Antitrust Law Daily Wrap Up, FRANCHISING & DISTRIBUTION—D.N.J.: Howard Johnson franchisee guarantors assessed damages in default judgment, (Jun 2, 2014)

By Edward L. Puzzo, J.D.

The federal district court in Newark, New Jersey, has entered a default judgment and assessed damages against the personal guarantors of a terminated Howard Johnson franchise agreement (Howard Johnson International, Inc. v. Ebuehi, May 29, 2014, Cecchi, C.).

Background. Viva Vista Ventures, Inc. entered into a franchise agreement with Howard Johnson International in June 2008. In April 2009, after Viva Vista discontinued operating their facility as a Howard Johnson's, Howard Johnson issued a termination letter and subsequently brought an action against Finnian Ebuehi and Elizabeth Ebuehi, as co-owners of Viva Vista and personal guarantors under the franchise agreement, seeking liquidated damages, payment of past due recurring fees, and attorneys fees. After the defendants failed to respond beyond submitting an answer to the complaint, and the court clerk entered a default, and Howard Johnson moved for a default judgment.

Default justified. In order to prove the breach of contract claims of the complaint, the court stated, Howard Johnson had to show the existence of a valid contract, the Ebuehis’ failure to perform, and damages. Based on the written contract, the court continued, neither Viva Vista nor the Ebuehis performed their contractual obligations. The court further found that Howard Johnson would suffer prejudice if the default judgment were denied because it had no other means of vindicating its claims. As to whether the defendants had a meritorious defense, the court noted their answer only presented bare-bones defenses without factual detail, and that after the court clerk entered a default six months prior to this opinion, defendants made no effort to lift the default or otherwise defend against Howard Johnson's motion for default judgment. Since plaintiff would suffer prejudice if the default judgment was denied, and it did not appear that defendants had a meritorious defense, the court ruled that Howard Johnson was entitled to a default judgment. The remaining issue was the extent of damages.

Damages. Howard Johnson relied upon extrinsic evidence to prove its damages. Proceeding under Fed. R. Civ. P. 55(b)(2), the court found that pursuant to the terms of the franchise agreement and guarantee, Howard Johnson's should be awarded $50.070.77, plus $276,000 in liquidated damages, $3.929.21 under the connectivity agreement, $229,439.10 in interest, and $8,723.19 and $2,772.08 in attorney fees and costs.

The case is Civil Action No. 11-cv-1346.

Attorneys: Justin Michael Vogel (LeClairRyan) for Howard Johnson International, Inc. David T. Schlendorf for Finnian Ebuehi.

Companies: Howard Johnson International, Inc.

Cases: FranchisingDistribution NewJerseyNews