United States District Court, D. Maryland, Southern Division
J. HAZEL, UNITED STATES DISTRICT JUDGE
Choice Hotels International, Inc. (“Plaintiff”)
initiated this action by filing an Application to Confirm
Arbitration Award. ECF No. 1. Pursuant to Federal Rule of
Civil Procedure 55(b), Plaintiff has filed a Request for
Judgment by Default, with a supporting affidavit, as to
Defendants Rahi Corp. and Nishil Patel
(“Defendants”). ECF No. 6. A hearing is not
necessary in this case. See Loc. R. 105.6 (D. Md.).
For the reasons that follow, Plaintiff’s Request for
Default Judgment will be granted.
is a “publicly-traded company incorporated under the
laws of the State of Delaware with principal place of
business located in Rockville, Maryland.” ECF No. 1
¶ 1.Plaintiff “is primarily in the
business of franchising hotels domestically and
internationally under its trade and brand marks, names and
systems, including but not limited to the trade and brand
marks, names and systems associated with Rodeway Inn &
Suites ®.” Id. Defendant Rahi Corp. is
“a corporation organized under the law of the state of
Georgia with principal place of business in Suwanee,
GA.” Id. ¶ 2. “Defendant Rahi Corp.
has no place of business in either the state of Maryland or
the state of Delaware.” Id. “Defendant
Rahi Corp. is owned entirely by Nishil Patel, a citizen of
the state of Georgia.” Id. Defendant Nishil
Patel “is an individual who at all times relevant to
these and underlying proceedings was and is currently a
citizen of and is domiciled in the state of Georgia.”
Id. ¶ 3.
about December 17, 2015, Plaintiff entered into a
“Franchise Agreement” with Defendants, under
which Plaintiff licensed Defendants to open and operate a
Rodeway Inn & Suites hotel in Enterprise, Alabama
(“Hotel”). Id. ¶ 4. The Franchise
Agreement contained an arbitration clause, stating in
relevant part that “any controversy or claim arising
out of or relating to this Agreement or any other related
agreements, or the breach of this Agreement or any other
related agreements . . . will be sent to final and binding
arbitration in the state of Maryland before either the
American Arbitration Association, J.A.M.S., or National
Arbitration Forum in accordance with the Commercial
Arbitration Rules of the American Arbitration
Association.” See ECF No. 1-3 at
ECF No. 1 ¶ 7. According to Plaintiff’s
Application to Confirm Arbitration Award:
On or about August 16, 2016, Plaintiff learned that
Defendants had lost possession of the Hotel in a foreclosure
proceeding in violation of the Franchise Agreement. Pursuant
to §10(b)(2)(b) of the Franchise Agreement, loss of
possession is grounds for termination upon notice.
Accordingly, Plaintiff terminated the Franchise Agreement via
written notice dated August 16, 2016, which made demand for
immediate payment of contractually specified fees, interest,
and liquidated damages for the period before the foreclosure.
Defendants did not pay the contractually required and
specified fees, interest, or liquidated damages amount to
ECF No. 1 ¶¶ 5–7.
about January 10, 2017, Plaintiff initiated arbitration
proceedings against Defendant with the American Arbitration
Association (“AAA”), Case No. 01-18-0000-4688,
“seeking resolution of its dispute with
Defendants.” Id. ¶ 7; see ECF
No. 1-4 at 1. “Specifically, Plaintiff claimed that
Defendants materially breached the parties’ Franchise
Agreement by losing possession of the Hotel.” ECF No. 1
proceedings were scheduled for June 12, 2018. See
ECF No. 1-4 at 1. Plaintiff sent notice of the proceedings to
Defendants at their last known address “by regular
mail, certified mail and/or overnight FedEx delivery.”
ECF No. 1 ¶ 9. Plaintiff “submitted its documents
and brief in adherence to the schedule established” by
the arbitrator. ECF No. 1-4 at 1. Defendants “failed to
submit any documents or argument.” Id.
“The Arbitrator reached out to [Defendants], again
requesting any submission, ” but received no response.
Id. “Defendants failed to appear or
participate during any proceeding.” ECF No. 1 ¶ 9.
25, 2018, having determined that Defendants “failed to
appear after due notice by mail in accordance with the Rules
of the American Arbitration Association, ” the
arbitrator entered an award in Plaintiff’s favor
against Defendants in the amount of $75, 685.25. ECF No. 1-4
at 2. The “total award” consisted of $73, 135.25
in “unpaid franchise fees, interest, and lost profits
and damages, as calculated from the franchise agreement
between the parties, ” as well as $1, 550.00 for the
“fees of the American Arbitration Association”
and $1, 000 for “the fee of the Arbitrator, ”
which Plaintiff had paid and for which Defendants were
ordered to reimburse Plaintiff. Id. The arbitrator
also ordered that the total award would “bear interest
at the rate of five percent per annum from the date of this
filed its Application to Confirm Arbitration Award in this
Court on September 25, 2018. ECF No. 1. The Ex Parte Final
Award, signed by Ronald Birch of the AAA on June 25, 2018, is
attached to the Application. ECF No. 1-4. Plaintiff named
Rahi Corp. and Nishil Patel as defendants. ECF No.
1. The court issued summons to Defendants on
September 25, 2018, and the summons were returned as executed
on October 2, 2018. ECF No. 3; ECF No. 4. The Clerk made an
entry of default for want of answer or other defense with
respect to Rahi Corp. and Nishil Patel on September 18, 2019.
ECF No. 8. Plaintiff now requests that the Court issue
judgment by default against Defendants. ECF No. 6.
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.”
Choice Hotels Int’l, Inc. v. Khan, No. DKC
17-3572, 2018 WL 1046301, at *2 (D. Md. Feb. 26, 2018)
(citing Dow v. Jones, 232 F.Supp.2d 491, 494 (D. Md.
2002)). When a motion for default judgment is based on an
application for confirmation of an arbitration award, the
plaintiff “must show that it is entitled to
confirmation of the arbitration award as a matter of
law.” Id. (quoting United Cmty. Bank v.
Arruarana, No. 1:10cv248, 2011 WL 2748722, at *2 (W.D.
N.C. July 13, 2011)).
the Federal Arbitration Act, a court may confirm an
arbitration award “[i]f the parties in their agreement
have agreed that a judgment of the court shall be entered
upon the award made pursuant to the arbitration . . .
.” 9 U.S.C. § 9. The Court must confirm the award
unless it vacates, modifies, or corrects the award pursuant
to 9 U.S.C. §§ 10 or 11. Id.
“Federal courts may vacate an arbitration award only
upon a showing of one of the grounds listed in the Federal
Arbitration Act, or if the arbitrator acted in manifest
disregard of law.” Apex Plumbing Supply, Inc. v.