I Do Not Find Trebling Appropriate, and in Any Event The Untrebled Amount
I Do Not Find Trebling Appropriate, and in Any Event The Untrebled Amount
Dockets.Justia.com
V.
AMENDED OPINION
Defendants.
1
I. BACKGROUND
THI is a Delaware corporation with its principal place of business in
Parsippany, New Jersey. (Compl. Dkt. No. 1, ¶1) SSB is a Tennessee-based
limited liability company with its principal place of business in Athens,
Tennessee. (Id. ¶2) SSB’s sole constituent member is Choonilal Daya, a citizen
of Tennesse. (Id. ¶3)
The Agreements
On June 5, 2007, THI entered into a License Agreement (the “License
Agreement”) with SSB for the operation of a 37-room Travelodge guest lodging
facility (the “Facility”) located at 2317 Andersonville Highway in Clinton,
Tennessee. (Id. ¶19) The License Agreement had a term of 15 years, during
which time SSB was permitted to use the Travelodge® marks in order to
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operate the Facility as a THI franchise. (Id. ¶ 13; see Section 1, License
Agreement, Ex. A, Fenimore Aff. Dkt. No. 9-3, at 13)
¶ 15)
Section 11.2 lists the circumstances under which THI could
terminate the License Agreement, including:
(Id. ¶18) In the event that the License Agreement is terminated pursuant to
Section 11.2, Section 13 requires SSB to pay “all amounts owed to [THI]” no
later than 10 days after termination. (Id. ¶20; see also Section 13.2, License
Agreement, Dkt. No. 9-3, at 30) It further provides that SSB “will owe [THu
Recurring Fees on Gross Room Revenues accruing while the Facility is
identified as a “Travelodge.” (Id.)
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$2,000 multiplied by the number of guest rooms you are then authorized to
operate.” (Section 12.1, License Agreement, Dkt. No. 9-3, at 28) Thus, if the
sum of accrued Recurring Fees paid in the two years prior to termination is
less than the product of the number rooms in the Facility multiplied by $2,000,
SSB is required to pay the latter, baseline rate.
Section 17.4 states that if legal action is necessary “to enforce this
Agreement or collect amounts owed under this Agreement,” then the “non-
prevailing party will pay all costs and expenses, including reasonable attorneys’
fees.” (Fenimore Aff. ¶21)
On the same day the parties executed the License Agreement, they
also entered into a Satellite Connectivity Services Addendum (“Satellite
Addendum”) that governed the use of satellite-based Internet connective
services at the Facility. (Id. ¶22). Section 13(c) of that Satellite Addendum
provides that if either the addendum or the underlying License Agreement is
terminated, SSB shall pay liquidated damages to THI in the amount of $2,500
within 10 days following the date of termination. (Id. ¶23)
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THJ alleges that between 2008 and 2012, SSB repeatedly failed to
make certain payments required under the License Agreement. (Id. ¶27) THI
states that it sent letters to SSB on July 10, 2008, October 28, 2009, April 30,
2009, July 6, 2009, April 8, 2010, September 27, 2010, March 28, 2011,
October 24, 2011, and March 16, 2012 advising that (i) SSB was in breach of
the License Agreement because it owed outstanding Recurring Fees, (ii) that it
had 30 days to cure the breach, and (iii) that if did not cure the breach, the
License Agreement was subject to termination. (Id. ¶28)
On March 28, 2012, THI informed SSB by letter that it had terminated
the License Agreement. (Compi. ¶32; see also Ex. G., Fenimore Aff. Dkt. No. 9-
3, at 144) The letter stated that as of March 24, 2012, SSB owed $153,287.18
in Recurring Fees and $76,500 in liquidated damages under the License
Agreement and Satellite Addendum. The letter also demanded that SSB “de
identify” the Facility as a Travelodge franchise and remove any signage or
listings displaying any Travelodge® marks.
