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Che v. Chang

United States District Court, D. Maryland

August 7, 2017

LI CHE, Plaintiff,


          Paula Xinis United States District Judge.

         Pending in this legal malpractice action is Defendants' motion to dismiss or, in the alternative, for summary judgment (ECF No. 13). The issues are fully briefed and a hearing was held on Tuesday, July 11, 2017. For the reasons stated below, Defendants' motion is granted in part and denied in part.

         I. BACKGROUND[1]

         In the fall of 2012, Plaintiff Che Li (“Plaintiff”) and her husband Zhang Zhengang (“Zhengang”), both of whom are Chinese citizens, decided to immigrate to the United States through the EB-5 Immigrant Investor Program offered by the United States Citizenship and Immigration Services (“USCIS”). Under this program, foreign entrepreneurs are eligible to apply for naturalization if they invest in a United States based commercial enterprise which creates or preserves ten permanent full-time jobs for qualified United States workers. The investment must meet certain requirements, to include the immigrant investor placing her investment “at risk” for the purpose of generating a return.

         In October 2012, Zhengang traveled from China to Florida to find a suitable investment for a potential EB-5 petition. While there, Zhengang met several individuals from Zhengang's and Plaintiff's native Chinese province of Shandong, including Qin Yuan (“Qing”), her brother Hongtao Yuan (“Hongtao”), and their sister Guizhi Yuan (“Guizhi”) (collectively, “the Yuans”).[2]The Yuans advised Zhengang that EB-5 projects in the Washington, D.C. area were more lucrative than those in Florida because they produce higher rates of return more quickly.

         The Yuans then invited Zhengang sightseeing in Washington, DC. Zhengang accepted and so he, along with Qing and Guizhi, embarked on a journey to the nation's capital. Both before and during their trip to Washington, Qing and Guizhi spoke highly of a wealthy D.C. couple, Xiaolan Zhang (“Xiaolan”) and Peide Yan (“Peide”), who were operating successful businesses that could potentially serve as qualifying EB-5 investments. Qing and Guizhi brought Zhengang to Xiaolan's home in Rockville, Maryland, where Zhengang stayed for several weeks.

         During Zhengang's stay with Xiaolan, Xiaolan informed Zhengang that she owned a lucrative luxury goods store. See Amend. Compl., ECF No. 6 at 6. In reality, according to Plaintiff, Xiaolan was not successful at all, but the mastermind of a fraudulent scheme involving the use of individuals' credit cards to purchase inventory at high-end department stores and then resell the purchases at a discount. Id. at 6-7. Xiaolan allegedly used the profits for her personal gain and also to repay earlier victims who were threatening to file criminal charges.

         Over the course of Zhengang's visit with Xiaolan, Xiaolan convinced Zhengang to invest in another luxury goods store to be opened in Washington, D.C. as a way for Zhengang and Plaintiff to satisfy the EB-5 investment requirement. Accordingly, on November 5, 2012, Zhengang, individually and on behalf of Plaintiff, incorporated KZDJ in Virginia with its stated corporate purpose as operating a luxury goods store. KZDJ Articles of Incorporation, ECF No. 6-1 at 21. Xiaolan and Guizhi agreed to manage the store while Zhengang and Plaintiff agreed to fund the enterprise with a $1 million investment to KZDJ. This capital would satisfy the investment requirement of the EB-5 petition.

         Around November 7, 2012, Zhengang designated Qing as KZDJ's vice president and Peide as its secretary. Zhengang then opened a business checking account with SunTrust Bank (“KZDJ SunTrust 9485”) by corporate resolution signed by all three KZDJ officers. See ECF No. 6-1 at 24-27. Zhengang then returned to China.

         On or about March 10, 2013, Plaintiff asked Zhengang to travel to the United States to discuss the EB-5 petition with Sam Chang (“Chang”), an immigration attorney Guizhi and Xiaolan had recommended to Zhengang during his initial visit to Washington. See Amend. Compl., ECF No. 6 at 9. Zhengang obliged and, once again, left for the United States. On or about March 11, 2013, Xiaolan took Zhengang to Chang's office at Wasserman, Mancini & Chang, PC (“WMC”) to discuss the EB-5 petition requirements.[3] Id. Because Zhengang could not read, write, or speak English, all discussions were in Chinese.

         After speaking with Chang about the EB-5 petition process, and upon Chang's advice, Zhengang, Plaintiff, Xiaolan, and Guizhi entered into an investment agreement titled “DC Duty Free Store” related to the opening of the luxury goods store. ECF No. 6-2 at 1-4. To assuage Zhengang's and Plaintiff's concerns regarding the riskiness of the investment and the amount of money they were being asked to invest, the parties' agreement states that Xiaolan and Guizhi would pledge their homes as collateral until KZDJ could generate a profit equal to Zhengang's and Che's investment. See ECF No. 6-2 at 3. Neither Zhengang nor Plaintiff knew that this provision of the investment agreement would likely violate USCIS's “at risk” investment requirement. ECF No. 6 at 11. But Plaintiff was not worried, as she relied on the attorney, Chang, to review the agreement for compliance with the immigration laws. Id.

