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44 55 66 77 United States District Court 88 Central District of California 99 1100 1111 DONG SU, et al., Case No. 2:20-cv-02235-ODW (PLAx)
1122 Plaintiffs, ORDER GRANTING DEFENDANT’S MOTION TO 1133 v. DISMISS [9]
1144 HENRY GLOBAL CONSULTING GROUP, et al., 1155 Defendants. 1166
1177 1188 I. INTRODUCTION 1199 On March 6, 2020, Plaintiffs1 initiated this putative class action against 2200 Defendants Henry Global Consulting Group (“Global”); Goldstone Advisors, Ltd.; 2211 and Henry Tongzhao USA Consulting, Inc., erroneously sued as Tongzhao USA 2222 Consulting, Inc. (“Tongzhao”). (Compl., ECF No. 1.) Plaintiffs allege they hired 2233 Global to act as their immigration agent, and Global failed to disclose a “finder’s fee” 2244 that it earned for referring Plaintiffs to investment projects in the United States. (Id. 2255 ¶¶ 15–20.) Plaintiffs assert one cause of action for breach of fiduciary duty against 2266 Defendants based on Global’s alleged failure to disclose the “finder’s fee.” (See 2277
2288 1 The named Plaintiffs are Dong Su, Jranyi Zeng, Lunchun Wu, Wenxia Yang, Yu Liao, and Xinran Chen. 1 generally Compl.) Tongzhao moves to dismiss for failure to state a claim, and the 2 matter is fully briefed. (Tongzhao Mot. to Dismiss (“Motion” or “Mot.”), ECF No. 9; 3 Opp’n, ECF No. 11; Reply, ECF No. 14.) For the reasons discussed below, the Court 4 GRANTS Tongzhao’s Motion.2 5 II. BACKGROUND 6 The U.S. EB-5 visa program provides a method for immigrant investors to 7 become lawful permanent residents by investing capital in a U.S. business that will 8 employ at least ten workers.3 (See generally Compl.) Plaintiffs allege Global is an 9 international immigrant investment company that identifies and refers foreign 10 investors, like Plaintiffs, to third-parties for potential EB-5 investments. (See id. 11 ¶¶ 16–19.) Global secured agreements with the third-parties (“Migration Agent 12 Agreements” or “MAAs”) to market and sell EB-5 investment opportunities to 13 Plaintiffs. (Id. ¶ 17.) Under the terms of the MAAs, Global received a “finder’s fee” 14 for “securing EB-5 investments and keeping those EB-5 investors in the [project] until 15 the end.” (Id. ¶ 18.) Plaintiffs allege Global never disclosed it received a “finder’s 16 fee” under the MAAs, and that their investments failed as a result of the fees, which 17 often exceeded $50 million. (Id. ¶¶ 18, 28, 42.) 18 According to Plaintiffs, they also hired Global to act as their immigration agent, 19 which included “preparing and/or assisting with the preparation of all immigration 20 documents.” (Id. ¶ 22.) Plaintiffs contend Global’s role as their immigration agent 21 required Defendants to uphold certain fiduciary duties, which Defendants breached by 22 Global’s failure to disclose the finder’s fee. (Id. ¶¶ 22, 38–42.) Based on the 23 foregoing, Plaintiffs assert one claim for breach of fiduciary duty against Defendants. 24 (See id. ¶¶ 38–42.) Tongzhao moves to dismiss, claiming that Plaintiffs’ sparse 25
26 2 Having carefully considered the papers filed in connection with the Motion, the Court deemed the matter appropriate for decision without oral argument. Fed. R. Civ. P. 78; C.D. Cal. L.R. 7-15. 27 3 See UNITED STATES CITIZENSHIP AND IMMIGRATION SERVICES, EB-5 Immigrant Investor Program, 28 https://www.uscis.gov/working-in-the-united-states/permanent-workers/eb-5-immigrant-investor- program (last visited April 2, 2021). 