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AFC Franchising LLC v. Pellicano

United States District Court, N.D. Alabama, Southern Division

May 22, 2018

AFC FRANCHISING LLC, Plaintiff,
v.
RHONDA PELLICANO, et al., Defendants.

          MEMORANDUM OPINION

          R. DAVID PROCTOR UNITED STATES DISTRICT JUDGE

         This matter is before the court on the Motion for Default Judgment, filed by Plaintiff AFC Franchising, LLC (“Plaintiff” or “AFCF”) on April 23, 2018 against Defendants Rhonda Pellicano (“Pellicano”) and Exigent Care, Inc. (“Exigent Care” and collectively “Defendants”). (Doc. # 34). After the Clerk's Entry of Default against Defendants on October 24, 2017 (Doc. # 26), Plaintiff now seeks a Rule 55(b) default judgment for the monetary relief sought in the Complaint (Doc. # 1) and an award totaling $193, 226.33. (Doc. # 34). For the reasons outlined below, the current Motion (Doc. # 34) is due to be granted.

         I. Background[1]

         AFCF is the franchisor of the American Family Care system of urgent care centers. (Doc. # 1 at ¶ 1). Exigent Care manages an AFCF franchise in Virginia. (Id.). In April 2013, AFCF acquired the assets of the Doctors Express system from DRX Urgent Care, LLC. (Id. at ¶ 13). The sale included an assignment of the Doctors Express franchise agreements to AFCF. (Id.).

         On November 16, 2009, Pellicano, who is a managing owner of Exigent Care, [2] executed a Franchise Agreement, which granted Defendants the right to operate an urgent care facility in Virginia. (Docs. # 1 at ¶¶ 1, 16-17; 1-3). The Franchise Agreement provides for an initial term of fifteen years from the date of opening the franchise. (Doc. # 1-3 at p. 51). As a part of the Franchise Agreement, Pellicano entered into a Personal Guarantee to “punctually pay and perform each and every undertaking, agreement, and covenant set forth in the Agreement . . . and [be] personally liable for the breach of[] each and every provision in the Agreement . . . .” (Id. at p. 59). In the Franchise Agreement, Pellicano also attested to 50% ownership in the franchisee.[3](Id. at p. 56, 60). Section 3.1 and Exhibit A of the Franchise Agreement provides for an ongoing weekly royalty payment of 6% of gross sales. (Id. at p. 13, 51). Section 3.4 of the Franchise Agreement provides for a monthly interest rate of 1.5% for unpaid royalties. (Id. at p. 13). Section 17.3 of the Franchise Agreement allows for AFCF to recover its costs and attorney's fees to enforce the terms of the Franchise Agreement. (Id. at p. 45).

         Defendants opened their AFCF Center at 20 Norfolk Street, Fredericksburg, Virginia, in early 2010. (Doc. # 1 at ¶ 19). On March 15, 2010, Pellicano executed a Consent to Transfer Agreement for the sole purpose of operating the Doctors Express franchise location in Virginia. (Doc. # 1-4). On March 30, 2016, AFCF sent a default and termination letter to Defendants regarding a past due royalty amount of $156, 790.16. (Doc. # 1-1). Defendants have not paid any portion of this amount. (Doc. # 1 at ¶ 1). On January 27, 2017, AFCF sent another default and termination letter to Defendants because they had failed to rebrand as required under the terms of their Franchise Agreement. (Doc. # 1-2). Defendants continue to operate their AFCF franchise despite being in breach of material obligations of their Franchise Agreement and have refused to complete the required rebranding. (Doc. # 1 at ¶¶ 4, 15).

         AFCF filed its Complaint on May 15, 2017. (Doc. # 1). On August 17, 2017, Pellicano was served. (Doc. # 20). On August 18, 2018, Exigent Care was served. (Doc. # 19). After the two failed to answer or defend, AFCF moved for an Entry of Default against Pellicano and Exigent Care on October 24, 2017. (Doc. # 25). On the same day, the Clerk of Court made an Entry of Default against Defendants. (Doc. # 26).

         II. Analysis

Rule 55(b) states in relevant part:
(b) Entering a Default Judgment.
(1) By the Clerk. If the plaintiff's claim is for a sum certain or for a sum which can be made certain by computation, the clerk--on the plaintiff's request, with an affidavit showing the amount due--must enter judgment for that amount and costs against a defendant who has been defaulted for not appearing and who is neither a minor or incompetent person.
(2) By the Court. In all other cases, the party must apply to the court for a default judgment. A default judgment may be entered against a minor or incompetent person only if represented by a general guardian, conservator, or other like fiduciary who has appeared. If the party against whom a default judgment is sought has appeared personally or by a representative, that party or its representative must be served with written notice of the application at least 7 days before the hearing. The court may conduct hearings or make referrals--preserving any federal statutory right to a jury trial--when, to enter or effectuate judgment, it needs to:
(A) conduct an accounting;
(B) determine the amount of ...

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