Che v. Chang et al
MEMORANDUM OPINION. Signed by Judge Paula Xinis on 8/7/2017. (kns, Deputy Clerk)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MARYLAND
Civil Action No. PX 16-2665
HSIEN CHENG CHANG and
WASSERMAN, MANCINI & CHANG, PC,
Pending in this legal malpractice action is Defendants’ motion to dismiss or, in the
alternative, for summary judgment (ECF No. 13). The issues are fully briefed and a hearing was
held on Tuesday, July 11, 2017. For the reasons stated below, Defendants’ motion is granted in
part and denied in part.
In the fall of 2012, Plaintiff Che Li (“Plaintiff”) and her husband Zhang Zhengang
(“Zhengang”), both of whom are Chinese citizens, decided to immigrate to the United States
through the EB-5 Immigrant Investor Program offered by the United States Citizenship and
Immigration Services (“USCIS”). Under this program, foreign entrepreneurs are eligible to apply
for naturalization if they invest in a United States based commercial enterprise which creates or
preserves ten permanent full-time jobs for qualified United States workers. The investment must
meet certain requirements, to include the immigrant investor placing her investment “at risk” for
the purpose of generating a return.
The facts are taken from the amended complaint and from exhibits attached to it.
In October 2012, Zhengang traveled from China to Florida to find a suitable investment
for a potential EB-5 petition. While there, Zhengang met several individuals from Zhengang’s
and Plaintiff’s native Chinese province of Shandong, including Qin Yuan (“Qing”), her brother
Hongtao Yuan (“Hongtao”), and their sister Guizhi Yuan (“Guizhi”) (collectively, “the Yuans”).2
The Yuans advised Zhengang that EB-5 projects in the Washington, D.C. area were more
lucrative than those in Florida because they produce higher rates of return more quickly.
The Yuans then invited Zhengang sightseeing in Washington, DC. Zhengang accepted
and so he, along with Qing and Guizhi, embarked on a journey to the nation’s capital. Both
before and during their trip to Washington, Qing and Guizhi spoke highly of a wealthy D.C.
couple, Xiaolan Zhang (“Xiaolan”) and Peide Yan (“Peide”), who were operating successful
businesses that could potentially serve as qualifying EB-5 investments. Qing and Guizhi brought
Zhengang to Xiaolan’s home in Rockville, Maryland, where Zhengang stayed for several weeks.
During Zhengang’s stay with Xiaolan, Xiaolan informed Zhengang that she owned a
lucrative luxury goods store. See Amend. Compl., ECF No. 6 at 6. In reality, according to
Plaintiff, Xiaolan was not successful at all, but the mastermind of a fraudulent scheme involving
the use of individuals’ credit cards to purchase inventory at high-end department stores and then
resell the purchases at a discount. Id. at 6–7. Xiaolan allegedly used the profits for her personal
gain and also to repay earlier victims who were threatening to file criminal charges.
Over the course of Zhengang’s visit with Xiaolan, Xiaolan convinced Zhengang to invest
in another luxury goods store to be opened in Washington, D.C. as a way for Zhengang and
Plaintiff to satisfy the EB-5 investment requirement. Accordingly, on November 5, 2012,
Zhengang, individually and on behalf of Plaintiff, incorporated KZDJ in Virginia with its stated
According to Plaintiff, the Shandong Province is a relatively remote area of China where family ties to the
Province often serve as bona fides before business relationships can actually be developed.
corporate purpose as operating a luxury goods store. KZDJ Articles of Incorporation, ECF No. 61 at 21. Xiaolan and Guizhi agreed to manage the store while Zhengang and Plaintiff agreed to
fund the enterprise with a $1 million investment to KZDJ. This capital would satisfy the
investment requirement of the EB-5 petition.
Around November 7, 2012, Zhengang designated Qing as KZDJ’s vice president and
Peide as its secretary. Zhengang then opened a business checking account with SunTrust Bank
(“KZDJ SunTrust 9485”) by corporate resolution signed by all three KZDJ officers. See ECF No.
6-1 at 24–27. Zhengang then returned to China.
On or about March 10, 2013, Plaintiff asked Zhengang to travel to the United States to
discuss the EB-5 petition with Sam Chang (“Chang”), an immigration attorney Guizhi and
Xiaolan had recommended to Zhengang during his initial visit to Washington. See Amend.
Compl., ECF No. 6 at 9. Zhengang obliged and, once again, left for the United States. On or
about March 11, 2013, Xiaolan took Zhengang to Chang’s office at Wasserman, Mancini &
Chang, PC (“WMC”) to discuss the EB-5 petition requirements.3 Id. Because Zhengang could
not read, write, or speak English, all discussions were in Chinese.
After speaking with Chang about the EB-5 petition process, and upon Chang’s advice,
Zhengang, Plaintiff, Xiaolan, and Guizhi entered into an investment agreement titled “DC Duty
Free Store” related to the opening of the luxury goods store. ECF No. 6-2 at 1–4. To assuage
Zhengang’s and Plaintiff’s concerns regarding the riskiness of the investment and the amount of
money they were being asked to invest, the parties’ agreement states that Xiaolan and Guizhi
would pledge their homes as collateral until KZDJ could generate a profit equal to Zhengang’s
and Che’s investment. See ECF No. 6-2 at 3. Neither Zhengang nor Plaintiff knew that this
Chang and WMC will be referred to collectively as “the Defendants” for the remainder of this Memorandum
provision of the investment agreement would likely violate USCIS’s “at risk” investment
requirement. ECF No. 6 at 11. But Plaintiff was not worried, as she relied on the attorney,
Chang, to review the agreement for compliance with the immigration laws. Id.
Xiaolan translated the investment agreement from Chinese, see ECF No. 6-2 at 1–2, to
English, see id. at 4, which was then executed by both parties. See ECF No. 6 at 10. According to
Plaintiff, the translated document, titled “Business Agreement,” is materially different than the
original contract—differences that neither Zhengang nor Plaintiff noticed because they cannot
read English. For example, Xiaolan’s English translation states that Xiaolan and Guizhi “will
cooperate with the immigration lawyer [Chang],” while the original agreement makes no
mention of an immigration lawyer. Compare ECF No. 6-2 at 3, with id. at 4.
On April 26, 2013, Zhengang and Plaintiff wired $1,020,000 into KZDJ SunTrust 9485.
One million dollars was the Plaintiff’s EB-5 investment itself, and the remaining $20,000 was
Chang’s retainer fee. On the same day, Peide withdrew from the KZDJ SunTrust 9485 account
roughly $1 million and used those funds to open another SunTrust checking account for KZDJ
ending in 9337 (“KZDJ SunTrust 9337”). See ECF No. 6 at 12; ECF No. 6-2 at 6–10. Neither
Zhengang nor Plaintiff knew about Peide’s transfer.
