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Howard Johnson International, Inc. v. Jay Shree Ganesh, LLC

United States District Court, D. New Jersey

August 22, 2018




         THIS 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.

         I. Background

         This 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.

         Under 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.

         Patel, 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. ¶ 21.

         HJI 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.

         On or 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.

         Plaintiff 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.

         II. Standard of Review

         Federal 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).

         Additionally, 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).

         III. Legal Analysis

         A. ...

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