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Howard Johnson International, Inc. v. Virk NB Ltd.

United States District Court, D. New Jersey

June 27, 2019

HOWARD JOHNSON INTERNATIONAL, INC., a Delaware Corporation, Plaintiff,
v.
VIRK NB LTD, an Ohio Limited Liability Company; RAGHBIR VIRK, an individual; and AMARJIT VIRK, an individual, Defendants.

          ORDER

          MADELINE COX ARLEO UNITED STATES DISTRICT JUDGE

         THIS MATTER comes before the Court by way of Plaintiff Howard Johnson International, Inc.'s (“Howard Johnson”) unopposed application for an entry of default judgment[1]pursuant to Federal Rule of Civil Procedure 55(b), ECF No. 11, against Defendants Virk NB LTD (“Virk NB”), Raghbir Virk (“R. Virk”), and Amarjit Virk (“A. Virk” or, together with Virk NB and R. Virk, “Defendants”);

         and it appearing that the pending claims arise out of a breach of a franchise agreement between Howard Johnson and Virk NB, see Compl. ¶¶ 10-40;

         and it appearing that on or about July 1, 2015, Howard Johnson entered into a franchise agreement (the “Agreement”) with Virk NB for the operation of a Howard Johnson guest lodging facility in Sandusky, Ohio, id. ¶ 10;

         and it appearing that the Agreement provided, among other things, that Virk NB was obligated to operate the Howard Johnson facility for a fifteen-year term, make certain periodic payments to Howard Johnson, submit periodic financial reports to Howard Johnson, and maintain accurate financial records, id. ¶¶ 11-21;

         and it appearing that the Agreement's termination provision allowed Howard Johnson to terminate with notice for various reasons, including Virk NB's failure to pay amounts owed to Howard Johnson under the Agreement, id. ¶ 22;

         and it appearing that, in the event of termination, Virk NB would pay liquidated damages to Howard Johnson in accordance with a formula specified in the Agreement and that the prevailing party in any action to enforce the Agreement's terms would be entitled to costs and expenses, including reasonable attorney's fees, id. ¶¶ 23-24;

         and it appearing that R. Virk and A. Virk provided Howard Johnson with a personal guaranty (the “Guaranty”) of Virk NB's obligations under the Agreement, id. ¶ 25;

         and it appearing that on or about June 9, 2015, Virk NB made, and R. Virk and A. Virk co-made, an initial fee note (the “Note”) in the amount of $10, 000, id. ¶ 28;

         and it appearing that, pursuant to the terms of the Note, if termination of the Agreement occurred for any reason, or if Virk NB defaulted under the Agreement and failed to cure within the time permitted, the outstanding principal balance would be immediately due and if not paid within ten days, the outstanding principal balance would “bear simple interest at a rate of the lesser of eighteen percent (18%) per annum or the highest rate allowed by applicable law, ” and Howard Johnson would be entitled to collect reasonable attorneys fees and costs of collection, id. ¶¶ 29- 32;

         and it appearing that by letter dated February 3, 2017, Howard Johnson advised Virk NB that it was in default under the Agreement and had thirty days to cure because, among other things, Virk NB had closed its facility without Howard Johnson's consent, id. ¶¶ 33-34;

         and it appearing that by letter dated June 8, 2017, Howard Johnson advised Virk NB that it was in breach of the Agreement because it owed approximately $54, 356.27 in outstanding recurring fees and advised Virk NB that it had ten days within which to cure this monetary default, id. ¶ 35; and it appearing that by letter dated July 6, 2017, Howard Johnson advised Virk NB that it remained in breach of the Agreement because it owed approximately $58, 223.76 in outstanding recurring fees and had not cured the operational defaults outlined in the February 3, 2017 letter, id. ¶ 36;

         and it appearing that by letter dated September 1, 2017, Howard Johnson advised Virk NB that it remained in breach of the Agreement because it owed approximately $62, 286.40 in outstanding recurring fees and had not cured the operational defaults outlined in the February 3, 2017 and July 6, 2017 letters, id. ¶ 37; and it appearing that by letter dated October 18, 2017, Howard Johnson advised Virk NB that its facility received a failing score on a quality assurance inspection and that Virk NB was thus in default under the Agreement and had forty-five days within which to cure, id. ¶ 38;

         and it appearing that by letter dated December 1, 2017, Howard Johnson advised Virk NB that it remained in breach of the Agreement because it owed approximately $76, 820.44 in outstanding recurring fees and had failed to cure the operational defaults outlined in the ...


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