Trademark Trial and Appeal Board Electronic Filing System. http://estta.uspto.gov
`
`ESTTA Tracking number:
`
`ESTTA1056122
`
`Filing date:
`
`05/18/2020
`
`IN THE UNITED STATES PATENT AND TRADEMARK OFFICE
`BEFORE THE TRADEMARK TRIAL AND APPEAL BOARD
`
`Proceeding
`
`92061514
`
`Party
`
`Correspondence
`Address
`
`Plaintiff
`John Shuman
`
`ANDREW S BAUGHER
`LENHART PETTIT
`90 NORTH MAIN STREET , SUITE 201 P O BOX 1287
`HARRISONBURG, VA 22803
`UNITED STATES
`asb@lplaw.com
`540-437-3138
`
`Submission
`
`Filer's Name
`
`Filer's email
`
`Signature
`
`Date
`
`Other Motions/Papers
`
`Andrew S. Baugher
`
`asb@fplegal.com, jlh@fplegal.com
`
`/andrew baugher/
`
`05/18/2020
`
`Attachments
`
`Petitioner Notice of Disposition of Civil Action.pdf(921408 bytes )
`
`

`

`IN THE UNITED STATES PATENT AND TRADEMARK OFFICE
`
`BEFORE THE TRADEMARK TRIAL AND APPEAL BOARD
`
`JOHN SHUMAN,
`
`Petitioner,
`
`V.
`
`HUI KUN LI,
`
`Respondent.
`
`Cancellation No. 92061514
`
`PETITIONER’S NOTICE OF DISPOSITION OF CIVIL ACTION
`
`Petitioner, John Shuman, pursuant to the Board’s order of July 11, 2019, hereby gives
`
`notice of the disposition of the civil action between Petitioner and Respondent, Hui Kun Li, and
`
`states as follows:
`
`1.
`
`On May 18, 2015, Petitioner, acting pro se, filed a petition to cancel Reg. No.
`
`4216849 and Reg. No. 4265943. Petitioner asserted, among other things, that the registrations
`
`should be cancelled because Respondent ceased use of the subject marks in 2011, prior to
`
`seeking registration, and because Petitioner or his related businesses were using the marks
`
`exclusively at that time.
`
`2.
`
`On October 12, 2015, Petitioner, again acting pro se, and with leave of the Board,
`
`filed an amended petition to cancel Reg. No. 4216849 and Reg. No. 4265943. In addition to his
`
`prior arguments, Petitioner asserted that Respondent committed fraud in the procurement of the
`
`registration of the marks, in that she represented she was using the marks in commerce when in
`
`fact she had ceased using them in 2011; that any prior use of the marks had not been by
`
`Respondent personally, as she represented, but
`
`through a multi-member limited liability
`
`company of which Petitioner was also a member; and that Petitioner had continuously used the
`
`

`

`marks exclusively in connection with his own business entities, of which Respondent was not a
`
`member or owner, or personally, since June 2011.
`
`3.
`
`Respondent filed a federal court action in the United States District Court for the
`
`Western District of Virginia against Petitioner, alleging infringement of the subject marks and
`
`other related claims (the “civil action”). Petitioner defended the civil action on many of the same
`
`grounds asserted before the Board in support of his petition for cancellation of the marks. On
`
`January 11, 2016, the Board suspended these proceedings pending final disposition of the civil
`
`action.
`
`4.
`
`On January 18, 2017, Petitioner notified the Board of the final disposition of the
`
`civil action. The notice informed the Board that the parties had engaged in full discovery in the
`
`civil action, including extensive written discovery, document exchange, and oral testimony by
`
`way of deposition, including depositions of Petitioner and Respondent. Following discovery and
`
`briefing submitted to the court by Petitioner and Respondent,
`
`the district court dismissed
`
`Respondent’s trademark infringement claims and the civil action as a whole on December 9,
`
`2016. Petitioner submitted a copy of the district court’s memorandum opinion and order with the
`
`notice. See also Li v. Shuman, 2016 WL 7217855 (W.D. Va. Dec. 9, 2016). Respondent did not
`
`appeal that decision and it is a final judgment.
`
`5.
`
`In dismissing the civil action, the district court made certain findings which are
`
`pertinent
`
`to the Board’s determination of these proceedings. The district court, citing
`
`Respondent’s own deposition testimony, found that Respondent had not used the marks since
`
`May 2011 (see memorandum opinion at p. 21 and fn. 16; 2016 WL 7217855 at *11 and n. 16).
`
`The district court further found that Respondent did not apply for registration of the marks until
`
`December 2011, after she ceased any use of the marks and after Petitioner began using the marks
`
`

