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Baymont Franchise Systems, Inc. v. Shree Hanuman, Inc.

United States District Court, D. New Jersey

March 30, 2015

BAYMONT FRANCHISE SYSTEMS, INC., Plaintiff,
v.
SHREE HANUMAN, INC. et al., Defendants.

OPINION

KEVIN McNULTY District Judge.

This matter comes before the Court on the unopposed motion of Plaintiff Baymont Franchise Systems, Inc. ("Baymont") for default judgment against Defendants Shree Hanuman, Inc. ("Hanuman"), Gurraj Grewal ("Grewal"), and Rekha M. Zaveri ("Zaveri"), pursuant to Fed.R.Civ.P. 55(b)(2). (ECF No. 10). This action arises from a breach of contract dispute. For the reasons set forth below, I will enter a default judgment in the amount of $175, 201.81, plus post-judgment interest from this date at the appropriate rate pursuant to 28 U.S.C. § 1961.

I. BACKGROUND

a. The Agreement

Baymont is a Delaware corporation with its principal place of business in Parsippany, New Jersey. (Compl. ECF No. 1). Hanuman is a Georgia corporation with its principal place of business in Goodiettsville, Tennessee. (Id. ¶2). Zaveri and Grewal are principals of Hanuman and citizens of Tennessee. (Id. H3-4).

On or about November 1, 2007, Baymont entered into a Franchise Agreement ("Agreement") with Hanuman. (Id. ¶9 (citing Ex. A)). Hanuman was authorized to operate a 70-room Baymont guest lodging facility located at 809 Wren Road, Goodlettsville, Tennessee 37072, Site No. 4343-72505-02 ("Facility"). (Id.).

Under the Agreement, Hanuman was obligated to operate the Facility for a twenty-year term and to make periodic payments to Baymont for "royalties, system assessments, taxes, interest, and other fees" ("recurring fees"). (Id. ¶¶ 10-11). Hanuman was required to pay interest "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. HI2).

The Agreement also required Hanuman to submit monthly reports to Baymont disclosing, inter alia, "the amount of gross room revenue earned by Shree Hanuman at the Facility in the preceding month for purposes of establishing the amount of royalties and other Recurring Fees due to [Baymont]." (Id. ¶ 13). Hanuman was to maintain accurate "financial information, including books, records, and accounts, " and allow Baymont to "examine, audit, and make copies" of these records. (Id. 14).

Section 11.2 outlines the circumstances under which Baymont could terminate the Franchise Agreement, including

(1) [failure to] cure a default as provided in Section 11.1 [requiring payment within 30 days of written notice]...
(7) [failure to] pay debts as they arise in the ordinary course of business...
(9) [receipt of] two or more notices of default from [Baymont] in any one year period (whether or not you cure the defaults)

(Id. Ex. A at 14; If 15).

In the event of a termination, Hanuman was required to pay liquidated damages to Baymont, which were set at $1, 000 per guest room in the Facility. (Id. ¶¶ 16-17). In the event of litigation, the losing party was required to pay "all costs and expenses, including reasonable attorneys' fees, incurred by the prevailing party." (Id. ¶ 18).

Zaveri and Grewal provided Baymont with a Guaranty of Hanuman's obligations under the Franchise agreement, effective as of the date of the Franchise Agreement. (Id. ¶ 19 (citing Ex. B)). The Guaranty required Zaveri and Grewal, upon a default under the Franchise Agreement, to "immediately make each payment and perform or cause Franchisee to perform, each unpaid or unperformed obligation of Franchisee under the [Franchise] Agreement." (Id. ¶ 20 (quoting Ex. B)). Because the Franchise Agreement required the losing party at litigation to pay the other party's costs, the Guaranty made Zaveri and Grewal personally responsible for these costs as well. (Id. ¶ 21).

b. The alleged defaults and termination

Baymont alleges that Hanuman repeatedly breached its obligation to pay recurring fees under the Franchise Agreement, beginning in 2011. (Id. ¶22).

On September 15, 2011, Baymont sent a letter informing Hanuman that it was in default of the Franchise Agreement, that it owed Baymont $27, 298.54 in unpaid recurring fees, and that it had 10 days to cure this default or else the Franchise Agreement might be subject to termination. (Id. ¶23 (citing Ex. C)).

Baymont sent a second letter on March 29, 2012, informing Hanuman that it was in default of the Franchise Agreement, that it now owed Baymont $47, 831.61 in unpaid recurring fees, and that it had 30 to cure this default or else the Franchise ...


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