Best Western International Incorporated v. Anderson Hospitality LLC et al

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IN THE UNITED STATED DISTRICT COURT
FOR THE DISTRICT OF ARIZONA
Best Western International Incorporated,
Plaintiff,
v.
Anderson Hospitality LLC, et al.,
Defendants.
No. CV-25-03077-PHX-MTM
REPORT AND
RECOMMENDATION
TO THE HONORABLE STEPHEN M. McNAMEE, SENIOR UNITED STATES
DISTRICT JUDGE:
Pending before the Court is Plaintiff’s Motion for Default Judgment. (Doc. 17.) This
Report and Recommendation is filed pursuant to General Order 21-25.1 The Court will
recommend that Plaintiff’s Motion be granted.
1 General Order 21-25 states in relevant part:
When a United States Magistrate Judge to whom a civil action has been
assigned pursuant to Local Rule 3.7(a)(1) considers dismissal to be
appropriate but lacks the jurisdiction to do so under 28 U.S.C. § 636(c)(1)
due to incomplete status of election by the parties to consent or not consent
to the full authority of the Magistrate Judge,
IT IS ORDERED that the Magistrate Judge will prepare a Report and
Recommendation for the Chief United States District Judge or designee.
IT IS FURTHER ORDERED designating the following District Court
Judges to review and, if deemed suitable, to sign the order of dismissal on
my behalf:
Phoenix/Prescott: Senior United States District Judge Stephen M. McNamee.
. . .
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I. Background
Plaintiff Best Western International Incorporated (“Plaintiff” or “Best Western”)
filed a Complaint in this matter on August 22, 2025, against Defendants Anderson
Hospitality LLC (“Anderson”), Ankit Panchal (“Panchal”), and Nikita Panchal
(collectively “Defendants”). (Doc. 1.) In its Complaint, Plaintiff alleges the following, in
pertinent part:
• Plaintiff is a non-profit corporation organized under Arizona law with its
headquarters located in Phoenix, Arizona. Defendant Anderson is a California
Limited Liability Company with its principal place of business in Bakersfield,
California. The sole shareholder of Anderson is Panchal, and he is a resident of
Pittsburg, California. Defendant Nikita Panchal is Defendant Panchal’s spouse and
is named solely for community property purposes.
• Anderson is the owner of a hotel located at 2688 Gateway Drive in Anderson,
California (the “Hotel”). Anderson executed a Membership Application and
Agreement with Best Western on December 7, 2021. Defendant Anderson
designated Panchal as its Voting Member for the membership. As the Voting
Member, Defendant Panchal agreed, acknowledged, and accepted personal liability
to answer for debts, liabilities, and obligations associated with the Membership,
Member, and the Property and to be jointly and severally liable to Best Western.
Nikita Panchal is Panchal’s spouse; she also acknowledged and agreed to be bound
by the Membership Agreement.
• Among Defendants’ contractual obligations was the requirement to timely pay all
fees, charges, and assessments. Each month, Best Western sent Defendants monthly
invoices with respect to the membership for the Hotel. Those invoices included an
“aging summary,” showing the current balance due, any amounts past due by 30
days, any amounts past due by 60 days, any amounts past due by 90 days, and any
amounts past due by 120 days or more. Most charges were billed in arrears for
reservation activity that occurred the month before.
• Defendants were regularly past due on their payment obligations, and Best Western
sent Defendants several letters concerning outstanding amounts. Past due balances
were also shown in the “aging summary” of their monthly statements. In an attempt
to cure the payment defaults, Defendants signed a payment plan, but defaulted on
the installments owed. In addition to payment defaults, Defendants failed to comply
with a number of other brand standards and membership requirements, to include
failing multiple Quality Assurance assessments, failing to provide a staffed front
desk for 24 hours daily seven days a week, and failing to satisfy the terms of a
Conditional Extension Agreement.
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• On February 4, 2025, Best Western sent a letter to Defendants notifying them of the
Board’s decision to terminate the membership (the “February Letter”). In the
February Letter, Best Western asked Defendants to make arrangements as soon as
possible to satisfy the balances owed on the Best Western account and to pay the
charges for fees and dues for the remainder of the fiscal year. The February Letter
also reminded Defendants that they were required by the Membership Agreement
and Regulatory Documents to de-brand and cease using Best Western’s trademarks
and logos (the “Best Western Marks”) by February 19, 2025, and included a request
that Defendants return a “Logo Removal Checklist and Affidavit” and submit
photographs showing that all Best Western Marks had been removed.
