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Choice Hotels International, Inc. v. SNV Hospitality, LLC

United States District Court, D. Maryland, Southern Division

September 22, 2016

CHOICE HOTELS INTERNATIONAL, INC., Plaintiff,
v.
SNV HOSPITALITY, LLC, ET AL., Defendants.

          MEMORANDUM OPINION

          George J. Hazel, United States District Judge

         Pursuant to Fed.R.Civ.P. 55(b), Plaintiff Choice Hotels International, Inc. ("Plaintiff* or "Choice''') has filed a Request for Default by Judgment, with a supporting affidavit, against Defendants SNV Hospitality, LLC and Muklesh Patel (collectively, "Defendants"). ECF No. 6; ECF No. 6-2. Presently pending before the Court is Plaintiffs Amended Motion for Judgment by Default. ECF No. 10. A hearing is not necessary in this case. See Loc. R. 105.6 (D. Md.). For the reasons that follow, Plaintiffs Amended Motion for Judgment by Default 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. 10 ¶ 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 Comfort Inn®.*' Id. Defendant SNV Hospitality, LLC is "based upon information, knowledge and belief, a limited liability company organized under the laws of the State of Ohio, with principal place of business located in Ohio." Id. ¶ 2. Defendant Muklesh Patel is "based upon information, knowledge and belief, a resident and citizen of the State of Ohio." Id. ¶3. On or about December 29, 2005, Choice entered into a Franchise Agreement with Defendants, individually, jointly and severally, under which Choice granted Defendants a limited and revocable license to operate a Comfort Inn hotel in Wapakoneta. Ohio. 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. 1-2 at I.[2] In Plaintiffs Amended Motion for Judgment by Default, Plaintiff states:

During the term of the Franchise Agreement, Defendants defaulted on their material obligations to make timely payment to Choice of franchise-related fees. Choice issued Defendants a written Notice of Default, and Defendants failed to cure said Default. Accordingly and as a result of Defendants' material breach, Choice terminated the Franchise Agreement.

Id. ¶ 5.

         On or about August 21, 2014, Choice initiated arbitration proceedings against Defendant with the American Arbitration Association, Case No.: 01-14-0001-2633, "seeking resolution of its dispute with Defendants." Id. ¶ 7. "Specifically, Choice claimed that Defendant materially breached the parties' Franchise Agreement and owed Choice fees, damages, interest, and costs incurred as a result of Defendant's breach." Id.

         Arbitration proceedings were scheduled for March 17, 2015. See ECF No. 1 at 1; ECF No. 1-1. Plaintiff sent notice of the proceedings to Defendants at their last known address "by regular mail, certified mail and/or overnight FedEx delivery." ECF No. 10 ¶ 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 Defendants in the amount of $80, 961.94. ECF No. 10 ¶ 11; ECF No. 1-1. The Arbitrator also ordered Defendants to reimburse Choice in the sum total of $2, 850.00 for "administrative filing fees of the AAA" and "fees and expenses of the arbitrator." ECF No. 1-1.

         Choice filed an "Application to Confirm Arbitration Award" in this Court on August 12, 2015. ECF No. 1. The "Ex Parte Award of Arbitrator, " signed by Kathryn P. Broderick of the American Arbitration Association on March 17, 2015, is attached to the Application. ECF No. 1-1. Choice named SNV Hospitality, Inc. and Muklesh Patel as defendants. ECF No. 1. The court issued summons to Defendants on August 14, 2015, and the summons were returned as executed on October 8, 2015. ECF No. 3; ECF No. 4. The Clerk made an entry of default for want of answer against Defendants on December 3, 2015. ECF No. 8. This Court issued a Letter Order directing Plaintiff to supplement its Motion for Default Judgment, and Plaintiff filed its currently pending Amended Motion for Judgment by Default on August 2, 2016. ECF No. 10.

         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 188, 193 (4th Cir. 1998). The situations permitting a court to vacate an arbitration award are found at 9 U.S.C. § 10(a), which provides:

         In any of the following cases the United States court in and for the district wherein the award was made may make an order vacating the award upon ...


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