TRAVELODGE HOTELS, INC. v. CPK, INC. et al

Filing 18

OPINION. Signed by Judge Claire C. Cecchi on 9/30/15. (DD, )

NOT FOR PUBLICATION

UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY

TRAVELODGE HOTELS, INC.,

Civil Action No.: 13-4796

Plaintiff,
OPINION
V.

CPK, INC., et al.,

Defendants.

CECCHI, District Judge.

This matter comes before the Court on the motion of Plaintiff Travelodge Hotels, Inc.
(“Plaintiff’) for entry of Final Judgment by Default against Defendants CPK, Inc. (“CPK”) and
Chris P. Kanaridis (“Kanaridis”) (collectively, “Defendants”), pursuant to Federal Rule of Civil
Procedure 55(b)(2). (ECF No. 17.) This motion is unopposed by Defendants. The Court decides
the motion without oral argument pursuant to Fed. R. Civ. P. 78. For the reasons set forth below,
the Court will grant the motion as to Defendant CPK. The Court will deny the motion as to
Defendant Kanaridis.
I.

BACKGROUND

This dispute stems from a franchise arrangement between Plaintiff and Defendants.
Plaintiff alleges that Defendant CPK breached its agreements, and continued to use Plaintiffs
trademarks once the license was terminated. (Compi. ¶J 36-52.) Plaintiff alleges that Defendant
Kanaridis is liable due to his unfulfilled guaranty of the agreements. (Compl. ¶J 28-91.)
Plaintiff filed its Complaint on August 9, 2013. (ECF No. 1.) On October 10, 2013,

Plaintiff requested default as to both Defendants. (ECF No. 5.) The clerk entered default on the
same day. On November 22, 2013, Plaintiff filed its Final Motion for Default Judgment. (ECF
No. 6.)
On December 9, 2013, (after the filing of Plaintiff s motion for default judgment but before
the Court issued a ruling on that motion,) Defendant Kanaradis filed a motion to dismiss Plaintiffs
Complaint on behalf ofboth Defendants. (ECF No. 7.) By letter submitted to the Magistrate Judge
on December 23, 2013, Plaintiff argued that Defendants’ motion to dismiss should not be accepted
because Defendant CPK is a corporation that must be represented by an attorney. (ECF No. 8.)
Plaintiff also requested that the motion to dismiss be adjourned until such time as Defendants “seek
to vacated[sic] default or until the Court rules upon [Plaintiffs] pending Motion for Default
Judgment.” (Id.) On January 28, 2014, Magistrate Judge Clark administratively terminated
Defendants’ motion to dismiss as to both Defendants and granted Defendant CPK a 30-day period
to retain counsel. (ECF No. 10.) Judge Clark held “all deliberations on [Plaintiffs motion for
default judgment] in abeyance pending this thirty-day period.” (Id.)
On March 24, 2014, Magistrate Judge Clark ordered that, since Defendant CPK did not
retain counsel within the allotted time, “the Court shall resume deliberations on the Motion for
Default Judgment.” (ECF No. 11.) On June 10, 2014, the Court denied Plaintiffs motion for
default judgment against Defendants due to Plaintiffs failure to demonstrate proper service. (ECF
No. 14.) In the accompanying Opinion, the Court notified Plaintiff pursuant to Rule 4(m) that it
would dismiss the complaint absent (1) a demonstration of proper service or (2) good cause why
Defendants were not served. (ECF No. 13.) In response to the Court’s order, Plaintiff submitted
a certification in support of service on July 9, 2014. (ECF No. 15.) Based on the evidence offered
in the certification, this Court directed the Clerk to reinstate the Entry of Default against
2

Defendants and provided Plaintiff with thirty (30) days to resubmit its Motion for Default
Judgment. (ECF No. 16.) Plaintiff filed its renewed motion for default judgment on February 4,
2015. (ECF No. 17.)

