Li et al v. Walsh, et al

Filing 162

OPINION AND ORDER denying 55 Motion to Dismiss for Failure to State a Claim. Signed by Judge Kenneth A. Marra on 7/22/2017. (ir)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF FLORIDA
CASE NO. 16-81871-CIV-MARRA
LAN LI, an individual, et al,
Plaintiffs,
vs.
JOSEPH WALSH, an individual, et al,
Defendants.
_____________________________________/
OPINION AND ORDER
This cause is before the Court upon Defendant Leslie Robert Evans and Leslie Robert
Evans & Associates, P.A.’s Motion to Dismiss Plaintiff’s Complaint (DE 55). The Motion is
fully briefed and ripe for review. The Court has carefully considered the Motion and is
otherwise fully advised in the premises.
I. Background
According to the Complaint, Plaintiffs are the victims of a $50 million fraud, theft, and
conspiracy, in which a web of individuals, primarily based in Palm Beach County, Florida,
preyed on foreign nationals desirous of leaving foreign countries, such as China and Iran, to
provide their families with the opportunity for a better life in the United States through the EB-5
program. (Compl. ¶ 1.) The “Bad Actors”1 conspired to fraudulently induce each Plaintiff to
each invest $500,000, plus a $40,000 “administrative fee,” into a purported Palm Beach real
estate project, known as the “Palm House Hotel” which was simply a mechanism to steal

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The Complaint uses the term “Bad Actors” to identify Defendants who were part of
fraud. The Complaint does not include the Evans Defendants as part of this group.

Plaintiffs’ funds and distribute them among the conspirators. (Compl. ¶ 2.) Plaintiffs’ funds were
supposed to be held in an escrow account unless and until their I-526 immigration petitions2
were approved by the United States government. (Compl. ¶ 3.) If and when Plaintiffs’ I-526
petitions were approved, the invested funds were supposed to be used to create at least 10 fulltime jobs for qualifying U.S. workers, in this case by:
(a) finishing the renovation and development of an existing luxury hotel structure in
Palm Beach;
(b) serving Palm Beach County by seeking to create jobs and increase U.S. exports
by developing an upscale resort hotel; and
(c) creating at least 790 direct and indirect jobs to support the EB-5 guidelines and
the number of investors sought.
(Compl. ¶ 4.)
However, Plaintiffs’ funds were not held in the escrow account. Instead, Plaintiffs’ funds
were transferred from the escrow account at PNC Bank to other accounts for the benefit of the
conspirators, including a second account at PNC Bank. (Compl. ¶ ¶ 5, 246.)
Defendant Leslie Roberts Evans is an attorney in Palm Beach County. Mr. Evans and his
law firm, Leslie Robert Evans & Associates, P.A. (the “Evans Defendants”) accepted a transfer
of Plaintiffs’ funds into their trust account after they were stolen from the escrow account at
PNC Bank. Specifically, from the second PNC account, the Bad Actors conspired and moved
about $35 million of Plaintiffs’ money to accounts belonging to the Evans Defendants. (Compl. ¶
249.) The Bad Actors also conspired and moved about $15 million from the second PNC
account to an account in the name of Palm House LLC controlled by Mr. Evans and the Evans
law firm. (Compl. ¶ 250.) Once moved to the Evans account, several of the Bad Actors quickly

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Under the EB-5 program, an immigrant investor applies for an immigrant visa by
submitting a Form I-526. (Compl. ¶ 71.)
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transferred funds to other accounts and used them for personal expenses and investments and to
pay off other participants in the scheme. (Compl. ¶ ¶ 251-52.) The Evans Defendants also
distributed Plaintiffs’ funds to persons and accounts selected by the conspirators. (Compl. ¶55.)
Mr. Evans and his law firm paid themselves compensation from these funds while they assisted
the Bad Actors in their theft and dissipation of the funds. (Compl. ¶ 258.)
The Complaint seeks injunctive relief against the Evans Defendants 3 under Florida
Statute 8812.035(1), (6) (count one); conversion (count three); avoidance of fraudulent transfers
pursuant to Florida Statute 726.105(1)(a) (counts twelve-fourteen); unjust enrichment (counts
seventeen) and equitable accounting (count nineteen).
The Evans Defendants move to dismiss the Complaint on the following grounds: (1) the
Complaint fails to satisfy pleading requirements to establish diversity jurisdiction; (2) the Evans
Defendants owed no legal duty to Plaintiffs; (3) Plaintiffs have no entitlement to injunctive relief
against the Evans Defendants; (4) the conversion claim must be dismissed due to lack of any
wrongful dominion and control or knowledge of any adverse right to the money; (5) the
fraudulent transfer claims fail to state a cause of action and (6) the unjust enrichment claim fails
because Plaintiffs did not confer a direct benefit to the Evans Defendants.
II. Legal Standard
Rule 8(a)(2) of the Federal Rules of Civil Procedure requires “a short and plain statement
of the claim showing that the pleader is entitled to relief.” Fed. R. Civ. P. 8(a)(2). The Supreme
Court has held that “[w]hile a complaint attacked by a Rule 12(b)(6) motion to dismiss does not
need detailed factual allegations, a plaintiff's obligation to provide the ‘grounds’ of his

