Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

Red Roof Franchising LLC, Inc v. Aa Hospitality Northshore

March 28, 2013

RED ROOF FRANCHISING LLC, INC.,
PLAINTIFF,
v.
AA HOSPITALITY NORTHSHORE, LLC ET AL., DEFENDANTS.



The opinion of the court was delivered by: Hillman, District Judge.

TABLE OF CONTENTS I. FACTUAL AND PROCEDURAL BACKGROUND...................... 4 A. Factual Background Related to Civil Action 10-cv-4065 ....................................... 5 B. Factual Background Related to Civil Action 10-cv-4120 ....................................... 7 II. DISCUSSION ............................................ 8 A. Defendants' Motion for Reconsideration in Civil Action 10-cv-4065 ....................................... 9 B. Plaintiff's Motion For An Order Determining Amount Due and Entering Final Judgment in Civil Action 10-cv-4065 ...................................... 18 1. Damages for Unpaid Franchise Fees .......... 20 a. Defendants' Claims that Plaintiff's Accounting of Damages is Incomplete .... 20 b. Defendants' Claims that Plaintiff's Accounting of Damages is Incorrect ..... 22 I. Defendants' Recorded Payments ..... 23 ii. Hardware Monitoring and Maintenance Fees................... 26 iii. Travel Agent and GDS Fees ......... 31 iv. Signature Program Fees ............ 32 v. In-House Management Training Fee .. 35 vi. Miscellaneous Other Expenses ...... 37 c. Accrued Interest on the Unpaid Franchise Fees ................................... 37 2. Liquidated Damages .......................... 39 3. Attorneys' Fees ............................. 44 4. Summary ..................................... 45 C. Defendants' Motion for Reconsideration in Civil Action 10-cv-4021....................................... 46 D. Plaintiff's Motion For An Order Determining Amount Due and Entering Final Judgment in Docket No. 10-4120 .................................................. 46 1. Signature Program Fees ..................... 49 2. Defendants' Recorded Payments ............... 50 3. Interest Accrued on Defendants' Unpaid Franchise Fees ........................................ 52 4. Liquidated Damages .......................... 53 5. Lost Profits ................................ 53 6. Attorneys' Fees ............................. 54 7. Summary ..................................... 58 III. CONCLUSION ............................................ 59

In this Memorandum Opinion, the Court addresses several motions filed in two separate but related civil actions, docketed at 10-cv-4065 and 10-cv-4021. Currently pending before the Court are four motions: (1) the Motion for Reconsideration by Defendants AA Hospitality Northshore, LLC ("AAHN") and Alpesh and Aruna Patel in Civil Action 10-cv-4065;(2) Plaintiff Red Roof Franchising LLC, Inc.'s ("RRF") Motion For An Order Determining Amount Due and Entering Final Judgment in Civil Action 10-cv-4065; (3) the Motion for Reconsideration by Defendants AAHN and Asvin and Aruna Patel in Civil Action 10-cv-4021; and (4) RRF's Motion For An Order Determining Amount Due and Entering Final Judgment in Civil Action 10-cv-4021.*fn1 For the reasons that follow, Defendants' Motions for Reconsideration in both civil actions will be denied, and Plaintiff's Motions For An Order Determining Amount Due and Entering Final Judgment will be granted in part and denied in part in both civil actions.

I. FACTUAL AND PROCEDURAL BACKGROUND

The full factual background of this case is familiar to all relevant parties and the Court, and is detailed in the Court's prior Opinions. The Court therefore only briefly discusses the facts and procedural history relevant to the instant motions.

This matter involves an alleged breach of two separate Red Roof Inn franchise agreements entered into between RRF and various members of the Patel family. The first franchise agreement was entered into between RRF and Asvin and Aruna Patel related to the operation of a RRF hotel in Bellmawr, New Jersey. The legal action stemming from the alleged breach of this franchise agreement is docketed at 10-cv-4065. The second franchise agreement was entered into between RRF and Alpesh and Aruna Patel related to the operation of a RRF hotel in Duluth, Minnesota. It appears from the record that Asvin Patel is Alpesh Patel's father.*fn2 The legal action related to the alleged breach of the Minnesota franchise agreement is docketed at 10-cv-4021. Both cases involve largely similar factual scenarios and the complaints in both legal actions contain nearly identical claims and counterclaims.*fn3 Furthermore, since the filing of the initial complaints, both legal actions have reflected essentially mirrored dockets, complete with the filing of virtually identical motions and briefing, and representation by the same counsel.

