United States District Court, N.D. California
ORDER DENYING PLAINTIFFS' MOTION FOR PARTIAL
SUMMARY JUDGMENT AND GRANTING DEFENDANTS' MOTION FOR
SUMMARY JUDGMENT DOCKET NOS. 61, 62, 89
M. CHEN, UNITED STATES DISTRICT JUDGE
Ji Taek Kim (“Kim”), Tae Youn Shim
(“Shim”), and Hua Xue (“Xue”) are
foreign nationals who made substantial investments in a
United States company, pursuant to the EB-5 Immigrant
Investor Program, in order to become eligible for green
cards. Plaintiffs each retained attorney Martin Lawler
(“Lawler”) and his law firm Lawler & Lawler
(collectively, “Defendants”) to guide them
through the EB-5 application process. Although each Plaintiff
ultimately obtained a green card, the company in which they
invested fared poorly. Plaintiffs have now sued Defendants,
alleging that Defendants violated their professional
obligations and fiduciary duties by misleading Plaintiffs
about the nature of their investments and representing other
parties involved in the EB-5 program with interests adverse
before the Court is Defendants' motion for summary
judgment, Docket No. 61 (“Def. Mot.”), and
Plaintiffs' motion for partial summary judgment, Docket
No. 62 (“Pl. Mot.”). For the reasons discussed
below, Defendants' motion for summary judgment is
GRANTED and Plaintiffs' motion for
partial summary judgment is DENIED.
The EB-5 Program
case arises out of Defendants' alleged conduct in
connection with the EB-5 Immigrant Investor Program. The EB-5
program affords certain foreign investors a path to becoming
lawful permanent residents (“LPRs”) in the United
States. See 8 U.S.C. § 1153(b)(5). Eligible
investors must show that they have invested or are in the
process of investing a specified amount of capital in a new
commercial enterprise, and that their investment will create
at least 10 jobs for United States workers. Id.
§ 1153(b)(5)(A). Where the new commercial enterprise is
based in a “targeted employment area, ” investors
must invest a minimum of $500, 000 in the enterprise to
qualify for the program. Id. § 1153(b)(5)(C).
The investment must be “at risk.” 8 C.F.R. §
204.6(j)(3). This means “there must be a risk of loss
and a chance for gain”; “[i]f the immigrant
investor is guaranteed a return, or a rate of return on all
or a portion of his or her capital, ” the investment
does not meet EB-5 requirements. U.S. Citizenship and
Immigration Services, Policy Manual, Vol. 6, Part G, Ch. 2,
(last visited July 5, 2019).
application passes through two stages. First, the investor
files a petition for EB-5 status (the “I-526
petition”) with United States Citizenship and
Immigration Services (“USCIS”), “seeking
approval of their submitted investment and business
plans.” Chang v. United States, 327 F.3d 911,
916 (9th Cir. 2003). If the I-526 petition is approved, the
investor and his or her dependents “may enter the
country as conditional LPRs.” Id. Second,
between 21 and 24 months after the I-526 petition, the
investor must file a second petition (the “I-829
petition”). Id. USCIS approves the I-829
petition and grants unconditional LPR status if it finds that
the investor made no material misrepresentations in the I-526
petition and complied with the EB-5 program requirements.
Id. (citing 8 C.F.R. §§ 204.6, 216.6).
are two ways for EB-5 investors to invest in qualifying
enterprises. The first is to invest directly in an enterprise
that employs qualifying employees. See U.S.
Citizenship and Immigration Services, About the EB-5 Visa
classification (last visited June 5, 2019). The second is to
invest indirectly through “regional centers.”
See Id. Regional centers are USCIS-approved entities
that support economic growth in particular regions by
coordinating investments in EB-5 enterprises. See
id.; 8 C.F.R. § 204.6(e), (m)(2). Regional centers
coordinate investors and allows them to pool their
investments in qualifying enterprises. See U.S.
Citizenship and Immigration Services, Policy Manual, Vol. 6,
Part G, Ch. 1,
(last visited July 5, 2019). A regional center can direct
investments into multiple EB-5 enterprises, and will
typically set up a separate investment fund, or “Newly
Created Entity, ” to accept investments in each
enterprise. Docket No. 61-3 (Ahn Decl.) ¶ 12.
The Parties and Relevant Entities
Lawler is an immigration attorney who has represented clients
in connection with the EB-5 program since 1991. Docket No.
