SUPER 8 WORLDWIDE, INC. v. SAYONA, INC. et al

Filing 11

OPINION. Signed by Judge John Michael Vazquez on 8/22/17. (sr, )

NOT FOR PUBLICATION
UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY

SUPER 8 WORLDWIDE, INC, formerly known
as SUPER 8 MOTELS, INC. a South Dakota
Corporation,

Plaintzff

Civil Action No. 17-00577
OPINION

V.

SAYONA, ll’JC., an Iowa Corporation; fNDU
PATEL, an individual; and MANOJ PATEL, an
individual,

Defendants.

John Michael Vazguez, U.S.D.J.
INTRODUCTION

I.

This matter comes before the Court on Plaintiff Super 8 Worldwide, Inc.’s (“SWI” or
“Plaintiff’) unopposed motion for default judgment against Defendants Sayona, Inc. (“Sayona”)
and Indu Pate! (“I. Patel”) (collectively “Defendants”)1 under Fed. R. Civ. P. 55(b). D.E. 10. The
Court reviewed all submissions made in support of the motion, and considered the motion without
oral argument pursuant to L. Civ. R. 78.1(b). for the reasons that follow, Plaintiffs motion is
granted.

Plaintiff does not bring this motion for default judgment against Defendant Manoj Patel, who
was previously dismissed from this matter without prejudice. D.E. 9.

II.

FACTS2 AND PROCEDURAL HISTORY

On or about November 9, 2006, SWI entered into a franchise agreement (the “Agreement”)
with Sayona for the operation of a sixty-room Super 8® guest lodging facility (the “Facility”)
located in Urbandale, Iowa. Complaint (“Compl.”) ¶9 (D.E. 1). The Agreement obligated Sayona
to operate the facility for a twenty-year term and required Sayona to make certain payments to
SWI “for royalties, system assessment fees, taxes, interest, reservation system user fees, and other
fees,” which the Agreement collectively referred to as “Recurring fees.” Id.

¶ 10-1 1. According

to the Agreement, Sayona owed interest to SWI on any past due amount at a rate of 1.5% per
month or the maximum amount permitted by the applicable law, whichever is less, accruing from
the due date until the amount is paid. Id.

¶ 12.

Upon notice to Sayona, SWI was permitted to terminate the Agreement if Sayona (a)
discontinued operating the Facility as a Super 8® guest-lodging establishment, and/or (b) lost
possession or the right to possession of the Facility. Id.

¶ 15. The Agreement also provided that

the non-prevailing party would “pay all costs and expenses, including reasonable attorneys’ fees,
incurred by the prevailing party to enforce th[ej Agreement or collect amounts owed under th[ej
Agreement.” Id.

¶

16.

Effective the same day as the Agreement, Defendant I. Patel signed a guaranty (the
“Guaranty”) agreeing, among other things, that in the event of a default by Sayona under the
Agreement, he would “immediately make each payment and perform or cause {Sayona] to
perform, each unpaid or underperformed obligation of [Sayona] under the Agreement.” Id.

¶ 18.

The Guaranty also provided that I. Patel would pay all costs, including reasonable attorneys’ fees,

2

The facts of this matter derive from the Complaint as well as the affidavits and exhibits submitted
in conjunction with Plaintiffs motion for default judgment.
2

incurred by SWI in enforcing its rights or remedies under the Guaranty and the Agreement. Id.

¶

19.
On or around June 24, 2016, Sayona lost possession of the Facility to a third party. Id. at

¶ 20.

By letter dated August 11, 2016, SWI acknowledged Sayona’s unilateral termination of the

Agreement, effective June 24, 2016, and advised Sayona that it was required to pay SWI all
outstanding Recurring Fees through the date of the termination. Id.

¶ 21.

SWI filed a four-count Complaint against Defendants seeking payment of certain

Recurring Fees owed pursuant to the terms of the Agreement and the Guaranty. After being served

with the Complaint, Defendants failed to answer, move, or otherwise respond. Default was then
entered against Defendants, and SWI subsequently filed this motion for default judgment. D.E.
10.
III. LAW AND ANALYSIS
A. Standard of Review

“Once a party has defaulted, the consequence is that ‘the factual allegations of the
complaint, except those relating to the amount of damages, will be taken as true.” Teamsters
Pension Fund ofPhita. & Vicinity v. Am. Helper, Inc., No.11-624, 2011 WL 4729023, at *2 (D.N.J.

