United States District Court, D. New Jersey
KEVIN McNULTY, District Judge.
This matter comes before the Court on the unopposed motion of Plaintiff Days Inn World Wide, Inc. ("DIW") for default judgment against Defendant Yamuna Kunj, LLC ("Yamuna") pursuant to Fed.R.Civ.P. 55(b). (Dkt. No. 11) For the reasons set forth below, I will enter a default judgment. DIW is awarded $4, 548.35 in attorneys' fees and costs. I also find that DIW has established an entitlement to $114, 477.30 in outstanding Recurring Fees. I have, within my discretion, opted to deny enforcement to a liquidated damages provision under which DIW claimed eight years of future payments. Under the particular circumstances of this case, it would constitute a penalty rather than a bona fide estimate of damages. Post-judgment interest from this date will be awarded at the appropriate rate in accordance with 28 U.S.C. § 1961.
DIW is a Delaware corporation with its principal place of business in Parsippany, New Jersey. (Compl., Dkt. No. 1, ¶ 1) Yamuna is an Indiana-based limited liability company with its principal place of business in Anderson, Indiana. Yamuna's constituent members are Upendrakumar Patel and Minal Patel (the "Patels"), both of whom are citizens of Indiana. The Patels are not party to this action.
On September 20, 2004, DIW entered into a License Agreement (the "License Agreement") with Yamuna for the operation of a 112-room Days Inn guest lodging facility located at 5901 South Scatterfield Road in Anderson, Indiana. (Pl. Aff. in Supp. of Mot. for J. by Default ("Pl. Aff."), Dkt. No. 11-3, ¶ 3) Under Section 7, Section 18, and Schedule C of the Franchise Agreement, Yamuna was required to make periodic payments to DIW for, inter alia, royalties, system assessment fees, taxes, interest, and access to its central reservation system (collectively, "Recurring Fees"). ( Id. at ¶ 5) Section 7.3 of the Franchise Agreement stated that the interest on such Recurring Fees would accrue at the rate of 1.5% per month for all payments that came past due. ( Id. at ¶ 6)
Section 11.2 lists the circumstances under which DIW could terminate the License Agreement, including:
(1) [failure to] cure a default as provided in Section 11.1...
(7) [failure to] pay debts as they come due in the ordinary course of business...
(11) [receipt of] two or more notices of default from [DIW] in any one year period (whether or not you cure the defaults)[.]
( Id. at ¶ 9) In the event that the License Agreement is terminated pursuant to Section 11.2, Section 13.2 provides that Yamuna must pay "all amounts owed to [DIW]" no more than 10 days after termination. Such amounts include all "Recurring Fees on Gross Room Revenues accruing while the Facility is identified as a Days Inn.'" ( See License Agreement, Dkt. No. 11-3, at 23) Additionally, under Section 12, Yamuna is obligated to pay liquidated damages within 30 days after termination in an amount equal to "the sum of accrued Royalties and Basic Services Charges during the immediately preceding 24 full calendar months (or the number of months remaining in the unexpired Term... at the date of termination, whichever is less.") ( Id. at 22)
Section 17.4 states that if legal action is necessary "to enforce this Agreement or collect amounts owed under this Agreement, " then the "non-prevailing party will pay all costs and expenses, including reasonable attorneys; fees." ( Id. at 27)
On the same day the parties executed the License Agreement, the parties also executed an addendum agreement (the "Indiana Addendum") that modifies certain aspects of the License Agreement. Section 1 of the Indiana Addendum states: "The laws of the State of Indiana supersede any provisions of the Offering Circular, the License Agreement or New Jersey law if such provisions are in conflict with Indiana law." (Indiana Addendum, Dkt. No. 11-3, at 50)
Section 4 of Indiana Addendum amends the liquidated damages provision contained in the License Agreement. It states in full:
Section 12 of the License Agreement is amended by the deletion of all references to liquidated damages and termination penalties and the addition of the following language to the original language that appears therein:
Notwithstanding any such Termination, and in addition to your other obligations, or in the event of Termination, or cancellation of the License Agreement under any of the provisions therein, you shall be, continue and remain liable to us for any all damages we have sustained or may sustained by reason of such default or defaults and the breach of the License Agreement on your part until the end of the Term.
At the time of such Termination, you covenant to pay to us within 10 days after demand compensation for all damages, losses, costs and expenses (including reasonable attorney's fees) incurred by us and/or amounts which would otherwise be payable for and during the remainder of the unexpired Term of the License Agreement but for such termination. This does not constitute a waiver of your right to trial on any of the above matters.
( Id. )
The Alleged Defaults and ...