Wyndham Hotels & Resorts, LLC v. Welcome Hotel Grp. LLC
| Decision Date | 23 March 2021 |
| Docket Number | Civil Action No. 17-4065 (ES) (JAD) |
| Parties | WYNDHAM HOTELS AND RESORTS, LLC, Plaintiff, v. WELCOME HOTEL GROUP LLC, EDISON HOLDINGS NJ LLC, and DEEPAK VISHWANATH, Defendants. |
| Court | U.S. District Court — District of New Jersey |
Not for Publication
Before the Court is plaintiff Wyndham Hotels and Resorts, LLC's ("Plaintiff") unopposed motion for default judgment against defendants Welcome Hotel Group LLC ("WHG"), Edison Holdings NJ LLC ("Edison Holdings"), and Deepak Vishwanath (collectively, "Defendants") pursuant to Federal Rule of Civil Procedure 55(b)(2). (D.E. No. 42 ("Motion")). The Court has considered Plaintiff's submissions and decides the motion without oral argument. See Fed. R. Civ. P. 78(b); see also L. Civ. R. 78.1(b). For the following reasons, Plaintiff's Motion is GRANTED-IN-PART and DENIED-IN-PART.
Plaintiff filed its complaint against Defendants asserting, inter alia, claims for (i) federal trademark infringement under the Lanham Act, 15 U.S.C. §§ 1051, et seq. (Counts I & II) and (ii) breach of contract (Counts V, VII, IX & X). (D.E. No. 1 ("Complaint" or "Compl."); see also D.E. No. 45). Plaintiff owns and has the exclusive rights to service marks WYNDHAM and WYNDHAM GARDEN and other related marks (the "Wyndham® Marks"), which it uses in connection with its lodging facilities. (Compl. ¶¶ 10-14). The Wyndham® Marks are allegedly known, recognized, and associated by consumers with Plaintiff's high-value lodging facilities and services. (Id. ¶ 14). On March 31, 2014, WHG entered into a fifteen-year franchise agreement with Plaintiff for the operation of a Wyndham guest lodging facility on a premises owned by Edison Holdings and leased by WHG. . The Franchise Agreement was executed by Vishwanath on behalf of WHG. (Compl. ¶ 28; Franchise Agmt. at 57). Attached to the Franchise Agreement is a personal guaranty whereby Vishwanath agreed that "upon default by [WHG], [Vishwanath] will immediately make each payment and perform each obligation required of [WHG] under the Agreement." (Franchise Agmt. at 64). Pursuant to the Franchise Agreement, WHG was permitted to use the Wyndham® Marks in association with the operation and use of the lodging facility as part of Plaintiff's franchise system. (Compl. ¶ 30; Franchise Agmt. at 37). In exchange, Defendants agreed to pay, inter alia, royalties, marketing and global sales fees, taxes, interest, reservation system user fees, and other fees (collectively, "Recurring Fees"). (Compl. ¶ 33; Franchise Agmt. at 28, 56 & 59).
On May 20, 2016, Plaintiff sent WHG a letter notifying WHG of its monetary default in the amount of $154,415.11 due to its failure to timely pay certain Recurring Fees. (Compl. ¶ 46 & Ex. D at 96). From August 5, 2016, to February 21, 2017, Plaintiff sent three additional letters notifying WHG of its continuing monetary default. . By February 21, 2017, WHG owed approximately $240,449.00 in outstanding Recurring Fees. . On or around April 5, 2017, WHG allegedly notified Plaintiff by letter that it was ceasing operation as a Wyndham® guest lodging facility. . In response, Plaintiffsent WHG a letter dated April 7, 2017, acknowledging WHG's termination of the Franchise Agreement.2 (Compl. ¶ 51; Ack. of Term.). Plaintiff also advised WHG that it must: (i) pay all outstanding Recurring Fees, (ii) pay liquidated damages in an amount of $394,000.00, and (iii) remove all signage bearing the Wyndham® Marks. (Compl. ¶ 51; Ack. of Term.). Plaintiff alleges that WHG and Edison Holdings continued to use the Wyndham® Marks without authorization such that the premises is identifiable as a Wyndham® guest lodging facility. (Compl. ¶¶ 56-57).
Plaintiff commenced this action on June 6, 2017. The Complaint and summons were served on Defendants on or about June 28, 2017. (D.E. No. 6). Defendants initially filed an answer but subsequently failed to respond to discovery requests, including appearing for deposition. (D.E. Nos. 10, 32 & 37). On November 6, 2019, Plaintiff filed a motion to strike Defendants' answer and sought the entry of default. (D.E. No. 40). On December 10, 2019, Magistrate Judge Dickson granted Plaintiff's motion and struck Defendants' answer from the record. (D.E. No. 41). Judge Dickson also directed the Clerk of Court to enter default against Defendants (id.), which the Clerk of Court did on December 11, 2019.
