View
4
Download
0
Category
Preview:
Citation preview
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF FLORIDA
Case No. 9:20-cv-80102-CANNON/BRANNON
TING PENG and LIN FU, on behalf of
themselves individually and all others similarly
situated, and derivatively on behalf of
HARBOURSIDE FUNDING, LP, a Florida
limited partnership,
Plaintiffs,
vs.
NICHOLAS A. MASTROIANNI II;
HARBOURSIDE FUNDING GP, LLC, a
Florida limited liability company; and
HARBOURSIDE PLACE, LLC, a Delaware
limited liability company,
Defendants,
and
HARBOURSIDE FUNDING, LP, a Florida
limited partnership,
Nominal Defendant.
ANSWER TO SECOND AMENDED CLASS-ACTION AND
DERIVATIVE COMPLAINT AND COUNTERCLAIMS
OF NICHOLAS A. MASTROIANNI II, HARBOURSIDE
FUNDING GP, LLC AND HARBOURSIDE PLACE, LLC
Defendants Nicholas A. Mastroianni II (“Mastroianni”), Harbourside Funding GP, LLC
and Harbourside Place, LLC (collectively, the “Defendants”), as and for their Answer and
Counterclaims to the Second Amended Class-Action and Derivative Complaint (the “Complaint”),
filed by Plaintiffs Ting Peng and Lin Fu, respectfully allege as follows:
Case 9:20-cv-80102-AMC Document 99 Entered on FLSD Docket 05/17/2021 Page 1 of 28
2
AS TO THE INTRODUCTION
1. Deny the allegations set forth in the first sentence of paragraph 1, except admit that
defendant Mastroianni was involved in the finance and development of a mixed-use commercial
development in Jupiter, Florida, financed in part by a loan to Harbourside Place LLC from
Harbourside Funding LP (the “Funding Partnership”), the limited partners of whom were
immigrant investors who applied for permanent residence in the United States under the EB-5
Program. Admit the allegations set forth in the second sentence of paragraph 1.
2. Deny the allegations set forth in paragraph 2 of the Complaint, except admit that
the Funding Partnership sold 199 units of membership in the Funding Partnership, and refer to the
transactional documents for the actual terms and conditions.
3-6. Deny the allegations set forth in paragraphs 3 through 6 of the Complaint, and refer
to the documents referenced therein for their actual terms and conditions.
7-8. Deny the allegations set forth in paragraph 7 through 8 of the Complaint, except
acknowledge that Plaintiffs purport to proceed as alleged therein, and deny that they are entitled
to any of the relief sought.
AS TO THE PARTIES
9. Deny knowledge or information sufficient to form a belief as to the truth of the
allegations set forth in paragraph 9, except admit that Plaintiff Ting Peng is an individual
participant in the EB-5 program who became a limited partner of the Funding Partnership on or
about April 2, 2013.
10. Deny knowledge or information sufficient to form a belief as to the truth of the
allegations set forth in paragraph 10, except admit that Plaintiff Lin Fu is an individual participant
in the EB-5 program that became a limited partner of the Funding Partnership on or about
December 16, 2011.
Case 9:20-cv-80102-AMC Document 99 Entered on FLSD Docket 05/17/2021 Page 2 of 28
3
11. Deny the allegations in paragraph 11, except admit that Mastroianni is an individual
who resides in Palm Beach County.
12. Deny the allegations set forth in paragraph 12 of the Complaint, except admit that
Florida Regional Center, LLC is a Delaware limited liability company, and state that by Order
dated May 3, 2021, Florida Regional Center, LLC was dismissed from this action, with prejudice.
13. Admit the allegations in the first sentence of paragraph 13. Deny the allegations in
the second sentence of paragraph 13.
14. Admit the allegations in the first sentence of paragraph 14. Deny the allegations
in the second sentence of paragraph 14.
15. Deny the allegations set forth in paragraph 15 of the Complaint.
AS TO JURISDICTION AND VENUE
16. The allegations set forth in paragraph 16 of the Complaint state a legal conclusion
to which no response is required. To the extent the allegations set forth in paragraph 16 are deemed
to contain facts to which a response is required, Defendants deny the allegations set forth in
paragraph 16 of the Complaint.
