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Davis Memorial Goodwill Industries v. Garada

United States District Court, E.D. Virginia, Alexandria Division

February 27, 2018

DAVIS MEMORIAL GOODWILL INDUSTRIES d/b/a Goodwill of Greater Washington, Plaintiff,
v.
ALAA GARADA, a/k/a Alan Garada, Defendant

          PROPOSED FINDINGS OF FACT AND RECOMMENDATIONS

          JOHN F. ANDERSON ALEXANDRIA, VIRGINIA UNITED STATES MAGISTRATE JUDGE

         This matter is before the court on defendant Alaa Garada's ("defendant" or "Garada") motion to vacate default judgment. (Docket no. 48). Since defendant's motion relates to a post-trail matter and seeks relief that could be dispositive, it is being considered in accordance with 28 U.S.C. § 636(b)(3). McLeod, Alexander, Powel & Apffel, P.C. v. Quarles, 925 F.2d 853 (5th Cir. 1991). Pursuant to 28 U.S.C. § 636(b), the undersigned magistrate judge is filing with the court his proposed findings of fact and recommendations, a copy of which will be provided to all interested parties.

         Factual Background

         As alleged in its complaint (Docket no. 1) ("Compl."), plaintiff Davis Memorial Goodwill Industries ("plaintiff' or "Goodwill") is a non-profit charitable 501(c)(3) organization funding its mission through diverse lines of business, including operating a chain of retail stores in the Washington, D.C. metropolitan area. (Compl. ¶¶ 5-6). Goodwill collects donations at donation bins and attended donation sites throughout the area, but cannot house and sell a significant portion of the donations it receives at its retail stores. (Compl. ¶¶ 8-9). To manage the excess donations and non-saleable items ("salvage goods"), Goodwill contracts with third parties for their removal. (Compl. ¶ 10). On March 23, 2012, Goodwill and "Whole Trade" entered into an agreement for a term ending on March 23, 2015 whereby Goodwill granted "Whole Trade" the right to act as the salvage dealer for the salvage goods at four of Goodwill's retail stores (the "Salvage Agreement"). (Compl. ¶¶ 12-13, 17). Whole Trade, which is not an existing entity, listed "Alan Garada" as its owner, and Garada signed the Salvage Agreement. (Compl. ¶¶ 13-15).

         Under the terms of the Salvage Agreement, Garada would satisfy Goodwill's salvage needs by picking up and replacing trailers at Goodwill's retail stores within thirty-six hours of notification from the store that the trailer was ready for pickup. (Compl. ¶ 16). The Salvage Agreement also gave Garada the right to place up to one hundred and fifty donation bins and up to ten attended donation sites anywhere within Goodwill's geographic bounds, subject to certain conditions. (Compl. ¶ 18). Garada originally agreed to pay Goodwill $61, 000 per month, and increased that amount to $130, 000 per month under the terms of an addendum signed on December 14, 2013 for a term ending on June 30, 2014. (Compl. ¶¶ 22, 26). On February 13, 2015, the parties signed a second addendum extending the Salvage Agreement on a month-to-month basis until terminated by either party, signed by Garada on behalf of "World Trade." (Compl. ¶ 27).

         Around May 2016, Garada became increasingly unwilling or unable to remove trailers from Goodwill stores upon request, causing the stores to run out of space to store the salvage goods and forcing Goodwill to incur substantial expenses to remove the excess salvage. (Compl. ¶¶ 33-36). Goodwill submitted two invoices to Garada for reimbursement on August 26, 2016 and November 9, 2016, totaling $148, 686.73 (the "Invoices"). (Compl. ¶ 37). Goodwill terminated the Salvage Agreement on November 18, 2016, effective December 18, 2016, and delivered a termination letter to Garada by hand. (Compl. ¶¶ 38-39). Goodwill followed up on January 5, 2017 regarding the unpaid Invoices as well as unpaid monthly payments, totaling $349, 976.73. (Compl. ¶¶ 42-43). Garada ignored Goodwill's repeated requests to remove unauthorized bins, leading to reputational damage and lost donations. (Compl. ¶¶ 45-51). On February 28, 2017, Goodwill sent a letter via FedEx to Garada identifying items related to the winding down of the business relationship, demanding that Garada remove all outstanding donation bins, remove Goodwill's name and logo from those bins, and pay the outstanding Invoices and monthly payments. (Compl. ¶¶ 57-58).

         Procedural Background

         On March 24, 2017, plaintiff filed the verified complaint in this action alleging breach of contract. (Docket no. 1). The same day, plaintiff also filed a motion for preliminary injunction (Docket no. 4) and noticed it for a hearing on April 14, 2017 (Docket no. 6). The District Judge entered an Order on March 27, 2017, directing plaintiff to provide notice reasonably calculated to inform defendant of the April 14, 2017 preliminary injunction hearing, or reschedule the hearing for a date for which reasonable notice had been provided. (Docket no. 7). On March 28, 2017, a summons was issued for service on Alaa Garada at 5105 Colebrook Place, Alexandria, Virginia 22312. (Docket no. 8). On March 29, 2017, plaintiffs counsel submitted a notice stating that defendant was personally served on March 28, 2017 at 7:59 p.m. with the verified complaint and its exhibits, plaintiffs motion for preliminary injunction and its exhibits, and the notice of hearing on plaintiffs motion for preliminary injunction. (Docket nos. 9, 9-1). In accordance with Federal Rule for Civil Procedure 12(a), defendant's responsive pleading was due on April 18, 2017, twenty-one days after service of process.

