Case 2:21-cv-20068-ES-AME Document 11 Filed 11/23/22 Page 1 of 10 PageID: 161
`
`Not for Publication
`
`
`UNITED STATES DISTRICT COURT
`DISTRICT OF NEW JERSEY
`
`
`AMERICINN INTERNATIONAL, LLC,
`
` Plaintiff,
`
` v.
`
`PRAKASH PATEL, et al.,
`
` Defendants.
`
`SALAS, DISTRICT JUDGE
`
`
`
`Civil Action No.: 21-20068 (ES)(AME)
`
`OPINION
`
`Before the Court is Plaintiff AmericInn International, LLC’s motion for default judgment
`
`against defendants Prakash Patel (“P. Patel”) and Hansa Patel (“H. Patel”) (collectively,
`
`“Defendants”). (D.E. No. 8 & D.E. No. 8-2 (“Mov. Br.”)). The motion is unopposed. The Court
`
`has considered Plaintiff’s submissions and decides the matter without oral argument. See Fed. R.
`
`Civ. P. 78(b); L. Civ. R. 78.1(b). For the following reasons, the Court GRANTS the motion.
`
`I.
`
`BACKGROUND
`
`On September 25, 2018, Plaintiff entered into a franchise agreement (the “Franchise
`
`Agreement”) with P. Patel “for the operation of a . . . guest lodging facility located at 12272
`
`Emerald Coast Parkway, Miramar Beach, Florida 32550” (the “Facility”), for a twenty-year term.
`
`(D.E. No. 1 (“Compl.”) ¶¶ 10–11, Ex. A). Pursuant to Section 3.1 and Schedule D of the Franchise
`
`Agreement, P. Patel agreed to complete construction of the Facility no later than November 25,
`
`2019. (Id. ¶ 12, Ex. A § 3.1, Schedule D). Pursuant to Section 11.2, Plaintiff could terminate the
`
`Franchise Agreement with notice to P. Patel if he failed to complete construction of the Facility
`
`(id. ¶ 14, Ex. A § 11.2), and pursuant to Section 12.1 and Schedule D, in the event that Plaintiff
`
`
`
`1
`
`

`

`Case 2:21-cv-20068-ES-AME Document 11 Filed 11/23/22 Page 2 of 10 PageID: 162
`
`terminated the Franchise Agreement prior to the facility’s “Opening Day,” P. Patel agreed to pay
`
`liquidated damages to Plaintiff in the amount of $2,000.00 per the number of guest rooms at the
`
`Facility within 10 days following the date of termination (id. ¶¶ 15–16, Ex. A § 12.1, Schedule D).
`
`Alternatively, also pursuant to Section 12.1, if P. Patel terminated the Franchise Agreement for
`
`any reason, P. Patel agreed to pay Plaintiff liquidated damages within 30 days following the date
`
`of termination, calculated based on certain monthly royalties and fees, but not less than “$3,000
`
`multiplied by the number of guest rooms[.]” (Id. Ex. A § 12.1).
`
`Additionally, pursuant to Section 7.3, interest is payable on any past due amount owed to
`
`Plaintiff under the Franchise Agreement at the rate of 1.5% per month accruing from the due date
`
`until the amount is paid. (Id. ¶ 13, Ex. A § 7.3). Further, pursuant to Section 17.4, P. Patel agreed
`
`that in the event of an enforcement action, the non-prevailing party shall pay all costs and expenses,
`
`including reasonable attorneys’ fees, of the prevailing party. (Id. ¶ 17, Ex. A § 17.4).
`
`Effective as of September 25, 2018, H. Patel provided Plaintiff with a guaranty (the
`
`“Guaranty”) of P. Patel’s obligations under the Franchise Agreement. (Id. ¶ 18, Ex. B). Pursuant
`
`to the Guaranty, H. Patel agreed that, upon a default of the Franchise Agreement, she would
`
`immediately make each payment and perform or cause P. Patel to perform each unpaid or
`
`unperformed obligation of P. Patel under the Franchise Agreement. (Id. ¶¶ 19–20, Ex. B). H.
`
`Patel further agreed to pay costs and expenses, including reasonable attorneys’ fees, incurred by
`
`Plaintiff in enforcing the Franchise Agreement. (Id.).
`
`By letter dated April 5, 2021, P. Patel informed Plaintiff of his decision to terminate the
`
`Franchise Agreement “effective as of April 26, 2021.” (Id. ¶ 21, Ex. C). By letter dated April 12,
`
`2021, Plaintiff confirmed its understanding that P. Patel terminated the Franchise Agreement,
`
`effective “as of the date of this letter.” (Id. ¶ 22, Ex. D). Plaintiff advised Defendants that, pursuant
`
`
`
`2
`
`

