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Mulugeta v. Ademachew

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

August 15, 2019

LULIT MULUGETA, Plaintiff,
v.
SAMUEL TAFESSE ADEMACHEW, Defendant.

          MEMORANDUM OPINION

          LIAM O'GRADY, UNITED STATES DISTRICT JUDGE

         This matter comes before the Court following a two-day bench trial. The parties submitted pre-trial briefs and oppositions thereto. As such, the claims and counterclaims in this case are now ripe for disposition.

         For the reasons that follow and for good cause shown, the Court finds in favor of Plaintiff Lulit Mulugeta and against Defendant Samuel Tafesse Ademachew on all claims and counterclaims in this case. Plaintiff Mulugeta will be awarded relief as described below.

         I. INTRODUCTION

         Plaintiff Lulit Mulugeta and Defendant Samuel Tafesse Ademachew are Ethiopian natives who immigrated to the United States and became United States citizens. After the parties became romantically involved, Ademachew convinced Mulugeta to move to Ethiopia where he operates his businesses and, as one of the richest men in the county, is well-connected. Mulugeta moved to Ethiopia, and the parties created a company called Salit Academy PLC to form and run a school on one of Ademachew's properties to provide Mulugeta with a source of income. Ademachew did almost everything to form Salit Academy PLC and create and operate the school, including providing the funds; Mulugeta's role was largely limited to providing her signature when necessary.

         Shortly after Mulugeta moved to Ethiopia, she became pregnant with Ademachew's son. She also quickly began to fear for her safety after a series of incidents involving Ademachew's wife. As a result, the parties agreed that Mulugeta should return to the United States. To give Mulugeta money to care for their son, start a business in the United States, and relieve her of any remaining obligations in Ethiopia, the parties entered into a contract to dissolve Salit Academy PLC and sell the school to Ademachew.

         After the parties' romantic relationship soured, however, Ademachew failed to make the scheduled payments for the school to Mulugeta as required by the contract. Mulugeta sued Ademachew for breach of contract in this Court, and Ademachew countersued for breach of contract, unjust enrichment, fraudulent conveyance, and alter ego liability. Ademachew also sued Salit Academy PLC in Ethiopia and obtained judgments that the contract was a mere draft.

         The Court declined to terminate this case in light of the Ethiopian judgments at the motion to dismiss and summary judgment stages. The Court then held a two-day bench trial to evaluate the parties' respective claims and determine whether the Ethiopian judgments should be recognized in evaluating those claims. At trial, the Court heard testimony from Plaintiff Lulit Mulugeta and Mr. Alemayehu Mengesha, Mulugeta's purported expert on corruption in the Ethiopian judiciary. Ademachew did not appear at either day of the bench trial, despite being on Mulugeta's witness list, and his counsel did not call any witnesses. As the parties had already submitted pre-trial briefs, this case is now ripe for a decision.

         II. FINDINGS OF FACT

         A. The Parties' Relationship with Each Other and the Formation of Salit Academy.

         As noted above, both Mulugeta and Ademachew are Ethiopian natives who relocated to the United States, became United States citizens, and renounced their Ethiopian citizenship.[1]Ademachew is a billionaire and has been represented to be the second wealthiest man in Ethiopia. Although he is now domiciled in Virginia, Ademachew continues to visit Ethiopia frequently to maintain his prominent construction business and has remained well connected with top officials in the Ethiopian government. Mulugeta immigrated to the United States in 1992 after graduating high school and obtained a bachelor's degree in business administration with a concentration in finance. At the time the parties met, Mulugeta was working at Boeing in Seattle.

         Ademachew first saw Mulugeta at a New Year's Eve function in 2008. After seeing Mulugeta at the function, Ademachew began pursuing a romantic relationship with her. Mulugeta was married and was not interested in becoming romantically involved with Ademachew. Ademachew, who was also married, nevertheless kept pursuing a romantic relationship with her. The parties eventually met in person for the time in August 2009 while Mulugeta was visiting a friend in Las Vegas, Nevada. At the time of that meeting, Mulugeta was separated from her husband and living in Seattle, while Ademachew was still married to his wife and living in Virginia.

