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Ramada Worldwide Inc. v. PRMC, Inc.

United States District Court, D. New Jersey

August 27, 2017

RAMADA WORLDWIDE INC., a Delaware Corporation, Plaintiff,
PRMC, INCORPORATED, a Virginia Corporation, and ZULFIQAR KHAN, an individual, Defendants.


          HON. KEVIN MCNULTY, U.S.D.J.


         The plaintiff, Ramada Worldwide Inc. ("RWI"), brought this action against PRMC, Incorporated ("PRMC") and Zulfiqar Khan ("Khan") for outstanding recurring fees, interest, attorneys' fees, and costs arising from a breach of a franchise agreement and guaranty.[1] Now before the Court is RWI's motion for summary judgment on the Fourth Count of its Complaint and dismissing Khan's Counterclaim with prejudice, pursuant to Fed.R.Civ.P. 56. For the reasons stated herein, the motion is granted in part and denied in part.


         A. Relevant Facts[2]

         RWI "operates a guest lodging facility franchise system comprised of federally-registered [trademarks] (the "Ramada®[3] Marks"), as well as the distinctive Ramada System." (SMF ¶ 3) RWI is a Delaware corporation headquartered in Parsippany, New Jersey. (Id. ¶ 1) PRMC is a Virginia corporation. (Id. ¶ 4) Zulfiqar Khan is a principal of PRMC. (Id. ¶ 5)

         In December 2008, RWI and PRMC entered into negotiations "to allow PRMC to open a 120-room Ramada guest lodging facility" in Lumberton, North Carolina" (the "Facility"). (Id. ¶ 6) In March 2009, RWI terminated the negotiations, "because PRMC failed to pay the initial fee and failed to execute the Special Incentive section of the proposed franchise agreement." (Id. ¶ 7)

         However, on August 26, 2009, RWI and PRMC entered into a franchise agreement (the "Agreement" or "Franchise Agreement") for the operation of the Facility. (Id. ¶ 8) Pursuant to section 5 of the Agreement, PRMC was obligated to operate the Facility as a Ramada guest lodging facility for a fifteen-year term. (Id. ¶ 10) Pursuant to section 7, section 18.1, and Schedule C of the Agreement, PRMC "was required to make certain periodic payments to RWI for royalties, service assessments, taxes, interest, reservation system user fees, and other fees (collectively, 'Recurring Fees')." (Id. ¶¶ 11-16) The Agreement also required PRMC to submit monthly financial reports to RWI and to allow RWI access to its books and records related to revenues that served as the basis for the Recurring Fees. (Id. ¶¶ 19-20) RWI could terminate the Agreement, pursuant to section 11.2, if PRMC "discontinued operating the Facility as a Ramada guest lodging establishment" or "lost possession or the right to possess[] the Facility". (Id. ¶ 21)

         Khan guaranteed PRMC's obligations under the Agreement, effective as of the date of the Agreement (the "Guaranty"). (Id. ¶ 26) The terms of the Guaranty included Khan's agreement to "immediately make each payment and perform or cause [PRMC] to perform, each unpaid or unperformed obligation of [PRMC] under the [Franchise] Agreement, " in the event of a default under the Agreement. (Id. ¶ 27) In addition, Khan agreed to pay attorney's fees and reasonable costs "incurred by RWI in enforcing its rights or remedies under the Guaranty" or Agreement. (Id. ¶ 28) Khan executed the Guaranty, and understood that by signing the Guaranty, he would be responsible for payments due and owing under the Agreement. (Id. ¶¶ 29-30)

         RWI "acknowledged the opening of the Facility, effective August 26, 2009, and further advised PRMC that it will be loaded into the Central Reservation System and live effective August 26, 2009." (Id. ¶ 9) Subsequently, in June and July 2010, RWI advised Khan by letter that PRMC owed $30, 503.92 in Recurring fees to RWI. (Id. ¶¶ 31-32) Then, on or around November 1, 2010, PRMC "lost possession of the Facility, " at which time PRMC still owed Recurring Fees to RWI. (Id. ¶ 33-34)

         RWI has demanded from Khan payment of the outstanding Recurring Fees owed to RWI under the Agreement and the Guaranty. (Id. ¶ 35) "Khan owes Recurring Fees to RWI in the amount of $114, 533.94 inclusive of interest, " and, "[i]n total, RWI seeks $125, 577.55, inclusive of Recurring Fees, interest, attorneys' fees and costs." (Id. ¶¶ 36-38)

         B. Procedural Background

         On June 9, 2015, RWI filed the complaint in this action. In Count 4 of die Complaint, "RWI demands judgment against Khan for damages in the amount of all liquidated damages or actual damages and Recurring Fees due and owing under the Agreement, together with interest, attorneys' fees, and costs of suit." (Compl. ¶ 36) On July 10, 2015, Khan filed an answer to the Complaint and a counterclaim against RWI on behalf of himself and PRMC. (ECF no. 6) The clerk rejected that filing because a corporation must be represented by counsel, and directed Kahn to re-file his Answer and Counterclaim on behalf of himself only, if he was proceeding pro se. (ECF no. 7) On August 3, 2015, RWI filed its answer to Khan's Counterclaim. (ECF no. 8) On December 8, 2015, Khan refiled the Answer and Counterclaim on behalf of himself only. (ECF no. 13)