• On March 1, 2025, Best Western billed early termination damages for fees and dues
owed by Defendants for the rest of the fiscal year in the amount of $28,788.84, plus
other charges, fees, and interest owed under the membership agreement for a total
“current” amount due of $30,992.78. Combined with the past due amounts owed on
the February statement ($51,034.78), the March 1 statement reflected an outstanding
balance of $82,027.56. On May 20, 2025, Best Western sent a demand letter to
Defendants with respect to the outstanding amounts owed to Best Western in the
amount of $84,642.47 for pre-termination services, accrued interest, and fees and
dues for the rest of the fiscal year. The letter also referenced the Defendants’ refusal
to timely de-brand Best Western’s trademarks from the Hotel and damages owed
for trademark infringement. Best Western reminded Defendants of the trademark
damages that Defendants had agreed to in the Membership Agreement and
explained that damages were accruing at a rate of $568.23 per day, which as of May
20, 2025, was $50,572.47 (89 days of infringement). As of June 24, 2025,
Defendants were still displaying Best Western signage at the Hotel in violation of
the Membership Agreement and trademark law and Best Western sent a second
letter to the Hotel about the Defendants’ ongoing use of Best Western’s trademarks.
• Despite demand, Defendants failed to pay Best Western as required by the
Membership Agreement and Best Western regulatory documents. Because of
Defendants’ breach of the Membership Agreement for their failure to pay their
outstanding balance and their unlawful use of Best Western Marks without
authorization, Best Western filed a Complaint against Defendants. As of July 1,
2025, the total account balance owed to Best Western, with accrued interest was
$87,183.14.
On September 5, 2025, Best Western served the Summons and Complaint on
Anderson; on September 14, 2025, Defendants Panchal and Nikita were served. (Docs. 10,
11, 12); see Fed. R. Civ. P. 4(e)(2)(A)-(C), 4(h)(1); Ariz. R. Civ. P. 4.1(d) and (i).
Accordingly, Defendants were properly served. Defendants have not responded to the
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Complaint.
Pursuant to Plaintiff’s request, the Clerk entered default against Defendants on
October 30, 2025.2 (Docs. 13, 14.) Best Western now moves for default judgment against
Defendants on Count I of the Complaint (Breach of Contract), Count II of the Complaint
(Breach of the Implied Covenant of Good Faith and Fair Dealing), and Count III of the
Complaint (Breach of Contract for Post-Terminational Use of Best Western’s
Trademarks).3 (Doc. 17.) No response to the Motion has been filed.
II. Motion for Default Judgment
A. Legal Standard
Under Rule 55(a) of the Federal Rules of Civil Procedure, “[w]hen a party against
whom a judgment for affirmative relief is sought has failed to plead or otherwise defend,
and that failure is shown by affidavit or otherwise, the clerk must enter the party’s default.”
Fed. R. Civ. P. 55(a). Once a party’s default has been entered, the district court has
discretion to grant default judgment against that party. See Fed. R. Civ. P. 55(b)(2); Aldabe
v. Aldabe, 616 F.2d 1089, 1092 (9th Cir. 1980).
In assessing a motion for default judgment, the district court first “has an affirmative
duty to look into its jurisdiction over both the subject matter and the parties.” Tuli v.
Republic of Iraq, 172 F.3d 707, 712 (9th Cir. 1999) (“To avoid entering a default judgment
that can later be successfully attacked as void, a court should determine whether it has the
power, i.e., the jurisdiction, to enter judgment in the first place.”). Once jurisdiction is
satisfied, the court must determine whether default judgment is proper under the Eitel
factors. See Eitel v.McCool, 782 F.2d 1470, 1471-72 (9th Cir. 1986). Specifically, a court
should consider:
(1) the possibility of prejudice to the plaintiff[;]
2 Plaintiff certified that its Application for Default was served on Defendants by mail to:
Anderson Hospitality, LLC 10080 Wolfe Road SW3-200 Cupertino, CA 95014; Ankit
Panchal 1183 Cheshire Circle Danville, CA 94506; and Nikita Panchal 1183 Cheshire
Circle Danville, CA 94506. (Doc. 13.)
