Wang et al v. Jianming et al

Filing 115

OPINION AND ORDER granting in part and denying in part 67 Motion to Amend Complaint; granting 86 Motion to Dismiss Plaintiffs' Claims for Lack of Personal Jurisdiction Pursuant to Rule 12(b)(2); granting 87 Motion to Dismiss Plaintiffs' Claims for Lack of Subject Matter Jurisdiction Pursuant to Rule 12(b)(1) and Failure to State a Claim Pursuant to Rule 12(b)(6). Signed by Judge Christina Reiss on 7/19/2019. (law)

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FIL.ED

UNITED STATES DISTRICT COURT
FOR THE
DISTRICT OF VERMONT
WEI WANG, GUANGYI XIONG,
XIAOFENG FENG,
Plaintiffs,
v.
SHEN JIANMING, SHENLA W LLC,
DARREN SIL VER, and DARREN SIL VER
& ASSOCIATES LLP,
Defendants.

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Case No. 2:17-cv-00153

OPINION AND ORDER GRANTING IN PART AND DENYING IN PART
PLAINTIFFS' THIRD MOTION TO AMEND COMPLAINT AND TO ADD
CLASS ACTION CLAIMS AND GRANTING SILVER DEFENDANTS'
MOTIONS TO DISMISS
(Docs. 67, 86, & 87)
On August 11, 2017, Plaintiffs Wei Wang, Guangyi Xiong, and Xiaofeng Feng
filed a Complaint in this court alleging legal malpractice; breach of contract; breach of
the implied covenant of good faith and fair dealing; unjust enrichment; violations of
Sections l0(b) and l0b-5 of the Securities Exchange Act of 1934; unfair and deceptive
practices in violation of the Vermont Consumer Protection Act, 9 V.S.A. §§ 2451-82j;
and breach of fiduciary duty against Jianming Shen 1 and ShenLaw LLC (collectively, the
"Shen Defendants"). Plaintiffs' claims arise out of development projects in Jay Peak,
Burke, and the greater Newport area of Vermont comprised of eight phases in various
stages of completion (the "Jay Peak Projects").
Pending before the court is Plaintiffs' third motion to amend the Complaint and to
add class action claims (Doc. 67). Also pending before the court are a motion to dismiss

1

In the caption, this Defendant is referred to as "Shen Jianming," however, both Defendants'
briefing and Attorney Shen's affidavit indicate that his name is "Jianming Shen." The court
therefore directs the Clerk of Court to correct the caption.

Plaintiffs' claims for lack of personal jurisdiction pursuant to Rule 12(b)(2) (Doc. 86), a
motion to dismiss for lack of subject matter jurisdiction pursuant to Rule l 2(b )( 1), and a
motion to dismiss for failure to state a claim pursuant to Rule 12(b)(6) (Doc. 87) filed by
Defendants Darren Silver and Darren Silver & Associates LLP (the "Silver Defendants").
At issue is whether Plaintiffs should be permitted to amend their Complaint a third
time; whether Plaintiffs' proposed class action claims are futile; whether Plaintiffs'
motion to amend should be denied on the grounds of undue delay; whether Plaintiffs have
standing to assert their proposed class action claims; whether the court has subject matter
jurisdiction in light of the absence of diversity of citizenship between proposed new
plaintiff Stephen Webster and the Silver Defendants; and whether the court may properly
exercise personal jurisdiction over the Silver Defendants.

I.

Procedural Background.
On June 22, 2018, approximately ten months after filing their initial Complaint,

Plaintiffs moved to amend their Complaint to add class action claims. In their First
Amended Complaint, Plaintiffs, individually and on behalf of similarly situated class
members, alleged four causes of action against a proposed class of defendants: breach of
fiduciary duty; unfair and deceptive practices in violation of the Vermont Consumer
Protection Act, 9 V.S.A. §§ 2451-82j; legal malpractice; and breach of the implied
covenant of good faith and fair dealing. The Shen Defendants opposed the motion to
amend.
On August 13, 2018, prior to the court's ruling on their first motion to amend,
Plaintiffs filed a second motion to amend their Complaint to add Stephen Webster as a
plaintiff and to add the Silver Defendants as defendants. Plaintiffs served their proposed
Second Amended Complaint without withdrawing their proposed First Amended
Complaint.
At a hearing on November 5, 2018, the court granted Plaintiffs' oral motion to
withdraw their first motion to amend the Complaint and granted in part and denied in part
Plaintiffs' second motion to amend the Complaint. The court ruled that the class action
allegations as pied were futile because the proposed class of plaintiffs lacked standing to
2

sue the proposed class of defendants. At Plaintiffs' request, the court granted Plaintiffs
thirty days to file a Third Amended Complaint (hereinafter, "TAC") to correct certain
factual errors in their Second Amended Complaint. The court did not foreclose the
possibility of revised class action claims. Thereafter, Plaintiffs embarked upon what they
characterize as a "vast overhaul of Part II" (Doc. 67 at 2) of their Complaint. They seek
to add claims for violations of the Racketeer Influenced and Corrupt Organizations Act
("RICO"), 18 U.S.C. § 1962 (Count I); conspiracy to violate 18 U.S.C. § 1962(c) (Count
II); civil conspiracy to violate 13 V.S.A. § 1108 (Count III); and unjust enrichment
(Count IV). They propose asserting these claims on behalf of a class of plaintiffs
comprised of "individuals who retained the Defendant Attorneys to perform all necessary
legal services for their investment at the Jay [Peak] Projects under and pursuant to the
United States Citizenship and Immigration Services Employment-Based, Fifth Preference
('EB-5') immigrant-investor program" (the "Proposed Class Plaintiffs") against a
proposed class of defendants comprised of individuals or business entities "hired by a
Plaintiff to represent them in their investment with the Jay Peak Projects" (the "Proposed
Class Defendants"). (Doc. 67-1 at 31, ,r,r 16, 21.)
The TAC further seeks to add Siyi Chen as a plaintiff and to add defendants
Darren Silver; Darren Silver & Associates LLP; 2 Dai & Associates LLP; Nguyen Huuan;
Ting Geng; the Law Offices of Geng & Zhang, PLLC; Leslie I. Snyder, BSC; Ruben
Flores; and Cheng Yun & Associates, PLLC. The TAC seeks to remove defendants
Schnader, Harrison, Segal & Lewis LLP; the Flores Group; and Yun Cheng.
The Shen Defendants filed an initial opposition on February 1, 2019 and a
supplemental opposition on March 13, 2019. Plaintiffs filed a reply on March 15, 2019
and a supplemental reply on March 27, 2019, at which time the court took the pending

