Opinion

UNITED STATES DISTRICT COURT 6/12/2026  11:44 am

EASTERN DISTRICT OF NEW YORK

U.S. DISTRICT COURT

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EASTERN DISTRICT OF NEW YORK

KIDDIE ACADEMY DOMESTIC FRANCHISING,

LONG ISLAND OFFICE

LLC

MEMORANDUM

Plaintiff, AND ORDER

- against - Civil Action

No. 24-02864 (GRB)(JMW)

PARADISE ORGANIZATION CORP. a/k/a

PARADISE ORGANIZATION, INC., SONU

CHADHA and DEEPAK CHADHA,

Defendants.

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GARY R. BROWN, United States District Judge:

Presently before the Court is a motion for partial summary judgment pursuant to Rule 56

of the Federal Rules of Civil Procedure filed by plaintiff Kiddie Academy Domestic Franchising,

LLC (“plaintiff”). Docket Entry (“DE”) 58. For the reasons stated herein, plaintiff’s motion is

GRANTED in part and DENIED in part.

Factual Background

Based on the parties’ submissions, the following relevant facts are undisputed, except as

noted. Plaintiff owns and operates educational childcare businesses that provide services for

children between the ages of six weeks and twelve years. Plaintiff has over 300 franchised

locations, including 14 in Nassau and Suffolk Counties. DE 61 ¶1.

In 1999, defendant Paradise Organization Corp. (“Paradise”) entered into a franchise

agreement with plaintiff to operate one of plaintiff’s learning centers as a franchisee. Id. ¶8.

After that agreement expired by its terms in 2012, the parties entered into a renewal franchise

agreement (the “Franchise Agreement”). Id. ¶21. Individual defendants Sonu and Deepak

Chadha personally guaranteed all of Paradise’s obligations outlined in the Franchise Agreement.

Id. ¶22.

The Franchise Agreement required Paradise to, inter alia, remit weekly royalty payments

and brand building fund (“BBF”) fees to plaintiff, maintain the premises and abide by both in-

term and post-term non-compete provisions. DE 61 ¶¶23-25. The Franchise Agreement further

provided that “[defendants] will have thirty (30) days after [their] receipt from [plaintiff] of a

written notice of default within which to remedy any default under this Agreement.” DE 56-16

at 48.

Beginning in 2012, and continuing to 2018, Paradise often submitted payments late, and

its arrears grew to a “substantial” number. DE 61 ¶30. As a result, to restructure defendants’

debt, the parties entered into a Voluntary Termination Agreement (the “VTA”) in connection

with two additional documents: a settlement agreement (the “2018 Settlement Agreement”) and a

promissory note (the “2018 Promissory Note”). Id. ¶¶31-32.

Under the VTA, plaintiff could terminate the Franchise Agreement immediately –

without providing defendants notice and an opportunity to cure – upon a “New Default” by

defendants. DE 56-19 at 2. A New Default was defined by the VTA, in relevant part, as “an

event of default of the Franchise Agreement or the [2018 Promissory] Note.” Id. In other words,

the VTA required defendants to satisfy the 2018 Promissory Note and adhere to their contractual

obligations under the Franchise Agreement or risk termination of the Franchise Agreement

without an opportunity to cure their default. The VTA was to become effective “as of the date

executed by [plaintiff],” but plaintiff seemingly never executed the VTA. Id. at 5 (VTA signed

only by defendants).

The 2018 Settlement Agreement provided that if Paradise was “not [ ] in default of the

Franchise Agreement, [and] upon Franchisee’s fulfillment of all obligations, terms and

conditions set forth in this Agreement and the Ancillary Agreements, the VTA . . . shall become

null and void and be of no further force and effect.” DE 56-18 at 4.

