RAMADA WORLDWIDE INC. v. KAANAM, LLC et al

Filing 7

OPINION. Signed by Judge Kevin McNulty on 10/29/15. (cm )

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW JERSEY

Civ. No. 14-5752 (KM) (MAR)

RAMADA WORLDWIDE INC.,
Plaintiff,

OPINION
V.

KAANAM, LLC and MILIND K. OZA,
Defendants.

MCNULTY, U.S.D.J.:
This matter comes before the Court on the unopposed motion of Plaintiff
Ramada Worldwide Inc. (“Ramada”) for default judgment against Defendants
KaanAm, LLC (“KaanAm”) and Milind K. Oza (“Oza”). For the reasons set forth
below, I will enter default judgment against KaanAm and Oza. Ramada is
awarded $120,416.14, comprising (i) $115,592.15 in outstanding fees and
interest and (ii) $4,823.99 in attorneys’ fees and costs. Post-judgment interest
will accrue from this date at the appropriate rate pursuant to 28 U.S.C.

§

1961.

BACKGROUND
Ramada is a Delaware corporation with its principal place of business in
New Jersey. (Complaint, Dkt. No. 1 (“Compi.”) ¶ 1) KaanAm is a limited liability
company organized under the laws of and maintaining its principal place of
2) Oza is the sole member of KaanAm and is a

business in New York. (Id.

¶

citizen of New York. (Id.

3—4)

¶J

This suit arises from a franchise agreement entered into between
Ramada and KaanAm on June 6, 2012 (“Franchise Agreement”) pursuant to
which KaanAm was to operate a 145-room hotel under the Ramada name in
Jamestown, New York for a period of fifteen years. (Compi. ¶J 9—10) Oza,
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KaanAm’s sole member, signed the Franchise Agreement on behalf of KaanAm.
4; Certification of Suzanne Fenimore in Support of Motion for Final
(Id.

¶

Judgment by Default, dated May 7, 2015, Dkt. No. 6-3 (“Fenimore Cert.”) Ex. A
(“Franchise Agreement”) p. 25) On the same day, Oza also executed a guaranty
of KaanAm’s obligations under the Franchise Agreement (“Guaranty”). (Compi.
17; Fenimore Cert. Ex. B) The Guaranty committed Oza to make any unpaid

¶

payments on behalf of KaanAm in the event that KaanAm defaulted under the
Franchise Agreement. (Compl.

18)

¶

Under the terms of the Franchise Agreement, KaanAm was obligated
make period payments to Ramada for royalties, taxes, and a variety of fees,
which are collectively defined by the Franchise Agreement as “Recurring Fees.”
(Compl.

¶

11; Franchise Agreement

§

7, 18.1) In order to calculate the

royalties owed, KaanAm undertook to prepare and submit to Ramada monthly
gross room revenue reports. (Compl. ¶ 13; Franchise Agreement § 3.6) KaanAm
was also obligated to maintain accurate books and records and to allow
Ramada to audit those documents. (Compl. ¶ 14) The Franchise Agreement
provided that Ramada could terminate the agreement if KaanAm discontinued
operating the property as a Ramada-branded hotel or if KaanAm lost
possession of the property. (Id.

¶

15; Franchise Agreement

§

11.2) On

December 4, 2012, KaanAm lost possession of the property to a third party,
triggering default and a termination of the Franchise Agreement. (Compl. ¶ 20)
Apparently, KaariAm had failed to pay the Recurring Fees since the execution
of the Franchise Agreement.
On September 16, 2014, Ramada filed its complaint in this action. (Dkt.
No. 1) The complaint asserts causes of action sounding in breach of contract
and unjust enrichment for KaanAm and Oza’s failure to remit payment on the
Recurring Fees. Although served, neither KaanAm nor Oza answered the
complaint. On January 14, 2015, the clerk entered default against KaanAm
and Oza. On May 8, 2015, Ramada filed this motion for a default judgment
against KaanAm and Oza. (Dkt. No. 6) Ramada seeks (i) $115,592.15 in unpaid
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recurring fees and interest, (ii) $4,000 in attorneys’ fees, and (iii) $823.99 in
costs, for a requested award of $120,416. 14. (Fenimore Cert.