`

`Case 2:21-cv-20068-ES-AME Document 11 Filed 11/23/22 Page 3 of 10 PageID: 163
`
`to Section 12.1 of the Franchise Agreement, liquidated damages of $148,000.00 plus interest were
`
`due and owing. (Id.). Plaintiff argues that, to date, Defendants have failed to pay the liquidated
`
`damages due and owing under the terms of the Franchise Agreement, in breach thereof. (Mov. Br.
`
`at 2).
`
`On November 18, 2021, Plaintiff filed the Complaint, asserting claims for breach of
`
`contract and seeking liquidated damages or, in the alternative, actual damages, interest, attorneys’
`
`fees, and costs of suit. (Compl. ¶¶ 23–36). On December 15, 2021, Plaintiff submitted proof of
`
`service of the Complaint on each Defendant. (D.E. No. 4). On January 5, 2021, the Clerk of the
`
`Court entered default as to each Defendant.
`
`On April 14, 2022, Plaintiff filed the instant motion, seeking $174,933.31 for liquidated
`
`damages and prejudgment interest. (D.E. No. 8; D.E. No. 8-9 (“Proposed Order”)).
`
`II.
`
`LEGAL STANDARD
`
`A district court may enter default judgment against a party who has failed to plead or
`
`otherwise respond to the action filed against him. Fed. R. Civ. P. 55(b)(2). To obtain a default
`
`judgment, a plaintiff must first request entry of default by the Clerk of the Court. See Nationwide
`
`Mut. Ins. Co. v. Starlight Ballroom Dance Club, Inc., 175 F. App’x 519, 521 n.1 (3d Cir. 2006)
`
`(citation omitted). Once default is entered, a plaintiff seeking default judgment must then file a
`
`motion with the district court requesting the relief.
`
`“[E]ntry of a default judgment is left primarily to the discretion of the district court.” Hritz
`
`v. Woma Corp., 732 F.2d 1178, 1180 (3d Cir. 1984) (citing Tozer v. Charles A. Krause Milling
`
`Co., 189 F.2d 242, 244 (3d Cir. 1951)). “Before entering default judgment, the Court must address
`
`the threshold issue of whether it has personal jurisdiction and subject matter jurisdiction over the
`
`parties.” Prudential Ins. Co. of Am. v. Bramlett, No. 08-0119, 2010 WL 2696459, at *1 (D.N.J.
`
`
`
`3
`
`