The 2018 Promissory Note required Paradise to make past due payments totaling

$133,934.90 as follows: $44,644.96 by October 31, 2018; $44,644.96 by November 30, 2018;

and $44,644.98 by December 31, 2018. DE 56-20 at 2. But defendants admit they were lax

about those deadlines – noting in their opposition papers that the 2018 Promissory Note was not

paid in full until July 19, 2019. DE 59 at 13 (“the Promissory Note was paid in full in [sic] by

July 19, 2019.”).1

In the ensuing years, Paradise continued to fall behind on payments. As of March 4,

2024, Paradise owed plaintiff more than $48,000. DE 61 ¶43. Compounding the financial

concerns, plaintiff also submits that Paradise violated the Franchise Agreement in 2023 and 2024

when it failed to provide plaintiff with the requisite financial information and failed to

adequately maintain the premises. Id. ¶¶46-48. As a result, on March 4, 2024, plaintiff invoked

the VTA to terminate the Franchise Agreement without giving defendants notice and an

opportunity to cure. DE 56-33. While the termination was only to become effective on April 3,

2024, the termination was unequivocal, and the time period between March 4 and April 3 was

not a period in which defendants could cure their alleged defaults. DE 63 ¶54.

1 This admission deviates from counsel’s prior representation in a pre-motion conference letter,

wherein counsel stated that “[i]t is undisputed that the promissory note was paid on or before

December 31, 2018.” DE 50 at 2 (emphasis added). This is not the only example of counsel

needlessly complicating this matter.

A few days after receiving the termination letter, but before termination became effective,

defendants began converting the premises into an independent educational childcare center that

would operate under the name “Blooming Buds Learning Center,” allegedly in violation of non-

competition provisions in the Franchise Agreement. Id. ¶¶61-62. The Franchise Agreement

prohibited defendants from competing, directly or indirectly, with plaintiff and its franchisees for

two years post-termination at: (i) any location within 20 miles of Paradise’s Protected Territory;

(ii) any location within 20 miles of any other Kiddie Academy location; and (iii) any location

within the primary market area served by any business operated by Kiddie or any entity that

owned or operated a Franchised Business under plaintiff’s marks and the Kiddie Academy

System. DE 56-16.

Plaintiff commenced the instant action on April 17, 2024. DE 1. Plaintiff now moves for

partial summary judgment on three of its claims: Count II for breach of contract based on

Paradise’s failure to make timely payments under the Franchise Agreement; Count IV for breach

of contract based on Paradise’s breach of the non-competition provisions in the Franchise

Agreement; and Count I for a permanent injunction enforcing the Franchise Agreement’s non-

compete provisions. Plaintiff also moves for summary judgment on defendants’ remaining

counterclaims for (1) breach of contract; (2) violation of the implied covenant of good faith and

fair dealing; (3) conspiracy; and (4) a declaratory judgment.2

2 Defendants voluntarily dismissed an additional counterclaim for breach of contract at the pre-

motion conference on July 21, 2025. That claim alleged that plaintiff breached the Franchise

Agreement by refusing defendants’ request to participate in the Universal Pre-K program. In yet

another example of defendants’ counsel unnecessarily multiplying proceedings, counsel initially

vigorously refused to drop the counterclaim, despite a clear admission from Sonu Chadha at her

deposition that “it was [her] decision” to not participate in the Universal Pre-K program. DE 56-

5 at 87:17-20.

Discussion

I. Standard of Review

Motions for summary judgment are decided under the oft-repeated and well understood

standard for review of such matters, as discussed in Bartels v. Inc. Vill. of Lloyd Harbor, 97 F.

Supp. 3d 198, 211 (E.D.N.Y. 2015), aff’d sub nom. Bartels v. Schwarz, 643 F. App’x 54 (2d Cir.

2016), which discussion is incorporated by reference herein.

II. Discussion

a. Breach of Contract Claims

As a threshold issue, defendants aver that the VTA was inefficacious at the time of

termination, and thus, plaintiff did not have the right to terminate the Franchise Agreement

without providing defendants notice and an opportunity to cure. Defendants advance two

arguments in support of their position:

First, defendants assert that the VTA never became effective because plaintiff never

executed the document, despite an unambiguous condition precedent that required plaintiff to

sign the VTA before it became effective. DE 56-19 at 5 (“the parties hereto have duly executed

this Agreement, with the intention that it become effective as of the date executed by

[plaintiff].”). But “[e]ven where signatures constitute a condition precedent, the parties can

waive the condition explicitly or by their conduct.” DC Mason Builders, Inc. v. Bancroft

Construction Co., 2018 WL 6179535 at *7 (D. Md. Nov. 27, 2018) (citing Hovanian Land Inv.

