Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

Wang v. Shen

United States District Court, D. Vermont

August 8, 2019

WEI WANG, GUANGYI XIONG, XIOFENG FENG Plaintiffs,
v.
JIANMING SHEN, SHENLAW, LLC, Defendants.

         ENTRY ORDER DENYING PLAINTIFFS' MOTION TO COMPEL PREVIOUSLY SUBPOENAED DEPOSITIONS OF THIRD-PARTY WITNESSES, GRANTING IN PART AND DENYING IN PART PLAINTIFFS' MOTION TO COMPEL THE CONTINUATION OF THE DEPOSITION OF BRENT RAYMOND, DENYING PLAINTIFFS' MOTION TO PROHIBIT THE STATE OF VERMONT FROM INTERFERING WITH A SUBPOENA DUCES TECUM ISSUED TO ANOTHER THIRD PARTY, AND GRANTING IN PART AND DENYING IN PART THE STATE OF VERMONT'S MOTION FOR A PROTECTIVE ORDER (DOCS. 92 & 98)

          Christina Reiss, District Judge.

         Plaintiffs Wei Wang, Guangyi Xiong, and Xiofeng Feng (collectively, "Plaintiffs") bring this action against Defendants Jianming Shen and ShenLaw, LLC (collectively, the "Shen Defendants") alleging legal malpractice; breach of contract; breach of the implied covenant of good faith and fair dealing; violations of Sections 10(b) and 10b-5 of the Securities Exchange Act; unfair and deceptive practices in violation of the Vermont Consumer Fraud Act, 9 V.S.A. §§ 2451-2482J; and breach of fiduciary duty.

         Pending before the court is Plaintiffs' March 22, 2019 motion to compel previously subpoenaed depositions of third-party witnesses, to compel the continuation of the deposition of former Vermont EB-5 Regional Center ("VRC") Executive Director Brent Raymond, and to prohibit the State of Vermont from interfering with a subpoena duces tecum issued to another third party. (Doc. 92.) On behalf of former Governor Peter Shumlin, former Agency of Commerce and Community Development ("ACCD") Secretary Lawrence Miller, former ACCD Secretary Patricia Moulton, former ACCD Capital Investment Coordinator James Candido, ACCD General Counsel John Kessler, and former Director Raymond, the State of Vermont opposed the motion to compel depositions, to continue former Director Raymond's deposition, and to prohibit interference with a third-party subpoena on April 5, 2019. The State of Vermont also moved for a protective order with regard to former Director Raymond's continued deposition. (Doc. 98.) Plaintiffs replied and opposed the protective order on April 29, 2019, at which time the court took the pending motions under advisement.

         Plaintiffs are represented by Russell D. Barr, Esq., and Chandler W. Matson, Esq. Defendants are represented by Andrew H. Montroll, Esq. The State of Vermont is represented by Assistant Attorneys General Jon T. Alexander, William E. Griffin, and Kate T. Gallagher.

         I. Factual and Procedural Background.

         A. The Allegations of the Third Amended Complaint.

         Plaintiffs are individuals who sought to invest and reside in the United States pursuant to the United States Citizenship and Immigration Services ("USCIS") employment-based fifth preference ("EB-5") visa program. This program authorizes foreign investors who have invested capital in a commercial enterprise in the United States to file an 1-526 Petition requesting conditional permanent residency status for a two-year period. An 1-526 Petition requires a petitioner to acquire and supply evidence that the chosen EB-5 investment project will create ten full-time positions for qualifying employees. If the foreign investor satisfies certain criteria, he or she may apply to have the conditions removed from his or her visa in order to permanently live and work in the United States.

         Jianming Shen is an attorney who is the managing partner and president of ShenLaw LLC which has its principal place of business in New York. ShenLaw LLC handles transactions for immigrant investors through the EB-5 program. Attorney Shen allegedly "holds himself out to be an experienced EB-5 attorney with a nationwide presence." (Doc. 67-1 at 8, ¶ 24.)

         Plaintiffs contend that Attorney Shen directed them to invest in the Jay Peak Projects and, on multiple occasions, authored, procured, and disseminated advertisements to foreign investors in which he endorsed the Jay Peak Projects as being one of the best EB-5 enterprises in the United States with a 100% 1-526 Petition approval rate. More specifically, Attorney Shen allegedly directed approximately seventy clients, including Plaintiffs, to invest in Phase VII of the Jay Peak Projects which included the Jay Peak Biomedical Research Park L.P.

         Plaintiff Feng retained Attorney Shen in December 2013, although Attorney Shen maintains that Plaintiff Feng did not pay his retainer or bills for legal fees. Plaintiff Wang retained Attorney Shen in May 2014 and paid approximately $18, 000 in legal fees and filing costs to the Shen Defendants. Plaintiff Xiong retained Attorney Shen in March 2016 and paid approximately $14, 500 in legal fees and filing costs to the Shen Defendants.