A. Factual Background Related to Civil Action 10-cv-4065

On August 23, 2002, Asvin and Aruna Patel entered into a written franchise agreement with RRF's predecessor, Red Roof Inns, Inc., to operate a hotel in Bellmawr, New Jersey. On March 1, 2005, Red Roof Inns assigned its rights and obligations under the franchise agreement to Accor Franchising North America, LLC ("Accor"). On June 20, 2007, Accor assigned its rights and obligations under the franchise agreement to Plaintiff RRF.

On June 13, 2006, the Patels assigned their interest in the franchise agreement to Defendant AAHN through a written transfer assignment and consent. The Patels also executed a guarantee, indemnification, and acknowledgment at this time, according to which they guaranteed the performance of AAHN's obligations. Subsequently, AAHN fell behind in payments it owed to RRF and defaulted under the terms of the franchise agreement. On January 19, 2010, RRF sent a notice of default to Defendants, indicating that they were in default and had the opportunity to cure by March 26, 2010. Defendants failed to do so, and RRF therefore sent them a notice of termination on April 10, 2010.

On August 9, 2010, Plaintiff RRF filed a Complaint in this Court, asserting three counts against Defendants: (1) breach of contract based on the franchise agreement; (2) breach of contract based on the guarantee agreement; and (3) specific performance related to the removal of Red Roof Inn signs and marks and continued use of its proprietary and confidential information. On October 17, 2011, Plaintiff moved for partial summary judgment on the breach of contract claims, which the Court granted on June 28, 2012. In granting summary judgment on the breach of the franchise agreement claim, the Court specifically stated as follows:

Defendants argue that the calculation of damages does not take into consideration the payments made by them, and does not indicate the type of fee. Defendants' dispute over the amount of damages, however, does not challenge the fact that RRF incurred damages as a result of the breach. Given that RRF has established that it incurred damages, it is entitled to partial summary judgment on its claim of breach of the franchise agreement. However, the Court agrees that plaintiff must provide a full and complete accounting of damages, including a breakdown by type of fee charged and history of payments made by defendants. Accordingly, plaintiff shall file a separate motion for award of damages in keeping with this Opinion.

On July 27, 2012, Plaintiff RRF filed the present Motion Determining Amount Due and Entering Final Judgment, in which it seeks $236,909.88 in damages. Defendants responded in opposition on August 31, 2012. Subsumed within their Response in Opposition, Defendants move for reconsideration of the Court's entry of summary judgment in Plaintiff's favor on the breach of franchise agreement claim. Plaintiff replied on September 17, 2012, thereby making this matter ripe for judicial consideration.

B. Factual Background Related to Civil Action 10-cv-4120

Similar to the above-discussed civil action, Alpesh and Aruna Patel operated a Red Roof Inn in Duluth, Minnesota. In 2007, the Patels assigned their interest in the franchise to Defendant AAHN. On April 9, 2007, AAHN entered into a written franchise agreement with Accor for a term of five years. Also on this day, the Patels executed a guarantee, indemnification and acknowledgment under which they guaranteed the performance of AAHN's obligations under the franchise agreement. On June 30, 2007, Accor assigned its rights and obligations under the franchise agreement to Plaintiff RRF. Subsequently, on July 1, 2010, AAHN ceased operating the franchise as a Red Roof Inn and started operating as an "America's Best Value Inn." On July 2, 2010, RRF sent written notice to Defendants advising them of termination of the franchise agreement, effective July 6, 2010, as a result of default due to abandonment.