THI alleges that SSB has continued to operate the Facility under the
Travelodge® name even though it is no longer authorized to do so. (Compl. ¶43)
By letter dated July 25, 2012, THI again demanded that SSB de-identify the
Facility and honor its post-termination obligations with regard to the
Travelodge® marks. (Ex. H., Fenimore Aff. Dkt. No. 9-3, at 144)
This Action
THI alleges that SSB continues to impermissibly use Travelodge®
marks for its own benefit. On February 7, 2014, it filed this action for a
declaratory judgment and permanent injunction. Specifically, THI seeks
$491,982.03 in damages from SSB and Daya in his capacity as guarantor. This
amount consists of: (i) $207,414.71 in outstanding Recurring Fees, inclusive of
the interest that has accrued since the date of the termination of the License
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Agreement; (ii) liquidated damages of $74,000 under the License Agreement
plus $2,500 under the Satellite Addendum; (iii) interest on those damages in
the amount of $34,711.60; (iv) $8,587.32 in attorneys’fees and costs; and (v)
$54,922.80 (trebled to $164,768.40) under the Lanham Act due to SSB’s
unauthorized use of the Travelodge® marks after the termination of the
franchise agreement. THI also seeks to permanently enjoin SSB from operating
the Facility under the Travelodge® name.
II. ANALYSIS
The entry 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)).
Because the entry of a default judgment prevents the resolution of claims on
the merits, “this court does not favor entry of defaults and default judgments.”
United States v. $55,518.05 in U.S. Currency, 728 F.2d 192, 194 (3d Cir. 1984).
Thus, before entering default judgment, the Court must determine whether the
“unchallenged facts constitute a legitimate cause of action” so that default
judgment would be permissible. DirecTV, Inc. v. Asher, 2006 WL 680533, at * 1
(D.N.J. Mar. 14, 2006) (citing Wright, Miller, Kane, 1OA Federal Practice and
Procedure: Civil 3d § 2688, at 58—59, 63).
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regarding damages as true.” Id. (citing Chariel, Inc. v. Gordashevsky, 558 F.
Supp. 2d 532, 536 (D.N.J. 2008)). Moreover, if a court finds evidentiary
support to be lacking, it may order or permit a plaintiff seeking default
judgment to provide additional evidence in support of the allegations. Doe,
2013 WL 3772532, at *
2.
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If, despite diligent efforts, personal service cannot be made in accordance
with N.J. Ct. R. 4:4-4(a)(1), in personam jurisdiction may be obtained over any
defendant by substituted or constructive service, in accordance with N.J. Ct. R.
4:4-4(b)(1)(C) by:
Here, despite diligent efforts and inquiry, THI was unable to personally
serve SSB, Daya, or any person authorized to receive service on behalf of SSB
(Cert. of Bryan Couch in Supp. of Mot. for Entry of Permanent Inj. And Final J.
by Default (“Couch Cert.”), Dkt. No. 9-2, ¶j5-6) THI did, however, successfully
serve the Summons and Complaint on March 25, 2014 via certified and regular
mail as permitted by N.J. Ct. R. 4:4-4(b)(3). (Id. ¶7) SSB’s time to respond to
the Complaint has long since expired. On April 25, 2014, the clerk entered
default. (Dkt. No. 5) Accordingly, I am satisfied that the prerequisites to filing a
default judgment are met. See Gold Kist, 756 F.2d at 18—19.
I must now evaluate the following three factors: (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
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Cir. 1987)). Those factors, considered in light of the record of this case, weigh in
favor of entry of a default judgment.
1. Factor 1
Under New Jersey law, a prima facie case for breach of contract requires
that the plaintiff show: (1) a contract between the parties; (2) a breach of that
contract; and (3) damages resulting from the breach. See Coyle v. Englander’s,
199 N.J. Super. 212, 223 (App. Div. 1985); Frederico v. Home Depot, 507 F.3d
188, 203 (3d Cir. 2007). The facts alleged in the Complaint establish that those
elements are satisfied here. The declaration submitted in support of THI’s
motion and the exhibits annexed thereto corroborate those factual allegations.
Both the License Agreement and Guaranty are valid and enforceable contracts.
Those contracts were breached by SSB’s failure to pay certain of the Recurring
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Fees owed to THI and Daya’s failure to personally pay the same. THI has
accrued damages as a result of these breaches. In sum, the facts alleged by THI
state a claim for breach of the License Agreement against SSB and breach of
the Guaranty against Daya. I cannot discern a meritorious defense to these
claims from the record before me.
The facts alleged by THI state a valid claim under both Section 32 and
43(a) of the Lanham Act. THI states in the Complaint that it has owned and
used the Travelodge® marks and their associated brand names since 1939,
that it has notified the public of the registration of these marks pursuant to 15
U.S.C. § 1111, and that the marks continue to retain full legal effect. (Compl.
