United States District Court, D. Maryland
Theodore D. Chuang United States District Judge
21, 2016, Choice Hotels International, Inc. ("Choice
Hotels") filed an Application to Confirm Arbitration
Award against Raj, Inc. and Nutan Bhakta (collectively,
"Defendants"). The award was based on Defendants'
alleged breach of a franchise agreement between the parties
("the Franchise Agreement"), specifically,
Defendants' failure to pay various fees due under its
terms. The arbitrator awarded Choice Hotels a total of $132,
198.13, comprised of fees, interest, liquidated damages, and
arbitration expenses. Defendants did not present any evidence
or participate in the arbitration hearing.
were served with the Application on July 29, 2016. On
September 8, 2016, Choice Hotels filed a Motion for
Clerk's Entry of Default and a Motion for Judgment by
Default against Defendants. The Clerk entered a default
against Defendants on September 28, 2016.
Defendants were served with the Motion for Judgment by
Default, to date, they have not responded to it, or to any
other filing in this case. The Motion is now ripe for
disposition, and the Court finds that no hearing is
necessary. See D. Md. Local R. 105.6. For the
reasons set forth below, the Motion is GRANTED.
Motion for Judgment by Default, Choice Hotels asserts that
Defendants have failed to file a timely responsive pleading
to its Application. Thus, Choice Hotels argues that it is
entitled to default judgment against Defendants in the amount
of the arbitration award and costs.
Federal Rule of Civil Procedure 55(b)(2), a default judgment
after an entry of default is left to the discretion of the
court. S.E.C. v. Lawbaugh, 359 F.Supp.2d 418, 421
(D. Md. 2005). Although the United States Court of Appeals
for the Fourth Circuit recognizes a "strong policy that
cases be decided on their merits, " United States v.
Shaffer Equip. Co., 11 F.3d 450, 453 (4th Cir. 1993), a
default judgment may be appropriate when a party is
unresponsive, Lawbaugh, 359 F.Supp.2d at 422-23
(citing Jackson v. Beech, 636 F.2d 831, 836 (D.C.
Cir. 1980)). When default judgment is sought with respect to
an application for confirmation of an arbitration award, the
plaintiff must show that it is entitled to confirmation of
the arbitration award as a matter of law. See D.H. Blair
& Co. v. Gottdiener, 462 F.3d 95, 109-10 (2d Cir.
The Arbitration Award
Court is satisfied that it has diversity jurisdiction over
this case pursuant to 28 U.S.C. § 1332. Choice Hotels is
a Delaware corporation with its headquarters located in
Rockville, Maryland. In the Motion for Judgment by Default,
Choice Hotels asserts that Raj, Inc. is a Kansas corporation
with its principal place of business in Kansas and that
Bhakta is a citizen of Kansas. In addition, the amount in
controversy is greater than the $75, 000 jurisdictional
minimum under 28 U.S.C. § 1332.
Federal Arbitration Act ("FAA"), 9 U.S.C.
§§ 1-16 (2012), provides in part that:
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.
Id. § 9. Here, the Franchise Agreement contains
an arbitration clause that states 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." Franchise Agreement ¶ 22, Appl. Ex.
2, ECF No. 1-3. Choice Hotels filed its Application to
Confirm Arbitration Award within one year of the
arbitrator's decision. The award was rendered in the
State of Maryland. The Court is therefore satisfied that the
requirements of the FAA are met, such that it may review the
review of an arbitration award is "severely
circumscribed, " and, in fact, is "among the
narrowest known at law because to allow full scrutiny of such
awards would frustrate the purpose of having arbitration at
all-the quick resolution of disputes and the avoidance of the
expense and delay associated with litigation." Apex
Plumbing Supply, Inc. v. U.S. Supply Co., Inc., 142 F.3d
188, 193 (4th Cir. 1998) (footnote omitted). Thus, where
there is a valid contract between the parties providing for
arbitration, and the arbitration resolved a dispute within
the scope of the arbitration clause, federal courts may
vacate an arbitration award only upon a showing of one of the
grounds set forth in the FAA, or if the arbitrator acted in
manifest disregard of law.' Id. Section 10 of
the FAA limits review to the following grounds: (1) "the
award was procured by-corruption, fraud, or undue
means"; (2) "there was evident partiality or
misconduct" on the part of the arbitrators; (3)
"the arbitrators were guilty of misconduct" by
which "the rights of any party have been
prejudiced"; Or (4) "the arbitrators exceeded their
powers." 9 U.S.C. § 10(a). A misinterpretation of a
contract, or of law, does not suffice to overturn an award.
See Upshur Coals Corp. v. United Mine Workers of Am.,