United States District Court, D. New Jersey
KEVIN MCNULTY, U.S.D.J.
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. 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
"operates a guest lodging facility franchise system
comprised of federally-registered [trademarks] (the
"Ramada® 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)
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)
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. ¶
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)
"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. ¶
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)
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)
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)
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.
SUMMARY JUDGMENT STANDARD
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.
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).
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.
DISCUSSION AND ANALYSIS
Khan's Liability for Breach of the Guaranty (Count
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.
New Jersey law,  "[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)).
Elements 1-4 and 6 of Guaranty liability and