DAYS INNS WORLDWIDE, INC. v. JAISHREE, INC. et al

Filing 50

OPINION. Signed by Judge John Michael Vazquez on 1/23/2017. (JB, )

NOT FOR PUBLICATION
UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY

DAYS INNS WORLDWIDE. INC..
Plaintiff

Civil Action No. 13-02868
OPINION

V.

JAISHREE, INC., a Utah Corporation;
PRAVEEN LAL, an individual; and BINESH
PRASAD, an individual,
Defendants.

John NIichael Vazguez. U.S.D.J.
INTRODUCTION

I.

This matter comes before the Court on Plaintiff Days Inns Worldwide, Inc.’s (“DIW” or
“Plaintiff’) unopposed motion for default judgment against Defendants Jaishree, Inc. (“Jaishree”)
and Praveen Lal (“La!”) (collectively “Defendants”) under Fed. R. Civ. P. 55(b). D.E. 47. The
Court reviewed all submissions made in support of the motion, and considered the motion without
oral argument pursuant to L. Civ. R. 78.1(b). For the reasons that follow, Plaintiffs motion is
granted.

II.

FACTS’ AND PROCEDURAL HISTORY
On or about April 5, 2001, DIW entered into a license agreement (the “Agreement”) with

Defendants for the operation of a Days Inn® guest lodging facility (the “Facility”) located in
Vernal. Utah. Complaint (“Compl.”) at

¶

9 (D.E. I). The Agreement provided Jaishree with a

license to operate the Facility for a fifteen-year tenri and required Jaishree to make certain
payments to DEW “for royalties, service assessments, taxes. interest, reservation system user fees,
and other fees,” which the Agreement collectively referred to as “Recurring Fees.” Id. at

91

10-

11. According to the Aereement. Jaishree owed interest to DIW on any past due amount at a rate
of 1.5% per month or the maximum amount permitted by the applicable law’, whichever is less,
accruing from the due date until the amount is paid. Id. at

¶

12.

Jaishree was not permitted to lease, transfer, or assign its interest in the Facility, or cease
operating the Facility as a Days Inn®, unless it obtained DIW’s prior written consent. Id. at ¶ IS.
Any attempt by Jaishree to do so would give DIW the right to terminate the Agreement. Id. Upon
termination of the Agreement, Jaishree agreed to pay liquidated damages to DIW in accordance
with a formula set forth in the Agreement. Id. at

¶

17. The Agreement also provided that the non-

prevailing party would pay all costs and expenses, including reasonable attorneys’ fees, incurred
by the prevailing party to collect amounts owed under the Agreement. Id. at

¶

18.

Effective the same day as the Agreement, Defendant Lal signed a guaranty (the
“Guaranty”) aeeing. among other things, that in the event of a default by iaishree under the
Agreement, he would “immediately make each payment and perform or cause [Jaishreej to

The facts of this matter derive from the complaint as well as the affidavits and exhibits submitted
in conjunction with Plaintiffs motion for default judgment.
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perform, each unpaid or underperformed obligation of [Jaishree] under the Agreement.”2 Id. at

¶

20. The Guaranty also provided that La! would pay a!l costs, including reasonable attorneys’ fees,
incurred by DIW in enforcing its rights or remedies under the Guaranty and the Agreement. Id. at
¶21.
On or around September 8, 2011, Jaishree sold the Faci!ity to a third party without
obtaining prior consent from DIW. Id. at

¶

22. On November 14, 2011, DIW wrote to Jaishree

indicating its uni!atera! tennination of the Agreement and advised Jaishree that it was required to
pay DEW liquidated damages for premature termination in the amount of 582,000.00 and all
outstanding Recurring Fees as required by the Agreement. Id. at ‘23.
On May 3, 2013. 01W fi!ed a six-count complaint against Defendants seeking payment of
certain Recurring Fees and liquidated damages owed pursuant to the terms of the Agreement and
the Guaranty. After being served with the comp!aint, Defendants Jaishree and Lal fai!ed to answer.
move, or otherwise respond. On May 11. 2016, default was entered against Jaishree and Lal.3 The
next day, Plaintiff served a copy of the default on Defendants. D.E. 47-2 at 113. On August 8.
2016, DIW filed this motion for a default judgment. D.E. 47.
Jil. LAW AND ANALYSIS
A. Standard of Review
“Once a party has defaulted, the consequence is that ‘the factual a!!egations of the
comp!aint. except those relating to the amount of damages, wi!! be taken as true.” Teamsters
Pension Fund ofPhila. & Vicinity v. Am. Helper, Itic., No.11-624,2011 WL 4729023, at *2 (D.N.J.

2

Defendant Prasad signed a simi!ar guaranty, however, Prasad was dismissed from this matter
on January 29, 2015. D.E. 30.
There is a long, but irrelevant, procedural history accounting for the three-year period between
the filing of the complaint and the entry of default. The only material fact to this motion during
that three-year period is that Defendants Jaishree and Lal never responded to the complaint.
3

Oct. 5,2011) (quoting DIRECTV, Inc.

i’.

