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Inc. v. Shri Narayan, LLC

United States District Court, D. New Jersey

July 23, 2015

SUPER 8 WORLDWIDE, INC., (KM)(MAH Plaintiff,
v.
SHRI NARAYAN, LLC and Chandubhai Patel, Defendants.

OPINION

KEVIN McNULTY, District Judge.

This matter comes before the Court on the unopposed motion of Plaintiff Super 8 Worldwide, Inc. ("SWI") for default judgment against Defendants Shri Narayan, LLC ("Shri Narayan"), and Chandubhai Patel, pursuant to Fed.R.Civ.P. 55(b)(2). (ECF No. 7) This action arises from an alleged breach of a franchising agreement. For the reasons set forth below, I will enter a default judgment in the amount of $268, 303.38. Post-judgment interest will accrue from this date at the appropriate rate pursuant to 28 U.S.C. § 1961.

I. BACKGROUND

a. The Franchise Agreement and Guaranty

SWI is a South Dakota corporation with a principal place of business in Parsippany, New Jersey. (Compl. ¶1, ECF No. 1) Shri Narayan is a Texas limited liability company with a principal place of business in Houston, Texas. ( Id. ¶2) Chandubhai Patel, a Texas citizen, is the principal and only constituent member of Shri Narayan. ( Id. ¶¶3-4)

On or about August 3, 2009, SWI entered into a Franchise Agreement with Shri Narayan. ( Id. ¶9 (citing Ex. A ("Agreement"))) The Franchise Agreement authorized Shri Narayan to operate a 40-room Super 8 guest lodging facility located at 1437 Keefer Street, Tomball, Texas 77375, Site No. 30978-84629-03 (the "Facility"). ( Id. )

Section 5 of the Franchise Agreement required Shri Narayan to operate the Facility for a fifteen-year term. ( Id. ¶10)

Section 7 and Schedule C of the Franchise Agreement specified that Shri Narayan was to make periodic payments to SWI for "royalties, system assessments, taxes, interest, reservation system user fees, and other fees" ("recurring fees"). ( Id. ¶11)

Shri Narayan 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. ¶12 (citing Agreement Section 7.3))

The Franchise Agreement also required Shri Narayan to submit monthly reports to SWI disclosing, inter alia, "the amount of gross room revenue earned by Shri Narayan at the Facility in the preceding month for purposes of establishing the amount of royalties and other Recurring Fees due to SWI." ( Id. ¶ 13 (citing Agreement Section 3.6)) Shri Narayan agreed to maintain "accurate financial information, including books, records, and accounts, " and allow SWI to "examine, audit, and make copies" of these records. ( Id. ¶14 (citing Agreement Sections 3.6, 4.8))

The circumstances under which SWI could terminate the Franchise Agreement, upon notice to Shri Narayan, include:

(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 oil two or more notices of default from [SWI] in any one year period (whether or not you cure the defaults) (Agreement Section 11.2; Compl. ¶15)

In the event of a termination, Shri Narayan was required to pay liquidated damages to SWI, which were set at $1, 000 per guest room in the Facility. (Compl. ¶¶ 16-17 (citing Agreement Sections 12.1, 18.1))

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 (citing Agreement Section 17.4))

Patel provided SWI with a Guaranty of Shri Narayan's obligations under the Franchise Agreement, effective as of the date of the Franchise Agreement. ( Id. ¶ 19 (citing Ex. B)) The Guaranty required Patel, upon a default under the Franchise Agreement, to "immediately make each payment and perform or cause [Shri Narayan] to perform, each unpaid or unperformed obligation of [Shri Narayan] 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 Patel personally responsible for these costs as well. ( Id. ¶21)

b. The alleged defaults and termination

SWI alleges that Shri Narayan repeatedly breached its financial obligations to SWI under the Franchise Agreement ...


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