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Ling Tie v. Peng Chan

United States District Court, C.D. California

December 12, 2014


Attorneys Present for Plaintiffs: Not Present.

Attorneys Present for Defendants: Not Present.


Present: The Honorable BEVERLY REID O'CONNELL, United States District Judge.

Proceedings: (IN CHAMBERS)


Pending before the Court are two separate motions: (1) Defendant Peng Chan's Motion to Dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim[1] (Dkt. No. 19); and (2) Defendants Harvinder Sandhu and Dinesh Sharda's joint Motion to Dismiss pursuant to Federal Rules of Civil Procedure 12(b)(6) and 12(b)(7)[2] (Dkt. No. 20). After considering the papers filed in support of and in opposition to the instant motions, the Court deems these matters appropriate for resolution without oral argument of counsel. See Fed.R.Civ.P. 78; C.D. Cal. L.R. 7-15. For the following reasons, the Court DENIES Chan's Motion to Dismiss and GRANTS in part and DENIES in part Sandhu and Sharda's Motion to Dismiss.


Plaintiff Ling Tie (" Plaintiff") is a citizen of the People's Republic of China. (First Am. Compl. (" FAC") ¶ 1.) In February 2012, Plaintiff retained Defendant Peng Chan (" Chan") as legal counsel to help him obtain a green card and become a permanent United States resident. (Id. ¶ 8.) Under the parties' legal services agreement ( see id. Ex. A), Chan agreed to assist Plaintiff in filing an EB-5 petition ( id. ¶ 8). The United States Citizenship and Immigration Services (" USCIS") administers the Immigration Investor Program, also known as EB-5, to encourage capital investment by foreign citizens. (Id.) To qualify, a foreign investor must invest in a new commercial enterprise, as well as satisfy various job creation and capital investment requirements. (Id.)

Chan is a California resident and an attorney licensed to practice law in South Carolina. (Id. ¶ ¶ 6, 8, 26.) Chan is not licensed in California, but he maintains a law office in Pasadena, California. (Id. ¶ ¶ 8, 27.) According to Plaintiff, Chan represented himself as an immigration attorney practicing law in California. (Id.)

As part of the EB-5 petition, Chan devised a business plan for Plaintiff to invest in an Arco gas station, AM/PM mini mart, and restaurant. (Id. ¶ 9.) Chan apparently represented that Defendants Harvinder Sandhu (" Sandhu") and Dinesh Sharda (" Sharda") would also invest in the business venture, and that these individuals were trustworthy business partners because Chan had known them for eighteen years. (Id.) To aid the venture, Plaintiff wired $1, 800 to Chan on March 1, 2012. (Id. ¶ 10.) Plaintiff believed Chan needed the money to form a California corporation to fund the investment project. (Id.) According to the FAC, Chan did not form a corporation but instead used the money to form a limited liability company known as MBLT Investments, LLC (" MBLT").[3] (Id.) The operating agreement for MBLT lists Sandhu as the company's president and chief executive officer and designates Sharda as its secretary. (Id.; see also id. Ex. C at 7-8.) Sandhu and Sharda are the only members and owners of MBLT; Plaintiff has no ownership interest in the company. (Id. Ex. C at 8.)

Nevertheless, Plaintiff alleges he believed he was a member of MBLT until 2014 based on various representations by Chan. (Id. ¶ ¶ 10, 12.) Apparently, Chan told Plaintiff he would own an 8% interest in MBLT in exchange for investing $500, 000 in the company. (Id. ¶ 12.) Chan also told Plaintiff that Sandhu and Sharda would invest $500, 000 and $100, 000, respectively, in exchange for 80% and 12% ownership shares. (Id.; see also id. Ex. E.) Based on these representations, Plaintiff deposited $500, 000 in a bank account he believed Chan had opened on MBLT's behalf. (Id. ¶ ¶ 11, 13; see also id. Exs. D, F.) Plaintiff apparently believed the account was a secure escrow account. (Id. ¶ ¶ 11, 13.) But according to the FAC, an individual named Emile Auguste, Jr. (" Auguste")[4] actually controlled the account. (Id. ¶ 11.)