On January 10, 2020, Plaintiff filed the Motion that is currently before the Court. (D.E. No. 42). On December 8, 2020, pursuant to the Court's order directing Plaintiff to clarify what claims Plaintiff moves under (D.E. No. 44), Plaintiff submitted a letter withdrawing the following claims: (i) injunctive relief against WHG and Edison Holdings (Counts I(a) & II(a)); (ii) demand for accounting against WHG (Count III); (iii) demand for accounting against Edison Holdings (Count IV); (iv) actual damages against WHG for breach of contract (Count VI); (v) unjustenrichment claim against WHG; (vi) unjust enrichment claim against Edison Holdings (Counts X(b) & XI); and (vii) injunctive relief against WHG to proceed with self-help (Count XII). (D.E. No. 45). As a result, the remaining counts are as follows: (i) infringement damages against WHG and Edison Holdings for violation of the Lanham Act (Counts I(b) & II(b)); (ii) liquidated damages against WHG for breach of contract (Count V); (iii) outstanding recurring fees against WHG for breach of contract (Count VII); (iv) liquidated damages and outstanding recurring fees against Vishwanath for breach of guaranty (Count IX(a)); and (v) liquidated damages, outstanding recurring fees, and infringement damages against Edison Holdings under an alter ego theory (Count X(a)). (Id.).
Under Federal Rule of Civil Procedure 55, the Court may enter default judgment against a party that fails to answer or otherwise defend against claims asserted against it. To obtain a default judgment pursuant to Rule 55(b), the moving party must first obtain an entry of default pursuant to Rule 55(a). See Nationwide Mut. Ins. Co. v. Starlight Ballroom Dance Club, 175 F. App'x 519, 521 n.1 (3d Cir. 2006). After obtaining entry of default, parties are not entitled to the subsequent entry of default judgment as of right; rather, it is within the discretion of the court whether to enter default judgment. Hritz v. Woma Corp., 732 F.2d 1178, 1180 (3d Cir. 1984).
Before entering default judgment, the Court must: "(1) determine it has jurisdiction both over the subject matter and parties; (2) determine whether defendants have been properly served; (3) analyze the Complaint to determine whether it sufficiently pleads a cause of action; and (4) determine whether the plaintiff has proved damages." Travelodge Hotels, Inc. v. Wilcox Hotel, LLC, No. 17-0391, 2018 WL 1919955, at *3 (D.N.J. Apr. 23, 2018). A party seeking default judgment is not entitled to relief as a matter of right; rather, the Court may enter default judgment"only if the plaintiff's factual allegations establish the right to the requested relief." Ramada Worldwide Inc. v. Courtney Hotels USA, LLC., No. 11-896, 2012 WL 924385, at *3 (D.N.J. Mar. 19, 2012) (internal quotation marks omitted) (quoting Nautilus Ins. Co. v. Triple C. Const. Inc., No. 10-2164, 2011 WL 42889, at *4 (D.N.J. Jan. 6, 2011)). At this juncture, the Court must accept all factual allegations as true, except with respect to damages. Premium Sports, Inc. v. Silva, No. 15-1071, 2016 WL 223702, at *1 (D.N.J. Jan. 19, 2016).
In addition, the Court must consider the following three factors prior to granting default judgment: "(1) prejudice to the plaintiff if default is denied, (2) whether the defendant appears to have a litigable defense, and (3) whether defendant's delay is due to culpable conduct." Chamberlain v. Giampapa, 210 F.3d 154, 164 (3d Cir. 2000). A meritorious defense is one that "if established at trial, would completely bar plaintiff's recovery." Momah v. Albert Einstein Med. Ctr., 161 F.R.D. 304, 307 (E.D. Pa. 1995) (quoting Foy v. Dicks, 146 F.R.D. 113, 116 (E.D. Pa. 1993)). Furthermore, a defendant's culpable conduct in allowing default is a relevant consideration for a district court. Farnese v. Bagnasco, 687 F.2d 761, 764 (3d Cir. 1982).
When a party requests default judgment against a party that fails to file a responsive pleading, the Court "has an affirmative duty to look into its jurisdiction both over the subject matter and the parties." Ramada Worldwide Inc. v. Benton Harbor Hari Ohm, L.L.C., No. 05-3452, 2008 WL 2967067, at *9 (D.N.J. July 31, 2008). The Court finds that it has both subject matter jurisdiction over this matter and personal jurisdiction over Defendants.
Plaintiff alleges a claim for trademark infringement under Section 32 of the Lanham Actpursuant to 15 U.S.C. § 1114 (Compl. ¶¶ 58-78), thereby invoking federal question jurisdiction. See 28 U.S.C. § 1331. Accordingly, the Court has subject matter jurisdiction over Counts I(b) and II(b) and supplemental jurisdiction over Plaintiff's remaining state law claims (Counts V, VII, IX(a), & X(a)). See 28 U.S.C. § 1367(a); Empire Healthchoice Assurance, Inc. v. McVeigh, 547 U.S. 677, 706 (2006); Hines v. Irvington Counseling Ctr., 933 F. Supp. 382, 387 (D.N.J. 1996).
Taking Plaintiff's allegations as true, as it must, the Court finds that Defendants WHG and Edison Holdings are each limited liability companies organized and existing under the laws of the State of New Jersey and operating their principal places of business at the same address: 1 West Lafayette Street, Trenton, NJ 08608. (Compl. ¶¶ 2-3). The...
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