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Super 8 Worldwide, Inc., A South Dakota Corporation v. Jai-Ambe Nebraska

March 19, 2012

SUPER 8 WORLDWIDE, INC., A SOUTH DAKOTA CORPORATION, PLAINTIFF,
v.
JAI-AMBE NEBRASKA, INC., A NEBRASKA CORPORATION; SHRAWAN KUMAR, AN INDIVIDUAL; AND LINA KUMAR, AN INDIVIDUAL, DEFENDANTS.



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

: OPINION

Plaintiff Super 8 Worldwide, Inc. ("Super 8") moves for default judgment only against defendant Jai-Ambe Nebraska, Inc. ("Jai-Ambe"). Because the Court finds that default judgment is appropriate under Federal Rule of Civil Procedure 55(b)(2), Super 8's motion is granted.

FACTUAL AND PROCEDURAL BACKGROUND

Super 8 brings this suit based on a franchise agreement between Super 8 and Jai-Ambe dated July 8, 2003 ("Franchise Agreement") for the operation of a guest lodging facility in Chadron, Nebraska. Compl. ¶ 9, Ex. A. Shrawan Kumar and Lina Kumar are alleged to be principals of Jai-Ambe who provided Super 8 with a guaranty of Jai-Ambe's obligations under the Franchise Agreement. Id. ¶¶ 3--4, 19, Ex. B. Under Sections 3 and 5 of the Franchise Agreement, Jai-Ambe was obligated to operate and maintain the facility as a Super 8 facility for a 20-year term in compliance with standards set by Super 8. Id. ¶¶ 9--10, Ex. A. During this period, Jai-Ambe was required under Section 7 and Schedule C to make periodic payments to Super 8 for certain recurring fees, including royalties, system assessments, taxes, and interest. Id.

¶ 11, Ex. A. Under Section 9 of the Franchise Agreement, Jai-Ambe was not permitted to lease the facility or to transfer or assign its interest in any way without Super 8's prior written consent. Id. ¶ 15, Ex. A.

Under Section 11 of the Franchise Agreement, Super 8 reserved the right to terminate the license with notice to Jai-Ambe for certain specified reasons. Id. ¶ 16, Ex. A. Grounds for termination included where Jai-Ambe (a) discontinued operating the facility as a Super 8 and/or

(b) lost possession or the right to possession of the facility. Id. In the event of termination on these grounds, Jai-Ambe was required to pay liquidated damages to Super 8 pursuant to a formula set out in Section 12 of the Franchise Agreement. Id. ¶ 17, Ex. A. Under Section 17.4, Jai-Ambe also agreed to pay all costs and expenses, including reasonable attorneys' fees, that Super 8 incurred to enforce or collect amounts owed under the Franchise Agreement. Id. ¶ 18, Ex. A.

Super 8 alleges that Jai-Ambe unilaterally terminated the Franchise Agreement under Sections 9 and 11 of the Franchise Agreement by relinquishing control of the facility to a third party without Super 8's prior consent. Id. ¶ 22. Pursuant to a letter to Jai-Ambe dated January 18, 2011, Super 8 provided written notice that the Franchise Agreement would terminate on February 2, 2011. Id. ¶ 23, Ex. C. This letter advised Jai-Ambe that it was required to pay Super 8 liquidated damages of $89,972.25 for premature termination under Section 12 of the Franchise Agreement, as well as all outstanding recurring fees owed to Super 8. Id.

On July 8, 2011, Super 8 filed the present suit against the corporate and individual defendants alleging breach of contract and unjust enrichment. Id. ¶¶ 24--49. After the three defendants failed to appear in this action or answer the Complaint, Super 8 requested an entry of default on September 13, 2011. Request for Entry of Default, ECF No. 6. The Clerk entered default against defendants Jai-Ambe, Shrawan Kumar and Lina Kumar the same day. ECF No. 6.

On October 13, 2011, Super 8 moved for default judgment against corporate defendant Jai-Ambe only seeking $184,339.02 in damages. Aff. of Suzanne Fenimore in Supp. of Mot. for Default J. ("Fenimore Aff.") ¶ 30. This amount consists of (1) $76,450.26 for recurring fees owed under the Franchise Agreement, (2) $101,641.53 for liquidated damages (including pre-judgment interest), and (3) $6,247.23 for attorneys' fees and costs. Id. ¶¶ 19, 27--29, Ex. G.

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) ...


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