2

The redlined version of the TAC indicates that Darren Silver & Associates LLP has been
deleted from the case caption. However, this appears to have been inadvertent, as Plaintiffs
indicated in their opposition to the Silver Defendants' motions to dismiss that they oppose
dismissal of Darren Silver & Associates LLP. See Doc. 109 ("Plaintiff ... hereby opposes and
moves this Honorable Court to deny Defendants, Darren Silver and Darren Silver & Associates
LLP (the "Silver Defendants"), Motions to Dismiss[.]").
3

motion under advisement. The Silver Defendants filed motions to dismiss on March 7,
2019 which Plaintiffs opposed on May 31, 2019. The Silver Defendants replied on June
21, 2019, at which time the court took those motions under advisement. In light of the
overlap among the pending motions, the court addresses them in a single opinion.
Plaintiffs are represented by Russell D. Barr, Esq. and Chandler W. Matson, Esq.
The Shen Defendants are represented by Andrew H. Montroll, Esq. The Silver
Defendants are represented by Christopher E.H. Sanetti, Esq.
II.

The TAC's Factual Allegations.
A.

Allegations Against the Shen Defendants Individually.

Plaintiffs are individuals who sought to invest and reside in the United States
pursuant to the United States Citizenship and Immigration Services ("USCIS")
employment-based fifth preference ("EB-5") visa program. This program authorizes
foreign investors who have invested capital in a commercial enterprise in the United
States to file an 1-526 Petition requesting conditional permanent residency status for a
two-year period. An 1-526 Petition requires a petitioner to acquire and supply evidence
that the chosen EB-5 investment project will create ten full-time positions for qualifying
employees. If the foreign investor satisfies certain criteria, he or she may apply to have
the conditions removed from his or her visa in order to permanently live and work in the
United States.
Jianming Shen is an attorney who is the managing partner and president of
ShenLaw LLC which has its principal place of business in New York. ShenLaw LLC
handles transactions for immigrant investors through the EB-5 program. Attorney Shen
allegedly "holds himself out to be an experienced EB-5 attorney with a nationwide
presence." Id. at 8, ,i 24.
Plaintiffs contend that Attorney Shen directed them to invest in the Jay Peak
Projects and, on multiple occasions, authored, procured, and disseminated advertisements
to foreign investors in which he endorsed the Jay Peak Projects as being one of the best
EB-5 enterprises in the United States with a 100% 1-526 Petition approval rate. More
specifically, Attorney Shen allegedly directed approximately seventy clients, including
4

Plaintiffs, to invest in Phase VII of the Jay Peak Projects, which included the Jay Peak
Biomedical Research Park L.P.
Plaintiff Peng retained Attorney Shen in December 2013, although Attorney Shen
maintains that Plaintiff Feng did not pay his retainer or bills for legal fees. Plaintiff
Wang retained Attorney Shen in May 2014 and paid approximately $18,000 in legal fees
and filing costs to the Shen Defendants. Plaintiff Xiong retained Attorney Shen in March
2016 and paid approximately $14,500 in legal fees and filing costs to the Shen
Defendants.
After retaining Attorney Shen, Plaintiffs received the investment offering
documents for Phase VII. The offerings required each Plaintiff to make a capital
contribution of $500,000 and pay a separate administrative or management fee of
$50,000 which was used to pay fees and expenses incurred by the promoters, including
the payment of commissions and finder's fees. Each Plaintiff complied with these
requirements and transferred $550,000 to the Phase VII promoters.
Attorney Shen allegedly "explicitly assured" Plaintiffs that he would assist with
the necessary due diligence and ensure the "immigration suitability" of the Jay Peak
Projects; however, he allegedly did not conduct any due diligence regarding Plaintiffs'
investments. Id. at 13,, 56. Plaintiffs assert that "[t]he most basic and standard legal
due diligence would have revealed that [Plaintiffs] were throwing their money into a
complete sham." Id. at 14,, 60. Attorney Shen did not request financial information
regarding how EB-5 investor funds were spent, and the Jay Peak Projects did not disclose
that information. In 2012, public allegations of wrongdoing by the Jay Peak Projects
promoters emerged. By May 2014, a group of twenty investors had complained about the
misappropriation of investor funds.
Phase VII's parent company, AncBio, was ultimately sold at auction in May 2014
to satisfy creditors. Phase VII did not obtain approval from the U.S. Food and Drug
Administration for the research center's products-a prerequisite for the operation of
Phase VII and the use of Plaintiffs' investment funds. Plaintiffs allege that Attorney
Shen failed to inform them of wrongdoing at the Jay Peak Projects because he was
5

receiving direct and indirect compensation in exchange for referring foreign investors to
the Jay Peak Projects.
As a result of the Shen Defendants' acts and omissions, Plaintiffs allege that they
have "lost their initial investment, their initial path to immigration in the United States,
their administrative fees, and the fees paid to [Attorney] Shen." Id. at 17-18, 182.
Through separate litigation, the federally appointed receiver of the Jay Peak Projects
secured a settlement from which each Plaintiff was offered $500,000. Plaintiffs Wang
and Feng each accepted the $500,000, while Plaintiff Xiong did not.
B.

Proposed Class Allegations and Claims.

Proposed Class Plaintiffs are over one hundred individuals who invested in the Jay
Peak Projects and retained Proposed Class Defendants to perform legal services in
support of their EB-5 visa applications. Proposed Class Defendants are approximately
seventy-one attorneys or law firms who allegedly marketed and promoted the Jay Peak
Projects to potential investors, including Proposed Class Plaintiffs.
Proposed Class Defendants collected legal fees from Proposed Class Plaintiffs of
approximately $13,000 to $18,000 per class member. Proposed Class Plaintiffs and
Proposed Class Defendants reviewed investment offering documents for the Jay Peak
Projects which described how the investors' money was to be used and how the profits
would be allocated to the investors.
Proposed Class Plaintiffs were required to invest a capital contribution of
$500,000 and pay a separate administrative fee of $50,000 which was "supposed to be
used to pay legitimate fees and expenses incurred by the Jay Peak Projects and the
promoters of the Projects." Id. at 38, 154. However, these funds were allegedly
commingled by the Jay Peak Projects and some of the funds were allegedly used to pay
individual kickback payments of $5,000 to $30,000 to Proposed Class Defendants for
each individual who invested in the Jay Peak Projects. The alleged kickback payments
were memorialized in agreements (the "Kickback Agreements") between the Jay Peak
Projects and each Proposed Class Defendant. Proposed Class Plaintiffs do not allege any
agreements between and among the Proposed Class Defendants regarding the Kickback
6

