Red Roof Franchising, LLC v. Patel

• Decision Date: 28 June 2012
• Docket Number: Civ. A. No. 10–4065 (NLH)(JS).
• Parties: RED ROOF FRANCHISING, LLC, Plaintiff, v. Asvin PATEL, et al., Defendants.
• Court: U.S. District Court — District of New Jersey

877 F.Supp.2d 124

RED ROOF FRANCHISING, LLC, Plaintiff,

v.Asvin PATEL, et al., Defendants.

Civ. A. No. 10–4065 (NLH)(JS).

United States District Court, D. New Jersey.

June 28, 2012.

Benjamin A. Levin, Hyland Levin LLP, Peter Jay Boyer, Hyland Levin, LLP, Marlton, NJ, for plaintiff and counter defendant, Red Roof Franchising, LLC.

Frank C. Fusco Clifton, NJ, for defendants and counter claimants, Asvin Patel, Aruna Patel, AA Hospitality, LLC.

OPINION

HILLMAN, District Judge.

This matter involves an alleged breach of a Red Roof Inn franchise agreement. Before the Court are three motions: plaintiff's motion for partial summary judgment, defendants' motion to amend or correct their opposition to summary judgment, and defendants' motion to strike plaintiff's affidavit. For the reasons explained below, the motion for partial summary judgment will be granted; the motionto amend or correct will be granted; and the motion to strike plaintiff's affidavit will be denied.

I. JURISDICTION

This Court exercises subject matter jurisdiction pursuant to 28 U.S.C. § 1332 (diversity). Plaintiff Red Roof Franchising, LLC (“RRF”) is a Delaware limited liability company. The sole member of RRF is RRF Holding Company, LLC (“RRF Holding”), a Delaware limited liability company. The sole member of RRF Holding is Red Roof Inns, Inc., a Delaware corporation with its principal place of business in Columbus, Ohio. Defendant AA Hospitality, LLC (“AAH”) is a New Jersey limited liability company. The members of AAH are defendant Asvin Patel, an individual and citizen of the State of New Jersey and defendant Aruna Patel, also an individual and citizen of the State of New Jersey. Plaintiff alleges that the amount in controversy exceeds $75,000.00, exclusive of interest and costs.

II. BACKGROUND

On August 23, 2002, defendants Asvin Patel and Aruna Patel (the “Patels”), entered into a written franchise agreement with plaintiff RRF's predecessor, Red Roof Inns, Inc., for a term of fifteen years. The Patels operated a Red Roof Inn, using RRF's system and marks, in Bellmawr, New Jersey. On March 1, 2005, Red Roof Inns, Inc. assigned its rights and obligations under the franchise agreement to Accor Franchising North America, LLC (“Accor”). On June 13, 2006, the Patels assigned their interest in the franchise agreement to defendant AAH through a written transfer assignment and consent. The Patels also executed a guarantee, indemnification and acknowledgment under which they guaranteed the performance of AAH's obligations under the franchise agreement. On June 30, 2007, Accor assigned its rights and obligations under the franchise agreement to plaintiff RRF.

Under the franchise agreement, AAH was required to pay monthly royalty fees to RRF. Failure to do so would result in a $50 late fee, plus 1.5% interest per month, and also constituted an event of default permitting RRF to terminate the franchise agreement after providing notice and opportunity to cure. The franchise agreement also permitted liquidated damages in the event of premature termination.

RRF alleges that as of December 15, 2009, AAH was in arrears on payment of franchise royalty fees and other fees due under the franchise agreement. RRF sent a notice of default dated January 19, 2010 to defendants. The body of the letter stated that it was a “WRITTEN NOTICE OF DEFAULT AND NOTICE OF TERMINATION.” (capital letters in original), and that AAH was in default and owed $23,593.56. The letter also stated that AAH had been given an opportunity to avoid default by making payments over several months to bring the account current to December 15, 2009. The notice provided another opportunity to cure by paying the past due amount by March 26, 2010, or the franchise agreement would be terminated without further notice.

On April 20, 2010, RRF sent AAH a “Notice of Termination of Franchise Agreement” stating that AAH had failed to cure and that the termination of the franchise agreement was effective as of the date of the letter, April 20, 2010. The notice advised AAH that it was to cease using the Red Roof Inn proprietary marks and system, and the Fidelio software, and to remove all signs, etc. displaying proprietary marks and systems.