On May 12, 2013, Plaintiff sent to Defendants the couple’s personal information, bank
records, resumes, work histories, and declarations in furtherance of her EB-5 petition. See ECF
No. 6 at 12–13. Included in Plaintiff’s declaration was a statement which reads: “Following the
receipt of funds in my Standard Chartered Bank account, I applied to transfer the investment
capital of $1 million to the SunTrust Bank account [ending in 9485] on April 24, 2013, and [the
SunTrust Bank account ending in 9485] received my investment capital on April 26, 2013.” See
ECF No. 6-2 at 13. Two weeks later, Peide wrote a $500,000 check to himself from SunTrust
KZDJ 9337 and then transferred the funds into a separate SunTrust checking account related to
the Yuan’s Virginia corporation, ZYD, Inc., and on which Peide was also a signatory. ECF No. 6
at 13. Peide and Xiaolan then purportedly took what was left of Plaintiff’s investment for
themselves. Plaintiff had no knowledge of these transfers.
On June 14 and 15, 2013, Xiaolan visited Chang at WMC’s D.C. office. Neither
Zhengang nor Plaintiff was in the United States at that time. According to Chang’s handwritten
notes, Xiaolan told Chang that Plaintiff’s $1 million investment would fund two separate
businesses for Peide and Xiaolan: (1) a duty-free gift shop and (2) a pan-Asian restaurant. Both
the restaurant’s and the gift shop’s employees would be considered in combination for the ten
full-time employees needed for Plaintiff’s EB-5 petition. Neither Plaintiff nor Zhengang
authorized or even knew about Xiaolan’s representations to Chang. See ECF No. 6 at 13–14.
Shortly before the June 14 and 15 meetings between Xiaolan and Chang, Taher
Albeitawi, a Florida businessman, registered an entity called “American Luxury Boutique”
(“ALB”). ECF No. 6 at 16; ECF No. 6-3 at 12–14. Taher incorporated ALB based upon a
business proposal drafted by Chawky Jabaly, who had emailed the same business proposal to
Xiaolan on April 3, 2013. ECF No. 6 at 16; ECF No. 6-3 at 15. On August 1, 2013, Peide wired
from the KZDJ SunTrust 9485 account $3,000 to the Jabaly Law Trust Account. ECF No. 6-3 at
16. Taher, Xialoan, and the property management company of 800 17th Street NW, Washington,
D.C. then allegedly executed a commercial lease in furtherance of the new ALB enterprise. It is
unclear whether Plaintiff was aware of these transactions. See ECF No. 6 at 16.
On June 17, 2013, Chang emailed Xiaolan a retainer agreement for Plaintiff and
requested an initial payment of $3,000 to WMC. See ECF No. 6 at 14–15; ECF No. 6-3 at 8–9.
The email also included questions for Plaintiff and requested further documentation regarding
Plaintiff’s and Zhengang’s business tax returns. On June 27, 2013, Plaintiff responded to
Chang’s June 17 email to Xiaolan through a translation service, Bright Life China (“BLC”).
Plaintiff designated Lydia from BLC as Plaintiff’s agent and translator, and copied on the email
was Lydia from BLC, Xiaolan, Zhengang, and another employee of BLC, Jerry. See ECF No. 63 at 10–11. Lydia sent two more emails on July 1 and 8, 2013 to Chang asking him whether he
received the June 27 email and asking him to call her. ECF No. 6 at 17.
On July 9, 2013, Chang sent an email to Xiaolan and Cindy at BLC, stating:
We have enclosed for your further handling the retainer agreement for the EB5
case. Please review, sign and return to our office with the retainer fee. Once we
receive the documentation, we will finalize the review of your documentation.
ECF No. 6-3 at 19–20. On July 12, 2013, Xiaolan sent WMC the retainer agreement and a check
for $3,000 drawn from KZDJ SunTrust 9485, but the retainer agreement was signed by Peide,
not Plaintiff. See ECF No. 6-4 at 3–6. Chang accepted the retainer agreement without calling or
emailing Plaintiff. WMC allegedly deposited the $3,000 check sent by Peide on July 14, 2013.
On July 15, Xiolan sent an email to Chang which contained attachments of KZDJ’s
incorporation papers. Oddly, the email copies a person named Debbie Chang. Defendant Chang
never inquired as to Debbie Chang’s relationship, if any, to Plaintiff. ECF No. 6 at 18.4
The next day, Defendant Chang sent another email directly to Xiaolan without copying
Plaintiff or Cindy at BLC, with the following instruction:
We are resending the retainer agreement for Che Li’s case. The retainer
agreement must be signed by Ms. Li. Please have her review, sign and return to
our office at her earliest convenience. When returning the retainer agreement, Ms.
Li should provide us with direct contact information including an email address.
Plaintiff alleges that Debbie Chang is Xiaolan’s sister, Chen Hua. ECF No. 6 at 18.
ECF No. 6 at 18–19; ECF No. 6-4 at 8. Chang then sent another email on July 18, 2013 only to
Xiaolan requesting Plaintiff produce documentation regarding her investment and business
venture. ECF No. 6-4 at 11.
On July 24, 2013, Plaintiff, through Lydia at BLC, sent Chang a signed retainer
agreement. See ECF No. 6-4 at 12–15. The retainer agreement provides that WMC would
provide the following services:
Step One (Form I-526/Form I-485 or IV Consulate Processing)
$3,000 to provide fee based consulting on questions and issues as the first
$12,000 when you retain us to start an EB5 case; we will assist you in
the feasibility period including advising you about the availability of the business
entities to invest in. When you decide to go forward with the investment and the
EB5 application, we will review the investment agreement and advise you about
the issues and documents involved. Finally, we will prepare and file the I-526
application package to USCIS.
Id. at 12.
On July 31, 2013, Chang sent two emails to Xiaolan, again requesting Xiaolan provide
Chang with Plaintiff’s email address even though Chang had already received several
communications from Lydia at BLC acknowledging that Lydia is Plaintiff’s representative. See
ECF No. 6-4 at 18; ECF No. 6 at 21, as Lydia was the person who sent Plaintiff’s signed retainer
agreement to Chang earlier that week.
On August 5, 2013, Xiaolan emailed WMC photographs depicting an April 2013
SunTrust Bank statement allegedly showing that Plaintiff had deposited $1,020,000 into KZDJ
SuntTrust 9485 on April 26, 2013. ECF No. 6 at 24. The bank statement also shows that at least
$1,000,000 of her investment had been transferred to KZDJ SunTrust 9337. Also included in the
email are photographs of an allegedly falsified signature card dated March 11, 2013, which
purports to add Xiaolan and Guizhi to KZDJ SunTrust 9485. Neither Plaintiff nor Zhengang
were copied on this email and Chang did not attempt to verify these documents with Plaintiff,
Zhengang, or BLC.
Throughout August, 2013, Peide and Xiaolan allegedly used Plaintiff’s investment for
their own personal expenses, and Chang and Xiaolan continued to communicate with one
another without involving Plaintiff or Zhengang. See ECF No. 6 at 25–27. Plaintiff’s complaint
also alleges that Xiaolan discussed with Chang two properties that Xialoan intended to rent using
Plaintiff’s investment. One was a restaurant called the “Zhan Restaurant,” a business unrelated to
Plaintiff’s investment. See ECF No. 6 at 29. Although this lease was unrelated to the EB-5
petition, Chang attached a copy of the restaurant lease to Plaintiff’s EB-5 petition. Chang did not
provide the restaurant lease to Plaintiff, Zhengang, or BLC until March 2015. See ECF No. 6 at
Chang apparently received another lease from Xiaolan, executed on behalf of KZDJ, for
the luxury store ALB. Plaintiff alleges that “[a]t no point before or after receiving the Restaurant
Lease and ALB Lease did Chang contact either [her] or ZZhang [sic] or otherwise inform them
of: (a) the fictitious owners listed on the leases; (b) the missing $1,000,000 investment; and (c)
the [sic] Peide wrote in the amount of $170,193.33 . . . from KZDJ SunTrust 9485 to secure the
leases.” ECF No. 6 at 32.
