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Days Inns Woldwide, Inc v. Lt Hospitality

July 14, 2011

DAYS INNS WOLDWIDE, INC.,
PLAINTIFF,
v.
LT HOSPITALITY, INC., A TEXAS CORPORATION; THOMAS UNG, AN INDIVIDUAL; AND CHRISTINE THANG, AN INDIVIDUAL, DEFENDANTS.



The opinion of the court was delivered by: Hon. William J. Martini

OPINION

This action comes before the Court on the motion of Plaintiff Days Inns Worldwide, Inc. ("DIW") for default judgment pursuant to Rule 55(b) of the Federal Rules of Civil Procedure against Defendants Thomas Ung and Christine Thang ("Defendants"). For the reasons explained below, Plaintiff's motion will be GRANTED with respect to liability and with respect to the determination of the amount of damages.

I. BACKGROUND

DIW, a Delaware corporation with its principal place of business in Parsippany, New Jersey, is a franchisor of guest lodging facilities. Thomas Ung and Christine Thang are principals of LT Hospitality and are citizens of California. 28 U.S.C. § 1332. Defendant LT Hospitality has already been dropped from this suit. The Court has personal jurisdiction over all Defendants pursuant to the agreement by and between LT Hospitality and DIW ("License Agreement") and pursuant to the separately signed Guaranty (Doc. No. 1-4 at 3), wherein Defendants expressly consented to the "non-exclusive personal jurisdiction of and venue in . . . the United States District Court for the District of New Jersey."

On August 10, 2007, DIW entered into the License Agreement with LT Hospitality for the operation of a 108-room guest lodging facility located at 515 East Commerce Street, Brownwood, Texas (the "Facility"). LT Hospitality was obligated to operate the Facility as a Days Inn guest lodging facility for fifteen years. Furthermore, LT Hospitality agreed to make certain periodic payments to DIW for royalties, service assessments, taxes, interest, reservation system user fees, and other fees ("Recurring Fees"), and to accurately report to DIW its monthly gross revenue for the purpose of determining the amount of Recurring Fees due DIW.

Section 11.2 of the License Agreement governed DIW's termination rights. Under this section, DIW could terminate the Franchise Agreement, with notice to the Defendants, for various reasons. This included failure to remedy any default of Defendants' obligations under the License Agreement within 30 days of receiving notice from DIW specifying one or more defaults under the License Agreement. In the event that DIW terminated the License Agreement pursuant to this section, LT Hospitality was obligated to pay liquidated damages to DIW. Furthermore, section 17.4 provided that in the event of litigation, the non-prevailing party would pay all legal costs and expenses.

Also on or about August 10, 2007, DIW entered into a Satellite Connectivity Services Addendum ("Satellite Addendum") with LT Hospitality. Pursuant to the Satellite Addendum, LT Hospitality agreed that, in the event of a termination of the Satellite Addendum (including by virtue of termination of the License Agreement), it would pay Satellite Addendum Liquidated Damages in the amount of $2,500.00 within 10 days following the date of termination.

In a letter dated January 27, 2009, DIW informed the Defendants that since September 18, 2008, the Facility had violated numerous laws governing fire safety, life safety, and City of Brownwood codes, and had lost its health permit as a result of various health violations. DIW therefore advised LT Hospitality that it was in default under the License Agreement.

In a letter dated April 20, 2009, DIW notified the Defendants that DIW terminated the License Agreement due to LT Hospitality's failure to cure its operational default. The letter further demanded immediate payment of past-due Recurring Fees and liquidated damages.

DIW filed a complaint in this Court on November 23, 2010. Service was made personally on Christine Thang in Brownwood, Texas on December 29, 2010. A copy of the Summons and Complaint was served via certified and regular mail on January 19, 2011 on Thomas Ung following a number of unsuccessful attempts at personal service. The Defendants did not answer or otherwise respond to the Complaint. The Clerk entered default on February 16, 2011. On March 9, 2011, Plaintiff filed this motion requesting entry of default judgment against Defendants. DIW now seeks to recover the Recurring Fees that were outstanding at the time of the termination of the License Agreement, liquidated damages in the amount of $69.431.73, and attorneys' fees and costs totaling $6,126.94. Plaintiff also seeks pre-judgment interest on the Recurring Fees and liquidated damages.

II. STANDARD OF REVIEW

Federal Rule of Civil Procedure 55 governs default. After the clerk's entry of default pursuant to Rule 55(a), a plaintiff may then seek the court's entry of default pursuant to Rule 55(b)(2). Doug Brady, Inc. v. N.J. Bldg. Laborers Statewide Funds, 250 F.R.D. 171, 177 (D.N.J. 2008). "Before imposing the extreme sanction of default, 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." Id. (quoting Emcasco Ins. Co. v. Sambrick, 834 F.2d 71, 74 (3d Cir. 1987)).

The district court has considerable latitude in determining the amount of damages. Jones v. Winnepesaukee Realty, 990 F.2d 1, 4 (1st Cir. 1993). The court is not required to conduct a hearing "as long as it ensure[s] that there [is] a basis for the damages specified in the default judgment." Transatlantic Marine Claims Agency, Inc. v. Ace Shipping Corp., 109 F.3d 105, 111 (2d Cir. 1997). "It is familiar practice and an exercise of judicial power for a court upon default, by taking evidence when necessary or by computation from facts of record, to fix ...


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