         On April 14, 2017, plaintiff and its counsel appeared before the District Judge for a hearing on plaintiffs motion for preliminary injunction and no one appeared on behalf of defendant. (Docket no. 11). The District Judge entered an Order granting in part and denying in part plaintiff s motion for preliminary injunction on April 17, 2017. (Docket no. 12). That Order directed defendant to disclose to plaintiff the location of each Goodwill-branded donation bin he had placed without approval by April 21, 2017, and authorized plaintiff to remove those bins and any Goodwill branding, then promptly return the bins to defendant. (Docket no. 12 at 7). Plaintiff was further directed to serve a copy of the Preliminary Injunction Order on defendant, and submit a pleading advising the court whether plaintiff had collected and returned the unauthorized bins to defendant. (Id.). Plaintiff filed a notice on April 20, 2017 stating that defendant had been personally served with the Preliminary Injunction Order on April 19, 2017. (Docket no. 13). On May 12, 2017, plaintiff submitted its supplemental pleading explaining that its representative and defendant had an in-person conversation in which defendant stated that he had removed all of the Goodwill-branded bins he previously placed. (Docket no. 19 ¶ 4). Plaintiff stated that it collected all Goodwill-branded bins that it was aware of at that time and returned them to defendant, but then subsequently learned of further unauthorized bins from landowners, which it planned to collect by May 16, 2017. (Docket no. 19 ¶¶ 1-2).

         On April 27, 2017, plaintiff filed a request for entry of default against defendant and plaintiff mailed a copy of those pleadings to the defendant at his home address. (Docket no. 15). The Clerk of Court entered default as to defendant Alaa Garada d/b/a Alan Garada on April 28, 2017 for failure to plead or otherwise defend. (Docket no. 16). On May 8, 2017, the District Judge entered an Order instructing plaintiff to file a motion for default judgment, an accompanying memorandum, and a notice setting a hearing on the motion. (Docket no. 17). On May 12, 2017, plaintiff filed a motion for default judgment (Docket no. 18), and on May 15, 2017 noticed the motion for a hearing before the undersigned on May 26, 2017 (Docket no. 20). The motion for default judgment was sent to defendant's home address at 5105 Colebrook Place, Alexandria, Virginia 22312 by U.S. Mail on May 12, 2017 (Docket no. 18 at 15), and the notice of hearing was sent by certified mail to the same address on May 15, 2017 (Docket no. 21). On May 26, 2017, counsel for plaintiff appeared at the hearing before the undersigned and no one appeared on behalf of defendant. (Docket no. 22). Following the hearing, the undersigned filed proposed findings of fact and recommendations recommending the entry of a default judgment, with objections due by June 9, 2017. (Docket no. 23). A copy of the proposed findings of fact and recommendations were mailed to the defendant at his home address by the undersigned. No objections were filed, and the undersigned's proposed findings of fact and recommendations were adopted: the plaintiffs motion for default judgment was granted and a judgment was entered against defendant for $349, 976.73, and the preliminary injunction was converted into a permanent injunction. (Docket no. 24). The court mailed the Judgment and Permanent Injunction Order to defendant at the address listed on the executed summons on June 14, 2017.

         On November 20, 2017, plaintiff filed several notices, seeking to depose Ahmed Garada, Akram Garada, Khaled Garadah, Lina Elnakka, Rafik Moheyldin, and Rim El Naka on December 7 and 8, 2017. (Docket nos. 26-31). These notices were served by U.S. Mail to Alaa Garada at 5015 Colebrook Place, Alexandria, Virginia 22312. On December 1, 2017, plaintiff re-noticed those same depositions for January 8 and 9, 2018 and served the notices on Alaa Garada by U.S. Mail. (Docket nos. 32-37). On January 5, 2018, plaintiff again re-noticed the deposition of Khaled Garadah for February 12, 2018 and served the notice on Alaa Garada by U.S. Mail. (Docket no. 38). On January 9, 2018, plaintiff moved to compel responses to its post-judgment discovery responses, and on January 19, 2018, plaintiff moved to compel the deposition of Lina Elnakka, defendant's sister-in-law. (Docket nos. 39, 40). Plaintiff served both motions on Alaa Garada by U.S. Mail, and served the latter motion on Lina Elnakka by U.S. Mail at the same address. (Id.). On January 26, 2018, counsel for plaintiff appeared at the hearing before the undersigned and no one appeared on behalf of defendant, and the court granted plaintiffs motions. (Docket nos. 45-47). At the hearing, plaintiffs counsel noted that they had been in contact with defendant, and expected him to file a motion seeking to vacate the default judgment.

         Later in the day on January 26, 2018, defendant filed this motion to vacate the default judgment, claiming that he never received the original summons in this case. (Docket nos. 48, 49). The memorandum had two affidavits attached, one from defendant and one from his wife, Rim El Naka ("El Naka"), [1] stating that nobody came to their residence at any time on March 28, 2017, the date of initial service. (Docket nos. 49-2, 49-3). Plaintiff filed its opposition on February 9, 2018, representing that it personally served defendant and sent pleadings by U.S. Mail several times over the course of the litigation. Defendant did not submit a reply, but submitted a letter to the court from El Naka stating that she received court documents regarding "Mr. Khaled Garada, Ms. Lina El-Nakka, and Mr. Rafik Moheyeldin," despite notifying the messenger that those individuals had not lived there for more than three years. (Docket no. 56 at 1). On February 16, 2018, the parties appeared before the undersigned to present argument on defendant's motion. (Docket no. 58). At this hearing the court also heard testimony from the three witnesses for the defendant, Alaa Garada, Reem El Naka, and Ken Robinson, a criminal defense attorney working with defendant on a separate matter, and plaintiff presented one witness, Abel Emiru, a private process server.[2] (Id.).

         Proposed Findings and Recommendations

         Defendant alleges that plaintiff failed to personally serve him and otherwise did not provide notice of the action until November 2017. As explained in more detail below, it is recommended that there be a finding that ...


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