         During that initial in-person meeting in Las Vegas, Ademachew finally convinced Mulugeta to begin a romantic relationship with him. Ademachew never promised Mulugeta that he would divorce his wife, but told Mulugeta that he had a "sisterly relationship" with his wife while "it was love at first sight" with Mulugeta. He told Mulugeta that in five years he would be able to "figure something out," and gave her what became the first promise ring of many throughout the course or their relationship.

         Ademachew also told Mulugeta that he wanted her to move closer to him. Although Ademachew lived in Virginia and had become a United States citizen, he remained a well-known and well-connected real estate and construction mogul in Ethiopia. He told Mulugeta that businesses are profitable in Ethiopia, and that he would open a school for her in Ethiopia and make her a multi-millionaire. At first, Mulugeta was hesitant to move to Ethiopia to be with Ademachew because her life and career were in Seattle. She also had never thought about opening a school before and did not have any special training in education. Eventually, however, Ademachew convinced her to move to Ethiopia for him.

         Before Mulugeta left Seattle, she purchased a home in Maryland to maintain her credit through mortgage payments. She purchased the home in Maryland instead of Seattle because Ademachew insisted that her United States home be close to his home in Virginia.

         Mulugeta officially moved to Ethiopia in March 2010. Ademachew then took the lead in establishing a school for her. He chose one of his developed properties to be the location of the school, told Mulugeta everything she needed to do to establish Salit Academy PLC, [2] and had "expediters" help speed up what would have otherwise been a slow process. Mulugeta's role in creating Salit Academy was largely limited to accompanying Ademachew to meetings to sign documents. Ademachew paid for everything for Salit Academy PLC and the school, including the price to rent and later purchase the school's land from his company for 4.2 million Ethiopian birr, the purchase price he set.[3] Ademachew also drafted the Articles of Incorporation for Salit Academy PLC, which Mulugeta owns with her mother because two owners are necessary to form a PLC.[4]

         Soon after moving to Ethiopia, Mulugeta became pregnant with Ademachew's son. She also began to feel unsafe after Ademachew's wife came to the house Ademachew was renting for Mulugeta and later left a letter at the house telling Mulugeta "you should go back to where you came from, or you're going to suffer dire consequences." As a result, Mulugeta resigned as the general manager of Salit Academy and moved back to Maryland in September 2010.

         Salit Academy had not yet opened before Mulugeta left Ethiopia. After Mulugeta left and resigned as general manager, her brother Tatek became the school's general manager at Ademachew's suggestion. Mulugeta remained the owner of the school, but was never involved in running the school and was not given updates about the school even when she asked.

         In 2014, Mulugeta decided to end her romantic relationship with Ademachew because she "felt like he wasn't the person that [she] thought he was going to be," although she strived to maintain a cordial, platonic relationship for the sake of their son. Sometime in 2014 or 2015, the parties agreed to close Salit Academy. Ademachew told Mulugeta the school was never profitable, and he was tired of infusing money into it. Mulugeta also had no interest in moving back to Ethiopia to run the school and wanted to reestablish herself in the United States. The parties therefore agreed to sell the school and have Mulugeta use the money from the sale to run a business in the United States.

         Ademachew found a buyer for the school and assured Mulugeta that the sale would go through and that he would cover the sale price if the buyer did not pay it in full. Based on Ademachew's representations, Mulugeta flew to Ethiopia to complete the necessary paperwork to complete the sale. Upon her arrival in Ethiopia, however, Ademachew informed Mulugeta that the buyer had changed his mind.

         A few weeks later, the parties agreed that Ademachew would buy the school from Salit Academy PLC and pay Mulugeta the sale price personally in United States dollars, which Mulugeta would then use to establish a business in the United States. The parties later formalized their oral agreement in the written contract that is the subject of this litigation.

