Eplus Technology, Inc. v. Aboud

155 F. Supp. 2d 692, 2001 U.S. Dist. LEXIS 11799, 2001 WL 930220
CourtDistrict Court, E.D. Virginia
DecidedAugust 10, 2001
DocketCIV. A. 00-699-A
StatusPublished
Cited by6 cases

This text of 155 F. Supp. 2d 692 (Eplus Technology, Inc. v. Aboud) is published on Counsel Stack Legal Research, covering District Court, E.D. Virginia primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Eplus Technology, Inc. v. Aboud, 155 F. Supp. 2d 692, 2001 U.S. Dist. LEXIS 11799, 2001 WL 930220 (E.D. Va. 2001).

Opinion

MEMORANDUM OPINION

ELLIS, District Judge.

This common-law fraud and RICO 1 action against Canadian defendants presents questions of personal jurisdiction and sufficiency of service under Rule 4(f), Fed. R.Civ.P., and the Hague Convention. Also presented is the question of whether the complaint states a valid RICO claim.

I.

Plaintiff ePlus Technology, Inc. is a Virginia corporation doing business as a supplier of computer equipment. Defendants Patricia Aboud, George Bernaehawy, and Jean-Marie Chartouni are Canadian citizens and residents of Montreal, Quebec, Canada. Defendant Daniel Ackerib is a resident of Florida.

Plaintiff entered into a contract in May or June of 1999 with Micro Business Technology (“MBT”), a Canadian corporation owned and operated by defendants. Plaintiffs amended complaint alleges that defendants used MBT to perpetrate fraud on more than twenty-seven computer equipment suppliers in the United States, including plaintiff. Specifically, the complaint alleges that defendants called various suppliers, including plaintiff, and made misstatements so as to obtain shipments of computer supplies to MBT on credit. It is further alleged that defendants would cause MBT to pay the suppliers a portion of what was due on the orders for the purpose of inducing further, larger shipments. Plaintiff also alleges that defendants advised potential suppliers to call MBT’s current clients, including plaintiff, to verify that defendants had good credit. According to the complaint, once the larger shipments were received on credit, defendants ceased making payments. Plaintiff further alleges that the defendants then caused MBT to file for bankruptcy, leaving its creditors in the United States, including plaintiff, with large financial losses. Specifically, plaintiff alleges that on March 23, 2000, Bernaehawy called plaintiff and ordered a shipment of goods, and that this order was based on a check defendants knew would not clear because they had already filed for bankruptcy at that time. Plaintiff claims it relied on Bernachawy’s false statement and shipped goods in the amount of $297,141, for which defendants never paid. Finally, plaintiff alleges that defendants have operated similar enterprises in the past to obtain goods on credit fraudulently, then to sell the items for cash, and finally to declare bankruptcy to avoid payment.

On April 27, 2000, plaintiff filed its complaint against the four defendants alleging that their actions constituted fraud and RICO violations. Ackerib was personally served in Florida. Service was accomplished on the remaining defendants by mail through the Secretary of the Commonwealth of Virginia pursuant to Virginia Code § 8.01-329, which provides that when the person to be served is not a resident of Virginia, the plaintiff may serve process on the Secretary of the Commonwealth, together with the defendant’s last known address, and the Secretary will then mail the process via certified mail to the person to be served at the address *694 provided. See Va.Code § 8.01-329. Accordingly, service for Aboud was mailed to her home in Montreal, Canada. Because plaintiff lacked addresses for defendants Bernachawy and Chartouni (neither of whom was listed in the Montreal directories), the summons for each of these defendants was directed via the Secretary of the Commonwealth to MBT’s address in Montreal.

None of the defendants filed a timely responsive pleading pursuant to Rule 12, Fed.R.Civ.P. Ackerib filed no response at all and was therefore found to be in default. Because he had been served personally in Florida, issues of sufficiency of service did not arise and his default led ultimately to the entry of a final judgment against him. 2

Although Aboud also failed to file a timely response to the complaint, she avoided default by the entry of a consent order granting her an extension of time to respond to the complaint. In her response, Aboud moved to dismiss plaintiffs complaint for failure to state a cause of action pursuant to Rule 12(b)(6), Fed. R.Civ.P., and for lack of personal jurisdiction pursuant to Rule 12(b)(2), Fed. R.Civ.P. The jurisdictional motion was denied, 3 but the Rule 12(b)(6) motion was granted as to the RICO claim based on a pleading defect, which plaintiff was allowed to remedy by filing an amended complaint. See ePlus Technology, Inc. v. Aboud, Civil Action No. 00-699-A (E.D.Va. August 18, 2000) (order). On August 28, 2000, plaintiff filed an amended complaint, which Aboud answered.

Bernachawy and Chartouni filed no response at all, leading plaintiff to move for default judgment against them in the same amount as the judgment entered against Ackerib. Following entry of default, notice issued for an ex parte proof of damages hearing to take place on August 4, 2000. Again, Bernachawy and Chartouni did not appear. A magistrate judge issued a Report and Recommendation on August 11, 2000, recommending that a default judgment be entered against both defendants as to the fraud count in the amount of $297,141 plus attorney’s fees and costs in the amount of $14,948.94. 4

On or about August 24, 2000, Berna-chawy and Chartouni, by counsel, 5 filed an objection to the magistrate judge’s recommendation of default on the ground of insufficiency of service, namely that neither Bernachawy nor Chartouni had ever used the MBT address, and thus any process directed to that address was not reasonably calculated to reach them. As such, these defendants argued, the mail service was insufficient because it violated *695 due process. See International Shoe Co. v. Washington, 326 U.S. 310, 316, 66 S.Ct. 154, 90 L.Ed. 95 (1945). Bernachawy and Chartouni also claimed they had no knowledge of the case until August 16, 2000. Additionally, Chartouni provided affidavits as to his and Bernachawy’s addresses. According to the affidavits, neither defendant was a citizen of Virginia, nor had either visited the state or personally transacted business there.

In light of this objection, the matter was remanded to the magistrate judge to consider whether the service by mail on Ber-nachawy and Chartouni using the MBT address was proper. On April 13, 2001, the magistrate judge issued a second Report and Recommendation, recommending a finding that although mail service was a proper method of service, the address to which the service was made was not reasonably calculated to give defendants notice because plaintiff knew that MBT had declared bankruptcy and that its offices had been vacated a month prior to the attempted service. Thus, the magistrate judge correctly concluded that mailed service on these defendants at MBT’s address did not satisfy due process and that additional time should be allowed for plaintiff to serve Bernachawy and Chartouni in some other proper manner. This Court accepted the magistrate judge’s recommendation and issued an order postponing the scheduled April 23 trial to allow plaintiff one further opportunity to effect service on both defendants.

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Cite This Page — Counsel Stack

Bluebook (online)
155 F. Supp. 2d 692, 2001 U.S. Dist. LEXIS 11799, 2001 WL 930220, Counsel Stack Legal Research, https://law.counselstack.com/opinion/eplus-technology-inc-v-aboud-vaed-2001.