United States District Court, D. New Jersey
MADELINE COX ARLEO UNITED STATES DISTRICT JUDGE
MATTER comes before the Court on Plaintiff Howard
Johnson International, Inc.'s (“Plaintiff” or
“HJI”) Motion for Default Judgment pursuant to
Federal Rule of Civil Procedure 55(b)(2) against Defendants
Jay Shree Ganesh, LLC (“JSG”) and Bharat Patel
(“Patel” and, collectively with JSG,
“Defendants”). ECF No. 9. For the reasons set
forth below, the motion is GRANTED.
case centers on a franchise agreement between HJI and JSG for
the operation of a 65-room Howard Johnson hotel (the
“Facility”) located in Statesboro, Georgia.
Compl. ¶ 9. Plaintiff entered into the Franchise
Agreement with Defendants and alleges that Defendants
breached the agreement and are liable for damages resulting
from the breach. Id. ¶¶ 22-23.
the franchise agreement, JSG was responsible for operating
the Facility for a fifteen-year term. Id. ¶ 10.
Further, JSG was required to make certain periodic payments
to HJI (“Recurring Fees”) under the franchise
agreement. Id. ¶ 11. JSG agreed to be liable
for interest 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” on
any past due amount payable to HJI. Id. ¶ 12.
The Franchise Agreement required JSG to prepare and submit
monthly reports disclosing revenue earned at the Facility to
HJI for purposes of establishing the amount of royalties and
other Recurring Fees due to HJI. Id. ¶ 13. JSG
further agreed to keep accurate financial information and to
allow HJI to audit this information. Id. ¶ 14.
the sole constituent member of JSG, provided HJI with a
Guaranty of JSG's obligations under the agreement in
which he agreed to “immediately make each payment and
perform” each obligation of the agreement. Id.
¶¶ 3-4, 20. Patel also agreed to pay the costs HJI
incurred “in enforcing its rights or remedies under the
Guaranty or the Franchise Agreement.” Id.
could terminate the agreement with notice to JSG if JSG
either “(a) discontinued operating the Facility as a
Howard Johnson® guest lodging establishment; and/or (b)
lost possession or the right to possession of the
Facility.” Id. ¶ 15. If a termination of
the agreement occurred, JSG agreed to pay liquidated damages
to HJI at $1, 000 for each guest room of the Facility.
Id. ¶ 17. JSG also agreed that the
“non-prevailing party would ‘pay all costs and
expenses, including reasonable attorneys' fees, incurred
by the prevailing party to enforce this [Franchise] Agreement
. . . .'” Id. ¶ 18.
around October 27, 2016, JSG ceased to operate the Facility
as a Howard Johnson® guest lodging
facility. Id. ¶ 22. On December 22, 2016, HJI
acknowledged JSG's alleged breach and informed JSG of its
requirement to pay HJI liquidated damages and all outstanding
Recurring Fees within thirty days. Id. ¶ 23.
filed the Complaint on June 26, 2017, alleging breach of the
Franchise Agreement and seeking to recover outstanding
Recurring Fees and liquidated damages. ECF No. 1. The
Defendants failed to answer or otherwise respond to the
Complaint. On November 1, 2017, HJI petitioned the Clerk of
the Court for an entry of default against JSG and Patel
pursuant to Fed.R.Civ.P. 55(a). ECF No. 7. The Clerk of the
Court entered default against both Defendants on November 14,
2017. On January 12, 2018, HJI moved for entry of default
judgment against both Defendants. ECF No. 9.
Standard of Review
Rule of Civil Procedure 55(b)(2) authorizes the court to
enter a default judgment against a properly served defendant
who has failed to plead or otherwise defend the action in a
timely manner. Fed.R.Civ.P. 55(b)(2). Before entering a
default judgment the Court must: (1) determine it has
jurisdiction both over the subject matter and parties; (2)
determine whether defendants have been properly served; (3)
determine whether the Complaint sufficiently pleads a cause
of action; and (4) determine whether the plaintiff has proved
damages. See Chanel, Inc. v. Gordashevsky, 558
F.Supp.2d 532, 535-36 (D.N.J. 2008); Wilmington Savings
Fund Soc., FSB v. Left Field Props., LLC, No. 10-4061,
2011 WL 2470672, at *1 (D.N.J. June 20, 2011). Although the
facts pled in the Complaint are accepted as true for the
purpose of determining liability, the plaintiff must prove
damages. See Comdyne I, Inc. v. Corbin, 908 F.2d
1142, 1149 (3d Cir. 1990).
prior to granting default judgment, the Court must make
explicit factual findings as to: (1) whether the party
subject to the default has a meritorious defense; (2) the
prejudice suffered by the party seeking default judgment; and
(3) the culpability of the party subject to default. Doug
Brady, Inc. v. N.J. Bldg. Laborers Statewide Funds, 250
F.R.D. 171, 177 (D.N.J. 2008).