Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-1_04-cv-06393/USCOURTS-caed-1_04-cv-06393-2/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 15:1114 Trademark Infringement

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IN THE UNITED STATES DISTRICT COURT FOR THE

EASTERN DISTRICT OF CALIFORNIA

VILLAGER FRANCHISE SYSTEMS, ) 

INC., )

)

Plaintiff and Counter- )

Defendant, )

)

vs. )

)

DHAMI, DHAMI & VIRK, a )

general partnership, MALUK )

DHAMI, an individual, and )

KULDIP S. DHAMI, an )

individual, )

 )

Defendants and Counter- )

Claimants. )

)

) 

No. CV-F-04-6393 REC SMS

ORDER GRANTING PARTIAL

SUMMARY JUDGMENT FOR

PLAINTIFF REGARDING

ATTORNEY FEES AND INTEREST.

(Doc. 21) 

On December 5, 2005, the Court heard Plaintiff’s Motion for

Summary Judgment or Alternatively For Partial Summary Judgment

(the “Motion”). In its Order issued January 6, 2006, the Court

granted partial summary judgment in favor of Plaintiff and

requested further briefing regarding the amounts of attorney’s

fees and interest due under the Agreement and the Promissory and

Initial Fee Notes. Order 27:9-21. The parties have now briefed

the issues of attorney’s fees and interest. Plaintiff seeks

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$56,964.60 in interest on liquidated damages, $26,126.10 in

interest on unpaid Recurring Fees, $30,611.04 in interest on

unpaid notes, and $57,572.85 in attorney’s fees and expenses.

Defendants object to Plaintiff’s claims for interest and

attorney’s fees on several grounds.

I. Choice of Law

Defendants object to Plaintiff’s request that the Court use

New Jersey law to decide issues of interest and attorney’s fees,

as called for under section 17.6.1 of the Franchise Agreement. 

See Cox Decl. Ex. A at 18. Defendants do not dispute that New

Jersey choice-of-law provision is enforceable and properly

encompasses these issues. See Nedlloyd Lines B.V. v. Super. Ct.,

3 Cal. 4th 459, 464-65 (1992) (strong policy in favor of

enforcing parties’ contractual choice of law). Defendants take

issue only with Plaintiff’s inconsistency in failing to invoke

this provision in its arguments regarding of liability. In any

event, Defendants’ argument appears to be purely academic as they

do not contend that employing New Jersey law to decide these

issues triggers a different result than would obtain under

California law or the law of any other jurisdiction. Thus, the

Court will apply New Jersey law.

II. Prejudgment Interest on Recurring Fees

Plaintiff seeks interest on the Recurring Fees pursuant to

the Franchise agreement. Section 7.3 of the Franchise Agreement

provides: “‘Interest’ is payable when you receive our invoice on

any past due amount payable to us under this Agreement at the

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The Court has held that, because of Defendants’ failure to 1

respond, the RFAs are “conclusively established.” Order 7:10-16.

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rate of 1.5% per month or the maximum rate permitted by

applicable law, whichever is less, accruing from the due date

until the amount is paid.” Cox Decl. Ex. A at 9.

Defendants argue that they need not pay interest under the

agreement because Plaintiff has not shown that Defendants

received any invoice showing a past due amount. Defendants admit

that they received the Notice of Default Plaintiff sent on

October 9, 2002. Request for Admission (“RFA”) to Defs. No. 2. 1

The Notice of October 9 lists the current balance of recurring

fees and includes an itemized list of all charges. Cox Decl. Ex.

H. Defendants also admit that they received notice of

termination of the agreement in the letter of December 16, 2002. 

RFA to Defs. No. 3. That letter states that Defendants must

immediately pay “the full amount of all Recurring Fees and other

charges due under the Agreement.” Cox Decl. Ex. I. The Court

finds that the requirement of section 7.3 that Defendants receive

an invoice on any past due amount is satisfied.

Defendants also argue that an award of liquidated damages

forecloses Plaintiff from recovering interest on unpaid recurring

fees. The Franchise Agreement provides, in section 12.1, that

“Liquidated Damages are paid in place of our claims for lost

future Recurring Fees under this Agreement. Our right to receive

other amounts due under this Agreement is not affected.” Cox

Decl. Ex. A. Defendants argue that this language means that any

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liquidated damages replace “all Plaintiff[’]s claims for

recurring fees including interest.” Opp’n 4:11-12.

Defendants’ interpretation is inconsistent with the plain

language of the Franchise Agreement. Plaintiff is seeking to

recover interest on Recurring Fees incurred prior to termination,

not interest on future Recurring Fees. Liquidated damages only

replace “future Recurring Fees,” not unpaid Recurring Fees

incurred prior to termination. See Cox Decl. Ex. A at 14. 

Therefore, the Court’s award of liquidated damages for future

Recurring Fees does not foreclose an award of prejudgment

interest on unpaid Recurring Fees incurred prior to termination.

Accordingly, the Court finds that, as a matter of law,

Plaintiff is entitled to prejudgment interest on the Recurring

Fees.

III. Prejudgment Interest on the Liquidated Damages

Plaintiff contends that section 7.3 of the Franchise

Agreement, which allows for interest on “any past due amount

payable to us under this Agreement,” requires the Court to award

prejudgment interest on the liquidated damages. See Cox Decl.

Ex. A at 9. Defendants argue that the Franchise Agreement is

silent as to whether interest is appropriate on liquidated

damages. If the amount of liquidated damages is not certain,

then such damages constitute an impermissible penalty, Defendants

contend, citing a pair of district court cases, Kingston

Constructors v. Washington Metropolitan Area Transit Authority,

930 F. Supp. 651, 656 (D.D.C. 1996), and Travelodge Hotels v. Kim

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Shin Hospitality, 27 F. Supp. 2d 1377, 1383 (M.D. Fla. 1998). 