On August 11, 2010, RRF filed suit against Defendants, asserting the same three claims that were filed in Civil Action 10-cv-4065. On October 17, 2011, RRF filed a summary judgment motion likewise seeking judgment on the two breach of contract claims. On June 28, 2012, the Court granted summary judgment in RRF's favor, but once again noted that the record was unclear with respect to the precise amount of damages. The Court therefore instructed Plaintiff to file a separate motion for an award of damages, in which it was to provide a "full and complete accounting of [its] damages." RRF filed such a motion on July 27, 2012, alleging that it is entitled to a monetary judgment against Defendants in the amount of $191,444.93. Defendants responded in opposition on September 2, 2012. Once again, just as in their opposition papers filed in Civil Action 10-cv-4065, Defendants have included a reconsideration request of the Court's prior Opinion and Order within their response to Plaintiff's Motion. RRF filed a reply brief on September 17, 2012, in which it urges the Court to deny Defendants' reconsideration motion and requests additional attorneys' fees. Accordingly, this matter is likewise ripe for judicial consideration at this time.

II. DISCUSSION

Presently before the Court are Plaintiff's Motions Determining Amount Due and Entering Final Judgment in both Civil Actions 10-cv-4065 and 10-cv-4021. Likewise before the Court are Defendants' Motions for Reconsideration in both actions. The Court will first consider the issues presented in Civil Action 10-cv-4065, followed by an analysis of the issues in Civil Action 10-cv-4120. Moreover, because a ruling on Defendants' reconsideration motions affects the analysis of Plaintiff's Motions, the Court considers the merits of Defendants' reconsideration requests in both actions first.

A. Defendants' Motion for Reconsideration in Civil Action 10-cv-4065

The Federal Rules of Civil Procedure do not expressly recognize motions for reconsideration. See Harrison v. Smith, No.Civ.A.08-3050, 2010 WL 715666, at *2 (D.N.J. Feb. 24, 2010) (citing United States v. Compaction Sys. Corp., 88 F.Supp.2d 339, 345 (D.N.J. 1999)). Such motions are generally treated as motions to alter or amend the judgment of the court pursuant to Rule 59(e), or as motions for relief from the court's judgment or order under Rule 60(b). See Harrison, 2010 WL 715666 at *2. In the District of New Jersey, motions for reconsideration are governed by Local Civil Rule 7.1(I). Bowers v. Nat'l Collegiate Athletics Assoc., 130 F. Supp. 2d 610, 612 (D.N.J. 2001). That Rule provides as follows:

[A] motion for reconsideration shall be served and filed within 14 days after the entry of the order or judgment on the original motion by the Judge[.] A brief setting forth concisely the matter or controlling decisions which the party believes the Judge [] has overlooked shall be filed with the Notice of Motion.

L. Civ. R. 7.1(I).

As an initial matter, Defendants' Motion utterly fails on procedural grounds, as they blatantly do not adhere to the requirements set forth by Local Rule 7.1. See United States v. Pechiney Plastics Packaging, Inc., No. Civ.A.09--5692, 2012 U.S. Dist. LEXIS 114255, at *11 (D.N.J. Aug. 14, 2012) (noting the "stringent standards" provided by Local Rule 7.1). First, Rule 7.1 states that motions seeking reconsideration must be made within 14 days of entry of the Court's initial order. The Court entered its initial Opinion and Order granting summary judgment in Plaintiff's favor on June 28, 2012. Defendants, however, did not file their reconsideration motion until 64 days later on August 31, 2012. As such, Defendants' Motion is significantly untimely.*fn4 Secondly, in their reconsideration request, Defendants did not specifically set forth "the matter or controlling decisions" which they believe the Court "overlooked." Indeed, other than cursorily alleging throughout their brief that reconsideration is necessary under the present circumstances, Defendants have not provided a single legal citation to support their argument. Thirdly, rather than filing a separate motion seeking reconsideration, Defendants commingle their reconsideration request with their arguments in opposition to RRF's Motion Determining Amount Due and Entering Final Judgment,*fn5 thereby placing the Court in the difficult position of attempting to extrapolate their purported basis for reconsideration and relief.

