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Super 8 Worldwide, Inc v. Urmita

July 18, 2011

SUPER 8 WORLDWIDE, INC.,
PLAINTIFF,
v.
URMITA, INC., AN ALABAMA CORPORATION;
TEJASH PATEL, AN INDIVIDUAL; AND NARENDRA PATEL, AN INDIVIDUAL,
DEFENDANTS.



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

OPINION

OPINION

This action comes before the Court on the motion of Plaintiff Super 8 Worldwide, Inc. ("SWI") for default judgment pursuant to Rule 55(b) of the Federal Rules of Civil Procedure against Defendants Urmita, Inc. ("Urmita"), Tejash Patel, and Narendra Patel ("Defendants"). Plaintiff's motion will be GRANTED.

I. BACKGROUND

SWI, a South Dakota corporation with its principal place of business in Parsippany, New Jersey, is a franchisor of guest lodging facilities. Urmita is a corporation organized and existing under the laws of Alabama, where its principal place of business is located. Tejash Patel and Narendra Patel are principals of Urmita and are citizens of Alabama. 28 U.S.C. § 1332. The Court has personal jurisdiction over all Defendants pursuant to the agreement by and between Urmita and SWI ("Franchise Agreement") and pursuant to the separately signed Guaranty (Pl. Comp., Ex. C). Defendants expressly consented to the "non-exclusive personal jurisdiction of and venue in . . . the United States District Court for the District of New Jersey." (Pl. Comp., Ex. A; Ex. C.)

SWI entered into the Franchise Agreement with Urmita for the operation of a 68-room guest lodging facility located at 6349 Alabama Highway, Cullman, Alabama (the "Facility"). Urmita was obligated to operate the Facility as a Super 8 guest lodging facility for twenty years. Furthermore, Urmita agreed to make certain periodic payments to SWI for royalties, service assessments, taxes, interest, reservation system user fees, and other fees ("Recurring Fees"), and to accurately report to SWI its monthly gross revenue for the purpose of determining the amount of Recurring Fees due SWI.

Section 11.2 of the Franchise Agreement governed SWI's termination rights. Under this section, SWI could terminate the Franchise Agreement, with notice to the Defendants, for various reasons. This included Urmita leasing the Facility or transferring, assigning, or conveying its interest without SWI's prior written consent. In the event that SWI terminated the Franchise Agreement pursuant to this section, Urmita was obligated to pay liquidated damages to SWI. Furthermore, section 17.4 provided that in the event of litigation, the non-prevailing party would pay all legal costs and expenses.

SWI also entered into a Satellite Connectivity Services Addendum ("Satellite Addendum") with Urmita. Pursuant to the Satellite Addendum, Urmita agreed that, in the event of a termination of the Satellite Addendum (including by virtue of termination of the Franchise Agreement), it would pay Satellite Addendum Liquidated Damages in the amount of $2,500.00 within 10 days following the date of termination.

Urmita transferred the Facility, notwithstanding the contractual provision prohibiting transfer (without prior consent from SWI) to Tejash Patel. In response, SWI terminated the Franchise Agreement. The termination letter further demanded immediate payment of past-due Recurring Fees and liquidated damages. Despite the termination of the Franchise Agreement, Tejash Patel continued to use the Super 8 title and marks. This continued despite SWI's numerous "cease and desist" letters.

SWI filed a complaint in this Court and service was made on the Defendants. The Defendants failed to make any timely response, i.e., an answer or a motion. The Clerk subsequently entered default against Tejash and Narendra Patel and against Urmita. Plaintiff then filed this motion requesting entry of default judgment against Defendants. SWI now seeks to recover the Recurring Fees that were outstanding at the time of the termination of the Franchise Agreement, liquidated damages in the amount of $138,500.00 and attorneys' fees and costs totaling $11,413.27 from all Defendants. Plaintiff also seeks pre-judgment interest on the Recurring Fees and liquidated damages.

SWI also seeks damages and injunctive relief under the Lanham Act against Tejash Patel in connection with his continued use of the Super 8 marks in regard to the Facility.

II. STANDARD OF REVIEW

Motion to Dismiss. 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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