Trademark Trial and Appeal Board Electronic Filing System. http://estta.uspto.gov
`ESTTA795726
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`ESTTA Tracking number:
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`Filing date:
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`01/18/2017
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`IN THE UNITED STATES PATENT AND TRADEMARK OFFICE
`BEFORE THE TRADEMARK TRIAL AND APPEAL BOARD
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`Proceeding
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`92061514
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`Party
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`Correspondence
`Address
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`Submission
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`Filer's Name
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`Filer's e-mail
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`Signature
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`Date
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`Attachments
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`Plaintiff
`John Shuman
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`JOHN SHUMAN
`1365 GREENWOOD ROAD
`WINCHESTER, VA 22602
`UNITED STATES
`jeshuman@aol.com
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`Other Motions/Papers
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`Andrew S. Baugher
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`asb@lplaw.com, mhw@lplaw.com
`
`/s/ Andrew S. Baugher
`
`01/18/2017
`
`Notice of Disposition of Civil Action.pdf(505143 bytes )
`Memorandum Opinion.pdf(2072861 bytes )
`Order Granting Motion for Summary Judgment.pdf(46419 bytes )
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`

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`
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`IN THE UNITED STATES PATENT AND TRADEMARK OFFICE
`
`BEFORE THE TRADEMARK TRIAL AND APPEAL BOARD
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`JOHN SHUMAN,
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`Petitioner,
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`v.
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`HUI KUN LI,
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`Respondent.
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`Cancellation No. 92061514
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`PETITIONER’S NOTICE OF DISPOSITION OF CIVIL ACTION
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`Petitioner, John Shuman, pursuant to the Board’s order of January 11, 2016, hereby gives
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`notice of the disposition of the civil action between Petitioner and Respondent, Hui Kun Li, and
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`states as follows:
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`1.
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`On May 18, 2015, Petitioner, acting pro se, filed a petition to cancel Reg. No.
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`4216849 and Reg. No. 4265943. Petitioner asserted, among other things, that the registrations
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`should be cancelled because Respondent ceased use of the subject marks in 2011, prior to
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`seeking registration, and because Petitioner or his related businesses were using the marks
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`exclusively at that time.
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`2.
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`On October 12, 2015, Petitioner, again acting pro se, and with leave of the Board,
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`filed an amended petition to cancel Reg. No. 4216849 and Reg. No. 4265943. In addition to his
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`prior arguments, Petitioner asserted that Respondent committed fraud in the procurement of the
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`registration of the marks, in that she represented she was using the marks in commerce when in
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`fact she had ceased using them in 2011; that any prior use of the marks had not been by
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`Respondent personally, as she represented, but
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`through a multi—mernber
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`limited liability
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`company of which Petitioner was also a member; and that Petitioner had continuously used the
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`marks exclusively in connection with his own business entities, of which Respondent was not a
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`member or owner, or personally, since June 2011.
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`3.
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`Respondent filed a federal court action in the United States District Court for the
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`Western District of Virginia against Petitioner, alleging infringement of the subject marks and
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`other related claims (the “civil action”). Petitioner defended the civil action on many of the same
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`grounds asserted before the Board in support of his petition for cancellation of the marks. On
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`January 11, 2016, the Board suspended these proceedings pending final disposition of the civil
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`action.
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`4.
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`Pursuant to the Board’s January 11, 2016 order suspending these proceedings,
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`Petitioner hereby notifies the Board of the final disposition of the civil action. The parties
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`engaged in full discovery in the civil action, including extensive written discovery, document
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`exchange, and oral testimony by way of deposition, including depositions of Petitioner and
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`Respondent. Following discovery and briefing submitted to the court by Petitioner and
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`Respondent, the court dismissed Respondent’s trademark infringement claims and the civil
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`action as a whole on December 9, 2016. A copy of the court’s memorandum opinion and order
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`are submitted herewith. Respondent’s time to appeal the disposition of the civil action expired on
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`January 9, 2017, without an appeal, and that disposition is final.
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`5.