Agreements. Proposed Class Plaintiffs were not aware of the Kickback Agreements at
the time they retained Proposed Class Defendants to provide legal services. "In general,"
Proposed Class Defendants "agreed that they would be paid money by Jay Peak after, and
only after, one of their client's money was released from escrow to the Jay Peak
Projects." Id. at 38, ,r 52. Proposed Class Plaintiffs' funds were held in an escrow
account to be released only after their initial 1-526 Petition was approved, however,
"upon information and belief, this escrow arrangement was not always followed[.]" Id. at
38, ,r 53.
The Kickback Agreements allegedly formed the basis of a "Kickback Association
or Enterprise" which was "an ongoing organization that functioned as a continuing unit
over the course of many years, and at least from 2007 to April of 2016" and allowed
Proposed Class Defendants to profit from funds paid to them by the Kickback
Association or Enterprise. Id. at 39, ,r 59. Proposed Class Defendants "appear[] to have
received" kickbacks totaling more than $4.6 million. 3 Id. at 41, ,i 76. The TAC alleges
that each time a Proposed Class Defendant received money from the Jay Peak Projects,
this created a deficit in funding that needed to be rectified by further investment by a
subsequent immigrant investor.
In 2012, each Proposed Class Defendant allegedly received a letter from Douglas
Hulme, an immigration advisor to the Jay Peak Projects, explaining that the Jay Peak
Projects had orchestrated a Ponzi-scheme. Proposed Class Defendants allegedly failed to
disclose this information to their clients and "assisted the Jay Peak Projects in hiding the
allegations and reporting of the Jay Peak Ponzi-scheme[.]" Id. at 43, ,r 85.

3

The TAC asserts that Attorney Shen received kickbacks totaling $1,255,000; Defendant Silver
received kickbacks totaling $685,000; Defendant Dai received kickbacks totaling $210,000;
Defendant Geng received kickbacks totaling $195,000; Defendant Huuan received kickbacks
totaling $140,000; Defendant Geng & Zhang, PLLC received kickbacks totaling $95,000;
Defendant Snyder received kickbacks totaling $90,000; Defendant Flores received kickbacks
totaling $90,000; and Defendant Cheng received kickbacks totaling $80,000.
7

111.

Conclusions of Law and Analysis.
A.

Whether to Allow Plaintiffs' Amendments to the Factual Allegations in
Part I of the TAC.

The Shen Defendants do not squarely oppose Plaintiffs' request to amend their
factual allegations as set forth in Part I of the TAC. With regard to those revisions,
Plaintiffs were granted leave to amend by the court. At least insofar as their new factual
allegations are concerned, there is no challenge to the proposed amendments on the
grounds of bad faith, undue delay, or futility. Plaintiffs' motion to amend to include
these revised factual allegations in Part I of the TAC is therefore GRANTED. See Fed.
R. Civ. P. 15(a)(2) ("The court should freely give leave [to amend] when justice so
requires.").
B.

Whether to Permit Plaintiffs' Third Motion to Amend Part II of their
Complaint.

Pursuant to Fed. R. Civ. P. 15(a)(l), "[a] party may amend its pleading once as a
matter of course within ... 21 days after service of a responsive pleading or 21 days after
service of a motion under Rule 12(b), (e), or (f), whichever is earlier." If more than
twenty-one days have elapsed, "a party may amend its pleading only with the opposing
party's written consent or the court's leave[,]" but "[t]he court should freely give leave
when justice so requires." Fed. R. Civ. P. 15(a)(2).
"The rule in this Circuit has been to allow a party to amend its pleadings in the
absence of a showing by the nonmovant of prejudice or bad faith." Pasternack v.

Shrader, 863 F.3d 162, 174 (2d Cir. 2017) (quotingAEP Energy Servs. Gas Holding Co.
v. Bank ofAm., NA., 626 F.3d 699, 725 (2d Cir. 2010)). In addition to a showing of
prejudice or bad faith, leave to amend may also be denied if there is undue delay in
seeking the amendment, or if the amendment is "futile[.]" Milanese v. Rust-Oleum

Corp., 244 F.3d 104, 110 (2d Cir. 2001). Both the court and the parties have a duty to
ensure "the just, speedy, and inexpensive determination" of this action. Fed. R. Civ. P. 1.
In addition to their individual claims in Part I of the TAC which are not challenged
by the Shen Defendants, in Part II of the TAC, Plaintiffs seek leave to assert class action
"stand alone" and conspiracy RICO claims, as well as a civil conspiracy to violate a
8

criminal statute claim and an unjust enrichment claim. (Doc. 67 at 2-3.) The Shen
Defendants oppose leave to amend on the grounds of futility and undue delay. They
assert that Plaintiffs lack standing for their class action claims, that "discovery is nearly
complete" (Doc. 74 at 3), and that if Plaintiffs' new claims are permitted to proceed on a
class action basis, "discovery will need to be significantly broadened and extended, all of
which will add to delays in this action, and impose additional costs on Defendants." Id.
The Shen Defendants further contend Plaintiffs' "hybrid civil/class action" is "highly
prejudicial" because it seeks "to combine ... two separate and distinct actions into one
action" and "has been and continues to be extremely confusing such that even the
Plaintiffs[] have not been able to keep it all straight." Id. at 4-5.
In general, "the longer the period of an unexplained delay, the less will be required
of the nonmoving party in terms of a showing of prejudice[,]" Block v. First Blood
Assocs., 988 F.2d 344, 350 (2d Cir. 1993) (internal quotation marks omitted), but "[m]ere
delay ... absent a showing of bad faith or undue prejudice, does not provide a basis for a
district court to deny the right to amend." State Teachers Ret. Bd. v. Fluor Corp., 654
F.2d 843, 856 (2d Cir. 1981). Prejudice to the opposing party nonetheless remains
"among the 'most important' reasons to deny leave to amend." AEP Energy, 626 F.3d at
725 (quoting Fluor, 654 F.2d at 856); see also Evans v. Syracuse City Sch. Dist., 704
F.2d 44, 46 (2d Cir. 1983) (citing Foman v. Davis, 371 U.S. 178, 182 (1962)) (holding
ability to amend is limited when there is "undue prejudice to the opposing party").
A litigant may be "prejudiced" within the meaning of the rule if the new
claim would: "(i) require the opponent to expend significant additional
resources to conduct discovery and prepare for trial; (ii) significantly delay
the resolution of the dispute; or (iii) prevent the plaintiff from bringing a
timely action in another jurisdiction."
Pasternack, 863 F.3d at 174 (quoting Block, 988 F.2d at 350).
In this case, although Plaintiffs' pleading practices have created unnecessary
confusion and consumed considerable party and judicial resources, the Shen Defendants
have been aware of the essence of Plaintiffs' claims for some time. To a large extent,
Plaintiffs' factual allegations have remained the same and have simply been repackaged
9

with new legal theories. This case is not yet set for trial and discovery is ongoing.
Against this backdrop, the delay has not been so extreme or prejudicial that leave to
amend should be denied on the grounds of prejudice or undue delay. Leave to amend,
however, is properly denied where a claim is futile. See Cimino v. Glaze, 228 F .R.D.
169, 171 (W.D.N.Y. 2005) ("A court may deny leave to amend ... where the amended
pleading is considered futile."). The Shen Defendants as well as the Silver Defendants
assert that Plaintiffs' revisions to Part II of the TAC fail to state a claim and the court
lacks subject matter jurisdiction.
1.

