-11-0438,
2011 WL 5118328, at *2 (D. Md. Oct. 25, 2011) (citing United States v. Shaffer Equip. Co., 11
F.3d 450, 453 (4th Cir. 1993)), “default judgment may be appropriate when the adversary process
has been halted because of an essentially unresponsive party[.]” Id. (citing S.E.C. v. Lawbaugh,
359 F. Supp. 2d 418, 421 (D. Md. 2005)). When a motion for default judgment is based on an
application for confirmation of an arbitration award, the plaintiff “must show that it is entitled to
confirmation of the arbitration award as a matter of law.” Choice Hotels Int’l, Inc. v. Khan, No.
DKC 17-3572, 2018 WL 1046301, at *2 (D. Md. Feb. 26, 2018) (quoting United Cmty. Bank v.
Arruarana, No. 1:10cv248, 2011 WL 2748722, at *2 (W.D.N.C. July 13, 2011)).
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
Case 8:20-cv-00189-GJH Document 9 Filed 02/17/21 Page 5 of 7
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
(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
(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).
“Review of an arbitrator’s award is severely circumscribed”—in fact, its scope “is among
the narrowest known at law”—“because to allow full scrutiny of such awards would frustrate” the
fundamental purpose of arbitration: “the quick resolution of disputes and the avoidance of the
expense and delay associated with litigation.” Apex Plumbing Supply, 142 F.3d at 193; see also
Jih v. Long & Foster Real Estate, Inc., 800 F.Supp. 312, 317 (D. Md. 1992). In essence, the
Court’s role in reviewing an arbitrator’s 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) (internal citations and
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. 1-2; ECF No. 1-3
Case 8:20-cv-00189-GJH Document 9 Filed 02/17/21 Page 6 of 7
at 1. Despite duly and properly notifying Defendants of the arbitration proceedings, Defendants
failed to appear or participate during any proceeding. ECF No. 1-3 at 1. 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.
1-2 at 1; ECF No. 1 ¶ 11. The arbitrator determined that Defendants had been duly notified and
proceeded with the hearing in their absence. ECF No. 1-3 at 1. The Arbitrator determined that
Defendants had breached the parties’ Franchise Agreement and awarded Plaintiff a judgment
against Defendants in the amount of $138,071.91. ECF No. 1-3 at 1; ECF No. 1 ¶ 13.
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. 1-2. The parties also
agreed that “[j]udgment on the arbitration award may be entered in any court having
jurisdiction.” Id. 2
For the reasons explained above, Plaintiff’s Motion for Default Judgment, ECF No. 6,
will be granted. Judgment by default is entered in favor of Plaintiff Choice Hotels and against
Defendants in the amount of $138,471.91, representing the Arbitrator’s award of $132,104.41,
administrative fees and expenses totaling $5,967.50, and costs of this action totaling $400.00.
The Court notes that it has jurisdiction over this matter because the parties are diverse and the amount of the
arbitration award for which Plaintiff seeks confirmation exceeds the jurisdictional minimum for diversity
jurisdiction. See 28 U.S.C. § 1332(a); see also Jai Shree Navdurga, LLC, 2012 WL 5995248, at *1, *3.
Case 8:20-cv-00189-GJH Document 9 Filed 02/17/21 Page 7 of 7
ECF No. 1. 3 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. § 1961(a) (“Interest shall be allowed on any money judgment in a civil
case recovered in a district court.”). A separate Order shall issue.
Dated: February 16, 2021
George J. Hazel
United States District Judge
In contrast to this Court’s prior decisions involving Plaintiff, here, Choice Hotels requested “costs of the action” in
their original Application to Confirm Arbitration Award, ECF No. 1 at 6. Cf. e.g., Choice Hotels Int’l, Inc. v.
Bhupinder Mander, No. GJH-14-3159, 2015 WL 1880277, at *4 (D. Md. Apr. 22, 2015); Choice Hotels Int’l, Inc. v.
Austin Area Hosp., Inc., No. CV TDC-15-0516, 2015 WL 6123523, at *3 (D. Md. Oct. 14, 2015); Choice Hotels
Int’l, Inc. v. Jai Shree Navdurga, LLC, No. CIV.A. DKC 11-2893, 2012 WL 5995248, at *3 (D. Md. Nov. 29,
2012). 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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