         B. The Terms of the Contract.

         The contract was drafted in Ethiopia on June 27, 2015 and signed on August 4, 2015.[5]Although the contract was written in Amharic, the Court has been provided with a certified English translation.

         The contract provides that Salit Academy PLC will sell the school to Ademachew for one million dollars. Contract ¶¶ 2, 4. Ademachew suggested the $1 million price and although Mulugeta was told she could get more for the school, she agreed to that amount because it was a good round number, the parties had agreed the money would go directly to Mulugeta, and the parties contracted that Mulugeta would not be responsible for any other costs.[6]

         The contract provides that Ademachew was to pay the $1 million in three installments. Id. ¶ 4. The parties further agreed that the $1 million would be paid to Mulugeta directly to help her reestablish herself and start a business in the United States.

         The first scheduled payment installment was for $435, 000. Id. at ¶ 4.1. Half of the first installment was due on July 22, 2015, and the second half was due on September 15, 2015. Id. The contract specifies that these payments were to "be deposited in Ms. Lulit Mulugeta['s] name at her account in America with the official exchange rate." Id.

         The second scheduled payment installment of $217, 500 was to be paid in full on October 25, 2015 by depositing that sum in "Ms. Lulit Mulugeta's U.S. account with an official exchange rate." Id. at ¶ 4.2.

         The third payment installment of $347, 500 was to be exchanged in person "after [Salit Academy PLC] gets a clearance and gets a sells [sic]" - i.e., title transfer[7] - "contract ready to be signed, from the office of documents registration and approval, and informs [Ademachew], before November 30 2015 [sic], and Ms. Lulit Mulugeta signs within sixty days." Id. at ¶ 4.3. Although paragraph 4.3 stated that Salit Academy PLC was to obtain the clearance and title transfer contract, Mulugeta understood that Ademachew had agreed to take on these responsibilities in paragraph 5.2 because Mulugeta was never really involved with the school and needed to return to the United States to care for their son, while Ademachew was often in Ethiopia and had experience selling property in Ethiopia. Consistent with Mulugeta's understanding, paragraph 5.2 states:

The building on this contract is sold because it was decided to dissolve Salit Academy Pic. Hence we have agreed that it is the responsibility of the buyer [Ademachew], either himself or through a representative, to follow up all the responsibilities of the hired manager of the association of all the tasks regarding dissolving the association and getting a clearance, checking the right documents have been given to the concerned government offices, [and ensuring] the account books of the association have been closed.

Id.52[8]

         Ademachew also agreed to assume the responsibility of providing the tax clearance forms for the sale of the school, id. at ¶ 3.3, and "cover all expenses... related to name transfer," including taxes, id. at ¶ 5.1. Additionally, consistent with both Mulugeta's understanding and Ademachew's representations of Ethiopian law governing the transfer of property title, the contract's final paragraph regarding the parties' obligations specifies that the title transfer contract will be "presented to the Office of Document Registration and Approval and signed" to effectuate the name transfer. Id. at ¶ 5.4.[9]

         Other than returning to Ethiopia to ultimately sign the title transfer paperwork, the only other obligation Mulugeta retained on behalf of Salit Academy PLC was to obtain a dissolution paper for the corporation from the Document Authentication and Registration Office ("DARO") within "six month (180) days of the signing of this contract." See Id. at ¶ 3.1 (quoted without alterations).

         In the meantime, the parties agreed that Ademachew would be given immediate control of the school and assume all expenses and responsibilities for the property. Id. at ¶¶ 5.3-5.4.

         In the event Ademachew defaulted on any of his obligations under the contract, he agreed to pay a $100, 000 penalty "according to the Civil Code No. 1889." Id. at ¶ 4.4. The contract does not contain any other provisions that would apply in the event of a breach.

