United States District Court, D. Maryland
THEODORE D. CHUANG United States District Judge.
8, 2017, Plaintiff Choice Hotels International, Inc.
("Choice Hotels") filed an Application to Confirm
Arbitration Award against Defendants Falguni K. Patel and
Minesh J. Patel. 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 to pay required
royalties and other fees. 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 January 5, 2017, the
arbitrator awarded Choice Hotels a total of $104, 599.37 in
damages, comprised of contractually specified franchise fees,
interest, liquidated damages, and arbitration expenses.
Patel was served with the Application on May 17, 2017.
Falguni Patel was served on June 15, 2017. No Defendant has
filed a response to the Application. On July 25, 2017, Choice
Hotels filed a Motion for Clerk's Entry of Default and a
Motion for Default Judgment against all Defendants. The Clerk
entered an Order of Default on August 1, 2017. Although
Defendants were served with the Motion for Default Judgment,
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, 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, 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 headquarters located in
Rockville, Maryland. Falguni Patel and Minesh Patel are
citizens of Texas. In addition, the amount in controversy is
greater than the $75, 000 jurisdictional minimum under 28
U.S.C. S 1332.
Federal Arbitration Act ("FAA"), 9 U.S.C. SS 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.
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 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 ¶ 21, Appl.
Ex. 1, ECF NO.1-1. Choice Hotels filed its application to
confirm the 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 arbitration award.
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. 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 Del,
Inc. v. DataQuick Info. 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 Agreement,
specifically, a failure to pay royalties and other fees due
under the Agreement. 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' agreement. 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. § 10(a). Accordingly,
the Court will grant the Motion for Default Judgment ...