`

`Case 2:21-cv-20068-ES-AME Document 11 Filed 11/23/22 Page 4 of 10 PageID: 164
`
`July 6, 2010). Then, “the Court must determine (1) whether there is sufficient proof of service;
`
`(2) whether a sufficient cause of action was stated; and (3) whether default judgment is proper.”
`
`Teamsters Health & Welfare Fund v. Dubin Paper Co., No. 11-7137, 2012 WL 3018062, at *2
`
`(D.N.J. July 24, 2012) (citations omitted). In making these determinations, “‘the factual
`
`allegations of the complaint, except those relating to the amount of damages, will be taken as
`
`true.’” DIRECTV, Inc. v. Pepe, 431 F.3d 162, 165 n.6 (3d Cir. 2005) (quoting Comdyne I, Inc. v.
`
`Corbin, 908 F.2d 1142, 1149 (3d Cir. 1990)). If the amount of damages cannot be adequately
`
`ascertained, “[t]he court may conduct hearings or make referrals . . . [to] determine the amount of
`
`damages[.]” Fed. R. Civ. P. 55(b)(2). Additionally, the Court may order supplemental briefing
`
`on the issue of damages calculations if necessary. See United States v. Sanchez, No. 16-3024,
`
`2018 WL 1151710, at *4 (D.N.J. 2018); see also Comdyne I, Inc., 908 F.2d at 1149.
`
`III. DISCUSSION
`
`A. Jurisdiction
`
`i.
`
`Subject Matter Jurisdiction
`
`The Court is satisfied that it has subject matter jurisdiction to enter default judgment.
`
`District courts have original jurisdiction over all civil actions where the amount in controversy
`
`exceeds $75,000.00, exclusive of interest and costs, and the action is between citizens of different
`
`States. 28 U.S.C. § 1332(a). A corporation is deemed a citizen of every State where it is
`
`incorporated and of the State of its principal place of business. Id. § 1332(c). The citizenship of
`
`a limited liability company is determined by the citizenship of its members. Lincoln Benefit Life
`
`Co. v. AEI Life, LLC, 800 F.3d 99, 105 (3d Cir. 2015). The citizenship of a natural person is
`
`determined by the state where the person is domiciled. Id. at 104.
`
`
`
`4
`
`

`

`Case 2:21-cv-20068-ES-AME Document 11 Filed 11/23/22 Page 5 of 10 PageID: 165
`
`Plaintiff, a limited liability company, is wholly owned by Wyndham Hotel Group, LLC,
`
`which is wholly owned by Wyndham Hotels & Resorts, Inc., a corporation organized and existing
`
`under the laws of the State of Delaware, with its principal place of business in Parsippany, New
`
`Jersey. (Compl. ¶¶ 1–3). Defendants P. Patel and H. Patel are citizens of the State of Texas,
`
`having an address at 1511 Caledonia Trail, Sugarland, Texas 77479. (Mov. Br. at 3 & D.E. No.
`
`4). Plaintiff submits that the amount in controversy in this matter, exclusive of prejudgment
`
`interest and costs, exceeds $75,000.00. (Compl. ¶ 6; see Mov. Br. at 3; see also D.E. No. 8-4
`
`¶¶16–18, Affidavit of Kendra Mallet (“Mallet Aff.”)). Therefore, this Court has original subject
`
`matter jurisdiction under 28 U.S.C. § 1332(a).
`
`ii. Personal Jurisdiction
`
`The Court has personal jurisdiction over Defendants. Under Section 17.6.3 of the
`
`Franchise Agreement, P. Patel consented to “personal jurisdiction . . . in the New Jersey state
`
`courts situated in Morris County, New Jersey and the United States District Court for the District
`
`of New Jersey for all cases and controversies under this [Franchise] Agreement or between
`
`[Plaintiff] and [P. Patel].” (Compl. Ex. A § 17.6.3). Under the Guaranty, H. Patel acknowledged
`
`that she is bound by Section 17 of the Franchise Agreement. (Id. Ex. B).
`
`To determine whether a forum selection clause grants personal jurisdiction, a court must
`
`determine (i) whether invoking the forum selection clause would be unreasonable, (ii) whether it
`
`is applicable to the claims at issue, and (iii) whether it is applicable to the person or entity at issue.
`
`Infinity Staffing Sols., LLC v. Greenlee, No. 18-12626, 2019 WL 1233554, at *3 (D.N.J. Mar. 18,
`
`2019). In considering the first factor, “a forum selection clause is presumptively valid unless the
`
`party objecting to it can show that enforcement of the clause would be unreasonable under the
`
`circumstances.” Cambridge Mgmt. Grp., LLC v. Baker, No. 12-3577, 2013 WL 1314734, at *8
`
`
`
`5
`
`

