DAYS INNS WORLDWIDE, INC. v. MEERA HOSPITALITY, LLC et al
Filing
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OPINION. Signed by Judge William H. Walls on 8/10/16. (dc, )
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UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY
DAYS INN WORLDWIDE, INC, a
Delaware Corporation,
Plaintiff,
:
v.
OPINION
Civ. No. 16-1070 (WHW)(CLW)
MEERA HOSPITALITY, LLC, an Illinois
Limited Liability Company; NEAL PATEL,
an individual; and ATUL KUMAR, an
individual,
Defendants.
Walls, Senior District Judge
Plaintiff Days Inns Worldwide, Inc. (“DIW”) moves under Fed. R. Civ. P. 55 for default
judgment against Defendants Meera Hospitality, LLC (“Meera Hospitality”), Neal Pate!, and
Atul Kumar (together, “Defendants”). DIW filed this action on February 25, 2016, alleging that
Meera Hospitality breached a franchise agreement with DIW. DIW further alleges that Neal
Patel and Atil Kumar served as guarantors of Meera Hospitality’s performance under the
agreement, that Meera Hospitality breached the agreement, and that Defendants owe DIW
unpaid fees. Defendants have failed to plead or otherwise defend the lawsuit. Decided without
oral argument under Fed. R. Civ. P. 78, Plaintiffs motion is granted.
PROCEDURAL AND FACTUAL BACKGROUND
Plaintiff DIW is a corporation organized and existing under the laws of Delaware, with
its principal place of business in Parsippany, New Jersey. Compl.
¶ 1, ECF No.
1. Defendant
Meera Hospitality is a limited liability company organized and existing under the laws of
Illinois, with its principal place of business at 1008 Halfway Road, Marion, Illinois. Id.
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¶ 2.
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Defendant Neal Patel is a member of Meera Hospitality and a citizen of the state of Illinois, with
an address at 700 East Main Street, Carbondale, Illinois. Id.
¶ 3. Defendant Atul Kumar is also a
member of Meera Hospitality and is a citizen of the state of Florida, with an address at 700 East
Main Street, Carbondale, Illinois. Id. ¶4.
On December 5, 2012, DIW entered into a franchise agreement with Meera Hospitality
for the operation of a 79-room Days Inn® guest lodging facility located at 1008 Halfway Road,
Marion, Illinois, Site No. 47062-02206-0 1 (the “facility”). See Aff. of Suzanne Fenimore in
Supp. of Mot. for Final J. by Default (“Fenimore Aff.”), ECF No. 8-3
¶ 3; see also franchise
Agreement, ECF No. 8-3 Ex. A. DIW licensed the “distinctive ‘Days Inn’ System for providing
transient guest lodging services” to Meera Hospitality. Id. Ex. A
§ 1. Meera Hospitality assumed
multiple obligations under the franchise agreement. Under section 5 of the franchise agreement,
Meera Hospitality was obligated to operate a Days Inn® guest lodging facility for a fifteen-year
term. See Id. Ex. A
§ 5. Under section 7, section 18.2, and Schedule C of the franchise
agreement, Meera Hospitality was required to make certain periodic payments to DIW for
royalties, system assessments, taxes, interest, reservation system user fees, and other fees
(collectively, the “Recurring Fees”). See Id. Ex. A
§ 7, 18.2, Schedule C. Meera Hospitality also
agreed, under section 7.3 of the franchise agreement, that interest was payable “on any past due
amount payable to [D1W] under this [Franchise] Agreement at the rate of 1.5% per month or the
maximum rate permitted by applicable law, whichever is less, accruing from the due date until
the amount is paid.” Id. Ex. A
§ 7.3.
Under section 3.6 of the franchise agreement, Meera Hospitality was required to prepare
and submit monthly reports to DIW disclosing, among other things, the amount of gross room
revenue earned by Meera Hospitality at the facility in the preceding month for purposes of
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establishing the amount of royalties and other Recurring Fees due to DIW. Id. Ex. A
§ 3.6. Also
under that section, Meera Hospitality agreed to maintain at the facility accurate financial
information relating to the gross room revenue of the facility, including books, records, and
accounts. Id. Meera Hospitality agreed to allow DIW to examine, audit, and make copies of the
entries in these books, records and accounts. Id. Ex. A
§ 3.6, 4.8.
