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Melehy & Associates LLC v. Haile

United States District Court, District of Columbia

September 12, 2019

MELEHY & ASSOCIATES LLC, Plaintiff,
v.
ERMIAS SIEFE HAILE, et al., Defendants.

          MEMORANDUM OPINION

          ELLEN S. HUVELLE UNITED STATES DISTRICT JUDGE.

         In this breach of contract action, plaintiff Melehy and Associates LLC (the “Melehy Law Firm”) has moved pursuant to Federal Rule of Procedure 55(b) for entry of a default judgment against individual defendants Ermias Siefe Haile and Tewodage Mulugeta. (Mot. for Default Judgment, ECF No. 10.) For the reasons stated herein, the motion is granted.

         BACKGROUND

         The Melehy Law Firm “is a limited liability company organized under the laws of the State of Maryland with its principal place of business in the State of Maryland.” (Compl. ¶ 5.) It “provides legal services to individual and corporate clients in Maryland and the District of Columbia in connection with, among other things, seeking relief under the United States Bankruptcy Code.” (Id.)

         Vision Investment LLC (“Vision” or “Vision LLC”) is “a limited liability company organized under the laws of the District of Columbia for the purpose of owning and managing a multi-unit rental property located in the District of Columbia.” (Id. ¶ 6.) Haile and Mulugeta are the only two members of Vision LLC, and both are citizens of Virginia. (Id. ¶¶ 1, 6.)

         On or about January 9, 2017, Haile and Mulugeta retained the Melehy Law Firm to represent Vision LLC in connection with filing for Chapter 11 bankruptcy. (Id. ¶ 8.) The terms under which the Melehy Law Firm agreed to represent Vision LLC are set forth in a Retainer Agreement. (Id. ¶ 9; see also Mot. for Default Judgment, Ex. D (copy of signed Retainer Agreement).) The Retainer Agreement was signed by Haile and Mulugeta in their capacity as members of Vision and also individually as guarantors. (See Compl. ¶ 9; see also Retainer Agreement at 6 (“As members of Vision Investment LLC, we have read, understand and agree to the above fee arrangement. We understand that we are jointly and severally liable for all amounts due under this retainer agreement.”).) The Retainer Agreement provides that “any billed balance which remains unpaid for more than 30 days continues to accrue interest at the rate of 18 percent per annum.” (Compl. ¶ 14; Retainer Agreement ¶ 22(i).) It further provides that Vision LLC would pay any attorney's fees and costs incurred “in connection with any collection efforts undertaken in order to secure payment of any sums that become due under the Retainer Agreement.” (Compl. ¶ 10; Retainer Agreement ¶ 22 (iv) & (v).) In addition, Haile and Mulugeta “executed an Unlimited Guaranty whereby they each individually agreed to be responsible for any attorney's fees incurred or costs advanced by [Melehy] in connection with its representation of Vision [] in its Chapter 11 bankruptcy case.” (Compl. ¶ 11.)

         The Melehy Law Firm's Representation of Vision LLC in the Bankruptcy Court:

         On January 9, 2017, Suvita Melehy, an attorney at the Melehy Law Firm, filed a Chapter 11 voluntary petition for bankruptcy on behalf of Vision LLC. See Petition, In re Vision Investment LLC, No. 17-bk-00012 (Bankr. D.D.C.) (“Vision Bankr.”). On February 3, 2017, Vision LLC (through Suvita Melehy) filed an application with the bankruptcy court to retain the Melehy Law Firm, specifically Suvita Melehy, to represent it in its bankruptcy proceedings. See Application, Vision Bankr., ECF No. 26. On February 24, 2017, the bankruptcy court approved the employment of the Melehy Law Firm and Suvita Melehy to represent Vision LLC in bankruptcy, with an effective date of January 9, 2017. See Order, Vision Bankr., ECF No. 28.

         On February 26, 2018, Suvita Melehy and the Melehy Law Firm, citing an inability to communicate with Haile, the managing member of Vision LLC, filed a motion to withdraw as counsel for Vision LLC. See Motion, Vision Bankr., ECF No. 108. On March 20, 2018, the bankruptcy court granted the motion. See Order, Vision Bankr., ECF No. 115. On April 20, 2018, the bankruptcy court converted Vision LLC's bankruptcy case from Chapter 11 to Chapter 7, designating Haile to act as the debtor. See Order, Vision Bankr., ECF No. 121.