`

`Case 2:21-cv-20068-ES-AME Document 11 Filed 11/23/22 Page 6 of 10 PageID: 166
`
`(D.N.J. Mar. 28, 2013). A party may show that a forum selection clause is unreasonable and
`
`unenforceable by demonstrating that (i) it is the result of fraud or overreaching, (ii) enforcement
`
`would violate a strong public policy, or (iii) enforcement would result in litigation in a jurisdiction
`
`“so seriously inconvenient as to be unreasonable.” Id. (quoting Coastal Steel Corp. v. Tilghman
`
`Wheelabrator, Ltd., 709 F.2d 190, 201 (3d Cir. 1983)); see also Cadapult Graphic Sys., Inc. v.
`
`Tektronix, Inc., 98 F. Supp. 2d 560, 564 (D.N.J. 2000) (noting courts will enforce such clauses
`
`absent a “strong showing” that the clause is unreasonable).
`
`Regarding reasonableness, first, nothing in the record suggests that the forum selection
`
`clause was the result of fraud. Second, the Court finds that enforcement would not violate public
`
`policy. Indeed, “New Jersey courts routinely find forum-selection clauses prima facie valid and
`
`enforceable.” Cadapult Graphic Sys., 98 F. Supp. 2d at 566 (collecting cases). And such favorable
`
`treatment is mirrored in federal courts. See id. Third, nothing in the record suggests that litigation
`
`in New Jersey would be so inconvenient to Defendants, citizens of Texas, as to be unreasonable.
`
`See id. at 568 (noting that litigation in Oregon was not unreasonably inconvenient for New Jersey
`
`litigant because “[b]y executing a forum-selection clause, the parties to the agreement bear the
`
`risks of such inconvenience”). Therefore, the Court finds that enforcing the forum selection clause
`
`is not unreasonable.
`
`Regarding the last two factors, the Court finds the terms of the forum selection clause in
`
`the Franchise Agreement, as well as those in the Guaranty, unambiguous. The forum selection
`
`clause is applicable to the claims at issue, which arise out of the Franchise Agreement. (See Compl.
`
`Ex. A § 17.6.3). And the clause is applicable to Defendants, specifically, to P. Patel under the
`
`terms of the Franchise Agreement, and also to H. Patel pursuant to the Guaranty. (See id.; see also
`
`id. Ex. B).
`
`
`
`6
`
`

`

`Case 2:21-cv-20068-ES-AME Document 11 Filed 11/23/22 Page 7 of 10 PageID: 167
`
`Thus, the Court finds that P. Patel, as a signatory to the Franchise Agreement containing
`
`the forum selection clause, and H. Patel, as a signatory to the Guaranty acknowledging that she is
`
`also bound by the forum selection clause, are subject to the Court’s personal jurisdiction.
`
`B. Proper Service
`
`The Court finds that Defendants were properly served. For service to be timely, a plaintiff
`
`must serve a defendant within 90 days after the complaint is filed. Fed. R. Civ. P. 4(m). Moreover,
`
`Federal Rule of Civil Procedure 4(e)(2) provides that an individual may be served in a judicial
`
`district of the United States by doing either of the following: “(A) delivering a copy of the
`
`summons and of the complaint to the individual personally; or (B) leaving a copy of each at the
`
`individual’s dwelling or usual place of abode with someone of suitable age and discretion who
`
`resides there.” Fed. R. Civ. P. 4(e)(2).
`
`Plaintiff personally served the summons and Complaint, filed on November 18, 2021, on
`
`P. Patel and H. Patel on December 7, 2021. (D.E. No. 4). Therefore, based on sufficient proof of
`
`service as to all Defendants, the Court finds that Defendants were timely and properly served.
`
`C. Sufficient Cause of Action
`
`The Court finds that the Complaint states a sufficient cause of action. The elements of a
`
`cause of action for breach of contract are (i) a valid contract, (ii) breach by the defendant, and (iii)
`
`resulting damages. See, e.g., Coyle v. Englander’s, 488 A.2d 1083, 1088 (N.J. Super. Ct. App.
`
`Div. 1985). Plaintiff alleges P. Patel entered into the Franchise Agreement, and that H. Patel
`
`guaranteed P. Patel’s obligations under that agreement by entering into the Guaranty. (Compl. ¶¶
`
`10 & 18). Plaintiff alleges Defendants breached the Franchise Agreement and the Guaranty by
`
`failing to pay liquidated damages after the Franchise Agreement was terminated. (Id. ¶¶ 28, 35–
`
`36). Plaintiff further alleges it suffered damages as a result of Defendants’ breach, specifically the
`
`
`
`7
`
`