         The contract also does not contain a choice-of-law clause governing the interpretation and enforcement of the contract. There is, however, a provision specifying that "all relevant proclamations of the civil code law will prevail in relation to the building [Salit Academy PLC] is transferring to [Ademachew]." Id. at ¶ 6.[10]

         Mulugeta, as the designated officer and deputy manager of Salit Academy PLC, and Ademachew signed the contract on August 4, 2015, certifying their agreement "that this contract is binding from the day the contracting parties signed on it" and that they "have agreed, with all willingness and desire, to implement the responsibilities and tasks implicated within this contract." Id. at ¶¶ 1, 7.

         C. Events Following the Formation of the Contract.

         While in Ethiopia to sign the contract, Mulugeta completed the only step the parties agreed she was required to take until she signed the title transfer document: obtain a dissolution certification from DARO.[11] Mulugeta also transferred control of the school to Ademachew, with her brother serving as general manager.[12]

         Ademachew failed to pay the first installment of the contract price as required. The contract required the first payment of $435, 000 to be paid in half by July 22, 2015, and in full by September 15, 2015. Id. at ¶ 4.2. Ademachew paid Mulugeta $99, 955 on July 9, 2015, [13] Pl.'s Ex. 2, $235, 000 on August 5, 2015, Pl.'s Ex. 3, and $100, 000 on September 8, 2015, Pl.'s Ex. 4. Together, these three payments were $45 shy of the $435, 000 Ademachew owed Mulugeta. Mulugeta was told the disparity was the result of wire transfer fees.[14]

         Mulugeta never received any portion of the second installment of the contract price. Mulugeta repeatedly asked Ademachew about the payment, and he kept responding that he would get it done. At some point, however, Ademachew began making additional demands of Mulugeta before he would send her the second installment. For example, Ademachew asked Mulugeta to give him the Salit Academy PLC dissolution papers so he could sell the school and pay Mulugeta from the proceeds. Ademachew also asked for a new agreement that differed from the contract the parties had signed. Mulugeta refused to give Ademachew the dissolution papers before she received the second payment installment required by the contract because once she gave Ademachew the dissolution papers, she believed there would be no way to get the school back or the money she was owed.

         After months of Ademachew also missing child support payments and threatening to reduce child support, Mulugeta sued Ademachew in Maryland for sole custody of their son and for court mandated child support. After the custody suit was filed, Ademachew told Mulugeta that he was "not doing anything anymore."

         Mulugeta hoped that the parties' child support, child custody, and contract disputes could all be resolved in a single settlement. To that end, after Mulugeta received a legal notice from Ademachew requesting that Mulugeta provide him with signed tax documents, [15] Mulugeta's attorney in the Maryland case sent a letter to Ademachew with the following offer:

Ms. Mulugeta has been awaiting payment since October 25, 2015 under the parties' contract, but Mr. Ademachew has recently voiced concerns about his ability to transfer the school to his name without Ms. Mulugeta's completion of documents that will help clear any clouds on title. We propose that Mr. Ademachew deposit the $565, 000.00 owed to Ms. Mulugeta in an escrow account in Maryland. After the funds are deposited, Ms. Mulugeta will complete the documents required to clear title on the school so that Mr. Ademachew can transfer the school to his name. Ms. Mulugeta will provide the completed documents to Mr. Ademachew, after which the escrowed funds can be transferred to her.

Pl.'s Ex. 5. Ademachew did not accept Mulugeta's offer.[16]

         Mulugeta believes that unless her contract with Ademachew is enforced, she will be damaged. Mulugeta testified that she would not feel safe traveling to Ethiopia to try to sell the property and, in any event, she believes Ademachew would interfere with any attempts she made to sell the property. Mulugeta also testified that she cannot hire a real estate agent to sell the property for her because when she attempted to do just that, the real estate agent was told to leave and that the property was not for sale. As a result, when Ademachew refused to comply with the contract or accept her settlement offer, Mulugeta filed this present lawsuit for breach of contract.

         After this lawsuit was filed, the parties discussed settling the case. During those discussions, Ademachew told Mulugeta "I may not win, but I am going to exhaust you financially litigating it." Ademachew also filed counterclaims alleging (1) breach of contract, (2) unjust ...


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