         On December 9, 2015, at RWI's request, the Clerk of the Court entered default against PRMC for its failure to plead or otherwise defend. (ECF no. 11) On July 12, 2016, RWI moved for default judgment against PRMC only. (ECF no. 21) On December 21, 2016, the Court administratively terminated RWI's motion for default judgment, without prejudice to renewal, reasoning that "there is little utility in a partial judgment, entered while the case continues" and "that the exploration of the merits in connection with the claims brought by and against Mr. Khan would illuminate the factors relevant to entry of a default judgment." (ECF no. 32)

         On February 20, 2017, RWI filed its motion (ECF no. 36) for summary judgment on the Fourth Count of its Complaint and dismissing Khan's Counterclaim with prejudice, pursuant to Fed.R.Civ.P. 56. That motion is now before the Court.


         Federal Rule of Civil Procedure 56(a) provides that summary judgment should be granted "if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(a); see also Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505 (1986); Kreschollek v. S. Stevedoring Co., 223 F.3d 202, 204 (3d Cir. 2000). In deciding a motion for summary judgment, a court must construe all facts and inferences in the light most favorable to the nonmoving party. See Boyle v. County of Allegheny Pennsylvania, 139 F.3d 386, 393 (3d Cir. 1998). The moving party bears the burden of establishing that no genuine issue of material fact remains. See Celotex Corp. v. Catrett, 477 U.S. 317, 322-23, 106 S.Ct. 2548 (1986). "[W]ith respect to an issue on which the nonmoving party bears the burden of proof . . . the burden on the moving parry may be discharged by 'showing'-that is, pointing out to the district court-that there is an absence of evidence to support the nonmoving party's case." Celotex, 477 U.S. at 325.

         Once the moving party has met that threshold burden, the non-moving party "must do more than simply show that there is some metaphysical doubt as to material facts." Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 586, 106 S.Ct. 1348 (1986). The opposing party must present actual evidence that creates a genuine issue as to a material fact for trial. Anderson, 477 U.S. at 248; see also Fed. R. Civ. P. 56(c) (setting forth types of evidence on which nonmoving parry must rely to support its assertion that genuine issues of material fact exist). "[Unsupported allegations . . . and pleadings are insufficient to repel summary judgment." Schoch v. First Fid. Bancorporation, 912 F.2d 654, 657 (3d Cir. 1990); see also Gleason v. Norwest Mortg., Inc., 243 F.3d 130, 138 (3d Cir. 2001) ("A nonmoving party has created a genuine issue of material fact if it has provided sufficient evidence to allow a jury to find in its favor at trial."). If the nonmoving party has failed "to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial, . . . there can be 'no genuine issue of material fact, ' since a complete failure of proof concerning an essential element of the nonmoving parry's case necessarily renders all other facts immaterial." Katz v. Aetna Cas. & Sur. Co., 972 F.2d 53, 55 (3d Cir. 1992) (quoting Celotex, 477 U.S. at 322-23).

         A pro se litigant, such as Khan here, is ordinarily entitled to considerable leeway. See Niblack v. Murray, No. CV126910MASTJB, 2016 WL 4086775, at *1 n.l (D.N.J. July 29, 2016) (citing Pratt v. Port Auth. of N.Y.& N.J., 563 F.App'x 132, 134 (3d Cir. 2014) ("[B]ecause [the plaintiff] is proceeding pro se, we will construe his brief liberally."); Marcinek v. Comm'r, 467 F.App'x 153, 154 (3d Cir, 2012) (holding that courts are "under an obligation to liberally construe the submissions of a pro se litigant")). See generally Haines v. Kemer, 404 U.S. 519 (1972). I have construed Khan's answer and counterclaim, and his opposition to summary judgment in the liberal spirit of Haines.


         A. Khan's Liability for Breach of the Guaranty (Count 4)

         RWI first seeks summary judgment on Count 4 of the Complaint. There, RWI alleges that Khan is liable to RWI for the overdue Recurring Fees owed to RWI by PRMC. (Compl. ¶¶ 33-36) I will grant in part RWI's motion for summary judgment on Count 4, and grant leave to file a motion for partial summary judgment disposing of remaining issues.

         Under New Jersey law, [4] "[i]n order to prove liability on a guaranty, a plaintiff must demonstrate: (1) execution of the guarantee by the guarantor; (2) the principal obligation and terms of the guaranty; (3) lender's reliance on the guaranty; (4) default by principal obligator; (5) written demand for payment on the guarantee; and (6) failure of the guarantor to pay upon written demand. Knights Franchise Sys., Inc. v. First Value RC, LLC, No. CV134976WHWCLW, 2017 WL 1170849, at *3 (D.N.J. Mar. 29, 2017) (citing U.S. on Behalf of Small Bus. Admin, v. DelGuercio, 818 F.Supp. 725, 727-28 (D.N.J. 1993)).

         1. Elements 1-4 and 6 of Guaranty liability and ...

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