On October 7, 2013, Zhengang met with Chang. Chang told Zhengang that everything
was going well with the EB-5 petition and that Chang would contact him if Chang had any
concerns. Chang further represented that Plaintiff could expect her conditional EB-5 visa within
45 days after the filing of the EB-5 petition. ECF No. 6 at 33. At this point, both Plaintiff and
Zhengang still trusted Xiaolan and Peide. Accordingly, based on Chang’s assurance that
Plaintiff’s application would be reviewed soon, Plaintiff, Zhengang, and Peide entered into
another business venture for a multiuse commercial building in Rockville, Maryland. On October
16, 2013, Plaintiff wired an additional $163,934.40 to Peide for the purchase of the Rockville
Predictably, instead of using the $163,934 to purchase the property, Xiaolan and Peide
allegedly kept the money for themselves and also charged over $131,146.80 worth of
merchandise on Zhengang’s credit card. Plaintiff alleges she incurred a total loss involving the
“Rockville property” deal of $318,667.20.
In October 2014, after hearing nothing from Defendants, both Zhengang and Plaintiff
travelled to the United States to oversee their investment. They, along with Guizhi, met with
Chang to discuss the status of Plaintiff’s EB-5 application. At this meeting, Chang advised
Plaintiff and Zhengang to remain in the United States because Plaintiff’s EB-5 application would
be approved in 45 days. During their visit to the United States, Zhengang and Plaintiff observed
Xiaolan and other employees engaging in fraudulent business practices in their operation of the
luxury store. Plaintiff’s fears came to fruition in early December 2014 when Xiaolan and Guizhi
began executing several IOU notes and forbearance agreements to Zhengang. See ECF No. 6 at
On January 6 and 15, 2015, Plaintiff and Zhengang met with Chang to discuss their
concerns surrounding their EB-5 application, including their suspicion that Peide and Xiaolan
embezzled Plaintiff’s EB-5 investment. Plaintiff states that even though she requested to see a
translated copy of her EB-5 application, Chang did not provide it and claimed ignorance as to the
missing funds or leases which contributed to the insolvency of KZDJ. ECF No. 6 at 37. It was
not until March 16, 2015 that Chang finally gave Plaintiff a copy of the EB-5 application in
English without any companion translation. Id.
The controversy spawned litigation in the Circuit Court for Montgomery County between
Xiaolan, Zhengang, Plaintiff, transferees of property belonging to KZDJ, and Xiaolan’s alleged
co-conspirators. During this litigation, Plaintiff believes that she had discovered numerous errors
in her EB-5 application, and so in July 2015, Zhengang demanded that the EB-5 application be
withdrawn. See ECF No. 6-8 at 12.
On July 23, 2016, Plaintiff filed her initial complaint in this Court against the Defendants.
ECF No. 1, and her amended complaint on October 14, 2016, alleging five counts: (1)
Negligence/Malpractice; (2) Breach of Fiduciary Duty; (3) Breach of Contract; (4) Negligent
Misrepresentation; and (5) Fraud. ECF No. 6. On December 2, 2016, the Defendants moved to
dismiss the amended complaint or alternatively for summary judgment. ECF No. 13.
STANDARD OF REVIEW
The parties rely on exhibits attached to the Defendants’ motion and Plaintiff’s reply in
their briefs. Pursuant to Fed. R. Civ. P. 12(d), such materials may be considered only if the
motion to dismiss is treated as a motion for summary judgment and Plaintiff is given an
opportunity to respond. Fed. R. Civ. P. 12(d). Whether to convert a motion to dismiss to one for
summary judgment is a matter within the Court’s “complete discretion.” Sager v. Hous. Comm’n
of Anne Arundel Cty., 855 F. Supp. 2d 524, 542 (D. Md. 2012). At the July 11th hearing, the
Court discussed with the parties its preliminary intention to treat the Defendants’ motion as one
for summary judgment. After further review, however, the Court declines to exercise that
discretion here. Because a more robust factual development is necessary on certain of the claims,
summary judgment determinations are deferred.5
The purpose of a motion to dismiss is “to test the sufficiency of [the] complaint.”
Edwards v. City of Goldsboro, 178 F.3d 231, 243 (4th Cir. 1999). Ordinarily a complaint need
only satisfy the minimal pleading requirement of Rule 8(a)(2) by providing “a short and plain
statement of the claim showing that the pleader is entitled to relief.” However, when the
allegations in the complaint sound in fraud, the complaint “must state with particularity the
circumstances constituting fraud or mistake.” Fed. R. Civ. P. 9(b). When the heightened pleading
requirement of Rule 9(b) applies, the plaintiff must allege “the time, place, and contents of the
false representations, as well as the identity of the person making the misrepresentation and what
he obtained thereby.” Harrison v. Westinghouse Savannah River Co., 176 F.3d 776, 784 (4th Cir.
When testing the sufficiency of a complaint, courts may “consider documents attached to
the complaint” under Fed. R. Civ. P. 10(c), provided they are “integral to the complaint and
authentic.” See Philips v. Pitt Cnty. Mem’l Hosp., 572 F.3d 176, 180 (4th Cir. 2009). Documents
contemplated by Rule 10(c) include “contracts, notes, and other writing[s] on which [a party’s]
action or defense is based,” but not affidavits. Rose v. Bartle, 871 F.2d 331, 339 n.3 (3d Cir.
1989) (alterations in original), quoted in Occupy Columbia v. Haley, 738 F.3d 107, 116 (4th Cir.
Here, Plaintiff has attached numerous exhibits to her amended complaint. They include
contracts, bank statements, emails, checks, letters, and business documents. Those documents are
“integral” to the amended complaint because they support the Plaintiff’s fraud, breach of
In this same vein, the Court notes that the parties agreed at the hearing that if the Court were to deny summary
judgment, they would jointly request that discovery proceed in the ordinary course. This joint request further
supports the Court’s view that summary judgment is premature.
contract, and other tort claims. See Malinowski v. Lichter Grp., LLC, No. WDQ-14-917, 2015
WL 857511, at *4 (D. Md. Feb. 26, 2015); Green Ventures Int’l, LLC, P’ship v. Guttridge, No.
2:10-CV-01709-MBS, 2010 WL 5019363, at *4 n.4 (D.S.C. Dec. 1, 2010) (emails attached to
complaint were integral to fraud allegations). The Defendants do not challenge the authenticity
of these documents. The Court will consider these documents, but will not consider Plaintiff’s
declaration, ECF No. 6-2 at 13–14, or the excerpts from deposition testimony created in related
cases, see, e.g., ECF No. 6-1 at 1–2. Malinowski, No. WDQ-14-917, 2015 WL 857511, at *4 (D.