In any event, even if Defendants' Motion complied with all the procedural requirements set forth by the Local Rules, it would nonetheless fail on substantive grounds. A motion for reconsideration is "a device to relitigate the original issue decided by the district court, and [is] used to allege legal error." Dermo v. Isaacson, No. Civ.A.11-06520, 2012 WL 4207179, at *1 (E.D. Pa. Sept. 19, 2012) (internal citations and quotation marks omitted). It is not, however, an opportunity for a litigant to raise new arguments or present evidence that could have been raised prior to the initial judgment. See Bapu Corp. v. Choice Hotels Int'l, Inc., No. Civ.A.07-5938, 2010 U.S. Dist. LEXIS 135844, at *6 (D.N.J. Dec. 23, 2010)(citing P. Schoenfeld Asset Mngmt. LLC v. Cendant Corp., 161 F.Supp.2d 349, 352 (D.N.J. 2001)); Kelly v. Hendricks, No.Civ.A.03-2536, 2006 U.S. Dist. LEXIS 3494, at * 5 (D.N.J. Jan. 27. 2006)(further citations omitted) ("[R]econsideration is not to be used as a means of expanding the record to include matters not originally before the court."). In order to prevail on a reconsideration motion, the movant has the burden of demonstrating one of the following:

(1) An intervening change in the controlling law; (2) the availability of new evidence that was not available when the court [issued its order]; or (3) the need to correct a clear error of law or fact or to prevent manifest injustice.

Max's Seafood Cafe v. Quinteros, 176 F.3d 669, 677 (3d Cir. 1999)(citing N. River Ins. Co. v. CIGNA Reins. Co., 52 F.3d 1194, 1218 (3d Cir. 1995)). The standard for reconsideration is high, and such motions are granted only sparingly. See Dermo, 2012 WL 4207179 at *2; Harrison, 2010 WL 715666 at *2. Thus, a party's difference of opinion with the court's initial decision should be dealt with through the normal appellate process. Bowers, 130 F.Supp.2d at 612 (citations omitted); Florham Park Chevron, Inc. v. Chevron U.S.A., Inc., 680 F.Supp. 159, 162 (D.N.J. 1988); see also Chicosky v. Presbyterian Med. Ctr., 979 F. Supp. 316, 318 (D.N.J. 1997); NL Indus., Inc. v. Comm. Union Ins. Co., 935 F. Supp. 513, 516 (D.N.J. 1996) ("Reconsideration motions . . . may not be used to re-litigate old matters, or to raise arguments or present evidence that could have been raised prior to the entry of judgment."). In other words, "[a] motion for reconsideration should not provide the parties with an opportunity for a second bite at the apple." Tishcio v. Bontex, Inc., 16 F.Supp.2d 511, 532 (D.N.J. 1998) (internal citation omitted).

At the summary judgment stage of proceedings, Defendants argued that Plaintiff, rather than Defendants, breached the franchise agreement first by refusing to disclose underlying invoices to the franchisees, thereby preventing them from making timely payments. (See e.g., Docket No. 33, Defs.' Resp. Opp'n to Pl.'s Mot. Summ. J. at 3--4. ("[T]here are [] potential 'black holes' of charges and expenses that might or might not have been charged to the Patels under their franchise agreement that cannot be identified without explicit invoicing methods. . . . [and] Courts have not hesitated to deny a summary judgment request when the movant has failed to provide backup documentation or explanation to support its breach of contract claim.").) In ruling on the summary judgment motion, the Court conducted a detailed analysis of Defendants' claim, and found that "the most that defendants have alleged regarding these complaints is a dissatisfaction with RR[F]. They have not shown that RRF has breached the franchise agreement." (Docket No. 52, 06/28/12 Mem. Op. at 20.) With respect to Defendants' specific argument that the failure to provide underlying invoices constituted a breach, the Court noted that "[a]lthough not technically a breach of Section 3 of the franchise agreement, RRF would have a duty to provide supporting documentation of its invoices. This complaint appears to now be moot given the declaration of Joy Purvis attaching the underlying invoices." (Id. at 20 n.6.)*fn6 The Court went on to find that, even if the complaints did equate to a breach of the franchise agreement on Plaintiff's part, Defendants' claim nonetheless failed because a non-breaching party may not stop performance while continuing to take advantage of a contract's benefits - an action which the Court found Defendants did under the facts presented by the record. (See id. at 21.)

