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Domt, Inc. v. Smikle

United States District Court, D. New Jersey

April 25, 2014

DOMT, INC., Plaintiff,
v.
RICARDO SMIKLE, et al., Defendant.

ORDER

JEROME B. SIMANDLE, Chief District Judge.

This matter comes before the Court on Plaintiff DOMT, Inc.'s motion for default judgment [Docket Item 8] against Defendants Ricardo Smikle and Prestige Commercial Cleaning Corp.

Plaintiff requested default against Defendants [Docket Item 7], and the Clerk of Court entered default on March 4, 2014 pursuant to Fed.R.Civ.P. 55(a). Plaintiff's motion for default judgment was set for April 7, 2014, and Defendants have not responded. "Once the default is established, defendant has no further standing to contest the factual allegations of plaintiff's claim for relief." Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure, § 2688 (3d ed.). The Court will therefore accept the facts of Plaintiff's Complaint [Docket Item 1] as true.

Plaintiff DOMT subfranchises janitorial unit franchises pursuant to a Subfranchise Rights Agreement with Anago Franchising, Inc. (Compl. ¶¶ 6-7.) DOMT sublicenses the "Anago" mark and other proprietary marks to franchisees, who provide commercial cleaning services to customer accounts assigned by DOMT. (Compl. ¶¶ 8-9.) As a condition of their franchise agreements, DOMT franchisees agree not to compete with DOMT during the term of and for two years after the termination of the franchise agreements. (Compl. ¶ 10.) Franchisees also agree to comply with restrictions on the use of proprietary materials and confidential information and to pay ongoing royalties and administrative fees. (Compl. ¶¶ 10, 12.)

On October 27, 2007, DOMT and Defendant Smikle entered into a ten-year franchise agreement ("the Franchise Agreement"). [Docket Item 4-1.] The Franchise Agreement mandates, inter alia, that Smikle agrees to pay DOMT a monthly royalty fee of 10% of monthly gross revenues, an administration fee of 3% of monthly gross revenues, and, if non-competitive covenants are violated, a weekly fee of $1, 000.00 in liquidated damages. [Docket Item 4-1 at 13, 36.]

In January 2009, Smikle incorporated Defendant Prestige in New Jersey. (Compl. ¶ 41.) Through Prestige, Smikle operated a competitive business during the term of and after the termination of the Franchise Agreement. (Compl. ¶ 42.)

The Prestige website states that Prestige's creation was driven by "frustration with the costly Franchise companies selling commercial cleaning services in the existing cottage industry." [Docket Item 4-3 at 2.] During the Franchise Agreement's term, certain customers terminated their accounts with DOMT and Defendants independently serviced them. (Compl. ¶¶ 48-49.) Smikle also used modified copies of DOMT's proprietary materials, including evaluation forms and cleaning specifications. (Compl. ¶ 58.)

As a result of Smikle's actions, DOMT lost accounts and suffered administrative expenses in transferring other accounts. (Compl. ¶¶ 65-68.) Defendants continue to compete with DOMT's business and continue to use DOMT's proprietary and confidential information. (Compl. ¶¶ 71-72.)

Plaintiff seeks an accounting of the royalties, fees, and expenses that Defendants owe. Plaintiff also seeks an injunction prohibiting Defendants from operating a competitive business within 30 miles of Plaintiff's business location for 24 months and from using DOMT's proprietary materials and confidential information.

When issuing a default judgment, "[i]f the sum is not certain or capable of easy computation, the court may hold whatever hearing or inquiry it deems necessary...." Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure, § 2688 (3d ed.).

The Court will grant a default judgment in part to the extent Plaintiff seeks an accounting, as established in Count I of the Complaint. In this case, an accounting must be conducted to determine the amounts owed. The Court will therefore order Defendant Smikle to deliver his books and records to Plaintiff for an accounting. Plaintiff shall then supplement its motion for default judgment by filing a certification detailing the amount of royalties, administrative fees, legal expenses, attorneys' fees, and other monies owed. The certification shall also detail the amount of liquidated damages owed, the beginning date and methodology for calculating such damages, and an explanation of how Plaintiffs determined that date. If the certification is sufficiently specific and if there is a sum certain, the Court will enter judgment in the appropriate amount. If there is not a sum certain, then the Court will schedule a hearing.

Plaintiff's proposed order suggests that Defendants be allowed to object to Plaintiff's certification. As explained above, defendants in default lose the right to object to the facts underlying a plaintiff's claims. If Defendants seek to object to Plaintiff's certification of costs, they may ask the Court to set aside entry of the default, which can be done for good cause pursuant to Fed.R.Civ.P. 55(c) and which would litigation process. The Third Circuit "does not favor entry of defaults or default judgments" and "require[s] doubtful cases to be resolved in favor of the party moving to set aside the default judgment so that cases may be decided on their merits." United States v. $55, 518.05 in U.S. Currency, 728 F.2d 192, 194-95 (3d Cir. 1984) (citation omitted).

In addition to monetary damages, Plaintiff also requests an injunction. Every injunction must state its terms with specificity and reasonable detail. Fed.R.Civ.P. 65(d). Plaintiff's proposed order states that Defendants "are permanently enjoined from using DOMT's confidential information and proprietary property" and that Defendants "are ordered to return all confidential information and proprietary property in their possession..., including but not limited to, Plaintiff's operations manual and business forms." [Docket Item 8-2 at 2.] This level of specificity is insufficient. Plaintiff shall submit a supplemental certification and a proposed order for injunction that details, inter alia, the address from which ...


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