Antitrust Law Daily Wrap Up, FRANCHISING & DISTRIBUTION—D. N.J.: Days Inn awarded default judgment against former franchisee, (Aug 12, 2016)

By Michael Menzhuber, J.D., LL.M.

Days Inn Worldwide, Inc.’s (DIW’s) uncontested motion for a default judgment to recover liquidated damages and recurring fees from a former franchisee and the franchisee’s guarantors was granted by the federal district court in Newark, New Jersey (Days Inn Worldwide, Inc. v. Meera Hospitality, LLC, August 10, 2016, Walls, W.).

DIW and Meera Hospitality, LLC entered into a franchise agreement for the operation of a Days Inn guest lodging facility. Pursuant to the agreement, Meera was required to pay DIW various recurring fees. The agreement also provided that, in the event it was terminated, Meera would pay DIW liquidated damages based on a per guest room rate. Meera’s obligations under the agreement were personally guaranteed by Neal Patel and Atul Kumar.

After Meera failed to meet its financial obligations, DIW sent Meera a letter terminating the franchise agreement. The letter also stated that Meera owed liquidated damages for premature termination of the agreement.

DIW then brought an action against Meera, Patel, and Kumar which sought liquidated damages and all outstanding recurring fees. The defendants did not enter an appearance or otherwise defend the case. Before the court was DIW’s motion for default judgment.

After the court noted that the prerequisites for default judgment had been met because the defendants were properly served, it evaluated whether the following three factors weighed in favor of entry of a default judgment: (1) whether there would be prejudice to DIW if default was denied; (2) whether the defendants had a litigable defense; and (3) whether the defendants’ delay was due to culpable conduct.

After noting that the defendants failed to oppose the motion and that DIW set forth a sufficient claim for breach of contract, the court determined that: (1) DIW would be prejudiced if default was denied; (2) the defendants did not present any arguments or suggest any facts to suggest that they had a litigable defense; and (3) the defendants failed to retain counsel in the six months since the filing of the complaint.

Based on a review of DIW’s submissions, the court found that the amounts of recurring fees, liquidated damages, and interest on the liquidated damages requested by DIW accurately represented what the defendants owed DIW under the franchise agreement and guaranty.

The case is No. 16-1070 (WHW)(CLW).

Attorneys: Matthew Ryan Cali (LeClair Ryan, PC) for Days Inn Worldwide, Inc.

Companies: Days Inn Worldwide, Inc.

Cases: FranchisingDistribution NewJerseyNews