TRAVELODGE HOTELS, INC. v. SURAJHIRA, LLC et al

Filing 9

OPINION. Signed by Judge Kevin McNulty on 02/27/2019. (sms)

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW JERSEY

Civ. No. 18-105 10 (KM)(CLW)

TRAVELODGE HOTELS, INC.,

Plaintiff,
OPINION
V.

SURAJHIRA, LLC, a South Carolina
Limited Liability Company, and
DARSHIL PATEL, an individual,
Defendants.

KEVIN MCNULTY. U.S.D.J.:

This matter comes before the Court on the unopposed motion of
the plaintiff, Travelodge Hotels, Inc. (“Travelodge”) for a default judgment
against the defendants, Surajhira, LLC (“Surajhira”), and Darshil Patel
(“Patel”), pursuant to Fed. 1?. Civ. P. 55(b)(2). (DE 8) This action arises
from an alleged breach of a Franchise Agreement between Travelodge and
Surajhira to operate a Travelodge facility, and a Guaranty Agreement
between Travelodge and Patel. For the reasons set forth below, I will
enter a default judgment in the amount requested.
I.

STANDARD FOR ENTRY OF DEFAULT JUDGMENT
“[T]he entry of a default judgment is left primarily to the discretion

of the district court.” Hritz v. Wama Corp., 732 F.2d 1178, 1180 (3d Cir.
1984) (citing Tazer 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 a $55,518.05 in U.S.

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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. u. Asher, 03-cv-1969, 2006 WL 680533, at
*1 (D.N.J. Mar. 14, 2006) (citing Wright, Miller, Kane, 1OA Federal
Practice and Procedure: 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 u. Simone, CIV.A. 125825, 2013 WL 3772532, at *2 (D.N.J. July 17, 2013). While “courts
must accept the plaintiffs well-pleaded factual allegations as true,” they
“need not accept the plaintiffs 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.
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. a Laurinburg Oil Co., Inc., 756 F.2d
14, 18—19 (3d Cir. 1985); Fed. 1?. Civ. P. 12(a).
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. SambHck, 834 F.2d 71, 74 (3d
Cir. 1987)).
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II.

DISCUSSION
a. Adequate Service & Defendants’ Failure to Respond

The prerequisites for default judgment

have

been met.

Srajhira and Patel were properly served. (DE 5, 6) Surajhira was
served on July 2, 2018, by in-person delivery to its registered agent. Patel
was served on July 9, 2018, at an address in Hardeeville, SC, by
personal delivery to Parvin Patel, who agreed to accept service on his
behalf. See Fed. R. Civ. P. 4(e), 4(h)(1); N.J. Ct. R. 4:4-4(a).’ See also
Affidavit of Brian P. Couch, Esq. (DE 8-1).
Each failed to file an answer or otherwise respond to the Complaint
within twenty-one days pursuant to Fed. I?. Civ. P. 12(a).
The clerk entered defaults on October 11, 2018 (clerk’s entry
following DE 7). Travelodge served a copy of the default on the
defendants by mail. (DE 8-1 at 5)
Accordingly, I am satisfied that the prerequisites to filing a default
judgment are met. See Gold Kist, Inc., 756 F.2d at 18—19.
b. Gold Kist factors
I next 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. a SambHck, 834
F.2d 71, 74 (3d Cir. 1987)).
i. Meritorious defense (Gold Kist factor 1)
As to the first factor, my review of the record reveals no suggestion
that Travelodge’s claims are legally flawed or that there is a meritorious
In the Franchise Agreement and Guaranty, defendants consented to
jurisdiction and venue in New Jersey, (Cplt. ¶ 6, 7, 8).
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defense to them. See Doe, 2013 WL 3772532, at *5 Accepting the factual
allegations as true, I find that Travelodge has stated a claim for breach of
the Franchise Agreement and the Guaranty.
Under New Jersey law, “[tb

state a claim for breach of contract, [a

plaintiff] must allege (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).
Travelodge’s Complaint alleges, and attaches copies of, two
contracts: the Franchise Agreement with Surajhira and the Guaranty of
Patel. The Franchise Agreement obligates Surajhira to pay certain
recurring fees. The Complaint alleges that it defaulted on that obligation,