`

`exclusively (see memorandum opinion at p. 26 and fn. 16; 2016 WL 7217855 at *13 and n. 16).
`
`The district court also found that, even if Respondent could prove the validity of the marks, her
`
`prior use of the marks was only through the limited liability company of which she and Petitioner
`
`were both members, and not by Respondent personally (see memorandum opinion at p. 34-37;
`
`2016 WL 7217855 at *17-18 (citing Kristin Marie Conolty d/b/a Fairway Fox Golf v. Conolty
`
`O’Connor NYC LLC, 111 U.S.P.Q.2d 1302 (TTAB July 3, 2014)).
`
`6.
`
`These factual findings demonstrate that Petitioner’s request for cancellation is
`
`appropriate because, as the district court recognized in the civil action, the registrations obtained
`
`by Respondent are void ab initio since Respondent was not the sole owner of the marks;
`
`Respondent was not using the marks in commerce when she sought registration; and Petitioner
`
`had been using the marks exclusively in connection with his separate businesses since June 2011,
`
`both before and during Respondent’s registration proceedings before the Board. Respondent’s
`
`false representations to the contrary in seeking registration of the marks should result in their
`
`cancellation.
`
`7.
`
`On June 2, 2017, the Board issued an Order directing Respondent, within 20 days,
`
`to show cause why the Board should not enter judgment against Respondent in view of the
`
`district court’s finding.
`
`8.
`
`On June 14, 2017, Respondent informed the Board that “[l]itigation will resume
`
`shortly in the Circuit Court.” On December 20, 2017, Respondent filed another action against
`
`Petitioner in the Circuit Court of Frederick County, styled Hui Kun Li, et al., v. John E. Shuman,
`
`et al., Virginia, Case No. CL17—811 (the “new civil action”).
`
`9.
`
`The Board issued an Order on April 4, 2018, to suspend this proceeding until
`
`resolution of the new civil action.
`
`

`

`10.
`
`The state circuit court dismissed the new civil action by orders entered July 6,
`
`2018, and June 5, 2019. True copies of the state circuit court’s orders are enclosed. Respondent
`
`filed a petition for appeal from the decision with the Supreme Court of Virginia.
`
`11.
`
`On May 1, 2020,
`
`the Supreme Court of Virginia entered an order refusing
`
`Respondent’s petition for appeal. A true copy of the court’s order is enclosed. Respondent’s time
`
`to request a rehearing has expired and the decision is final. Va. Sup. Ct. R. 5:20; TBMP §
`
`510.02(b).
`
`12.
`
`Pursuant to the Board’s Order of July 11, 2019, Petitioner submits this notice of
`
`disposition of the new civil action. For the reasons set forth in its prior notice of January 18,
`
`2017, and pursuant to the Board’s order to show cause of June 2, 2017, Petitioner respectfully
`
`submits that
`
`this proceeding is ripe for decision and that Respondent’s marks should be
`
`cancelled.
`
`WHEREFORE, Petitioner respectfiJlly requests that Reg. No. 4216849 and Reg. No.
`
`4265943 be cancelled and that his Amended Petition to Cancel be sustained.
`
`Dated: May 18, 2020
`
`Respectfully submitted,
`
`JOHN SHUMAN
`
`By:
`
`
`/s/ Andrew S. Baughcr
`Andrew S. Baugher, VSB #74663
`Flora Pettit PC
`
`90 North Main Street, Suite 201
`PO. Box 1287
`
`Harrisonburg, Virginia 22803
`Tel: (540) 437-3138
`Fax: (540) 437—3101
`asb@fplegal.com
`Counselfor Petitioner
`
`