17. The allegations set forth in paragraph 17 of the Complaint state a legal conclusion
to which no response is required. To the extent the allegations set forth in paragraph 17 are deemed
to contain facts to which a response is required, Defendants deny the allegations set forth in
paragraph 17 of the Complaint.
AS TO THE GENERAL ALLEGATIONS
18. Paragraph 18 purports to characterize statutes, which speak for themselves.
Defendants respectfully refer to the statutes cited therein for their full and accurate contents.
19-21. Deny the allegations set forth in paragraphs 19 through 21, and refer generally to
the EB-5 statutes, policies, rules and regulations for the full terms and scope thereof.
Case 9:20-cv-80102-AMC Document 99 Entered on FLSD Docket 05/17/2021 Page 3 of 28
4
22. Admit the allegations set forth in paragraph 22 of the Complaint.
23. Deny the allegations in paragraph 23 of the Complaint.
24. Deny the allegations set forth in paragraph 24, and state that each Plaintiff
specifically represented, as a condition to acceptance as a limited partner of the Funding
Partnership that he or she did not rely on any “advertising materials,” and that if any Plaintiff
believed that repayment was guaranteed, he or she could not qualify for EB-5 immigration status
or a green card, because the investment had to be “at risk” in order to so qualify.
25-29. Deny the allegations set forth in paragraphs 25 through 29, which purport to
characterize the terms of the Offering Documents, and refer to the Offering Documents for their
full and accurate contents.
30. Deny the allegations set forth in paragraph 30, and to the extent the allegations in
paragraph 30 purport to characterize the terms of the Offering Documents, refer to the Offering
Documents for their full and accurate contents.
31. Deny the allegations set forth in paragraph 31, which purport to characterize the
terms of the Offering Documents, and refer to the Offering Documents for their full and accurate
contents.
32. Deny the allegations set forth in paragraph 32 of the Complaint, and state that the
principals of Harbourside Place reserved the right to sell less than 200 membership units for any
reason.
33-35. Deny the allegations set forth in paragraphs 33 through 35, and state that the
transactions complained of therein were consistent with the terms of the Offering Documents,
disclosed in writing to the EB-5 Investors and authorized, ratified and directed by the written
consent of the limited partners in 2014—including the specific, written approval of the two named
Plaintiffs.
Case 9:20-cv-80102-AMC Document 99 Entered on FLSD Docket 05/17/2021 Page 4 of 28
5
36. Deny the allegations set forth in paragraph 36, and to the extent the allegations in
paragraph 36 purport to characterize the terms of the April 2013 Letter, refer to the April 2013
Letter for its full and accurate contents.
37. Deny the allegations set forth in paragraph 37, which purport to characterize the
terms of the April 2013 Letter, and refer to the April 2013 Letter for its full and accurate contents.
38. Deny the allegations set forth in paragraph 38, and to the extent the allegations in
paragraph 38 purport to characterize the terms of the April 2013 Letter, refer to the April 2013
Letter for its full and accurate contents.
39. Deny the allegations set forth in paragraph 39, and to the extent the allegations in
paragraph 39 purport characterize the terms of the April 2013 Letter, refer to the April 2013 Letter
for its full and accurate contents.
40-42. Deny the allegations set forth in paragraphs 40 through 41 of the Complaint, which
purport to characterize the terms of the April 2013 Letter, and refer to the April 2013 Letter for its
full and accurate contents.
43. Deny the allegations set forth in paragraph 43, which purport to characterize the
terms of the March 2014 Report, and refer to the March 2014 Report for its full and accurate
contents.
44-47. Deny the allegations set forth in paragraphs 44 through 47 of the Complaint.
48. Admit that a majority of the Limited Partners declined to ratify a proposed
resolution provided in December 2016, demonstrating that the Limited Partners knew how to agree
or not agree to proposals.
49-50. Deny the allegations set forth in paragraphs 49 through 50, and to the extent the
allegations in paragraphs 49 through 50 purport to characterize the terms of the August 25, 2017
Letter, refer to the August 25, 2017 for its full and accurate contents.