Whether Part II of the TAC Fails to State a Claim.

"An amendment to a pleading is futile if the proposed claim could not withstand a
motion to dismiss pursuant to Fed. R. Civ. P. 12(b)(6)." Lucente v. Int'! Bus. Machs.
Corp., 310 F.3d 243, 258 (2d Cir. 2002) (citing Dougherty v. N Hempstead Bd. of
Zoning Appeals, 282 F.3d 83, 88 (2d Cir. 2002)). To survive a Fed. R. Civ. P. 12(b)(6)
motion to dismiss for failure to state a claim upon which relief can be granted, a
plaintiffs complaint "must contain sufficient factual matter, accepted as true, to 'state a
claim to relief that is plausible on its face."' Elias v. Rolling Stone LLC, 872 F .3d 97,
104 (2d Cir. 2017) (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)). The
sufficiency of a proposed amendment is thus evaluated using a "two-pronged
approach[.]" Hayden v. Paterson, 594 F.3d 150, 161 (2d Cir. 2010) (internal quotation
marks omitted) ( quoting Iqbal, 556 U.S. at 679). First, the court discounts legal
conclusions or "[t]hreadbare recitals of the elements of a cause of action, supported by
mere conclusory statements[.]" Iqbal, 556 U.S. at 678. Second, the court considers
whether the factual allegations, taken as true, "plausibly give rise to an entitlement to
relief." Id. at 679. This second step is fact-bound and context-specific, requiring the
court "to draw on its judicial experience and common sense." Id. The court does not
"weigh the evidence" or "evaluate the likelihood" that a plaintiffs claims will prevail.
Christiansen v. Omnicom Grp., Inc., 852 F.3d 195, 201 (2d Cir. 2017); see also
Kardovich v. Pfizer, Inc., 97 F. Supp. 3d 131, 140 (E.D.N.Y. 2015) ("[I]ssues of fact,
credibility, and the weight of the evidence are not properly considered on a motion to
10

dismiss[.]"). Instead, it determines whether Plaintiffs have "nudged their claims across
the line from conceivable to plausible[.]" Bell At!. Corp. v. Twombly, 550 U.S. 544, 547
(2007).

a.

Conspiracy to Violate 13 V.S.A. § 1108.

Count III of the TAC alleges a conspiracy to violate 13 V.S.A. § 1108, a criminal
statute regulating the receipt of kickbacks by private corporations which states as follows:
(a) An officer or agent of, or person employed by a private corporation or
business entity, who, being authorized to procure material, supplies, or
other articles by purchase or contract, or to employ service or labor, shall
not, directly or indirectly, solicit, ask, demand, exact, seek, accept, receive,
or agree to receive, with intent that he or she will be influenced adversely to
the interest of the employer or principal, any benefit from a person who
makes such contract, furnishes such material, supplies, or other articles, or
from a person who renders service or labor under such contract, nor shall a
person give or offer such benefit.
(b) A person who violates this section shall, if the value of the benefit is
less than $500.00, be imprisoned not more than two years or fined not more
than $5,000.00, or both. A person who violates this section shall, if the
value of the benefit is $500.00 or more, be imprisoned not more than five
years or fined not more than $10,000.00, or both.
13 V.S.A. § 1108.
In order to establish a claim for civil conspiracy under Vermont law, a plaintiff
"must be damaged by something done in furtherance of the agreement, and the thing
done [must] be something unlawful in itself{.]" Akerley v. N Country Stone, Inc., 620 F.
Supp. 2d 591, 600 (D. Vt. 2009) (internal quotation marks omitted) (quoting Boutwell v.

Marr, 42 A. 607, 609 (Vt. 1899)). In a non-precedential Order, a three-judge panel of the
Vermont Supreme Court appeared to question the continued vitality of a common law
cause of action for civil conspiracy. See Davis v. Vile, 2003 WL 25746021, at *3 (Vt.
Mar. 1, 2003) (unpub. mem.) (dismissing for failure to state a claim and in doing so,
"[a]ssuming that there continues to be an independent cause of action for the tort of civil
conspiracy").
Where applicable state substantive law is unclear, a federal court sitting in
diversity must predict how the state's highest court would decide the case. See Giuffre
11

Hyundai, Ltd. v. Hyundai Motor Am., 756 F.3d 204,209 (2d Cir. 2014) ("[I]t is our job to

predict how the forum state's highest court would decide the issues before us[.]")
(internal quotation marks omitted). The court thus predicts that, in certain circumstances,
a civil conspiracy claim may be recognized under Vermont law which provides that "[a]ll
who aid in the commission of a tort by another, or who approve of it after it is done, if
done for their benefit, are liable in the same manner as they would be if they had done it

with their own hands." Montgomery v. Devoid, 2006 VT 127, ,i 22, 181 Vt. 154, 164,
915 A.2d 270,278 (quoting Dansro v. Scribner, 187 A. 803, 804 (Vt. 1936)). The
Vermont Supreme Court has frequently looked to the Second Restatement of Torts in
defining the elements of a claim. See, e.g., Glassford v. Dufresne & Assocs., P.C., 2015
VT 77, ,i 12, 199 Vt. 422,430, 124 A.3d 822, 827 (adopting the Second Restatement of
Torts in defining claims of negligent misrepresentation); Birchwood Land Co. v. Krizan,
2015 VT 37, ,i 9, 198 Vt. 420,425, 115 A.3d 1009, 1012 ("We frequently have adopted
provisions of this Restatement where our law is undeveloped.").
The Second Restatement of Torts describes tort liability for persons acting in
concert as follows:
For harm resulting to a third person from the tortious conduct of another,
one is subject to liability if he (a) does a tortious act in concert with the
other or pursuant to a common design with him, or (b) knows that the
other's conduct constitutes a breach of duty and gives substantial assistance
or encouragement to the other so to conduct himself, or (c) gives substantial
assistance to the other in accomplishing a tortious result and his own
conduct, separately considered, constitutes a breach of duty to the third
person. . . . Parties are acting in concert when they act in accordance with
an agreement to cooperate in a particular line of conduct or to accomplish a
particular result. The agreement need not be expressed in words and may
be implied and understood to exist from the conduct itself.
Restatement (Second) of Torts § 876 (1979).
Even if a civil conspiracy claim is cognizable under Vermont law, however,
Plaintiffs' conspiracy claim based on a violation of 13 V.S.A. § 1108 must be dismissed.
A private plaintiff generally cannot assert a claim based on a violation of a criminal
statute. See Spokeo, Inc. v. Robins, 136 S. Ct. 1540, 1551 (2016) ("Generally, only the
12