Md. Feb. 26, 2015), but see Occupy Columbia v. Haley, 738 F.3d 107, 116 (4th Cir. 2013)
(“There is no uniform rule among the circuits with respect to whether an affidavit attached as an
exhibit to a pleading is a ‘written instrument’ such that it may be considered by a district court in
resolving a Rule 12(b)(6) or Rule 12(c).”); cf. Barnard v. Lackawanna Cty., 194 F. Supp. 3d 337,
340 (M.D. Pa. 2016) (explaining that depositions are not considered “written instruments” under
Rule 10(c)) (citing cases).
Choice of Law
This Court is presiding over a diversity action in Maryland, and thus applies Maryland
choice of law rules. See Wells v. Liddy, 186 F.3d 505, 521 (4th Cir. 1999) (“A federal court
sitting in diversity must apply the choice-of-law rules from the forum state.”) (applying
Maryland law). For causes of action sounding in tort, Maryland adheres to the lex loci delicti
rule, applying the substantive law of the state in which the alleged tort took place. Philip Morris
Inc. v. Angeletti, 358 Md. 689, 744–45 (2000). For causes of action sounding in contract,
Maryland follows the doctrine of lex loci contractus, applying the substantive law of the place
where the contract was formed. Allstate Ins. Co. v. Hart, 327 Md. 526, 529 (1992). A legal
malpractice action may sound in either tort or contract depending upon the context. McCoubrey
v. Kellogg, Krebs & Moran, 7 F. App’x 215, 219 (4th Cir. 2001).
The parties’ retainer agreement includes a choice-of-law clause, which states that any
litigation arising from the legal services agreement “shall be governed and construed under the
laws of the District of Columbia.” ECF No. 6-4 at 14. The parties entered into the retainer
agreement in the District of Columbia and the events giving rise to Plaintiffs’ causes of action
occurred in the District of Columbia, including attorney-client consultations with Plaintiff,
Zhengang, and Xiaolan, and the Defendants’ review of Plaintiff’s immigration forms took place
in the District. Both parties, and the Court, agree that District of Columbia law applies to
Count One (Legal Malpractice)
To succeed on a legal malpractice claim, the plaintiff must show that (1) the defendant
was employed as the plaintiff’s attorney, (2) the defendant breached a reasonable duty, and (3)
that breach resulted in, and was the proximate cause of, the plaintiff’s loss or damages. Martin v.
Ross, 6 A.3d 860, 862 (D.C. 2010) (citing Niosi v. Aiello, 69 A.2d 57, 60 (D.C. 1949)).
Plaintiff alleges that, after the Defendants agreed to help her obtain an EB-5 visa, their
services fell below the standard of care for legal counsel. Plaintiff specifically points to the
Defendants’ failures to (1) translate certain documents for Plaintiff into her native tongue; (2)
communicate with her or her designated representative, BLC; (3) provide critical documents to
her; and (4) keep her apprised of transfers of her investment or notify her when Xiaolan and her
conspirators began making unauthorized use of her investment. See Amend. Compl., ECF No. 6
at 43–46. Plaintiff also alleges that Chang filed her EB-5 application with “glaring
inconsistencies” and “fraudulent signatures” which exposed Plaintiff to sanctions from USCIS.
Change’s misconduct thereby forced Plaintiff to withdrawal her application.
The Defendants first counter that their attorney-client relationship with Plaintiff did not
begin until June 2013 when Chang met with Xiaolan to discuss Plaintiff’s EB-5 application. See
ECF No. 13-1 at 21–25. Thus, according to the Defendants, Chang cannot be held liable for
Plaintiff’s claimed injuries arising from the execution of the Business Agreement and the
allegedly fraudulent transfer of Plaintiff’s funds because these acts all predated their involvement
as Plaintiff’s attorneys.
It is fundamental that a lawyer’s duty to her client begins only after the attorney-client
relationship is established. Hinton v. Rudasill, 624 F. Supp. 2d 48, 53 (D.D.C. 2009) (applying
District of Columbia law); see also Teltschik v. Williams & Jensen, PLLC, 683 F. Supp. 2d 33,
45 (D.D.C. 2010). An attorney-client relationship is formed when a client and attorney
“explicitly or by their conduct, manifest an intention to create the attorney/client relationship.”
Headfirst Baseball LLC v. Elwood, 999 F. Supp. 2d 199, 209 (D.D.C. 2013) (quoting In re Ryan,
670 A.2d 375, 379 (D.C. 1996)) (internal quotations omitted). In determining whether an
attorney-client relationship exists, courts consider a variety of factors, including whether the
client sought professional advice or assistance from the attorney, whether the attorney took
action on behalf of the client, and whether the attorney represented the client in proceedings or
otherwise held himself out as the client’s attorney. Teltschik, 683 F. Supp. 2d at 45 (citing In re
Lieber, 442 A.2d 153, 156 (D.C. 1982); In re Shay, 756 A.2d 465, 474–75 (D.C. 2000); In re
Bernstein, 707 A.2d 371, 375 (D.C. 1998)). Notably, “neither a written agreement nor the
payment of fees is necessary to create an attorney-client relationship,” and an attorney need not
take substantive action or give legal advice to establish such a relationship. In re Lieber, 442
A.2d at 156 (citing cases).
Plaintiff has alleged that the attorney-client relationship began in March 2013 with
sufficient factual detail to survive dismissal. She alleges that, on or about March 10, 2013,
Plaintiff asked Zhengang to travel to the United States to discuss the EB-5 program with Chang.
ECF No. 6 at 9. On March 11, he, along with Xiaolan, met with Chang at his office and
discussed the EB-5 process. Id. On March 14, Zhengang then returned to China to assemble the
documents Chang needed to begin the EB-5 application process—conduct consistent with having
met and discussed the EB-5 with Chang. See id. at 11. Plaintiff then allegedly sent Chang the
required documents on May 12, 2013, before the June 2013 meetings. See id. at 12; ECF No. 6-2
But this does not end the analysis. Even assuming an attorney-client relationship existed
as of March 2013, the Plaintiff must demonstrate that the attorney failed to exercise that “‘degree
of reasonable care and skill expected of lawyers acting under similar circumstances.’” Seed Co.
Ltd. v. Westerman, 832 F.3d 325, 335 (D.C. Cir. 2016) (quoting Morrison v. MacNamara, 407
A.2d 555, 561 (D.C. 1979)). Whether an attorney has breached the applicable standard of care
typically is reserved for the factfinder, and usually involves the introduction of expert testimony
to establish the standard of care. See Hickey v. Scott, 796 F. Supp. 2d 1, 3 (D.D.C. 2011); Chase
v. Gilbert, 499 A.2d 1203, 1211 (D.C. 1985) (“Expert testimony must be presented to establish
the standard care unless the attorney’s lack of care and skill is so obvious that the trier of fact can
find negligence as a matter of common knowledge.”) (internal citation and quotation marks
At this stage, Plaintiff has sufficiently alleged that the Defendants’ representation fell
below the applicable standard of care. Plaintiff points specifically to Defendants’ failure to
review the Business Agreement with her and give counsel as to any potential issues that may
arise. See Amend. Compl., ECF No. 6 at 21. Indeed, Chang never even requested a copy of the
Business Agreement, even though he knew of its existence as of July 17, 2013. Id. Because
Chang did not review the Business Agreement and its English translation, he likewise did not
inform Plaintiff of the material differences between the two. Chang’s failure to review with
Agreement meant that he missed its lack of conformance with the USCIS’s “at risk” investment
requirement. See Amend. Compl., ECF No. 6 at 11.