Oct. 5, 2011) (quoting DIRECTV, Inc. v. Fepe, 431 F.3d 162, 165 n.6 (3d Cir. 2005)). “The entry
of a default judgment is largely a matter of judicial discretion, although the Third Circuit has
emphasized that such ‘discretion is not without limits, however, and [has] repeatedly state[d] [its]
preference that cases be disposed of on the merits whenever practicable.”
Gordashevsk-v, 558 F. Supp. 2d 532, 535 (D.N.J. 2008) (quoting Hritz
1178, 1181 (3dCir. 1984)).

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V.

Chanel, Inc. v.

Woma Corp., 732 F.2d

Prior to entering a default judgment, the court is required to: “(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.” Moroccanoil, Inc. v. JMG
Freight Gip. LLC, No. 14-5608, 2015 WL 6673839, at *1 (D.N.J. Oct. 30, 2015). Additionally,
the Court must consider the following three factors: “(1) 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);
see also Nationwide Mat. Ins. Co. v. Starlight Ballroom Dance Clttb, Inc., 175 F. App’x 519, 522
(3d Cir. 2006).
B. Jurisdiction and Service

“Before entering a default judgment as to a party ‘that has not filed responsive pleadings,
the district court has an affirmative duty to look into its jurisdiction both over the subject matter
and the parties.” HICA Editc. Loan Corp. v. Surikov, No. 14-1045, 2015 WL 273656, at *2
(D.N.J. Jan.22, 2015) (quoting Ramada Worldwide, Inc. v. Benton Harbor Hurl Ohm, L.L.C., No.
08—3452, 2008 WL 2967067, at *9 (D.N.J. July 31, 2008)).
i. Subject Matter Jurisdiction

To establish diversity jurisdiction, pursuant to 2$ U.S.C.

§

1332(a), “the party asserting

jurisdiction must show that there is complete diversity of citizenship among the parties” as well as
an amount in controversy that exceeds the statutory threshold. Schneller cx rel Schneller v. Crozer
Chester Med. Ctr., 387 Fed. App’x 289, 292 (3d Cir. 2010). Here, Plaintiff is a South Dakota
corporation with its principal place of business in New Jersey. Compi.

¶

1. The Complaint

indicates that Sayona is an Iowa corporation with its principal place of business in Iowa and that

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I. Patel is an Iowa citizen. Id.

¶ 2-3. Damages are alleged in excess of $75,000.

¶ 5, 28, 32,

Id.

37. Accordingly, the Court has diversity jurisdiction because Plaintiff and Defendants are citizens
of different states and the amount in controversy exceeds the statutory threshold.
ii. Personal Jurisdiction

“The United States Supreme Court has held that a contractual consent to personal
jurisdiction should be enforced unless it would be unreasonable or unjust to do so.” Park Inn Int’l,
L.L.C. v. Mody Enters., Inc., 105 F. Supp. 2d 370, 373 (D.N.J. 2000) (citing Burger King Corp. v.

Rudzewicz, 471 U.S. 462, 472 n.14 (1985)); see also Coyle v. Mathai, No. 11—5185, 2011 WL
5828522, at *4 (D.N.J. Nov. 18, 2011) (“Personal jurisdiction is a right that can be waived by
agreeing in advance to submit to the jurisdiction of a given court pursuant to a contract with a
forum selection clause.”); Danka funding, L.L. C. v. Page, Scrantom, Sprouse, Tztcker & Ford,

P.C., 21 F. Supp. 2d 465, 469 (D.N.J. 1998) (opining that personal jurisdiction can be established
solely through a forum selection clause in place of a due process analysis). In this instance,
Defendants consented “to the non-exclusive personal jurisdiction of and venue in.
States District Court for the District of New Jersey.” Compl.

.