3 Best Western has filed a Notice of Voluntary Dismissal of the remaining claims against
Defendants (Counts IV-VII). (Doc. 16.)
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(2) the merits of plaintiff’s substantive claim[;]
(3) the sufficiency of the complaint[;]
(4) the sum of money at stake in the action;
(5) the possibility of a dispute concerning material facts;
(6) whether the default was due to excusable neglect[;] and
(7) the strong policy underlying the Federal Rules of Civil Procedure
favoring decisions on the merits.
Id. at 1471-72. In applying the Eitel factors, “the factual allegations of the complaint,
except those relating to damages, will be taken as true.” Geddes v. United Fin. Grp., 559
F.2d 557, 560 (9th Cir. 1977).
B. Discussion
1. Jurisdiction
“When entry of default is sought against a party who has failed to plead or otherwise
defend, a district court has an affirmative duty to look into its jurisdiction over both the
subject matter and the parties.” Tuli, 172 F.3d at 712. Here, Plaintiff asserts claims related
to the alleged infringement of its trademark and claims jurisdiction pursuant to 15 U.S.C.
§ 1121. Accordingly, the Court has jurisdiction over this matter. (Doc. 1.)
2. Eitel Factors
Having determined that this Court has jurisdiction, the Court will examine whether
entry of default judgment is proper under the Eitel factors.
a. The First, Fifth, Sixth, and Seventh Eitel Factors
When Defendants have not responded or participated in any litigation, the “first,
fifth, sixth, and seventh [Eitel] factors are easily addressed.” Zekelman Industries Inc. v.
Marker, No. CV-19-02109-PHX-DWL, 2020 WL 1495210, at *3 (D. Ariz. March 27,
2020).
The first factor weighs in favor of default judgment because denying Plaintiff’s
Motion will leave it “without other recourse for recovery,” PepsiCo, Inc. v. California
Security Cans., 238 F.Supp.2d 1172, 1177 (C.D. Cal. 2002), and prejudice would exist if
Plaintiff’s Motion were denied because it would lose the right to a “judicial resolution” of
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its claims. Elektra Entertainment Group, Inc. v. Crawford, 226 F.R.D. 388, 392 (C.D. Cal.
2005). The fifth factor weighs in favor of default judgment because the well-pleaded
factual allegations in the Complaint are taken as true, and there is no “genuine dispute of
material facts” that would preclude granting the Motion. PepsiCo, 238 F.Supp.2d at 1177.
The sixth factor considers whether the default was due to excusable neglect. Here,
Defendants’ failure to participate after being personally served does not indicate that
default was due to excusable neglect. See Twentieth Century Fox Film Corp. v. Streeter,
438 F.Supp.2d 1065, 1071-1072 (D. Ariz. 2006). The seventh factor -- favoring decisions
on the merits -- generally weighs against default judgment; however, “the mere existence
of Rule 55(b) indicates that ‘this preference, standing alone, is not dispositive,’” PepsiCo,
238 F.Supp.2d at 1177, and is not sufficient to preclude the entry of default judgment in
this case. Warner Bros. Entertainment Inc. v. Caridi, 346 F.Supp.2d 1068, 1073 (C.D. Cal.
2004) (explaining that the seventh Eitel factor “standing alone, cannot suffice to prevent
entry of default judgment for otherwise default judgment could never be entered” and
courts have concluded that “this factor does not weigh very heavily”). Here, a decision on
the merits is impossible, given that Defendants failed to appear.
In sum, the first, fifth, sixth, and seventh factors weigh in favor of default judgment.
b. The Second and Third Eitel Factors
The second and third Eitel factors -- the merits of the claim and the sufficiency of
the complaint -- are “often analyzed together and require courts to consider whether a
plaintiff has state[d] a claim on which [it] may recover.” Vietnam Reform Party v. Viet Tan-
Vietnam Reform Party, 416 F.Supp.3d 948, 962 (N.D. Cal. 2019).
“The elements of breach of contract claim are (1) a contract exists, (2) breach of the
contract, and (3) resulting damages.” Granite State Ins. Co. v. CME Prof’l Services LLC,
2019 WL 399923, at *3 (D. Ariz. Jan. 31, 2019). Best Western alleges that it entered into
a Membership Agreement with Defendants under which Defendants agreed to pay Best
Western for fees, dues, charges and assessments, and costs of all goods or services provided
or ordered through Best Western as well as interest at the rate of 1.5% per month. (Doc. 1
¶¶ 30-32, 68-74.) Defendants failed to make payments required by the Membership
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Agreement, and, thus, breached the parties’ contract.