Grp. v. Annapolis Towne Ctr. at Parole, LLC, 25 A.3d 967, 983 (Md. 2011)).3 “[U]nder

Maryland law, a party to a contract may waive a condition precedent by taking actions that are

3 The Franchise Agreement, Section 26.1, provided that Maryland law governs the construction

and enforcement of the Franchise Agreement. DE 56-16 at 61.

inconsistent with an intent to rely on the protections of that condition precedent.” Gray v.

Philadelphia Contributionship, 748 F. Supp. 3d 367, 374 (D. Md. 2024) (citing Hovanian Land

Inv. Grp., 25 A.3d at 983-85). While waiver of a condition precedent is ordinarily a question of

fact, “[o]ccasionally, [ ] the waiver is so obvious that a ruling can be made as a matter of law.”

Hovanian Land Inv. Grp., 25 A.3d at 984. This is such a case.

Notwithstanding the fact that plaintiff apparently never executed the VTA, defendants

acted as though plaintiff had. Defendants admit that they made payments in accordance with the

schedule outlined in the 2018 Promissory Note as required by the VTA, even if belatedly. DE 59

at 14. Through their actions, defendants appear to have waived the requirement of execution.

Therefore, as a matter of law, defendants waived the condition precedent, and the VTA was

effective.

Second, defendants maintain that even if the VTA was effective, it became null and void

upon full payment of the 2018 Promissory Note in July 2019, pursuant to the 2018 Settlement

Agreement. Defendants argue that even though payments under the 2018 Promissory Note were

untimely, and they subsequently fell behind on BBF fees and royalty payments, plaintiff

continued to accept payments, thereby waiving its rights under the VTA to terminate the

Franchise Agreement without providing notice and an opportunity to cure. Thus, defendants

assert that even if they were in default of their obligations under the Franchise Agreement as of

March 4, 2024, they were entitled to notice and a 30-day opportunity to cure before termination.

“Under Maryland law, when a party continues to accept performance after an alleged

breach, then the accepting party waives its right to terminate the contract, or to deny the

continued performance.” Bunting Graphics, Inc. v. Whiting-Turner Contracting Co., 2025 WL

299211 at *17 (D. Md. Jan. 23, 2025); see also Pumphrey v. Pelton, 245 A.2d 301, 305-306 (Md.

1968) (holding that knowledge of a continuous breach constituted a “continuing waiver” of the

breach, making a subsequent termination unreasonable). Thus, “if a party claims that the other

has defaulted in its performance, but, nonetheless, continues to accept performance, that party

cannot later terminate the other party for the alleged default it did not act upon.” Bunting

Graphics, Inc., 2025 WL 299211 at *17 (citing Hovanian Land Inv. Grp., 25 A.3d at 986).

“Given the highly factual nature of the waiver inquiry, it is an uncommon case in which

the issue can be resolved by summary judgment.” Hovanian Land Inv. Grp., 25 A.3d at 984; see

also Univ. Nat'l Bank v. Wolfe, 369 A.2d 570, 576 (Md. 1977) (the question of “whether

subsequent conduct of the parties amounts to a modification or waiver of their contract is

generally a question of fact to be decided by the trier of fact.”). This holds true here. It is

undisputed – and indeed troubling – that defendants did not make timely payments according to

the schedule set forth in the 2018 Promissory Note, consistently fell behind on royalty payments

and BBF fees and allowed at least the playground on the premises to deteriorate into some state

of disrepair. DE 61 ¶¶ 30, 39, 46-48. All of these lapses may have provided grounds for

termination of the Franchise Agreement under the VTA, but plaintiff continued to accept

payments after the December 31, 2018 deadline and did not invoke the VTA to terminate the

Franchise Agreement until March 4, 2024 – nearly six years after entering into the VTA and five

years after satisfaction of the 2018 Promissory Note. A reasonable juror could find that this

constituted a waiver of plaintiff’s right under the VTA to terminate the Franchise Agreement

without providing notice and an opportunity to cure.

Both the VTA and the 2018 Settlement Agreement contain “non-waiver” language

providing that “[t]he failure of [plaintiff] to enforce any term of this Agreement or the Franchise

Agreement or the Ancillary Agreements shall not constitute a waiver of any rights or deprive

[plaintiff] of the right to insist thereafter upon strict adherence to the [sic] such Agreements or

any other terms of this Agreement.” DE 56-18 at 6; DE 56-19 at 4. “The party alleging waiver

must show an intent to waive both the contract provision at issue and the non-waiver clause.”