Pepe, 431 F.3d 162, 165 n.6 (3d Cir.2005)). “The entry

of a default judgment is largely a matter of judicial discretion, although the Third Circuit has
emphasized that such ‘discretion is not without limits, however, and [has] repeatedly state[d] [its]
preference that cases be disposed of on the merits whenever practicable.”

C/zone!, Inc.

i’.

Gordashevshy, 558 F. Supp. 2d 532, 535 (D.N.J. 2008) (quoting Hritz v. Woma Corp., 732 F.2d
1178, 1181 (3dCir.1984)).
Prior to entering a default judgment, the court is required to: “(I) detennine it has
jurisdiction both over the subject matter and parties; (2) determine whether defendants have been
properly served; (3) analyze the Complaint to determine whether it sufficiently pleads a cause of
action; and (4) determine whether the plaintiff has proved damages.” Moroccanoil, Inc.

i’.

JMG

Freight Grp. LLC, No. 14-5608, 2015 WL 6673839, at *1 (D.N.J. Oct. 30, 2015). Additionally,
the Court must consider the following three factors: “(1) prejudice to the plaintiff if default is
denied, (2) whether the defendant appears to have a litigable defense, and (3) whether defendant’s
delay is due to culpable conduct.” Chamberlain v. Gianzpapa, 210 F.3d 154, 164 (3d Cir. 2000);

see also Nationwide Mitt, Ins. Co.

i’.

Starlight Ballroom Dance Club, Inc., 175 F. App’x 519, 522

(3d Cir. 2006).
B. Jurisdiction and Service
“Before entering a default judgment as to a party ‘that has not filed responsive pleadings,
the district court has an affirmative duty to look into its jurisdiction both over the subject matter
and the parties.” HIC’A Educ. Loan Corp. v Sztrikov, No. 14-1045, 2015 WL 273656, at *2
(D.N.J. Jan. 22, 2015) (quoting Ramada Worldwide, Inc. v. Benton Harbor Han Ohm, L.L.C., No.
08—3452, 2008 WL 2967067, at *9 (D.N.J. July31, 2008)).
i. Subject Matter Jurisdiction

4

To establish diversity jurisdiction, pursuant to 28 U.S.C.

§

1332(a), “the party asserting

jurisdiction must show that there is complete diversity of citizenship among the parties” as well as
an amount in controversy that exceeds the statutory threshold. Schne/icr cx ret Sc/inc/icr v. Crozer
chester Med. Or, 387 Fed. App’x 289, 292 (3d Cir. 2010).

Here, Plaintiff is a Delaware

corporation with its principal place of business in New Jersey. Compi. at

¶

I. The complaint

indicates that Jaishree is Utah corporation with its principal place of business in Utah and that La?
is a Utah citizen. Id. at ¶ 2-3. Damages are alleged in excess of $75,000. Id. at

34, 42, 46,

¶1J 5,

50. Accordingly, the Court has diversityjurisdiction because Plaintiff and Defendants are citizens
of different states and the amount in controversy exceeds the statutory threshold.
ii. Personal Jurisdiction
“The United States Supreme Court has held that a contractual consent to personal
jurisdiction should be enforced unless it would be unreasonable or unjust to do so.” Park Inn Jut 1,
L.L.C.

i’.

Mod Enters., Inc., 105 F. Supp. 2d 370, 373 (D.N.J. 2000) (citing Burger King Corp. v.

Rudzeiticz, 471 U.S. 462, 472 n.14 (1985fl; see a/so Coy/c v. Mathai. No. 11—5185, 2011 WL
5828522, at *4 (D.N.J. Nov. 18, 2011) (“Personal jurisdiction is a right that can be waived by
agreeing in advance to submit to the jurisdiction of a given court pursuant to a contract with a
forum selection clause.”); Dan/ca Funding, L.L.C. v. Page, Scranton,, Sprouse, Tucker & Ford,
P.c., 21 F.Supp.2d 465, 469 (D.N.J. 1998) (opining that personal jurisdiction can be established
solely through a forum selection clause in place of a due process analysis).

In this instance,

Defendants consented “to the non-exclusive personal jurisdiction of and venue in
States District Court for the District of New Jersey.” Compi. at

¶

.

.

.

the United

6. The Court sees no reason

why this freely agreed-upon consent to personal jurisdiction in New Jersey should not be enforced.
Therefore, the Court has personal jurisdiction over Defendants.

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iii. Sufficiency of Proof of Service
“Before the Court can enter default judgment, it must find that process was properly served
on the Defendant.” Teamsters Pension Fund of Philadelphia, 2011 WL 4729023, at *2 (citing
Gold Kist, Inc.

i’.

Laurinburg Oil Co., Inc., 756 F.2d 14, 19 (3d Cir.1985)). Jaishree, a corporation,

may be served “by delivering a copy of the summons and of the complaint to an officer, a managing
or general agent, or any other agent authorized by appointment or by law to receive service of
process.” Fed. R. Civ. P. 4(h)(1)(B). Lal, an individual, may be served by “delivering a copy of
the summons and of the complaint to [him] personally.” Id. at 4(e)(2)(A).
Here, Lal was personally served with the summons and complaint that was addressed to
him. D.E. 45. Lal was also served with the summons and complaint directed to Jaishree. Id.
According to the complaint, Lal is a principal of Jaishree, and therefore, may accept service on its
behalf Compl. at 93. As such, the Court finds that both Defendants were properly served.
C. Sufficiency of Causes of Action and Damages
Plaintiff alleges causes of actions for breach of contract seeking damages for the Recurring
Fees, liquidated damages. and interest.4 Compl. at

¶ 24-50.

