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Days Inns Worldwide, Inc., A Delaware Corporation v. Nomiju Corp.

March 19, 2012

DAYS INNS WORLDWIDE, INC., A DELAWARE CORPORATION, PLAINTIFF,
v.
NOMIJU CORP., A WASHINGTON CORPORATION; AND MI YOUNG AHN, AN INDIVIDUAL, DEFENDANTS.



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

OPINION

Plaintiff Days Inns Worldwide Inc. ("DIW") moves for default judgment against defendants Nomiju Corp. ("Nomiju") and Mi Young Ahn. Because the Court finds that default judgment is appropriate under Federal Rule of Civil Procedure 55(b)(2), DIW's motion is granted.

FACTUAL AND PROCEDURAL BACKGROUND

DIW brings this suit based on a license agreement between DIW and Nomiju dated April 17, 2006 ("License Agreement") for the operation of a 51-room guest lodging facility in Everett, Washington. Compl. ¶ 8, Ex. A. Mi Young Ahn is a principal of Nomiju who provided DIW with a guaranty of Nomiju's obligations under the License Agreement. Id. ¶¶ 3, 22, Ex. C. Under Sections 3 and 5 of the License Agreement, Nomiju was obligated to operate and maintain the facility as a Days Inn for a 15-year term in compliance with standards set by DIW. Id. ¶¶ 9--10, Ex. A. During this period, Nomiju was required under Section 3.10 to obtain and maintain insurance coverage consistent with the standards set by DIW. Id. ¶ 11, Ex. A. Nomiju was also required to make periodic payments to DIW under Section 7 and Schedule C for certain recurring fees, including royalties, system assessments, taxes, and interest. Id. ¶ 12, Ex. A.

Nomiju and DIW executed an addendum for satellite connectivity equipment and services dated April 17, 2006. Id. ¶ 20, Ex. B. Under Section 11 of the License Agreement, DIW reserved the right to terminate the license with notice to Nomiju for certain specified reasons. Id. ¶ 16, Ex. A. Grounds for termination included (a) Nomiju's failure to pay any amount due to DIW, (b) Nomiju's failure to remedy any other default of its obligations or warranties within 30 days after receipt of written notice from DIW, and/or (c) Nomiju's receipt of two or more notices of default in any one year period, whether or not the defaults were cured. Id. In the event of termination, Nomiju was required to pay liquidated damages to DIW pursuant to a formula set out in Section 12 of the License Agreement, but an amount no less than $2,000 per guest room. Id. ¶¶ 17--18, Ex. A. Under Section 17.4, Nomiju also agreed to pay all costs and expenses, including reasonable attorneys' fees, that DIW incurred to enforce or collect amounts owed under the License Agreement. Id. ¶ 19, Ex. A.

Beginning in February 2008, DIW alleges that Nomiju breached its obligations under the License Agreement by failing to provide proof that it had obtained the minimum insurance coverage required under Section 3.10. Id. ¶ 25. Pursuant to letters to Mi Young Ahn at Nomiju dated February 27, 2008, May 8, 2008, and March 20, 2009, DIW provided written notice that Nomiju was in breach of the License Agreement due to its failure to provide proof of minimum insurance, that it was required to cure the insurance default within 30 days in accordance with Section 11.1, and that the License Agreement might be subject to termination if the default was not cured. Id. ¶¶ 26--28, Ex. D--F. In a letter dated March 30, 2009, DIW notified Mi Young Ahn at Nomiju that it was formally terminating the License Agreement. Id. ¶ 29, Ex. G. This termination letter advised Nomiju of its obligation to pay DIW liquidated damages of $104,500.00 for premature termination, as required under the License Agreement and the satellite connectivity addendum, as well as all outstanding recurring fees through the date that Nomiju completed certain de-identification procedures at the facility. Id.

On March 25, 2011, DIW filed the present suit alleging breach of contract and unjust enrichment. Id. ¶¶ 30--56. DIW asserts that personal service of process was ineffective because neither Nomiju nor Mi Young Ahn could be located despite diligent efforts and inquiry. Certification of Bryan P. Couch, Esq. in Supp. of Request for Entry of Default ("Couch Certification I") ¶¶ 4--5, Exs. A--B. DIW then served the Summons and Complaint on both defendants by certified and regular mail pursuant to New Jersey Court Rule 4:4-4(b)(1)(C) on June 21, 2011. Id. ¶ 6, Ex. C. After neither defendant appeared in this action or answered the Complaint, DIW requested an entry of default on July 19, 2011. Id. ¶ 9. The Clerk entered default against Nomiju and Mi Young Ahn on July 20, 2011. On October 13, 2011, DIW moved for default judgment against both defendants, jointly and severally, seeking damages in the amount of $160,604.24. This amount consists of (1) $2,828.16*fn1 for recurring fees owed under the License Agreement, (2) $104,500.00 for liquidated damages, (3) $47,459.13 for prejudgment interest on the liquidated damages, and (4) $5,816.95 for attorneys' fees and costs. Aff. of Suzanne Fenimore in Supp. of Mot. for Default J. ("Fenimore Aff.") ¶¶ 25, 32--34.

STANDARD OF REVIEW

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 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). Accordingly, the Third Circuit has clarified that, while "the entry of a default judgment is left primarily to the discretion of the district court," this "discretion is not without limits." Hritz, 732 F.2d at 1181 (citations omitted). Cases should be "disposed of on the merits whenever practicable." Id. See also $55,518,05 in U.S. Currency, 728 F.2d at 194--95.

In deciding a motion for default judgment, "the factual allegations in a complaint, other than those as to damages, are treated as conceded by defendant." DIRECTV, Inc. v. Pepe, 431 F.3d 162, 165 (3d Cir. 2005). The court must, however, make "an independent inquiry into whether the unchallenged facts constitute a legitimate cause of action" and an "independent determination" regarding questions of law. Days Inn Worldwide, Inc. v. Mayu & Roshan, L.L.C., No. 06-1581, 2007 WL 1674485, at *4 (D.N.J. June 8, 2007) (citations omitted). The Third Circuit has explained that three factors control whether a default judgment should ultimately 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).

DISCUSSION

I.Jurisdiction

Before entering a default judgment as to a party "that has not filed responsive pleadings, a district court has an affirmative duty to look into its jurisdiction both over the subject matter and the parties." Ramada Worldwide Inc. v. Benton Harbor Hari Ohm, ...


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