`

`CERTFICATE
`
`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 May 18, 2020, by First Class Mail, postage prepaid, and by e—mailing said
`copy on the same date, to:
`
`Michael N. Lau, Esq.
`Lau & Associates, LLC
`
`10517 West Drive, Unit B
`
`Fairfax, VA 22030
`M-Lau@Michaelnlau.com
`michael_lau_ yahoo.com
`Counselfor Respondent
`
`/s/ Andrew S. Baugher
`Dated: May 18, 2020
`
`827279
`
`

`

`V I R G I N I A:
`
`IN THE CIRCUIT COURT FOR FREDERICK COUNTY
`
`HUI KUN LI, et als.,
`Plaintiffs
`
`V.
`
`CIVIL DOCKET: CL17-811
`
`JOHN SHUMAN, et al.,
`Defendants
`
`ORDER
`
`This matter came before the court on July 3, 2018 upon Defendants’ Demurrer and Pleas
`in Bar (Pleas of Res Judicata and Statute of Limitations) to the Complaint filed with this court on
`December 20, 2017. The Plaintiffs were personally present with their attorney, Michael N. Lau,
`Esquire and the Defendant, John Shuman was present in person and by his counsel, Andrew S.
`Baugher, Esquire. The issues were briefed and argued by counsel for submission to the court.
`
`WHEREUPON, for the reasons hereinafter recited, Defendants’ Plea of the Statute of
`Limitations as to counts three (3) through eleven (11) be and hereby is sustained and those
`counts are Dismissed with prejudice. As to counts one and two of Plaintiffs’ complaint the Plea
`is overruled. Inasmuch as the court has granted Defendants’ Plea of the Statute of Limitations as
`to the causes of action named in those counts, Defendants’ remaining issues as to those counts
`are moot and the court need not render an opinion on the same as it applies to counts three (3)
`through eleven (1 1).
`
`With respect to counts one and two of Plaintiffs’ complaint, Defendants’ Plea of Res
`Judicata is sustained and those counts are Dismissed with prejudice.
`
`Brief History of the Proceedings
`
`To begin, the first suit involving these same parties and substantially the same issues was
`filed with this court on June 3, 2011 as an action seeking injunctive relief. In December 2011,
`with the permission of this court, Plaintiffs filed an “Amended Pleading” setting forth causes of
`action for forgery, fraud, conspiracy, trademark infringement, misappropriation of trade secrets
`and intentional infliction of emotional distress. Thereafter and without leave of this court,
`Plaintiffs filed a “Second Amended Pleading” on April 18, 2014 and a “Complaint for Damages”
`on May 30, 2014. This court has been unable to locate any motion or order permitting leave to
`amend Plaintiffs’ original complaint except its December 7, 2011 order directing Plaintiffs to
`“file additional pleadings.” As such, the “Second Amended Pleading” and “Complaint for
`Damages” are a nullity and without any legal effect. See Virginia Supreme Court Rule 1:8;
`Mechtensimer v. Wilson, 246 Va. 121, 431 S.E.2d 301 (1993).
`
`Page 1 of 7
`
`

