Egypt Dep't of Def. v. Alboghdady
| Docket Number | Civil Action 21-1144 (BAH) |
| Decision Date | 10 March 2022 |
| Parties | EGYPT DEPARTMENT OF DEFENSE, Plaintiff, v. MAHMOUD ALBOGHDADY, et al., Defendants. |
| Court | U.S. District Court — District of Columbia |
In April 2021, plaintiff Egypt Department of Defense sued defendants Mahmoud Alboghdady and Joud, LLC, over possession of a building owned by plaintiff, which defendants leased in order to operate a hotel on the premises, and for which defendants ceased paying rent in February 2020, in violation of the Lease Agreement in effect between the parties. Compl. ¶¶ 6, 9, 12, 15, ECF No. 1. Plaintiff sought defendants' civil ejectment and various forms of damages under the District of Columbia civil ejectment statute, D.C Code § 16-1101, et seq., as well as damages for breach of contract and unjust enrichment, Compl. ¶¶ 66-112.
For the second time, this matter is before the Court on rival motions by plaintiff for default judgment, this time on seven of the eight counts in the Complaint, and by defendants to vacate the entries of default against them, this time on these seven counts.[1] Plaintiff's previous motion for default judgment as to Count I of the Complaint, containing its civil ejectment claim was granted after plaintiff “established entitlement to the entry of default judgment on its civil ejectment claim and to an order ejecting defendants from the leased premises.” Egypt Dep't of Def. v Alboghdady (“Egypt DOD I”), No 21-cv-1144 (BAH), 2021 WL 3737682, at *6 (D.D.C. Aug. 24, 2021). Defendants' motion to vacate the entries of default as to all counts of the Complaint was denied, since their “default was willful and prejudicial” and they had “failed to assert any defense.” Id. At the same time, default judgment on the seven remaining counts was neither requested by plaintiff nor granted by the Court.
Having retaken possession of the leased property and conducted a full assessment of its condition in the wake of defendants' departure, plaintiff has now filed a second motion for default judgment, as to the remaining seven counts of its Complaint. Pl.'s Mot. for Entry of Default J. Awarding Damages Pursuant to Rule 55(b) (“Pl.'s Mot.”), ECF No. 18. Defendants oppose this motion, Defs.' Mem. in Opp'n to Pl.'s Mot. for Default J. ( ), ECF No. 19, and have filed a “renew[ed]” motion to vacate the Clerk's entries of default against them, Defs.' Renewed Mot. to Vacate Entries of Default (“Defs.' 3d Mot. Vacate”) at 1, ECF No. 20, to which they attach an answer and counterclaim which have not been filed directly on the docket. In connection with defendants' filings, plaintiff also seeks sanctions against defendants and their counsel. Pl.'s Mot. for Sanctions (“Pl.'s Mot. Sanctions”), ECF No. 23.
For the reasons discussed below, defendants' motion to vacate the entries of default is granted, such that the case may proceed on the merits, and plaintiff's motion for default judgment on the remaining claims and motion for sanctions are denied.
The relevant factual and procedural history of this matter is summarized below, with plaintiff's factual allegations, as set out the Complaint, presumed to be true. See Robinson v. Ergo Sols., LLC, 4 F.Supp.3d 171, 178 (D.D.C. 2014) .
In July 2014, plaintiff entered into a lease contract with Alboghdady for plaintiff's building at 2590 L Street, N.W.[2] Compl. ¶ 6; id., Ex. 1, Lease Agreement at 1, 16, ECF No. 1-1. The next month, Alboghdady incorporated Joud, LLC, to operate a hotel on the premises. Compl. ¶¶ 9-10; see also Lease Agreement § 2 ().
The Lease Agreement, which was signed by Alboghdady and plaintiff's representative, see Lease Agreement at 16, provided for defendants to occupy the premises for seven years, beginning September 1, 2014, and ending August 31, 2021, Compl. ¶ 7; Lease Agreement § 1. Alboghdady was required to pay plaintiff rent in monthly installments of $45, 000 for the first three years of the rental; $46, 350 per month in year four; $47, 740.50 per month in year five; $49, 172.75 per month in year six; and $50, 648 per month in the final year. Compl. ¶ 12; Lease Agreement § 3.1(a). Rent was due on the first of the month, with a 10% late fee assessed where rent was not paid within the first five days. Compl. ¶ 13; Lease Agreement § 3.8. The Lease Agreement stipulated that plaintiff's acceptance of partial or late payments did not waive its right to recover the full balance owed, including for unpaid late fees. Compl. ¶ 27; Lease Agreement § 3.4. Alboghdady was also required to post a $180, 000 security deposit, of which plaintiff was permitted to “use, apply or retain all or part . . . for the payment of rent or any other sum in default, ” although plaintiff was “not . . . required” to do so. Lease Agreement § 4; see also Compl. ¶ 39. On September 2, 2014, defendants paid plaintiff a security deposit in this amount from an account held by “Joud Real Estate LLC.” Pl.'s Mot., Ex. 3, Decl. of Col. Ahmed Farrag (“Farrag Decl.”) ¶ 5, ECF No. 18-5.