Plaintiff likewise points to Defendants’ negligently communicating with Xiaolan as
Plaintiff’s agent without Plaintiff’s authorization, including Chang’s private conversations with
Xiaolan on June 14 and 15, 2013 when they discussed Plaintiff’s EB-5 visa application and her
$1 million investment. ECF No. 6 at 13–14. This was also when Xiaolan informed Chang that
Plaintiff’s investment would be used to fund two businesses: a duty-free gift shop and a pan
Asian restaurant. See id. at 14. According to Chang’s notes from these meetings, the two
businesses would be reported under the same federal tax identification number to satisfy the EB5 requirement for a single business enterprise. See id. Plaintiff contends that Xiaolan’s decision
to fund two businesses from her investment instead of one made KZDJ untenable, given the
additional start-up costs and operating expenses. Most problematic, Plaintiff alleges neither she
nor Zhengang were in the United States at the time of these appointments and had no idea they
had taken place. Had the Defendants informed Plaintiff of this meeting and its contents, Plaintiff
would have prevented Xiaolan from pursuing this strategy with her investment funds.
Plaintiff similarly points to evidence that Chang failed to communicate with her
authorized agent, Lydia, and instead persisted in using Xiaolan as the intermediary, even after
Plaintiff directed Chang to send all communications through BLC to Plaintiff and Zhengang. See
Amend. Compl., ECF No. 6 at 15; see also Email, ECF No. 6-3 at 10. Lydia, on behalf of
Plaintiff, sent several other emails to Chang requesting a status update regarding Plaintiff’s EB-5
application. ECF No. 6 at 17; ECF No. 6-3 at 17–18. Chang did not respond to these emails.
Rather, Chang used Xiaolan as Plaintiff’s representative. See, e.g., Amend. Compl., ECF No. 6 at
18–19; ECF No. 6-4 at 8, 11. Indeed, after Defendants filed Plaintiff’s EB-5 application,
Plaintiff alleges that they did not notify her of its filing or provide her a copy of the filed
application. Amend. Compl., ECF No. 6 at 35. But Chang did forward the application to Xiaolan.
When Lydia requested a copy of the application on behalf of Plaintiff, Chang simply informed
Lydia that he had already sent a copy to Xiaolan. See ECF No. 6-8 at 4.
Notably this all occurred against the backdrop of Xiolan’s fraudulently transferring
Plaintiff’s investment to other business ventures. Plaintiff avers that Chang knew of this fraud
and failed to alert her. On August 5, 2013, Xiaolan emailed photographs to Chang depicting an
April 2013 SunTrust Bank statement that shows Plaintiff’s $1,020,000 investment deposited on
April 26, 2013 into the KZDJ SunTrust 9485. However, the bank statement also shows that the
entire sum was immediately removed and placed into the KZJD SunTrust account ending in
9337. See ECF No. 6-3 at 8–17. The email also includes photographs of an allegedly falsified
signature card dated March 11, 2013, which purports to add Xiaolan and Guizhi to the SunTrust
9485 account. The documents appear to have both Zhengang and Plaintiff’s signature. However,
the original SunTrust documents include only the signatures of Zhengang, Qing, and Peide.
Neither Plaintiff nor Zhengang were copied on this August 5th email and Chang allegedly made
no attempt to verify these documents with Plaintiff or Zhengang. Simply put, a reasonably well
trained, educated and experienced attorney would have done more to safeguard his client’s
Defendants essentially counter that Plaintiff’s complaints do not amount to professional
negligence. Central to Defendants’s argument is their claimed scope of representation: they
assert that they were to assist Plaintiff in obtaining an EB-5 visa and nothing more. See ECF No.
13-1 at 25. Based on this limited representation, they claim that Chang had no obligation to
review the Business Agreement; thus, any damage that Plaintiff incurred as a result of the errors
in this document should be borne by Xiaolan and her confederates, not the Defendants.
Defendants point to the retainer agreement which confines their services to the EB-5 visa
petition, and not any “security and/or financial aspects of the investment.” The agreement further
instructs the client “to seek independent advice on [certain financial aspects of the investment]
from a financial advisor, business advisor, business or securities lawyer or accountant.” Retainer
Agreement, ECF No. 6-4 at 13.
Plaintiff, however, aptly notes that Zhengang signed the Business Agreement precisely
because she hired Chang to review it and advise her as to its compliance USCIS’s EB-5 Program
requirements. ECF No. 14-5 at 5–6. Plaintiff also highlights that the retainer agreement
specifically provides that:
[WMC] will assist you in the feasibility period including advising you about the
availability of the business entities to invest in. When you decide to go forward
with the investment and the EB-5 application, we will review the investment
agreement and advise you about the issues and documents involved.
ECF No. 6-4 at 12 (emphasis added). Thus, the scope of Defendants’ representation, as pled,
included reviewing the Business Agreement and advising Plaintiff “about the issues and
Defendants also take issue with whether Xiaolan was Plaintiff’s authorized agent. See
ECF No. 13-1 at 25–26. According to the Defendants, Xiaolan is Plaintiff’s designated agent
according to the English version of the Business Agreement. See ECF No. 6-2 at 4 ECF No. 6-2
at 3. (“During the EB-5 application, [Xiaolan and Guizhi Yuan] will cooperate with the
immigration lawyer.”). Chang also attests that Xiaolan held herself out to Chang as Plaintiff’s
agent for the purpose of the EB-5 petition. See ECF No. 13-2 at 3, and that neither Plaintiff nor
Zhengang ever instructed him to cease communications with Xiaolan until January 2015. Id.
Plaintiff’s amended complaint specifically avers, however, that she did not designate
Xiaolan as her agent with authority to communicate with the Defendants. Likewise, Plaintiff
asserts that because they were working through Xiaolan, Defendants also failed to adequately
communicate with Plaintiff on matters pertaining to her EB-5 petition. These allegations are
sufficient to sustain Plaintiff’s professional negligence claim.
Defendants nonetheless maintain dismissal is warranted because even if they breached
their duties to Plaintiff, such breach was not the proximate cause of her injuries. See ECF No. 131 at 26–28. In a nutshell, Defendants claim that Plaintiff’s losses were the result of Xiaolan’s
embezzlement, not Chang’s negligence.6 Defendants similarly argue that Plaintiff’s legal
malpractice claim must fail to the extent that Plaintiff is seeking damages as a result of not
receiving an EB-5 visa. ECF No. 13-1 at 28. This is so, say Defendants, because “[Plaintiff’s]
EB-5 petition was doomed to fail regardless of any alleged negligent actions or inactions by the
Defendants through the representations,” and because the Business Agreement converted her
Defendants raise the companion argument that because Plaintiff’s $1 million was fraudulently diverted
prior to the formation of the attorney-client relationship, any alleged malpractice cannot be the cause of
Plaintiff’s harm. As discussed infra, a genuine issue of material disputed fact exists as to when the
attorney-client relationship began. If the factfinder credits Plaintiff’s evidence, then the embezzlement
occurred after the attorney client relationship began. Accordingly, Defendants proximate cause argument
on this basis must be rejected for the same reasons.
investment into a loan which ran afoul of USCIS’s “at risk” requirement. ECF No. 13-1 at 28.