1 allegations concerning its involvement in Global’s actions are insufficient to state a 2 claim against Tongzhao. (See generally Mot.) 3 III. LEGAL STANDARD 4 A court may dismiss a complaint under Rule 12(b)(6) for lack of a cognizable 5 legal theory or insufficient facts pleaded to support an otherwise cognizable legal 6 theory. Balistreri v. Pacifica Police Dep’t, 901 F.2d 696, 699 (9th Cir. 1988). To 7 survive a dismissal motion, a complaint need only satisfy the minimal notice pleading 8 requirements of Rule 8(a)(2)—“a short and plain statement of the claim.” Porter v. 9 Jones, 319 F.3d 483, 494 (9th Cir. 2003). The factual “allegations must be enough to 10 raise a right to relief above the speculative level.” Bell Atl. Corp. v. Twombly, 11 550 U.S. 544, 555 (2007). That is, the complaint must “contain sufficient factual 12 matter, accepted as true, to state a claim to relief that is plausible on its face.” 13 Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (internal quotation marks omitted). The 14 determination of whether a complaint satisfies the plausibility standard is a 15 “context-specific task that requires the reviewing court to draw on its judicial 16 experience and common sense.” Id. at 679. On a Rule 12(b)(6) motion, a court is 17 generally limited to the pleadings and must construe all “factual allegations set forth 18 in the complaint . . . as true and . . . in the light most favorable” to the plaintiff. Lee v. 19 City of Los Angeles, 250 F.3d 668, 679 (9th Cir. 2001). However, a court need not 20 blindly accept conclusory allegations, unwarranted deductions of fact, and 21 unreasonable inferences. Sprewell v. Golden State Warriors, 266 F.3d 979, 988 22 (9th Cir. 2001). 23 IV. DISCUSSION 24 While Plaintiffs’ Complaint contains many detailed factual allegations 25 regarding Global’s actions, the same cannot be said for those concerning Tongzhao. 26 Plaintiffs’ core allegations concerning Tongzhao appear only in the two paragraphs 27 pertaining to venue and the identity of the parties. (See Compl. ¶¶ 5, 14.) In those 28 paragraphs, Plaintiffs allege that Defendants used Tongzhao’s office “to communicate 1 with Plaintiffs regarding their investments in various [projects] which contained false 2 and misleading statements,” to store and prepare documents related to the investments 3 and immigration petitions, and as a meeting place. (Compl. ¶ 5.) Plaintiffs further 4 allege that “Tongzhao was actually owned and controlled by [Global]. Tongzhao 5 earned no money and has no assets.” (Id. ¶ 14.) “Instead, Tongzhao is a separate 6 corporate entity in name only as all other corporate formalities have not been 7 conducted . . . .” (Id.) 8 Tongzhao argues that Plaintiffs’ allegations fail to state a claim against the 9 company for breach of fiduciary duty. (See generally Mot.) In opposition, Plaintiffs 10 contend that the facts alleged in the Complaint demonstrate that Tongzhao is directly 11 liable: (1) for breach of fiduciary duty, or (2) as a co-conspirator for its role in the 12 purported scheme; or (3) indirectly liable for Global’s actions as a joint venturer. 13 (Opp’n 4–5.) Despite Plaintiffs’ arguments to the contrary, Tongzhao is correct— 14 Plaintiffs’ scant factual allegations concerning Tongzhao fail to establish that it is 15 liable for breach of fiduciary duty under either theory. 16 A. Direct Liability for Breach of Fiduciary Duty 17 First, Plaintiffs contend their allegations demonstrate Tongzhao is directly 18 liable for breach of fiduciary duty. (Opp’n 5 (citing Compl. ¶¶ 38–39).) To establish 19 a claim for breach of fiduciary duty, Plaintiffs must show: (1) the existence of a 20 fiduciary relationship; (2) a breach of that relationship; and (3) damages. Oasis W. 21 Realty, LLC v. Goldman, 51 Cal. 4th 811, 820–21 (2011).
