United States District Court, D. Maryland
CHOICE HOTELS INTERNATIONAL, INC. Plaintiff,
GURNEE PROPERTY MANAGEMENT INC. ET AL. Defendants.
Paula Xinis, United States District Judge
January 24, 2017, Plaintiff Choice Hotels International, Inc.
(“Choice Hotels”) filed an application to confirm
an arbitration award in the above-captioned case. ECF No. 1.
Summonses were served on the Defendants, Gurnee Property
Management, Inc. (“Gurnee”) and Syed Khan
(“Khan”) on March 19, 2017. See ECF No.
10. On April 27, 2017, the Plaintiff moved for entry of
default against the Defendants pursuant to Rule 55(a) of the
Federal Rules of Civil Procedure. ECF No. 7. The Clerk
entered default on May 3, 2017. ECF No. 10. Choice Hotels has
moved for default judgment pursuant to Federal Rule of Civil
Procedure 55(b). ECF No. 8. Defendants have not filed a
response, and the time for doing so has passed. See
Loc. R. 105.2.a. Pursuant to Local Rule 105.6, a hearing is
not necessary. For the reasons stated herein, Choice
Hotels' Request for Judgment by Default is GRANTED.
action is brought by Choice Hotels, a publicly traded company
incorporated under Delaware law with a principal place of
business in Rockville, Maryland. ECF No. 1 at ¶ 1. In
2006, in Maryland, Choice Hotels entered into a franchise
agreement with Gurnee, a corporation organized under Illinois
law with a principal place of business in Gurnee, Illinois,
and Khan, an individual who is domiciled in Illinois. Choice
Hotels entered into a franchise agreement with Defendants to
open and operate a hotel using the Econo Lodge® name and
marks in Illinois. Id. at ¶¶ 2-4.
Hotels alleges that the Defendants breached the franchise
agreement by defaulting on payment of required monthly fees.
ECF No. 1 at ¶¶ 4-7. As a result, Choice Hotels
initiated arbitration proceedings as provided in the
franchise agreement. Id. at ¶ 8. The Defendants
failed to respond or appear despite having received adequate
notice of the arbitration proceedings. Id. at ¶
10. At the arbitration hearing, which took place in Maryland,
the arbitrator determined that the dispute fell under the
arbitration clause of the franchise agreement, that the
Defendants had received adequate notice of the proceedings,
and that the Defendants had breached the franchise agreement.
The arbitrator also awarded Choice Hotels $90, 762.43 in
damages. See Id. at ¶¶ 11, 12. Choice
Hotels then filed its Application to Confirm the Arbitration
Award. ECF No. 1. Choice Hotels now requests that this Court
enter default judgment in this action. Id. at ¶
Rule of Civil Procedure 55(b) provides that default judgment
may be entered “[i]f the plaintiff's claim is for a
sum certain or a sum that can be made certain by
computation” and the defendant is in default for
failing to appear. Fed.R.Civ.P. 55(b)(1). The entry of
default judgment is a matter within the discretion of the
Court. SEC v. Lawbaugh, 359 F.Supp.2d 418, 421 (D.
Md. 2005) (citing Dow v. Jones, 232 F.Supp.2d 491,
494 (D. Md. 2002)).
“the Fourth Circuit has a ‘strong policy that
cases be decided on the merits, '” Disney
Enters. v. Delane, 446 F.Supp.2d 402, 405 (D. Md. 2006)
(quoting United States v. Shaffer Equip. Co., 11
F.3d 450, 453 (4th Cir. 1993)), it is within the Court's
discretion to grant default judgment when a defendant is
unresponsive, see Park Corp. v. Lexington Ins. Co.,
812 F.2d 894, 896 (4th Cir. 1987); Disney Enters.,
446 F.Supp.2d at 405-06. To determine whether a default
judgment is appropriate, the Court engages in a two-step
inquiry: First, the Court must decide “whether the
unchallenged facts in plaintiff['s] complaint constitute
a legitimate cause of action.” Agora Fin., LLC v.
Samler, 725 F.Supp.2d 491, 494 (D. Md. 2010). Second, if
the Court finds liability is established, it must “make
an independent determination regarding the appropriate amount
of damages.” Id. The Court may hold a hearing
to determine damages, or it may rely on detailed affidavits
or other documentary evidence. Lipenga v. Kambalame,
219 F.Supp.3d 517, 525 (D. Md. 2016).
Defendants each were served with Choice Hotels'
Application to Confirm Arbitration Award on March 19, 2017,
and did not respond. See ECF No. 10. The Defendants
also did not respond to Choice Hotels' motion for entry
of default judgment, nor did Defendants move to set aside the
Order of Default entered by the Clerk of the Court. The Court
will exercise its discretion to grant default judgment in
light of the Defendants' failure to respond. See
Educ. Credit Mgmt. Corp. v. Optimum Welding, 285 F.R.D.
371, 373 (D. Md. 2012).
Hotels requests that this Court confirm the arbitration award
that it received pursuant to the Federal Arbitration Act, 9
U.S.C. §§ 9, 13. ECF No. 1 at ¶¶ 13, 17.
A plaintiff moving for default judgment to confirm an
arbitration award “must show that it is entitled to
confirmation of the arbitration award as a matter of
law.” Choice Hotels International, Inc. v. Ja
I Shree Navdurga, LLC, DKC 11-2893, 2012 WL 5995248,
at *2 (D. Md. Nov. 29, 2012) (collecting cases). Section 9 of
the Federal Arbitration Act provides that “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 so specified
for an order confirming the award.” 9 U.S.C. § 9.
Section 9 further provides that this Court must grant the
order unless the award is modified, vacated or corrected
pursuant to sections 10 and 11 of the same Act. Id.
Choice Hotels filed its motion for confirmation within one
year of the award. See ECF No. 1-2 at 3. The
arbitration took place in Maryland. ECF No. 1 at ¶ 11.
The parties are of diverse citizenship and the jurisdictional
amount in controversy has been met, so this Court properly
has jurisdiction in this action. See Id. at
¶¶ 13, 14. The dispute giving rise to the
arbitration award fell under the franchise agreement, which
included a mandatory arbitration clause. No evidence suggests
that the franchise agreement is invalid, and so this
Court's review of the arbitration award is limited to
determining whether the award was procured by corruption,
fraud, or undue means; whether the arbitrator exhibited
partiality or misconduct; whether misconduct on the part of
the arbitrator prejudiced the rights of one of the parties;
and whether the arbitrator exceeded his or her powers.
See 9 U.S.C. § 10(a).
and Khan were served in this case and received notice of
Choice Hotels' motion, but have failed to answer or to
make any showing that the arbitration award should be
vacated. Upon examining Choice Hotels' application and
supporting documents, the Court finds no reason to vacate the
award. Accordingly, the Court will grant ...