In addition to its terms, the contract contains an implied covenant of good faith and
fair dealing. Wells Fargo Bank v. Arizona Laborers, 38 P.3d 12, 28 (Ariz. 2002). “The
essence of that duty is that neither party will act to impair the right of the other to receive
the benefits which flow from their agreement or contractual relationship.” Rawlings v.
Apodaca, 726 P.2d 565, 569 (Ariz. 1986). Defendants failed to honor their agreement with
Best Western – they failed to make payments as promised and have ignored multiple
demands from Best Western for payment. Defendants’ refusal to honor their payment
obligations to Best Western is a breach of the implied covenant of good faith and fair
dealing.
Because the Court takes these allegations as true, Geddes, 559 F.2d at 560, Plaintiff
“has stated a claim on which [it] may recover.” Vietnam Reform Party, 416 F.Supp.3d at
962. Thus, the second and third Eitel factors support an entry of default judgment.
c. The Fourth Eitel Factor
The fourth Eitel factor considers “the amount of money at stake in relation to the
seriousness of Defendant’s conduct.” PepsiCo, Inc., 238 F.Supp.2d at 1177. “If the sum of
money at stake is completely disproportionate or inappropriate, default judgment is
disfavored.” Twentieth Century Fox Film Corp., 438 F.Supp.2d at 1071.
Here, Best Western agreed to provide Defendants with reservation systems and
marketing campaigns, as well as the option to participate in the collective purchasing of
hotel equipment, furnishings, and supplies. (Doc. 1.) Further, Best Western provided
Defendants with use of the trade name, trademarks, service marks, logs, in connection with
the Hotel pursuant to a limited, non-exclusive license, as set forth in the parties’
Membership Agreement. (Id.) In exchange, Defendants agreed to pay annual dues, monthly
fees, membership fees, and other assessment/charges, and to abide by all obligations
established in the Regulatory Documents. (Id.) Plaintiff is requesting $161,053.04, and
claims this amount is not significant considering it includes services already provided to
Defendants, for which they have not paid.
Taking Plaintiff’s allegations as true, the Court finds that the amount requested is
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reasonable and not disproportionate or inappropriate. Thus, the fourth Eitel factor weighs
in favor of default judgment.
Overall, the Court finds that the Eitel factors weigh in favor of entering default
judgment against Defendants.
3. Damages
Having found that entry of default judgment is proper under the Eitel factors, the
Court will turn to the issue of damages. Unlike the allegations in the Complaint, the Court
does not take allegations relating to damages as true. Geddes, 559 F.2d at 560; see also
TeleVideo Sys., Inc. v. Heidenthal, 826 F.2d 915, 917-18 (9th Cir. 1987). Indeed, plaintiffs
have the burden of “proving up” damages, and “if the facts necessary to determine damages
are not contained in the complaint, or are legally insufficient, they will not be established
by default.” Philip Morris USA, Inc. v. Castworld Prods., Inc., 219 F.R.D. 494, 498 (C.D.
Cal. 2003). Courts may rely on declarations submitted by the plaintiff in determining
appropriate damages. Tolano v. El Rio Bakery, No. CV-18-00125-TUC-RM, 2019 WL
6464748, at *6 (D. Ariz. Dec. 2, 2019) (citing Philip Morris USA, Inc., 219 F.R.D. at 498).
According to its Motion and accompanying Declaration, the total account balance
owed to Best Western for pre-termination services, accrued interest, and fees and dues for
the rest of the fiscal year was $87,183.14. (Doc. 17-1, Exh. A.) Pursuant to the Membership
Agreement, the liquidated damages calculation for unauthorized use of Best Western’s
trademarks and logos (the “Best Western Marks”) is 15% of the Hotel’s average daily rates,
times the total number of rooms, times the number of days the Hotel has been displaying
the Best Western logo without authorization. As of the date of termination, the Hotel’s
average daily rate was $97.12 and it had a total of 39 guest rooms. Fifteen percent (15%)
of the Hotel’s average daily rate is $14.57. The daily damages per day for the Hotel’s
infringement pursuant to the Membership Agreement is $568.23. Defendants used Best
Western’s Marks without authorization for a minimum of 130 days (from February 19,
2025, through June 29, 2025). Thus, the liquidated damages owed by Defendants to Best
Western for Defendants’ unauthorized use of Best Western’s Marks is $73,869.90 ($568.23
x 130 days = $73,869.90).