`

`J
`
`By order of this court, entered August 9, 2014, Plaintiffs’ state court claims were
`dismissed without prejudice, leaving only Defendants’ counter claim as a pending state court
`action. Plaintiffs did not appeal that decision of Judge Athey. Approximately one month earlier,
`Plaintiffs’ filed suit in federal Court alleging that Defendants engaged in trademark infringement,
`conversion, breach of fiduciary duty, wrongful distribution of properties, breach of duty of
`loyalty, conspiracy, fraud, gross negligence, and misappropriation of trade secrets. By
`December 9, 2016, the federal court had granted Defendants’ summary judgment dismissing all
`of Plaintiffs’ federal causes of action. Thereafter, on December 20, 2017 Plaintiffs’ filed the
`present complaint citing grounds that are identical to or strikingly similar to those filed in the
`first state court action, as amended, and the federal cases that were dismissed without leave to
`further amend.
`
`Plea of the Statute of Limitations
`
`The current litigation was instituted by Plaintiffs with the filing of their complaint with
`this court on December 20, 2017. Plaintiffs’ complaint alleges eleven (11) counts or causes of
`action grounded in: conversion (counts 1 and 2), breach of fiduciary duty (counts 3 and 4),
`wrongful distribution (count 5), breach of fiduciary duty (count 6), breach of duty of loyalty
`(count 7), actual fraud (count 8), constructive fraud (count 9), gross negligence (count 10) and
`civil conspiracy (count 11).
`
`With the exception of the counts alleging conversion which are governed by a five (5)
`year statute of limitations pursuant to Virginia Code § 801-243 B, the remaining counts all
`require suit to be brought within a period of two (2) years from the time the cause of action
`accrued.I Plaintiffs allege that Defendants excluded them from the Mimosa restaurant business
`operations in May 2011 when Plaintiffs’ cause of action accrued. Plaintiffs then filed their first
`state court action on June 3, 2011 seeking injunctive relief and properly amended that original
`complaint with their “Amended Pleading” filed on December 28, 2011 and, for the first time,
`alleged forgery, fraud, conspiracy, trademark infringement, misappropriation of trade secrets,
`and intentional infliction of emotional distress as causes of action. This court then dismissed
`Plaintiffs’ claims without prejudice on August 9, 2014. Even with Plaintiffs’ federal filing on
`July 8, 2014 tolling the running of the statute of limitationsz, after the federal claims were
`
`1 See Virginia Code § 8. 01-243 A (“Unless otherwise provided in this section or by other statute,
`every action for personal injuries, whatever the theory ofrecovery, and every action for damages
`resultingfiom fraud, shall be brought within two years after the cause ofaction accrues. ”);
`Virginia Code § 8. 01-248 (“Every personal action accruing on or after July I, 1995, for which
`no limitation is otherwise prescribed, shall be brought within two years after the right to bring
`such action has accrued. ”); Virginia Code § 13.1-1036 ("Ifa member has received a
`distribution in violation ofthe articles oforganization or an operating agreement or in violation
`0f§ 13.1-1035 ofthis chapter, then the member is liable to the limited liability companyfor a
`period oftwo years thereafterfor the amount ofthe distribution wrongfully made. ”).
`
`
`2 (See De La Riva v. Vowell 52 Va. Cir. 488, Scott County Circuit Court holding that the filing of
`personal injury suit in federal court later dismissedfor lack ofdiversityjurisdiction did toll
`Virginia’s statute oflimitations). Welding, Inc. v. Bland County Serv. Auth, 261 Va. 218, 54]
`SE. 29 909 (Va. Sup. Ct. 2001).
`
`Page 2 of 7
`
`

`

`dismissed on December 9, 2016, leaving no state or federal court action pending, the clock
`resumed such that by December 20, 2017 the statute of limitations had expired on all Plaintiffs’
`claims except the claims for conversion.
`
`Specifically, this court finds with that with respect to the claims of wrongful distribution,
`breach of duty of loyalty and gross negligence a total of 4 years, 11 months and 22 days expired
`before Plaintiffs filed their present complaint on December 20, 2017. On Plaintiffs’ claim for
`breach of fiduciary duty, a period of 5 years, 7 months and 11 days elapsed prior to institution of
`the current action and, finally, as to the claims for actual and constructive fraud as well as the
`conspiracy claim, a total period of 2 years, 5 months and 12 days elapsed prior to the December
`20, 2017 filing. Thus, Plaintiffs’ counts three (3) through eleven (1 1) are necessarily precluded
`by the applicable statute of limitations and prosecution of those claims is barred. For the reasons
`herein discussed, Defendants’ Plea of the Statute of Limitations is Granted as to Counts 3
`through 11 of Plaintiffs’ Complaint and those counts are hereby DISMISSED with prejudice.
`
`The conversion claims were first raised in Plaintiffs’ filing with the federal court on July
`8, 2014. Again, according to Plaintiffs’ present complaint in this court, the cause of action
`accrued in May 2011 approximately 3 years 1 month and 7 days prior to raising the conversion
`claims in their federal filing. All federal claims were dismissed with prejudice on February 5,
`2016 thereby recommencing the running of the limitation period until the second state court
`action was filed on December 20, 2017. Giving the Plaintiffs all due consideration regarding the
`date when the cause of action accrued, the court has used the date of June 1, 2011 as being the
`earliest date upon which the Plaintiffs could file a complaint since no actual date in May 2011
`was alleged in the complaint. Consequently, 3 years, 1 month and 7 days elapsed between
`accrual of the conversion action and Plaintiffs’ filing in federal court. The federal claims were
`then dismissed on February 5, 2016 leaving 1 year ten 10 months and 13 days before the second
`state action was filed. The total time accrued and not tolled by the statute of limitations prior to
`the filing of the present suit was four (4) years, eleven (11) months and twenty (20) days;
`consequently, as to Plaintiffs’ counts one (1) and two (2) alleging conversion, Defendants’ Plea
`of the Statute of Limitations is DENIED.
`
`Plea of Res Judicata
`
`In View of this court’s ruling dismissing Plaintiffs’ counts 3 through 11 for failure to
`commence their causes of action within the limitation period, this court need only now address
`Defendants’ Plea of Res Judicata as the same applies to the two conversion claims (Counts l and
`2 of the Plaintiffs’ current complaint). Nevertheless, this court would have been satisfied that the
`doctrinal bar of res judicata equally applied to counts 3 through 11 based upon the identical
`parties and issues ultimately decided by final order of the federal court that was not appealed by
`the Plaintiffs.
`
`Plaintiffs first raised conversion as theory of recovery against the Defendants in their suit
`filed in federal court on July 8, 2014. Without going into exhaustive detail because of the
`voluminous nature of the filings in both federal and state court, suffice it to say, that with regard
`to the conversion claims in this court, the current state court case involves the exact same parties
`as those involved in the federal litigation that ultimately resulted in the federal court dismissing
`
`Page 3 of 7
`
`