The Court disagrees.
As in all negligence based actions, legal malpractice “is predicated on a finding that the
injury was proximately caused by the breach of duty.” Dalo v. Kivitz, 596 A.2d 35, 41 (D.C.
1991) (citing District of Columbia v. Freeman, 477 A.2d 713, 715–16 (D.C. 1984) (tortious act
must “play a central role” in the injury or be a “substantial factor” leading to the harm)).
Proximate cause is satisfied where the evidence shows a “substantial and direct causal link”
between the attorney’s breach and the injury sustained by the client, Freeman, 477 A.2d at 716.
Proximate cause is also “normally a question of fact reserved for the jury.” Hickey v. Scott, 796
F. Supp. 2d 1, 4 (D.D.C. 2011) (quoting Royal Ins. Co. of Am. v. Miles & Stockbridge, P.C., 133
F. Supp. 2d 747, 762 (D. Md. 2001) (applying Maryland law)) (internal quotations omitted).
“Although it is sufficient to show that the movant could have ‘fared better’ in reaching the
ultimate goal sought, . . . or that there would have been a difference in the trial’s outcome, . . .
more is required than speculation.” Chase v. Gilbert, 499 A.2d 1203, 1212 (D.C. 1985) (internal
Here, Plaintiff has sufficiently alleged that Defendants’ representation included review of
the Business Agreement for USCIS compliance. Had the Defendants’ reviewed the Agreement,
so the argument goes, they would have noticed that it did not comply with the EB-5 Program and
warned Plaintiff accordingly. Likewise, had Defendants reviewed the Agreement and performed
the related due diligence, it would have uncovered Xiaolan’s embezzlement prior to the
unauthorized dissipation of her funds and with sufficient time to claw back her investment.
Plaintiff has averred sufficient facts on proximate cause. Defendant’s motion is, therefore,
denied as to Count One.
Breach of Fiduciary Duty and Breach of Contract (Counts Two and Three)
A claim for breach of fiduciary duty is similar in many respects to a claim for legal
malpractice. Under District of Columbia law, a plaintiff must prove (1) the existence of a
fiduciary duty, (2) a breach of the duties associated with that relationship, and (3) injuries that
were proximately caused by the breach of the fiduciary duty. Armenian Genocide Museum &
Memorial, Inc. v. The Cafesijian Family Found., Inc., 607 F. Supp. 2d 185, 190–91 (D.D.C.
2009). While a legal malpractice claim is based on negligence—or, a breach of the standard of
care—a fiduciary duty claim rests on the breach of a fiduciary duty, or a “standard of conduct.”
Bolton v. Crowley, Hoge & Fein, P.C., 110 A.3d 575, 583 (D.C. 2015) (explaining the difference
between legal malpractice and fiduciary duty claims). Accordingly, claims of negligent
representation do not suffice to sustain a claim for a breach of fiduciary duty.
For this reason, courts in the District of Columbia often dismiss claims for breach of
fiduciary duty as duplicative of the plaintiff’s malpractice claim because the claims are
essentially indistinguishable. See, e.g., Rocha v. Brown & Gould, LLP, 101 F. Supp. 3d 52, 78
(D.D.C. 2015) (“Under D.C. law, when a plaintiff’s breach of fiduciary duty claim is
indistinguishable from her legal malpractice claim, her inability to prove the malpractice claim
renders the fiduciary duty claim unsustainable.” (quoting Johnson v. Sullivan, 748 F. Supp. 2d 1,
12 (D.D.C. 2010) (internal quotations and alterations omitted)); Mawalla v. Hoffman, 569 F.
Supp. 2d 253, 257 (D.D.C. 2008) (“In professional malpractice cases, additional claims which
are based on the underlying malpractice claim cannot survive if the professional malpractice
claim fails.” (citing Macktal v. Garde, 111 F. Supp. 2d 18, 23 (D.D.C. 2000)); N. Am. Catholic
Educ. Programming Found., Inc. v. Womble, Carlyle, Sandridge & Rice, PLLC, 887 F. Supp. 2d
78, 83 (D.D.C. 2012) (dismissing plaintiff’s fiduciary duty claim, among others, because there
were “based on the same sets of facts and seek identical relief.”).7 The Defendants follow this
lead, and summarily argue that Plaintiff’s malpractice and fiduciary duty claims “completely
overlap” and therefore must be dismissed. See ECF No. 13-1 at 28.
Plaintiff’s breach of fiduciary duty claim, to be sure, mirrors her professional negligence
case as to the duty of care. But the claims differ in one important respect. In her fiduciary duty
claim, Plaintiff alleges that the Defendants breached duty of care by “knowingly or recklessly”
facilitating the transfer of Xiaolan’s investment to Xiaolan for her personal use. ECF No. 6 at 46.
She also alleges that the Defendants “knowingly and recklessly” concealed their knowledge of
said transfers, id., actions that may fall below an attorney’s standard of conduct. The Defendants
do not argue otherwise. Moreover, Plaintiff’s duty of loyalty claim is centered on the allegation
that the Defendants provided legal advice to Xiaolan, whose interests conflicted with those of
Plaintiff. These allegations are not part of Plaintiff’s legal malpractice claim. Accordingly, the
two counts allege sufficiently distinct misconduct so that Defendants’ motion must be denied as
to Count Two.
The Defendants also argue that Plaintiff’s breach of contract claim should be dismissed
as duplicative. See ECF No. 13-1 at 28–29. The Court agrees. Plaintiff’s breach of contract count
is based on the exact conduct giving rise to her legal malpractice claim. Specifically, she alleges
that “Defendants breached the legal services contract by failing to: (a) review the investment
agreement: (b) inform [Plaintiff] of their concerns that KZDJ did not have 10 fulltime
See also, e.g., Hinton v. Rudasill, 384 F. App’x 2, 2 (D.C.Cir. 2010) (“[A]ppellant cannot recast his malpractice
claim as a breach of fiduciary duty claim . . . and he has not shown that his claims of negligence, breach of care,
breach of trust, and bad faith are distinguishable from his malpractice claim.”) (citation omitted); Iacangelo v.
