DiMuroGinsberg, P.C. v. VLOX, LLC
1:18-cv-01046
E.D. Va.Aug 7, 2019Background
- DMG (Virginia firm) and Artabane (D.C. firm) represented VLOX and later Starwalker (both owned/controlled by Hamed Wardak) on government-contract disputes arising from an HNT contract; plaintiffs were not paid for their services.
- Artabane had an express oral agreement with Defendants (rate $550/hr); DMG had an implied-in-fact agreement to assist Artabane on the option-year matters and performed substantial work.
- Plaintiffs negotiated and effectuated large settlements: a Base Year settlement (~$2.7M to VLOX) and an Option Year settlement (~$27.4M paid to Starwalker).
- After receipt, Wardak caused transfers/distributions: $2M from VLOX (post-Base Year) and $27M from Starwalker (post-Option Year) to his personal account; VLOX and Starwalker became undercapitalized and lacked operating accounts.
- Plaintiffs submitted invoices on May 13, 2016 (DMG: $92,299.80; Artabane: $242,440.40 after adjustments); Defendants terminated representation, refused payment, and Plaintiffs sued.
- After bench trial, court awarded judgments to DMG and Artabane against VLOX, Starwalker, and Wardak (jointly & severally) for the billed amounts with 6% interest from May 13, 2016; court denied quantum meruit, fraudulent-inducement, fraudulent-transfer remedies, punitive damages, injunctive relief, and attorneys’ fees.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Existence of contract with Artabane | Artabane had an express agreement to represent VLOX at $550/hr | No dispute on agreement; only amount contested | Express oral agreement found; Artabane awarded fees ($242,440.40) |
| Existence of contract with DMG | DMG impliedly contracted to provide services (assisting Artabane); entitled to reasonable value | Defendants contended no agreement with DMG | Implied-in-fact contract found; DMG awarded $92,299.80 |
| Reasonableness of fees billed | Fees and hours were reasonable given work and region; expert testimony supported bills | Defendants argued delay in billing and excessive/unnecessary hours warrant reduction | Court credited plaintiffs’ expert, reviewed lodestar, found fees reasonable (minor adjustments applied) |
| Piercing corporate veil / personal liability of Wardak | Wardak used VLOX/Starwalker as alter egos, disregarded formalities, diverted funds -> should be personally liable | Wardak argued distributions were proper and corporate formalities were maintained | Veil piercing of VLOX warranted under D.C. law; Wardak personally liable jointly & severally with entities; judgment entered against Wardak |
| Fraudulent transfer / injunctive relief | Transfers of settlement proceeds were made to avoid paying creditors (including law firms); seek rescission/recovery | Defendants argued transfers were distributions and not intended to evade payment; some funds remained to cover fees | Transfers were fraudulent as to creditors (assignment and transfer found fraudulent), but plaintiffs failed to prove by clear, convincing evidence transfers were made specifically to avoid these legal fees; equitable relief (injunction/recovery) denied |
| Quantum meruit / alternative recovery | If no enforceable contract, recovery in quantum meruit | Defendants argued express/implied contracts existed covering the work | Because enforceable contracts existed, quantum meruit claim dismissed in favor of defendants |
| Attorneys’ fees and punitive damages | Plaintiffs sought fees (collection clause in earlier letter) and punitive damages for fraud | Defendants opposed; punitive damages tied to fraud claim which was abandoned | No attorneys’ fees awarded (no applicable statute/contract/exception); punitive damages denied (fraud claim abandoned) |
Key Cases Cited
- Spectra-4, LLP v. Uniwest Commercial Realty, Inc., 772 S.E.2d 290 (Va. 2015) (principles on express and implied-in-fact contracts)
- Ramos v. Wells Fargo Bank, NA, 770 S.E.2d 491 (Va. 2015) (elements of breach of contract claim)
- Seagram v. David's Towing & Recovery, Inc., 62 F. Supp. 3d 467 (E.D. Va. 2014) (reasonable-value recovery where contract terms are absent)
- Estate of Raleigh v. Mitchell, 947 A.2d 464 (D.C. 2008) (D.C. veil-piercing test: unity of interest and injustice/fraud)
- La Bella Dona Skin Care, Inc. v. Belle Femme Enterprises, LLC, 805 S.E.2d 399 (Va. 2017) (fraudulent transfer requires clear, cogent, and convincing evidence of intent to defraud creditors)
- Prospect Dev. Co. v. Bershader, 515 S.E.2d 291 (Va. 1999) (attorneys’ fees may be awarded in fraud cases at court’s discretion)
- Moore Bros. Co. v. Brown & Root, Inc., 207 F.3d 717 (4th Cir. 2000) (equities test for prejudgment interest)