Section 11.2 of the franchise agreement provided that DIW could terminate the franchise
agreement, with notice to Meera Hospitality, if Meera Hospitality (a) failed to pay any amount
due DIW under the franchise agreement, (b) failed to remedy any other default of its obligations
or warranties under the franchise agreement within 30 days after receipt of written notice from
DIW specifying one or more defaults under the franchise agreement, and/or (c) received two or
more notices of default under the franchise agreement in a one-year period, whether or not the
defaults were cured. Id. Ex. A
§ 11.2. Under sections 12.1 and 18.1 of the franchise agreement,
Meera Hospitality also agreed that, in the event of a termination of the franchise agreement under
section 11.2 before the last two years of the franchise agreement, it would pay liquidated
damages to DIW at a rate of $1,000.00 per guest room Meera Hospitality was authorized to
operate in the facility. Id. Ex. A
§ § 12.1, 18.1. Meera Hospitality also agreed, under section 17.4
of the franchise agreement, that the non-prevailing party would “pay all costs and expenses,
including reasonable attorneys’ fees, incurred by the prevailing party to enforce this [Franchise]
Agreement or collect amounts owed under this [Franchise] Agreement.” Id. Ex. A
§ 17.4.
Effective as of the date of the franchise agreement, Defendants Pate! and Kumar
provided DIW with a guaranty of Meera Hospitality’s obligations under the franchise agreement.
See Id. Ex. B. Under the terms of the guaranty, Defendants Pate! and Kumar agreed, among other
things, that upon a default under the franchise agreement, they would “immediately make each
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payment and perform or cause [Meera Hospitality] to perform, each unpaid or unperformed
obligation of [Meera Hospitality] under the [Franchise] Agreement.” Id. Defendants Patel and
Kumar also agreed, under the terms of the guaranty, to pay the costs, including reasonable
attorneys’ fees, incurred by DIW in enforcing its rights or remedies under the guaranty or the
franchise agreement. Id.
On November 5, 2014, DIW advised Meera Hospitality by letter that (a) it was in
breach of the franchise agreement because it owed DIW approximately $55,605.78 in outstanding
Recurring Fees, (b) it had 30 days in which to cure this monetary default, and (c) if the default was
not cured, then the franchise agreement might be subject to termination. See Id. Ex. C. On February
5, 2015, DEW advised Meera Hospitality by letter that (a) it was in breach of the franchise
agreement because it owed DIW approximately $67,824.28 in outstanding Recurring Fees, (b) it
had 30 days in which to cure this monetary default, and (c) if the default was not cured, then the
franchise agreement might be subject to termination. See Id. Ex. D. On April 8, 2015, DIW advised
Meera Hospitality by letter that (a) it was in breach of the franchise agreement because it owed
DIW approximately $74,460.51 in outstanding Recurring Fees, (b) it had 30 days in which to cure
this monetary default, and (c) if the default was not cured, then the franchise agreement might be
subject to termination. See Id. Ex. F. By letter dated June 30, 2015, DEW terminated the franchise
agreement, effective June 30, 2015, and advised Meera Hospitality that it was required to pay DIW
a sum of $79,000.00 in liquidated damages, as required by the franchise agreement, as well as all
outstanding Recurring Fees through the date of termination. See Id. Ex. F.
Because Defendants never paid those amounts, DIW filed the complaint in this matter on
February 25, 2016. ECF No. 1; Certification of Bryan P. Couch in Supp. of Mot. for Final 3.
(“Couch Cert.”), ECF No. 8-2
¶ 3.
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On June 3, 2013, DIW forwarded the summons and complaint to Recon Management
Group to effectuate personal service upon Defendants. Couch Cert.
¶
4. The summons and
complaint were served upon Defendant Meera Hospitality on April 19, 2016. Id.
¶ 5;
ECF No. 5.
The sunm-ions and complaint were served upon Defendant Neal Patel on April 26, 2016. Couch
Cert.
¶ 6;
ECF No. 5. Despite diligent effort and inquiry, Recon Management Group has been
unable to locate Defendant Am! Kumar. Couch Cert.
¶
7. By letter dated May 26, 2013, D1W
served Defendant Kumar with a copy of the summons and complaint via certified and regular mail
under New Jersey Court Rule 4:4-4(b)(1)(C). Id.
¶ 8.
The time in which Defendants had to answer or otherwise respond to the complaint expired,
and Defendants have not answered or otherwise moved. Id.
¶ 9.
The Clerk of the Court entered
default against Defendants on June 30, 2016 for their failure to plead or otherwise defend this
action. Id.
¶ 10. By letter dated June 30, 2016, DIW served a copy of the default upon Defendants.
Id. Ex. C. DIW performed a search for Neal Patel in the data banks of the Department of Defense
Manpower Data Center to determine whether Mr. Patel was currently in the military service of the
United States or its allied nations, and returned no records as of July 6, 2016. Id.
¶
14; see also
Couch Cert. Ex. D. DIW performed a search for Atul Kumar in the data banks of the Department
of Defense Manpower Data Center to determine whether Mr. Kumar was currently in the military
service of the United States or its allied nations, and returned no records as of July 6, 2016. Couch
Cert.
¶ 14; see also Couch Cert. Ex. E.