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Plaintiff is requesting that judgment be entered in its favor and against Defendants
in the total amount of $161,053.04 ($87,183.14 + $73,869.90), accruing pre-judgment
interest at the rate of 1.5% per month, from July 1, 2025, until the date of the entry of the
judgment, and accruing post-judgment interest pursuant to 28 U.S.C. § 1961 from the date
of entry of the judgment until the judgment is paid in full. Plaintiff additionally requests
that the Court allow it to file a motion for attorneys’ fees and costs should the Court grant
default judgment.
The Court finds that Plaintiff’s requested relief accurately calculates the damages it
is entitled to and supported by Plaintiff’s Declaration. Therefore, the Court finds it
appropriate to award Plaintiff $161,053.04. Additionally, the Court finds that Plaintiff is
entitled to its attorneys’ fees and costs pursuant to the Membership Agreement. 4
III. Conclusion and Recommendation
Having reviewed Plaintiff’s Motion and the underlying documents in the record, the
Court finds that the Eitel factors weigh in favor of granting default judgment in favor of
Plaintiff for the requested amount.
Accordingly,
IT IS RECOMMENDED that Plaintiff’s Motion for Default Judgment (Doc. 17)
be GRANTED;
IT IS FURTHER RECOMMENDED that Judgment be entered in favor of
Plaintiff Best Western International, Inc., and against Defendants, in the amount of
$161,053.04, accruing pre-judgment interest at the rate of 1.5% per month, from July 1,
4 While Arizona statutory law does not authorize an award of attorneys’ fees in an
uncontested action arising out of a contract in the context of a default, A.R.S. § 12–
341.01(A), the Membership Agreement at issue provides, in pertinent part, “[i]n the event
that Member breaches any obligation to Best Western, Member is liable to Best Western
for all attorneys' fees, costs, and expenses incurred by Best Western in connection with the
breach or violation, whether or not suit is filed.” When parties contractually agree to pay
attorney fees, § 12–341.01 does not alter the parties’ agreement. See McDowell Mountain
Ranch Comm. Assoc. v. Simons, 165 P.3d 667, 670 (Ariz. Ct. App. 2007) (noting that it is
“well-settled in Arizona that ‘[c]ontracts for payment of attorneys’ fees are enforced in
accordance with the terms of the contract’”) (citations omitted); Dorn v. Robinson, 762
P.2d 566, 574 (Ariz. Ct. App. 1988) (awarding prevailing party attorneys’ fees where they
were provided for by contract).
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2025, until the date of the entry of this judgment, and accruing post-judgment interest
pursuant to 28 U.S.C. § 1961, from the date of entry of this judgment until the judgment is
paid in full;
IT IS FURTHER RECOMMENDED that Plaintiff have no later than 21 days
after entry of Judgment to file an application for attorneys’ fees and costs.
This recommendation is not an order that is immediately appealable to the Ninth
Circuit Court of Appeals. Any notice of appeal pursuant to Rule 4(a)(1), Federal Rules of
Appellate Procedure, should not be filed until entry of the district court’s judgment. The
parties shall have 14 days from the date of service of a copy of this Report and
Recommendation within which to file specific written objections with the Court. See 28
U.S.C. § 636(b)(1); Fed. R. Civ. P. 6(a), 6(b) and 72. Thereafter, the parties have 14 days
within which to file a response to the objections.
Failure to timely file objections to the Magistrate Judge’s Report and
Recommendation may result in the acceptance of the Report and Recommendation by the
district court without further review. See United States v. Reyna-Tapia, 328 F.3d 1114,
1121 (9th Cir. 2003). Failure to timely file objections to any factual determinations of the
Magistrate Judge will be considered a waiver of a party’s right to appellate review of the
findings of fact in an order of judgment entered pursuant to the Magistrate Judge’s Report
and Recommendation. See Fed. R. Civ. P. 72.
Dated this 15th day of January, 2026.
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