For the reasons set forth below, the Court finds that Plaintiff has demonstrated Defendants
were properly served. The Court finds that Plaintiff is entitled to a judgment by default against
Defendant CPK. However, because Defendant Kanaridis has “otherwise defend[ed]” within the
framework of Federal Rule of Civil Procedure 55(a), Plaintiff is not entitled to a judgment by
default against Defendant Kanañdis and the entry of Defendant Kanaridis’s default should be set
aside.
II.

DISCUSSION
A.

Proper service of process

Plaintiff’s counsel certifies that service was made pursuant to New Jersey Court Rule 4:44(b)(1)(C) “via regular mail and certified mail, return receipt requested.” (Response Certification
of Bryan P. Couch ¶ 10 (“Couch Cert.”).’) Counsel certifies that service was made on September
4, 2013. (Id. ¶ 9.) Counsel certifies that it does not “have a copy of either the green mailing receipt
showing that defendants accepted the certified mailing, or a copy of the certified mail returned as
unclaimed.” (Id.

¶ 14.)

Counsel further certifies that Defendants were served at the address which

Defendants themselves indicate is their own, only afier diligent efforts were made to locate
Defendants, and that the regular mail sent to that address was not returned as undeliverable.
(Id.

¶J 7-8,

11-13.)

New Jersey appellate courts have held that, although not ideal, a return receipt is not

ECFNo. 15.
3

required for proper service under Rule 4:4-4(b)(l)(C) when the corresponding regular mail was
not returned. Fidelity Asset Management, LL.C. v. Fame, No. F-24369-06, 2010 WL 4861456,
at *1..2 (N.J. Super. Ct. App. Div. Dec. 1, 2010). Accordingly, the Court finds that Plaintiff
properly served Defendants pursuant to New Jersey Court Rule 4:4-4(b)(l)(C), and therefore
Plaintiff has demonstrated proper service of process pursuant to Fed. R. Civ. P. 4.
B.

Default Judgment

Having found that service of process on the Defendants was proper, the Court now turns
to the merits of Plaintiffs motion for default judgment. The Court has subject matter jurisdiction
as to the trademark infringement claims under 28 U.S.C.

§ 1331, 1332, & 1338. The Court also

has supplemental jurisdiction over the breach of contract claims pursuant to 28 U.S.C.

§ 1367.2

Defendants consented to personal jurisdiction and venue in this Court and in New Jersey state
courts in the September 15, 2004 license agreement between CPK and THI (the “License
Agreement”), and the guaranty of Kanardis’s obligations (“Guaranty”) under the License
Agreement, signed by Kanaridis. (Compl.

¶J 6-7, Ex. A, Ex. C.)

Pursuant to Federal Rule of Civil Procedure 5 5(a), the Clerk entered a default against
Defendants on October 10, 2013. However, this Court has the discretion to “set aside an entry of
default for good cause.” fed. R. Civ. P. 55(c); see also United States v. $55,518.05 in U.S.
Currency, 728 f.2d 192, 194 (3d Cir. 1984) (“A decision to set aside the entry of default pursuant
to fed. R. Civ. P. 55(c).

2

.

.

is left primarily to the discretion of the district court.”); AllGood Entm’t,

The Court notes that subject matter jurisdiction over state law claims would also exist
because there is complete diversity among opposing parties and the amount in
controversy exceeds $75,000.
Vacated on June 11, 2014 per this Court’s June 10, 2014 Order and later reinstated by
this Court’s January 9, 2015 Order.
4

Inc. v. Gridiron Video, No. 09-2406, 2012 WL 395373, at *3.4 (D.N.J. Feb. 6, 2012). “Entries of
default and default judgments are generally disfavored, and courts should, in doubtful cases, set
aside entries of default or default judgments in order to allow cases to be decided on their merits.”
AilGood Entm’t, 2012 WL 395373, at *3
Though “the entry of a default judgment is largely a matter ofjudicial discretion,” the Court
must determine that Plaintiff has stated a sufficient cause of action, accepting the factual
allegations in the complaint, except those relating to the amount of damages, as true. Chanel, Inc.
v. Gordashevsky, 552 F. Supp. 2d 532, 535-36 (D.N.J. 2008) (citing Comdyne I, Inc. v. Corbin,
908 F.2d 1142, 1149 (3d Cir. 1990)). In addition, “[b]efore imposing the extreme sanction of
default, 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.” Doug Brady, Inc. v. N.J. Bldg. Laborers Statewide
Funds, 250 F.R.D. 171, 177 (D.N.J. 2008) (citing Emcasco Ins. Co. v. Sambrick, 834 F.2d 71, 74
(3d Cir. 1987)).
The Court separately addresses the motion for default judgment against each Defendant.
1.