RRF alleges that after termination, AAH continued to use RRF's franchise system and marks, and that as of October 17, 2011, the amount of unpaid royalty fees, plus interest, was $49,829.88, and that as of September 13, 2011, the amount of liquidated damages, plus interest was $98,050.47. RRF brought claims of breach of contract of the franchise agreement and of the guarantee, and seeks specific performance in the removal of the Red Roof signs and marks, and other proprietary and confidential information. Defendants filed counterclaims for unconscionable franchise agreement and guarantee agreement, breach of contract, breach of the covenant of good faith and fair dealing, violation of the New Jersey Franchise Practices Act, and wrongful conversion. Plaintiff seeks summary judgment on its breach of contract claims and on defendants' counterclaims.

III. DISCUSSION

Before addressing plaintiff's motion for partial summary judgment, the Court will address defendants' motions to correct a footnote in their opposition brief and to strike plaintiff's affidavit.

A. Motion to Amend or Correct Opposition

In their opposition brief, defendants state “With regard to affirmative defenses, there exist genuine issues of material fact regarding Red Roof's having committed a prior material breach of the franchise agreement.” At the end of this sentence was a footnote (footnote one) simply stating, “Defendants hereby withdraw the remaining affirmative defenses set out in their Answer.” ¹ Defendants seek permission to correct footnote one of their opposition. According to the affidavit of defendants' counsel, Jeffrey Goldstein, Esquire, in his haste to file the opposition, he inadvertently deleted the majority of the footnote. The proposed corrected footnote states:

Defendants hereby withdraw the remaining affirmative defenses set out in their Answer except for the wrongdoing of breach of contract and NJFPA. The discussion above on Red Roof's prior material breaches goes to both the related Affirmative Defense and the Counterclaim on such. Similarly, Red Roof's default and termination letters attached to Wallace's Affidavit go to both the prior notice violation of statute (NJFPA) as an Affirmative Defense as well as the Counterclaim for same. (See letters from Red Roof dated January 19, 2010 (“Default Letter”) and April 20, 2010 (“Termination Letter”) to Patel showing that even Red Roof understood the January 19th letter to be a Default letter, not a termination letter. Red Roof entitled it “Notice of Default” and intended the second letter to be the termination notice as it entitled the letter “Notice of Termination.” In addition, Mr. Wallace's Declaration correctly identifies the two letters separately—the first as a default letter and the second as a termination letter.) (See also the existence of active negotiations by the parties between the two letters showing that there were efforts to cure the default such that the default letter was not the termination letter; and that there actually was payment by Mr. Patel to cure the default, even though Mr. Wallace states there was not. Patel Exhibit 9, dated April 26).

Plaintiff responded that it does not oppose defendants' motion to amend or correct the footnote as long as the Court also considers its response to the points raised by defendants in response to their footnote.

Accordingly, the Court will grant defendants' motion to amend or correct footnote one of its opposition to summary judgment. The arguments raised by plaintiff in response to the footnote shall be considered along with its motion for summary judgment.

B. Motion to Strike Affidavit of Joy Purvis

In support of its motion for partial summary judgment, plaintiff attached the affidavit of Robert Wallace, Executive Vice President of RRF. Attached to his affidavit were the various written agreements between the parties, the letter of default and letter of termination, and a schedule of outstanding franchise fees owed and calculation of liquidated damages. In their opposition, defendants argue that Wallace has no individual personal knowledge of the billing, payment or accounts receivable history of the Patels, and that the schedule of fees owed do not correlate to any invoices or refer to the history of payments made by the Patels. In their reply, plaintiff states that Wallace does have personal knowledge of the facts in this case, as he swears to in his affidavit. Plaintiff also argues that the spreadsheets attached to the Wallace affidavit provide sufficient evidence of the amount owed and take into account the amounts paid by defendants. Plaintiff further argues that defendants previously received invoices that correspond to each of the entries on the spreadsheets.

The day after plaintiff filed its reply, it also filed the declaration of Joy Purvis, the accounts receivable/credit collections supervisor at Red Roof Inns, Inc., an affiliate of the plaintiff, RRF. Purvis declared, under penalty of perjury, that she attached true copies of invoices issued by RRF to defendant AAH. She declared that the invoices correspond to the entries on the account status report attached as an exhibit to the Wallace affidavit.

Defendants move to strike the Purvis declaration on grounds that it was untimelyand violated Local Rule 56.1(a) ² because it constituted new evidence. Plaintiff responds that the Purvis declaration was filed one day late due to an unexpected delay in Purvis being located out of State and requests that the Court permit it to file the Purvis declaration out of time.

There is no question that the proper time for plaintiff to have requested permission for an extension to file the Purvis declaration was prior to the reply deadline, and certainly prior to the filing...