`

`Case 2:21-cv-20068-ES-AME Document 11 Filed 11/23/22 Page 8 of 10 PageID: 168
`
`failure to pay liquidated damages due under the Franchise Agreement. (Id. ¶¶ 29–32). Based on
`
`these allegations, which are accepted as true, the Court finds that Plaintiff has sufficiently stated a
`
`cause of action for breach of contract to establish Defendants’ liability for the purpose of default
`
`judgment.
`
`D. Propriety of Default Judgment
`
`The Court finds that default judgment is proper in this action. To determine whether
`
`granting default judgment is proper, the Court must make factual findings as to “(1) whether the
`
`party subject to default has a meritorious defense, (2) the prejudice suffered by the party seeking
`
`default, and (3) the culpability of the party subject to default.” Doug Brady, Inc. v. N.J. Bldg.
`
`Laborers Statewide Funds, 250 F.R.D. 171, 177 (D.N.J. 2008) (citing Emcasco Ins. Co. v.
`
`Sambrick, 834 F.2d 71, 74 (3d Cir. 1987)). Here, the current record does not indicate any
`
`meritorious defense. See Malibu Media, LLC v. Deleon, No. 15-3855, 2016 WL 3452481, at *3
`
`(D.N.J. June 20, 2016) (“The Court may presume that a defendant who has failed to plead, defend,
`
`or appear has no meritorious defense.”). Moreover, Plaintiff has been prejudiced by Defendants’
`
`failure to answer because Plaintiff has been prevented from seeking relief. See Gowan v. Cont’l
`
`Airlines, Inc., No. 10-1858, 2012 WL 2838924, at *2 (D.N.J. July 9, 2012) (finding that the
`
`plaintiff would suffer prejudice if the court did not enter default judgment because the plaintiff
`
`“has no other means of seeking damages for the harm allegedly caused by Defendant”). Finally,
`
`with respect to whether default was the result of culpable conduct, Defendants have not
`
`participated in the litigation despite being served with the Complaint nearly one year ago. See,
`
`e.g., Prudential Ins. Co. of Am. v. Taylor, No. 08-2108, 2009 WL 536403, at *1 (D.N.J. Feb. 27,
`
`2009) (noting that the defendant is culpable when there is nothing suggesting that anything other
`
`than the defendant’s willful negligence caused the failure to answer). Thus, Defendants are
`
`
`
`8
`
`