Case 9:20-cv-80102-AMC Document 99 Entered on FLSD Docket 05/17/2021 Page 5 of 28
6
51. Deny the allegations set forth in paragraph 51, and to the extent the allegations in
paragraph 51 purport to characterize the terms of the October 13, 2017 Letter and the Limited
Partnership Agreement, refer to those documents for their full and accurate contents.
52. Deny the allegations set forth in paragraph 52, which purport to characterize the
terms of the October 13, 2017 Letter, and refer to the October 13, 2017 for its full and accurate
contents.
53-55. Deny the allegations set forth in paragraphs 53 through 55 of the Complaint.
56. Deny the allegations set forth in paragraph 56, which purport to characterize the
terms of the Offering Documents, and refer to the Offering Documents for their full and accurate
contents.
57-62. Deny the allegations set forth in paragraphs 57 through 62 of the Complaint.
AS TO THE VEIL-PIERCING ALLEGATIONS
63-64. Deny the allegations set forth in paragraphs 63 through 64 of the Complaint, and
state a six-year-old allegation in a dismissed lawsuit does not provide adequate basis to pierce the
corporate veil, particularly where the threatened basis, i.e., “serious problems” with the USCIS or
SEC never came to pass, and each Plaintiff successfully obtained their green cards.
AS TO THE DERIVATIVE ACTION ALLEGATIONS
65. Deny that a derivative action is appropriate, except admit that the Plaintiffs purport
to proceed as alleged in paragraph 65.
66. The allegations set forth in paragraph 66 state a legal conclusion to which no
response is required. To the extent a response is required, Defendants deny the allegations set
forth in paragraph 66, and state that because Plaintiffs only became limited partners as a result of
their breaches of representations and warranties, they never properly became limited partners and
have no standing to pursue derivative claims.
Case 9:20-cv-80102-AMC Document 99 Entered on FLSD Docket 05/17/2021 Page 6 of 28
7
67. Deny the allegations set forth in paragraph 67 of the Complaint.
AS TO DEMAND FUTILITY
68. Deny the allegations set forth in paragraph 68, including subparagraphs (a) through
(f) alleged therein.
AS TO THE CLASS ALLEGATIONS
69. Deny that a Class action is appropriate, except admit that Plaintiffs purport to
proceed as alleged in paragraph 69.
70. The allegations set forth in paragraph 70 state a legal conclusion to which no
response is required. To the extent a response is required, Defendants deny the allegations set
forth in paragraph 70.
71. Deny that Plaintiffs are entitled to the relief sought in paragraph 71.
72-78. Defendants deny the allegations set forth in paragraphs 72 through 78, except admit
that Defendants have last known addresses for Limited Partners of the Funding Partnership; and
Defendants state that two of the those alleged “questions of law and fact common to the Class”
described in paragraphs 77. (a), (b) and (c) have already been dismissed with prejudice.
AS TO THE CLAIMS FOR RELIEF
As to Count I – Declaratory Relief on Behalf of Plaintiffs and the Proposed Class
79. Deny that Plaintiffs are entitled to seek the relief, individually and/or on behalf of
the other limited partners.
80-82. Deny the allegations set forth in paragraphs 80 through 82 of the Complaint, except
admit the allegation in paragraph 82 that Defendants dispute Plaintiffs’ allegations.
As to Count II – Breach of Fiduciary Duties Owed to the Funding Partnership
83. Deny that Plaintiffs are entitled to seek derivative relief.
Case 9:20-cv-80102-AMC Document 99 Entered on FLSD Docket 05/17/2021 Page 7 of 28
8
84. The allegations set forth in paragraph 84 state a legal conclusion to which no
response is required. To the extent a response is required, Defendants deny the allegations set
forth in paragraph 84.
85-89. Deny the allegations set forth in paragraphs 85 through 89 of the Complaint,
including subparagraphs 85. (a) through (h).
As to Count III – Breach of Fiduciary Duties Owed to Plaintiffs and the Proposed Class
90. Deny that Plaintiffs are entitled to seek relief, individually and/or on behalf of the
proposed class.
91. The allegations set forth in paragraph 91 state a legal conclusion to which no
response is required. To the extent a response is required, Defendants deny the allegations set
forth in paragraph 91.
