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Choice Hotels International, Inc. v. Shree Sai Properties

United States District Court, D. Maryland, Southern Division

March 17, 2017

CHOICE HOTELS INTERNATIONAL, INC. Plaintiff,
v.
SHREE SAI PROPERTIES, et at, Defendants.

          MEMORANDUM OPINION

          George J Hazel United States District Judge.

         Plaintiff Choice Hotels International, Inc. ("Plaintiff or "Choice") filed an Application to Confirm the Arbitration Award against Defendants Shree Sai Properties, LLC, Sandip Patel, and Ketan Patel (collectively, "Defendants"). Presently pending before the Court is Defendants' Motion to Dismiss Plaintiffs' Application to Confirm Arbitration Award, ECF No. 11, and Plaintiffs' Motion to Enforce Arbitration Clause, ECF No. 22. No hearing is necessary. See Loc. R. 105.6 (D. Md.). For the following reasons, Defendants' Motion to Dismiss is denied, and Plaintiffs Motion to Enforce Arbitration Clause is granted.

         I. BACKGROUND

         Plaintiff is a Delaware corporation primarily engaged in the business of hospitality franchising. ECF No. 1 at 1[1]; ECF No. 18 ¶ 1. On or about September 16, 2008, Plaintiff entered into a franchise agreement (the "Franchise Agreement*') with Defendants Shree Sai Properties, an Indiana limited liability company, Sandip Patel, and Ketan Patel, individually, jointly and severally. ECF No. 18 ¶ 1. Under this Agreement, Defendants, as franchisees, would open and operate a hotel at 7275 South County Road 75 East Exit 78, 1-69, Warren, Indiana 46792 using Choice's Comfort Inn® mark. Id. 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, or the breach of this Agreement, including any claim that this Agreement or any part of this Agreement is invalid, illegal, or otherwise voidable or void, as well as any claim that we violated any laws in connection with the execution or enforcement of this Agreement and any claim for declaratory relief, will be sent to final and binding arbitration before either the American Arbitration Association, J.A.M.S., or National Arbitration Forum in accordance with the Commercial Arbitration Rules of the American Arbitration Association . . .

ECF No. 1-2 at 1; see also ECF No. 11-2 at 19. The arbitration clause further provided that "[i]f any party fails to appear at any properly noticed arbitration proceeding, an award may be entered against the party, notwithstanding its failure to appear." Id.

         From September 16, 2008 to approximately April 9, 2012, Defendants operated the hotel in Warren, Indiana as a Comfort Inn Hotel. ECF No. 18-13 at 2. By 2011, however, Defendants had "[fallen] behind in their monthly payment obligations" to franchisor Choice. Id. Choice sent Defendants two notices of default, in February 2011 and October 2011. Id. Additionally, Choice learned in April 2012 that the property had "changed ownership" via a Purchase Agreement from Sandip and Ketan Patel to non-party Kailash Varkal. Id.; see ECF No. 11-1. Under the parties" Franchise Agreement, Defendants were prohibited from transferring the hotel without Choice's prior written consent. See ECF No. 11-2 at 10; ECF No. 18-13 at 3.

         On or about September 23, 2014, Choice filed an arbitration demand against Defendants with the American Arbitration Association ("AAA") alleging breach of contract and requesting an award for liquidated damages, costs, and expenses. ECF No. 18 ¶ 3; ECF No. 18-1. Choice sent an arbitration demand to Defendants' last known addresses, including an address in Monee, Illinois; Round Lake, Illinois; and Warren, Indiana. Id.; ECF No. 18-1 at 1-6. The AAA case administrator also sent an initiation letter to these addresses on September 26, 2014. ECF No. 18 ¶ 4; ECF No. 18-2 at 1-2. Choice states that they received a "certified returned receipt" for the demand sent to Ketan Patel at 25542 E. Sunrise Drive, Monee, IL 60449, signed by "E.R. Patel, " and confirming that the demand was received at the address sent. ECF No. 18 ¶ 5; ECF No. 18-3 at 1. However, the AAA notified Choice that the mail sent to Sandip Patel at 252 W. Spruce Drive, Round Lake, IL 60073 was returned as undeliverable. ECF No. 18 ¶ 6; ECF No. 18-3 at 3. According to Choice, they were obliged by the Franchise Agreement to continue sending correspondence to this address until the franchisees changed it, but Choice ''performed [an] additional search" and identified a new personal address for Sandip Patel at 5409 Castle Pines, Knoxville, TX 37920. Id. ¶ 7; ECF No. 18-5 at 1. Choice attests that neither they nor the AAA received undeliverable returned mail from the Knoxville address. ECF No. 18 ¶ 8. Thus, all further correspondence was sent to the addresses in Monee, IL, Warren, IL. and Knoxville, TN. Id. ¶ 9.