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`In dismissing the civil action, the court made certain findings which are pertinent
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`to the Board’s determination of these proceedings. The court, citing Respondent’s own
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`deposition testimony, found that Respondent had not used the marks since May 2011 (see
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`memorandum opinion at p. 21 and fn. 16). The court further found that Respondent did not apply
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`for registration of the marks until December 2011, after she ceased any use of the marks and
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`after Petitioner began using the marks exclusively (see memorandum opinion at p. 26 and fn.
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`16). The court also found that, even if Respondent could prove the validity of the marks, her
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`prior use of the marks was only through the limited liability company of which she and Petitioner
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`were both members, and not by Respondent personally (see memorandum opinion at p. 34—3 7,
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`citing Kristin Marie Conolty d/b/a Fairway Fox Golf v. Conolty O’Connor NYC LLC, 111
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`U.S.P.Q.2d 1302 (TTAB July 3, 2014)).
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`6.
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`These factual findings demonstrate that Petitioner’s request for cancellation is
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`appropriate, because, as the court recognized in the civil action, the registrations obtained by
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`Respondent are void ab initio since Respondent was not
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`the sole owner of the marks;
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`Respondent was not using the marks in commerce when she sought registration; and Petitioner
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`had been using the marks exclusively in connection with his separate businesses since June 2011,
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`both before and during Respondent’s registration proceedings before the Board. Respondent’s
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`false representations to the contrary in seeking registration of the marks should result in their
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`cancellation.
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`WHEREFORE, Petitioner respectfully requests that Reg. No. 4216849 and Reg. No.
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`4265943 be cancelled and that his Amended Petition to Cancel be sustained.
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`Dated: January 18, 2017
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`Respectfully submitted,
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`JOHN SHUMAN
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`By:
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`/s/ Andrew S. Baugher
`Andrew S. Baugher, VSB #74663
`LENHART PETTIT
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`90 North Main Street, Suite 201
`PO. Box 1287
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`Harrisonburg, Virginia 22803
`Tel: (540) 437-3138
`Fax: (540) 437-3101
`asb@lplaw.com
`Counselfor Petitioner
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`

`

`CERTFICATE
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`I hereby certify that a true and complete copy of the foregoing Notice of Disposition of
`Civil Action has been served on Michael N. Lau, Esq., counsel for Respondent, Hui Kun Li, by
`mailing said copy on January 18, 2017, by First Class Mail, postage prepaid, and by e—mailing
`said copy on the same date, to:
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`Michael N. Lau, Esq.
`Lau & Associates, LLC
`10517 West Drive, unit B
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`Fairfax, VA 22030
`M-Lau@Michaelnlau.com
`Counselfor Respondent
`
`/s/ Andrew S. Baugher
`Dated: January 18, 2017
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`5 89239
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`
`
`
`
`

`

`IN THE UNITED STATES DISTRICT COURT
`FOR THE WESTERN DISTRICT OF VIRGINIA
`HARRISONBURG.DIVlSION
`
`HUI KUN LI, et al.,
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`Plaintiffs,
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`v.
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`JOHN E. SHUMAN, et al.
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`Defendants.
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`)
`)
`)
`)
`)
`)
`)
`)
`)
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`Civil Action No. 5:14-cv-00030
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`By: Michael F. Urbanski
`United States District Judge
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`MEMORANDUM OPINION
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`The parties to this case are former business partners in an Asian restaurant venture.
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`For more than five years, their business dispute has been the subject of extensive state
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`litigation, which remains pending in the Circuit Court for Frederick County, Virginia.
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`Plaintiffs Hui Kun Li, Jian Lu, and Mimosa Asian Fusion, LLC filed this concurrent federal
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`action in July 2014, raising fifteen claims against defendants John Shuman, Nicole Edwards
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`and Mimosa Restaurant, LLC. All that remains of this federal case are two counts of
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`trademark infringement (Counts 1 ·& 2) and one count of misappropriation of trade secrets
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`in violation of Virginia Code§ 59.1-336 (Count 15).1 This matter is now before the court on
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`the parties' cross-motions for summary judgment.