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44 55 66 77 United States District Court 88 Central District of California 99 1100 1111 DONG SU, et al., Case No. 2:20-cv-02235-ODW (PLAx)
1122 Plaintiffs, ORDER GRANTING DEFENDANT’S MOTION TO 1133 v. DISMISS [9]
1144 HENRY GLOBAL CONSULTING GROUP, et al., 1155 Defendants. 1166
1177 1188 I. INTRODUCTION 1199 On March 6, 2020, Plaintiffs1 initiated this putative class action against 2200 Defendants Henry Global Consulting Group (“Global”); Goldstone Advisors, Ltd.; 2211 and Henry Tongzhao USA Consulting, Inc., erroneously sued as Tongzhao USA 2222 Consulting, Inc. (“Tongzhao”). (Compl., ECF No. 1.) Plaintiffs allege they hired 2233 Global to act as their immigration agent, and Global failed to disclose a “finder’s fee” 2244 that it earned for referring Plaintiffs to investment projects in the United States. (Id. 2255 ¶¶ 15–20.) Plaintiffs assert one cause of action for breach of fiduciary duty against 2266 Defendants based on Global’s alleged failure to disclose the “finder’s fee.” (See 2277
2288 1 The named Plaintiffs are Dong Su, Jranyi Zeng, Lunchun Wu, Wenxia Yang, Yu Liao, and Xinran Chen. 1 generally Compl.) Tongzhao moves to dismiss for failure to state a claim, and the 2 matter is fully briefed. (Tongzhao Mot. to Dismiss (“Motion” or “Mot.”), ECF No. 9; 3 Opp’n, ECF No. 11; Reply, ECF No. 14.) For the reasons discussed below, the Court 4 GRANTS Tongzhao’s Motion.2 5 II. BACKGROUND 6 The U.S. EB-5 visa program provides a method for immigrant investors to 7 become lawful permanent residents by investing capital in a U.S. business that will 8 employ at least ten workers.3 (See generally Compl.) Plaintiffs allege Global is an 9 international immigrant investment company that identifies and refers foreign 10 investors, like Plaintiffs, to third-parties for potential EB-5 investments. (See id. 11 ¶¶ 16–19.) Global secured agreements with the third-parties (“Migration Agent 12 Agreements” or “MAAs”) to market and sell EB-5 investment opportunities to 13 Plaintiffs. (Id. ¶ 17.) Under the terms of the MAAs, Global received a “finder’s fee” 14 for “securing EB-5 investments and keeping those EB-5 investors in the [project] until 15 the end.” (Id. ¶ 18.) Plaintiffs allege Global never disclosed it received a “finder’s 16 fee” under the MAAs, and that their investments failed as a result of the fees, which 17 often exceeded $50 million. (Id. ¶¶ 18, 28, 42.) 18 According to Plaintiffs, they also hired Global to act as their immigration agent, 19 which included “preparing and/or assisting with the preparation of all immigration 20 documents.” (Id. ¶ 22.) Plaintiffs contend Global’s role as their immigration agent 21 required Defendants to uphold certain fiduciary duties, which Defendants breached by 22 Global’s failure to disclose the finder’s fee. (Id. ¶¶ 22, 38–42.) Based on the 23 foregoing, Plaintiffs assert one claim for breach of fiduciary duty against Defendants. 24 (See id. ¶¶ 38–42.) Tongzhao moves to dismiss, claiming that Plaintiffs’ sparse 25
26 2 Having carefully considered the papers filed in connection with the Motion, the Court deemed the matter appropriate for decision without oral argument. Fed. R. Civ. P. 78; C.D. Cal. L.R. 7-15. 27 3 See UNITED STATES CITIZENSHIP AND IMMIGRATION SERVICES, EB-5 Immigrant Investor Program, 28 https://www.uscis.gov/working-in-the-united-states/permanent-workers/eb-5-immigrant-investor- program (last visited April 2, 2021). 