Co-Owners of Franchisee Liable to Franchisor for Damages When Co-Owners/Guarantors Stopped Operations as a Franchise
In the business litigation franchise case of Howard Johnson International, Inc vs. Ebuehi, 12-7-4370. U.S. Dist. CT., the Plaintiffs filed a motion for default judgment against Defendants. Non-party Viva Vista Ventures, Inc. entered into a franchise agreement with Plaintiff and a connectivity agreement with Plaintiff. Defendants are co-owners of Viva Vista, and provided Plaintiff with a guarantee that if Viva Vista defaulted upon its obligations they would perform its obligations. Viva Vista stopped operating the facility as a Howard Johnson facility on April 1, 2009 and Plaintiff sent Viva Vista a termination letter pursuant to the franchise agreement. This termination triggered certain obligations by Viva Vista, including liquidated damages under both agreements, payment of any past due recurring fees, and attorney fees. Plaintiff seeds payment of these obligations from Defendants due to the Guarantee. The complaint clearly states a cause of action for breach of contract. Neither Viva Vista nor Defendants have performed the obligations required by the contracts. The Court finds that Plaintiff is harmed by not receiving payment, and absent default Plaintiff will have no other means of vindicating its claims against Defendants. Thus, Plaintiff will suffer prejudice without default. Although Defendant’s stricken answer sets forth ten defenses, these defenses provide no factual detail for the Court to determine their merit. Finally, the record indicates that the clerk’s default was entered against Defendants over six months ago, yet Defendants have not sought to lift default or otherwise defend against this motion for default judgment. Plaintiff’s motion for default judgment is granted.
Reference: Case & Analysis, New Jersey Law Journal, 216 N.J.L.J. 928 (June 30, 2014)
Filed Under: Commercial Litigation; Business Litigation Franchises
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