Georgetown University, 760 F. Supp. 2d 63, 66 (D.D.C. 2011) (“[T]he plaintiffs’ claim for breach of fiduciary duty
is entirely duplicative of their claims for medical malpractice and lack of informed consent; this claim rests on the
same factual allegations as the other two, would be decided under the same legal standards as one or the other of
those claims, and authorizes the same forms of relief.”); Biomet Inc. v. Finnegan Henderson LLP, 967 A.2d 662,
670 n.4 (D.C. 2009) (“Biomet’s attempt to recast its [legal] malpractice argument as also breach of contract and
breach of fiduciary duty fails.”)
employees, and (c) provide competent representation.” ECF No. 6 at 48. Cf. N. Am. Catholic
Educ. Programming Found., Inc., 887 F. Supp. 2d at 83 (“The plaintiff’s claims for breach of
contract, breach of the implied duty of good faith and fair dealing, and breach of fiduciary duty
are duplicative of its malpractice claim and must be dismissed.”); Biomet Inc., 967 A.2d at 670
n.4 (D.C. 2009) (“Biomet’s attempt to recast its [legal] malpractice argument as also breach of
contract and breach of fiduciary duty fails.”). Accordingly, the Defendants’ motion is granted on
Negligent Misrepresentation (Count Four)
In the District of Columbia, the elements of negligent misrepresentation are (1) a false
statement or omission of a fact that a defendant had a duty to disclose; (2) that the defendant
intended or should have recognized that the plaintiff would be deleteriously affected by reliance
on the misrepresentation; and (3) that the plaintiff reasonably relied upon the misrepresentation
to her detriment. Howard Univ. v. Watkins, 857 F. Supp. 2d 67, 75 (D.D.C. 2012) (citing Hall v.
Ford Enter., Ltd., 445 A.2d 610, 612 (D.C. 1982)).
Plaintiff’s negligent misrepresentation claim rests principally on Chang’s
communications to Zhengang regarding the timeline of Plaintiff’s EB-5 petition. Specifically, on
October 7, 2013, Zhengang allegedly met with Chang who assured Zhengang that her EB-5
petition process was moving along smoothly. ECF No. 6 at 49. Chang further represented that,
upon filing the EB-5 application, Plaintiff could expect her conditional admission to the United
States within forty-five days. Id.
Believing that their immigration to the United States was imminent, Zhengang and
Plaintiff decided to pursue an investment opportunity with Peide to purchase a multiuse
commercial building in Rockville, Maryland. Id. at 49–50. Plaintiff and Zhengang provided a
down payment of over $318,000 in currency and credit toward the purchase of the commercial
building. Id. at 50. Xiaolan and Peide later cancelled the commercial building contract and
allegedly misspent the down payment.
Chang filed Plaintiff’s EB-5 petition on November 19, 2013, after Zhengang and Plaintiff
had forwarded Peide the money to secure the Rockville commercial building. When Chang filed
the EB-5 application, he received a notice from USCIS that the timeline for processing an EB-5
application was, on average, approximately thirteen months. See ECF No. 6-8 at 9–10. On
October 14, 2014, Zhengang, Guizhi, and Plaintiff met with Chang who allegedly reiterated that
Plaintiff’s EB-5 application would be approved within forty-five days. Plaintiff asserts, therefore,
that Chang’s forty-five-day assurance was a false representation; that the Defendants should have
known Plaintiff would rely on this representation; and that Plaintiff did so to her detriment by
pursuing an investment with Xiaolan and Peide that turned out to be another part of their
fraudulent scheme. See generally ECF No. 6 at 49–50 (outlining Plaintiff’s negligent
The Defendants counters that Plaintiff’s negligent misrepresentation claim must fail for
several reasons. See ECF No. 13-1 at 30–32. First they argue that Chang’s alleged reassurance of
the EB-5 timeline during the October 2014 meeting was accurate because Plaintiff’s petition had
been outstanding for approximately eleven months. Second, they argue that the statement
amounts to aspirational predictions about future events, and so are not demonstrably false
statements. Third, the Defendants argue that even if Chang’s statement was false, it is nothing
more than a mistake of legal professional judgment and not an act of negligent
misrepresentation. Finally, they argue that Plaintiff could not have reasonably relied on the
statement to purchase the commercial property because this investment had nothing to do with
the EB-5 petition. Also, by that time, Plaintiff was aware that Xiaolan and Guizhi had defaulted
on their payments for the investment loan pursuant to the Business Agreement. Thus, Plaintiff
must take some responsibility for entering into a separate transaction with business partners who
had already failed her once before.
The Court agrees with the Defendants, at least in part, and thus concludes that Plaintiff’s
negligent misrepresentation claim as it relates to Chang’s 45-day assurance fails as a matter of
law. Under District of Columbia law, to recover for a negligent misrepresentation claim, a
plaintiff must prove “that the defendant’s challenged conduct proximately caused [the] plaintiff’s
injury.” Steele v. Isikoff, 130 F. Supp. 2d 23, 34 (D.D.C. 2000) (citing Thompson v. Shoe World,
Inc., 569 A.2d 187, 189 (D.C. 1990)). A defendant’s challenged conduct is the proximate cause
of a plaintiff’s injury “only if ‘the injury is the natural and probable consequence of the
negligence or wrongful act and ought to [have been] foreseen in light of the circumstances.’”
Steele, 130 F. Supp. 2d at 34 (quoting Sanders v. Wright, 642 A.2d 847, 849 (D.C. 1994)).
“Proximate cause is generally a factual issue to be resolved by the jury, however, it becomes a
question of law when the evidence adduced at trial will not support a rational finding of
proximate cause.” Majeska v. D.C., 812 A.2d 948, 950 (D.C. 2002) (quoting Washington Metro.
Area Transit Auth., et al., v. Davis, 606 A.2d 165, 170 (D.C. 1992)) (quotation marks omitted).
Here, Plaintiff’s amended complaint is insufficient as to proximate cause. Plaintiff does
not allege, nor can she, that had her EB-5 petition been approved within forty-five days as Chang
promised, the outcome of Plaintiff’s second investment with Peide would have been any
different. While Chang’s promise may have animated Plaintiff’s decision to pursue the
investment opportunity, it had nothing to do with Xiaolan’s and Peide’s alleged fraud—the true
cause of Plaintiff’s injury. In fact, Plaintiff, Xiaolan, and Peide consummated the new deal
before Chang filed Plaintiff’s EB-5 petition and thus before the alleged 45-day clock began.
Moreover, Plaintiff does not allege that she informed Chang of her decision to pursue this
investment opportunity, let alone that she was doing so on Chang’s assurance that the EB-5
review process would take little time. In this way, Plaintiff has failed to demonstrate that her
injury “is the natural and probable consequence” of Chang’s statement or that the loss of her
investment “ought to [have been] foreseen in light of the circumstances.” Steele, 130 F. Supp. 2d
at 34. Accordingly, the Defendants’ motion to dismiss is granted in this respect.
Plaintiff argues that Chang’s promise of a speedy petition process was not the only
instance of negligent misrepresentation she pleaded. Indeed, the amended complaint incorporates
into Count Four Plaintiff’s previous allegations. See ECF No. 6 at 49. She specifically highlights
paragraph 214 of her amended complaint which reads:
WMC and Chang owned [sic] a duty of care to both [Plaintiff] and KZDJ to
refrain from engaging in grossly negligent or reckless conduct including their
repeated failures to disclose to [Plaintiff] facts a reasonable person in similar
circumstances would want to know including that:
On April 26, 2016, [Plaintiff]’s entire $1,020,000 investment was removed
from the KZDJ 9485 business checking account.
Xiaolan failed to produce monthly bank statements, canceled checks or
proof of expenses regarding the EB-5 investment.
All bank statements were being sent to the home of Xiaolan and Peide.