1 allegations concerning its involvement in Global’s actions are insufficient to state a 2 claim against Tongzhao. (See generally Mot.) 3 III. LEGAL STANDARD 4 A court may dismiss a complaint under Rule 12(b)(6) for lack of a cognizable 5 legal theory or insufficient facts pleaded to support an otherwise cognizable legal 6 theory. Balistreri v. Pacifica Police Dep’t, 901 F.2d 696, 699 (9th Cir. 1988). To 7 survive a dismissal motion, a complaint need only satisfy the minimal notice pleading 8 requirements of Rule 8(a)(2)—“a short and plain statement of the claim.” Porter v. 9 Jones, 319 F.3d 483, 494 (9th Cir. 2003). The factual “allegations must be enough to 10 raise a right to relief above the speculative level.” Bell Atl. Corp. v. Twombly, 11 550 U.S. 544, 555 (2007). That is, the complaint must “contain sufficient factual 12 matter, accepted as true, to state a claim to relief that is plausible on its face.” 13 Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (internal quotation marks omitted). The 14 determination of whether a complaint satisfies the plausibility standard is a 15 “context-specific task that requires the reviewing court to draw on its judicial 16 experience and common sense.” Id. at 679. On a Rule 12(b)(6) motion, a court is 17 generally limited to the pleadings and must construe all “factual allegations set forth 18 in the complaint . . . as true and . . . in the light most favorable” to the plaintiff. Lee v. 19 City of Los Angeles, 250 F.3d 668, 679 (9th Cir. 2001). However, a court need not 20 blindly accept conclusory allegations, unwarranted deductions of fact, and 21 unreasonable inferences. Sprewell v. Golden State Warriors, 266 F.3d 979, 988 22 (9th Cir. 2001). 23 IV. DISCUSSION 24 While Plaintiffs’ Complaint contains many detailed factual allegations 25 regarding Global’s actions, the same cannot be said for those concerning Tongzhao. 26 Plaintiffs’ core allegations concerning Tongzhao appear only in the two paragraphs 27 pertaining to venue and the identity of the parties. (See Compl. ¶¶ 5, 14.) In those 28 paragraphs, Plaintiffs allege that Defendants used Tongzhao’s office “to communicate 1 with Plaintiffs regarding their investments in various [projects] which contained false 2 and misleading statements,” to store and prepare documents related to the investments 3 and immigration petitions, and as a meeting place. (Compl. ¶ 5.) Plaintiffs further 4 allege that “Tongzhao was actually owned and controlled by [Global]. Tongzhao 5 earned no money and has no assets.” (Id. ¶ 14.) “Instead, Tongzhao is a separate 6 corporate entity in name only as all other corporate formalities have not been 7 conducted . . . .” (Id.) 8 Tongzhao argues that Plaintiffs’ allegations fail to state a claim against the 9 company for breach of fiduciary duty. (See generally Mot.) In opposition, Plaintiffs 10 contend that the facts alleged in the Complaint demonstrate that Tongzhao is directly 11 liable: (1) for breach of fiduciary duty, or (2) as a co-conspirator for its role in the 12 purported scheme; or (3) indirectly liable for Global’s actions as a joint venturer. 13 (Opp’n 4–5.) Despite Plaintiffs’ arguments to the contrary, Tongzhao is correct— 14 Plaintiffs’ scant factual allegations concerning Tongzhao fail to establish that it is 15 liable for breach of fiduciary duty under either theory. 16 A. Direct Liability for Breach of Fiduciary Duty 17 First, Plaintiffs contend their allegations demonstrate Tongzhao is directly 18 liable for breach of fiduciary duty. (Opp’n 5 (citing Compl. ¶¶ 38–39).) To establish 19 a claim for breach of fiduciary duty, Plaintiffs must show: (1) the existence of a 20 fiduciary relationship; (2) a breach of that relationship; and (3) damages. Oasis W. 21 Realty, LLC v. Goldman, 51 Cal. 4th 811, 820–21 (2011). Here, Plaintiffs argue that 22 “preparing immigration petitions and being hired as an immigration consultant creates 23 a fiduciary relationship.” (Opp’n 5 (citing SEC v. Hui Feng, 935 F.3d 721 (9th Cir. 24 2019)).) Even if that is true, Plaintiffs do not allege that Tongzhao prepared 25 immigration petitions or that Plaintiffs hired Tongzhao as an immigration consultant. 26 (See generally Compl.) Thus, they have not demonstrated the existence of a fiduciary 27 relationship between Tongzhao and Plaintiffs. 