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`As set forth in detail below, Li's trademark infringement claims fail as a matter of law
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`because she is unable to prove secondary meaning. In any event, Li used the marks
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`"Mimosa Asian Fusion" and BSl$.&lin connection with the operation of Mimosa Asian
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`t Although Nicole Edwards was named as a defendant in the amended complaint, none of the three surviving claims in
`this case concern her. Counts 1, 2, and 15 allege claims against Shuman and Mimosa Restaurant, LLC. Additionally,
`while Mimosa Asian Fusion, LLC is a named plaintiff, none of the derivative claims survive.
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`Fusion, LLC, of which Shuman was a member. Li cannot assert trademark infringement
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`against her former partner when their business dispute is still pending in state court and the
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`various corporate assets and rights flowing therefrom have yet to be disentangled. Finally, as
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`Lu cannot prove he derived independent economic value from his alleged "secret recipes,"
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`his misappropriation claim under Virginia Code§ 59.1-336 also fails as a matter oflaw.
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`Because there is no genuine issue of material fact to be resolved by a jury, defendants'
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`motion for summary judgment (ECF No. 207) will be GRANTED, plaintiffs' motion for
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`summary judgment (ECF No. 212) will be DENIED, and this case will be dismissed. 2
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`I.
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`There is no love lost ｢･ｴｷｾ･ｮ＠these former business pattners, and each side has a
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`story to tell. Plaintiffs Hui Kun Li and Jian "Jay" Lu, a mother and son, allege they opened
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`an Asian restaurant as a family business, allowed defendant] ohn Shuman to invest and
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`become an equal partner in that business, and then Shuman stole the restaurant out from
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`under them. For his part, Shuman claims his investment (which far exceeded the agreed(cid:173)
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`upon amount) and organizational management prevented the restaurant from closing its
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`doors; yet one day, without warning, Lu shut it down and physically locked Shuman out of
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`the restaurant, forcing him to reopen on his own. The resulting dispute has been the subject
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`of ongoing litigation in state court since 2011, and the issues related to the dissolution of the
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`partnership between Li, Lu, and Shuman are matters of state law pending before the
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`Frederick County Circuit Court
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`2 As such, the pending motions in limine (ECF Nos. 179 & 205) will be DENIED as moot.
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`2
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`This parallel federal action has been narrowed significantly, leaving only claims of
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`trademark infringement and misappropriation of trade secrets to be resolved by this court.
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`Nevertheless, the underlying business dispute permeates all aspects of this federal litigation.
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`Accusations about what led to the breakdown of the partnership and ensuing litigation
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`abound in the parties' filings. Accordingly, a detailed factual history is warranted.
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`A. Li forms Mimosa I
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`Mimosa Asian Fusion ("Mimosa I"), an Asian restaurant located at 202 Grocery
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`Avenue in Winchester, Virginia, opened its doors in 2008. The restaurant was a joint
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`venture between the family of plaintiff Hui Kun Li and her friend You Cheng. See Lu Dep.,
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`ECF No. 251, at 23-25. Cheng had previous experience in the restaurant industry; Li's
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`experience was limited to her work at a McDonald's restaurant, at which she has been
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`employed since 1986. Li Dep., ECF No. 208-2, at 8-11, 15. Cheng brought the restaurant(cid:173)
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`specific knowledge to the business, her husband Jun Hua Yang did the cooking, and Li's
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`son, plaintiff Jian ''Jay" Lu, managed the restaurant. Lu Dep., ECF No. 251, at 25-26; Li
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`Dep., ECF No. 251, at 16, 6.
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`Li and Cheng secured a business license, ECF No. 213-22, as well as an ABC license,
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`ECF No. 213-24, 214, and signed a five-year lease with a personal guaranty, ECF No. 214-1.
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`The business took the form of a limited liability company, Mimosa Asian Fusion, LLC. ECF
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`No. 214-7. As there was no operating agreement, the contours of the Li/Lu family and
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`Cheng/Yang family partnership are rather unclear, as are the various ownership stakes in the
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`3
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`restaurant.3 Certain evidence in the record suggests Li and Cheng were equal owners of the
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`restaurant. See, e.g., Li Dep., ECF No. 208-2, at 13, 22; Lu Dep., ECF No. 208-3, at 24; Ex.
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`12 to Lu Dep., ECF No. 208-3; Ex. 2 to Li Dep., ECF No .. 208-2. Tax returns from 2008,
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`however, show Li, Lu, Cheng, and Yang all owned 25% shares in the business. Ex. 2 to
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`Shuman Aff., ECF No. 208-11.