         For the entirety of the period the Melehy Law Firm represented Vision LLC in bankruptcy (from January 9, 2017 through March 19, 2018), it rendered legal services and advanced costs totaling $121, 061.58. (Compl. ¶¶ 12.) On April 18, 2017, while it was still acting as Vision LLC's counsel, the Melehy Law Firm filed its “first interim application for compensation of counsel for the debtor, ” seeking to be paid for services rendered and expenses incurred from January 9, 2017 through April 18, 2017. See Application, Vision Bankr., ECF No. 43. On May 16, 2017, the bankruptcy court approved that application, awarding Melehy $36, 848.25 in attorneys' fees and $2, 596.12 in costs, for a total award of $39, 444.37. See Order, Vision Bankr., ECF No. 47.

         On April 25, 2019, over a year after its representation of Vision LLC had ended, the Melehy Law Firm filed a second application for compensation with the bankruptcy court, seeking to recover its fees and costs for the remainder of the period it had represented Vision LLC (from April 18, 2017 through March 19, 2018). See Second Application, Vision Bankr., ECF No. 210, at 2. The application indicated that the Melehy Law Firm intended to “file its claim as an administrative priority claim” with the bankruptcy Trustee, but that it was “simultaneously filing its fee petition to obtain court approval of the fees and costs which will be sought in [its] claim.” Id. The Trustee has filed an opposition to this application and has also requested that the Melehy Law Firm be ordered to disgorge the compensation it was previously awarded. See Opposition and Request for Disgorgement, Vision Bankr., ECF No. 212. The bankruptcy court has scheduled a combined hearing on the Melehy Law Firm's second application for compensation and the Trustee's request for disgorgement, which is currently set for September 17, 2019. See Minute Entry, Vision Bankr., ECF No. 227.

         To date, the Melehy Law Firm has been paid a total of $39, 479.37, [1] leaving, by its calculation, an outstanding debt of $81, 617.21. (Compl. ¶ 13.)

         The Current Litigation:

         On November 5, 2018, the Melehy Law Firm filed a breach of contract action against Haile and Mulugeta (jointly referred to as “Defendants” in the complaint), seeking to recover from them the money it claims to be owed by Vision LLC for legal services and costs for the period from April 18, 2017 through March 19, 2018.[2] The complaint alleges that Haile and Mulugeta are personally liable for Vision LLC's breach of contract “[b]y operation of the Unlimited Guaranty and the Retainer Agreement.” (Compl. ¶ 15; see also Id. ¶ 18 (“The Retainer Agreement and the Unlimited Guaranty are written contracts signed by [Haile and Mulugeta] in their individual capacity. By signing the Retainer Agreement and the Unlimited Guaranty[, ] [Haile and Mulugeta] each agreed to be bound by the terms and conditions set forth therein and each assumed personal liability for all debts incurred by Vision in connection with [the Melehy Law Firm's] representation of Vision in its Chapter 11 bankruptcy [c]ase.”). The complaint further alleges that “Haile and Mulugeta have received notice of the amounts owed to [the Melehy Law Firm] since the commencement of Vision's bankruptcy case because [the Melehy Law Firm] has sent detailed invoices to them both at their home address on a periodic basis and made a demand for payment” (id. ¶ 16); that the Melehy Law Firm “has attempted to contact [Haile and Mulugeta] to make payment arrangements by electronic mail and telephone for several months with no success” (id.); that “[a]ll of the legal services rendered by [the Melehy Law Firm] to Vision were reasonable and necessary” (id. ¶ 19); that “[Haile and Mulugeta] were aware [the Melehy Law Firm] was providing these services, ” [from which they benefited “as the only two members of Vision” (id.); that “[Haile and Mulugeta] breached the Retainer Agreement and the Personal Guaranty by failing to pay the debt owed by Vision to the [the Melehy Law Firm] after the [the Melehy Law Firm] made repeated demand[s] upon both Haile and Mulugeta for payment due” (id. ΒΆ 20); ...


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