¶J 16—18)

This Court has jurisdiction over this action pursuant to 28 U.S.C.

§

1332, as there is complete diversity of citizenship between the parties and the
amount in controversy exceeds $75,000.
LEGAL STANDARD AND DISCUSSION
“[Tjhe entry of a default judgment is left primarily to the discretion of the
district court.” Hritz v. Womcz Corp., 732 F.2d 1178, 1180 (3d Cir. 1984) (citing
Tozer v. Charles A. Krause Milling Co., 189 F.2d 242, 244 (3d Cir. 1951)).
Because the entry of a default judgment prevents the resolution of claims on
the merits, “this court does not favor entry of defaults and default judgments.”
United States v. $55,518.05 in U.S. Currency, 728 F.2d 192, 194 (3d Cir. 1984).
Thus, before entering default judgment, the Court must determine whether the
“unchallenged facts constitute a legitimate cause of action” so that default
*
judgment would be permissible. DirecTV, Inc. v. Asher, 2006 WL 680533, at 1
(D.N.J. Mar. 14, 2006) (citing Wright, Miller, Kane, 1OA Fed. Prac. & P. Civil 3d

§ 2688, at 58—59, 63).
“[D]efendants are deemed to have admitted the factual allegations of the
Complaint by virtue of their default, except those factual allegations related to
the amount of damages.” Doe v. Simone, 2013 WL 3772532, at *2 (D.N.J. July
17, 2013). While “courts must accept the plaintiff’s well-pleaded factual
allegations as true,” they “need not accept the plaintiff’s factual allegations
regarding damages as true.” Id. (citing Chanel, Inc. v. Gordashevsky, 558 F.
Supp. 2d 532, 536 (D.N.J. 2008)). Moreover, if a court finds evidentiary
support to be lacking, it may order or permit a plaintiff seeking default
judgment to provide additional evidence in support of the allegations. Doe,
2013 WL 3772532, at *2.

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I.

Prerequisites for Entry of Default Judgment

Before a court may enter default judgment against a defendant, the
plaintiff must have properly served the summons and complaint, and the
defendant must have failed to file an answer or otherwise respond to the
complaint within the time provided by the Federal Rules, which is twenty-one
days. See Gold Kist, Inc. v. Laurinburg Oil Co., Inc., 756 F.2d 14, 18—19 (3d Cir.
1985); Fed. R. Civ. p. 12(a).
Service of an individual, such as Oza, may be made by personal service,
leaving a copy of the summons and complaint at the individual’s dwelling or
usual place of abode with a person of suitable age and discretion, delivering a
copy of the summons and complaint with an agent for service of process, or by
following state law for serving a summons in an action brought in courts of
general jurisdiction where the district court is located or where service is made.
Fed. R. Civ. P. 4(e).
Service of a corporate entity, such as KaanAm, may be made by
delivering a copy of the summons and complaint to “an officer, a managing or
general agent, or any other agent authorized by appointment or by law to
receive service of process” or by following state law for serving a summons in an
action brought in courts of general jurisdiction where the district court is
located or where service is made. Fed. R. Civ. P. 4(h)(1).
New Jersey law states in relevant part that service on a corporation may
be made
on any officer,
by serving a copy of the summons and complaint.
trustee or managing or general agent, or any person
director,
authorized by appointment or by law to receive service of process on
behalf of the corporation, or on a person at the registered office of
the corporation in charge thereof, or, if service cannot be made on
any of those persons, then on a person at the principal place of
business of the corporation in this State in charge thereof, or if there
is no place of business in this State, then on any employee of the
corporation within this State acting in the discharge of his or her
duties.
.

4

.