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`Together on the computer, Li and Lu designed the restaurant logo £Ei!SS•M Li
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`Dep., ECF No. 208-2, at 18; see also Lu Dep., ECF No. 208-3, at 36, which appeared on
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`signs, menus, gift cards, and advertisements for Mimosa I, ECF No. 214-8; see also ECF
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`No. 213-17 ( signage details). Li testified she came up with the name "Mimosa" for the
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`restaurant because it is the name of a flower she likes. Li Dep., ECF No. 208-2, at 18. Lu
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`testified that as "Mimosa" is also·the name of a drink, a number of drinks by the same name
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`were offered on the menu: Mimosa Classic, Mimosa Moon, Mimosa Royale, Bubble Gum
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`Mimosa, Fancy Panties Mimosa, DiSaronno Mimosa, Pina Colada Mimosa, Fiddler's Toast
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`Mimosa, Peach Mimosa and Grand Mimosa.
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`7 to Lu Dep., ECF No. 208-3; see also Lu
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`Dep., ECF No. 208-3, at 36-37. Lu explained: " ... I figure thatif [the customers] see the
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`name Mimosa, then perhaps in their mind it's related to drinks.'' Lu Dep., ECF No. 208-3,
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`at 41.
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`In addition to Mimosa drinks, the menu at Mimosa I incorporated dishes from across
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`Asia as well as cooking styles from various regions of China. Li Dep., ECF No. 208-2, at 25;
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`Lu Dep., ECF No. 208-3., at 42. Lu testified they tried to sell "some of the more popular
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`Asian dishes" such as General Tso's chicken but also tried to differentiate the restaurant
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`3 The record in this case is hampered by the parties' failure to observe corporate formalities throughout the existence
`and operation of Mimosa I.
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`4
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`from the typical Chinese take-out restaurant. Lu Dep., ECF No. 208-3, at 42-43. When
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`Mimosa I opened, You Cheng and her husband Jun Yang were the chefs, and Li and Lu
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`relied on their cooking experience and recipes. Li Dep., ECF No. 208-2, at 26; Lu Dep.,
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`ECF No. 208-3, at 43, 44. There was also a chef named Sonny working in the kitchen. Lu
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`Dep., ECF No. 208-3, at 43.
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`In its first year of operation, the business claimed a loss of $42,517, Ex. 2 to Shuman
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`Aff., ECF No. 208-11, and in early 2009, Li bought out Cheng's (and, presumably, Cheng's
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`family's) interest in the restaurant. In a "Partnership Buy-out Agreement" dated March 10,
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`2009, Li purchased Cheng's ownership interest in Mimosa Asian Fusion, LLC for $82,500.
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`Ex. 2 to Li Dep., ECF No. 208-2. An incomplete provision of the agreement states that
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`"You Cheng or Jun Yang, agrees to remain employed at Mimosa Asian Fusion Restaurant as
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`the executive chef until the complet [sic]." Id. Lu testified this cut-off provision ''was really
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`to protect us, that if we bought them out that they would-they would stay long enough to,
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`I guess, pass on their experiences, their cooking methods off to me, so that we can continue
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`operating, continuing the flavor, the flavor of the restaurant." Lu Dep., ECF No. 208-3, at
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`44.
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`B. Lu takes over the kitchen of Mimosa I
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`It is unclear how long after Li bought out Cheng's interest that Cheng and Yang
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`continued to work in the kitchen at Mimosa I, but Lu testified that after their departure he
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`assumed kitchen duties. Lu Dep., ECF No. 208-3, at 46. Lu testified that after they left, "it
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`was Jackie and me, and then we hired another chef [Bing] to work with Jackie. There was
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`also Manuel. Yeah." Id. at 43. Lu took on the role of head chef and oversaw the woks, the
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`5
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`

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`sauces, and the sushi, despite the fact that he had no prior experience as a cook.4 Lu Dep.,
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`ECF No. 208-3, at 14, 46. Lu asserts that in his capacity as head chef in 2009, he created
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`certain secret recipes for which he claims trade secret protection in this case. Lu Dep., ECF
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`No. 208-20, at 100. These recipes are set forth in an Excel spreadsheet. Ex. 16 to Lu's
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`Dep., ECF No. 208-23; ECF No. 214-20 (Pls.' Ex. R-4). He testified these recipes came
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`from Cheng and Yang but he incorporated "his own taste." Lu Dep., ECF No. 208-3, at 47.