government ha[ s] the authority to vindicate a harm borne by the public at large, such as
the violation of the criminal laws.") (Thomas, J., concurring); Linda R.S. v. Richard D.,
410 U.S. 614,619 (1973) ("[A] private citizen lacks a judicially cognizable interest in the
prosecution or nonprosecution of another."); AKC ex rel. Carroll v. Lawton Indep. Sch.

Dist. No. 8, 9 F. Supp. 3d 1240, 1245 (W.D. Okla. 2014) ("[A] civil conspiracy claim
cannot be based on a violation of [a criminal] statute."); Martensen v. Koch, 2014 WL
3057172, at *7 (D. Colo. July 7, 2014) (holding that a civil conspiracy claim may not be
based upon the violation of criminal statutes that "do not provide for private civil causes
of action").
As applied to this case, there is no evidence that the Vermont Legislature intended
to create a private cause of action for § 1108' s enforcement. Leave to amend to add
Count III of Part II is therefore DENIED as futile and Count III of Part II of the TAC is
hereby DISMISSED.
b.

Unjust Enrichment.

Plaintiffs' unjust enrichment claims fail for a different reason. In Count IV of
both Part I and Part II of the TAC, Plaintiffs assert claims for unjust enrichment under
Vermont law, alleging that:
Shen accepted and retained consideration from Plaintiffs Wang and Feng
for legal services not performed.
As a consequence of Shen' s wrongful acts and conduct, Wang and Xiong
have suffered, and continue to suffer, harm and damages, and Shen has
been, and continues to be, unjustly enriched.
(Doc. 67-1 at 21, 11106-07.)
In Part II, Plaintiffs propose to assert an unjust enrichment claim on a class action
basis as follows:
The Attorney Defendants accepted and retained consideration from their
Plaintiff-clients for legal services that were not performed or not performed
according to the reasonable expectations of their Plaintiff-clients.
As a consequence of Defendants' wrongful acts and conduct, Plaintiffs are
entitled to the forfeiture of any property and consideration acquired by
Defendants through the purported performance of Defendants' legal
13

services, including the legal fees paid to Defendants, and the disgorgement
of the illegal Kickbacks taken by Defendants.
Id. at 60-61, ,r,r 141-42.
To state a claim for unjust enrichment under Vermont law, a plaintiff must allege:
"(1) a benefit was conferred on defendant; (2) defendant accepted the benefit; and
(3) defendant retained the benefit under such circumstances that it would be inequitable
for defendant not to compensate plaintiff for its value." Center v. Mad River Corp., 561
A.2d 90, 93 (Vt. 1989). Unjust enrichment is a quasi-contractual theory of liability, by
which the law "implies a promise to pay when a party receives a benefit and retention of
the benefit would be inequitable." Brookside Mem 'ls, Inc. v. Barre City, 702 A.2d 47, 49
(Vt. 1997).
Where, as in the instant case, an unjust enrichment claim is based upon a contract
between a client and his or her attorney, it fails to state a claim for which relief may be
granted. This is because the contract provides a remedy at law which forecloses the
availability of equitable relief. See, e.g., City of Yonkers v. Otis Elevator Co., 844 F .2d
42, 48 (2d Cir. 1988) ( dismissing a quasi-contractual cause of action because "an express
contract cover[ ed] the subject matter"); Mansfield Heliflight, Inc. v. Freestream Aircraft
USA, Ltd., 2016 WL 7176586, at* 17 (D. Vt. Dec. 7, 2016) (recognizing that "[i]n the
event [p ]laintiff s adequate recovery at law is established, [p ]laintiff s equitable claims
will be dismissed"); Dreves v. Hudson Grp. (HG) Retail, LLC, 2013 WL 2634429, at* 12
(D. Vt. June 12, 2013) ("The existence of a valid, express contract generally precludes
quasi-contractual relief."); Air Atlanta Aero Eng'g Ltd. v. SP Aircraft Owner I, LLC, 637
F. Supp. 2d 185, 196 (S.D.N.Y. 2009) ("The existence of a valid contract will generally
preclude quasi-contract claims.") (internal quotation marks omitted). As the Vermont
Supreme Court has observed, "it can hardly be equitable to impose a contract on the
parties that completely undermines the contractual relationships that the parties
themselves have created." DJ Painting, Inc. v. Baraw Enters., Inc., 776 A.2d 413,419
(Vt. 2001).

14

As presently pled, Counts IV of Part I and II of the TAC fail to state a claim upon
which relief may be granted because those counts assert an unjust enrichment claim
based upon a contractual relationship. 4 Leave to amend to include an unjust enrichment
claim is DENIED and Counts IV in Part I and II of the TAC are DISMISSED.

2.

Whether Plaintiffs Have Standing for Their Remaining
Proposed Class Action Claims.

