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Country Inns & Suites By Carlson, Inc. v. Praestans One, LLC

United States District Court, D. Minnesota

December 11, 2014

Country Inns & Suites by Carlson, Inc., Plaintiff,
v.
Praestans One, LLC, et al., Defendants.

REPORT AND RECOMMENDATION

LEO I. BRISBOIS, Magistrate Judge.

This matter came before the undersigned United States Magistrate Judge upon Plaintiff's Motion for Default Judgment and Award of Attorneys' Fees and Costs Against Defendants Praestans One, LLC, Naresh Amin, Sanjay Amin, Ramesh Joshi, and Vijay Modi, [Docket No. 66]. The Honorable Patrick J. Schiltz, United States District Judge for the District of Minnesota, referred the present motion to the undersigned Magistrate Judge for report and recommendation, pursuant to 28 U.S.C. § 636(b)(1) and Local Rule 72.1. (Order of Reference [Docket No. 24]). The Court held a motion hearing on November 18, 2014, and the Court took Plaintiff's motion under advisement. For reasons discussed herein, the Court recommends GRANTING Plaintiff's Motion for Default Judgment and Award of Attorneys' Fees and Costs Against Defendants Praestans One, LLC, Naresh Amin, Sanjay Amin, Ramesh Joshi, and Vijay Modi, [Docket No. 66].

I. BACKGROUND[1]

Plaintiff Country Inns & Suites by Carlson, Inc. ("Plaintiff") initiated the present case, alleging breach of contract, on or about December 9, 2013. (Compl. [Docket No. 1]). On or about March 30, 2005, Plaintiff and Defendant Praestans One, LLC ("Praestans") executed a License Agreement, attached to Plaintiff's Complaint as Exhibit A. (Id. ¶ 15; Schindler Aff. [Docket No. 69], ¶ 7). The License Agreement granted Praestans One, LLC license to construct and operate a Country Inns & Suites System Hotel for fifteen (15) years. (Schindler Aff. [Docket No. 69], ¶ 7). Contemporaneously, Plaintiff and Defendants Naresh Amin, Sanjay Amin, Ramesh Joshi, Vijay Modi, and others who are no longer parties to the present case executed a Personal Guaranty of License Agreement; Defendants guaranteed to make full and prompt payment of all fees, charges, payments, and amounts due or payable to Plaintiff under the License Agreement.[2] (Id. ¶ 8). The individual guarantors agreed that upon termination or expiration of the License Agreement, they would timely perform all of Praestans's post-termination obligations. (Id.)

Praestans's hotel - the subject of the License Agreement and the Personal Guaranty - was not successful, and Praestans fell behind on payments required under the License Agreement. (Compl. [Docket No. 1], at ¶ 25). On March 6, 2009, Praestans and Plaintiff executed a promissory note to arrange a payment plan. (Id.) Subsequently, on October 8, 2010, Plaintiff advised Praestans that it had defaulted on both the License Agreement and the promissory note. (Id. at ¶ 26; Pl.'s Ex. C [Docket No. 1-2], at 4-8). Over the ensuing two years, the parties negotiated "numerous" extensions of Praestans's deadline to cure the default, but Praestans never fully cured. (Compl. [Docket No. 1], at ¶ 27; see also Pl.'s Ex. D [Docket No. 1-2], at 9-13) (hereinafter, the "October 23, 2012 Notice of Extension")). The October 23, 2012 Notice of Extension provided that in the event Praestans failed to cure the outstanding defaults by November 30, 2012, the License Agreement would terminate effective December 12, 2012. (October 23, 2012 Notice of Extension [Docket No. 1-2], at 11). On December 5, 2012, Plaintiff served Defendant Praestans with a further Notice of Extension. (Compl. [Docket No. 1], at ¶ 28; Pl.'s Ex. E [Docket No. 1-2], at 14-18). In this Notice, Plaintiff advised that the License Agreement would not terminate on December 12, 2012, but that Praestans's failure to cure the default by January 4, 2013, would result in termination of the License Agreement on January 16, 2013. (Dec. 5, 2012 Notice of Extension [Docket No. 1-2], at 15-16).