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`At the same time, he stated:
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`[U]ltimately, we did not change the overall taste that the
`customers was [sic] accustomed to. We didn't want to-we
`didn't want the customers to sense that there was too much
`changes [sic], so we tried to keep their sauces or keep the
`previous ways as the basis to how we going to move forward.
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`Id. at 48. Indeed, while Lu claims to have "learned the process" from Cheng and Yang, he
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`could not articulate anything he changed specifically about their recipes:
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`Q. Is this a copy of their recipe?
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`A. They didn't sell me this recipe, but I learned the process
`from them.
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`Q. So you learned the shrimp with lobster sauce recipe from
`Mr. Yang and Ms. Cheng?
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`A. Yes.
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`Q. Did you add anything to it that's different from what they
`did?
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`A. I believe so.
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`Q. What?
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`4
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`His prior work experience included working as a teller at a bank, as a waiter at several restaurants, and starting his own
`online vitamin business. Lu Dep., ECF No. 208-3, at 14-16.
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`6
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`A. I don't recall right now. I don't recall particularly how they
`made it and how I did it.
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`Lu Dep., ECF No. 208-20, at 102.s More than forty pages of Lu's deposition transcript
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`focus on these recipes and what makes them unique. Lu insists the secret is in the
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`process6-Lu's particular way of making each recipe-but provides little detail as to what
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`exactly about the process makes his recipes special:
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`The secret is in the process it takes to make this dish, and
`nobody else makes it this way. Even though this dish may be a
`traditional dish that you will hear the name being used in other
`restaurants, but we did not have anything similar to other
`restaurants.
`I'm trying to recreate something based on my
`experience, based on my knowledge of how this dish-how this
`dish should be tasting.
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`There is a basis as to how this dish should taste and should look
`like. Every single company, every single restaurant has-·(cid:173)
`perhaps they add different recipes to it, different sauces,
`perhaps .they don't. Perhaps some or perhaps they all have
`peas. Perhaps it's all clear sauce. But the taste and what goes
`into it, the processes may all be different.
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`Q. Help me understand ,the process. What are you talking
`about?
`
`A. That's secret
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`s At his deposition, Lu was presented with Exhibit 17, a handwritten list of ingredients for various sauces. Lu insisted
`these were Cheng and Yang's recipes that he and Ll had purchased in the buy-out, which Lu believed had been lost. Lu
`Dep., ECF No. 251, at 151-52. Lu accused Shuman of stealing them. Id:. at 152. Shuman's bookkeeper A.lex Gibson
`stated in an affidavit filed as an exhibit to defendants' brief in opposition to plaintiffs' motion for summary judgment
`that he came across these recipes while cleaning up the restaurant's files in late 2015 or early 2016; he found them in a
`folder containing other documents stored in a rarely-used storage room. Gibson Aff., ECF No. 229-1, at ii 4.
`6 Again, the court notes that Lu learned "the process" from Cheng and Yang. Lu Dep., ECF No. 208-20, at 102.
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`7
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`... In my secret recipes there are maybe SO-plus secret sauces in
`here and processes, and every one is unique in its own special
`way. And there's nothing in here that is similar to anybody
`else's. And if you can find me one same sauce, show me.
`
`Q. Well, that's your burden in this case, and I'm asking you,
`what is it about-help me understand. Is it-fried rice on the
`first page. Is fried rice your trade secret?
`
`A. Yes.
`
`Q. Fried rice is your trade secret?
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`A. The fried rice in here is my special way of making it.
`Nobody else makes this fried rice the way I make it.
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`Q. All rigpt. Explain to me how your fried rice is different
`from everyone else's fried rice.
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`A. Fried rice will have cup eggs, carrots, peas and died [sic]
`onions. It's a very simple process. Just eggs, carrots, peas and
`onions. What is special about it is the sauce that goes into it.