`

`the claims. Essentially, Plaintiffs claim that Defendants became involved in the restaurant
`business with Plaintiffs as investors and/or part time employees assisting with deliveries,
`bookkeeping and directing financial operations ofthe business. As time passed, Plaintiffs allege
`Defendants took over more and more of the financial operations to the complete exclusion of
`Plaintiffs until eventually, the business become that of the Defendants and was transferred into
`Mimosa 11. These are, in a nutshell, the same allegations that were pled in the federal action
`which was ultimately dismissed with prejudice for failure to assert derivative claims on behalf of
`the restaurant business and not the individual Plaintiffs.
`
`Res judicata is a judicially created doctrine to promote judicial economy and finality of
`
`judgments and to prevent repetitive litigation. Bares v. Devers 214 Va. 667, 670, 202 S.E.2d 917
`(1974). Virginia Supreme Court Rule 1:6 provides in pertinent part:
`
`A party whose claim for relief arising from identified conduct,
`a transaction, or an occurrence, is decided on the merits by a
`final judgment, shall be forever barred from prosecuting any second
`or subsequent civil action against the same opposing party or parties
`on any claim or cause of action that arises from that same conduct,
`transaction or occurrence, whether or not the legal theory or rights
`asserted in the second or subsequent action were raised in the prior
`lawsuit, and regardless of the legal elements or the evidence upon
`which any claims in the prior proceeding depended, or the particular
`remedies sought. A claim for relief pursuant to this rule includes those
`set forth in a complaint, counterclaim, cross-claim or third-party pleading.
`
`The concept of res judicata involves both issue and claim preclusion and where, as in the
`present case, claim preclusion is the matter before the court that concept
`
`“bars the assertion of legal or equitable rights of action,
`even ifthey were not specifically resolved in earlier litigation. .
`Called ”merger" when the claimant wins the first suit and "bar"
`when the claimant loses it, claim preclusion under the doctrine
`of res judicata treats unasserted claims as being subsumed in the disposition of the
`related, previously adjudicated, claims.”
`
`.
`
`.
`
`Kent Sinclair & Leigh B. Middleditch, Jr., Virginia Civil Procedure § 14.11[B][5], at
`1214 (6th ed. 2014) (emphasis in original).
`
`For purposes of res judicata, the task of categorizing the cluster of facts that define a
`dispute is a pragmatic exercise that focuses on how the parties, not legal dictionaries, would View
`the conflict. From this perspective, there is no reason to subject the parties — and the judicial
`system —— to two separate lawsuits to resolve one underlying dispute. Funny Guy, LLC v.
`Lecego, LLC, 293 Va. 135, 795 S.E.2d 887, 2017 Va. LEXIS 7, 2017 WL 640843.
`
`Res judicata or claim preclusion bars a party from re—litigating a matter that the party has
`already had the chance or opportunity to litigate. Thus, res judicata or claim preclusion bars the
`
`Page 4 of 7
`
`

