United States District Court, D. New Jersey
KEVIN McNULTY, District Judge.
This matter comes before the Court on the unopposed motion of Plaintiff Travelodge Hotels, Inc. ("THI") for default judgment against Defendants Shivmansi, Inc. ("Shivmansi"), Narendra Patel, and Hasmukh Patel pursuant to Fed.R.Civ.P. 55(b). (Dkt. No. 12) For the reasons set forth below, I will enter a default judgment. THI is awarded $112, 458.08 in outstanding recurring fees. I will also award $142, 368.40 in liquidated damages and interest, and $5, 085.77 in attorneys' fees and costs. Post-judgment interest from this date will be awarded at the appropriate rate in accordance with 28 U.S.C. § 1961.
THI is a Delaware corporation with its principal place of business in Parsippany, New Jersey. (Compl., Dkt. No. 1, ¶ 1) Shivmansi is a corporation incorporated in California with its principal place of business in Corona, California. ( Id. at ¶ 2) Shivmansi's sole shareholders are Narendra Patel, Hasmukh Patel, and Surendra Patel, all of whom are citizens of California. ( Id. at ¶¶ 3-4). Only Narendra Patel and Hasmukh Patel (the "Patels"), however, are named in this action. The remainder of this Opinion will collectively refer to Shivmansi and the Patels as the "defendants."
On May 25, 2005, THI entered into a license agreement (the "License Agreement") with Shivmansi for the operation of a 45-room Travelodge guest lodging facility located at 1701 West 6th Street in Corona, California (the "Facility"). (Pl. Aff. in Supp. of Mot. for J. by Default ("Pl. Aff."), Dkt. No. 12-3, ¶ 3) Shivmansi pledged to operate the Facility as a Travelodge hotel for a period of 15 years. ( Id. at ¶ 4). Under Section 7, Section 18, and Schedule C of the License Agreement, Shivmansi was required to make periodic payments to THI 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 past due. ( Id. at ¶ 6)
Section 9.1 of the License Agreement prohibits Shivmansi from transferring its interest in the Facility without THI's prior written consent. ( Id. at ¶ 9) Section 9.3 permits THI to withhold such consent unless both Shivmansi and the transferee meet the conditions set forth in that provision. (License Agreement, Section 9.3, Dkt. No. 19)
Section 11.2 lists the circumstances under which THI may terminate the License Agreement. Those circumstances includes when "a violation of Section 9 occurs, or a Transfer occurs before the relicensing process [described in Section 9.3] is completed." ( Id. at 20) If the License Agreement is terminated pursuant to Section 11.2, Section 13.2 provides that Shivmansi must pay "all amounts owed to [THI]" no more than 10 days after termination. ( Id. at 22) Those "amounts owed" include all "Recurring Fees on Gross Room Revenues accruing while the Facility is identified as a Travelodge.'" ( Id. ) Additionally, under Section 12, Yamuna is obligated to pay liquidated damages within 30 days after termination in an amount equal to "the product of $2, 000 multiplied by the number of guest rooms [THI is] authorized to operate under... this Agreement." ( Id. )
Section 17.4 states that if legal action is necessary "to enforce this Agreement or collect amounts owed under this Agreement, " then the "nonprevailing party will pay all costs and expenses, including reasonable attorneys' fees." ( Id. at 27)
On the same day that THI executed the License Agreement with Shivmansi, it also obtained a personal guaranty (the "Guaranty") from Narendra Patel, Hasmukh Patel, and Surendra Patel. ( See Guaranty, Dkt. No. 12-3, at 44) All three guarantors assumed joint and several liability for Shivmansi's "unpaid or unperformed obligations" under the License Agreement. ( Id. )
The Alleged Defaults and Termination
THI alleges that on March 29, 2011, Shivmansi sold the Facility to a third party without obtaining THI's prior written consent as required by the License Agreement. (Pl. Aff., Dkt. No. 12-3, at ¶ 13) It appears that THI worked with the buyer to secure its compliance with the terms of Section 9.3, but that those efforts were fruitless, and that THI therefore withheld its consent to the sale.
On June 3, 2011, THI sent the Patels a letter stating that, based on the unauthorized sale of the Facility, THI had terminated the License Agreement as of the date of the sale, March 29, 2011. ( Id. at ¶ 14). The letter further stated:
While we have been working in good faith with your Buyer in an effort to secure a long-term agreement to continue the Facility's affiliation with the Travelodge Chain, our efforts have not been successful. We regret that the Facility will no longer operate as a Travelodge facility and must now require you to fulfill the post-termination obligations set forth in the Agreement, including the payment of liquidated damages.
As a result of your premature termination of the Agreement, you are required to pay us liquidated damages in the amount of $90, 000 as provided in Section 12.1 of the Agreement... You are also responsible to pay all outstanding Recurring Fees and other charges within 10 days. We ...