Neither of these cases discuss prejudgment interest on liquidated

damages. Rather, they both appear to discuss the requirement

that liquidated damages be a reasonable forecast of expected

damages. The Court has already found that the liquidated damages

in this case reasonably forecast expected damages “based on how

long Plaintiff typically takes to replace a terminated hotel

property.” Order 24:26-25:1. New Jersey law does not bar a

plaintiff from recovering prejudgment interest on liquidated

damages amounts. Meier v. N.J. Life Ins. Co., 101 N.J. 597, 622

(N.J. 1986). 

The Court finds that the award of prejudgment interest on

the liquidated damages is proper. In this case, two commercial

entities entered a Franchise Agreement providing for liquidated

damages and prejudgment interest on past due amounts. The

liquidated damages came due as soon as Plaintiff terminated the

Franchise Agreement. Defendants have had the use of these monies

to which Plaintiff is entitled since that time. As a matter of

law, Plaintiff is entitled to prejudgment interest on the

liquidated damages.

IV. Attorney’s Fees and Expenses

Plaintiff requests attorney’s fees in the amount of

$51,788.70, a figure it supports with partially redacted copies

of billing invoices portraying work done on this matter. See

Plattner Decl. Exs. A-P. Defendants do not dispute that

Plaintiff is entitled to recover attorney’s fees for work done on

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this action. Defendants argue instead that the fees Plaintiff

seeks are unreasonable. 

Defendants, citing Section 17.6.2 of the Franchise

Agreement, suggest that the fee award should be reduced because

Plaintiff did not attempt to resolve the dispute prior to

instigating litigation. See Cox Decl. Ex. A at 18 (Section

17.6.2 of the Franchise Agreement provides that “[t]he parties

shall attempt in good faith to resolve any dispute concerning

this Agreement or the parties’ relationship promptly through

negotiation between authorized representatives.”) That provision

does not indicate the parties intended to reduce attorney’s fees

as a penalty for failing to attempt to resolve a dispute out of

court. Defendants do not explain how such a reading could be

reasonable. In any event, Plaintiff offered to resolve the suit

without litigation in correspondence sent October 9, 2002,

December 16, 2002, and March 21, 2003. See Cox Decl. Exs. H, I,

J. 

Defendants do not claim that the hourly rates Plaintiff’s

counsel billed are unwarranted. Defendants appear to argue that

the litigation did not require as many hours of work as

Plaintiff’s counsel claim. The fees are excessive, Defendants

assert, to the extent they arise from work the description of

which has been partially redacted. Defendants calculate that

$18,457.65 of the fees Plaintiff seeks are for such work. They

urge the Court to reduce the fee award by that figure. 

The Court has reviewed the billing invoices and concludes

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that the redactions do not prevent it from determining the

reasonableness of the work performed. Most of the redacted

entries thoroughly describe the tasks performed. For instance,

an entry on June 19, 2003, accounting for .40 hours, reads

“REVIEW [redacted] TO PREPARE COMPLAINT AND COURT RULES TO

[redacted],” (Plattner Decl. Ex. A) and an entry on December 19,

2003, for .40 hours, states “REVIEW [redacted] AND WORK ON

REVISING DRAFT COMPLAINT [redacted]” (Plattner Decl. Ex. C). In

these entries, the purpose of the work is clearly to prepare the

Complaint, though the particular materials or subject matter of

the research are redacted. In other entries, the subject matter

of communications with the client or fellow counsel is redacted: 

.10 hours on March 7, 2005, for “CORRESPONDENCE WITH CLIENT RE

[redacted]” (Plattner Decl. Ex. I) and .30 hours on May 3, 2005,

for “CONFERENCE WITH COUNSEL REGARDING [redacted]” (Plattner

Decl. Ex. J). 

Some entries are more vague. For example, two entries on

June 9, 2005, both read simply “WORK ON [redacted].” Plattner

Decl. Ex. J. It is easy to tell based on the timing of these

entries what reasonable work they might reflect. The surrounding

entries indicate that Plaintiff’s counsel were concurrently at

work drafting a settlement conference statement on that day. See 

Plattner Decl. Ex. J.

The redactions appear to properly serve the interests of

maintaining attorney-client privilege and strategically

protecting attorney work product. The entries on the billing

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invoices are thorough enough to allow Defendants to object to

work performed as unnecessary or excessive. Defendants, however,

have failed to argue that any portion of the billing invoice

contains an unreasonable amount of hours given the difficulty of

the work or the demands of the litigation schedule. Defendants

merely conclusively state that the amount of discovery performed

and the work product filed in this case do not support the award

Plaintiff requests. 

The Court disagrees. Nothing before the Court indicates

that Plaintiff’s counsel spent an unreasonable amount of time

working on this case. Rather the time spent seems to correspond

with ordinarily diligent litigation activity. The brunt of the

hours billed appear to be spent during the most important stages

of the litigation: drafting and revising the complaint,

preparing for and taking depositions of Defendants, and

researching and drafting the summary judgment motion. The Court

finds that, as a matter of law, Plaintiff is entitled to recover

the attorney fees and expenses set forth in the billing invoices.

Accordingly, partial summary judgment is granted as to the

following amounts of damages:

1. Prejudgment interest on unpaid liquidated damages: 

$56,964.60.

2. Prejudgment interest on unpaid Recurring Fees: $26,126.10.

3. Prejudgment interest on the unpaid Initial Fee Note and

Promissory Note: $30,611.04.

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4. Attorney’s fees and expenses: $57,572.85.

IT IS SO ORDERED.

Dated: April 12, 2006 /s/ Robert E. Coyle 

810ha4 UNITED STATES DISTRICT JUDGE

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