“To establish a breach of contract

claim, a plaintiff has the burden to show that the parties entered into a valid contract, that the
defendant failed to perform his obligations under the contract and that the plaintiff sustained
damages as a result.” Murpiw v. Implicito, 392 N.J. Super. 245, 265 (App. Div. 2007).
Here, Plaintiff adequately pleaded the elements of breach of contract. Plaintiff pleaded (I)
the existence of a valid contract and guaranty between Plaintiff and Defendants, (2) that
Defendants breached the Agreement and the Guaranty by selling the Facility without Plaintiffs

The complaint also seeks damages for “attorneys’ fees and costs of suit,” however, it does not
appear that Plaintiff seeks those amounts in its motion for default judgment. See D.E. 47-3 at ¶{
16-24.

‘

6

consent, and (3) that Plaintiff was harmed by Defendants’ breach through nonpayment of the
Recurring Fees and liquidated damages. Plaintiff also adequately pled that it was in compliance
with the Agreement. Plaintiff has adequately submitted proof of damages through an affidavit and
exhibits demonstrating that S101,864.35 is owed in Recurring fees and S82.000.00 in liquidated
damages, plus interest. D.E. 47-3: see Moroccanoil. 2015 WL 6673839. at *2 (“Although the facts
pled in the Complaint are accepted as true for the purpose of determining liability, the plaintiff
must prove damages.”). Accordingly, Plaintiff has sufficiently alleged a cause of action for breach
of contract establishing Defendants’ liability and damages owed for purposes of this default
judgment motion.
D. Default Judgment
“Before imposing the extreme sanction of default judgment, district courts must make
explicit factual findings as to (1) whether the party subject to default has a meritorious defense,
(2) the prejudice suffered by the party seeking default, and (3) the culpability of the party subject
to default.” Teamsters Pension Fund of Phila., 2011 WL 4729023, at *4 (quoting Doug Brady,
Inc. v. N.J. Bldg. Laborers Statewide Funds, 250 F.R.D. 171, 177 (D.N.J. 2008)).
Here, all three factors weigh in favor of entering default judgment. First, considering that
Defendants have not responded in this matter, “Defendant{sJ ha[ve] put forth no evidence or facts
containing any infonnation that could provide the basis for a meritorious defense.” HICA Ethic.
Loati Corp., 2015 WL 273656, at *3 Additionally, there is nothing on the face of the complaint
indicating that a meritorious defense is available. Jaishree sold the Facility without DIW’s consent
in contravention of the clear terms of the Agreement. Second, Plaintiff has been prejudiced by
Defendants’ failure to answer. Without a default judgment, “Plaintiff has no other means of
seeking damages for the harm allegedly caused by Defendant[s].” Gowan v. Cont 7 Airlines, Inc.,

7

No. 10-1858, 2012 WL 2838924, at *2 (D.N.J. July 9, 2012).

Lastly, Defendants’ failure to

answer, without providing any reasonable explanation, demonstrates their culpability in the
default. Sec Days Inns Worldwide, Inc. v. Mangur LLC, No. l5-CV-2027, 2016 WL 845141, at
*4 (D.N.J. Mar. 4,2016).
For those reasons, the Court finds that default judgment is warranted.
E. Remedies
Plaintiff seeks two forms of compensation, totaling S256.454.lS. D.E. 47-3 at

¶ 24.

That

amount consists of S 101,864.35 in Recurring Fees, including principal and prejudgment interest,
and S 154,589.80 in liquidated damages, including principal and prejudgment interest. Id. at ¶ 16,
22-23. The Recurring Fees are made up of certain charges that were due pursuant to section 7.3
of the Agreement, which have been itemized and submitted (inclusive of interest) in support of
Plaintiffs motion. Id. at Ex. E. Under section 12.1 of the Agreement, liquidated damages are
calculated by multiplying the number of guest rooms in the Facility by S2000. Id. at

¶ 21.

At the

time that Defendants breached the Agreement. 41 guest rooms were in operation, totaling
liquidated damages at S82.000.00. Id. The Agreement provides that interest is 18% per year
bringing the total amount of interest owed on the liquidated damages to S72,589.80.5 Id. at 123.
Defendants have not appeared in this matter, and as a result, there is no evidence before the Court
to contest the accuracy of the damages sought by Plaintiff. Accordingly, Plaintiff is entitled to
$256,454.15 in damages.
IV.

CONCLUSION

Interest was calculated as of the anticipated return of this motion, September 6, 2016. D.E. 473 at ¶24.
8

For the reasons set forth above, Plaintiffs motion for a default judgment is granted. An
appropriate order accompanies this opinion.

Dated: January 23, 2017.

John Michael Vazquez, U

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