Defendants now request the Court to reconsider its findings related to RRF's potential breach of the franchise agreement. More specifically, Defendants argue that:

RRF's very belated (during the summary judgment phase of litigation) production of the underlying invoices conclusively demonstrate thatDefendants [sic], all along, were justified in suspecting thatRRFhad [sic] been invoicing charges that were unpermitted [sic] under the franchise agreement. . . . RRFcompounded [sic] its wrongdoing bylaterrefusing [sic] to provide the supporting documentation for those expenses. . . . Had RRF properly disclosed the underlying invoices to Defendants when they were requested years before the present litigation, Defendants would have known exactly which charges were legitimate and which ones were illegitimate, and could have properly issued payment for the correct amount of franchise fees. (Defs.' Mot./Resp. Opp'n at 1--2.)

Defendants have not predicated their reconsideration request on any of the three scenarios set forth by the Third Circuit in Max's Seafood,*fn7 but rather appear to rehash the original argument they made at the summary judgment stage of proceedings - that Plaintiff, rather than Defendants, breached the franchise agreement first by refusing to disclose underlying invoices to the franchisees.*fn8 The Court already considered this argument. The law in this District is clear that "[a] motion for reconsideration is improper when it is used to ask the Court to rethink what it had already thought through - rightly or wrongly." Fishbein Fam. P'ship v. PPG Indus., No Civ.A.93-653, 1994 U.S. Dist. LEXIS 18812, at *3 (D.N.J. Dec. 28, 1994)(internal quotation marks & citations omitted); Nelson v. Borgata Hotel Casino & Spa, No. Civ.A.05-5705, 2007 U.S. Dist. LEXIS, at *2 (D.N.J. Oct. 23, 2007) (Simandle, J.) ("Reconsideration is not warranted when the moving party simply recapitulates the cases and arguments considered by the court prior to rendering its initial decision.")(internal citation omitted). Defendants cannot merely recycle their original argument in the guise of a motion for reconsideration.

Accordingly, the Court declines to reconsider its prior findings related to RRF's alleged prior breach of the franchise agreement.*fn9

B. Plaintiff's Motion For An Order Determining Amount Due and Entering Final Judgment in Civil Action 10-cv-4065

On June 28, 2012, the Court entered an Order awarding summary judgment in Plaintiff's favor on its breach of contract claims and dismissing Defendants' counterclaims. In granting summary judgment, the Court indicated that RRF was entitled to recover monetary damages, but noted that the evidentiary record was unclear as to the precise damages amount. The Court therefore instructed RRF to file a motion for an award of damages and attorneys' fees no later than July 27, 2012, in which it was to "provide a full and complete accounting of damages, including a breakdown by type of fee charged and history of payments made by defendants." RRF filed the instant Motion before the Court on this date, to which Defendants responded in opposition on August 31, 2012. RRF filed a reply on September 17, 2012, in which it asserted that it has incurred additional counsel fees in responding to Defendants' opposition papers. Accordingly, RRF presently submits to the Court that it is entitled to:

(1) $58,697.00 in unpaid franchise fees, costs, royalities, and accrued interest,

(2) $112,109.87 in liquidated damages and accrued interest, and

(3) $66,103.01 in attorneys' fees, for a total damages award of $236,909.88.

Defendants respond that RRF failed to abide by the Court's June 2012 Order because its account of damages is neither complete nor correct. More specifically, Defendants contend that RRF only submitted invoices from 2009 onward, despite the fact that the franchise term began in September of 2007. Defendants argue that this intentional withholding of pre-2009 invoices demonstrates Plaintiff's intent to overcharge them. Defendants further allege that RRF has not established the legitimacy of many of its claimed damages, and that its submitted account of damages is intentionally disorganized so as to mask its true intent to overcharge them. Moreover, Defendants assert that RRF's calculation of its unpaid franchise fees is incorrect because it did not properly record payments made by them and improperly billed them for certain fees. Finally, Defendants contend that Plaintiff's calculation of liquidated damages is incorrect because late fees and interest accrual do not apply to the total damages amount.