61-1 (Lawler Decl.) ¶ 3. He and his law firm, Lawler
& Lawler, are the named defendants in this suit.
Id. ¶ 1. Plaintiffs Shim, Xue, and Kim each
retained Defendants to assist them in applying for EB-5
visas. Id. ¶ 18.
Ahn, who is not a party to this action, is an investor and
attorney who helped found the Green Detroit Regional Center
(“GDRC”) between 2009 and 2010 and was its CEO.
Ahn Decl. ¶¶ 1-3. The purpose of GDRC was to bring
in foreign investments through the EB-5 program and direct
them to qualifying enterprises. Id. ¶ 3. To
become a qualified EB-5 regional center, GDRC had to apply
for and secure USCIS approval. Id. ¶ 4. GDRC
retained Lawler “to file the original I-924 application
[to become a qualified regional center] for GDRC and
subsequent amendments.” Id. ¶ 5.
Lawler's “role was to provide legal services to
GDRC to facilitate the process with USCIS for immigration
matters dealing with GDRC relating to maintaining regional
center status under the EB-5 program.” Id.
GDRC eventually obtained USCIS approval as an EB-5 regional
center. Lawler Decl. ¶¶ 10-11. Ahn also set up SMS
Investment Group, LLC (“SMS”) as the “Newly
Created Entity” to accept the EB-5 investments in ALTe.
Ahn Decl. ¶ 12. Investors thus became limited partners
in SMS, and their investments were directed ALTe.
enterprise in which SMS invested was ALTe LLC
(“ALTe”), which “developed electric
powertrain systems for commercial vehicles.” Lawler
Decl. ¶ 10; Ahn Decl. ¶ 12. GDRC “worked with
migration agents . . . to bring in potential foreign
investors for ALTe.” Ahn Decl. ¶ 9. Each Plaintiff
invested $500, 000 in ALTe to qualify for the EB-5 program.
Kim invested in ALTe directly, on or around August 16, 2010.
Docket No. 63 (First Hinton Decl.), Exh. 4 (Lawler
Deposition) at 91:1-8; id., Exh. 5 (Subscription
Agreement). Shim and Xue each invested in ALTe indirectly on
or around July 5, 2010, via SMS. See Docket No. 70
(Second Hinton Decl.), Exh. 95 (Shim Deposition) at 34:5-10;
id., Exh. 96 (Xue Deposition) at 41:10-17. Each
Plaintiff decided to invest in ALTe after consulting with
their respective migration agents. See First Hinton
Decl., Exh. 2 (Kim Deposition) at 37:23-25; Shim Deposition
at 24:2-21; Xue Deposition at 22:2-12.
Plaintiffs' EB-5 Applications
Plaintiff retained Defendants as counsel in connection with
his or her EB-5 application after making the decision to
invest in ALTe. See Kim Deposition at 37:18-25; Shim
Deposition at 39:16-21; Xue Deposition at 14:14-16. Kim
retained Defendants in 2010. He was referred to Defendants by
Kukje Immigration Development Corp. (“KIDC”), a
South Korean migration agency. Lawler Decl. ¶ 22. The
retainer agreement provided that Kim employed Defendants
“as attorneys to represent me and my spouse and
children under age 21 for permanent resident status in the
United States via the EB-5 investor category.” Docket
No. 61-2 (Roeca Decl.), Exh. C. at 1. The agreement also
Lawler & Lawler has not advised me to invest in any
particular project. I understand I must conduct a due
diligence analysis of any investment. Lawler & Lawler
will provide no business advice. I hereby hold Lawler
& Lawler harmless from any loss I may incur in the
investment I make for the EB-5 visa.
. . . .
It is understood that Lawler & Lawler provides no
business advice and has not and will not make recommendations
for a business investment from an economic viewpoint, but
only provides services for an EB-5 visa.
Id. at 1, 2 (emphasis in original).
also signed a “waiver of conflict of interest [and]
consent to joint representation.” Id., Exh. D.
