Kun v. Shuman
| Decision Date | 16 June 2015 |
| Docket Number | Civil Action No. 5:14-cv-00030 |
| Court | United States District Courts. 4th Circuit. United States District Court (Western District of Virginia) |
| Parties | HUI KUN LI, et al., Plaintiffs, v. JOHN E. SHUMAN, et al., Defendants. |
MEMORANDUM OPINION
This matter is before the court on defendants' motions to dismiss plaintiffs' complaint for failure to state a claim and for lack of subject matter jurisdiction (Dkt. # 22 & 23).1 For the reasons set forth below, the motions will be GRANTED in part and DENIED in part.
This is a dispute over an Asian restaurant. Plaintiffs Hui Kun Li and Jian Lu allege they were the sole members of Mimosa Asian Fusion, LLC, a limited liability company that operated a restaurant of the same name (hereinafter, "Mimosa I") in Winchester, Virginia. Compl., Dkt. # 1, at ¶¶ 31, 32. The complaint alleges that Li signed a five-year lease on January 23, 2008, id. at ¶ 29, and the restaurant opened its doors on September 18, 2008, id. at ¶ 30.
Plaintiffs claim that between April and June 2010, defendant John E. Shuman, owner of an unrelated business, Shuman's Flagcar Service, invested $35,000 into Mimosa I and began to work part-time at the restaurant. Id. at ¶¶ 33-35. The complaint alleges that by virtue of this financialinvestment, Shuman became "a member and manager of Mimosa Asian Fusion, LLC."2 Id. at ¶ 125. At Shuman's suggestion, Lu agreed to delegate bookkeeping and accounting responsibilities for Mimosa I to defendant Nicole Edwards, an employee of Shuman's Flagcar Service and part-time Mimosa I employee. Id. at ¶ 36. The complaint alleges that "on a nightly basis, Shuman would count the cash register and take possession of cash from the register allegedly to deliver the cash to Edwards [at her Shuman's Flagcar Service office] for accounting and bank deposit." Id. at ¶ 37. Plaintiffs claim that, over time, Shuman moved all of the Mimosa I financial records and information from the restaurant to Shuman's Flagcar Service and refused to give Li or Lu access to the records. Id. at ¶¶ 38-42. The complaint alleges that Shuman co-mingled Mimosa I funds with his own personal and business funds, id. at ¶ 44, used Mimosa I funds to pay personal debts, id. at ¶ 46, and, eventually, depleted the business funds, forcing Mimosa I to close its doors on May 20, 2011, id. at ¶¶ 226-232.
According to the allegations, Shuman then misrepresented his ownership interest in Mimosa I in order to negotiate and secure a new five-year lease for the subject property beginning June 1, 2011, id. at¶ 47, and misrepresented to the Frederick County Commissioner of Revenue that Mimosa I was closed for business, id. at ¶ 48, in order to open a new restaurant operating as a sole proprietorship. Specifically, plaintiffs claim that Shuman filed a Certificate of Fictitious or Assumed Name in Frederick County Circuit Court on May 25, 2011 for "Mimo's Asian Fusion," listing himself as owner and sole proprietor. Id. at ¶ 49. Plaintiffs claim that Shuman obtained a business license, id. at ¶ 120, and began conducting business as Mimo's Asian Fusion beginning in June 2011 at the same physical location where Mimosa I had operated, and that he repeatedly sought policeassistance in removing Lu from the premises. Id. at ¶ 51; see also id. at ¶¶ 56-57, 122-23. Thereafter, on June 1, 2012, Shuman allegedly obtained another business license and formed a new limited liability company, Mimosa Restaurant, LLC (hereinafter, "Mimosa II"), of which he was the sole member, and which operated as a restaurant at the same physical location as Mimosa I. Id. at ¶¶ 148-49.
