Choice Hotels International, Inc. v. Gopi Hospitality, LLC et al, No. 8:2018cv01680 - Document 14 (D. Md. 2018)
Court Description: MEMORANDUM OPINION (c/m to Defendants 10/2/18 sat). Signed by Judge Deborah K. Chasanow on 10/2/2018. (sat, Chambers)
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Choice Hotels International, Inc. v. Gopi Hospitality, LLC et al Doc. 14 IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MARYLAND : CHOICE HOTELS INTERNATIONAL, INC. v. : : Civil Action No. DKC 18-1680 : GOPI HOSPITALITY, LLC, et al. : MEMORANDUM OPINION Plaintiff filed a motion for default judgment on July 24, 2018. (ECF No. 6). For the following reasons, the motion will be granted as to the corporate defendant and denied as to the individual defendants. I. Background Plaintiff commenced this action on June 8, 2018 by filing an application to confirm an arbitration award against Defendants Gopi Hospitality, LLC, Upesh Shah (“Mr. Shah”), and Vipul M. Patel (“Mr. Patel”). (ECF No. 1). The attached “Final Award,” dated January 31, 2018 states Plaintiff established by a preponderance of the evidence that: (1) Defendants Gopi Hospitality, LLC, Mr. Shah, and Mr. Patel materially defaulted on the franchise agreement entered into on May 7, 2007; (2) the agreement was properly terminated; and (3) Plaintiff incurred damages under the franchise agreement. Pursuant to the arbitration clause in the parties’ franchise agreement, Plaintiff commenced arbitration proceedings Dockets.Justia.com with the American Arbitration Association on November 23, 2016. (ECF No. 1-2, at 1-2). Richard T. Seymour (“the arbitrator”) ordered Hospitality, Patel Defendants to pay, $229,526.65. Gopi jointly (ECF No. and LLC, severally, 1-2, at 4). Mr. the The Shah, and Mr. total sum of total award was comprised of $165,900 in damages for lost profits, $52,138.15 in damages other than lost profit but $11,488.50 for arbitration expenses. including interest, and (Id.). Plaintiff served Defendants with a summons and copy of the application on June 16, 2018. (ECF No. 4). Plaintiff moved for an entry of default by the Clerk (ECF No. 5) and for default judgment (ECF No. 6) on July 24, 2018. The Clerk default against all defendants on August 3, 2018. entered (ECF No. 8). Individual Defendants Mr. Shah and Mr. Patel filed a motion for extension of time on August 13, 2018, requesting additional 30 days to answer Plaintiff’s complaint. 9). The court construed Defendants’ motion as a an (ECF No. motion to vacate the entry of default and provided Plaintiff fourteen (14) days to respond. Defendants (ECF No. 10). filed a “reply by the defendant towards the application filed by the plaintiff for the arbitration award” on August 11, 2018. (ECF No. 11). Defendants’ motion. Plaintiff did not respond to In a memorandum opinion and order dated September 4, 2018, the court accepted the Individual Defendants’ reply as an answer to Plaintiff’s application on behalf of the 2 Individual Defendants Mr. Shah and Mr. Patel and reminded the corporate defendant, Gopi Hospitality, LLC, that it may appear only through counsel. vacated the Clerk’s (ECF No. 12). entry of The opinion and order also default Defendants, Mr. Shah and Mr. Patel. as to (Id.). the Individual Thus, the motion for default judgment can only apply to the corporate defendant. II. Motion for Default Judgment A defendant’s default does not automatically entitle the plaintiff to entry of a default judgment. Instead, the decision to enter default is within the court’s discretion. See Dow v. Jones, 232 F.Supp.2d 491, 494 (D.Md. 2002); 10A Charles Alan Wright et al., Federal Practice and Procedure § 2682 (4th ed. 1998) (“Rule 55(a) [] authorizes a default to be entered against any party who fails to plead or otherwise defend within the 21 days allowed by Rule 12(a). to grant additional defend.”). time Of course, the court has discretion to a party to plead or otherwise The United States Court of Appeals for the Fourth Circuit has a “strong policy that cases be decided on their merits,” United States v. Shaffer Equip. Co., 11 F.3d 450, 453 (4th Cir. 1993), but recognizes the court’s discretion to grant default judgment “when the adversary process has been halted because of an [] unresponsive party,” SEC v. Lawbaugh, 359 F.Supp.2d 418, 421 (D.Md. 2005). Upon complaint entry as to of default, liability “the well-pled are taken 3 as allegations true, although in a the allegations as to damages are not.” Id. at 422. Fed.R.Civ.P. 54(c) limits the type of judgment that may be entered based on a party’s default: “A default judgment must not differ in kind from, or exceed in amount, what is demanded in the pleadings.” Thus, where a complaint specifies the amount of damages sought, the plaintiff is limited to entry of a default judgment in that amount. “[C]ourts have generally held that a default judgment cannot award additional damages . . . because the defendant could not reasonably have expected that his damages would exceed that