`

`litigation of not only issues that were already litigated, but also issues that could have been
`litigated, might have been litigated, or should have been litigated in the former suit or former
`proceedings. In this respect, resjudicata, or claim preclusion, is a broader remedy than
`collateral estoppel which applies only to issues that were actually litigated.
`(emphasis added).
`
`Here the current litigation involves the same parties as were involved in the federal
`litigation. The same causes of action have been asserted in this court as were alleged in federal
`court and the federal court rendered a final judgment that now lays to rest any claims that were
`litigated, could have been litigated or should have been litigated in that court between these same
`parties. Consequently, for the foregoing reasons, Defendants Plea of Res Judicata is sustained as
`to counts 1 and 2 for conversion and those claims are DISMISSED.
`
`For the reasons hereinbefore recited, Plaintiffs’ Complaint be and hereby is DISMISSED
`
`with prejudice.
`
`Defendants’ Reguest for Sanctions
`
`By separate motion, Defendants have moved this court for an order sanctioning Plaintiffs
`and/or their attorney pursuant to Virginia Code § 8.01-271.1 for filing the most recent complaint
`in this court. By letter (Exhibit A to Defendants’ Motion) to Plaintiffs’ counsel, dated December
`28, 2017, defense counsel set forth the legal reasons why counsel believed that Plaintiffs’
`complaint was both time barred and unable to withstand a res judicata challenge based upon the
`finality of the federal court’s decision dismissing the federal claims that appear identical to those
`in the present litigation in this court. Moreover, defense counsel warned that if the complaint
`was not Withdrawn prior to Defendants having to file a responsive pleading, counsel would seek
`sanctions under the Virginia statute.
`
`Virginia’s purpose behind the enactment of the sanctions statute focuses on policy
`considerations whereby " [T]he possibility of a sanction can protect litigants from the mental
`anguish and expense of frivolous assertions of unfounded factual and legal claims and against the
`assertions of valid claims for improper purposes.” Gilmore v. Firm, 259 Va. 448, 527 S.E.2d
`426, 2000 Va. LEXIS 52 quoting from Oxenharn v. Johnson, 241 Va. 281, 286, 402 S.E.2d 1, 3
`(1991).
`
`In reviewing a trial court's award of sanctions under this section, the appellate court will
`apply an abuse of discretion standard and, in applying that standard, will use an objective
`standard of reasonableness in determining whether a litigant and his attorney, after reasonable
`inquiry, could have formed a reasonable belief that the pleading was well grounded in fact,
`warranted by existing law or a good faith argument for the extension, modification or reversal of
`existing law, and not interposed for an improper purpose. Flippo v. CSC Assocs. III, L.L.C., 262
`Va. 48, 547 S.E.2d 216, 2001 Va. LEXIS 84 (2001).
`
`Where there are issues in litigation that are the proper subject of a legitimate debate,
`sanctions are not appropriate for consideration even though the proponent may had those issues
`decided against him. See Ward V. NationsBank, 256 Va. 427, 507 S.E.2d 616 (1998).
`
`Page 5 of 7
`
`