Plaintiffs Motion For Default Judgment Against Defendant Kanaridis
Will Be Denied

After the entry of default against both Defendants, but before the Court entered default
judgment, Defendant Kanaridis’s filed a motion to dismiss on behalf of himself pro se. (See ECF
No. 7.)

Notwithstanding Magistrate Judge Clark’s administrative termination of Defendant

Kanaridis’s motion for reasons related to co-Defendant CPK’s failure to retain counsel (see ECF
No. 10), it would be incorrect for this Court to find that Defendant Kanaridis has not “otherwise
defend[ed]” within the framework of the Federal Rule of Civil Procedure 55(a). See Harrison v.
Bomn, Bornn & Handy, 200 F.R.D. 509, 513-14 (D.V.I. 2001) (“otherwise defend’ refers to a
5

motion challenging such matters as service, venue, or the sufficiency of a pleading”) (citing
Wright, Miller & Kane, 1OA federal Practice and Procedure

§ 2682, at 16-17 (3d ed. 1998)). This

is especially true considering Plaintiff is representing himself pro Se, and is therefore entitled to
leeway with respect to procedural requirements.

$ Tabron v. Grace, 6 F.3d 147, 153 n.2 (3d Cir.

1993) (“[W] e have traditionally given pro se litigants greater leeway where they have not followed
the technical rules of pleading and procedure.”).
Accordingly, the Court finds that, to this point, Defendant Kanaridis has “otherwise
defend[ed]” in this case. The Court will, therefore, deny Plaintiff’s motion for default judgment
against Defendant Kanaridis without prejudice. Having found good cause, this Court will also set
aside the entry of default against Defendant Kanaridis and provide him thirty (30) days to answer
or file a motion.
2.

Plaintiff’s Motion For Default Judgment Against Defendant CPK Will Be
Granted

The time for Defendant CPK to answer or otherwise respond to the Complaint has expired.

$ Fed. R. Civ. P. 12(a). Defendant CPK has failed to appear and no opposition to the present
motion has been filed. As the Court noted in its June 10, 2014 Opinion, although Defendant
Kanaridis submitted a motion to dismiss, pro se, styled on behalf of himself and Defendant CPK,
because Defendant CPK is a corporation, it must be represented by authorized counsel and it
cannot be represented by Defendant Kanaridis. (See ECF No. 13.) Despite being given numerous
opportunities to obtain counsel, Defendant CPK has failed to do so and has not made an appearance
before this Court.
Before awarding a default judgment, the Court must determine whether the moving party’s
complaint establishes a legitimate cause of action. Chanel, 558 F. $upp. at 535-36. Here, the
Plaintiff alleges causes of actions for both trademark infringement under the Lanham Act and
6

breach of contract. (Compl.

¶ 53-96.)

To establish trademark infringement, the complaint must

allege that plaintiff (1) has a valid and legally protectable mark; (2) owns the mark; and (3) the
defendant’s use of the mark to identify goods or services causes a likelihood of confusion. A & H
Sportswear, Inc. v. Victoria’s Secret Stores, Inc., 237 f.3d 198, 210 (3d Cir. 2000). A complaint
sufficiently states a cause of action for breach of contract “by alleging that Defendants entered into
a valid franchise agreement with Plaintiff, that Defendants breached this agreement, and that
Plaintiff suffered resulting damages.” Super 8 Worldwide, Inc. v. Aksar Corp., No. 14-1037, 2014
WL 4613664, at *9 (D.N.J. Sept. 15, 2014) (citing Coyle v. Englander’s, 199 N.J. Super. 212, 223,
488 A.2d 1083, 1088 (N.J. Super. Ct. App. Div. 1985)); Howard Johnson v. Patel, No. 11-918,
2011 WL218575, at *3 (D.N.J. May31, 2011).
In its Complaint, Plaintiff alleges that it owns several registered and valid trademarks.
(Compl.