In March 2013, Chan sent Plaintiff various documents, including a subscription agreement, an escrow agreement, and an offering circular. (Id. ¶ 14.) Plaintiff alleges that Chan, Sandhu, and Sharda represented that his $500, 000 investment would be returned to him if USCIS did not approve his petition or if he asked to withdraw from MBLT. (Id. ¶ ¶ 14-15; see also id. Exs. G, H.) Plaintiff alleges that he signed the agreements in reliance on these representations. (Id. ¶ 14.)

On May 4, 2013, Plaintiff asked Chan about the status of his EB-5 petition and the MBLT investment project. (Id. ¶ 16.) Chan responded two days later and guaranteed that Plaintiff's " money [was] safe and none of it has been spent at this point." (Id.) Chan also reaffirmed that Sandhu and Sharda had agreed to refund Plaintiff's $500, 000 if the MBLT venture failed. (Id.) In late June 2013, Plaintiff discovered that the bank account was not an escrow account for MBLT and was under Auguste's control. (Id. ¶ 17.) Around the same time, Plaintiff also discovered that Auguste had taken $500, 000 from the account. (Id.)

Believing Chan, MBLT, Sandhu, and Sharda violated his rights, Plaintiff initiated this lawsuit on June 12, 2014, invoking this Court's diversity jurisdiction under 28 U.S.C. § 1332. (Dkt. No. 1.) Plaintiff filed the FAC on August 19, 2014. (Dkt. No. 12.) The FAC brings eight state law claims for relief. With respect to Chan, Plaintiff alleges claims for: (1) professional negligence; (2) unauthorized practice of law; (3) breach of contract; (4) breach of fiduciary duty; (5) fraud; and (6) negligent misrepresentation. ( See FAC ¶ ¶ 19-40, 46-64.) Plaintiff also alleges Sandhu and Sharda are liable for breach of written and oral contracts, [5] as well as fraud. (Id. ¶ ¶ 41-54, 65-68.)

On October 23, 2014, Chan moved to dismiss Plaintiff's claim for unauthorized practice of law under Federal Rule of Civil Procedure 12(b)(6). (Dkt. No. 19.) About two weeks later, Sandhu and Sharda moved to dismiss all three of Plaintiff's claims against them pursuant to Federal Rules of Civil Procedure 12(b)(6) and 12(b)(7). (Dkt. No. 20.) Plaintiff timely opposed both motions.[6] (Dkt. Nos. 25, 26.) Chan, Sandhu, and Sharda timely replied. (Dkt. Nos. 28, 29.)


A. Federal Rule of Civil Procedure 12(b)(6)

Federal Rule of Civil Procedure 8(a) requires that a complaint contain a " short and plain statement of the claim showing that the [plaintiff] is entitled to relief." Fed.R.Civ.P. 8(a). If a complaint fails to do this, the defendant may move to dismiss it under Rule 12(b)(6). Fed.R.Civ.P. 12(b)(6). " To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to 'state a claim that is plausible on its face.'" Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009). A claim is plausible on its face " when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id. " Factual allegations must be enough to raise a right to relief above the speculative level." Bell A. Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). Thus, there must be " more than a sheer possibility that a defendant has acted unlawfully." Iqbal, 556 U.S. at 678. " Where a complaint pleads facts that are 'merely consistent with' a defendant's liability, it 'stops short of the line between possibility and plausibility.'" Id.

In ruling on a motion to dismiss under Rule 12(b)(6), a court should follow a two-pronged approach: (1) first, discount conclusory statements, which are not presumed to be true; and (2) then, assuming any factual allegations are presumed true, determine " whether they plausibly give rise to entitlement to relief." See id. at 679; see also Chavez v. United States, 683 F.3d 1102, 1108 (9th Cir. 2012). A court may consider the contents of the complaint and its attached exhibits, documents incorporated into the complaint by reference, and matters properly subject to judicial notice. Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308, 322-23, 127 S.Ct. 2499, 168 L.Ed.2d 179 (2007); see also Lee v. City of L.A., 250 F.3d 668, 688 (9th Cir. 2001). Where a district court grants a motion ...

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