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Howard Johnson International, A Delaware Corporation v. Kirit Patel

May 31, 2011


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



Howard Johnson International moves for default judgment against defendants Kirit Patel and Viddhyaben Patel. Pursuant to Rule 78 of the Federal Rules of Civil Procedure, the motion is decided without oral argument. Howard Johnson‟s motion for default judgment is granted.


Howard Johnson is a hotel company that entered into a license agreement dated October 25, 2006, with defendants. This agreement, which was to last 15 years, authorized the Patels to operate a Howard Johnson lodging facility. (Compl. ¶¶ 7-8; Ex. A to Compl.)Under its terms, the defendants were to make periodic payments to Howard Johnson for royalties, service assessments, taxes, interest, reservation system user fees, annual conference fees, and other fees (collectively, the "recurring fees"). The defendants were also required to prepare and submit monthly revenue reports and maintain accurate financial information. (Compl. ¶¶ 11-12; Ex. A to Compl.) An addendum for satellite connectivity services was also executed between the parties on October 25, 2006. (Compl. ¶ 16; Ex. B to Compl.)

Howard Johnson could terminate the agreement if defendants discontinued operating the facility as a Howard Johnson establishment or lost possession of the facility. (Compl. ¶ 13; Ex. A to Compl.) If this happened, defendants agreed to pay liquidated damages according to a formula laid out in the license agreement. Defendants were also required to pay $2,500 in liquidated damages if the satellite addendum to the license agreement was terminated. (Compl. ¶ 14.) Under the terms of the license agreement, the non-prevailing party would "pay all costs and expenses, including reasonable attorneys‟ fees, incurred by the prevailing party to enforce this [License] Agreement or collect amounts under this [License] Agreement." (Compl. ¶ 15.)

On June 1, 2009, the Patels terminated the license agreement when they ceased operating the property as a Howard Johnson facility. (Compl. ¶ 18.) Howard Johnson wrote to the Patels on June 19, 2009. (Compl. ¶ 19; Ex. C to Compl.) Howard Johnson acknowledged defendants‟ request to terminate the lease and explained the debts owed to Howard Johnson under the terms of the license agreement after the agreements‟ termination. (Compl. ¶ 19, Ex. C to Compl.) The Patels have not satisfied these outstanding debts.

On February 18, 2011, Howard Johnson filed a complaint alleging that the defendants had not fulfilled their duties and obligations under the franchise agreement. The defendants were served with process on March 14, 2011. (ECF No. 3.) The defendants did not appear in this action or answer the complaint. On April 6, 2011, Howard Johnson moved for default judgment against defendants. On April 8, 2011, the Clerk of Court entered default against the Patels.

Howard Johnson then moved for the entry of a default judgment in the amount of $156,808.55. This amount is comprised of: (1) $47,953.75 for recurring fees owed under the agreement, (2) $103,215.89 for liquidated damages, and (3) $5,638.91 for attorneys‟ fees and costs. Although served, the defendants have not filed any opposition to this motion.


Federal Rule of Civil Procedure 55 governs the entry of default and default judgment. The power to grant default judgment "has generally been considered an "inherent power,‟ governed not by rule or statute but by the control necessarily vested in courts to manage their own affairs so as to achieve the orderly and expeditious disposition of cases." Hritz v. Woma Corp., 732 F.2d 1178, 1181 (3d Cir. 1984) (citations omitted). Because a default judgment prevents a plaintiff‟s claims from being decided on the merits, "this court does not favor entry of defaults or default judgments." United States v. $55,518.05 in U.S. Currency, 728 F.2d 192, 194 (3d Cir. 1984).

Several factors are to be considered by courts in determining "whether a default judgment should be granted: (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).

"[T]he factual allegations in a complaint, other than those as to damages, are treated as conceded by the defendant." DIRECTV, Inc. v. Pepe, 431 F.3d 162, 165 (3d Cir. 2005). Although, the Court makes "an independent inquiry into "whether the unchallenged facts constitute a legitimate cause of action‟" and "must make an independent determination" regarding questions of law. Days Inns Worldwide, Inc. v. Mayu & Roshan, L.L.C., No. 06-1581, 2007 WL 1674485, at *4 (D.N.J. June 8, 2007).

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. 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 default ...

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