`The sauce, no body does it the way I do.
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`Q. All right. What about -
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`A. That's why I was willing to name it Mimosa's fried rice.
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`Q. What about the fried rice sauce is different from everyone
`else's?
`
`A. The brown sauce, two quarts chicken stock, half cup sugar,
`five tablespoons salt, three tablespoons black pepper. That
`seems very simple. Sugar, salt, pepper, chicken stock, but
`what's special is my sauce. My sauce, if you go into the sauces
`and how the brown sauce is made -
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`Q. Let's do that. That's on page 4.007.
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`A. The brown sauce. K:ikkoman soy sauce, 7 ladles. Golden
`Label .Soy, sugar, chicken stock, Fujian wine, oyster sauce,
`Hoisin sauce, thick sauce, soy sauce, star anise seed, red
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`8
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`peppercorns, carrots, ginger, scallions, onions, chicken bones,
`whole, scallions. Fill a large pot with half water. As you can
`see, it's a very complex sauce.
`
`Q. And explain to me what about the brown sauce is different
`from the way other people make brown sauce.
`
`A. Actually, that's a
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`that's a process I'm not willing to share.
`
`Q. Sir, you have to share it.
`
`A. The secret is the way you process it and the combination of
`the different ingredients that go into it.
`
`Lu Dep., ECF No. 208-20, at 102-07.
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`Lu acknowledges that every Asian restaurant has its own brown sauce. As to what
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`.
`.
`-
`makes his different from all the others, Lu testified: "There's a way of prepping it first, and
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`then the combinations goes in afterwards. And based on the initials steps and when you add
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`those sauces into it makes a big difference." Id. at 108. He went on to explain that the
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`brown sauce forms the base for a number of other sauces and "sets the taste. It sets the
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`uniqueness to my sauce, to my secret recipes." Id. at 111. According to Lu, it is therefore
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`the most important. Id.
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`Lu testified these recipes and the menu at Mimosa I were set when Jackie began
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`working as chef. Lu Dep., ECF No. 208-3, at 48; see Ex. 7 to Lu Dep., ECF No. 208-3.
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`Throughout 2010 and 2011, Jackie, Bing, Manuel and Lu worked in the kitchen. Lu Dep.,
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`ECF No. 208-3, at 43.
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`9
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`C. Shuman invests in Mimosa I
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`Never intending to operate the restaurant alone, Li and Lu began searching for new
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`investors to help share the financial and day-to-day responsibilities of running the business
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`after Cheng and Yang left. See Lu Dep., ECF No. 208-3, at 90-92; Li Dep., ECF No. 251, at
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`43-45. Enter defendant John Shuman.
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`Shuman was a regular customer at Mimosa I. Shuman Aff., ECF No. 208-1, ｡ｴｾ＠6;
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`Lu Dep., ECF No. 208-3, at 87-88. After he learned from Lu of the restaurant's financial
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`problems, Shuman expressed interest in investing in the business. Shuman Aff., ECF No.
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`208-1, ｡ｴｾｾ＠7-8; Lu Dep., ECF No. 208-3, at 88-89. In approximately April of 2010, Lu, on
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`behalf of Li,7 invited Shuman to purchase a 50% interest in the family business. Shuman
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`Aff., ECF No. 208-1, ｡ｴｾ＠8-9; Shuman Dep., ECF No. 208-4, at 243-44; Li Dep., ECF No,
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`208-2, at 36-37; Lu Dep., ECF No. 208-3, at 92. Li explained: "So we were thinking John
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`Shuman is the local people in the community and has a lot of friend, and also he has his
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`business experience .... " Li Dep., ECF No. 208-2, at 36. Likewise, Lu testified that
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`Shuman "sold himself as somebody who is good with numbers, good with the books. And
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`since he had years of experience as a businessman, I took his word that he was-he knows
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`how to handle the Quick:Books or the financials." Lu Dep., ECF No. 208-3, at 91.