         Xiaolan translated the investment agreement from Chinese, see ECF No. 6-2 at 1-2, to English, see Id. at 4, which was then executed by both parties. See ECF No. 6 at 10. According to Plaintiff, the translated document, titled “Business Agreement, ” is materially different than the original contract-differences that neither Zhengang nor Plaintiff noticed because they cannot read English. For example, Xiaolan's English translation states that Xiaolan and Guizhi “will cooperate with the immigration lawyer [Chang], ” while the original agreement makes no mention of an immigration lawyer. Compare ECF No. 6-2 at 3, with Id. at 4.

         On April 26, 2013, Zhengang and Plaintiff wired $1, 020, 000 into KZDJ SunTrust 9485. One million dollars was the Plaintiff's EB-5 investment itself, and the remaining $20, 000 was Chang's retainer fee. On the same day, Peide withdrew from the KZDJ SunTrust 9485 account roughly $1 million and used those funds to open another SunTrust checking account for KZDJ ending in 9337 (“KZDJ SunTrust 9337”). See ECF No. 6 at 12; ECF No. 6-2 at 6-10. Neither Zhengang nor Plaintiff knew about Peide's transfer.

         On May 12, 2013, Plaintiff sent to Defendants the couple's personal information, bank records, resumes, work histories, and declarations in furtherance of her EB-5 petition. See ECF No. 6 at 12-13. Included in Plaintiff's declaration was a statement which reads: “Following the receipt of funds in my Standard Chartered Bank account, I applied to transfer the investment capital of $1 million to the SunTrust Bank account [ending in 9485] on April 24, 2013, and [the SunTrust Bank account ending in 9485] received my investment capital on April 26, 2013.” See ECF No. 6-2 at 13. Two weeks later, Peide wrote a $500, 000 check to himself from SunTrust KZDJ 9337 and then transferred the funds into a separate SunTrust checking account related to the Yuan's Virginia corporation, ZYD, Inc., and on which Peide was also a signatory. ECF No. 6 at 13. Peide and Xiaolan then purportedly took what was left of Plaintiff's investment for themselves. Plaintiff had no knowledge of these transfers.

         On June 14 and 15, 2013, Xiaolan visited Chang at WMC's D.C. office. Neither Zhengang nor Plaintiff was in the United States at that time. According to Chang's handwritten notes, Xiaolan told Chang that Plaintiff's $1 million investment would fund two separate businesses for Peide and Xiaolan: (1) a duty-free gift shop and (2) a pan-Asian restaurant. Both the restaurant's and the gift shop's employees would be considered in combination for the ten full-time employees needed for Plaintiff's EB-5 petition. Neither Plaintiff nor Zhengang authorized or even knew about Xiaolan's representations to Chang. See ECF No. 6 at 13-14.

         Shortly before the June 14 and 15 meetings between Xiaolan and Chang, Taher Albeitawi, a Florida businessman, registered an entity called “American Luxury Boutique” (“ALB”). ECF No. 6 at 16; ECF No. 6-3 at 12-14. Taher incorporated ALB based upon a business proposal drafted by Chawky Jabaly, who had emailed the same business proposal to Xiaolan on April 3, 2013. ECF No. 6 at 16; ECF No. 6-3 at 15. On August 1, 2013, Peide wired from the KZDJ SunTrust 9485 account $3, 000 to the Jabaly Law Trust Account. ECF No. 6-3 at 16. Taher, Xialoan, and the property management company of 800 17th Street NW, Washington, D.C. then allegedly executed a commercial lease in furtherance of the new ALB enterprise. It is unclear whether Plaintiff was aware of these transactions. See ECF No. 6 at 16.

         On June 17, 2013, Chang emailed Xiaolan a retainer agreement for Plaintiff and requested an initial payment of $3, 000 to WMC. See ECF No. 6 at 14-15; ECF No. 6-3 at 8-9. The email also included questions for Plaintiff and requested further documentation regarding Plaintiff's and Zhengang's business tax returns. On June 27, 2013, Plaintiff responded to Chang's June 17 email to Xiaolan through a translation service, Bright Life China (“BLC”). Plaintiff designated Lydia from BLC as Plaintiff's agent and translator, and copied on the email was Lydia from BLC, Xiaolan, Zhengang, and another employee of BLC, Jerry. See ECF No. 6-3 at 10-11. Lydia sent two more emails on July 1 and 8, 2013 to Chang asking him whether he received the June 27 email and asking him to call her. ECF No. 6 at 17.

         On July 9, 2013, Chang sent an email to Xiaolan and Cindy at BLC, stating:

We have enclosed for your further handling the retainer agreement for the EB5 case. Please review, sign and return to our office with the retainer fee. Once we receive the documentation, we will finalize the review of your documentation.

