Antitrust Law Daily Wrap Up, FRANCHISING & DISTRIBUTION—D.N.J.: Ramada franchisee ordered to pay damages, unpaid fees, (May 19, 2016)

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

The federal district court in Newark, New Jersey, granted Ramada Worldwide Inc. (RWI) a default judgment to recover liquidated damages, unpaid fees, and attorney fees from a former guest lodging franchisee and guarantors of the parties’ licensing agreement (Ramada Worldwide Inc. v. APS Corp., May 17, 2016, Walls, W.).

APS Corporation entered into a license agreement with RWI for the operation of a Ramada guest lodging facility. Pursuant to the agreement, APS was required to pay royalties and various recurring fees. APS’s obligations under the license agreement were guaranteed by APS’s principals.

When APS later repeatedly failed to meet its financial obligations under the license agreement, RWI advised APS that: (1) it was in breach of the license agreement for failure to pay outstanding recurring fees; (2) it had ten days to cure the monetary default; and (3) the license agreement might be subject to termination if the default was not cured. RWI subsequently sent APS follow-up letters, with mounting recurring fees that included past due interest. RWI eventually terminated the license agreement and advised APS that it was required to pay liquidated damages for premature termination and all outstanding recurring fees.

RWI filed a breach of license agreement against APS and the principal guarantors. However, the claim against one of the guarantors was dismissed. The remaining defendants, despite being served, failed to plead or otherwise defend the lawsuit. After a default was entered against them, RWI moved for a default judgment seeking all liquidated or actual damages and recurring fees due under the license agreement, together with interest, attorney fees, and costs of the suit.

As an initial matter, the court determined that RWI had sufficiently pleaded the elements of its breach of contract claim because: (1) the parties had entered into a license agreement and guaranty for the operation of a lodging facility; (2) the defendants breached those contracts by failing to meet their contractual financial obligations to RWI; (3) damages flowed therefrom because RWI performed services without being compensated for them; and (4) RWI performed its own contractual obligations as promised.

The court then determined that a default judgment was appropriate because: (1) RWI would suffer prejudice if the default judgment was denied since it had already waited nearly four years since the breach of the license agreement to be paid the recurring fees, attorney fees and court costs to which it was entitled; (2) the defendants had not presented any facts or arguments to suggest that they had a litigable defense for their breaches of contract; and (3) the defendants’ failure to retain counsel in the nearly 27 month period since the filing of the complaint was arguably due to culpable conduct.

The court granted the judgment amount sought by RWI because, after reviewing RWI’s submissions, it found that these amounts accurately represented the amount owed by the defendants.

The case is No. 13-07784 (WHW) (CLW).

Attorneys: Kelly Ann Krug (LeClair Ryan) for Ramada Worldwide, Inc.

Companies: Ramada Worldwide, Inc.; APS Corp.

Cases: FranchisingDistribution NewJerseyNews