N.J. Ct. R. 4:4-4(a)(6).
If, despite diligent efforts, personal service cannot be made in accordance
with N.J. Ct. R. 4:4-4(a)(l), in personam jurisdiction may nevertheless be
obtained over any defendant by substituted or constructive service, in
accordance with N.J. Ct. R. 4:4-4(b)(1)(C), by
mailing a copy of the summons and complaint by registered or
certified mail, return receipt requested, and, simultaneously, by
ordinary mail to: (1) a competent individual of the age of 14 or
over, addressed to the individual’s dwelling house or usual place of
abode; (2) a minor under the age of 14 or a mentally incapacitated
person, addressed to the person or persons on whom service is
authorized by paragraphs (a)(2) and (a)(3) of this rule; (3) a
corporation, partnership or unincorporated association that is
subject to suit under a recognized name, addressed to a registered
agent for service, or to its principal place of business, or to its
principal place of business, or to its registered office.
N.J. Ct. R. 4:4-4(b)(3).’
Here, the prerequisites for default judgment have been met. The
complaint was filed on September 16, 2014. (Dkt. No. 1) Despite diligent efforts
and inquiry, Ramada was unable to personally serve KaanAm, Oza, or any
person authorized to receive service on behalf of KaanAm. (Dkt. No. 5;
Certification of Bryan P. Couch In Support of Motion for Final Judgment by
Default, dated May 8, 2015, Dkt. No. 6-2 (“Couch Cert.”)

¶ 4)

Ramada did,

however, successfully serve the Summons and Complaint on November 19,
2014 via regular and certified mail as permitted by N.J. Ct. R. 4:4-4(b)(3).
(Couch Cert.

¶J 5—6)

KaanAm and Oza had twenty-one days (until December

10, 2014) to file an answer or otherwise respond to the complaint pursuant to

Rule 4 also permits service to be made in accordance with the laws of the
courts of general jurisdiction where service is made. Here, service was attempted in
Texas, at the last known addresses for KaanAm and Oza. (Dkt. No. 5) Texas law states
that service is made by delivering a copy to the party to be served, or the party’s duly
authorized agent or attorney of record, in person, by mail, by commercial delivery
service, by fax, by email, or by such other manner as the court in its discretion may
direct. (See Vernon’s Ann. Texas Rules Civ. P. Rule 2 la)
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Fed. R. Civ. P. 12(a). The clerk entered default against KaanAm and Oza on
January 14, 2015. (Dkt. No. 5) Accordingly, I am satisfied that the
prerequisites to filing a default judgment are met. See Gold Kist, 756 F.2d at
1 8— 19.
II.

Three Factor Analysis

After the prerequisites have been satisfied, a court must evaluate the
following three factors: “(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)). Those factors, considered
in light of the record of this case, weigh in favor of entry of a default judgment.
a. Factor 1
The evaluation of the first factor is complicated, of course, by KaanAm
and Oza’s failure to answer or to oppose this motion. My independent review of
the record, however, does not suggest that the claims asserted by Ramada
against the defendants are legally flawed or that either KaanAm or Oza could
*5• Accepting the
mount a meritorious defense. See Doe, 2013 WL 3772532, at
allegations in the Complaint as true, Comdyne j, Inc. v. Corbin, 908 F.2d 1142,
1149 (3d Cir. 1990), I find that Ramada has successfully stated claims for relief
as against KaanAm and Oza.
The complaint asserts four causes of action, which, in essence, amount
to a claim for breach of contract against KaanAm for failing to remit payment
on the Recurring Fees and breach of the Guaranty against Oza, in her capacity
as guarantor, for failing to pay the Recurring Fees on behalf of KaanAm. Under
New Jersey law, a prima facie case for breach of contract requires that the
plaintiff show: (1) a contract between the parties; (2) a breach of that contract;
and (3) damages resulting from the breach. See Coyle v. Englander’s, 199 N.J.
Super. 212, 223 (App. Div. 1985); Frederico v. Home Depot, 507 F.3d 188, 203
(3d Cir. 2007). The facts alleged in the Complaint establish that those elements
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are satisfied here. The declaration submitted in support of Ramada’s motion
and the exhibits annexed thereto corroborate those factual allegations. Both
the Franchise Agreement and Guaranty are valid and enforceable contracts.
Those contracts were breached by KaanAm’s failure to pay certain of the
Recurring Fees owed to Ramada and Oza’s failure to personally pay the same.
Ramada has accrued damages as a result of these breaches. In sum, the facts
alleged by Ramada state a claim for breach of the Franchise Agreement against
KaanAm and breach of the Guaranty against Oza. I cannot discern a
meritorious defense to these claims from the record before me.
b. Factors 2 and 3
The second and third factors weigh in favor of default. KaanAm and Oza
were properly served on November 19, 2014 but have failed to appear and
defend themselves in any manner. It is clear that Ramada has been prejudiced
by this dereliction because it has been “prevented from prosecuting [its] case,
engaging in discovery, and seeking relief in the normal fashion.” See Teamsters
Pension Fund of Philadelphia & Vicinity v. Am. Helper, Inc., 2011 WL 4729023,
at *4 (D.N.J. Oct. 5, 2011) (finding that a defendant’s failure to answer
prejudices the plaintiff); see also Gowan v. Cont’l Airlines, Inc., 2012 WL
2838924, at *2 (D.N.J. Jul. 9, 2012) (“[Plaintiffs] will suffer prejudice if the
Court does not enter default judgment as Plaintiff[s] [have] no other means of
seeking damages for the harm caused by Defendant.”). Absent any evidence to
the contrary, “the Defendant’s failure to answer evinces the Defendant’s
culpability in [the] default.” Teamsters Pension Fund of Philadelphia & Vicinity,
2011 WL 4729023 at *4 In this case, “there is nothing before the Court to
show that the Defendant[s’] failure to file an answer was not willfully
negligent.” Id. (citing Prudential Ins. Co. of America v. Taylor, 2009 WL 536043,
at *1 (D.N.J. Feb. 27, 2009) (finding that when there is no evidence that the
defendant’s failure to answer the complaint was due to something other than
its own willful negligence, the defendant’s conduct is culpable and default
judgment is warranted).
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Overall, then, the three factors support the entry of default judgment
against KaanAm and Oza, and I will grant the motion for default judgment
against the defendants.