         Between January 2015 and October 2015, numerous communications were sent by Choice or the AAA to the Defendants, including letters selecting and appointing the arbitrator, scheduling various hearings, and reporting the results of those hearings. ECF No. 18 at 4-6; ECF Nos. 18-6-18-16. A preliminary hearing was held by conference call on March 27. 2015. ECF No. 18 ¶ 14. Defendants did not attend the call. Id. The AAA sent Defendants the Report of the Preliminary Hearing on April 13, 2015. Id. ¶ 15; ECF No. 18-11 at 1. A return receipt for the Report signed by "C.R. Patel" at the Knoxville address was received. ECF No. 18 ¶ 16; ECF No. 18-12 at 3. The Report of the Preliminary Hearing established a motions deadline of May 8, 2015, a deadline for responses of May 15, 2015, and stated that if "no Response is received[, ] the Arbitrator will issue a decision on May 29, 2015." ECF No. 18-11 at 5. Choice filed a Motion for Judgment on or about May 8, 2015 and sent copies to Defendants. ECF No. 18 ¶ 18; ECF No. 18-13. Defendants did not respond. ECF No. 18 ¶ 18. The Arbitrator rendered her final award on October 8, 2015. ECF No. 18 ¶ 21; ECF No. 18-16 at 1-3. Another certified return receipt signed by "S. Patel" was received from the Knoxville address on October 17. 2015. ECF No. 18 ¶ 21; ECF No. 18-16 at 4. Defendants did not participate in any part of these proceedings. See ECF No. 18 at 6.

         Choice filed the instant Complaint in this Court on January 27, 2016. seeking confirmation of the arbitration award. ECF No. 18 ¶ 22. On June 14, 2016, Defendants Ketan Patel and Sandip Patel filed a Motion to Dismiss, ECF No. 11, and separately filed an Answer to the Complaint, a Third Party Complaint against Kailash Varkal, a Cross-Claim against Shree Sai Properties, and a Counterclaim against Choice Hotels International, ECF No. 12. Plaintiff filed a Response in Opposition to the Motion to Dismiss on July 8, 2016, ECF No. 18, and a Motion to Enforce Arbitration Clause and Answer to the Counterclaim, ECF No. 22, on August 30, 2016. Defendants filed their Response in Opposition to the Motion to Enforce Arbitration Clause on September 19, 2016. ECF No. 25. The pending motions are now ready for resolution.

         II. ANALYSIS

         By the terms of the parties" signed Franchise Agreement, the authenticity of which has not been disputed, the parties agreed to submit claims arising out of the Agreement to arbitration. See ECF No. 1-2 at 1; ECF No. 11-2 at 19. The Federal Arbitration Act, 9 U.S.C. § 1 el seq., provides:

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. . .

9 U.S.C. § 9 (emphasis added). An award has been issued in this matter by an arbitrator. ECF No. 1-1 at 1. The arbitration clause of the parties' Agreement states that "[j]udgment on the arbitration award may be entered in any court having jurisdiction." See ECF No. 1-2 at 1; ECF No. 11-2 at 19. Defendants have not filed a Motion to Vacate in this case; rather, they have filed a Motion to Dismiss. Nonetheless, the Court will construe Defendants' Motion liberally as a Motion to Vacate. As ...


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