The waiver informed the investor that “Lawler &
Lawler represents both the Green Detroit Regional Center and
Ahn & Associates and SMS Investment Group, LLC . . . and
the Investor in securing an immigrant visas [sic]
for the Investor.” Id. Kim's I-526
petition was approved on June 22, 2011, his conditional LPR
status was approved on May 10, 2012, and his full LPR status
was approved on November 14, 2016. Lawler Decl. ¶¶
retained Defendants in 2010. Lawler Decl. ¶ 22. She was
referred to Defendants by KIDC. Id. Shim's
retainer agreement contained the same express language
limiting the scope of Defendants' representation to EB-5
immigration services only, the same as Kim's retainer
agreement. See Roeca Decl., Exh. M; Shim Deposition
at 47:15-50:4. Shim also signed the same waiver of conflict
and consent to joint representation as Kim. See
Roeca Decl., Exh. N; Shim Deposition at 50:8-21. Shim's
I-526 petition was approved on July 27, 2011, her conditional
LPR status was approved on April 3, 2012, and her full LPR
status was approved on March 28, 2016. Lawler Decl.
¶¶ 26, 30.
retained Defendants in 2011. Lawler Decl. ¶ 24. She was
referred to Defendants by an attorney named Peter Jensen.
Id. Xue's retainer agreement contained the same
express language limiting the scope of Defendants'
representation to EB-5 immigration services only as in
Kim's retainer agreement. Roeca Decl., Exh. S. Xue also
signed the same waiver of conflict and consent to joint
representation as Kim. Id., Exh. T. Xue's I-526
petition was approved on September 7, 2011 and her
conditional LPR status was approved on May 22, 2012. Lawler
Decl. ¶ 27. Xue did not retain Defendants to prepare her
I-829 petition, but with the assistance of other counsel she
also obtained full LPR status. Id. ¶ 29.
Conversion of Kim's ALTe Investment
entered into a Subscription Agreement with ALTe on August 16,
2010 pursuant to which he made a direct investment of $500,
000 in ALTe. See First Hinton Decl., Exh. 5.
However, Kim asserts that “his direct holdings in ALTe
would last but a week, ” because on August 23, 2010,
his “direct equity interest in ALTe was
eliminated” and converted into an indirect interest via
SMS, such that his investment in ALTe was “held
indirectly under the control of SMS.” Pl. Mot. at 6.
Kim claims that “[t]his conversion was done without
[his] knowledge or authorization.” Id.;
see Kim Deposition at 84:3-14. However, a letter
sent by GDRC to USCIS in support of Kim's I-829 petition
states that “Mr. Kim elected to have SMS manage his
shares.” First Hinton Decl., Exh. 21 at 2.
October 15, 2014, Lawler sent Kim an email notifying him of
“problems pertaining to ALTe's job creation,
” which are discussed in more detail below. Lawler
Decl., Exh. C. In the email, Lawler also reported that he was
recently apprised of the conversion of Kim's interest in
ALTe, and warned Kim that the conversion may have
consequences for his EB-5 status:
You transferred your EB-5 funds and filed your visa petition
as a direct investor in ALTe. SMS recently notified me just
prior to filing your I-829 petition that your ownership
interest has been transferred from ALTe to SMS, and you
became a limited partner in SMS, and therefore there are no
records of your current ownership in ALTe. I was also
notified that you no longer hold a position on the Advisory
Board at ALTe. USCIS may challenge whether you have properly
maintained your investment in ALTe as a direct investor. . .
. It is unclear how this will affect you as a direct
Id. Lawler concluded by informing Kim that his
services were limited to immigration issues, and advised Kim
to contact SMS or ALTe about his investment:
As you know, I am only involved in the immigration visa
matters, not the finance or business matters related to the
Regional Center or it's [sic] projects. If you
have any questions regarding the business aspects or job
creation, I encourage you to contact Simon Ahn, the Principal
of SMS Investment Group, LLC, or Darren Post, the CEO of ALTe
Technologies, Inc. If you have any questions about the
immigration implications, please let me know and I am happy
to have a call.
23, 2016, Lawler sent a letter to Kim reiterating his
concerns that the conversion of Kim's interest in ALTe,
among other issues, could jeopardize Kim's pending I-829
You initially made your EB-5 investment directly in ALTe . .
The I-526 petition was filed and approved based on this
direct investment in ALTe. Your I-829 was also filed based on
this direct investment.
I have received some conflicting information about whether
you have maintained your investment in ALTe. . . . I am
unclear if you still hold an ownership interest in ALTe for
your direct investment. I was informed much later that you
and Simon Ahn entered into an arrangement where you were also
accepted as a limited partner in SMS. I was not aware when
this change transpired, and it was completed without my
knowledge or legal advice.