A complaint may proceed as a proposed class action without the court first
determining whether to grant class action certification under Fed. R. Civ. P. 23. See

Presser v. Key Food Stores Co-op., Inc., 218 F.R.D. 53, 57 (E.D.N.Y. 2003) ("Where ...
the defendant's opposition to [an] amendment involves not-yet-certified classes, allowing
[an] amendment is appropriate and defendant's arguments against certification are more
appropriately addressed in the context of motions to certify the proposed classes.")
(citation and internal quotation marks omitted). A class action claim cannot proceed,
however, if the court lacks subject matter jurisdiction over it.
The Shen Defendants assert that the TAC is deficient for the same reasons as
Plaintiffs' previous Complaints because Proposed Class Plaintiffs lack Article III
standing to sue Proposed Class Defendants. The Silver Defendants additionally argue
that the claims against them must be dismissed for lack of subject matter jurisdiction
because if this case does not proceed as a class action, there is no diversity of citizenship.
The Silver Defendants concede that complete diversity is not always required for a class
action under the Class Action Fairness Act of 2005 ("CAFA"), 28 U.S.C. § 1332(d). In
the event that diversity jurisdiction is found under CAFA, they seek dismissal for lack of
personal jurisdiction.
Under Article III of the United States Constitution, the jurisdiction of federal
courts is limited to the resolution of"[c]ases" and "[c]ontroversies[.]" U.S. Const. art.
III, § 2. "A case is properly dismissed for lack of subject matter jurisdiction under Rule

4

Although the Shen Defendants do not affirmatively seek dismissal of Part I of the TAC, they
oppose the amendments generally as futile. Because Count IV of Parts I and II allege similar
facts to support claims of unjust enrichment, the court has addressed both claims here.
15

12(b)(l) when the district court lacks the statutory or constitutional power to adjudicate
it." Makarova v. United States, 201 F.3d 110, 113 (2d Cir. 2000). "A plaintiff asserting
subject matter jurisdiction has the burden of proving by a preponderance of the evidence
that it exists." Id. To invoke the jurisdiction of the federal courts, a plaintiff "must
clearly ... allege facts demonstrating each element" of Article III standing. Spokeo, Inc.,
136 S. Ct. at 1547 (internal quotation marks omitted).
[T]he irreducible constitutional minimum of standing contains three
elements. First, the plaintiff must have suffered an injury in fact-an
invasion of a legally protected interest which is (a) concrete and
particularized, ... (b) actual or imminent, not conjectural or hypothetical[.]
Second, there must be a causal connection between the injury and the
conduct complained of-the injury has to be fairly ... trace[ able] to the
challenged action of the defendant, and not ... th[ e] result [of] the
independent action of some third party not before the court. Third, it must
be likely, as opposed to merely speculative, that the injury will be redressed
by a favorable decision.
Lujan v. Deft. of Wildlife, 504 U.S. 555, 560-61 (1992) (citations and internal quotation

marks omitted).
In the class action context, "with respect to each asserted claim against each
defendant, a plaintiff must always have suffered a distinct and palpable injury to herself."
Langan v. Johnson & Johnson Consumer Cos., 897 F .3d 88, 94 (2d Cir. 2018) (citation

and internal quotation marks omitted). In other words, "representative plaintiffs must
have individual standing to assert claims against all the members of a defendant class."
Angel Music, Inc. v. ABC Sports, Inc., 112 F.R.D. 70, 74 (S.D.N.Y. 1986); see also
Denney v. Deutsche Bank AG, 443 F.3d 253,264 (2d Cir. 2006) (holding "no class may

be certified that contains members lacking Article III standing").
The Second Circuit has observed that "a plaintiffs injury resulting from the
conduct of one defendant [does not necessarily] have any bearing on her Article III
standing to sue other defendants, even if they engaged in similar conduct that injured
other parties." Mahon v. Ticor Title Ins. Co., 683 F.3d 59, 65 (2d Cir. 2012); see also
DaimlerChrysler Corp. v. Cuna, 547 U.S. 332, 335 (2006) (holding that "a plaintiff must

demonstrate standing for each claim he seeks to press"). "Nor does a plaintiff who has
16

been subject to injurious conduct of one kind possess by virtue of that injury the
necessary stake in litigating conduct of another kind, although similar, to which he has
not been subject." Blum v. Yaretsky, 457 U.S. 991, 999 (1982).
Plaintiffs' claims in Part II include alleged violations of RICO on a class action
basis. RICO makes it unlawful for "any person employed by or associated with any
enterprise engaged in, or the activities of which affect, interstate or foreign commerce, to
conduct or participate, directly or indirectly, in the conduct of such enterprise's affairs
through a pattern of racketeering activity[.]" 18 U.S.C. § 1962(c).
"A plaintiffs burden is high when pleading RICO allegations as [c]ourts look with
particular scrutiny at claims for a civil RICO, given RICO's damaging effects on the
reputations of individuals alleged to be engaged in RICO enterprises and conspiracies."
Mackin v. Auberger, 59 F. Supp. 3d 528, 541 (W.D.N.Y. 2014) (internal quotation marks
omitted).
To state a claim for damages under RICO a plaintiff has two pleading
burdens. First, he must allege that the defendant has violated the
substantive RICO statute[.] In so doing, he must allege the existence of
seven constituent elements: (1) that the defendant (2) through the
commission of two or more acts (3) constituting a "pattern" (4) of
"racketeering activity" (5) directly or indirectly invests in, or maintains an
interest in, or participates in (6) an "enterprise" (7) the activities of which
affect interstate or foreign commerce. Plaintiff must allege adequately
defendant's violation of section 1962 before turning to the second burdeni.e., invoking RICO's civil remedies of treble damages, attorney[']s fees
and costs. To satisfy this latter burden, plaintiff must allege that he was
"injured in his business or property by reason of a violation of section
1962."
Moss v. Morgan Stanley Inc., 719 F.2d 5, 17 (2d Cir. 1983) (citations omitted).
In support of Counts I and II of Part II of the TAC, Plaintiffs allege predicate acts
including "entering into the [Kickback] Agreements with Jay Peak, for the diversion of
investor money to the Defendant Attorneys, upon the occurrence of a client investing
their money into the Ponzi-scheme." (Doc. 67-1 at 52, ,r 104.) Plaintiffs allege that these
acts constitute a "scheme or artifice to defraud ... another of the intangible right of

17

honest services" under 18 U.S.C. § 1346. Id. at 52, 1105 (internal quotation marks
omitted).
Although Plaintiffs arguably allege RICO claims against their own respective
attorneys and the alleged "Kickback Association or Enterprise," 5 there is no plausible
allegation that the Proposed Class Defendants had agreements amongst themselves to
assist or participate in the criminal enterprise. To the contrary, the TAC alleges that the
Proposed Class Defendants acted only in concert with the Jay Peak Projects and the
Kickback Association or Enterprise, not with each other. For example, in Count I, the
TAC alleges:
Defendant Attorneys are persons within the meaning of 18 U.S.C.
§ 1961 (3) because they and their law firms were "capable of holding a legal
or beneficial interest in property." They conducted the affairs of the
enterprise with the Jay Peak Projects through a pattern of racketeering in
violation of 18 U.S.C. § 1962(c). The Defendant Attorneys participated in
the overall enterprise's affairs through a pattern of racketeering activity as
defined by 18 U.S.C. § 1961(5), consisting of numerous and repeated uses
of the mails, interstate wire communications, and bank transfers to execute
a scheme to defraud in violation of 18 U.S.C. § 1962(c).
The "Kickback Association" or "Kickback Enterprise" described herein
was an association-in-fact within the meaning of 18 U.S.C. § 1961(4)
consisting of (i) Defendant Attorneys, including their employees and
agents; (ii) the Jay Peak Projects, including their principals, employees, and
agents; (iii) unnamed conspirators who were aware of and assisted in
delivering and procuring the Agreements with Defendant Attorneys, and
who assisted in concealing the Kickback Agreements from potential
investors in the Jay Peak Projects. The Kickback Association -- drawn
together and memorialized in the Kickback Agreements consisting of
payments in exchange for investor clients -- was an ongoing organization
that functioned as a continuing unit over the course of many years, and at
least from 2007 to April of 2016. The Defendant Attorneys worked in
conjunction with and in agreement with Jay Peak Projects over the course
of those years, exploiting the structure of the association as a whole, and its
5 "The