         After retaining Attorney Shen, Plaintiffs received the investment offering documents for Phase VII. The offerings required each Plaintiff to make a capital contribution of $500, 000 and pay a separate administrative or management fee of $50, 000 which was used to pay fees and expenses incurred by the promoters, including the payment of alleged commissions and finder's fees. Each Plaintiff complied with these requirements and transferred $550, 000 to the Phase VII promoters.

         Attorney Shen allegedly "explicitly assured" Plaintiffs that he would assist with the necessary due diligence and ensure the "immigration suitability" of the Jay Peak Projects; however, he allegedly did not conduct any due diligence regarding Plaintiffs' investments. Id. at 13, ¶ 56. Plaintiffs assert that "[t]he most basic and standard legal due diligence would have revealed that [Plaintiffs] were throwing their money into a complete sham." Id. at 14, ¶ 60. Attorney Shen did not request financial information regarding how EB-5 investor funds were spent, and the Jay Peak Projects did not disclose that information. In 2012, public allegations of wrongdoing by the Jay Peak Projects promoters emerged. By May 2014, a group of twenty investors had complained about the misappropriation of investor funds.

         Phase VII did not obtain approval from the U.S. Food and Drug Administration for the research center's products-a prerequisite for the operation of Phase VII and the use of Plaintiffs' investment funds. Phase VTTs parent company, AncBio, was ultimately sold at auction in May 2014 to satisfy its creditors. Plaintiffs allege that Attorney Shen failed to inform them of wrongdoing at the Jay Peak Projects because he was receiving direct and indirect compensation in exchange for referring foreign investors to those EB-5 projects.

         As a result of the Shen Defendants' acts and omissions, Plaintiffs allege that they have "lost their initial investment, their initial path to immigration in the United States, their administrative fees, and the fees paid to [Attorney] Shen." Id. at 17-18, ¶ 82. Through separate litigation, the federally appointed receiver of the Jay Peak Projects secured a settlement from which each Plaintiff was offered $500, 000. Plaintiffs Wang and Feng each accepted the $500, 000, while Plaintiff Xiong did not.

         B. Depositions of State of Vermont Officials.

         In their Answer to Plaintiffs' initial Complaint, the Shen Defendants alleged, among other things, the following affirmative defense: "Defendants reasonably relied upon the representations of officials of the State of Vermont" ("Affirmative Defense No. 18"). (Doc. 3 at 14, ¶ 18.) Plaintiffs assert that in order to probe the veracity of Affirmative Defense No. 18 and to counter it, they issued deposition subpoenas to various state officials involved with the Jay Peak Projects and the VRC, including Attorney Kessler, former Director Raymond, former Capital Investment Coordinator Candido, former Secretary Miller, former Secretary Moulton, and former Governor Shumlin.

         On August 20, 2018, Plaintiffs deposed former Director Raymond, who testified that he did not remember meeting Attorney Shen. The deposition ended early because former Director Raymond had to attend to a childcare responsibility. The parties agreed to continue the deposition on another day, although the terms of that agreement are disputed.

         On August 27, 2018, the State of Vermont filed a motion to quash the subpoena for Attorney Kessler's deposition and for a protective order. On October 19, 2018, the State of Vermont filed a motion to quash subpoenas for depositions of former Secretary Miller, former Secretary Moulton, and former Capital Investment Coordinator Candido and for a protective order. Plaintiffs opposed both motions.

         At a hearing on November 5, 2018, the court granted in part and denied in part the State of Vermont's motions to quash, holding that:

All discovery related to the Depositions of State Officials will not take place until Mr. Shen has been deposed. The court finds that the relevance of discovery sought from deponents is cabined by the scope of Defendant Shen's defense. Attorney Kessler is not de facto opposing counsel and any privilege must be asserted by him on a question by question basis. The court is likely to issue a protective order regarding the scope of discovery.

(Doc. 60.)

         On January 22, 2019, Attorney Shen was deposed. He stated that, in directing clients to invest in Jay Peak Projects, he relied upon marketing materials that he obtained from Jay Peak Projects as well as on "the level of support [the VRC] gave to Jay Peak [Projects] throughout the years." (Doc. 92-11 at 19.) Attorney Shen stated that he also relied upon speeches made by State officials at a 2009 conference and at 2013 seminars held in China. For example, in response to questions posed by Plaintiffs' attorney, he responded as follows:

A. The first trip was in 2009 actually. I had my own agenda. I went to participate in a conference organized by one immigration service company in Be[i]jing. It was a huge event. There were dozens of project companies showing up, to my surprise. I didn't expect since it was-
Q. But you had no interaction with the Vermont Regional Center or Bill Stenger at that point?
A. I did see them. They were in the audience when I spoke. I was one of the speakers. I was only speaking about the legal aspects of immigration petition filings. And they were there. They clapped and-
Q. Who is they?
A. Bill Stenger and Douglas Hulme. And a few others on his team. I forgot who the-who the people are. But not just the two of them.
Q. And then the next trip, the next trip?
A. I have trips to China each year. But the next trip
Q. I'm talking about only with regard to Jay Peak. You ...

Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.