92-96. Deny the allegations set forth in paragraphs 92 through 96 of the Complaint,
including subparagraphs 92. (a) through (f) and subparagraphs 93. (i) through (l). [There are no
subparagraphs (g) or (h) in the Complaint].
As to Count IV – Aiding and Abetting Breaches of Fiduciary Duty
to the Funding Partnership
97-101. By Order dated May 3, 2021, this Count was dismissed with prejudice, so no
response is required to paragraphs 97 through 101. To the extent any response is required,
Defendants deny the allegations in paragraphs 97-101, including subparagraphs 98. (a) through
(h).
As to Count V – Aiding and Abetting Breaches of Fiduciary Duty to Plaintiffs
and the Proposed Class
102-107. By Order dated May 3, 2021, this Count was dismissed with prejudice, so no
response is required to paragraphs 102 through 107. To the extent any response is required,
Defendants deny the allegations in paragraphs 102 through 107.
Case 9:20-cv-80102-AMC Document 99 Entered on FLSD Docket 05/17/2021 Page 8 of 28
9
As to Count VI – Breach of Contract
108. Deny that Plaintiffs are entitled to seek derivative relief.
109-110. Admit the allegations set forth in paragraphs 109 through 110 of the Complaint.
111-117. Deny the allegations set forth in paragraphs 111 through 117 of the Complaint.
As to Count VII – Conversion
118-125. By Order dated May 3, 2021, this Count was dismissed with prejudice, so no
response is required to paragraphs 118 through 125. To the extent any response is required,
Defendants deny the allegations in paragraphs 118-125.
As to Count VIII – Civil Theft
126-138. By Order dated May 3, 2021, this Count was dismissed with prejudice, so no
response is required to paragraphs 126 through 138. To the extent any response is required,
Defendants deny the allegations in paragraphs 126-138.
As to Count IX – Accounting
139. Deny that Plaintiffs are entitled to seek derivative relief.
140. Deny that Plaintiffs are entitled to equitable relief.
141-142. Deny the allegations set forth in paragraphs 141 through 142 of the Complaint.
AS TO THE PRAYER FOR RELIEF
143. To the extent not otherwise denied, Defendants deny that Plaintiffs are entitled to
any relief or remedy in the “Wherefore” clauses set forth in the Complaint, including
subparagraphs (1) through (14) alleged therein.
AFFIRMATIVE AND OTHER DEFENSES
144. Defendants state the following affirmative defenses without assuming any burden
of proof or persuasion that properly lies with the Plaintiffs.
Case 9:20-cv-80102-AMC Document 99 Entered on FLSD Docket 05/17/2021 Page 9 of 28
10
AS AND FOR A FIRST DEFENSE
145. Each of the remaining Counts in the Complaint fails to state a claim upon which
relief may be granted.
AS AND FOR A SECOND DEFENSE
146. Defendants have a defense based upon documentary evidence received by and/or
executed by the Plaintiffs, including but not limited to the Subscription Agreement, Partnership
Agreement, Offering Documents, and 2014 Ordinary Resolution of the Partnership.
AS AND FOR A THIRD DEFENSE
147. Plaintiffs are equitably estopped from maintaining their claims.
AS AND FOR A FOURTH DEFENSE
148. The relief sought in the Complaint is barred by the applicable statutes of limitations.
AS AND FOR A FIFTH DEFENSE
149. The asserted claims are barred, in whole or in part, by the doctrines of waiver,
laches, acquiescence and/or ratification.
AS AND FOR A SIXTH DEFENSE
150. The actions of the General Partner were undertaken in good faith in accordance
with the terms of the Partnership Agreement, and the General Partner is protected by the
contractually agreed limitations on liability set forth therein.
AS AND FOR A SEVENTH DEFENSE
151. Plaintiffs have no right or standing to assert derivative claims.
AS AND FOR AN EIGHTH DEFENSE
152. This action is not suitable as a class action and Plaintiffs and their proposed counsel
do not qualify as class representatives or class counsel.
