DAYS INNS WORLDWIDE, INC. v. HH PRAMUKH, LLC et al
Filing
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OPINION. Signed by Judge Madeline C. Arleo on 12/14/2016. (JB, )
UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY
DAYS INNS WORLDWIDE, INC.,
Plaintiff,
Civil Action No. 15-4318
v.
OPINION
HH PRAMUKH, LLC, et al.,
Defendants.
ARLEO, UNITED STATES DISTRICT JUDGE
This matter comes before the Court by way of Plaintiff Days Inns Worldwide, Inc.’s
(“DIW”) Motion for Default Judgment pursuant to Federal Rule of Civil Procedure 55(b)(2). Dkt.
No. 17. For the reasons stated below, the motion is GRANTED.
I.
BACKGROUND
DIW is a Delaware corporation with its principal place of business in Parsippany, New
Jersey. Compl. ¶ 1, Dkt. No. 1. It licenses the operation of Days Inn hotels. See id. ¶ 18.
Defendant HH Pramukh, LLC (“HHP”) is a South Carolina limited liability company with its
principal place of business in Charleston, South Caroline. Id. ¶ 2. On August 18, 2015, DIW
entered into a license agreement (“License Agreement”) for the operation of a 119-room Days Inn
hotel (the “Facility”) in Hilton Head, South Carolina. Id. ¶ 18.
Pursuant to the License Agreement, HHP was obligated to operate the Facility for a fifteenyear term. Id. ¶ 19. In operating the Facility, HHP was required to make periodic payments to
DIW for royalties, system assessments, taxes, interest, reservation system user fees, and other fees,
(collectively, “Recurring Fees”), id. ¶ 20; prepare and submit monthly reports to DIW disclosing,
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among other things, the amount of gross revenue earned at the Facility, id. ¶ 22; and maintain
accurate financial information relating to the gross room revenue, and allow DIW to examine,
audit, and make copies of the financial information, id. ¶ 23. The License Agreement states that
any delinquent amounts owed would be assessed interest at a rate of 1.5% per month, or the
maximum rate allowed by law, whichever is less. Id. ¶ 21. The License Agreement also provides
that the non-prevailing party shall pay all costs and expenses, including reasonable attorneys’ fees,
incurred by the prevailing party in enforcing the License Agreement. Id. ¶ 25.
Defendants Gunatitprakesh Patel, Vimal Patel, Kiran Patel, Devendra Patel, and Kavyesh
Patel (the “Individual Defendants”) are all members of HHP, and provided DIW with a guaranty
of HHP’s obligations under the License Agreement. Id. ¶¶ 3-7, 26-28.
DIW could terminate the License Agreement with notice if HHP discontinued operating
the Facility as a Days Inn hotel or lost possession of the facility. Id. ¶ 24. On February 28, 2012,
HHP lost possession of the Facility to a third party. Id. ¶ 29. At the time, it owed Recurring Fees
due to DIW pursuant to the License Agreement. Id. ¶ 30. HHP and the Individual Defendants
(collectively, “Defendants”) have failed to pay the outstanding fees. Id. ¶ 31.
DIW filed the instant lawsuit against Defendants on December 23, 2015, seeking an
accounting and recovery of all unpaid fees. Dkt. No. 1. Defendants failed to answer or otherwise
defendant the action. On April 20, 2016, DIW petitioned the Clerk of Court for an entry of default
against Defendants pursuant to Fed. R. Civ. P. 55(a). Dkt. No. 13. The Clerk of Court entered
default against Defendants on April 21, 2016. Dkt. Entry dated April 21, 2016.
II.
STANDARD OF REVIEW
“The district court has the discretion to enter default judgment, although entry of default
judgments is disfavored as decisions on the merits are preferred.” Animal Sci. Prods., Inc. v. China
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Nat’l Metals & Minerals Imp. & Exp. Corp., 596 F. Supp. 2d 842, 847 (D.N.J. 2008).
Before
entering default judgment the court must: (1) determine 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. See Chanel, Inc. v. Gordashevsky, 558 F. Supp. 2d 532, 535-36
(D.N.J. 2008); Wilmington Savings Fund Soc., FSB v. Left Field Props., LLC, No. 10-4061, 2011
WL 2470672, at *1 (D.N.J. June 20, 2011). Although the facts pled in the Complaint are accepted
as true for the purpose of determining liability, the plaintiff must prove damages. See Comdyne
I, Inc. v. Corbin, 908 F.2d 1142, 1149 (3d Cir. 1990).
Additionally, prior to granting default judgment, the Court must make explicit factual
findings as to: (1) whether the party subject to the default has a meritorious defense; (2) the
prejudice suffered by the party seeking default judgment; 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).
III.
ANALYSIS
A. Jurisdiction & Service
The Court has both subject matter jurisdiction over this dispute and personal jurisdiction
over Defendant. Subject matter jurisdiction here is present pursuant to diversity under 28 U.S.C.
§ 1332.
