DAYS INNS WORLDWIDE, INC. v. PEARSALL HOTELS, LLC

District Court, D. New Jersey·Decided October 20, 2021·No. 2:19-cv-00508·Unknown

Opinion

Not for Publication

UNITED STATES DISTRICT COURT DISTRICT OF NEW JERSEY

DAYS INN WORLDWIDE, INC., Plaintiff,

v. Civil Action No. 19-508 OPINION PEARSALL HOTELS, LLC, and AKRUTIBEN PATEL, Defendants.

John Michael Vazquez, U.S.D.J. This matter comes before the Court on Days Inn Worldwide, Inc.’s renewed unopposed motion for default judgment against Pearsall Hotels, LLC, and Akrutiben Patel under Federal Rule of Civil Procedure 55(b). D.E. 40. The Court reviewed all submissions made in support of the motion and considered the motion without oral argument pursuant to Federal Rule of Civil Procedure 78 and Local Civil Rule 78.1(b). For the reasons that follow, Plaintiff’s motion is GRANTED. I. FACTS AND PROCEDURAL HISTORY The Court recounts the facts and procedural history relied upon in its previous Opinion and Order, D.E. 36, in response to Plaintiff’s first application for a default judgment, D.E. 35. The facts of this matter derive from the First Amended Complaint (“FAC”), D.E. 21, which the Court accepts as true for purposes of this motion for default judgment. Teamsters Pension Fund of Phila. & Vicinity v. Am. Helper, Inc., No.11-624, 2011 WL 4729023, at *2 (D.N.J. Oct. 5, 2011). On or about March 22, 2013, Plaintiff Days Inn Worldwide, Inc. (“DIW”) and Defendant Pearsall Hotels, LLC (“Pearsall”) entered into a Franchise Agreement (the “Agreement”), under which Pearsall was to operate a 41-room Days Inn guest lodging facility in Pearsall, Texas. FAC

¶ 10. Plaintiff and Pearsall entered into a SynXis Subscription Agreement (the “SynXis Agreement”) on or about July 26, 2016, “which governed Pearsall Hotels’ access to and use of certain computer programs, applications, features, and services, as well as any and all modifications, corrections, updates, and enhancements to same.” Id. ¶ 11. The FAC details numerous obligations that Pearsall undertook pursuant to the Agreement: Pearsall “was obligated to operate a Days Inn guest lodging facility for a twenty-year term,” id. ¶ 12; “was required to make certain periodic payments to DIW for royalties, system assessments, taxes, SynXis fees interest, and other fees (collectively, ‘Recurring Fees’),” id. ¶ 13; “agreed that interest is payable ‘on any past due amount payable to [DIW] under this [Franchise] Agreement 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,’” id. ¶ 14 (alterations in original); “was required to prepare and submit monthly reports to DIW disclosing, among other things, the amount of gross room revenue earned by Pearsall Hotels at the Facility in the preceding month for purposes of establishing the amount of royalties and other Recurring Fees due to DIW,” id. ¶ 15; and “agreed to maintain at the Facility accurate financial information, including books, records, and accounts, relating to the gross room revenue of the Facility” and “to allow DIW to examine, audit, and make copies of the entries in these books, records, and accounts,” id. ¶ 16. Under the terms of the Agreement, Plaintiff could terminate the Agreement with notice to Pearsall “for various reasons,” including Pearsall’s (a) failure to pay any amount due DIW under the Franchise Agreement, (b) failure to remedy any other default of its obligations or warranties under the Franchise Agreement within 30 days after receipt of written notice from DIW specifying one or more defaults under the Franchise Agreement, (c) receipt of two or more notices of default under the Franchise Agreement in any one year period, whether or not the defaults were cured, (d) failure to operate the Facility as a “Days Inn,” and/or (e) loss of possession or the right to possession of the Facility. Id. ¶ 17. Pearsall “agreed that, in the event of a termination of the Franchise Agreement . . . it would pay liquidated damages to DIW in accordance with a formula specified in the Franchise Agreement.” Id. ¶ 18. Liquidated damages were specified as “the lesser of (i) $1,000 for each guest room of the Facility was authorized to operate at the time of Termination, or (ii) the total amount of Recurring Fees generated at the Facility during the twelve full calendar months of operation immediately preceding the month in with Termination occurs.” Id. ¶ 19. The parties further agreed that the non-prevailing party would pay the costs and expenses, including attorneys’ fees, that the prevailing party expended to enforce the Agreement, or to collect amounts owed pursuant to the Agreement. Id. ¶ 20. The FAC alleges that Patel provided Plaintiff with a guaranty (“Guaranty”) of Pearsall’s obligations under the Agreement and, pursuant to the terms of the Guaranty, he would “immediately make each payment and perform or cause [Pearsall Hotels] to perform, each unpaid or unperformed obligation of [Pearsall Hotels] under the [Franchise] Agreement.” Id. ¶¶ 21-22 (alterations in original). Patel also agreed in the Guaranty “to pay the costs, including reasonable attorneys’ fees, incurred by DIW in enforcing its rights or remedies under the Guaranty or the Franchise Agreement.” Id. ¶ 23. Pearsall lost possession of the Facility on or about September 4, 2018. Id. ¶ 24. On January 16, 2019, Plaintiff acknowledged in a letter that Pearsall had terminated the Agreement, effective September 4, 2018. Id. ¶ 25. Plaintiff further advised Pearsall that it was required to pay Plaintiff “liquidated damages for the premature termination” in the sum of $24,023.66, as well as “all outstanding Recurring Fees through the date of termination.” Id. ¶ 26.

Plaintiff filed a Complaint, D.E. 1, and then the FAC on March 18, 2020, D.E. 21.1 On July 8, 2020, Plaintiff requested that default be entered against Pearsall and Patel for failure to plead or otherwise defend, D.E. 27, which the Clerk entered. Plaintiff filed its initial motion for default judgment on February 5, 2021. D.E. 35. In an Opinion and Order, the Court denied Plaintiff’s motion. D.E. 36. While the Court was satisfied that it had subject-matter and personal jurisdiction, id. at 5-6, the Court could not determine whether Plaintiff properly effected service under Federal Rule of Civil Procedure 4(e) because Plaintiff did not specify which sovereign’s law controlled and did not provide proof of service, id. at 6-7. The Court also found that “Plaintiff fail[ed] to indicate the applicable law in this diversity

action or the elements of each cause of action alleged in the FAC – much less why Plaintiff is entitled to relief.” Id. at 7. Finally, the Court held that Plaintiff had insufficiently established its entitlement to damages, as the documents it submitted were conclusory and did not explain how it arrived at the amount of requested damages. Id. at 8. Accordingly, the Court denied Plaintiff’s motion without prejudice, and granted Plaintiff “leave to cure the noted deficiencies ….” Id. at 9. Plaintiff filed a renewed motion on September 10, 2021. D.E. 40. To date, Pearsall and Patel have not responded.

1 A third Defendant, Anukul Dass, was also named in the Complaint and the FAC, but Dass was dismissed as a party on January 26, 2021. D.E. 34. II. STANDARD OF REVIEW Rule 55 of the Federal Rules of Civil Procedure permits a court to enter a default judgment against a properly served defendant who fails to respond. Anchorage Assoc. v. V.I. Bd. of Tax Review, 922 F.2d 168, 177 n.9 (3d Cir. 1990).

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