Hovnanian Land Inv. Grp., 25 A.3d at 984. “Non-waiver clauses, although not favored by

courts, must be considered by the trier of fact.” Id. Thus, the presence of the non-waiver clauses

in the VTA and the 2018 Settlement Agreement demonstrates another issue of fact foreclosing

summary judgment.

And this question raises others, including liability for liquidated damages. See

Merriweather Post Bus. Tr. v. It's My Amphitheater, Inc., 2020 WL 4530659 at *18 (Md. Ct.

Spec. App. Aug. 6, 2020) (“where one party has materially breached a contract, the other party is

no longer obligated to perform.”).

Accordingly, plaintiff’s motion for summary judgment is denied as to its claims for

breach of contract.

b. Permanent Injunction

“A party seeking a permanent injunction must demonstrate ‘actual success’ on the merits,

rather than [the] mere ‘likelihood of success’ required to obtain a preliminary injunction.” Ass'n

of Am. Publishers, Inc. v. Frosh, 607 F. Supp. 3d 614, 618 (D. Md. 2022). Given the issues of

fact as to plaintiff’s breach of contract claims, plaintiff has not shown actual success on the

merits and thus a permanent injunction is improper at this juncture.

c. Defendants’ Counterclaims

Defendants’ first counterclaim is for breach of contract by which they seek damages for

plaintiff’s wrongful termination of the Franchise Agreement. The issues of fact that preclude

summary judgment as to plaintiff’s breach of contract claims similarly affect defendants’

counterclaim for breach of the Franchise Agreement. Whether plaintiff waived its termination

right under the VTA must be decided by the trier of fact before consideration of whether plaintiff

breached the Franchise Agreement.

As to defendants’ second counterclaim for breach of the implied covenant of good faith

and fair dealing, “there is no independent cause of action at law in Maryland for breach of the

implied covenant of good faith and fair dealing.” Mount Vernon Props., LLC v. Branch Banking

And Tr. Co., 907 A.2d 373, 381 (Md. Ct. Spec. App. 2006). Instead, breach of the implied duty

of good faith and fair dealing is better viewed as “an element of another cause of action at law,”

such as breach of contract. Id. Accordingly, plaintiff’s motion for summary judgment is granted

as to defendants’ second counterclaim.

Defendants’ third counterclaim for conspiracy alleges that plaintiff conspired to cheat and

defraud defendants out of their franchise so that a more favored franchisee could purchase the

location. The parties dispute which state’s law applies to defendants’ third counterclaim.

However, neither New York nor Maryland recognizes civil conspiracy as an independent tort.

Est. of Greenwald v. Greenwald, 2026 WL 836112 at *6 (Md. Ct. Spec. App. Mar. 26, 2026) (“A

party alleging civil conspiracy will not succeed absent underlying tortious conduct”); Generation

Next Fashions Ltd. v. JP Morgan Chase Bank, NA., 698 F. Supp. 3d 663, 688 (S.D.N.Y. 2023)

(Under New York law, “[a]llegations of conspiracy are permitted only to connect the actions of

separate defendants with an otherwise actionable tort.”). Defendants do not allege an underlying

tort perpetrated by plaintiff. Their counterclaims sound in contract, not tort. Accordingly,

summary judgment is granted for plaintiff as to defendants’ third counterclaim for conspiracy.

Finally, defendants’ fifth counterclaim seeks a declaratory judgment that plaintiff is

barred from enforcing the terms of the Franchise Agreement – specifically the noncompete

provisions. Given the issues of fact as to whether plaintiff properly terminated the Franchise

Agreement, the Court cannot declare the rights of the parties at this juncture. Accordingly,

summary judgment for plaintiff is denied as to defendants’ fifth counterclaim.

Conclusion

For the reasons set forth above, plaintiff’s motion for partial summary judgment is

GRANTED in part and DENIED in part.

SO ORDERED.

Dated: Central Islip, New York

June 12, 2026

/s/ Gary R. Brown

GARY R. BROWN

United States District Judge