`

`In the present case, confusion has abounded due in no small part to the fact that 4
`different judges, including the federal suit, have been involved at one time or another. The first
`state court action resulted in a dismissal of Plaintiffs’ claims without prejudice but preserving for
`trial Defendants counter claim filed in that action. Approximately one month prior to the
`dismissal of Plaintiffs’ claims in the first state court action, Plaintiff filed Virtually the same
`causes of action against the same Defendants in federal court including allegations of trademark
`violations. As previously indicated, all federal claims were eventually dismissed without leave
`to amend, which brought finality to Plaintiffs claims. Then in December 2017, Plaintiffs’
`counsel instituted the present action that is almost identical to the dismissed federal cause of
`action both as to the counts and allegations pled as well as the misunderstanding as to the nature
`of derivative actions versus a personal action.
`
`The crux of the sanctions statute can be found in its third paragraph, which reads:
`
`An oral motion made by an attorney or party in any court of the
`Commonwealth constitutes a representation by him that (i) to the
`best of his knowledge, information and belief formed after reasonable
`inquiry it is well grounded in fact and is warranted by existing law or
`a good faith argument for the extension, modification or reversal of
`existing law, and (ii) it is not interposed for any improper purpose,
`such as to harass or to cause unnecessary delay or needless increase
`in the cost of litigation. (Emphasis added).
`
`Thus for this court to impose sanctions against the Defendants and/or their counsel, this
`court must determine under an objectively reasonable standard that Defendants’ current
`complaint was not well grounded in existing law and that it was filed for an improper purpose.
`This court has little difficulty concluding the former as by all legal measures Plaintiffs’ current
`claims were barred by res judicata as well as the statute of limitations applicable to the respective
`counts pled in the complaint. As to the second required finding, this court has no evidence
`before it to conclude that the Plaintiffs filed their second state court claim because of a deep
`rooted animus towards Defendants. Instead, it is this court’s belief based upon the pleadings
`filed and the arguments of their counsel that Plaintiffs truly thought Defendants “stole their
`business” even though the manner by which they sought legal redress has been less than artfully
`managed.
`
`From a fair reading of the first and second state court files as well as all exhibits and
`mailings provided the court by counsel including pertinent portions of the file from the federal
`litigation, it is apparent that Plaintiffs’ counsel, acting upon his own zealous belief in the
`righteousness of his clients’ cause, simply did not understand the complexities and nuances of
`the law and various rulings made by this and the federal court. Mere inattention or confusion as
`to the law does not, in and of itself, constitute “bad faith” so as to invoke sanctions under the
`statute. While his and Plaintiffs’ actions certainly resulted in increased litigation expenses for
`the Defendants, this court cannot employ a reasonably objective standard to conclude Defendants
`acted to “interpose any improper purpose such as to harass .
`.
`. cause unnecessary delay or
`needless increase in the cost of litigation.” Consequently, for the foregoing reasons this court
`DENIES Defendants request for sanctions.
`
`Page 6 of 7
`
`

`

`The clerk shall forward a copy of this Order to counsel of record and shall then file this
`case among the CASES ENDED.
`
`Counsel are advised that their respective clients have 30 days from the date of this order
`to note any appeal.
`
`Endorsement by counsel is hereby dispensed with pursuant to Rule 1:13.
`
`THIS ORDER IS FINAL.
`
`ENTERED this 6th day of July, 2018.
`
`/ N. R“ do
`
`.«gu,..n..--wum._. .fl-m 1mm»:
`“any.
`l
`j AGpr-Attest:
`..
`4
`Frederick County Circuit Court
`Rebecca P. Ho an. Clerk
`
`‘4
`
`.WW.
`
`Deputy Clerk
`
`Page 7 of 7
`
`

`

`VIRGINIA:
`
`IN THE CIRCUIT COURT OF FREDERICK COUNTY
`
`HUI KUN LI, et al.,
`
`Plaintiffs,
`
`v.
`
`JOHN E. SHUMAN, et al.,
`
`Defendants.
`
`Case No. CL17-811
`
`AMENDED FINAL ORDER CLARIFYING JULY 6, 2018 ORDER
`
`THIS MATTER CAME before the Court on Wednesday, June 5, 2019, upon the Court’s
`
`prior Order entered on July 6, 2018, the Virginia Supreme Court’s Order Dismissing Appeal
`
`Without Prejudice entered on April 30, 2019 (Exhibit 1, attached to this Order); the Motion by
`
`Defendants requesting the Court to clarify and amend its prior Order of July 6, 2018; and was
`
`argued by counsel.
`
`The Court had intended its July 6, 2018 Order to be a Final Order disposing of all claims
`
`in the case, but omitted any specific reference to Count 12 of the Complaint. The July 6, 2018
`
`Order was appealed by Plaintiffs. On April 30, 2019, the Virginia Supreme Court entered an
`
`Order Dismissing the Appeal Without Prejudice, the Virginia Supreme Court stating:
`
`The Court finds the July 6, 2018 Order appealed fiom (“July 6 Order ”) is
`not a Final Order because it does not “dispose[] of the whole subject[,] give[] all the
`relief contemplated and leave[] nothing to be done by the court. ” [citation omitted].
`Specifically,
`the July 6 Order does not dispose of Count 12 of Li’s Complaint
`contending Defendant John E. Shuman failed to provide tax returns to fellow partners
`regarding tax returns they initiated filings thereof as a tax matter partner.
`See
`Lockheed Info. Mgmt Sys. Co. v. Maximus, Inc., 259 Va. 92, 107 (2000)(“An order is
`notfinal and appealable ifclaims against [a party] remain unresolved. "); see also Rule
`I.'2(d)(Absent a partial summary judgment order pursuant to Rule 1:2(a), "any order
`which adjudicates fewer than all the claims or the rights and liabilities offewer than all
`the parties in the action is not a final judgment. ”) Accordingly, the Court dismisses the
`petition for appealfiled in the above—styled case.
`
`