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¶J 11-13) Moreover, Section 1 of the License Agreement expressly states that
SSB’s license to use the Travelodge® marks expires in the event that the
agreement is terminated:
2. Factors 2 and 3
The second and third factors also weigh in favor of default. SSB was
properly served on March 25, 2014, but has failed to appear and defend itself
in any manner. It is clear that THI has been prejudiced by this dereliction
because it has been “prevented from prosecuting [its] case, engaging in
discovery, and seeking relief in the normal fashion.” See Teamsters Pension
Fund of Philadelphia & Vicinity v. Am. Helper, Inc., 2011 WL 4729023, at *4
(D.N.J. Oct. 5, 2011) (find that a defendant’s failure to answer prejudices the
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plaintiff). Additionally, unless there is evidence to the contrary, SSB’s failure to
answer the Complaint is sufficient to prove its culpability in the default. Id. In
this case, “there is nothing before the Court to show that the Defendant’s
failure to file an answer was not willfully negligent.” Id. (citing Prudential Ins.
Co. of America v. Taylor, 2009 WL 536043, at *1 (D.N.J. Feb. 27, 2009) (finding
that when there is no evidence that the defendant’s failure to answer the
Complaint was due to something other than its own willful negligence, the
defendant’s conduct is culpable and default judgment is warranted).
Overall, then, each of the three factors support the entry of default
judgment against SSB. I therefore find that default judgment is warranted.
C. Remedies
THI seeks the following five forms of monetary relief: (i) $207,414.71 in
outstanding Recurring Fees and interest; (ii) liquidated damages of $74,000
under the License Agreement and $2,500 under the Satellite Addendum; (iii)
interest on those damages in the amount of $34,711.60; (iv) $8,587.32 in
attorneys’fees and costs; and (v) $164,768.40 in treble damages for the
Lanham Act violations.
THI also seeks a permanent injunction to bar SSB from the use of any
and all Travelodge® marks in connection with the Facility.
I will grant THI’s request for the amount owed as Recurring Fees and
interest, as set forth in Section 7, Section 18.4, and Schedule C of the License
Agreement. The itemized statement submitted in support of THI’s motion
details unpaid Recurring Fees dating back to ianuary 2008. (Ex. I, Fenimore
Aff. Dkt. No. 9-3, at 171) The last entry in that statement, dated April 2013,
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lists the outstanding balance on the account as $207,414.72.’ This amount
includes interest which accrued at the rate of 1.5% per month as set forth in
Section 7.3 of the License Agreement. I will award the full amount of
$207,414.72.
I will also grant THI’s request for $76,500 in liquidated damages and
$34,711.60 interest. These amounts are determined by Sections 12.1 and 7.3
of the License Agreement, and Section 13(c) of the Satellite Addendum.
1 THI also says, however, says that this amount reflects the total amount of
Recurring Fees owed by SSB “as of September 23, 2014.” (Fenimore Aff. Dkt. No. 9-3,
¶39)
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April 28, 2012 (i.e., 30 days after the date THI terminated the License
Agreement. (Id.) The amount of interest owed by SSB is calculated from that
date through November 3, 2014, which was the return date for THI’s motion for
default judgment. The $34,711.60 figure is calculated by multiplying $76,500
by 18% (i.e. 1.5% per month), which equals $13,770 in interest per year. That
amount is then divided by 365 days to equal $37.73 in interest per day. When
the per diem interest of $37.73 is multiplied by 920 days—the number of days
between the date of termination and the return date of the motion—the interest
owed is $34,711.60.
As to attorneys’ fees and costs, I adopt THI’s analysis. THI has skimpily
documented its attorneys’ fees, but they do not seem unreasonable or
disproportionate. (See License Agreement, Section 17.4, Dkt. No. 9-3, at 32
(giving the prevailing party the right to recover reasonable attorneys’ fees);
Fenimore Aff. Dkt. No. 9-3, ¶50) I will therefore award $7,800 in attorneys’ fees
and $787.32 in costs, for a total of $8,587.32.
As for the Lanham Act violations, THI seeks: (1) compensatory damages
of $54,922.80 based upon the Recurring Fees that it would have received
during the period of infringement; (2) trebling of that sum based on SSB’s
allegedly deliberate and willful conduct; and (3) injunctive relief barring SSB
from the continued use of any Travelodge® marks.
a. Damages
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Renosky, 399 F.3d 168, 176 (3d Cir.2005); Bracco Diagnostics, Inc. v.
Amersham Health, Inc., 627 F. Supp. 2d 384, 480 (D.N.J. 2009).