1. Damages for Unpaid Franchise Fees

a. Defendants' Claims that Plaintiff's Accounting of Damages is Incomplete

Defendants first argue that RRF's accounting of damages is incomplete because RRF has only provided invoices from 2009 onward, despite knowing that Defendants believed they were improperly charged throughout the entirety of the franchise term, which began in September of 2007. Plaintiff responds that it did not submit these invoices because they are irrelevant to its calculation of damages.

As indicated by the evidentiary record, RRF has alleged that AAHN was in arrears on payments of franchise fees as of December 15, 2009. RRF therefore sent notices of default and termination to Defendants in late 2009 and early 2010. When Defendants failed to cure the default, RRF terminated the franchise agreement on April 20, 2010. Thus, any such damages that RRF incurred in this respect occurred in 2009 and 2010. Therefore, the Court agrees with Plaintiff that the submission of pre-2009 invoices is unnecessary under these circumstances.*fn10

Defendants also assert that RRF failed to abide by the Court's previous Order because it did not provide a breakdown by type of fee charged. More specifically, Defendants contend that RRF's submission intentionally lacks organization and clarity in order to make it more difficult to identify duplicate charges and hidden fees. In its June 2012 Order, the Court did not indicate that Plaintiff was required to utilize any particular method of organization, but rather left it to RRF's discretion to "provide a full and complete accounting of [its] damages, including a breakdown by type of fee charged and history of payments made[.]" At present, Plaintiff has submitted several documents in support of its sought damages award. In Exhibit A, Plaintiff has provided a copy of its Applied Receipts Register reflecting payments made by Defendants to RRF between August 2008 and September 2010. These payments are grouped by date, and listed in chronological order. Exhibit B contains copies of payments Defendants made to RRF by check and credit card. These payments reference specific invoice numbers from Exhibit A, and appear largely in chronological order. Exhibit C is an Account Status Report which provides a chronological account of all of Defendants' unpaid invoices. Exhibit D includes copies of every invoice RRF sent to Defendants between 2009 and 2010, including the paid and unpaid invoices referenced in Exhibits A and C.

Each submitted invoice contains a line description of the type of fee charged. Defendants admit that the invoices provided in Exhibit D are not in chronological order, but submit that this was done because of bill number sequencing and that the status of an invoice as "paid" or "unpaid" in Exhibit D can be easily ascertained by cross-referencing it with the invoices provided in Exhibits A and C.

The Court sees no discernible error in Plaintiff's method of organization with respect to its submitted documentation to support its damages claim. While Defendants may have chosen an alternative method of organization that was, in their view, better structured, Plaintiff's chosen method does not equate to a violation of the Court's previous Order. As such, the Court declines to give merit to Defendants' assertions that Plaintiff's submitted damages amount is incomplete based on its method of organization.*fn11

b. Defendants' Claims that Plaintiff's Accounting of Damages is Incorrect

In addition to their claims that Plaintiff's submitted amount of damages is incomplete, Defendants also allege that RRF's calculation of the unpaid franchise fees is incorrect.

Specifically, Defendants maintain that RRF did not properly record certain payments made by them and impermissibly billed them for miscellaneous fees not permitted under the franchise agreement.

i. Defendants' Recorded Payments

Defendants contend that RRF wrongfully failed to account for over $15,000 of credit card payments made by Asvin Patel in December of 2009 in their damages account. In support of this contention, Defendants attach a copy of Asvin's credit card statement depicting a $5,010.20 payment on December 8, 2009. (See Defs.' Resp. Opp'n, Ex. 56-9.) As reflected by Plaintiff's Applied Receipts Register, however, RRF recorded this credit card payment and applied it to Defendants' account on December 13, 2009. Accordingly, this amount will not be deducted from Plaintiff's sought damages.

Defendants likewise contend that RRF did not account for a $10,336.19 credit card payment made by Asvin on December 8, 2009. This payment, however, was made in relation to the related RRF franchise in Duluth, Minnesota. As such, consideration of this credit card payment is unrelated to the instant case, and the Court will consider it, if need ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.