`

`This dismissal is without prejudice to the right of any party to appeal a final
`order ofthe Circuit Court ofFrederick County.
`
`The Court hereby finds as follows:
`
`1.
`
`On July 6, 2018,
`
`the Court entered an Order dismissing Counts 1-11 of the
`
`Complaint filed on December 20, 2017 (“the Complaint”).
`
`2.
`
`The Court ruled Counts 1 and 2 were barred by the doctrine of res judicata, and
`
`therefore, the Court dismissed Counts 1 and 2.
`
`3.
`
`The Court held that Counts 3-11 were barred by the statute of limitations, and
`
`therefore, the Court dismissed Counts 3-11, including Counts 3 and 4 for breach of fiduciary
`
`duty.
`
`4.
`
`However, the July 6, 2018 Order inadvertently omitted a specific reference to
`
`Count 12 of the Complaint, which states: “Third count of breach of fiduciary duty by Defendant
`
`John E. Shuman for failure to provide tax returns to fellow partners regarding tax returns he
`
`initiated filings thereof as a tax matter partner.” In support, Plaintiffs alleged Shuman breached
`
`fiduciary duties to them by not providing them with tax returns in 2010, 2011, 2012, 2013, and
`
`2014.
`
`5.
`
`For the reasons set forth in the Court’s July 6, 2018 Order, the Court holds that
`
`this Count 12 breach of fiduciary duty claim is also barred by the statute of limitations and
`
`should be dismissed as well.
`
`6.
`
`As the Court previously ruled in dismissing Counts 3 and 4 of Plaintiffs
`
`Complaint, which also alleged breach of fiduciary duty, such claims are governed by a two—year
`
`statute of limitations. As set forth on the face of the Complaint, in particular, at the “Twelveth
`
`[sic] Cause of Action” in paragraphs 261-264, any alleged breach of fiduciary duty for failing to
`
`

`

`disclose certain tax returns between 2010 and 2014 occurred more than two years before the
`
`filing of the Complaint on December 20, 2017.
`
`7.
`
`Accordingly, the Court amends its July 6, 2018 Order to also dismiss Count 12 on
`
`the basis of the statute of limitations, as well as on the basis of res judicata.
`
`THIS IS A FINAL ORDER.
`
`The Clerk is directed to send an attested copy of this Order to counsel of record.
`
`ENTER this Ell-day of June, 2019.
`
`I ASK FOR THIS:
`
`
`
`
`
`
`Andrew S. B
`er (V SB #74663)
`William E. Shmidheiser, III (V SB # 19047)
`Of Flora Pettit
`
`
`
`Lau & Associates, LLC
`Tel: (703) 637-0488
`
`Tel: (540) 437—3 138
`Fax: (703) 644-4303
`
`Fax.: (540) 437-3101
`michael lau @yahoo.com
`
`
`asb@fplegal.com
`Counselfor Plaintifls
`
`
`
`Counsel for De endanrs
`
`19381/001/757950
`
`

`

`MIA;
`
`JutfieSupmmeGawdaflWWfiefldattfieSupwmeCawdfiuifldinth/w
`Gilgaflficfimandanfmdagtfie30tfidagaflapw,2m9.
`
`Hui Kun Li, et a