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The Court excludes counts not brought against the Evans Defendants
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‘entitlement to relief’ requires more than labels and conclusions, and a formulaic recitation of the
elements of a cause of action will not do. Factual allegations must be enough to raise a right to
relief above the speculative level.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007)
(internal citations omitted).
"To survive a motion to dismiss, a complaint must contain sufficient factual matter,
accepted as true, to state a claim to relief that is plausible on its face." Ashcroft v. Iqbal, 129 S.
Ct. 1937, 1949 (2009) (quotations and citations omitted). "A claim has facial plausibility 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. Thus, "only a complaint that states a
plausible claim for relief survives a motion to dismiss." Id. at 1950. When considering a motion
to dismiss, the Court must accept all of the plaintiff's allegations as true in determining whether a
plaintiff has stated a claim for which relief could be granted. Hishon v. King & Spalding, 467
U.S. 69, 73 (1984).
III. Discussion
A. Subject Matter Jurisdiction
The Court begins, as it must, by addressing subject matter jurisdiction. University of S.
Ala. v. Am. Tobacco Co., 168 F.3d 405, 410 (11th Cir. 1999). The Evans Defendants contend
that there is no diversity jurisdiction because Plaintiffs have not brought any federal law claims
against them, and diversity jurisdiction is not properly alleged in the Complaint. Plaintiffs
respond that there is subject matter jurisdiction over these Defendants on the basis of
supplemental jurisdiction, as Plaintiffs have alleged federal claims against other Defendants.
(Compl. 61-62.)

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The Supplemental Jurisdiction statute, 28 U.S.C. § 1367, provides in pertinent part:
... in any civil action of which the district courts have original jurisdiction, the district courts
shall have supplemental jurisdiction over all other claims that are so related to claims in the
action within such original jurisdiction that they form part of the same case or controversy
under Article III of the United States Constitution.
28 U.S.C. § 1367(a).
In determining whether state law claims “are so related” to a federal claim, a court should
examine “whether the claims arise from the same facts, or involve similar occurrences, witnesses
or evidence.” Hudson v. Delta Air Lines, Inc., 90 F.3d 451, 455 (11th Cir.1996); see Lucero v.
Trosch, 121 F.3d 591, 598 (11th Cir.1997) (finding state and federal claims derive from common
nucleus of operative facts because the claims rely on identical actions of defendants); Palmer v.
Hospital Auth. of Randolph County, 22 F.3d 1559,1563-64 (11th Cir.1994) (standard met when
federal and state claims involve same witnesses, presentation of same evidence, determination of
same facts); L.A. Draper & Son v. Wheelabrator-Frye, Inc., 735 F.2d 414, 427 (11th Cir.1984)
(acts by same witnesses were basis for both federal and state claims).
After careful review of the Complaint, the Court finds that the state claims against the
Evans Defendants arise from a common nucleus of facts as the federal claims lodged against
other Defendants. Thus, there is no basis to find subject matter jurisdiction lacking.
B. Injunctive Relief Pursuant to Florida Statute §§812.035(1), (6)
The Complaint alleges that Defendant Joseph Walsh stole Plaintiffs money and seeks to
restrain the Evans Defendants (as well as other Defendants) who have received these proceeds
from disposing of these funds. The Complaint does not appear to allege that the money remains
in the escrow account. The Court will, however, permit Plaintiffs to amend the Complaint to
allege that the money remains in the escrow account, which would allow Plaintiffs to seek that
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the funds not be dissipated under Florida Statute § 812.035(6).
C. Conversion
Under Florida law, the elements of conversion are “(1) an act of dominion wrongfully
asserted; (2) over another's property; and (3) inconsistent with his ownership therein.” Special
Purpose v. Prime One, 125 F. Supp .2d 1093, 1099–1100 (S.D. Fla.2000) (citing Warshall v.
Price, 629 So.2d 903, 904 (Fla. 1993)). A defendant must possess the property in order to
convert the property. Medinis v. Swan, 955 So. 2d 595, 597 (Fla. Dist. Ct. App. 2007).
The Evans Defendants seek dismissal of the conversion count because the Complaint
does not identify these Defendants as wrongdoers and there are no allegations that the Evans
Defendants had any knowledge of adverse claims to the money. Second, the Evans Defendants
argue that the Complaint does not allege that they had any obligation to keep intact the money
received because the Complaint does not allege they knew Plaintiffs had any adverse claim to
the money. Lastly, the Evans Defendants state that the Complaint does not allege they possessed
the money at the time of conversion because the conversion had already taken place before the
money was transferred into the Evans’ account.
The Court rejects the Evans Defendants’ arguments on the basis that the Complaint
adequately identifies them as wrongdoers. Indeed, the Complaint alleges that Mr. Evans and his
law firm paid themselves compensation from these funds while they assisted the Bad Actors in
their theft and dissipation of the funds. (Compl. ¶ 258) (emphasis added). As for the Evans
Defendants’ argument that the conversion took place before they received the money, that
assumes that there is no joint liability between the Bad Actors and the Evans Defendants, which
is contradicted by the allegations of the Complaint. Indeed, if the Evans Defendants and the Bad