DIW moved for default judgment against Defendants on July 20, 2016. ECF No. 2. DIW
seeks recurring fees in the amount of $112,689.35 inclusive of interest (calculated at the rate of
1.5% per month under section 7.3 of the franchise agreement) against Defendants. See Fenimore
Aff. Ex. G (itemized statement of Recurring Fees). DIW also seeks liquidated damages in the
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amount of $79,000.00, representing $1,000 for each of the 79 rooms Meera Hospitality was
authorized to operate at the facility, as authorized by sections 12.1 and 18.1 of the franchise
agreement; as well as interest in the amount of $14,882.72 (calculated at the rate of 1.5% per
month). Fenimore Aff.
¶J 25-27; see also id. Ex. H (itemized statement of amounts allegedly due).
Defendants have not opposed or otherwise responded to this motion.
STANDARD FOR DEFAULT JUDGMENT
When evaluating a motion for default judgment under Fed. R. Civ. P. 55, courts in the
Third Circuit consider three factors: (1) whether there is 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. Giampapa, 210 F.3d 154, 164 (3d
Cir. 2000). A court must treat “the factual allegations in a complaint, other than those as to
damages.
.
.
as conceded by the defendant.” DIRECTV, Inc. v. Fepe, 431 F.3d 162, 165 (3d Cir.
2005). A court must also make “an independent inquiry into whether the unchallenged facts
constitute a legitimate cause of action” and “must make an independent determination” regarding
questions of law. See Days Inn Worldwide, Inc. v. Mayu & Roshan, L.L.C., No. 06-1581, 2007
WL 1674485, at *4 (D.N.J. June 8, 2007) (citations omitted). Similarly, a court does not accept
as true allegations pertaining to the amount of damages, and may employ various methods to
ascertain the amount of damages due. While the court may conduct a hearing to determine the
damages amount, Fed. R. Civ. P. 55(b)(2), a damages determination may be made without a
hearing “as long as [the court] ensure[s] that there [is] a basis for the damages specified in the
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default judgment.” Transatlantic Marine Claims Agency, Inc. v. Ace Shipping Corp., 109 F.3d
105, 111 (2dCir. 1997).
DISCUSSION
I.
Default Judgment is Appropriate
This action is based on the Defendants’ breach of contract. The elements of such a claim
are “(1) a contract between the parties; (2) a breach of that contract; (3) damages flowing
therefrom; and (4) that the party stating the claim performed its own contractual obligations.”
Frederico v. Home Depot, 507 F.3d 188, 203 (3d Cir. 2007). Here, the parties entered into the
franchise agreement and guaranty for the operation of a lodging facility. Defendants breached
those contracts by failing to pay the Recurring fees they owed DIW under the franchise
agreement and failing to remedy the default of its obligations within 30 days of receipt of written
notice from DIW. See fennimore Aff.
¶J 9, 16-19. Damages flowed therefrom because DIW
performed services without being compensated for them. DIW performed its own contractual
obligations under the franchise agreement because it performed the services promised. See
Fenimore Aff Ex. G (itemizing the services DIW performed, for which it charged Meera
Hospitality the recurring fees). DIW has pled the elements of this claim and put forth
unchallenged facts which constitute a legitimate cause of action.
Under the Chamberlain factors, default judgment is appropriate. DIW will suffer prejudice
if default is denied because it has already waited over a year since the breach of the franchise
agreement to be paid the recurring fees and liquidated damages to which it is entitled. Defendants
have not presented any facts or arguments to suggest they have a litigable defense for their breaches
of contract. It is not clear if Defendants’ failure to litigate is the result of willful or bad faith
conduct, though they have failed to retain counsel in the six months since the filing of the
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complaint. Having considered these three factors, the Court finds that default judgment is
appropriate.
II.
The Amount of Damages Is Satisfactorily Established
DIW seeks damages that include the Recurring Fees ($112,689.35 including interest
calculated at 1.5% per month under section 7.3 of the franchise agreement), liquidated damages
($79,000.00 under sections 12.1 and 18.1 of the franchise agreement), and interest on the liquidated
damages ($14,882.72, calculated at 1.5% per month). The Court has reviewed DIW’s submissions
and finds that these amounts accurately represent the amount Defendants owe DIW under the
franchise agreement and guaranty. See Fenimore Aff.
¶J 20-28;
Id. Ex. G (Itemized Statement of
Recurring Fees); Id. Ex. H (itemized statement of amounts allegedly due.
CONCLUSION
Plaintiffs motion for default judgment is granted. Judgment is entered against
Defendants Meera Hospitality, LLC, Neal Patel, and Atul Kumar in the total amount of
$206,572.07. An appropriate order follows.
DATE:/
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William H. Walls
Senior United States District Court Judge
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