Red Roof Franchising, LLC v. AA Hospitality Northshore, LLC

• Decision Date: 28 June 2012
• Docket Number: Civ. A. No. 10–4120 (NLH)(JS).
• Citation: 877 F.Supp.2d 140
• Parties: RED ROOF FRANCHISING, LLC, Plaintiff, v. AA HOSPITALITY NORTHSHORE, LLC, et al., Defendants.
• Court: U.S. District Court — District of New Jersey

877 F.Supp.2d 140

RED ROOF FRANCHISING, LLC, Plaintiff,

v.AA HOSPITALITY NORTHSHORE, LLC, et al., Defendants.

Civ. A. No. 10–4120 (NLH)(JS).

United States District Court, D. New Jersey.

June 28, 2012.

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

Rank C. Fusco, Clifton, NJ, for defendants and counter claimants, Alpesh Patel, Aruna Patel, AA Hospitality Northshore, 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 in part and denied in part; the motion to 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 Northshore, LLC (“AAHN”) is a Minnesota limited liability company. The members of AAHN are defendant Alpesh Patel, an individual and citizen of the State of New Jersey and defendant Aruna Patel, and 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 April 9, 2007, defendant AAHN entered into a written franchise agreement with Accor Franchising North America, LLC (“Accor”) for a term of five years. On the same day, Alpesh Patel and Aruna Patel (the “Patels”), executed a guarantee, indemnification and acknowledgment under which they guaranteed the performance of AAHN's obligations under the franchise agreement. The Patels operated a Red Roof Inn, using RRF's system and marks, in Duluth, Minnesota. On June 30, 2007, Accor assigned its rights and obligations under the franchise agreement to plaintiff RRF.

On July 1, 2010, AAHN ceased operating the franchise as a Red Roof Inn and started operating it as an “America's Best Value Inn.” On July 2, 2010, RRF sent written notice to defendants advising them of termination of the franchise agreement effective July 6, 2010, as result of default due to abandonment.

RRF alleges that defendants have not paid franchise fees in the amount of $71,880.80, and that after termination, AAHN continued to use RRF's franchise system and marks in contravention of the franchise agreement. 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, and violation of the Minnesota Franchise Act. 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 remainingaffirmative 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 the covenant of good faith and the Minnesota Franchise Act. The discussion above on Red Roof's prior material breaches goes to both the related Affirmative Defense and the Counterclaims on breach of contract, covenant of good faith and Minnesota Franchise Act. Under the Minnesota Franchise Act a franchise agreement may not be terminated except for “good cause.” Good cause is defined as the failure by a franchisee to comply substantially with the material and reasonable franchise requirements imposed by the franchisor. Because of Red Roof's prolific breaches, Defendants were unable to fully comply with all of their alleged obligations but did substantially comply despite Red Roof's serious failures to meet its obligations as set forth above.

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 termination, and a schedule of outstanding franchise fees owed and calculation of lost profits. 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 takes 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 AAHN. 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 untimely and 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 of the declaration on the Court's docket. To simply file it without permission and then only request permission in response to a motion to strike is not proper procedure. The Court, however, has discretion to grant an extension to file a reply brief, and finding no prejudice to the defendants in permitting the declaration to be filed one day after the deadline, shall grant plaintiff's request nunc pro tunc. See U.S. Small Business Administration as Receiver for Penny Lane Partners, L.P. v. Herbst, No. 08–1396, 2009 WL 1351577, at *1 (D.N.J. May 14, 2009) (granting plaintiff an extension of time to file its reply).

The Court also finds that the Purvis declaration does not violate Local Rule 56.1(a). The declaration does not provide any new evidence or allege new facts. Rather, it provides supplemental evidence in support of the Wallace affidavit regarding the invoices sent to the defendants, in response to the arguments raised by defendants in their opposition to summary judgment.

Therefore, defendants are permitted to correct their footnote, and plaintiff is permitted to file its supplemental declaration of Joy Purvis. The remaining motion is plaintiff's motion for partial summary judgment seeking judgment in its favor on its breach of contract claims and on defendants' counterclaims.

C. Standard for Summary Judgment

Summary judgment is appropriate where the Court is satisfied that “the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.” Celotex Corp. v. Catrett, 477 U.S. 317, 330, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986); Fed.R.Civ.P. 56(c).

An issue is “genuine” if it is supported by evidence such that a reasonable jury could return a verdict in the nonmoving party's favor. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). A fact is “material” if, under the governing substantive law, a dispute about the fact might affect the outcome of the suit. Id. In considering a motion for...