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Dimuroginsberg, P.C. v. VLOX, LLC

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

August 7, 2019

DIMUROGINSBERG, P.C., el al., Plaintiffs,
v.
VLOX, LLC, el al., Defendants.

          MEMORANDUM OF DECISION AND ORDER

          ANTHONY J. TRENGA UNITED STATES DISTRICT JUDGE

         Plaintiffs DiMuroGinsberg, P.C. ("DMG") and Artabane & Belden, P.C. ("Artabane"), Virginia and D.C. law firms, respectively, have not been paid for legal services provided to Defendants VLOX, LLC ("VLOX") and Starwalker PR, LLC ("Starwalker"). VLOX and Starwalker are government contract companies owned and controlled by Defendant Hamed Wardak ("Wardak"), who, Plaintiffs allege, used those companies as his alter ego and, through improper transfers to himself, deprived those entities of any ability to satisfy their outstanding bills. Plaintiffs seek judgments against all three Defendants for their billed fees and costs, together with punitive damages, pre- and post-judgment interest, injunctive relief as to certain transferred assets, and reasonable attorneys' fees and costs incurred in pursuing this litigation.

         The Defendants allege that they had a representation agreement only with Artabane and therefore do not owe DMG any fees or costs, that the amount billed by Artabane is unreasonable in light of the work performed, that Wardak's distributions to himself were proper, that he properly maintained corporate formalities as to VLOX and Starwalker, and that he therefore has no personal liability for any fees and expenses due and owing.

         In their five-count Amended Complaint, Plaintiffs assert claims for Breach of Contract (Count I), Quantum Meruit (Count II), Fraud in the Inducement (Count III), [1] Corporate Veil Piercing (Count IV), and Fraudulent Transfer (Count V). See [Doc. 34]. The Court held a bench trial on those claims on June 4 and 5, 2019 and heard closing arguments on June 13, after which the Court took the matter under advisement. As directed, the parties have submitted their proposed findings of fact and conclusions of law. By way of summary, the Court finds and concludes the following:

(1) Both DMG and Artabane had a valid representation agreement with VLOX and Starwalker.
(2) $92, 299.80 is a fair and reasonable amount for the legal services and expenses provided by DMG.
(3) $242, 440.40 a fair and reasonable amount for the legal services and expenses provided by Artabane.
(4) The equities favor an award of prejudgment interest in favor of Plaintiffs.
(5) The veil piercing of VLOX is appropriate as to Wardak; and Wardak is personally liable, jointly and severally, with VLOX and Starwalker, for the judgments entered in this case.
(6) Wardak's transfer of assets from VLOX and Starwalker and from Starwalker to himself, while fraudulent conveyances, do not under all the circumstances warrant an award of equitable relief to the Plaintiffs;

         Accordingly, the Court finds in favor of the Plaintiffs on Count I (breach of contract) and Count IV (corporate veil piercing) and will enter judgments as follows:

1. in favor of Plaintiff DMG and against Defendants VLOX, Starwalker, and Wardak, jointly and severally, in the amount of $92, 299.80, with interest at the rate of 6% as of May 13, 2016;
2. in favor of Plaintiff Artabane and against Defendants VLOX, Starwalker and Wardak, jointly and severally, in the amount of $242, 440.40, with interest at the rate of 6% as of May 13, 2016; and
3. in favor of Defendants on Counts II (Quantum Meruit), Count III (Fraudulent Inducement), and Count V (Fraudulent Transfer).

