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Bi v. McAuliffe

United States Court of Appeals, Fourth Circuit

June 12, 2019

XIA BI; NIAN CHEN; YUANYUAN CHEN; QINGLI CHENG; YING CHENG; DONGSHENG HU; JUN HUANG; KUI LE; CHUNGSHENG LI; ZHONGHUI LI; LIN LIN; LAN LIU; LING LIU; ZHENG QIN; MEIMING SHEN; YUNPING TAN; BIXIANG TANG; XIAONAN TANG; CHUN WANG; RUI WANG; YAHONG WANG; YUE WANG; JIAN WU; LEI YAN; JUNPING YAO; JIN YOU; ZHEN YU; HOUQIAN YU; NIANQING ZHANG; XUEMEI ZANG; HUIBIN ZHAO; YAN ZHAO, Plaintiffs - Appellants,
v.
TERRY MCAULIFFE; ANTHONY RODHAM, Defendants - Appellees and XIAOLIN CHARLES WANG; AMERICAN IMMIGRATION CENTERS, LLC, a Virginia limited liability company; CAPITAL WEALTH HOLDINGS LIMITED, a British Virgin Islands company; GREENTECH AUTOMOTIVE CAPITAL A-3 GP, LLC, a Delaware limited liability company; GREENTECH AUTOMOTIVE, INC., a Mississippi corporation; GULF COAST FUNDS MANAGEMENT, LLC, a Louisiana limited liability company; WM INDUSTRIES CORP, a Virginia corporation; DOES 1-100, Defendants.

          Argued: May 7, 2019

          Appeal from the United States District Court for the Eastern District of Virginia, at Alexandria. Claude M. Hilton, Senior District Judge. (1:17-cv-01459-CMH-IDD)

         ARGUED:

          Gerard Patrick Fox, Marina Vladimir Bogorad, GERARD FOX LAW P.C., Los Angeles, California, for Appellants.

          Marc Erik Elias, PERKINS COIE LLP, Washington, D.C., for Appellees.

         ON BRIEF:

          Scott M. Abeles, GERARD FOX LAW P.C., Washington, D.C., for Appellants.

          Bruce V. Spiva, Amanda R. Callais, PERKINS COIE LLP, Washington, D.C., for Appellees.

          Before WILKINSON and NIEMEYER, Circuit Judges, and DUNCAN, Senior Circuit Judge.

          WILKINSON, CIRCUIT JUDGE:

         Twenty-seven Chinese investors appeal from the dismissal of their claims against Terry McAuliffe and Anthony Rodham stemming from failed investments in an electric vehicle startup. For the reasons that follow, we affirm.

         I.

         A.

         We accept as true the following facts, which come from plaintiffs' amended complaint. Plaintiffs-Appellants are a group of twenty-seven Chinese citizens who invested $500, 000 each in a partnership that loaned their money to GreenTech Automotive. GreenTech, founded in 2008, was a Mississippi corporation that wanted to enter the hybrid and electric vehicle markets. Initially, GreenTech planned to produce the "MyCar," a vehicle that would travel at low speeds and thus be subject to lower levels of regulatory scrutiny.

         This ambitious plan required a great deal of capital. GreenTech sought to raise some funds from foreign investors who might qualify under the Employment-Based Immigration Fifth Preference, or EB-5, Program. See 8 U.S.C. § 1153(b)(5). This program offered a path to permanent residency for foreign investors whose investments in American projects created or preserved at least ten jobs for American workers. While the program ordinarily required a $1 million investment, investments of $500, 000 in certain rural areas or areas with high unemployment may also qualify under the EB-5 program.

         GreenTech thus planned to build a new manufacturing facility in Tunica, Mississippi to take advantage of the lower investment threshold. The company collected funds from potential EB-5 immigrants through several different investment platforms. Some Chinese investors, for example, purchased preferred shares directly from GreenTech. The plaintiffs in this lawsuit, however, invested their money in GreenTech Automotive Partnership A-3, LP (the "A-3 partnership"), which was created to collect capital and then loan it to GreenTech. Plaintiffs' investments were governed by a series of documents, including "the private placement memorandum, the subscription agreement, the limited partnership agreement, a construction loan agreement, [and] a power of attorney agreement." J.A. 155. These documents were distributed to plaintiffs in English only, not Chinese.

         Plaintiffs allege that they signed the subscription documents "without reviewing any version" and do not claim to have translated the documents into their native language. Id. at 181, 186. Pursuant to those written agreements, each of the twenty-seven plaintiffs paid $500, 000 for a partnership share in A-3 sometime between July 2012 and December 2013. They each also remitted an "Administrative Fee" of $60, 000 or $61, 000 to Gulf Coast Funds Management, LLC, a GreenTech affiliate that managed the A-3 partnership.

         In total, the A-3 partnership collected $500, 000 from each of eighty-six investors, and then loaned the total of about $43 million to GreenTech. The loan terms were "not the result of arm's length negotiations." Id. at 169. The Private Placement Memorandum reveals that the loan, which was non-recourse, "specifically exclude[d] customary provisions designed to protect the interests of lenders." Id. at 278. GreenTech would make interest-only payments to the A-3 partnership at a 4% interest rate; of that amount, 1.5% would be used to pay Gulf Coast yearly management fees. Id. at 257.

         Defendants-appellees are Terry McAuliffe and Anthony Rodham.[1] McAuliffe was the co-founder and former Chairman of GreenTech. Rodham was the CEO of both the A-3 partnership and another entity that was formed to serve as A-3's general partner, GreenTech Automotive Capital A-3 GP, LLC. Rodham also served as President and CEO of Gulf Coast, the management company that received plaintiffs' administrative fees.

         Plaintiffs claim that Rodham and McAuliffe made a series of false statements relating to the A-3 partnership's fundraising efforts. The complaint alleges that Rodham made the following misstatements:

(1) On April 25, 2011, Rodham claimed that EB-5 funds accounted for only 7.8% of GreenTech's capital during an event in Beijing, China.
(2) At this same event, Rodham expressed that Gulf Coast "chose" GreenTech as a suitable ...

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