United States District Court, D. Maryland
THEODORE D. CHUANG UNITED STATES DISTRICT JUDGE
October 4, 2016, Plaintiff Choice Hotels Internationa,, Inc.
("Choice Hotels") filed an Application to Confirm
Arbitration Award against Defendan~s Sandhu Hospitality, Inc.
("Sandhu Hospitality",, Manjit Sandhu, Mohinder
Sandhu, and Jaskiran Sandhu. The award at issue was based on
Defendants' alleged breach of a franchise agreement
between the parties ("the Franchise Agreement"),
specifically the failure of Defendants' hotel to pass a
required quality assurance review and Defendants' failure
to correct deficiencies identified in that review. Although
Defendants were notified of arbitration proceedings relating
to the alleged breach of contract, they did not present any
evidence or participate in the arbitration proceeding.. On
May 13, 2016, the arbitrator awarded Choice Hotels a total of
$85, 135.08 in damages, comprised of contractually specified
franchise fees, interest, liquidated damages, and arbitration
Hospitality was served with the Application on March 1, 2017.
Manjit Sandhu, Mohinder Sandhu, and Jaskiran Sandhu were
served on May 16, 2017. No Defendant has filed a response to
the Application. On May 22, 2017, Choice Hotels filed a
Motion for Clerk's Entry of Default. The Clerk entered an
Order of Default on June 20, 2017. On June 23, 2017, Choice
Hotels filed a Motion for Default Judgment against all
Defendants. Although Defendants were served with the Motion,
to date, no Defendant has responded to it or to any other
filing in this case. The Motion is now ripe for disposition,
and the Court finds no hearing necessary. See D. Md.
Local R. 105.6. For the reasons set forth below, the Motion
for Default Judgment is GRANTED.
Motion for Default Judgment, 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, 411
(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, 433 (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 as a
matter of law. See D.H. Blair & Co. v.
Gottdiener, 462 F.3d 95, 109-10 (2d Cir. 2006).
The Arbitration Award
Court is satisfied that it has diversity jurisdiction over
this case pursuant to 28 U.S.C. S 1332. Choice Hotels is a
Delaware corporation with its headquartess located in
Rockville, Maryland. Sandhu Hospitality, Inc. is a citizen of
Kansas. Manjit Sandhu, Mohinder Sandhu, and Jaskiran Sandhu
are citizens of California. In addition, the amount in
controversy is greater than the $75, 000 jurisdictionll
minimum under 28 U.S.C. S 1332.
The Federal Arbitration Act ("FAA"), 9 U.S.C.
§§ 1-16 (2012), provides in part
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.
9 U.S.C. S 9. Here, the Franchise Agreement contains an
arbitration clause that states that "any controversy or
claim arising out of or relating to this Agreemen,, or the
breach of this Agreemen,, . . . will be sent
to final and binding arbitration, " and that
"D]udgment on the arbitration award may be entered in
any court having jurisdiction"" Franchise Agreement
~ 21, Appl. Ex. 2, ECF No. 1-2. Choice Hotels filed its
application to confirm the award within one year of the
arbitratorss decision. The award was rendered in the State of
Maryland. The Court is therefore satisfied that the
requiremenss 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. !d. 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. S 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., Dist. 31, 933 F.2d 225, 229 (4th
Cir. 1991). Where an arbitration award is challenged, the
party opposing the award bears the burden of proving the
existence of grounds for vacating the award. Three S Dei,
Inc. v. DataQuickInfo. Sys., Inc., 492 F.3d 520, 527
(4th Cir. 2007).
Choice Hotels alleges, and the arbitrator awarded damages
for, a breach of the parties' Franchise Agreemen,,
specifically, a failure to pass a quality assurance review
and correct identified deficiencies, resulting in the
termination of the Franchise Agreemen.. As noted above, the
Franchise Agreement provides that a claim for breach of the
agreement is subject to arbitration, so the claims resolved
by arbitration were within the scope of the parties'
agreemen.. Although Defendants were served in this case and
received notice of the Motion, they have failed to file an
Answer to Choice Hotels' Application or otherwise make a
showing of any grounds for vacating the arbitration award.
Nor is there anything in the record to suggest that any of
the limited grounds for setting aside an arbitration award
are present in this case. See 9 U.S.C. S 10(a).
Accordingly, the Court will grant the Motion for Default