United States District Court, D. New Jersey
KEVIN McNULTY, District Judge.
This matter comes before the Court on the unopposed motion of Plaintiff Days Inns Worldwide, Inc. ("DIW") for default judgment against Defendants Savita Hospitality Group, Inc., Arun Bhula, and Smita A. Bhula, pursuant to Fed.R.Civ.P. 55(b)(2). For the reasons set forth below, I find that default judgment is appropriate. I will also award compensatory damages.
DIW is a corporation organized under the Delaware law and based in New Jersey. (Compl. at ¶ 1 [ECF No. 1]). Savita is a Utah-organized and based corporation, and its principals are Arun and Smita Bhula. ( Id. at ¶¶ 2-4).
On May 19, 2008, DIW and Savita entered into a 15-year franchise agreement for Savita's operation of a 42-room Days Inn hotel in Rexburg, Idaho. ( Id. at ¶¶ 9-10). On the same day, DIW and Savita entered into a "Connectivity Equipment Lease and Services Addendum". ( Id. at ¶¶ 18-19). Arun Bhula signed both the franchise agreement and the addendum on Savita's behalf. ( See id. at Exs. A-B). In addition, both Arun and Smita Bhula signed a guaranty of all of Savita's obligations under the above agreements, effective the date of the franchise agreement. ( See id. at Ex. C).
The gist of the complaint is that Savita, on May 12, 2011, lost possession of the hotel facility to a third party, effecting a termination of the franchise agreement pursuant to section 11.2 thereof (providing that DIW "may terminate this Agreement, effective when we send written notice to you... when [inter alia]... you discontinue operating the Facility as a "Days Inn "... you lose possession or the right to possession of the Facility..."). ( See id. at ¶¶ 15, 23; Ex.Aat 11.2).
Further, DIW seeks liquidated damages, which it says defendants owe under the franchise agreement and connectivity addendum upon termination, but have not paid. ( See id. at ¶¶ 16, 19, 24, 29-36; Ex. A at § 12). It alleges that the amount of liquidated damages is to accord with a formula set forth in the connectivity addendum. ( See id. at ¶ 19). In its complaint, DIW specified that the amount of liquidated damages was $86, 500.
DIW also seeks recurring fees, which it says defendants owe under the franchise agreement, but have not paid. ( See id. at ¶¶ 11, 41-44; Ex. A at § 7).
As to the liquidated damages and recurring fees it seeks, DIW alleges that it is entitled to prejudgment interest, pursuant to section 7.3 of the franchise agreement. ( See id. at ¶ 12).
Finally, DIW claims that it is entitled to its attorneys' fees and costs in pursuing these remedies and prevailing, based on section 17.4 of the franchise agreement. ( See id. at ¶ 17).
DIW served Savita with the summons and complaint by regular and certified mail on August 27, 2013. [ECF No. 8 at p. 10]. DIW served Arun and Smita Bhula with the summons and complaint via process server on September 2, 2013. [ECF No. 7]. Pursuant to Fed.R.Civ.P. 12(a)(1), defendants had 21 days to respond to the complaint; their time to respond expired on September 17 and 23, 2013, respectively. They have not answered or otherwise responded at any point, On DIW's request, the Clerk of Court entered default against all of the defendants on October 10, 2013. On December 13, 2013, DIW filed the now-pending motion for default judgment against all of the defendants.
A. Legal Standard for Entry of Default Judgment
"[T]he entry of a default judgment is left primarily to the discretion of the district court." Hritz v. Woma Corp. , 732 F.2d 1178, 1180 (3d Cir. 1984) (citing Tozer v. Charles A. Krause Milling Co. , 189 F.2d 242, 244 (3d Cir.1951)). Because the entry of a default judgment prevents the resolution of claims on the merits, "this court does not favor entry of defaults and default judgments." United States v. $55, 518.05 in U.S. Currency , 728 F.2d 192, 194 (3d Cir. 1984). Thus, before entering default judgment, the Court must determine whether the "unchallenged facts constitute a legitimate cause of action" so that default judgment would be permissible. ...