¶

9-17.) Plaintiff further alleges that Defendant’s licensed use of Plaintiffs marks

terminated when Defendants terminated the License Agreement, and that Defendants continued to
use the mark thereafter in violation of the Lanham Act. (Compl.

¶ 44-52.)

Thus, Plaintiff has

sufficiently pleaded that the marks were valid, it owns the marks, and the Defendants infringed the
marks.

A & H Sportswear, Inc., 237 F.3d at 210.
Plaintiff alleges that CPK breached the License Agreement by (1) failing to pay liquidated

damages triggered by Defendants’ unilateral termination of the License Agreement and (2) failing
to make payments of “Recurring Fees” as required under the License Agreement.
(Compl.

¶

68-87.) In addition to supporting an action for breach of contract, the facts support

Plaintiffs claim of unjust enrichment, as Plaintiff “conferred a benefit on defendant that enriched
defendant beyond its contractual rights” and “retention of that benefit without payment would be
unjust.” Cooper v. Samsung Electronics America, Inc., No. 07-3853, 2008 WL 4513924, at *9
7

(D.N.J. Sept. 30, 2008) (citing VRG Corp. v. GKN Realty Corp., 135 N.J. 539, 554, 641 A.2d 519,
526 (1994)).
Given that Defendant CPK has failed to appear or plead in this action and that Plaintiff has
provided evidence of Defendant CPK’s entry into and breach of the License Agreement and
Guaranty and trademark infringement, the Court finds no basis for Defendant CPK to claim a
meritorious defense.

Jackson Hewitt v. Gleason, No. 13-5 10, 2013 WL 6384650, at *2 (D.N.J.

Dec. 6, 2013); cf Emcasco, 834 F.2d at 74 (holding that district court was required to consider
whether defendant’s proffered answer raised meritorious defense). Plaintiff has been prejudiced
by Defendant CPK’s failure to answer because Plaintiff has incurred additional costs, has been
unable to move forward with the case, and has been delayed in receiving relief. See Malik v.
Hannah, 661 F. Supp. 2d 485, 490-9 1 (D.N.J. 2009). finally, where Defendant CPK has failed to
respond, there is a presumption of culpability. ç Teamsters Pension Fund of Phila. & Vicinity
v. Am. Helper, Inc., No. 11-624, 2011 WL 4729023, at *4 (D.N.J. Oct. 5, 201 1). Therefore, the
Court finds that default judgment is proper at this time against Defendant CPK.
The allegations in Plaintiffs Complaint regarding damages are not treated as true upon
entry of a default judgment. Boards of Trustees of Operating Engineers Local 825 Welfare Fund
v. Robert Silagy Landscaping, Inc., No. 06-1795, 2006 WL 3308578, at *3..4 (D.N.J. Nov. 13,
2006). A court may conduct hearings to determine the amount of damages or may decline to hold
such hearings, “particularly where ‘the amount claimed [is] capable of ascertainment from definite
figures contained in the documentary evidence or in detailed affidavits.”

(internal quotations

omitted). In this case, Plaintiff has submitted evidence adequate to support its request for damages
and for reasonable attorneys’ fees and costs. (Sec Affidavit of Suzanne Fenimore, ECF No. 17-3.)

8

III.

CONCLUSION

For the reasons described herein, Plaintiffs motion for default judgment will be
granted-in-part and denied-in-part. Default judgment shall be entered against Defendant CPK, and
Defendant CPK shall be ordered to pay the total amount of $211,163.16, comprised of liquidated
damages, recurring fees, Lanham Act damages, damages, and attorneys’ fees and costs. Defendant
Kanaridis is given thirty (30) days to answer or file a motion. An appropriate Order accompanies
this Opinion.

DATED: September30, 2015

-

CLAIRE C. CECCHI, U.S.D.J.

9