Case 9:20-cv-80102-AMC Document 99 Entered on FLSD Docket 05/17/2021 Page 10 of 28
11
AS AND FOR A NINTH DEFENSE
153. Plaintiffs are not entitled to any relief because if, arguendo, their allegations in the
Complaint and at deposition were true, then Plaintiffs have committed a fraud against the
Defendants and lied on their sworn immigration petitions.
AS AND FOR A TENTH DEFENSE
154. The claims asserted are barred by the doctrine of judicial estoppel because Plaintiffs
signed and swore to a set of facts in their immigration petitions, which were administratively
adjudicated and approved by the United States Citizenship and Immigration Services division of
the United States Department of Homeland Security, that are contradicted by the allegations in the
Complaint. Because the Plaintiffs obtained the immigration benefits for themselves and for their
families for which they had petitioned, they are estopped from asserting facts different from those
in their immigration petitions, and their claims are barred.
AS AND FOR AN ELEVENTH DEFENSE
155. Plaintiffs’ claims are barred and/or any compensable damages reduced by
Plaintiffs’ contributory or comparative fault/negligence, including without limitation Plaintiffs’
failure to request translations of the Offering Documents and/or consult with independent advisors
prior to purchasing their membership interests in the Funding Partnership as they represented and
warranted they had done.
AS AND FOR A TWELFTH DEFENSE
156. Defendants reserve the right to amend this Answer, including, without limitation,
to raise and rely upon any defenses that become available or apparent during discovery.
Case 9:20-cv-80102-AMC Document 99 Entered on FLSD Docket 05/17/2021 Page 11 of 28
12
COUNTERCLAIMS
Nicholas A. Mastroianni II, Harbourside Funding GP, LLC and Harbourside Place, LLC
(collectively, the “Counterclaim Plaintiffs”), respectfully allege as follows for their Counterclaims
against Ting Peng and Lin Fu (together, the “Counterclaim Defendants”).
INTRODUCTION
1. The Counterclaims involve fraud, misrepresentation and breach of warranty by the
two Plaintiffs and Counterclaim Defendants, as revealed in their depositions in this action, and a
contractual duty to indemnify set forth in the agreements signed by the Counterclaim Defendants.
The Counterclaim Defendants, Chinese nationals, obtained green cards for themselves and their
families through a years-long series of lies, investment fraud, immigration fraud, lies to the
Department of Homeland Security, and lies to the very partnership in which they invested.
2. The Counterclaim Defendants are each millionaire Chinese citizens who sought to,
and in fact did, immigrate to the United States with their families, and obtained green cards through
the United States Government-approved EB-5 Visa Program (the “EB-5 Program”). The EB-5
Program (which stands for employment based-fifth preference) permits foreign investors to
immigrate and apply for permanent residency if they invest $500,000 in a new commercial
enterprise that is an “at risk” investment and creates at least ten (10) new permanent jobs per
investor and the funds remain at risk for the required period of time.
3. To qualify for Counterclaim Plaintiffs’ EB-5 project (a loan to finance development
of Harbourside Place in Jupiter, Florida), each Counterclaim Defendant was required to submit an
application to Counterclaim Plaintiffs, and to make a series of material representations and
warranties in order to qualify for consideration as an immigrant investor.
4. Counterclaim Defendants made those representations and warranties in writing to
Counterclaim Plaintiffs, submitted and repeated them to the Department of Homeland Security in
Case 9:20-cv-80102-AMC Document 99 Entered on FLSD Docket 05/17/2021 Page 12 of 28
13
their immigration petitions, were accepted as partners of Harbourside Funding L.P. and then had
their immigration petitions granted and obtained their green cards.
5. In their deposition testimony, Counterclaim Defendants revealed that their
representations and warranties were false, and consequently, their immigration petitions similarly
contained the false representations and warranties. Counterclaim Plaintiffs relied on the
representations and warranties in accepting Counterclaim Defendants into the partnership, in
paying substantial investment returns to Counterclaim Defendants and in treating Counterclaim
Defendants as partners and supporting their immigration applications.