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`This was to be a side venture for Shuman. Shuman Aff., ECF No. 208-1, ｡ｴｾ＠8. His
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`primary business is running Shuman's Flag Car Service, which provides guidance for
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`deliveries of oversized truck loads on interstates and local roads throughout the eastern
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`United States. Id. ｡ｴｾ＠1. Shuman's previous employment consists of work in a factory, as a
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`7 The record contains a document that purports to grant power of ｡ｴｾｯｭ･ｹ＠over Li to Lu. The document is signed by Li
`and dated May 1, 2009 but is not notarized. Ex. 4 to Li Dep., ECF No. 208-2; see also Li Dep., ECF No. 208-2, at 35.
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`10
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`butcher in a country store, in the construction and automotive industries, and for a coffee
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`service business. Shuman Dep., ECF No. 251, at 234, 238-41. He has started several small
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`businesses, including a farm that is still operational. Id. at 238-41. At the time he became
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`involved in Mimosa I, Shuman did not have previous experience in the restaurant industry
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`but testified that he loved Asian food and "cook[ed] a lot of it in [his] 20s, 30s" with a friend
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`who was a chef. Id. at 236-37.
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`There is no partnership agreement between Li and Lu and Shuman, 8 nor is there
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`formal documentation showing the amount of Shuman's investment. Shuman attests:
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`We agreed that I would invest $70,000 and become an equal
`50/50 owner of Mimosa I, with my ownership percentage
`increasing if I made additional investments. We also agreed that
`I would make direct payments of $35,000 to Jay [Lu]'s family
`members upon his request and that the remainder of the buy-in
`would be invested as direct payment of the operational costs for
`Mimosa I and in funding a new checking account. Jay told me
`that, at the time, Mimosa I did not have a bank account, line of
`credit, or any other access to outside finances, so my ability to
`pay for operational costs along the way was necessary and an
`agreeable form of investment.
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`Shuman Aff., ECF No. 208-1, ｡ｴｾ＠9. Evidence of Shuman's financial investment in Mimosa
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`I comes in the form_ of four checks-three made payable to Cai F. Park in the amounts of
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`$5,000 (dated April 13, 2010), $10,000 (dated April 27, 2010), and $10,000 (dated May 5,
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`2010), and one $10,000 check made payable to Zhuo Xiong Lu (dated June 9, 2010).9 Ex. 1
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`to Shuman Aff., ECF No. 208-1. Shuman explains:
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`I made payments totaling $35,000 by check to Jay's sister and
`father. (Exhibit 1 ). I then funded a new checking account for
`Mimosa I in the amount of $5,000.
`I then made direct
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`8 What appears to be an unsigned, proposed partnership agreement can be found in the record at ECF No. 214-10.
`9 The amended complaint alleges Cai F. Park is Li's daughter (Lu's sister) and Zhuo Xiong Lu is Li's husband (Lu's
`father). ECF No. 53, at ii 32.
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`11
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`purchases, using my cash and my personal credit cards, towards
`operational costs for Mimosa I in the amount of $81,746.68
`between May 2010 and May 20, 2011. Under the terms of our
`agreement, I made more than the necessary $70,000 investment
`that Jay and I had discussed and according to the terms that we
`had agreed upon.
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`Shuman Aff., ECF No. 208-1, at if 10.
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`Lu, however, sees things differently. He testified Shuman
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`had agreed on a buy-in amount of seventy plus-70,000 plus
`inventory, but I did not receive the full amount. And I pursued
`him on a regular basis to complete those transactions so we
`could have a legitimate business partnership going on. And he
`was supposed to be amended to that lease so that he could take
`on the liabilities of the restaurant as a business partner.
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`And then he started-but because he took all the cash
`and all the money from the company every single day, he started
`to use that money. And he called it reinvesting into the
`business, and which I never agreed on doing so, but he was
`buying things in and out and stocking up the restaurant. fully
`with the company's money. But then he's considered as his
`own investment. I just don't understand how he is so clever on
`how to increase his financial numbers.
`
`Lu Dep., ECF No. 251, at 92-93.
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`A 2010 tax return for Mimosa Asian Fusion, LLC shows Shuman owning 98% of the
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`partnership capital and Lu (rather than Li) 2%. Ex. 10 to Lu Dep., ECF No. 208-22. Profits
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`and losses were said to be shared 60 I 40 between Shuman and Lu. Id. Li, however,
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`adamantly disputes that she ever sold her shares of the business to either Shuman or Lu, and
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`she accuses Shuman of misrepresenting her interest on these tax forms. Li Aff., ECF No.