The Court also has personal jurisdiction over Defendants based upon consent to
jurisdiction in this district in the License Agreement and the Guaranty. See Affidavit of Suzanne
Fenimore (“Fenimore Aff.”) Ex. A ¶ 17.6.3, Dkt. No. 17-3; see also Feinmore Aff. Ex. B (“We
acknowledge that Section 17 of the [License] Agreement . . . applies to this Guaranty.”). Plaintiff
also provided the Court with proof of personal service of Gunatitprakesh Patel and Kiran Patel,
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see Executed Summonses, Dkt. Nos. 5-6, and affidavits of diligent service on the remaining
Defendants, see Certification of Bryan P. Couch (“Couch Cert.”) Exs. A-E, Dkt. No. 17-2. 1 Thus,
the Court is satisfied that it has jurisdiction to enter default judgment and that Defendants were
properly served.
B. Liability
“A consequence of the entry of a default judgment is that the factual allegations of the
complaint, except those relating to the amount of damages, will be taken as true.” Comdyne I, 908
F.2d at 1149. The Complaint pleads facts which, taken as true, establish Defendant’s liability for
breach of contract.
In New Jersey, a plaintiff must allege three elements to state a cause of action for breach
of contract: (1) a valid contract, (2) breach of that contract, and (3) damages resulting from that
breach. 2 Ramada Worldwide Inc. v. Courtney Hotels USA, LLC, No. 11-896, 2012 WL 924385,
at *3 (D.N.J. Mar. 19, 2012). Here, DIW has alleged that (1) there were contractual relationships
based on the License Agreement and the Guaranties; (2) Defendant HHP breached the License
Agreement when it failed to pay outstanding fees after losing possession of the Facility to a third
party; (3) the Individual Defendants breached the Guaranties when they failed to satisfy HHP’s
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New Jersey law provides that, if personal service cannot be effectuated, a plaintiff may submit
an affidavit containing facts which illustrate that “despite diligent effort and inquiry personal
service cannot be made.” N.J. Ct. R. 4:4-4(b). DIW has submitted affidavits for the unavailable
Defendants, explaining DIW’s attempts to locate and serve them. DIW has also provided proof of
service by mail on those Defendants’ listed dwellings or businesses, as required by N.J. Ct. R. 4:43 and 4-4(b)(1)(C). The Court is satisfied that these efforts were sufficiently diligent to warrant
alternative service. See Days Inns Worldwide, Inc. v. Patel, No. 13-6047, 2014 WL 2737893, at
*2 (D.N.J. June 17, 2014).
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Although the franchise at issue was located in Florida, the License Agreement provides that the
agreement shall be governed by and constructed under New Jersey law, except for conflicts of law
principles. Fenimore Aff. Ex. A ¶ 17.6.1.
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obligations; and (3) DIW suffered resulting damages in the amount of $89,354.44, Fenimore Aff.
¶ 15. Therefore, Plaintiff has sufficiently alleged a cause of action for breach of contract.
C. Appropriateness of Default Judgment
Next, the Court must consider (1) whether the party subject to the default has a meritorious
defense; (2) the prejudice suffered by the party seeking default judgment; and (3) the culpability
of the party subject to default. Doug Brady, 250 F.R.D. at 177. The Court concludes that in the
absence of any responsive pleading and based upon the facts alleged in the Complaint, Defendants
do not have a meritorious defense. See Ramada, 2012 WL 924385, at *5. Second, the Court finds
that DIW will suffer prejudice absent entry of default judgment as it would have no other means
of obtaining relief. Finally, the Court finds that Defendants acted culpably as they have been
served with the Complaint, are not infants or otherwise incompetent, and are not presently engaged
in military service. See Couch Cert. ¶¶ 16-21; Nationwide Mut. Ins. Co. v. Starlight Ballroom
Dance Club, Inc., 175 F. App’x 519, 523 (3d Cir. 2006) (holding that a defendant’s failure to
respond to communications from the plaintiff and the court can constitute culpability).
D. Monetary Damages
Although the facts pled in the Complaint are accepted as true for the purpose of determining
liability, the plaintiff must prove damages. See Comdyne I, 908 F.2d at 1149. DIW seeks
judgment in the amount of $89,354.44. Fenimore Aff. ¶ 15. This consists of (1) $49,730.98 in
Recurring Fees owed under the License Agreement, (2) 39,493.91 in prejudgment interest, and (3)
$129.55 in taxes. DIW provides an itemized statement of the overdue Recurring Fees that proves
it is owed the requested $49,730.98. See Fenimore Aff. Ex. D. The invoice dates from which
HHP’s past-due recurring fees began accruing interest range from September 2011 to March 2012.
Fenimore Aff. Ex. D. The Court is satisfied that the interest accrued from these dates, at a rate of
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1.5% per month as provided by the License Agreement, matches the amount requested by DIW.
Combining the principal outstanding balance, the accrued interest, and taxes equals the damages
Plaintiff requests.
Therefore, DIW is entitled to default judgment in the total amount of
$89,354.44.
IV.
CONCLUSION
For the foregoing reasons, Plaintiff’s Motion for Default Judgment is GRANTED. An
appropriate order accompanies this opinion.
Dated: December 14, 2016
/s Madeline Cox Arleo___________
MADELINE COX ARLEO
United States District Judge
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