United States District Court, D. Maryland
CHOICE HOTELS INTERNATIONAL, INC. Plaintiff,
AALIA HOSPITALITY CORP., et al., Defendants.
PAULA XINIS, UNITED STATES DISTRICT JUDGE
before the Court are Defendants AALIA Hospitality, Corp.
(“AALIA”) and Taj A. Khan's Motion to Vacate
the Complaint (ECF No. 13) and Plaintiff Choice Hotels
International, Inc.'s (“Choice Hotels”)
Motion for Clerk's Entry of Default (ECF No. 10), Motion
for Default Judgment (ECF No. 11), and Application to Confirm
Arbitration Award. ECF No. 1. For the following reasons,
Choice Hotels' Motions for Clerk's Entry of Default
and Default Judgment are DENIED as moot (ECF Nos. 10, 11),
AALIA and Khan's Motion to Vacate is DENIED (ECF No. 13),
and Choice Hotels' Application to Confirm Arbitration
Award is GRANTED. ECF No. 1.
October 17, 2013, Choice Hotels entered into a franchise
agreement with Diamond Hospitality, Corp., Kamlesh
Brahmbhatt, AALIA, and Khan (collectively, “the
franchisees”). Id. ¶ 6. The franchise
agreement provided that the franchisees would operate a
Choice Hotels-branded hotel in Suffolk, Virginia.
Id. The franchise agreement also included an
arbitration provision in which the parties agreed that
disputes arising from the franchise agreement would be
referred for binding arbitration. ECF No. 1-2 ¶ 21.
year later, Choice Hotels issued a written notice of default
to the franchisees for failure to respond to a pressing
safety violation. ECF No. 1 ¶¶ 7-8. Choice Hotels
thereafter initiated arbitration proceedings on February 17,
2018, because the franchisees failed to remedy the breach.
Id. ¶ 9. As damages, Choice Hotels demanded
contractual fees, interest, and liquidated damages.
to Commercial Arbitration Rule 43, the franchisees were
properly served notice of the arbitration proceedings, but
none of the franchisees attended the arbitration. Commercial
Arbitration R-43; ECF No. 1-3 at 1; ECF No. 1 ¶ 12.
Following an evidentiary hearing, the arbitrator found the
franchisees jointly and severally liable for breaching the
agreement, and awarded damages for unpaid franchise fees of
$29, 200.03, interest of $11, 831.40, contractual lost profit
damages of $128, 667.67, arbitrator's compensation and
expenses of $2, 947.41, and expenses of $7, 597.41, totaling
$177, 295.51. ECF No. 1-3 at 2.
25, 2018, Choice Hotels brought this Application to Confirm
Arbitration Award against the franchisees. ECF No. 1. The
Defendants were served on July 27, 2018. ECF No. 9. Because
the Defendants failed to respond timely, Choice Hotels moved
for clerk's entry of default and default judgment on
February 14, 2019. ECF Nos. 10, 11. On March 4, 2019,
Defendants moved to vacate the arbitration award. ECF No. 13.
For the following reasons, the Court denies the default
motions as moot and confirms the arbitration award.
Motion for Entry of Default and Motion for Default
Pursuant to Federal Rule of Civil Procedure 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.” Fed.R.Civ.P.
55(a). Thereafter, the court may enter default judgment at
the plaintiff's request and with notice to the defaulting
party. Fed.R.Civ.P. 55(b)(2). Plaintiff, however, is not
automatically entitled to default judgment simply because the
defendant responded late or not at all. See, e.g.,
Choice Hotels Int'l, Inc. v. Jai Shree Navdurga,
LLC, DKC 11-2893, 2012 WL 5995248, at *1 (D. Md. Nov.
29, 2012). When possible, cases should be decided on the
merits. United States v. Schaffer Equip. Co., 11
F.3d 450, 453 (4th Cir. 1993).
Clerk of this Court never entered Rule 55(a)
default and Defendants have now responded to the
Application to Confirm Arbitration Award. ECF No. 13. Because
this Court sees no reason to avoid reaching the merits of the
Application, the Motions for Entry of Default and Default
Judgment are DENIED as moot. ECF Nos. 10, 11.
Application to Confirm Arbitration Award and Motion to
merits, the parties have filed dueling motions: one asking
the Court to confirm the arbitration award, the other asking
to vacate it. ECF Nos. 1, 13. The Federal Arbitration Act
(“FAA”) provides that within one year after an
arbitration award is filed, the prevailing party must apply
to the Court to confirm the award. 9 U.S.C. § 9.
Importantly, the Court's scope of review of an
arbitrator's award is “among the narrowest known at
law” and for good reason. Apex Plumbing Supply,
Inc. v. U.S. Supply Co., 142 F.3d 188, 193 (4th Cir.
1998). To hold otherwise would frustrate the parties'
very purpose of agreeing in advance to arbitration:
“the quick resolution of disputes and the avoidance of
the expense and delay associated with litigation.”
the Defendants' requested relief, an award may be vacated
only where the movant demonstrates that “(1) the award
was procured by corruption, fraud, or undue means; (2) the
arbitrator engaged in misconduct or was not impartial; or (3)
the arbitrator exceeded his powers.” Choice Hotels
Int'l, Inc. v. Niteen Hotels (Rochester), LLC, 103
Fed.Appx. 489, 492 (4th Cir. 2004); see also 9
U.S.C. § 10(a)(1)-(4); Choice Hotels Int'l, Inc.
v. SM Prop. Mgmt., LLC, 519 F.3d 200, 207 (4th Cir.
2008). Defendants maintain that vacatur of the award is
warranted because they did not receive notice of the
arbitration proceeding. ECF No. 13 ¶¶ 5-8. Khan,
more specifically, avers that he was travelling
internationally and was not present at the address that
Choice Hotels sent notice of the arbitration proceedings.
Id. ¶¶ 5-6. Because Plaintiff does not meet
any of the grounds supporting vacatur, Defendants'
argument must fail.
agreed that they would be bound by the Commercial Arbitration
Rules of the American Arbitration Association
(“AAA”). ECF No. 1-2 ¶ 21. These Rules
permit process to be served “by mail addressed to the
party or its representative at the last known address.”
Commercial Arbitration R-43; see also Choice Hotels
Int'l, Inc. v. Shree Sai Props., No. GJH-15-0231,
2017 WL 1025724, at *4 (D. Md. Mar. 13, 2017) (applying the
Commercial Arbitration Rules' service requirements).
Additionally, the parties do not dispute that Choice Hotels
effected proper service in accordance with Commercial
Arbitration R-43. Choice Hotels searched for Defendants'
current addresses through the Tracers public databases and
the Virginia.gov business entity search and found the
Defendants' latest known address was 2864 Pruden
Boulevard, Suffolk, Virginia 23434 (“2864
Pruden”). ECF No. 17 ¶ 3. Choice Hotels mailed
copies of the arbitration demand and a representative of the
American Arbitration Association sent letters regarding the
preliminary hearing to this address. ECF Nos. 17 ¶ 3,
17-1-17-3. Although Khan was travelling internationally, 2864
Pruden is the last known professional address for Khan as an
individual and for Khan as the Defendants' Registered