United States District Court, D. Maryland
THEODORE D. CHUANG, United States District Judge.
April 27, 2018, Plaintiff Choice Hotels International, Inc.
("Choice Hotels") filed an Application to Confirm
Arbitration Award against Defendants Kapil, LLC
("Kapil") and Riteshkumar D. 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
maintain the franchise property in accordance with the
standards set forth in the Franchise Agreement. 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
December 19, 2017, the arbitrator awarded Choice Hotels a
total of $182, 258.88 in damages, comprised of contractually
specified franchise fees, liquidated damages, interest, and
Defendants were served with the Application on May 4, 2018.
No. Defendant has filed a response to the Application. On
June 21, 2018, 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 June
27, 2018. 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, 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, 453 (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. § 1332. Choice Hotels is
a Delaware corporation with its headquarters located in
Rockville, Maryland. Patel is a citizen of North Carolina.
Kapil, LLC is wholly owned by Patel and thus is also a
citizen of North Carolina. In addition, the amount in
controversy is greater than the $75, 000 jurisdictional
minimum under 28 U.S.C. § 1332.
Federal Arbitration Act ("FAA"), 9 U.S.C.
§§ 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. § 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. 1-2. 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
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. §
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. 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 Agreement,
specifically, a failure of Defendants to maintain the
franchise property in accordance with the standards set forth
in 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 ...