Antitrust Law Daily Wrap Up, FRANCHISING & DISTRIBUTION—D. N.J.: Days Inns awarded default judgment against former franchisee, (Mar 7, 2016)

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

Days Inns Worldwide, Inc.’s (DIW’s) motion for a default judgment to recover liquidated damages and recurring fees from a former franchisee and two of its members was granted by the federal district court in Newark, New Jersey (Days Inns Worldwide, Inc. v. Mangur LLC, March 4, 2016, McNulty, K.).

DIW and Mangur LLC entered into a franchise agreement for the operation of a Days Inn guest lodging facility. Pursuant to the agreement, Mangur was required to operate the facility in accordance with DIW’s “system standards” and to meet certain financial obligations, which included paying DIW various recurring fees. Mangur’s obligations under the agreement were personally guaranteed by Maninder Anand and Monica Anand.

After Mangur repeatedly defaulted on its obligation to operate the facility in accordance with “system standards” and to meet its financial obligations, DIW sent Mangur a letter terminating the franchise agreement. The letter also stated that Mangur owed liquidated damages for premature termination of the agreement.

DIW then brought an action against Mangur, Maninder Anand, and Monica Anand which sought liquidated damages, or in the alternative actual damages, and recurring fees under theories of breach or unjust enrichment. The defendants did not enter an appearance or otherwise defend the case. DIW filed a motion for default judgment.

After the court found that the perquisites 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 the party subject to default had a meritorious defense; (2) the prejudice suffered by the party seeking the default judgment; and (3) the culpability of the party subject to default.

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, based on the evidence presented, the defendants did not have a meritorious defense. Additionally, DIW was prejudiced by the defendants’ failure to answer the complaint and that, absent any evidence to the contrary, the defendants’ failure to answer evinced their culpability in the default.

The case is No. 15-cv-2027.

Attorneys: Joseph C. Megariotis (LeClairRyan) for Days Inns Worldwide, Inc.

Companies: Days Inns Worldwide, Inc.; Mangur LLC

Cases: FranchisingDistribution NewJerseyNews