III.

Remedies

Ramada seeks two types of compensation, totaling $120,416.14. (See
Fenimore Cert.

¶

18) Specifically, Ramada seeks (1) $115,591.15 in recurring

fees, including principal and interest, and (2) $4,823.99 for attorneys’ fees and
costs. (See id.

VT

16—17)

Ramada has submitted documentary evidence in support of its demands,
while KaanAm and Oza have submitted nothing and have failed to appear or
respond in any manner. An ex parte hearing would thus serve little additional
purpose, so I rule based on the record before me.
I will grant Ramada’s request for the principal amount of recurring fees
due and interest on those fees. (See Fenimore Cert. ] 16) Ramada has
documented recurring fees (and the interest thereon calculated at 1.5%
monthly) owed from June 2012 through September 2013, corresponding to the
time between the when the Franchise Agreement was executed until Ramada
filed its complaint, in the amount of $115,592.15. (Fenimore Cert. Ex. A p. 11,
Ex. C)
I will also grant Ramada’s request for attorneys’ fees and costs. Ramada
has adequately documented its attorneys’ fees, which do not seem
unreasonable or disproportionate. (See Couch Cert.
Agreement

§

¶J

10—11; Franchise

17.4 (non-prevailing party is to “pay all costs and expenses,

including reasonable attorneys’ fees incurred by the prevailing party to enforce
this Agreement or to collect amounts owed under this Agreement”) Ramada has
also adequately documented its costs, which I also find to be reasonable. (Id.

¶

12)1 will enter a judgment that includes $4,000 in attorneys’ fees and $823.99
in costs, for a total of $4,823.99.
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The total judgment awarded is, therefore, $120,416.14. Post-judgment
per diem interest will accrue from this date at the appropriate rate pursuant to
28 U.S.C.

§ 1961.

CONCLUSION
For the foregoing reasons, the motion is granted as to defendants
KaanAm and Oza, and a default judgment will be entered against defendants
KaanAm and Oza and in favor of plaintiff Ramada in the total amount of
$120,416.14, with post-judgment interest from this date at the appropriate
rate pursuant to 28 U.S.C.

§ 1.961.

An appropriate order and judgment will issue.
-

1J

KEVIN MCNULTY, U.S.D.
Date: October 29, 2015

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