United States District Court, D. Vermont
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.
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.
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.
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.
Factual and Procedural Background.
The Allegations of the Third Amended Complaint.
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.
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, ¶
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.
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
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.
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.
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.
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.
Depositions of State of Vermont Officials.
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.
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.
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.
hearing on November 5, 2018, the court granted in part and
denied in part the State of Vermont's motions to quash,
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.
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
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