Under the terms of the Lease Agreement, Alboghdady was required to maintain the premises in good condition throughout the term of the rental, Compl. ¶ 46; Lease Agreement § 12(a), and to restore the property to its original condition at the end of the tenancy, Compl. ¶ 46; Lease Agreement §§ 7, 10. He was responsible for payment of all utilities, including water and gas, Lease Agreement § 3.1, and for the upkeep and repair of the “foundation, roof, exterior, building walls, and the outer walls (including doors, locks, door jambs, windows, and glass), ” id. § 12(a). Pursuant to the Lease Agreement, Alboghdady agreed to procure and maintain various types of insurance “[t]hroughout the Lease Term, ” including public liability and property damage insurance; state worker's compensation insurance; and business interruption insurance “equal to 100% of the Base Annual Rental for a period of indemnification of not less than 12 months.” Id. at 4; see also Compl. ¶ 52. The Lease Agreement specified that the policies should designate plaintiff as a “named additional insured[]” and that Alboghdady should “provide to [plaintiff] . . . certificates of insurance or, upon [plaintiff]'s request, duplicate originals of insurance policies evidencing that insurance satisfying the requirements of this Lease is in effect at all times.” Lease Agreement at 5; see also Compl. ¶ 53. Although not covered under the terms of the Lease Agreement, plaintiff also “supplied Defendants with the full assortment of furniture they then used to operate the hotel, ” Compl. ¶ 48, which “were to be maintained in good condition by Defendants under the Lease Agreement and returned to [plaintiff] when Defendants vacated the building, ” Farrag Decl. ¶ 11.
Throughout the tenancy, Alboghdady “never paid . . . rent on time, ” Compl. ¶ 24, and regularly failed to pay the contractual ten percent fee for late payments, id. ¶ 26, until, over the final two years of the lease term, “the situation became steadily more untenable, ” id. ¶ 24. Alboghdady paid rent for January 2020 “more than 6 months after it was due, ” and did not pay rent for February 2020 until December of that year. Id. No. subsequent payments were made. Id. Although plaintiff applied the $180, 000 security deposit to offset the overdue rent and late fees, such amount was far insufficient to cover the total rent in arrears. Id. ¶¶ 40-43. Yet despite Alboghdady's failure to pay rent from March 2020 through August 31, 2021, id. ¶ 15, defendants continued to operate the premises as a hotel throughout this period, id. ¶ 17.
For the duration of defendants' tenancy, plaintiff repeatedly asked defendants to provide proof they had secured the requisite insurance policies under the Lease Agreement, to which defendants continually responded “with assurances that [they] had the policies and documentation would be provided.” Farrag Decl. ¶ 7. Ultimately, however, plaintiff only received “a copy of a Worker's Compensation and Employers Liability Policy for Joud LLC which provided coverage from June 29, 2021 - June 29, 2022, ” meaning it covered “only the last two months of the Lease.” Pl.'s Mot., Ex.1, Decl. of Haig V. Kalbian (“Kalbian Decl.”) ¶ 7, ECF No. 18-2.
Prior to filing the instant suit, plaintiff attempted to “resolve this matter” by proposing to Alboghdady, via counsel, a tenant payment plan pursuant to D.C. Code § 42-3192.01 (2021), Compl. ¶¶ 33-34, which was enacted by the D.C. Council in response to the COVID-19 pandemic to provide commercial tenants with a demonstrable “inability to pay all or a portion of the rent due as a result of the public health emergency, ” the opportunity to negotiate a payment plan with their landlord, D.C. Code § 42-3192.01(h)(1)(A). If a payment plan were in place, the landlord would be prohibited from “filing any collection lawsuit or eviction for non-payment of rent, ” id. § 42-3192.01(g), or reporting the tenant “to a credit reporting agency as delinquent, ” id. § 42-3192.01(a)(3). Plaintiff “received no response” from defendants to this proposal. Compl. ¶ 35.
In accordance with the Court's August 24, 2021, Order defendants vacated the premises on August 31, 2021. Pl.'s Status Report ¶ 6, ECF No. 17. Plaintiff thereafter “initiated an inspection of the Premises” which included “a walkthrough of all individual units.” Id. ¶ 7. The inspection,...
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