TRAVELODGE HOTELS, INC. v. LC STAR INV. CO. et al

Filing 23

OPINION & ORDER denying without prejudice THI's 22 Motion for Default Judgment as to LC Star Inv. Co. and Chung Ki Choe to refile at the conclusion of the case between THI and the remaining defendant, Hung P. Hong. Signed by Judge Katharine S. Hayden on 4/21/16. (cm )

United States District Court
for the District of New Jersey

TRAVELODGE HOTELS, INC., a Delaware
Corporation,
Plaintiff,

Civil No: 15-5598 (KSH)(CLW)

V.
LC STAR INV. CO, an Alaska Company;
CHUNG KI CHOE, an individual; HUNG P.
HONG, an individual,

OPINION AND ORDER

Defendants.

Katharine S. Hayden, U.S.D.J.
This matter comes before the Court on a motion by plaintiff, Travelodge Hotels, Inc.
(“THI”), seeking a final judgment by default against defendants Chung Ki Choe (“Choe”) and
LC Star Inv. Co. (“LC Star”), pursuant to Federal Rule of Civil Procedure 55(b)(2).
I.

Background
THI alleges in a complaint (D.E. 1 (“Compl.”)) filed on July 1, 2015, that on or around

May 18, 2011, it entered into a Franchise Agreement (D.E. 1, Ex. A (“Franchise Agreement”))
with defendant LC Star. The parties to the License Agreement contracted to operate a 95-room
Travelodge hotel (the “Facility”) in Anchorage, Alaska for a 15-year term. (Compl. ¶¶ 9, 10.)
While operating the Facility, LC Star was required to make certain recurring payments for
royalties, service assessments, taxes, interest, reservation system user fees, and other fees.
(Compl. ¶ 11.) THI could terminate the Franchise Agreement if LC Star discontinued operating
the Facility or lost possession of, or the right to possess, the Facility. (Compl. ¶ 15; Franchise
Agreement.) Chung Ki Choe and Hung P. Hong signed a Guaranty (D.E. 1, Ex. C (“Guaranty”))
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which provided that in the event of default, they would be “jointly and severally” liable to
perform or to pay THI for LC Star’s unperformed or unpaid obligations under the Franchise
Agreement. (Compl. ¶¶ 18, 19; Guaranty.)
On or around May 23, 2014, LC Star ceased operating the Facility as a Travelodge hotel.
(Compl. ¶ 21.) Stemming from this alleged breach of the Franchise Agreement, THI asserts in
the sixth and final count of its complaint that the Choe and Hung have failed to perform as they
are obligated and are therefore liable for recurring fees of $100,743.72. (Compl. ¶¶ 44-46.)
Choe was served on October 19, 2015 (D.E. 12). After he failed to respond or otherwise
answer the complaint, on November 20, 2015, the Clerk of Court entered default against him.
Similarly, despite service to LC Star on August 17, 2015, it failed to file or otherwise respond to
the complaint. Accordingly, default was entered on November 30, 2015. Shortly thereafter, on
December 4, 2015, Choe wrote to the court requesting time to find an attorney and file an
answer. (D.E. 15.) The Court ordered that defendants Choe and LC Star retain counsel and
answer by March 14, 2015. (D.E. 18.) Neither Choe nor LC Star provided the Court with an
answer or proof that they retained counsel by the prescribed deadline. On March 24, 2016, THI
moved for final judgment by default as to defendants Cho and LC Star. Hung answered the
complaint and asserted crossclaims against Choe and LC Star on September 25, 2015; the case
continues to move forward against him.
II.

Default Judgment and Discussion
In evaluating a motion for default judgment, the Court must first determine whether the

Clerk of Court properly entered default. Fed. R. Civ. P. 55(a). Because Choe and LC Star have
failed to formally enter an appearance, file an answer, or in any way respond to the complaint,
beyond Choe’s request for an extension, the entry of default is proper in this case.

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“As a general matter, even when a party is properly in default, the other side is not
entitled to the entry of default judgment as of right, and the entry of such a judgment is left
primarily to the discretion of the district court.” Ramada Worldwide Inc. v. Abel Lodging, LLC,
2014 WL 5361914, at *1 (D.N.J. Oct. 21, 2014) (Linares, J.); see, e.g., Hritz v. Woma Corp., 732
F.2d 1178, 1180 (3d Cir. 1984). Where a motion for default judgment is made as to only one
defendant in a multi-defendant case, “the preferred practice is for the court to withhold granting
default judgment until the action is resolved on its merits against non-defaulting defendants: if
plaintiff loses on [the] merits, the complaint should then be dismissed against both defaulting and
non-defaulting defendants.” Animal Sci. Products, Inc. v. China Nat. Metals & Minerals Imp. &
Exp. Corp., 596 F. Supp.2d 842, 849 (D.N.J. 2008) (Brown, J.) (citing Frow v. De La Vega, 82
U.S. 552 (1872)); see also Charles A. Wright et. al., 10A Fed. Prac. & Proc. Civ. § 2690 (3d ed.
2015) (“judgment should not be entered against that defendant until the matter has been
adjudicated with regard to all defendants, or all defendants have defaulted”). To avoid potential
absurdities that could result from inconsistent judgments, this practice is most strictly applied
where the alleged liability is joint and several. See e.g., Farzetta v. Turner & Newall, Ltd., 797
F.2d 151, 154 (3d Cir. 1986) (citing Golf Coast Fans, Inc. v. Midwest Electronics Importers,
Inc., 740 F.2d 1499, 1511-12 (11th Cir. 1984) (finding default judgment “incongruous and
unfair” where defendants were jointly and severally liable)); see also Eteam, Inc. v. Hilton
Worldwide Holdings, Inc., 2016 WL 54676 (D.N.J. Jan. 5, 2016) (Walls, J.) (declining to grant
default judgment against one of two defendant where it would “create the risk of potentially
inconsistent judgments”).
Here, the Guaranty imposes liability “jointly and severally” between the guarantors
(Choe and Hung), and the action is proceeding on the merits against Hung. Under these

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circumstances the Court withholds granting default judgment against Choe and LC Star until this
lawsuit is either resolved on the merits or all defendants have defaulted.
III.

Conclusion and Order
For the foregoing reasons, THI’s application for default judgment is denied without

prejudice.

Based on the foregoing,
IT IS on this 21st day of April, 2016,
ORDERED that THI's motion for default judgment as to LC Star Inv. Co. and Chung Ki
Choe is denied without prejudice to refile at the conclusion of the case between THI and the
remaining defendant, Hung P. Hong.

/s/ Katharine S. Hayden
Katharine S. Hayden, U.S.D.J.

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