amount.” In re Genesys Data Techs., Inc., 204 F.3d 124, 132 (4th Cir. 2000). Here, the damages request in Plaintiff’s motion for default judgment is an exact replica of the amount Plaintiff sought in arbitration award. request damages interest and complies with the application for confirmation of Because both the motion and the application in the costs, the amount of Plaintiff’s damages $229,526.65, motion requirement for of exclusive default of judgment Fed.R.Civ.P. 54(c). (ECF Nos. 1, at 6; 6, at 1-2).1 Where application default for judgment confirmation is of sought an with respect arbitration to award, an the petitioner “must [also] show that it is entitled to confirmation of the arbitration award as a matter of law.” 1 United Cmty. Bank Plaintiff’s interest claim is irrelevant here because Plaintiff is entitled to recover such interest by operation of law. See 28 U.S.C. § 1961(a) (“Interest shall be allowed on any money judgment in a civil case recovered in a district court.”). 4 v. Arruarana, 2011 WL 2748722, at *2 (W.D.N.C. July 13, 2011) (citing D.H. Blair & Co. v. Gottdiener, 462 F.3d 95, 109–10 (2d Cir. 2006); McColl Partners, LLC v. DME Holdings, LLC, No. 3:10cv274, 2011 WL 971575, at *1 (W.D.N.C. Mar. 17, 2011)). As set forth in 9 U.S.C. § 9: If the parties in their agreement have agreed that a judgment of the court shall be entered upon the award made pursuant to the arbitration, and shall specify the court, then at any time within one year after the award is made any party to the arbitration may apply to the court so specified for an order confirming the award, and thereupon the court must grant such an order unless the award is vacated, modified, or corrected as prescribed in sections 10 and 11 of this title. If no court is specified in the agreement of the parties, then such application may be made to the United States court in and for the district within which such award was made. The arbitration clause in the parties’ franchise agreement provides, in part, that “any controversy or claim arising out of or relating to this Agreement, or the breach of this Agreement, . . . will be sent to final and binding arbitration,” and that “[j]udgment on the arbitration award may be entered in any court having jurisdiction.” (ECF No. 1-1 ¶ 21). In compliance with the arbitration clause, arbitration occurred in and a judgment was awarded in the State of Maryland. (ECF No. 1 ¶ 17). Plaintiff properly complied with 9 U.S.C. § 9 by filing its application with this court within one year after the award was 5 made. Thus, an order confirming the award must be granted unless the award is vacated, modified, or corrected. Section 10 of the Federal Arbitration Act allows vacatur of an arbitration award: (1) where the award was procured corruption, fraud, or undue means; by (2) where there was evident partiality or corruption in the arbitrators, or either of them; (3) where the arbitrators were guilty of misconduct in refusing to postpone the hearing, upon sufficient cause shown, or in refusing to hear evidence pertinent and material to the controversy; or of any other misbehavior by which the rights of any party have been prejudiced; or (4) where the arbitrators exceeded their powers, or so imperfectly executed them that a mutual, final, and definite award upon the subject matter submitted was not made. 9 U.S.C. § 10(a). Additionally, the court may vacate an arbitration award “if the arbitrator acted in manifest disregard of law.” Apex Plumbing Supply, Inc. v. U.S. Supply Co., Inc., 142 188, F.3d arbitrator’s 193 award (4th is Cir. 1998). strictly limited Court in review scope “to of an avoid frustrating the fundamental purpose of arbitration, i.e., quick dispute resolution and avoidance of the expense and delay of court proceedings.” Jih v. Long & Foster Real Estate, Inc., 800 F.Supp. 312, 317 (D.Md. 1992). Additionally, the burden of proof is on the party challenging the award to clearly establish grounds for vacating the award. Id. 6 By failing to answer or otherwise respond to Plaintiff’s application, demonstrate granting Defendant grounds the documentary arbitration award, and why hearing the Hospitality, vacating the was the and should not be a to award. In that the at the finding in submitted supported (ECF No. 1-2 ¶ 5). award failed concluded evidence credible LLC arbitration arbitrator testimonial favor of plaintiff. reason for Gopi There is no evident confirmed as to Gopi Hospitality, LLC. Accordingly, Plaintiff’s motion for the entry of a default judgment in the amount of $229,526.65, together with interest at the post-judgment rate until paid, plus costs of $400.00 will be granted as to the corporate defendant, Gopi Hospitality, LLC and denied without prejudice as to the individual defendants Mr. Shah and Mr. Patel. remaining claims. A scheduling order will be entered for the A separate order will follow. /s/ DEBORAH K. CHASANOW United States District Judge 7
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