On December 17, 2012, Praestans ceased operation and transferred the hotel pursuant to a substitute trustee's auction. (Schindler Aff. [Docket No. 69], ¶ 10). On December 19, 2012, Plaintiff sent Praestans a Notice of Default and Notice of Termination stating that the December 17 transfer occurred without Plaintiff's consent, in violation of Article 17.1, subsections (f) and (i) of the License Agreement. (Id. ¶ 11). By the language of the License Agreement, the violation entitled Plaintiff to terminate the Agreement without affording Defendants the opportunity to cure. (Id.)

Plaintiff initiated the present case, and summonses were issued to Defendants Prem P. Agarwal, Naresh Amin, Nayanesh P. Amin, Sanjay M. Amin, Ramesh Joshi, Vijay Modi, and Praestans One, LLC on or about December 10, 2013. (Summons Issued [Docket No. 4]). Defendant Praestans One, LLC was served with a copy of the summons and Complaint on December 18, 2013; Defendants Sanjay M. Amin, Prem P. Agarwal, and Vijay Modi were served on December 13, 2013; and Defendants Nayanesh P. Amin, Ramesh Joshi, and Naresh Amin were served on December 12, 2013. (See [Docket Nos. 5, 6, 7, 8, 9, 10, 11]).

On January 17, 2014, after it appeared that more than twenty-one (21) days had elapsed since Defendants were served with the summons and Complaint, the Court issued an Order directing the following:

1. Within three (3) business days of this Order, Counsel for Country Inns & Suites by Carlson, Inc. ("Plaintiff"), shall notify Defendants that they are required to file a responsive pleading or move for an extension of time to do so; and
2. If the Defendants fail to file a responsive pleading or move for an extension of time to do so within five (5) business days of having been given the notice required by Paragraph 1, Plaintiff shall file an application of default; or advise the Court in writing of any good cause for not doing so; and
3. If the Plaintiff fails to comply with the foregoing within twenty (20) days of the date of this Order, the Court will recommend that the case be dismissed for lack of prosecution.

(Order [Docket No. 12]). Following several Defendants' non-compliance with the Court's January 17, 2014 Order, [3] on January 31, 2014, Plaintiff applied for and received entry of default against Defendants Praestans One, LLC, Ramesh Joshi, Vijay Modi, and Naresh Amin. (Application for Entry of Default [Docket No. 18]; Clerk's Entry of Default [Docket No. 20]). Defendant Sanjay M. Amin received an extension of time to answer or otherwise respond to the Complaint. (Stipulation [Docket No. 15]; Order [Docket No. 21]).

However, following the clerk's entry of default, Defendants Modi and Joshi received an extension of time to answer or otherwise respond to the Complaint. (Orders [Docket Nos. 31, 32]). Defendants S. Amin, Modi, and Joshi filed motions to dismiss, [Docket Nos. 36, 37, 40]. The Court subsequently recommended denying Defendants' motions to dismiss, [Docket No. 57], and Judge Schiltz adopted the Report and Recommendation on July 14, 2014. (Order [Docket No. 61]).

With clerk's entries of default in place, Plaintiff moved for default judgment against Defendant Praestans One, LLC and Naresh Amin on June 2, 2014. (Motion for Default Judgment [Docket No. 50]). However, Plaintiff withdrew its motion on July 1, 2014, in light of case law that would ultimately prevent the Court from entering Plaintiff's requested relief. (Letter to Magistrate Judge [Docket No. 59]). Plaintiff explicitly withdrew its motion for default judgment with the understanding that the Court would allow Plaintiff to refile the motion upon final judgment or resolution of the case against all remaining Defendants. (Id.)

After it appeared that more than fourteen (14) days had elapsed since the Court's denial of Defendants Modi, Joshi, and S. Amin's motions to dismiss, the Court issued an Order noting that the Federal Rules of Civil Procedure required these three Defendants to answer the Complaint and directing the following:

1. Within three (3) business days of this Order, Counsel for Country Inns & Suites by Carlson, Inc. ("Plaintiff"), shall notify Defendants Ramesh Joshi, Vijay Modi, and Sanjay M. Amin that they are required to file a responsive ...

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