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Choice Hotels International, Inc. v. Harikrishna, Inc.

United States District Court, D. Maryland, Southern Division

September 19, 2016

CHOICE HOTELS INTERNATIONAL, INC., Plaintiff,
v.
HARIKRISHNA, INC., Defendant.

          Choice Hotels International, Inc., Plaintiff, represented by Zachary E. Berge, Choice Hotels International Inc.

          MEMORANDUM OPINION

          GEORGE J. HAZEL, District Judge.

         Pursuant to Fed.R.Civ.P. 55(b), Plaintiff Choice Hotels International, Inc. ("Plaintiff" or "Choice") has tiled a Motion for Default Judgment, with a supporting affidavit, as to Defendant Harikrishna, Inc. ("Defendant" or "Harikrishna, Inc."). ECF No. 7. A hearing is not necessary in this case. See Loc. R. 105.6 (D. Md.). For the reasons that follow, Plaintiff's Motion for Default Judgment will be granted.

         I. BACKGROUND

         Choice is a "publicly-traded company incorporated under the laws of the State of Delaware, with principal headquarters in Rockville, Maryland." ECF No. 11 ¶ 1.[1] Choice is "primarily in the business of franchising hotels domestically and internationally... including but not limited to the trade and brand marks, names and systems associated with Quality Inn®." Id. Defendant is "based upon information, knowledge and belief, a limited liability company organized under the laws of the State of Nebraska, with principal place of business located in Nebraska." Id. ¶ 2. On or about December 28, 2010, Choice entered into a Franchise Agreement with Defendant, under which Choice granted Defendant a limited and revocable license to operate a Quality Inn hotel in Omaha. Nebraska. Id. ¶ 4. The parties' Franchise Agreement contained an arbitration clause, stating in relevant part that "any controversy or claim arising out of or relating to this Agreement... will be sent to final and binding arbitration before either the American Arbitration Association, J.A.M.S., or National Arbitration Forum..." See ECF No. 1-5. In Plaintiff's Supplemental Motion for Default Judgment, Plaintiff states:

During the term of the Franchise Agreement, Defendants transferred the Hotel to a new owner without Choice's prior consent in violation of Section 9(d) of the Franchise Agreement. Such action constituted material default of the terms of the Franchise Agreement, and, accordingly, on or about May 1, 2012, Choice terminated the Franchise Agreement in accordance with Section 10 of the Franchise Agreement.

Id. ¶ 5.

         On or about January 29, 2015, Choice initiated arbitration proceedings against Defendant with the American Arbitration Association, Case No.: XX-XX-XXXX-XXXX, "seeking resolution of its dispute with Defendants." Id. ¶ 7. "Specifically, Choice claimed that Defendant materially breached the parties' Franchise Agreement and owed Choice damages and costs incurred as a result of Defendant's breach." Id.

         Arbitration proceedings were scheduled for August 13, 2015. See ECF No. 7-1 ¶ 3; ECF No. 1-4. Plaintiff sent notice of the proceedings to Defendants at their last known address "by regular mail, certified mail and/or overnight Fed Ex delivery." ECF No. 11 ¶ 9. "Defendants failed to appear or participate during any proceeding." Id. The Arbitrator determined that "Defendant had received due and proper notice of all proceedings in accordance with AAA's Commercial Rules, the Franchise Agreement, and Maryland law" and entered an award in Choice's favor against Defendant in the amount of $171, 360.00. ECF No. 11 ¶ 11; ECF No. 1-4. The Arbitrator also ordered Defendants to reimburse Choice in the sum total of $7, 778.20 for "administrative fees and expenses" and "compensation and expenses of the arbitrator." ECF No. 1-4.

         Choice Hotels filed an "Application to Confirm Arbitration Award" in this Court on November 20. 2015. ECF No. 1. The "Ex Parte Award of Arbitrator, " signed by John Connolly of the American Arbitration Association on August 13, 2015, is attached to the Application. ECF No. 1-4. Choice Hotels named Harikrishna, Inc. and Mahendra Patel as defendants. ECF No. 1. The court issued summons to Defendants on November 24, 2015, and the summons were returned as executed on December 14, 2015. ECF No. 3; ECF No. 4. Plaintiff stipulated to the dismissal of Defendant Patel, and Patel was terminated as a party on December 14, 2015. See ECF No. 5. The Clerk made an entry of default for want of answer against Harikrishna, Inc. on March 30, 2016. ECF No. 9. Choice Hotels now requests that the Court issue judgment by default against Harikrishna, Inc. ECF No. 7.

         II. DISCUSSION

         A. Motion for Default

         "A defendant's default does not automatically entitle the plaintiff to entry of a default judgment; rather, that decision is left to the discretion of the court." Choice Hotels Intern., Inc. v. Savannah Shakti Corp., DKC-11-0438, 2011 WL 5118328 at * 2 (D. Md. Oct. 25, 2011) (citing Dow v. Jones, 232 F.Supp.2d 491, 494 (D. Md. 2002)). When a motion for default judgment is based on an arbitration award, the plaintiff "must show that it is entitled to confirmation of the award as a matter of law." Id. (citations and internal quotation marks omitted).

         Under the Federal Arbitration Act, a court may confirm an arbitration award "[i]f the parties in their agreement have agreed that a judgment of the court shall be entered upon the award made pursuant to the arbitration..." 9 U.S.C. § 9. The Court must confirm the award unless it vacates, modifies, or corrects the award under 9 U.S.C. §§ 10 or 11. Id. "Federal courts may vacate an arbitration award only upon a showing of one of the grounds listed in the Federal Arbitration Act, or if the arbitrator acted in manifest disregard of law." Apex Plumbing Supply v. U.S. Supply Co., Inc.,142 F.3d ...


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