Plaintiffs allege fifteen causes of action in their complaint filed on July 8, 2014:
Defendants initially moved to dismiss the complaint for failure to state a claim for which relief can be granted pursuant to Federal Rule of Civil Procedure 12(b)(6) and for improper venue pursuant to Rule 12(b)(3). See Dkt. # 6. The court held a hearing on October 1, 2014, at which it became apparent that this dispute had been extensively litigated in state court and that additional issues may need to be addressed at the Rule 12 stage. By Order entered the same date, the court denied the pending motion to dismiss and gave the parties an opportunity to file and brief any supplemental motions to dismiss in light of the filing of the state court record.
Defendant Nicole Edwards filed a supplemental motion to dismiss (Dkt. # 22), in which she appears to assert that the court lacks subject matter jurisdiction over the claims against her because she is not named in any of the trademark infringement counts. Defendants Mimo's Asian Fusion, Mimosa II, and John E. Shuman also filed a supplemental motion to dismiss (Dkt. # 23) pursuant to Rule 12(b)(1) and 12(b)(6).3 These motions are ripe for adjudication.
Rule 12(b)(6) of the Federal Rules of Civil Procedure permits a dismissal when a plaintiff fails "to state a claim upon which relief can be granted." To survive a Rule 12(b)(6) motion to dismiss, a complaint must contain sufficient "facts to state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). The complaint's "[f]actual allegations must be enough to raise a right to relief above the speculative level." Id. at 555.
A court should construe factual allegations in the nonmoving party's favor and will treat them as true, but is "not so bound with respect to [the complaint's] legal conclusions." Dist. 28,United Mine Workers, Inc. v. Wellmore Coal Corp., 609 F.2d 1083, 1085-86 (4th Cir. 1979). Indeed, a court will accept neither "legal conclusions drawn from the facts" nor "unwarranted inferences, unreasonable conclusions, or arguments." E. Shore Mkts., Inc. v. J.D. Assocs. Ltd. P'ship, 213 F.3d 175, 180 (4th Cir. 2000). Further, "[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). Only after a claim is stated adequately may it then "be supported by showing any set of facts consistent with the allegations in the complaint." Twombly, 550 U.S. at 546.
Defendants also argue that the complaint fails to allege facts that permit the exercise of federal subject matter jurisdiction over certain defendants. For such challenges brought pursuant to Rule 12(b)(1), "all the facts alleged in the complaint are assumed to be true and the plaintiff, in effect, is afforded the same procedural protection as he would receive under a Rule 12(b)(6) consideration." Adams v. Bain, 697 F.2d 1213, 1219 (4th Cir. 1982). Thus, the motion will be denied if the complaint alleges sufficient facts to invoke subject matter jurisdiction. Kerns v. United States, 585 F.3d 187, 192 (4th Cir. 2009).
Before turning to the merits of the pending motions to dismiss, the court will first address the concurrent state litigation. The dispute that is the subject of the instant litigation has been the subject of state court litigation dating back to 2011. At the court's request, the parties filed extensive state court records for the court's review. See Dkt. # 20 & 27. It appears from these records that the parties to this matter are also parties to Frederick County Circuit Court case number CL11-439, an action brought by Li and Lu against Shuman and Edwards. Li and Lu's claims were dismissed without prejudice, however, by order entered August 9, 2014,4 on account of plaintiffs' failure to pay their share of the fees and expenses of the court-appointed Commissioner in Chancery and SpecialReceiver. See Dkt. # 27-47, 27-54. The case remains pending in state court on Shuman's counterclaim, which is set down for a jury trial scheduled to begin August 31, 2015.
Having reviewed the voluminous state court records, the court is satisfied that res judicata does not bar plaintiffs' claims in this case. See Taylor v. Sturgell, 553 U.S. 880, 892 (2008) (). Although the subject of the parties' state and federal litigation is largely the same, there has been no adjudication of plaintiffs' claims on the merits, presenting no bar to plaintiffs' raising them in the instant complaint. Id. ().
Additionally, although no party has raised the issue specifically, the court has considered whether dismissal of this action would be appropriate in light of the pending state court litigation....
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