         In further support of this verdict, the Court issues the following findings of fact and conclusions of law pursuant to Federal Rule of Civil Procedure 52(a).[2]

         FINDINGS OF FACT AND CONCLUSIONS OF LAW

         I. Findings of Fact[3]

         Based on the evidence presented at trial, including the Court's assessment of the credibility of the witnesses, the weight to be given each piece of evidence, and the reasonable inferences to be drawn from that evidence, the Court makes the following findings of fact:

1. DMG is a Virginia law firm located in Alexandria, Virginia. Artabane is a Washington D.C. law firm. All DMG attorneys who performed legal work for VLOX in this matter are Virginia attorneys, and Joseph Artabane, the only Artabane attorney who performed legal work for VLOX in this matter, is a Washington D.C. attorney.
2. Mr. Artabane performed his work for VLOX at DMG's offices in Alexandria, Virginia.
3. Wardak resides in Dorado, Puerto Rico.
4. VLOX is a District of Columbia limited liability company wholly owned by Wardak, its sole member. VLOX began operations as NLC Construction, LLC. In June 2008, NLC Construction, LLC changed its name to NCL Holdings, LLC. On February 1, 2011 NCL Holdings, LLC changed its name to VLOX. VLOX operated without a board of directors since 2009.
5. Starwalker is a Puerto Rico limited liability company wholly owned by Wardak, its sole member.
6. In 2012, VLOX retained DMG to represent it before the United States Court of Appeals for the Fourth Circuit in connection with an appeal from a judgment in the amount of $2, 814, 034.12 entered against it in favor of Mirzada Transport & Logistics Co. ("Mirzada") and related collection discovery by Mirzada with respect to that unpaid judgment. VLOX and DMG signed a written engagement letter dated December 4, 2012 in connection with that representation.
7. The engagement letter stated DMG partner Ben DiMuro's rate at $450 per hour, the rate for DMG associates at $300 per hour, the rate for DMG paralegals at $75 per hour, and the rate for law clerks at $100 per hour. By its terms, the representation letter applied only to the Fourth Circuit appeal, although the letter did say that "[w]e would, of course, be happy to discuss further representation on a mutually agreeable basis after the Fourth Circuit issues its final decision." [Doc. 101-15].
8. In April 2013, while this representation was ongoing, the parties began discussing DMG's potential representation of VLOX in an action to enforce the terms of a contract VLOX had with the Army to provide shipping services in Afghanistan before the Armed Services Board of Contract Appeals ("ASBCA") in Falls Church, Virginia ("the HNT Contract").
9. Wardak viewed himself as the ultimate owner of the HNT Contract; and the HNT Contract dispute centered on amounts owed under two provisions: the "base year demurrage" provision and demurrages under the "first year option" provision, which were being pursued in two separate appeals before ASBCA.
10. At that time, DMG did not have an attorney on staff who specialized in government contract matters and therefore referred VLOX to Artabane, who specialized in this area.
11. From April to September 2013, VLOX was bidding on another matter and chose not to pursue the HNT Contract claims while bidding on that project. Therefore, the parties did not reach a formal agreement for Artabane to represent VLOX until after that bidding and selection process was completed, which occurred by September 2013. VLOX did not win the bid, and discussions about Artabane's representation of VLOX on the HNT Contract matters resumed in earnest in September 23, 2013.
12. Those discussions pertaining to Artabane's representation took place over a series of telephone calls and emails between VLOX and Plaintiffs. Artabane initially quoted an hourly rate of $650; but at DiMuro's request, quoted a reduced hourly rate of $550. Neither Mr. Artabane nor DiMuro informed defendants how often they would be billed.
13. In a September 2013 conference call on which Mr. Artabane, DiMuro, and Wardak were present, Wardak verbally approved the rate of $550 per hour for Artabane and retained Artabane to represent VLOX on the HNT Contract matters, including both the base year demurrage appeal, which had already been filed by VLOX's former counsel, Smith Pachter and was still pending, and the first-year option appeal.
14. As a result of their discussions and agreements, Defendants had an express representation agreement with Artabane.
15. Artabane began working on both claims in September 2013, but initially focused primarily on the base year claim. DMG attorneys did not initially perform work on the base year claim. However, Artabane began focusing on the option year claim in early 2014, at which time DMG also began working on the option year claim.
16. Throughout DMG's involvement in the option year representation, Wardak and other VLOX personnel interacted with DG attorneys and never questioned ...

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