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Actors acted separately in such manner as to show that “the act of each was the exercise of the
assumption of dominion over the property unauthorized by the rightful owner,” a claim for
conversion may proceed against the Evans Defendants. Wilson Cypress Co. v. Logan, 162 So.
489, 490-91 (1935).
D. Fraudulent Transfer
The Evans Defendants challenge these claims on the basis that they took the funds in
good faith as subsequent transferees, they are not “debtors” liable on any legal claim, and the
Complaint does not provide fair notice of the claims against them.
As in the argument pertaining to conversion, the Evans Defendants’ arguments rest on
their position that they acted simply as an escrow agent with no knowledge of the fraudulent
scheme. While that may be the case, the Court cannot make this assumption at the pleading
stage. Instead, the Court must rely on the allegations of the Complaint which allege the Evans
Defendants assisted the Bad Actors in their theft and dissipation of the funds. (Compl. ¶ 258.)
Nor does the Court agree that the Evans Defendants have not been placed on fair notice of these
claims. (See Compl. ¶ ¶ 55, 249-52, 258.)
For these reasons, the Court denies the motion to dismiss the fraudulent transfer counts
against the Evans Defendants.
E. Unjust Enrichment
The Evans Defendants move to dismiss the unjust enrichment claim on the basis that the
Complaint does not allege that a benefit was conferred directly onto them. To state a claim for
unjust enrichment, the following elements must be met: “(1) a benefit conferred upon a
defendant by the plaintiff, (2) the defendant's appreciation of the benefit, and (3) the defendant's

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acceptance and retention of the benefit under circumstances that make it inequitable for him to
retain it without paying the value thereof.” Vega v. T–Mobile USA, Inc., 564 F.3d 1256, 1274
(11th Cir. 2009) (citing Rollins, Inc. v. Butland, 951 So.2d 860, 876 (Fla. Dist. Ct. App. 2006));
Della Ratta v. Della Ratta, 927 So.2d 1055, 1059 (Fla. Dist. Ct. App.2006) (same).
This Court has recognized that an unjust enrichment claim may go forward where a
benefit is conferred through an intermediary, finding that direct contact, or privity, is not the
equivalent of conferring a direct benefit. Aceto Corp. v. TherapeuticsMD, Inc., 953 F. Supp. 2d
1269, 1288 (S.D. Fla. 2013); see also Williams v. Wells Fargo Bank, N.A., No. No.
11–21233–CIV, 2011 WL 4901346 (S.D. Fla. Oct. 14, 2011) (“just because the benefit conferred
by [the] [p]laintiffs on the [d]efendants did not pass directly from the [p]laintiffs to the
[d]efendants—but instead passed through a third party—does not preclude an unjust-enrichment
claim. Indeed to hold otherwise would be to undermine the equitable purpose of unjust
enrichment claims.”)
The Evans Defendants contend they had no involvement in the transfer of money from
one PNC Bank account to another and they merely acted as escrow agents. Again, as discussed
supra, the Complaint adequately alleges that the Evans Defendants acted not as innocent escrow
agents but were part of the fraudulent scheme. Thus, at the motion to dismiss stage, this claim
must be allowed to proceed.4

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In their motion (DE 55), the Evans Defendants do not make any argument to dismiss the
equitable accounting claim, although they do briefly address this claim in the reply
memorandum. Nonetheless, the Court cannot consider it. Tallahassee Mem. Regional Med. Ctr.
v. Bowen, 815 F.2d 1435, 1446 n. 16 (11th Cir. 1987) (“it is well settled that a party cannot
argue an issue in its reply brief that was not preserved in its initial brief”) (citing United States v.
Oakley, 744 F.2d 1553, 1556 (11th Cir. 1984)).
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IV. Conclusion
Accordingly, it is hereby ORDERED AND ADJUDGED that the Evans Defendant’s
Motion to Dismiss Plaintiff’s Complaint (DE 55) is DENIED.
DONE AND ORDERED in Chambers at West Palm Beach, Palm Beach County,
Florida, this 22nd day of July, 2017.
______________________________________
KENNETH A. MARRA
United States District Judge

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