honest-services statute, § 1346, defines the term scheme or artifice to defraud ... to
include a scheme or artifice to deprive another of the intangible right of honest services."
Skilling v. United States, 561 U.S. 358, 369 (2010) (internal quotation marks omitted). The
statute prohibits "fraudulent schemes to deprive another of honest services through bribes or
kickbacks[.]" Id. at 404.
18

would-be legitimate operations as an EB-5 project, in order to commit the
offenses described herein and to conceal the underlying Kickback
Agreement that assured lucrative money for the Defendant Attorneys and
continuation of the Ponzi-scheme. While the pattern of racketeering
activity was not the only activity of the Kickback Associations as a whole,
the Defendant Attorneys were able to commit the offenses solely by virtue
of their position within the Kickback Association. The Kickback
Association was created and used as a tool to effectuate Defendant[s']
pattern of racketeering activity. The Class Defendant "persons" are distinct
from the Kickback Enterprise.
The Kickback Enterprise falls within the meaning of 18 U.S.C. § 1961(4)
and consists of a group of "persons" associated for the common purpose of
diverting client funds from the investment pool, and misappropriating of
these funds for the illicit purpose of paying the Defendant Attorneys in
exchange for a client subscribing to and committing their money to the Jay
Peak Ponzi-scheme.
Every time the Agreements were executed it created a predicate act that
ultimately constituted racketeering activity (again, the "Racketeering
Activity["]). The Racketeering Activity described herein consists of
continuous predicate acts in entering into the Agreements with Jay Peak,
for the diversion of investor money to the Defendant Attorneys, upon the
occurrence of a client investing their money into the Ponzi-scheme. The
Racketeering Activity also includes the receipt of the money each time that
a client put their money into the Jay Peak Ponzi-scheme. In each case, the
predicate acts are entering the Kickback Agreements and receipt of the
Kickback itself.
For the purposes of this cause of action, the predicate acts consist of
violations under 18 U.S.C. §§ 1341, 1542, and 1346, which prohibit the use
of the mails and interstate wires to implement a "scheme or artifice to
defraud [by depriving] another of the intangible right of honest services."
18 U.S.C. § 1346.
The Defendant Attorneys used and exploited their positions, and their
attorney-client relationships, for illicit personal gain in breach of their
duties owed to clients. The Defendant Attorneys derived undisclosed
profits from business transacted with their clients, in deprivation of the
client's rights to honest services in violation of 18 U.S.C. § 1341. In every
agreed upon transaction for money in exchange for a client, the Defendant
Attorneys used the interstate mails and wire communications in furtherance
of a scheme to misuse the attorney-client relationship for gain at the
expense of the client's right to attorney services.
Id. at 134-137, ,r,r 101-06 (emphasis supplied).
19

In Count II, Plaintiffs allege a conspiracy to violate RICO, in relevant part as
follows:
Defendant Attorneys entered into individual and ongoing Agreements with
the Jay Peak Projects; each Defendant Attorney entered into more than two
of these Agreements in a ten-year time period; and each Defendant
Attorney received more than two payments (within a ten-year period) under
these Agreements in exchange for their client's commitment of their
investment into the Jay Peak Ponzi scheme. The Kickback Agreements
themselves created an agreement and conspiracy to violate 18 U.S.C.
§§ 1341, 1542, and 1346.
The Defendant Attorneys have intentionally conspired and agreed to
conduct and participate in the conduct of the affairs of the Enterprise
through a pattern of racketeering activity. The Defendant Attorneys knew
that their predicate acts were part of a pattern of Racketeering Activity and
agreed to the commission of those acts to further the schemes described
above. That conduct constitutes conspiracy to violate 18 U.S.C. § 1962(c),
in violation of 18 U.S.C. § 1962(d).

Each of the Plaintiff-clients was damaged by the scheme to deprive them of
honest services, because each one of them was deprived of honest services.
The damage was the direct and proximate cause of the wrongful conduct,
because depriving them of these services in order to be illegitimately
compensated from the investor[ s '] pool of funds was the direct object of the
conspiracy and agreement to undertake the wrongful conduct.
The Defendant Attorneys did not just breach a fiduciary duty, the
Defendant Attorneys exploited their position as lawyers, and exploited their
clients and their client[s'] investment funds, to illicitly benefit themselves
in an undisclosed transaction.
Id. at 141-42, 11122-25 (emphasis supplied).

"In order to bring suit under§ 1964(c), a plaintiff must plead (1) the defendant's
violation of§ 1962, (2) an injury to the plaintiff's business or property, and (3) causation
of the injury by the defendant's violation." Commercial Cleaning Servs., LLC v. Colin
Serv. Sys., Inc., 271 F.3d 374, 380 (2d Cir. 2001). For both Plaintiffs' "stand alone" and

conspiracy RICO claims, each Proposed Class Plaintiff must allege an injury he or she
suffered which is fairly traceable to each Proposed Class Defendant. See Lujan, 504 U.S.
at 560-61 (ruling that to establish an "injury in fact" a plaintiff must plausibly allege he or
she suffered "an invasion of a legally protected interest which is (a) concrete and
20