.

the United

¶ 6. The Court sees no reason why

this freely agreed-upon consent to personal jurisdiction in New Jersey should not be enforced.
Therefore, the Court has personal jurisdiction over Defendants.
iii. Sufficiency of Proof of Service

“Before the Court can enter default judgment, it must find that process was properly served
on the Defendant.” Teamsters Pension Fttnd ofPhila., 2011 WL 4729023, at *2 (citing Gold Kist,
Inc. v. Laurinburg Oil Co., Inc., 756 F.2d 14, 19 (3d Cir.1985)). Sayona, a corporation, maybe
served “by delivering a copy of the summons and of the complaint to an officer, a managing or
general agent, or any other agent authorized by appointment or by law to receive service of

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process.” Fed. R. Civ. P. 4(h)(1)(B). I. Pate!, an individual, may be served by “leaving a copy of
[the summons and complaint] at the individual’s dwelling or usual place of abode with someone
of suitable age and discretion who resides there.” Id. 4(e)(2)(B).
Here, I. Pate! and Sayona were properly served. SWI’s process sewer left a copy of the
Complaint and Summons addressed to I. Patel and Sayona with M. Pate! at her home. M. Patel is
alleged to reside in the same dwelling as I. Patel and is also the managing agent of Sayona. D.E.
5 at 1-4. Therefore, she could properly accept service on behalf of both Sayona and I. Patel.
C. Sufficiency of Causes of Action and Damages

SWI alleges four causes of action sounding in breach of contract, seeking damages for the
Recurring fees and interest.3 Compi. at

¶J 22-37. “To establish a breach of contract claim, a

plaintiff has the burden to show that the parties entered into a valid contract, that the defendant
failed to perform his obligations under the contract and that the plaintiff sustained damages as a
result.” Murphy v. Implicito, 392 N.J. Super. 245, 265 (App. Div. 2007).
Here, Plaintiff adequately pleaded the elements of breach of contract. Plaintiff pleaded (1)
the existence of a valid contract and guaranty between Plaintiff and Defendants, (2) that
Defendants breached the Agreement and the Guaranty by losing possession of the Facility, and (3)
that Plaintiff was harmed by Defendants’ breach through nonpayment of the Recurring Fees.
Plaintiff also adequately pled that it was in compliance with the Agreement.
Moreover, Plaintiff sufficiently submitted proof of Recurring fee damages through an
affidavit and exhibits demonstrating that $85,431.57 is owed. D.E. 10-3

¶ 16 & Ex. D;

see

Moroccanoil, 2015 WL 6673839, at *2 (“Although the facts pled in the Complaint are accepted as

The Complaint also seeks damages for “attorneys’ fees and costs of suit,” however, it does not
appear that Plaintiff seeks those amounts in its motion for default judgment. See Compl. ¶J 1624; D.E. 10-1.
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true for the purpose of determining liability, the plaintiff must prove damages.”). The Recurring
Fees are made up of certain charges that were due pursuant to section 7.3 of the Agreement, which
have been itemized and submitted (inclusive of interest) in support of Plaintiffs motion. Id.
Accordingly, Plaintiff sufficiently alleged a cause of action for breach of contract
establishing Defendants’ liability and damages owed for purposes of this default judgment motion.
D. Default Judgment

“Before imposing the extreme sanction of default judgment, 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.” Teamsters Pension Fund of Phi/a., 2011 WL 4729023, at *4 (quoting Doug Brady,
Inc. v. N.J Bldg. Laborers Statewide Funds, 250 F.R.D. 171, 177 (D.N.J. 200$)).

Here, all three factors weigh in favor of entering default judgment. First, considering that
Defendants have not responded in this matter, “Defendant[s] ha{ve] put forth no evidence or facts
containing any information that could provide the basis for a meritorious defense.” HICA Educ.
Loan Corp., 2015 WL 273656, at *3 Additionally, there is nothing on the face of the Complaint

indicating that a meritorious defense is available.

Sayona lost possession of the Facility in

contravention of the Agreement’s terms. Second, Plaintiff has been prejudiced by Defendants’
failure to answer. Without a default judgment, “Plaintiff has no other means of seeking damages
for the harm allegedly caused by Defendant[s].” Gowan v. Cont’l Airlines, Inc., No. 10-1$5$,
2012 WL 2838924, at *2 (D.N.J. July 9, 2012). Lastly, Defendants’ failure to answer, without
providing any reasonable explanation, demonstrates their culpability in the default. See Days Inns
Worldwide, Inc.

V.

MangttrLLC, No. 15-2027, 2016 WL 845141, at *4 (D.N.J. Mar. 4,2016).

For those reasons, the Court finds that default judgment is warranted.

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IV.

CONCLUSION

For the reasons set forth above, Plaintiffs motion for a default judgment is granted. An
appropriate Order accompanies this Opinion.

Dated: August 22, 2017.

John Michael Vazque)U..D.J.

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