Khalil v. El Rafaei (In Re Rafaei), 2022 Bankr. LEXIS 2033, 2022 WL 2916876 (E.D. Va. Bankr. Jul. 22, 2022)
On September 28, 2020, Hanan Khalil (“Khalil”) filed a complaint against the Mohamed A. El Rafaei (“El Rafaei”) and Design 2 Build, LLC (“D2B” and together with El Rafaei, the “Defendants”) in D.C. Superior Court (the “D.C. Action”), seeking the return of the $131,686.00 Khalil had paid the Defendants, plus other unspecified amounts, for the renovation of a property that Khalil purchased for use as a personal residence and a rental property. On November 23, 2020, El Rafaei filed for Chapter 11 bankruptcy. Thereafter, the El Rafaei removed the D.C. Action to federal court, which case was eventually transferred to the bankruptcy court. Khalil filed a Proof of Claim seeking to recover a total of $2,014,752.42 against El Rafaei, including a claim for disgorgement of $131,686.00, treble damages of $1,207,422.87, punitive damages of $100,000.00, and attorney fees of $575,643.55. Khalil commenced an Adversary Proceeding by filing a Complaint that sought a determination as to: (a) the dischargeability of the debt owed to Khalil under Section 523(a)(2)(A) and 523(a)(6) of the Bankruptcy Code; and (b) damages for negligence, negligent misrepresentation, breach of contract, fraud, violation of 16 DCMR § 800.1, violation of the District of Columbia Consumer Protection Procedures Act § 28-3904, breach of the implied warranty of good faith and fair dealing, unjust enrichment and quantum meruit, and piercing the corporate veil.
The Court entered judgment for Khalil as to her claims for negligent misrepresentation, fraud, violation of 16 DCMR § 800.1, and violation of the District of Columbia Consumer Protection Procedures Act § 28-3904, for a total award of $172,800, including reasonable attorneys’ fees to be determined at a later date. The Court determined that the entire judgment would be exempted from El Rafaei’s discharge in bankruptcy, as the judgment was a debt arising from El Rafaei’s fraud against Khalil under Section 523(a)(2)(A) of the Bankruptcy Code. The Court held that Khalil’s negligence claim failed because she, through her expert, failed to produce admissible evidence on the appropriate standard of care and any breach thereof. The Court found Khalil’s breach of contract claim failed because any agreement she reached with the Defendants was null, void, and unenforceable on a contract or quasi-contract theory based on the lack of a signed document that was a complete and final expression of the parties’ agreement. The Court found that Khalil had met her burden of proof under 11 U.S.C.S. § 523(a)(2)(A) because El Rafaei misrepresented to Khalil that he had some specialized ability to obtain permits expeditiously, despite knowing that the permits could not be expedited.