`

`Case 2:21-cv-20068-ES-AME Document 11 Filed 11/23/22 Page 9 of 10 PageID: 169
`
`culpable for defaulting in this case. For the foregoing reasons, default judgment against
`
`Defendants is proper.
`
`E. Damages
`
`Plaintiff seeks liquidated damages in the amount of $148,000.00 plus prejudgment interest
`
`based on the Franchise Agreement. For the following reasons, the Court finds that Plaintiff has
`
`not adequately identified the basis for its liquidated damages calculation.
`
`Section 12.1 of the Franchise Agreement provides for liquidated damages under two
`
`different circumstances. First, if P. Patel terminated the Franchise Agreement, he must pay
`
`liquidated damages within 30 days following the date of termination, which are to be calculated
`
`based on certain monthly royalties and fees, but “will not be less than $3,000 multiplied by the
`
`number of guest rooms.” (Compl. Ex. A § 12.1).
`
`Second, if Plaintiff terminated the Franchise Agreement for certain reasons outlined under
`
`Schedule D before the Facility’s “Opening Date,” Defendant must pay liquidated damages “within
`
`10 days after [Defendant] receive[s] [Plaintiff’s] notice of termination . . . equal to $2,000
`
`multiplied by the number of guest rooms at the Facility.” (Id.). Plaintiff alleges that Defendant P.
`
`Patel terminated the Franchise Agreement but seeks liquidated damages equal to $2,000.00 per
`
`guest room at the Facility, which appears to be the calculation applicable if Plaintiff had terminated
`
`the Franchise Agreement pursuant to Schedule D. (Mov. Br. at 5, 6; Compl. Ex. A § 12.1).
`
`Further, Plaintiff identifies the date of Plaintiff’s letter (April 12, 2021) as the date of termination,
`
`rather than the date provided in P. Patel’s letter (April 26, 2021), as the effective date of
`
`termination. (Mov. Br. at 6 (identifying May 12, 2021 as “30 days from the date of termination”)).
`
`Therefore, it is unclear which specific clause of Section 12.1 Plaintiff seeks to invoke to calculate
`
`
`
`9
`
`

`

`Case 2:21-cv-20068-ES-AME Document 11 Filed 11/23/22 Page 10 of 10 PageID: 170
`
`liquidated damages, or whether April 12, 2021 is the appropriate termination date upon which such
`
`damages should be based.1
`
`Accordingly, Plaintiff has not provided an adequate basis for the amount of liquidated
`
`damages it seeks. See Days Inns Worldwide, Inc. v. Panchal, No. 15-1459, 2015 WL 5055318, at
`
`*2 (D.N.J. Aug. 25, 2015). As such, the Court directs Plaintiff to separately move for a
`
`determination of the amount of liquidated damages it is entitled to within 30 days of this Opinion.
`
`See Fed. R. Civ. Pr. 55(b)(2); see also Comdyne I, Inc., 908 F.2d at 1142; Sanchez, 2018 WL
`
`1151710 at *4. Upon such motion, Plaintiff shall set forth all information relevant to the basis for
`
`its calculation, including specific references to the applicable clauses of the Franchise Agreement,
`
`a basis for its asserted termination date, and, to the extent necessary, the reason for termination.
`
`IV. CONCLUSION
`
`For the foregoing reasons, the Court GRANTS Plaintiff’s motion for default judgment
`
`against Defendants. The Court reserves decision on the amount of liquidated damages to be
`
`awarded pending Plaintiff separately moving for the same. An appropriate Order accompanies
`
`this Opinion.
`
`
`
`Dated: November 23, 2022
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`_______________________
`Hon. Esther Salas, U.S.D.J.
`
`
`To the extent Plaintiff seeks to invoke the clause of Section 12.1 that would have been triggered upon
`1
`Plaintiff’s termination of the Franchise Agreement pursuant to Schedule D, the Court notes that Plaintiff’s termination
`must have been based on certain reasons outlined under Schedule D before the Facility’s “Opening Date.” (Compl.
`Ex. A § 12.1). However, the reason for termination here is unclear. P. Patel’s April 5, 2021 letter identifies three
`reasons for termination: (i) “Serves no purpose for Miramar Hotel LLC in advancing the health of the hotel”; (ii)
`“Failure to follow through on proposed marketing and promoting of the brand effectively”; and (iii) “Did not have
`sufficient time[.]” (Compl. Ex. C). But according to Plaintiff’s April 12, 2021 letter, termination was because P. Patel
`“stopped developing the Facility[.]” (Comp. Ex. D).
`
`
`
`10
`
`