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Jackson Hewitt, Inc. v. Dupree-Roberts

United States District Court, Third Circuit

August 7, 2013

JACKSON HEWITT, INC., Plaintiff,
v.
DORIS DUPREE-ROBERTS, Defendant.

OPINION

WILLIAM H. WALLS, District Judge.

Plaintiff Jackson Hewitt, Inc. moves for default judgment against Defendant Doris Dupree-Roberts. Under Federal Rule of Civil Procedure 78, the motion is decided without oral argument and granted.

FACTUAL AND PROCEDURAL BACKGROUND

Plaintiff Jackson Hewitt is a Virginia corporation with its principal place of business in Parsippany, New Jersey. Compl. ¶ 1. It is a franchisor of income tax preparation businesses. Id. Defendant Doris Dupree-Roberts is a citizen and resident of Texas. Id. ¶ 2.

On or about December 30, 1999, Jackson Hewitt and Dupree-Roberts entered into Franchise Agreements TX 228 and TX 224. Id. ¶¶ 20, 27. On the same day, Dupree-Roberts personally guaranteed her performance and obligations set out under the Franchise Agreements. Id. ¶¶ 7, 21, 28. These Franchise Agreements authorized Dupree-Roberts to operate Jackson Hewitt income tax preparation businesses for a 10-year term within a defined geographic area in Texas designated by five zip codes. Id. At the end of the initial 10-year term, Dupree-Roberts and Jackson Hewitt renewed both franchise agreements for an additional 10-year term. Id. ¶¶ 22, 29. On February 9, 2010, Dupree-Roberts again provided Plaintiff with a personal guaranty of her performance and obligations under the renewed Franchise Agreement. Id. ¶¶ 23, 30.

On January 8, 2010, Jackson Hewitt signed a promissory note in favor of Dupree-Roberts. Id. ¶ 35. According to the terms of the promissory note, all unpaid balances would immediately become due to Jackson Hewitt upon termination of the Franchise Agreements. Id. ¶ 36. Under the two Franchise Agreements, Dupree-Roberts was obligated to pay Jackson Hewitt royalty fees, advertising fees, electronic filing fees and other fees determined as a percentage of the "gross volume of business" at the franchised locations. Id. ¶ 37. Gross volume of business is defined as "the total revenue and other consideration from the franchised business." Id.

On or about September 10, 2010, Jackson Hewitt terminated the first Franchise Agreement, TX 228, citing Dupree-Robert's failure to meet performance standards. Id. ¶ 31. On September 23, 2011, Jackson Hewitt terminated the second Franchise Agreement, TX 224, citing Dupree-Robert's failure to make payments pursuant to the terms of the Franchise Agreement and promissory note. Id. ¶ 45. According to Jackson Hewitt Dupree-Roberts has failed to comply with her post-termination obligations. Id. ¶¶ 62-64.

Plaintiff alleges Dupree-Roberts is now operating a competing tax business under the name "Roberts Insurance and Tax agency" at previous franchise location 11001 Fondren Road, Suite C, Houston, TX 77096, in breach of her covenant not to compete found in Franchise Agreement TX 224. Id. ¶¶ 57-58. Jackson Hewitt sent Dupree-Roberts a cease and desist letter demanding she immediately cease operation of the competing tax business within the former franchised territory and advising Dupree-Roberts that she was in violation of her posttermination obligations under the TX 224 Franchise Agreement. Id. ¶ 59. Dupree-Roberts was unresponsive. Id.

Plaintiff filed the Complaint on January 18, 2013. Dupree-Roberts was served with a Summons and a copy of Plaintiff's Verified Complaint by regular and certified mail on March 21, 2013. ECF No. 4. Jackson Hewitt requested an Entry of Default on April 30, 2013 under Fed.R.Civ.P. Rule 55(a), which the Clerk granted on May 1, 2013. ECF No. 5. Throughout the litigation Dupree-Roberts has been unresponsive.

On May 10, 2013 Plaintiff moved for Default Judgment against Defendant for a failure to plead or otherwise defend. Mot. for Default ¶ 1; ECF No. 6. Jackson Hewitt seeks damages in the amount of $162, 306.37 plus post-judgment interest. Mot. for Default ¶ 1. This amount is comprised of (1) $158, 958.47 in monetary damages including interest; (2) $2, 997.00 in attorneys' fees and; (3) $350.90 in costs. Id. Plaintiff also seeks to permanently enjoin Defendants in her various post-termination obligations found in the Franchise Agreements including an injunction from operating a competing tax preparation business at 11001 Fondren Road, Suite C, Houston, TX 77096 under the terms of the covenant not to compete. Id.

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 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 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 must make 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).

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. 05-3452, 2008 WL 2967067, at *9 (D.N.J. July 31, 2008). A default judgment entered without personal jurisdiction over the defendant is void. D'Onofrio v. Il Mattino, 430 F.Supp.2d 431, 436 (E.D. Pa. 2006).

A. Subject Matter Jurisdiction

Subject matter jurisdiction exists pursuant to 28 U.S.C. § 1332. Plaintiff Jackson Hewitt is a Virginia Corporation with its principal place of business in New Jersey. Compl. ¶ 1. Defendant Doris Dupree-Roberts is a Texas resident. Id. ¶ 2. The amount in controversy, exclusive of interests and costs, exceeds the sum of $75, 000. Id. ¶ 3.

B. Personal Jurisdiction

This Court possesses personal jurisdiction over Defendant Doris Dupree-Roberts. The Franchise Agreement includes a clause by which Defendant consented to personal jurisdiction in "the United States District Court nearest to [Jackson Hewitt's] principal place of business, (presently the District of New Jersey, Newark Division)." The Defendant was personally bound by this clause. Compl. ¶ 4. And Plaintiff Jackson Hewitt complied with the requirements for proper service of process necessary to establish personal jurisdiction. Lampe v. Xouth, Inc., 952 F.2d 697, 700-01 (3d Cir. 1991). ...


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