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Days Inns Worldwide, Inc., A Delaware Corporation v. Mimar Investment Co.

March 19, 2012

DAYS INNS WORLDWIDE, INC., A DELAWARE CORPORATION, PLAINTIFF,
v.
MIMAR INVESTMENT CO., A VIRGINIA CORPORATION; JAMES M. KOKOLIS, AN INDIVIDUAL; AND PAULA KOKOLIS, 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 Mimar Investment Co. ("Mimar"), James M. Kokolis, and Paula Kokolis. 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 Mimar dated July 2, 2008 ("License Agreement") for the operation of a 120-room guest lodging facility in Williamsburg, Virginia. Compl. ¶ 9, Ex. A. James M. Kokolis and Paula Kokolis are principals of Mimar who provided DIW with a guaranty of Mimar's obligations under the License Agreement. Id. ¶¶ 3--4, 18--20, Ex. B. Under Sections 3 and 5 of the License Agreement, Mimar was obligated to operate and maintain the facility as a Days Inn until April 2023 in compliance with standards set by DIW. Id. ¶¶ 9--10, Ex. A. During this period, Mimar was 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. ¶ 11, Ex. A. Under Section 9 of the License Agreement, Mimar was not permitted to lease the facility or to transfer or assign its interest in any way without DIW's prior written consent. Id. ¶ 15, Ex. A. Under Section 11 of the License Agreement, DIW reserved the right to terminate the license with notice to Mimar for certain specified reasons. Id. ¶ 16, Ex. A. Grounds for termination included where Mimar (a) discontinued operating the facility as a Days Inn and/or (b) lost possession or the right to possession of the facility. Id. Under Section 17.4, Mimar 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. ¶ 17, Ex. A.

On or about November 4, 2010, DIW alleges that Mimar breached its obligations under Sections 9 and 11 of the License Agreement by relinquishing control of the facility to a third party without DIW's prior consent. Id. ¶ 21. DIW further alleges that Mimar thereby unilaterally terminated this agreement. Id. The Complaint does not allege that DIW sent written notice to Mimar that DIW intended to exercise a right to terminate the agreement under Section 11.2.

On June 3, 2011, DIW filed the present suit alleging breach of contract and unjust enrichment. Id. ¶¶ 27--35. After none of the defendants appeared in this action or answered the Complaint, DIW requested an entry of default on October 31, 2011. Request for Entry of Default, ECF No. 11. The Clerk entered default against all three defendants on November 1, 2011. On November 21, 2011, DIW moved for default judgment against all three defendants seeking damages in the amount of $115,516.13. Aff. of Suzanne Fenimore in Supp. of Mot. for Default J. ("Fenimore Aff.") ¶ 20. This amount consists of (1) $108,355.77 for recurring fees owed under the License Agreement, including prejudgment interest, and (2) $7,160.36 for attorneys' fees and costs. Id. ¶¶ 18--19.

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) (quotation 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. 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 the 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, L.L.C., No. 05-cv-3452, 2008 WL 2967067, at *9 (D.N.J. July 31, 2008).

A.Subject Matter Jurisdiction

Subject matter jurisdiction exists pursuant to 28 U.S.C. § 1332. DIW is a Delaware corporation, with its principal place of business in New Jersey. Compl. ¶ 1. Defendant Mimar is a Virginia corporation, with its principal place of business in Virginia. Id. ¶ 2. Defendants James M. Kokolis and Paula Kokolis are citizens of the state of Virginia. Id. ¶¶ 3--4. The amount in controversy in ...


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