A federal court in New Jersey recently entered default judgment against franchisee Nisha Investments, LLC and its guarantor Rajesh Patel arising from their early termination of a franchise agreement with La Quinta Franchising. La Quinta Franchising, LLC v. Nisha Invs., LLC, 2025 WL 1352304 (D.N.J. May 7, 2025).
The default judgment included $462,464 in liquidated damages and $117,907 in prejudgment interest. In September 2019, La Quinta and Nisha Investments entered into a franchise agreement for the operation of a La Quinta hotel until May 2038. Patel guaranteed Nisha Investments’ obligations under the franchise agreement. The franchise agreement established that early termination would trigger liquidated damages, past due recurring fees, and attorneys’ fees. In October 2023, Patel, on behalf of Nisha Investments, sent an email to La Quinta terminating the franchise agreement. La Quinta acknowledged the unilateral termination and filed a complaint alleging breach of contract and seeking damages against Patel for Nisha Investments’ breach. Neither Nisha Investments nor Patel filed any responsive pleading to the complaint or the subsequent motion for default judgment.
The court found La Quinta was entitled to default judgment because the uncontested facts demonstrated that Nisha Investments and Patel failed to perform their obligations under the franchise agreement. The court also found default judgment appropriate because: (1) La Quinta lacked other means of obtaining redress for the alleged harm; (2) there was no evidence in the record for Nisha Investments and Patel to claim a meritorious defense; and (3) Nisha Investments’ and Patel’s conduct was culpable due to failure to answer for over one year. The court calculated the liquidated damages and prejudgment interest as provided for in the franchise agreement. The court awarded prejudgment interest exceeding the amount requested by La Quinta because the court calculated prejudgment interest through the date of judgment, instead of the anticipated return date of La Quinta’s motion. La Quinta’s award totaled $580,371.30.
*Haozheng Jiang is a Summer Associate for Lathrop GPM who contributed to the writing of this post.
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