Zhao v. Li

CourtDistrict Court, District of Columbia
DecidedOctober 11, 2022
DocketCivil Action No. 2020-3138
StatusPublished

This text of Zhao v. Li (Zhao v. Li) is published on Counsel Stack Legal Research, covering District Court, District of Columbia primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Zhao v. Li, (D.D.C. 2022).

Opinion

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA

YAN ZHAO et al.,

Plaintiffs,

v. Civil Action No. 20-3138 (TJK)

KEQIANG LI et al.,

Defendants.

MEMORANDUM OPINION

This suit is the latest attempt by a group of corporate entities and an investor to secure

ownership and control over a group of luxury hotels. After dismissing Plaintiffs’ claims against

three of the defendants, the Court ordered Plaintiffs to show cause why it should not sanction them

and their counsel for apparent litigation misconduct. Plaintiffs responded to that show-cause order

and then docketed several other filings, including two lis pendens notices about the underlying

properties. One of the three former defendants, AB Stable VIII LLC, now moves for relief from

the lis pendens notices. For the following reasons, the Court will grant AB Stable VIII’s motion,

and under its show-cause order the Court will dismiss this case and refer Plaintiffs’ attorney to the

Court’s Committee on Grievances.

I. Background

The Court assumes familiarity with the background of this case. See ECF No. 52 at 2–6.

As relevant here, Plaintiffs are an individual named Yan Zhao and four corporate entities (“Plain-

tiff Entities”) who basically claim to own several hotels in the United States, including one in

Washington, D.C. See ECF No. 1 ¶¶ 14, 16, 28–30, 78, 80–81, 94–95, 98–99, 103–04, 107–08;

see also ECF No. 10 at 2 (identifying the underlying properties). They allege that the Plaintiff Entities obtained these properties through a series of arbitration awards granted under an arbitra-

tion agreement formed under the Delaware Rapid Arbitration Act as part of a scheme to prevent

the Chinese government from confiscating those assets. See id. ¶¶ 28–37, 50, 249. When they

sought to enforce those awards in Delaware state court, however, they allege that Vice Chancellor

J. Travis Laster of the Delaware Court of Chancery, working with a company named AB Stable

VIII LLC and Delaware attorney Matthew Belger (who represented AB Stable VIII’s parent com-

pany) conspired with the Chinese government to illegally expropriate those properties by declaring

the arbitration agreement fraudulent and the arbitration awards invalid. See id. ¶¶ 51–55, 168–76,

181–213; see also World Award Found. Inc. v. Anbang Ins. Grp. Co., No. 2019-0605-JTL, 2020

WL 3799714, at *1–2 (Del. Ch. July 2, 2020); AB Stable VIII LLC v. MAPS Hotels & Resorts One

LLC, No. 2020-0310-JTL, 2020 WL 7024929, at *1–4, *6, *8–10, *12, *17, *21–26, *46 (Del.

Ch. Nov. 30, 2020), aff’d, 268 A.3d 198 (Del. 2021).

In this Court, Plaintiffs then sued Vice Chancellor Laster, Belger, AB Stable VIII, several

Chinese government officials, and a Chinese government entity, asserting an array of claims

against them related to this alleged conspiracy and seeking nearly one trillion dollars in damages,

among other relief. See ECF No. 1. A few months later, Plaintiffs filed an “Ex Parte Petition for

Temporary Restraining Order” to prevent the sale of the underlying properties by AB Stable VIII,

which indirectly owns them. ECF No. 4; ECF No. 52 at 5 n.2. The Court denied that motion,

finding that Plaintiffs failed to meet their burden to obtain such relief in “several respects,” includ-

ing by failing to identify a particular legal claim on which they were likely to succeed, failing to

provide non-conclusory evidence to support their motion, and failing to show irreparable harm.

See Minute Order of January 12, 2021. The next day, Plaintiffs sought similar relief by filing an

2 “Emergency Amended Motion for Appointment of Temporary Receivers/Trustees.” ECF No. 10.

The Court denied this motion for largely the same reasons. See Minute Order of August 27, 2021.

Meanwhile, Vice Chancellor Laster, Belger, and AB Stable VIII each moved to dismiss on

“myriad grounds,” including lack of personal jurisdiction. ECF No. 52 at 6; see also ECF No. 24;

ECF No. 27; ECF No. 31. With those motions pending, Plaintiffs filed an “Emergency Motion

for Show Cause Hearing,” asking for “Judicial Intervention” under Federal Rule of Civil Procedure

24 to try yet again to obtain the relief they had sought in their prior two motions. See ECF No. 49.

The Court denied that motion as well, mainly because Rule 24, which governs third-party inter-

vention in a lawsuit, provided no basis for the relief they sought. See Minute Order of August 27,

2021. 1 The Court then granted the pending motions to dismiss and dismissed Vice Chancellor

Laster, Belger, and AB Stable VIII from the case. See ECF No. 51; ECF No. 52 at 6–12.

Then the Court ordered Plaintiffs and their attorney Ning Ye, a member of the Bar of this

Court, to show cause why they should not be sanctioned for several apparent violations of Federal

Rule of Civil Procedure 11(b). ECF No. 56. They responded. ECF No. 59. They also filed a

“Rule 60” motion about the Court’s dismissal order as well as a recusal motion under 28 U.S.C.

§ 455. ECF No. 61; ECF No. 62. The Court denied both as meritless. See Minute Order of

September 30, 2022; ECF No. 80. Plaintiffs also docketed two lis pendens notices about the un-

derlying properties. See ECF No. 71; ECF No. 74. AB Stable VIII moves for relief from those

notices. See ECF No. 72; ECF No. 75; see also ECF No. 78; ECF No. 79. 2

1 Plaintiffs later moved to strike parts of AB Stable VIII’s opposition to their “Rule 24” motion. See ECF No. 53. The Court denied that motion because it was groundless under the legal standards applicable to it. See Minute Order of September 10, 2021. 2 After the Court’s show-cause order and AB Stable VIII’s motions ripened, Plaintiffs filed a notice of appeal of the Court’s dismissal order, ECF No. 51; ECF No. 52; as well as of the Court’s orders

3 II. Legal Standards

The Court “has the inherent authority to protect its integrity and prevent abuses of the ju-

dicial process.” Compton v. Alpha Kappa Alpha Sorority Inc., 938 F. Supp. 2d 103, 105–06

(D.D.C. 2013) (cleaned up). The Court’s use of this inherent authority is committed to its discre-

tion. See Shepherd v. Am. Broadcasting Cos., 62 F.3d 1469, 1475 (D.C. Cir. 1995). In addition,

under Rule 11, the Court on its own motion may “order an attorney . . . or party to show cause why

conduct specifically described in the order has not violated Rule 11(b).” Fed. R. Civ. P. 11(c)(3).

If the Court finds a violation, it may impose an “appropriate sanction” on the responsible attorney

or party. Id. The imposition of sanctions under Rule 11 is committed to the Court’s discretion.

1443 Chapin St., LP v. PNC Bank, Nat’l Ass’n, 718 F. Supp. 2d 78, 86 (D.D.C. 2010).

III. Analysis

A. The Court Will Grant AB Stable VIII’s Motions for Relief from Plaintiffs’ Lis Pendens Notices Because, Through Them, Plaintiffs Are Abusing the Judicial Process

After the Court dismissed AB Stable VIII from this case, Plaintiffs docketed two lis pen-

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