15 U.S.C. § 1117(b).
Although THI’s damages cannot be predicted with exact specificity, the
Lanham Act authorizes damages even when they are not susceptible to precise
calculations. See Travelodge Hotels, Inc. v. Elkins Motel Associates, Inc., 2005
WL 2656676, at *11 (D.N.J. Oct. 18, 2005) (quoting Ramada Inns, Inc. v.
Gadsden Motel Co., 804 F.2d 1562, 1565 (11th Cir. 1987)). “Franchise fees
normally received for use of a mark are a proper measure of damages under
the Lanham Act.” Id.
Here, THI seeks damages based on the lost Recurring Fees to which
it would have been entitled post-termination, assuming that SSB had
continued on as a franchisee as contemplated by the contract. The
infringement period is said to run from March 28, 2012 (the date the License
Agreement was terminated) to November 3, 2014 (the return date for the
default judgment motion). THI has not been able to ascertain the actual
amount of gross room revenue earned by SSB in this time period, but it
estimates that figure based on the Facility’s average Gross Room Revenues in
the two years preceding the termination of the License Agreement. (Fenimore
Aff. Dkt. No. 9-3, ¶49) During that two-year period, the Facility earned an
average of $21,538.37 in Gross Room Revenue per month. (Id.) Therefore, THI
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says, SSB would have been obligated to pay Recurring Fees of $1,830.76 per
month (i.e. $21,538.37 multiplied by 8.5%). (Id.; see also Section 7, Section
18.4, and Schedule C, License Agreement, Dkt. No. 9-3, at 33, 46, and 65)
When that amount is multiplied by 30 months (the number of months in the
infringement period), the result is $54,922.80. THI then requests that this
amount be trebled to $164,768.40 pursuant to 15 U.S.C. § 1117(b) because, it
says, SSB’s infringement of the Travelodge® marks was deliberate and willful.
(Fenimore Afff., Dkt. No 9-3, ¶49)
2 Section 12.1 of the License Agreement states that “Liquidated Damages are paid
in place of our claims for lost future Recurring Fees under this Agreement.” (See
Section 12.1, License Agreement, Dkt. No. 9-3, at 28) As stated in Section II.C.1.,
supra, the liquidated damages are equal to the sum of the Recurring Fees accrued in
the 24 months prior to termination, but in any event a minimum of $74,000. The
Lanham Act damages, too, are calculated by multiplying the average monthly
Recurring Fees in the 24 months prior to termination ($1,830.76) by a number of
months. The only difference is that the number of months is 30 (the alleged
infringement period) rather than the 24 month period specified in the liquidated
damages provision. Of course that infringement period, too, could have been mitigated
by a timely request for temporary or preliminary injunctive relief.
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I note also that the $54,922.80 Lanham Act figure is less than the
minimum liquidated damages figure of $74,000. Finding that the two measures
are duplicative, but that the liquidated damages provision sets a bargained-for
minimum, I have decided to award the higher liquidated damages figure and to
deny the Lanham Act damages.
b. Injunctive Relief
GucciAmerica, Inc. v. Daffy’s Inc., 354 F.3d 228, 236—37 (3d Cir.2003) (quoting
Shields v. Zuccarini, 254 F.3d 476, 482 (3d Cir.2001)).
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not a benefit to which SSB is entitled. An injunction would leave SSB in the
same position it found itself after THI terminated the License Agreement,
namely, unable to lawfully use the Travelodge® marks in association with the
Facility. Lastly, it is well within the public interest for the Court to enjoin SSB
from deceiving or misleading consumers into believing that the Facility meets
the standards represented by the Travelodge® brand. Accordingly, THI is
entitled to injunctive relief. SSB is hereby permanently enjoined from
marketing, promoting, or selling guest-lodging services at the Facility through
and with the Travelodge® marks.
THI seeks to hold Daya liable in his capacity as guarantor for both the
damages arising from the breach of the License Agreement—the outstanding
Recurring Fees, liquidated damages, interest, and attorneys’fees and costs—
and the damages resulting from the Lanham Act violations. I find that Daya, in
his capacity as guarantor, is liable in contract for the damages assessed above.
The Guaranty states that Daya “irrevocably and unconditionally (i)
warrant[sl. .that [SSB’s] representations and warranties in the Agreement are
.
true and correct as stated, and (ii) that [SSB’sj obligations under the
Agreement.. .will be punctually paid and performed.” (Guaranty, Ex. C,
Finemore Aff. Dkt. No. 9-3, at 78)
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III. CONCLUSION
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