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`214-12, at iJiJ 5-6. As this is the only formal documentation of Shuman's ownership interest
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`in Mimosa I, his stake in the company is unclear.
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`12
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`What is clear, however, is that Shuman was a member of Mimosa Asian Fusion, LLC.
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`At the time Shuman beca_me an investor, Mimosa Asian Fusion, LLC's corporate existence
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`had been cancelled automatically by the State Corporation Commission on February 28,
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`2010. See Ex. 11 to Lu Dep., ECF No. 208-3. Lu testified this resulted from a late filing.
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`Lu Dep., ECF No. 251, at 69-70. The LLC was reinstated on May 21, 2010.
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`Ex. 11 to
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`Lu Dep., ECF No. 208-3; ECF No. 214-7. On the reinstatement form, Shuman replaced
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`Cheng as registered agent for the LLC, and Lu signed the form as manager. ECF No. 20-1,
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`at 20.
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`Also at the time Shuman became an investor, rent payments under the 2008 Lease
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`Agreement were in arrears. Lu Dep., ECF No. 251, at 70, 91; Li Dep., ECF No. 208-2, at
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`22-23; Shuman Aff., ECF No. 208-1, ｡ｴｾ＠12; Harner Dep., ECF No. 208-5,_ at 18; Cornett
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`Dep., ECF No. 208-6, at 8. David Harner, Senior Real Estate.Manager for Paramount
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`Development Corporation, testified they "had difficulties collecting rent from Jay [Lu] from
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`early on," but tried to work with him because they knew he was experiencing "a lot of
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`hardship." Harner Dep., ECF No. 208-5, at 18, 25. R. Eric Cornett, Chief Operating
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`Officer for Paramount, testified similarly: "[TJhere were some months we'd get some
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`payment, and some we'd get maybe none. But regardless, we never got made whole. We
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`were always in ·the hole; i.e., a deficit in the amount of rent collected." Cornett Dep., ECF
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`No. 208-6, at 8.
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`As of April 2010,.Mimosa I was nearly $50,000 behind in rent. The landlord issued a
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`notice of default under the 2008 Lease Agreement on April 9, 2010, giving Lu and the
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`restaurant 5 days to cure. Ex. 1 to Cornett Dep., ECF No. 208-6; Harner Dep., ECF No.
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`208-5, at 25. At that point, Lu sat down with Cornett and introduced him to Shuman.
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`I think that's about the time when I - I went to Winchester,
`Virginia, sat down with Jay [Lu]. He introduced me to John
`[Shuman], and basically said John was going to be his partner,
`and that was enough of-again, we were looking for a reason to
`hope, why should we continue to work with you.
`
`You owe us $50,000, you haven't paid us, why should we
`continue? You give me a reason to stay in here and keep
`fighting with you. And that was my recollection. I had a - that
`was the reason he gave, was hey, I have a partner now who is
`going to help me, and also bring capital to the business to help.
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`And so that was enough, I met John, asked questions,
`and, you know, it gave us enough of a reason for perhaps things
`were going to change that we did not exercise our rights at that
`time and said all right, we'll stay in here and fight with you a
`little bit longer and see if bringing John in here as a partner will
`help.
`
`Cornett Dep., ECF No. 208-6, at 34; Harner Dep., ECF No. 208-5, at 40 (''Jay told me he
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`had a partner and that was one of his many, many, many explanations as to how he was
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`going to meet his financial obligations with us."), 72 ('jay communicated to me that he
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`either was going to or had decided to partner with one of his best customers.").
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`Shuman's entrance on the scene had a positive impact on at least this aspect of
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`Mimosa I's financial condition. Cornett testified: "The most consistent we ever received
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`rent was in the early days when John Shuman became a partner. We received rent like
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`clockwork for a period of months when] ohn Shuman became a partner with Jay." Cornett
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`Dep., ECF No. 208-6, at 49. While Mimosa I made good on its current rent payments after
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`Shuman became involved, it never fully caught up with the past due rent it owed. See
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