and that Travelodge terminated the agreement as a result. The Guaranty
obligates Patel, in the event of Surajhira’s default, to make such
payments or cause Surajhira to do so. The agreements also provide for
liquidated damages and attorney’s fees. There are no facts indicating that
there was any breach by Travelodge that would excuse the defendants’
nonperformance.
I do not discern any meritorious defenses to Travelodge’s
allegations.
ii. Prejudice suffered by party seeking default &
culpability of the parties subject to default (Gold Kist
factors 2, 3)
The second and third factors also weigh in favor of default.
Defendants were properly served but have failed to appear and defend
themselves in any manner. See Teamsters Pension Fund of Philadelphia &
Vicinity u. Am. Helper, Inc., CIV. 11-624 JBS/JS, 2011 WL 4729023, at
*4 (D.N.J. Oct. 5, 2011) (finding that “Plaintiffs have been prejudiced by
the Defendants’ failure to answer because they have been prevented from
prosecuting their case, engaging in discovery, and seeking relief in the

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normal fashion.”). Absent any evidence to the contrary, “the Defendant[s9
failure to answer evinces the Defendant[s’l culpability in [thej default. Id.
And “[t]here is nothing before the Court to show that the Defendant[s’j
failure to file an answer was not willfully negligent.” Id. at *4 (citing
Prudential Ins. Co. of America v. Taylor, No. 08—2108, 2009 WL 536403,
at *1 (D.N.J. Feb. 27, 2009) (finding that when there is nothing before the
court to suggest anything other than that the defendant’s willful
negligence caused the defendant to fail to file an answer, the defendant’s
conduct is culpable and warrants default judgment)).
The only possible conclusion based on the record is that Surajhira
and Patel breached their obligations under the Franchise Agreement and
the Guaranty; that they, not Travelodge, were culpable for the breach;
and that Travelodge was prejudiced as a result. Accordingly, I find that
the entry of a default judgment is appropriate.
c. Remedies
Travelodge seeks $109,357.55 in liquidated damages (principal
plus prejudgment interest) and $85,954.33 in delinquent recurring fees
(principal plus prejudgment interest). Travelodge has submitted
documentary evidence in support of its demands, while defendants have,
submitted nothing. An ex pade hearing would serve little additional
purpose, so I rule based on the record before me.
I will grant Travelodge’s request for recurring fees and interest, as
set forth in Sections 7, 7.3, 18.1, and Schedule C of the Franchise
Agreement. (Fenimore Aff.

¶1J

7, 8)2 Travelodge has itemized and

documented recurring fees in the amount of $85,954.33, a figure which
includes contractual interest at a rate of 1.5% per month. (Id.
(citing Exs. D—G); id.

¶

¶f

17—2 1

23 & Ex. I (itemized statement of recurring fees

Fenimore Aff. = Affidavit of Suzanne Fenimore, filed November 9, 2018, in
support of DIW’s motion for default judgment, (DE 8-2)

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and interest))
Liquidated damages of $2,000 multiplied by 49 (the number of
guest rooms in the facility), totaling $98,000, are provided for in the
Franchise Agreement. (Fenimore Aff. ¶11 28—30 (citing section 12.1 of the
Agreement). At the contractual rate of l.5% per month, interest on this
amount through December 3,2018 amounts to $11,357.55. (Id. ¶ 31 &
Ex. J (itemized statement)). The liquidated damages have a rational basis
and are not disproportionate to the loss Travelodge would likely suffer as
a result of early termination of this fifteen-year agreement.
IlL

CONCLUSION

For the foregoing reasons, a default judgment will be entered in
favor of the plaintiff, Travelodge Hotels, Inc., in a total amount of
$195,311.88, with post-judgment interest to accrue from this date at the
appropriate rate pursuant to 28 U.S.C. §1961.
An appropriate order and judgment will be entered in accordance
with this Opinion.
Dated: February 27, 2019

Kevin McNulty
United States District Judge

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