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Days Inns Worldwide, Inc., A Delaware Corporation v. Hartex Ventures

March 28, 2011

DAYS INNS WORLDWIDE, INC., A DELAWARE CORPORATION,
PLAINTIFF,
v.
HARTEX VENTURES, INC., A TEXAS CORPORATION;
SCOTT HARLESS, AN INDIVIDUAL; AND JANICE A. PARTEN, AN INDIVIDUAL, DEFENDANTS.



The opinion of the court was delivered by: Walls, Senior District Judge

NOT FOR PUBLICATION

OPINION

Plaintiff Days Inns Worldwide, Inc. ("DIW") moves for default judgment against defendant Hartex Ventures, Inc. ("Hartex"). The motion is unopposed. Pursuant to Rule 78 of the Federal Rules of Civil Procedure, the Court decides this motion without oral argument. The motion is granted.

FACTUAL AND PROCEDURAL BACKGROUND

This matter arises out of a license agreement dated January 3, 2007 ("License Agreement"), which permitted Hartex to operate a 121-room guest lodging facility in Corpus Christi, Texas. (Pl. Ex. A, License Agreement.) Plaintiff alleges that, under the agreement, Hartex was obligated to operate the facility for a term of fifteen years. (Workman Aff. at ¶ 4, License Agreement Section 5.) Hartex was also required to make periodic payments to plaintiff for royalties, service assessments, taxes, interest, reservation system user fees, annual conference fees, and other fees (collectively known as "recurring fees"). (Workman Aff. at ¶ 5, License Agreement at Section 7 and Schedule C.) Defendants Janice Parten and Scott Harless provided DIW with a guaranty of Hartex's obligations under the License Agreement. (Compl., Ex. B.)

On May 27, 2009, plaintiff notified Hartex that it was in default under the License Agreement and owed $64,280.07 in recurring fees. (Workman Aff. at ¶ 11, Pl. Ex. B). Plaintiff later informed Hartex that, as of July 22, 2009, it owed $78,759.59. (Workman Aff. at ¶ 12, Pl. Ex. C.) As of December 9, 2010, the total amount of recurring fees owed by Hartex to DIW was $176,045.43, including interest. (Workman Aff. at ¶13.)

On January 21, 2010, DIW filed suit in this matter to recover past due fees owed by Hartex under the License Agreement. (Compl., ECF No. 1.) On March 18, 2010, Harless filed a pro se answer on behalf of himself, and purportedly on behalf of Hartex as well. (ECF No. 8.) Due to Hartex's failure to retain counsel and respond, DIW requested entry of default, which was entered by the Clerk of the Court against Hartex on March 18, 2010. (ECF No. 7.) DIW's first motion for default judgment against Hartex was filed on May 18, 2010, (ECF No. 10), but DIW voluntarily withdrew this motion because Hartex filed for Chapter 11 bankruptcy protection. (ECF No. 16.) The bankruptcy case involving Hartex was later dismissed, (ECF No. 20), and DIW re-filed its motion for default judgment (ECF No. 24.)

STANDARD OF REVIEW

Rule 55 of the Federal Rules of Civil Procedure governs a court's decision to grant default judgment. Parties seeking default judgment are not entitled to such relief as a matter of right. See Petrucelli v. Bohringer & Ratzinger, 46 F.3d 1298, 1303 (3d Cir. 1995). The Clerk of the Court must first approve plaintiff's request for entry of default, after which a court may enter default judgment. Fed. R. Civ. P. 55(a). In order to determine if default judgment should be granted, the court must ascertain whether "the unchallenged facts constitute a legitimate cause of action, since a party in default does not admit mere conclusions of law." Directv v. Croce, 332 F. Supp. 2d 715, 717 (D.N.J. 2004). Courts should accept as true the well-pleaded factual allegations of the complaint, but need not accept the moving party's legal conclusions or factual allegations relating to the amount of damages. See Comdyne I, Inc. v. Corbin, 908 F.2d 1142, 1149 (3d Cir. 1990). A court must "conduct its own inquiry 'in order to ascertain the amount of damages with reasonable certainty.'" Int'l Assoc. of Heat & Frost Insulators v. S. Jersey Insulation Servs., No. 05-3143, 2007 WL 276137, at *1 (D.N.J. Jan. 26, 2007) (quoting In re Indus. Diamonds, 119 F. Supp. 2d 418, 420 (S.D.N.Y. 2000)).

Once a legitimate cause of action is established, a court decides whether to issue a default judgment by looking at: "(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.2d 154, 164 (3d Cir. 2000). The issuance of default judgment is largely a matter of judicial discretion. Hritz v. Woma Corp., 732 F.2d 1178, 1181 (3d Cir. 1984). This "discretion is not without limits," as the Third Circuit's preference is "that cases be disposed of on the merits whenever practicable." Id.

DISCUSSION

I.Service of Process

The Court must first assess the adequacy of service of process in order to determine whether default judgment should be entered. Lampe v. Xouth, Inc., 952 F.2d 697, 700-01 (3d Cir. 1991). Proper service of process is required to establish personal jurisdiction over a defendant. Id. Without personal jurisdiction, the Court cannot enter default judgment. Id.

Rule 4 of the Federal Rules of Civil Procedure states that a corporation may be 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 process." Fed. R. Civ. P. 4(h)(1)(B). On February 3, 2010, service of the Summons and Complaint was effectuated with respect to Hartex by personally serving it in Corpus Christi, Texas, upon Scott Harless, the registered agent of Hartex. (ECF No. 4, Aff. of Service.) Harless accepted service on Hartex's behalf. (Id.) ...


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