28 1 Plaintiffs also point to paragraphs thirty-eight and thirty-nine of the Complaint 2 to support their position that Tongzhao owed them a fiduciary duty. (Opp’n 3.) But 3 those paragraphs merely “repeat and re-allege” the preceding deficient allegations and 4 state in conclusory terms that “[Global], Goldstone, and [Tongzhao] owed a fiduciary 5 duty to Plaintiffs.” (Compl. ¶¶ 38–39.) This conclusory statement is entirely devoid 6 of detail and fails to demonstrate the existence of a fiduciary relationship. Therefore, 7 to the extent Plaintiffs seek to hold Tongzhao directly liable for breach of fiduciary 8 duty, their claim fails. 9 B. Conspiracy Liability 10 Second, Plaintiffs contend their allegations demonstrate Tongzhao is liable for 11 breach of fiduciary duty “for playing a role in the conspiracy.” (Opp’n 5.) To 12 establish the existence of a conspiracy, Plaintiffs must show: “(1) the formation and 13 operation of the conspiracy, (2) wrongful conduct in furtherance of the conspiracy, 14 and (3) damages arising from the wrongful conduct.” Sanchez v. Am. Media, Inc., 15 No. CV 20-2924 DMG (PVCx), 2020 WL 8816343, at *10 (C.D. Cal. Dec. 29, 2020). 16 Here, Plaintiffs’ Complaint makes no mention of a “conspiracy,” and there are no 17 facts alleged that support the existence of one. Plaintiffs cannot simply beef up their 18 deficient factual allegations by asserting new legal theories in their Opposition. See 19 Bastidas v. Good Samaritan Hosp. LP, No. 13-cv-04388-SI, 2014 WL 6900051, 20 at *4 n.3 (N.D. Cal. Dec. 8, 2014) (“It is axiomatic that the complaint may not be 21 amended by briefs in opposition to a motion to dismiss.” (internal quotation marks 22 omitted) (collecting cases)). Therefore, to the extent Plaintiffs seek to hold Tongzhao 23 liable for breach of fiduciary duty under a conspiracy theory, their claim fails. 24 C. Joint Venture Liability 25 Third and finally, Plaintiffs contend their allegations demonstrate Tongzhao is 26 liable for breach of fiduciary duty “because [Defendants] have engaged in a joint 27 venture.” (Opp’n 4.) To establish the existence of a joint venture, Plaintiffs must 28 show: (1) joint control over the venture, (2) a share in the profits of the undertaking, 1 || and (3) ownership interests in the venture. Simmons v. Ware, 213 Cal. App. 4th 1035, 1049 (2013). Here, Plaintiffs’ vague allegations that Global controlled Tongzhao and 3 || that Defendants utilized Tongzhao’s office to communicate with Plaintiffs, to store 4|| documents, and as a meeting place, (see Compl. {| 5, 14), do not satisfy the elements 5 || required to prove a joint venture. Therefore, to the extent Plaintiffs seek to hold 6 || Tongzhao liable for breach of fiduciary duty under a joint venture theory, their claim 7 | fails. D. Summary 9 Plaintiffs’ allegations with respect to Tongzhao are utterly deficient, and their 10 || attempt to fill in the gaps in their Complaint by asserting new legal theories in 11 || opposition to Tongzhao’s Motion fails. Moreover, based on Plaintiffs’ allegations that 12 || Global “controlled” Tongzhao and that “Tongzhao earned no money and has no 13 || assets,” (Compl. § 14 (emphasis added)), it is not entirely clear why Tongzhao is a party to this litigation. Regardless, because amendment does not appear entirely 15 || futile, Plaintiffs will have another opportunity to state a claim against Tongzhao, if 16 || they so choose. (See Opp’n 5 (requesting leave to amend).) 17 Vv. CONCLUSION 18 For the foregoing reasons, the Court GRANTS Tongzhao’s Motion and 19 | Plaintiffs’ claim for breach of fiduciary duty as to Tongzhao is DISMISSED with 20 | leave to amend. (ECF No. 9.) If Plaintiffs choose to file a First Amended Complaint 21 |} (“FAC”), they must do so no later than twenty-one (21) days from the date of this 22 || Order. If Plaintiffs file a FAC, Defendants must file their responses no later than 23 || fourteen (14) days from the date of the FAC filing. 24 25 IT IS SO ORDERED. oe 26 April 2, 2021 a 27 Sedat
28 OTIS D. HT, UNITED STATES DISTRICT JUDGE