There is currently no accepted USCIS procedure for you to
switch from a direct investor in ALTe to a Regional Center
investor in SMS without filing a new I-526 petition. If you
have failed to maintain your investment and interest in ALTe,
and you are no longer serving in a management role with ALTe,
your I-829 petition may be denied.
Decl., Exh. D at 1. Lawler also repeated his disclaimer that
he was “only involved in the immigration visa matters,
not the finance or business matters related to the Regional
Center of its projects, ” and his recommendation that
Kim should contact SMS or ALTe with any questions about the
business aspects of his investment. Id. at 2.
Problems at ALTe
produced materials promoting EB-5 investment in ALTe,
including a document titled “United States EB-5
Immigrant Investor Program.” First Hinton Decl., Exh.
10; see also id., Exh. 11 (Chinese version of
document), Exh. 12 (Korean version of
document). The document specifically targets
investment in ALTe. See Id. at 3-4 (“The EB-5
immigration program of Green Detroit Regional Center, LLC
(SMS) will make investment in a company which provides
various technologies for electric and hybrid electric
powertrain conversions.”). The document contains a
number of statements touting ALTe, including:
• On the front cover, “Funds allocated by U.S.
Department of Energy” is displayed in large text above
logos for SMS and ALTe. Id. at 1.
• ALTe “has obtained direct support from
high-ranking government officials in the United States,
including the United States Secretary of Commerce, United
States Secretary of Energy, governor of Michigan and several
members of United States Congress.” Id. at 3;
see Id. at 5 (listing specific government
• “Orders of 240, 000, 000 U.S. dollars' value
already received.” Id. at 5.
• “The project does not rely on EB-5 investment
because 80% of its capitals [sic] are from the Department of
Energy of the federal government and the product orders it
already confirmed.” Id.
reality turned out to be less rosy. Theodore Oshman, an ALTe
investor and board member who is not a party to this suit,
recounted that ALTe sought a loan from the Department of
Energy (“DOE”) but was unsuccessful. First Hinton
Decl., Exh. 13 at 51:24-52:2 (“Q. So ultimately the
Department of Energy did not provide a loan to ALTe?”
A. Correct, they ultimately did not.”). The only sale
ALTe made was for one prototype truck to Southern California
Edison. See Id. at 70:9-16.
October 15, 2014 email to Kim stated that “[t]here are
problems pertaining to ALTe's job creation.” Lawler
Decl., Exh. C. The email explained that in the course of
preparing responses to a Request for Evidence issued by USCIS
to several investors with pending I-829 petitions, Lawler
was informed by [GDRC] and ALTe executives that due to
various business issues, ALTe has not been able to create the
number of jobs they originally expected. Over the years the
company has hired many employees, but many of these jobs had
to be laid off last year. We do not know if USCIS will accept
these jobs for the EB-5 job creation requirement because they
were laid off.
. . . .
It is possible that USCIS may allow SMS to show more jobs
will be created within a year. I am told ALTe is working on
several new business deals that they believe will create new
ALTe ceased operations. According to Ahn, “ALTe came to
the point where it was better to focus on manufacturing
energy storage units.” Ahn Decl. ¶ 13. ALTe thus
“[m]orph[ed]” into a company named eMatrix. Def.
Mot. at 16. Ahn represents that he “negotiated that the
EB-5 investors [in ALTe] would retain their same interest in
eMatrix of approximately 29 percent (the percentage they had
held in ALTe)” after the transition. Ahn Decl. ¶
13. It appears that eMatix is still an active company, and
“SMS investors got the same shares in eMatrix as they
had in ALTe in the beginning.” Id. ¶ 14.
Rule of Civil Procedure 56 provides that summary judgment
shall be rendered on a claim or defense, or part of a claim
or defense, “if the movant shows that there is no
genuine dispute as to any material fact and the movant is
entitled to judgment as a matter of law.” Fed.R.Civ.P.
56(a). A fact is material if it could affect the outcome of
the suit under the governing law. Anderson v. Liberty
Lobby, Inc., 477 U.S. 242, 248-49 (1986). A dispute is
genuine “if the evidence is such that a reasonable jury
could return a verdict” for either party. Id.
“The mere existence of a scintilla of evidence . . .
will be insufficient; there must be evidence on which the
jury could reasonably find for the [non-moving party].”