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Travelodge Hotels, Inc v. Meridian Global Investments

June 15, 2012


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


Plaintiff Travelodge Hotels, Inc. ("THI") moves for final judgment by default against Defendants Meridian Global Investments, LP ("Meridian Global"), Meridian Premier Management, LLC ("Meridian Premier") and Evan Jacobson pursuant to Fed. R. Civ. P. 55(b)(2). Pursuant to Rule 78 of the Federal Rules of Civil Procedure, the motion is decided without oral argument. THI's motion for default judgment is granted.


This suit arises from a license agreement originally entered into between THI and SNB Hotels, Ltd. ("SNB") on or about September 5, 2001 for the operation of a 201-room guest lodging facility ("facility") in Texas. Compl. ¶ 18, Ex. A. On or about February 10, 2003, THI and SNB entered into a Satellite Connectivity Services Addendum ("the addendum"), which is part of the license agreement. Id. ¶ 30, Ex. C. On or about July 31, 2006, THI and SNB entered into an amendment to the license agreement that modified sections 18.1 and 18.3 of the license agreement. Id. ¶ 19, Ex. C. On March 1, 2007, THI entered into an assignment and assumption agreement with SNB and Meridian Global, wherein Meridian Global assumed and accepted all rights and obligations of SNB under the license agreement. Id. ¶ 20, Ex. B. At this time Jacobson provided THI with a guaranty of Meridian Global's obligations under the agreement and agreed that upon default that he would immediately make each payment and perform or cause Meridian Global to perform each obligation required under the agreement. Id. ¶¶ 32-34, Ex. A.

Under the terms of the license agreement, Meridian Global was obligated to operate the facility for a period of fifteen years and make periodic payments to THI for royalties, system assessment fees, taxes, interest, reservation system user fees, annual conference fees, and other fees (collectively, the "recurring fees"). Id. ¶¶ 21-22, Ex.A. Meridian Global further agreed that interest would be payable on any past due amount at the rate of 1.5% per month or the maximum rate permitted by applicable law, whichever is less, accruing from the due date until the amount is paid. Id. ¶ 23, Ex. A. Meridian Global was also required to prepare and submit monthly reports to THI disclosing the amount of gross room revenue earned by Meridian Global at the facility in the preceding months for purposes of establishing the amount of royalties and other recurring fees due to THI as well as prepare and maintain at the facility's accurate financial information for THI to examine, audit, and copy. Id. ¶¶ 24-25, Ex. A.

THI could terminate the license agreement if Meridian Global discontinued operating the facility as a Travelodge guest lodging establishment or lost possession or the right to possession of the facility. Id. ¶ 26, Ex. A. Meridian Global agreed that if the agreement was terminated, it would pay liquidated damages to THI according to a formula in the license agreement. Id. ¶ 27, Ex. C. The agreement also provided that Meridian Global's obligations in the event of a termination included immediately ceasing the use of all Travelodge Marks in association with the operation and use of the facility. Id. ¶ 28, Ex. A. Additionally, the agreement provided that the non-prevailing party would "pay all costs and expenses, including reasonable attorneys' fees, incurred by the prevailing party to enforce this Agreement or collect amounts owed under this Agreement." Id. ¶ 29, Ex. A. Lastly, Meridian Global agreed in the event of a termination it would pay additional liquidated damages to THI in the amount of $1,000 within 10 days of termination. Id. ¶ 31, Ex. C.

On or about June 25, 2009 Meridian Global ceased to operate the facility as a Travelodge facility, unilaterally terminating the lease agreement. Id. ¶ 35. THI wrote to Meridian Global on July 8, 2009 acknowledging the termination and advising Meridian Global to immediately discontinue all indicia of operation, materials and marks identifying the facility as a Travelodge to effectively distinguish its facility from a Travelodge facility within 14 days from receipt of notice. Id. ¶ 36, Ex. D. THI also requested the liquidated damages owed for premature termination and demanded all outstanding recurring fees through the date of termination. Id. THI alleges that despite the termination of the agreement and its request that Meridian Global to de-identify the facility, Meridian Global continued to use the Travelodge Marks through at least February 18, 2011. Id. ¶¶ 39-41, Ex. G.

THI filed a complaint against the Defendants on May 5, 2011, alleging a breach of contract, premature termination and violation of the Lanham Act. Meridian Global, Meridian Premier and Jacobson were personally served on January 16, 2012. ECF No. 10, No. 11, No. 12. Defendants did not appear in this action or answer the complaint and THI requested entry of default against Meridian Premier, Meridian Global and Jacobson, which was entered by the Clerk on February 17, 2012. ECF No. 13.

THI now moves for final judgment by default in the amount of $733,522.05. Fenimore Aff. ¶ 42. This amount is comprised of (1) $89,097.90 for recurring fees owed under the agreement, (2) $45,423.62 for prejudgment interest on the recurring fees, (3) $202,000.00 for liquidated damages, (4) $100,008.44 for prejudgment interest on the liquidated damages, (5) $288,901.08 for infringement damages, trebled pursuant to the Lanham Act, and (6) $8,091.01 for attorneys' fees and costs. Id.


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 the entry of default 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 default judgment is left primarily to the discretion of the district court," this "discretion is not without limits," and cases should be "disposed of on the merits whenever practicable." Hritz, 723 F.2d at 1181 (citations omitted). See also $55,518,05 in U.S. Currency, 728 F.2d at 194-95.

The Third Circuit considers three factors in determining "whether a default judgment should 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).

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, since a party in default does not admit mere conclusions of law." DIRECTV, Inc. v. Asher, No. 03-1969, 2006 WL 680533, at *1 (D.N.J. Mar. 14, 2006) (quoting 10A Charles A. Wright, Arthur R. Miller & Mary Kaye Kane, Federal Practice and Procedure ยง 2688, at 63 (3d ed. 1998). While the court may conduct a hearing to determine the damages amount, Fed. R. Civ. P. 55(b)(2), a damages determination may be made without a hearing "as long ...

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