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Choice Hotels International, Inc. v. Khan

United States District Court, D. Maryland

February 26, 2018



          DEBORAH K. CHASANOW United States District Judge

         Presently pending and ready for resolution are an application to confirm arbitration award against Defendant Muhammad Khan (ECF No. 1) and motions for clerk's entry of default (ECF No. 7) and default judgment (ECF No. 8) as to Defendant Khan, filed by Plaintiff Choice Hotels International, Inc. (“Plaintiff”). The issues have been briefed, and the court now rules, no hearing being deemed necessary. Local Rule 105.6. For the following reasons, the motions will be granted.

         I. Background

         Plaintiff commenced this action on December 1, 2017, by filing an application to confirm an arbitration award against Defendant Khan and Abdus Salam. (ECF No. 1). Mr. Salam was dismissed as a Defendant, without prejudice, on January 11, 2018. (ECF No. 6). The attached “ex-parte award of arbitrator, ” dated August 31, 2017, recites that Plaintiff established by a preponderance of the evidence that: Defendant Khan, Mr. Salam, and Frontier Hotels Inc. materially defaulted on the franchise agreement, entered into on November 20, 2008; the agreement was properly terminated; and Plaintiff incurred damages under the franchise agreement for unpaid royalty fees and liquidated damages.[1] (ECF No. 1-3, at 1-2). The arbitrator ordered Defendant Khan, Mr. Salam, and Frontier Hotels Inc. to pay, jointly and severally, the total sum of $307, 118.85 (consisting of $63, 501.52 for unpaid royalty fees, $24, 162.38 in interest, $214, 704.95 for unpaid liquidated damages, and $4, 750 for administrative fees and arbitrator compensation) within thirty days of the date of the award.[2] (Id. at 2-3). Plaintiff's application requests entry of a judgment in favor of Plaintiff and against Defendant Khan in the amount of $307, 118.85, plus post-judgment interest until paid, and $400.00 for the costs of this action. (ECF No. 1, at 6).

         Plaintiff filed a return of service on January 11, 2018, indicating that Defendant Khan was served personally on December 30, 2017. (ECF No. 4-1). On January 29, Plaintiff filed the pending motions for entry of default (ECF No. 7) and default judgement (ECF No. 8). Defendant Khan has not responded to these motions.

         II. Motion for Entry of Default

         Pursuant to Fed.R.Civ.P. 55(a), “[w]hen a party against whom a judgment for affirmative relief is sought has failed to plead or otherwise defend, and that failure is shown by affidavit or otherwise, the clerk must enter the party's default.” Although this rule refers to entry of default by the clerk, “it is well-established that a default also may be entered by the court.” Breuer Elec. Mfg. Co. v. Toronado Sys. of Am., Inc., 687 F.2d 182, 185 (7th Cir. 1982).

         Defendant Khan was served personally on December 30, 2017. (ECF No. 4-1). He was required to respond within twenty-one days after service and has failed to do so or otherwise defend this action. Accordingly, Plaintiff's motion for entry of default as to Defendant Khan will be granted.

         III. Motion for Default Judgment

         A defendant's default does not automatically entitle the plaintiff to entry of a default judgment; rather, that decision is left to the discretion of the court. See Dow v. Jones, 232 F.Supp.2d 491, 494 (D.Md. 2002). The United States Court of Appeals for the Fourth Circuit has a “strong policy” that “cases be decided on their merits, ” United States v. Shaffer Equip. Co., 11 F.3d 450, 453 (4th Cir. 1993), “but default judgment may be appropriate when the adversary process has been halted because of an [] unresponsive party, ” SEC v. Lawbaugh, 359 F.Supp.2d 418, 421 (D.Md. 2005).

         Upon entry of default, the well-pled allegations in a complaint as to liability are taken as true, but the allegations as to damages are not. Id. at 422. Fed.R.Civ.P. 54(c) limits the type of judgment that may be entered based on a party's default: “A default judgment must not differ in kind from, or exceed in amount, what is demanded in the pleadings.” Thus, where a complaint specifies the amount of damages sought, the plaintiff is limited to entry of a default judgment in that amount. “[C]ourts have generally held that a default judgment cannot award additional damages . . . . because the defendant could not reasonably have expected that his damages would exceed that amount.” In re Genesys Data Techs., Inc., 204 F.3d 124, 132 (4th Cir. 2000).

         Plaintiff's application for confirmation of arbitration award and motion for default judgment both request entry of judgment in the amount of $307, 118.85, together with interest at the post-judgment rate until paid, plus $400.00 for the costs of this action. (ECF Nos. 1, at 6; 8 ¶ 3). The court need not specifically grant an award of post-judgment interest as Plaintiff is entitled to recover such interest by operation of law. See 28 U.S.C. § 1961(a) (“Interest shall be allowed on any money judgment in a civil case recovered in a district court.”).

         Where default judgment is sought with respect to an application for confirmation of an arbitration award, the petitioner “must show that it is entitled to confirmation of the arbitration award as a matter of law.” United Cmty. Bank v. Arruarana, 2011 WL 2748722, at *2 (W.D. N.C. July 13, 2011) (citing D.H. Blair & Co. v. Gottdiener, 462 F.3d 95, 109-10 (2d Cir. 2006); McColl Partners, LLC v. DME Holdings, LLC, 2011 WL 971575, at *1 (W.D. N.C. Mar. 17, 2011)). As set forth in 9 U.S.C. § 9:

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 ...

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