ECF No. 6-3 at 19-20. On July 12, 2013, Xiaolan sent WMC the retainer agreement and a check for $3, 000 drawn from KZDJ SunTrust 9485, but the retainer agreement was signed by Peide, not Plaintiff. See ECF No. 6-4 at 3-6. Chang accepted the retainer agreement without calling or emailing Plaintiff. WMC allegedly deposited the $3, 000 check sent by Peide on July 14, 2013.

         On July 15, Xiolan sent an email to Chang which contained attachments of KZDJ's incorporation papers. Oddly, the email copies a person named Debbie Chang. Defendant Chang never inquired as to Debbie Chang's relationship, if any, to Plaintiff. ECF No. 6 at 18.[4]

         The next day, Defendant Chang sent another email directly to Xiaolan without copying Plaintiff or Cindy at BLC, with the following instruction:

We are resending the retainer agreement for Che Li's case. The retainer agreement must be signed by Ms. Li. Please have her review, sign and return to our office at her earliest convenience. When returning the retainer agreement, Ms. Li should provide us with direct contact information including an email address.

ECF No. 6 at 18-19; ECF No. 6-4 at 8. Chang then sent another email on July 18, 2013 only to Xiaolan requesting Plaintiff produce documentation regarding her investment and business venture. ECF No. 6-4 at 11.

         On July 24, 2013, Plaintiff, through Lydia at BLC, sent Chang a signed retainer agreement. See ECF No. 6-4 at 12-15. The retainer agreement provides that WMC would provide the following services:

         Step One (Form I-526/Form I-485 or IV Consulate Processing)

a) $3, 000 to provide fee based consulting on questions and issues as the first step.
b) $12, 000 when you retain[] us to start an EB5 case; we will assist you in the feasibility period including advising you about the availability of the business entities to invest in. When you decide to go forward with the investment and the EB5 application, we will review the investment agreement and advise you about the issues and documents involved. Finally, we will prepare and file the I-526 application package to USCIS.

Id. at 12.

         On July 31, 2013, Chang sent two emails to Xiaolan, again requesting Xiaolan provide Chang with Plaintiff's email address even though Chang had already received several communications from Lydia at BLC acknowledging that Lydia is Plaintiff's representative. See ECF No. 6-4 at 18; ECF No. 6 at 21, as Lydia was the person who sent Plaintiff's signed retainer agreement to Chang earlier that week.

         On August 5, 2013, Xiaolan emailed WMC photographs depicting an April 2013 SunTrust Bank statement allegedly showing that Plaintiff had deposited $1, 020, 000 into KZDJ SuntTrust 9485 on April 26, 2013. ECF No. 6 at 24. The bank statement also shows that at least $1, 000, 000 of her investment had been transferred to KZDJ SunTrust 9337. Also included in the email are photographs of an allegedly falsified signature card dated March 11, 2013, which purports to add Xiaolan and Guizhi to KZDJ SunTrust 9485. Neither Plaintiff nor Zhengang were copied on this email and Chang did not attempt to verify these documents with Plaintiff, Zhengang, or BLC.

         Throughout August, 2013, Peide and Xiaolan allegedly used Plaintiff's investment for their own personal expenses, and Chang and Xiaolan continued to communicate with one another without involving Plaintiff or Zhengang. See ECF No. 6 at 25-27. Plaintiff's complaint also alleges that Xiaolan discussed with Chang two properties that Xialoan intended to rent using Plaintiff's investment. One was a restaurant called the “Zhan Restaurant, ” a business unrelated to Plaintiff's investment. See ECF No. 6 at 29. Although this lease was unrelated to the EB-5 petition, Chang attached a copy of the restaurant lease to Plaintiff's EB-5 petition. Chang did not provide the restaurant lease to Plaintiff, Zhengang, or BLC until March 2015. See ECF No. 6 at 32.

         Chang apparently received another lease from Xiaolan, executed on behalf of KZDJ, for the luxury store ALB. Plaintiff alleges that “[a]t no point before or after receiving the Restaurant Lease and ALB Lease did Chang contact either [her] or ZZhang [sic] or otherwise inform them of: (a) the fictitious owners listed on the leases; (b) the missing $1, 000, 000 investment; and (c) the [sic] Peide wrote in the amount of $170, 193.33 . . . from KZDJ SunTrust 9485 to secure the leases.” ECF No. 6 at 32.

         On October 7, 2013, Zhengang met with Chang. Chang told Zhengang that everything was going well with the EB-5 petition and that Chang would contact him if Chang had any concerns. Chang further represented that Plaintiff could expect her conditional EB-5 visa within 45 days after the filing of the EB-5 petition. ECF No. 6 at 33. At this point, both Plaintiff and Zhengang still trusted Xiaolan and Peide. Accordingly, based on Chang's assurance that Plaintiff's application would be reviewed soon, Plaintiff, Zhengang, and Peide entered into another business venture for a multiuse ...

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