KZDJ was in danger of losing its qualifying status by failing to employ 10
full time employees.
Qing and Peide had signed on behalf of KZDJ the ALB Lease which
required monthly payments of $8,333.00.
Qing and Peide had signed on behalf of KZDJ the Restaurant Lease which
required KZDJ to make monthly payments of $12,000.00.
The landlord for ALB and Zhang Restaurant demanded and received from
KZDJ $150,000 for security deposited [sic] for both ALB and Zhang Restaurant.
Xiaolan was holding herself out as a partner and claiming an ownership
interest in KZDJ.
ECF No. 6 at 45–46. These failures, according to Plaintiff, are other instances of negligent
Defendants do not challenge the sufficiency of these factual averments. Rather,
Defendants erroneously contend that Plaintiff has raised these bases for the first time in her
briefs and should not be permitted to amend her complaint via the pleadings. See ECF No. 15 at
10 (citing, inter alia, Zachair Ltd. V. Driggs, 965 F. Supp. 741, 748 n.4 (D. Md. 1997) (stating
that a plaintiff “is bound by the allegations contained in its complaint and cannot, through the use
of motion briefs, amend the complaint”)). But the amended complaint incorporates all factual
assertions made throughout into her negligent misrepresentation claim. Defendants, therefore,
cannot cry foul because they were put on notice of these very allegations in support of the
negligent misrepresentation count. Accordingly, the majority of Plaintiff’s misrepresentation
claim survives. However, to the extent Plaintiff relies on Defendant’s promises of a speedy
petition process as the basis for her negligent misrepresentation claim, those allegations are
Count Five (Fraud)
To establish fraud under District of Columbia law, a plaintiff must prove: (1) the
defendant made a false representation; (2) in reference to a material fact; (3) with knowledge of
its falsity; (4) with the intent to deceive the plaintiff; (5) the plaintiff acted in reasonable reliance
on that representation; (6) which consequently resulted in provable damages. C & E Servs., Inc.
v. Ashland, Inc., 498 F. Supp. 2d 242, 255 (D.D.C. 2007) (citing Atraqchi v. GUMC Unified
Billing Servs., 788 A.2d 559, 563 (D.C. 2002); Dresser v. Sunderland Apartments Tenants Ass’n,
Inc., 465 A.2d 835, 839 (D.C. 1983); Alicke v. MCI Commc’ns Corp., 111 F.3d 909, 912 (D.C.
Cir. 1997)). “To find that a misstatement was made with knowledge of its falsity, the person
accused . . . must be found to have known that the statement was false, or to have made that
statement with reckless indifference as to its truth.” Powell v. District of Columbia Housing
Authority, 818 A.2d 188, 197 (D.C.2003). Rule 9(b) of the Federal Rules of Civil Procedure
requires that a “party . . . state with particularity the circumstances constituting fraud or
Plaintiff’s fraud claim stems from Chang’s alleged failure to advise Plaintiff and
Zhengang that KZDJ Inc. would be a two-layered business—a DC store and a pan-Asian
restaurant—for the purposes of the EB-5 petition. The amended complaint specifically alleges,
“upon information and belief,” that Chang intentionally misrepresented that KZDJ was a single
business enterprise and that that “Chang received compensation from Peide and Xiaolan to
facilitate the multilayer structure.” Amend. Compl., ECF No. 6 at 52. In other words, Plaintiff
asserts that the Defendants deliberately omitted Xiaolan’s intent to fund two separate businesses
with Plaintiff’s investment to receive additional compensation from Peide and Xiaolan. These
allegations are sufficient to satisfy Rule 9(b) and avoid dismissal.
Defendants contend nonetheless that Plaintiff’s fraud claim fails to meet Rule 9(b)’s
heightened pleading standard. See ECF No. 13-1 at 33. Specifically, Defendants argue that
Plaintiff “has not and cannot allege sufficient facts to create an inference that Chang
‘intentionally’ failed to disclose the two-layered business structure.” Id. Rule 9(b) allows
“[m]alice, intent, knowledge, and other conditions of a person’s mind may be alleged generally.”
Fed. R. Civ. P. 9(b). Plaintiff has done so here.
Defendants also argue that Plaintiff has failed to allege that Defendants statements to
Xiaolan regarding the two-layered business structure were mere legal opinions and not factual
misrepresentations. See ECF No. 13-1 at 34 (citing De May v. Moore & Bruce, LLP, 584 F.
Supp. 2d 170, 185 (D.D.C. 2008) (explaining that erroneous legal advice normally does not
constitute a factual misrepresentation)). Additionally, Defendants maintain that Xiaolan was
Plaintiff’s agent for purposes of the EB-5 petition process.
Defendants overlook, however, Plaintiff’s plausible allegations that Xiaolan was never
designated as Plaintiff’s agent. This allegation must be taken as true at this stage. Further,
Defendants’ argument misconstrues the basis of Plaintiff’s fraud claim. Although Plaintiff takes
issue the Defendants’ role in moving forward with the two-layered business structure, the basis
of her fraud claim is that the Defendants intentionally kept this decision from Plaintiff, which
advanced the Defendants’ and Xiaolan’s interests at the expense of the Plaintiff. Because
Plaintiff’s allegations are sufficient at the motion to dismiss stage, Count Five survives.
Defendants’ Unclean Hands Defense
Defendants’ last claim is that Plaintiff claims are barred under the doctrine of unclean
hands. “The unclean hands doctrine derives from the equitable maxim that ‘he who comes into
equity must come with clean hands.’” U.S. v. Philip Morris, Inc., 300 F. Supp. 2d 61, 74
(D.D.C. 2004) (quoting Precision Instrument Mfg. Co. v. Automotive Maintenance Mach. Co.,
324 U.S. 806, 814 (1945)). “The doctrine ‘closes the doors of a court of equity to one tainted
with inequitableness or bad faith relative to the matter in which he seeks relief.’” Id. (internal
citation omitted). According to the Defendants, Plaintiff and Zhengang never produced the
Business Agreement to the Defendants and the nature of the Agreement was knowingly withheld
from USCIS. The Defendants allege that Plaintiff and Zhengang kept the nature of the
Agreement secret because they knew it did not comply with the requirements for an EB-5
petition, and disclosing such information would place their goal of immigration at risk.
Taking the facts as alleged in the amended compliant as true, the Court cannot credit
Defendants unclean hands position at this juncture. Indeed, Plaintiff alleges that she did not
know that the Business Agreement failed to comply with the EB-5 requirements and in fact hired
Chang to assure compliance. Thus, according to Plaintiff, any missteps in the petition process
fall on the Defendants, not Plaintiff. Defendants’ motion is denied on this basis.
Based on the foregoing, the Defendants’ motion to dismiss is granted in part and denied
in part. It is denied with respect to Counts One (Legal Malpractice), Two (Breach of Fiduciary
Duty), and Five (Fraud). It is granted with respect to Count Three (Breach of Contract). The
motion is granted with respect to Count Four (Negligent Misrepresentation) to the extent it rests
on the Defendants’ alleged promise to Plaintiff of a speedy EB-5 petition process, but denied in
all other respects. A separate order will follow.
United States District Judge
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