particularized, ... (b) actual or imminent, not conjectural or hypothetical, ... and
fairly ... trace[ able] to the challenged action of the defendant") (citations and internal
quotation marks omitted).
In Counts I and II of Part II of the TAC, the Proposed Class Plaintiffs stumble
when they seek to allege claims against a Proposed Class of Defendants who include
individuals with whom they have had no contact. They do not plausibly allege they
suffered an injury caused by attorneys they neither retained nor relied upon. For
example, although Plaintiff Wang alleges that he suffered an injury caused by the Shen
Defendants' acceptance of alleged kickbacks from the Jay Peak Projects or the Kickback
Enterprise, he does not and cannot plausibly allege he suffered this same or a similar
injury as a result of the acts or omissions of the Silver Defendants who did not represent
him in his EB-5 visa application and investment activities. Nor can Plaintiff Wang allege
that attorneys who did not represent him, such as the Silver Defendants, owed him a duty
of care. Any injury Plaintiff Wang suffered as a result of the alleged RICO enterprise
was thus caused by his own attorney's agreements, acts, or omissions and not by the
agreements, acts, or omissions of attorneys with whom he had no interaction or
relationship. Because Plaintiff Wang could not bring a RICO claim individually against
an attorney with whom he had no interaction or relationship, he cannot do so as a class
action plaintiff. See In re LIBOR-Based Fin. Instruments Antitrust Litig., 27 F. Supp. 3d
447, 481-82 (S.D.N.Y. 2014) (holding that "named plaintiffs lack standing to sue each of
the named defendants 'in their own right' under Article III" because "[t]o the extent that
any named plaintiff experienced an injury, it may be fairly traced to the defendant that
allegedly breached the contract and was then unjustly enriched, not to the [entity] with
which plaintiff maintained no relationship").
Casting a claim as a conspiracy to violate RICO does not materially alter the
analysis. See Brown v. Protective Life Ins. Co., 353 F.3d 405, 407-08 (5th Cir. 2003)
(ruling that in class actions a RICO plaintiff can only assert his or her own injuries to
satisfy standing); Rola v. City Investing Co. Liquidating Tr., 155 F.3d 644, 659 (3d Cir.
1998), abrogation on other grounds recognized by Forbes v. Eagleson, 228 F.3d 471 (3d
21

Cir. 2000) ("To link their own injuries to the alleged RICO enterprise, plaintiffs must
allege what happened to them. . . . Until the putative class is certified, the action is one
between [the named plaintiffs] and the defendants"). Nor is standing plausibly alleged by
conclusory allegations that the Proposed Class Defendants "conspired," coupled with the
elements of a RICO violation unsupported by facts supporting an agreement between the
Defendants. See Iqbal, 556 U.S. at 678 ("A pleading that offers 'labels and conclusions'
or 'a formulaic recitation of the elements of a cause of action will not do.'"); La Marv. H
& B Novelty & Loan Co., 489 F.2d 461,466 (9th Cir. 1973) (finding that named plaintiffs

could not bring a class action against defendants that did not injure them, "even though
the plaintiff may have suffered an identical injury at the hands of a party other than the
defendant").
In essence, Proposed Class Plaintiffs seek to allege a "'rimless wheel' conspiracy
[which] is one in which various defendants enter into separate agreements with a
common defendant, but where the defendants have no connection with one another, other
than the common defendant's involvement in each transaction." Dickson v. Microsoft
Corp., 309 F.3d 193,203 (4th Cir. 2002). In Kotteakos v. United States, 328 U.S. 750,
755 (1946), the Supreme Court "made clear that a rimless wheel conspiracy is not a
single, general conspiracy but instead amounts to multiple conspiracies between the
common defendant and each of the other defendants." Dickson, 309 F.3d at 203 (citing
Kotteakos, 328 U.S. at 768-69 and Joseph F. McSorley, A Portable Guide to Federal
Conspiracy Law 145 ( 1996) ("While the hub may view its dealings with the spokes as
part of a single agreement, a spoke may be concerned simply with his or her own
actions.")). Although some courts have been willing to allow such a claim to proceed in
the context of a Sherman Act violation, Plaintiffs cite no authority for relaxing the
standing requirement for alleging a conspiracy to violate RICO, especially prior to the
certification of a class. See Denney, 443 F .3d at 263-64 (ruling that the "filing of suit as a
class action does not relax [the] jurisdictional requirement [and] no class may be certified
that contains members lacking Article III standing"); Tomassini v. FCA US LLC, 326
F.R.D. 375, 384 (N.D.N.Y. 2018) (observing that "the language in Denney is clear
22

enough: a proposed class must be defined in such a way that anyone within it would have
standing") (internal quotation marks omitted).
Because Proposed Class Plaintiffs' claims set forth in Counts I and II of Part II of
the TAC lack standing to proceed on a class action basis against Proposed Class
Defendants with whom they had no relationship, leave to amend for those claims is
DENIED and Counts I and II of Part II of the TAC are DISMISSED.

C.

Whether the Court Lacks Personal Jurisdiction or Subject Matter
Jurisdiction over the Silver Defendants.

Because the court has dismissed Part II of the TAC which contains only class
action claims, the court need not consider whether those same claims should be dismissed
against the Silver Defendants for lack of diversity jurisdiction or personal jurisdiction.
See Ruhrgas AG v. Marathon Oil Co., 526 U.S. 574, 587-88 (1999) (observing that

addressing subject matter jurisdiction at the outset of a case will often be most efficient as
it will negate a personal jurisdiction challenge). In order to obviate this issue, the court
nonetheless agrees that without class action claims, it would not have jurisdiction over
state law claims asserted by Plaintiff Stephen Webster against the Silver Defendants
because they are all residents of California. See 28 U.S.C. § 1332 (requiring complete
diversity of citizenship between plaintiffs and defendants in addition to the requisite
amount in controversy).
With regard to personal jurisdiction, Plaintiffs assert that "because jurisdiction is
proper as to [the Shen Defendants], jurisdiction in this RICO suit is proper as to all codefendants arising out of the same operative facts." (Doc. 109 at 7.) Although 18 U.S.C.
§ 1965(b) provides for nationwide service of process in certain circumstances, it "does
not provide for nationwide personal jurisdiction over every defendant in every civil RICO
case, no matter where the defendant is found." PT United Can Co. v. Crown Cork & Seal
Co., 138 F.3d 65, 71 (2d Cir. 1998). Instead, a plaintiff must establish personal

jurisdiction over one defendant and demonstrate that the "ends of justice" require
exercising jurisdiction over the remaining defendants. Id. The court declines to engage

23

in an ends of justice analysis at this time in light of its determination that Plaintiffs' class
actions claims against Proposed Class Defendants are futile and must be dismissed.

CONCLUSION
For the foregoing reasons, the court GRANTS IN PART AND DENIES IN PART
Plaintiffs' third motion to amend their Complaint (Doc. 67) and GRANTS the Silver
Defendants' motions to dismiss (Docs. 86 & 87) on the grounds set forth herein.
SO ORDERED.

(ft..,

Dated at Burlington, in the District of Vermont, this

)1 day of July, 2019.

United States District Court

24