6. As is generally the case with private investment opportunities, the sponsor creates
an Offering Memorandum setting forth the terms of the investment and providing the transaction
documents. In order to ensure an expressly stated and unambiguous basis for the investment, and
that investors only rely on the information in the Offering Memorandum, and nothing else, the
Subscription Agreement signed by each Counterclaim Defendant contained certain representations
and warranties. Among other representations and warranties, each Counterclaim Defendant
represented that:
she met the “accredited investor” test;
she invested in the partnership based solely on her own analysis of the
partnership;
she had numerous investments prior to investing in the partnership;
she was capable of evaluating the merits and risks of their investment in the
partnership units;
she had received and reviewed the Offering Documents; and
she understood that the estimate prepared by the partnership was not
guaranteed.
Case 9:20-cv-80102-AMC Document 99 Entered on FLSD Docket 05/17/2021 Page 13 of 28
14
7. The representations and warranties were expressly given by Counterclaim
Defendants to induce Counterclaim Plaintiffs’ reliance and to induce their acceptance as limited
partners of the partnership.
8. Counterclaim Plaintiffs relied on each of these clear, express, unambiguous and
written representations and warranties in admitting Counterclaim Defendants into the partnership.
9. Thereafter, Counterclaim Defendants attached to their sworn immigration petition
submitted to the Department of Homeland Security the very documents evidencing their
investment, including the Subscription Agreement, containing the above representations and
warranties and swore that the attached evidence was true.
10. Then, in March 2021, Counterclaim Defendants admitted at their depositions,
among other things, that:
they did not invest in Harbourside Funding based on their own analysis of
Harbourside Funding;
they were not experienced investors;
they were not capable of evaluating the merits and risks of their investment
in the Partnership units; and
they had not read, understood or reviewed the Offering Documents.
11. Had Counterclaim Defendants not given their representations and warranties, but
instead made the statements in the previous paragraph at the time of their investment application
and immigration applications, they would:
i. not have been accepted into the partnership;
ii. not have obtained green cards for themselves and their families;
iii. not have received more than $50,000 investment returns paid to date by the
partnership.
12. As a result, Counterclaim Defendants are liable for fraud, misrepresentation and
breach of warranty and should be ordered to pay damages to Counterclaim Plaintiffs, including
Case 9:20-cv-80102-AMC Document 99 Entered on FLSD Docket 05/17/2021 Page 14 of 28
15
disgorging their investment returns. Additionally, Counterclaim Plaintiffs are entitled to a
declaratory judgment determining that the dissociation of Counterclaim Defendants from the
partnership is proper under the agreements and law.
THE PARTIES
13. Counterclaim Plaintiff Nicholas A. Mastroianni II (“Mastroianni”) is an individual
who resides in Palm Beach, County of Florida. In 2010, Mastroianni established the Florida
Regional Center, LLC, Harbourside Funding GP, LLC, Harbourside Funding, LP, and
Harbourside Place, LLC as the appropriate business entities required to properly conduct EB-5
Program business in accordance with USCIS requirements.
14. Counterclaim Plaintiff Harbourside Funding GP, LLC (the “General Partner”) is a
Florida limited liability company that serves as the general partner of Harbourside Funding, LP
(“Harbourside Funding”).
15. Counterclaim Plaintiff Harbourside Place, LLC (the “Developer”) is a Delaware
limited liability company.
16. Counterclaim Defendant Ting Peng (“Ms. Peng”) is an individual who resides in
Sammamish, Washington. On April 2, 2013, Ms. Peng was accepted as a limited partner of
Harbourside Funding.
17. Counterclaim Defendant Lin Fu (“Ms. Fu”) is an individual who resides in
Princeton, New Jersey. On December 16 2011, Ms. Peng was accepted as a limited partner of
Harbourside Funding.
BACKGROUND TO THE INVESTMENT
18. Harbourside Funding was created in 2010 to be an investment and funding vehicle
to make a loan to the Developer of Harbourside Place, a multi-use real estate development in
Jupiter, Florida.
Case 9:20-cv-80102-AMC Document 99 Entered on FLSD Docket 05/17/2021 Page 15 of 28
16
19. To raise funds, Harbourside Funding was established to be an EB-5 compliant
investment, under regulations promulgated by the United States Citizenship and Immigration
Services (“USCIS”) division of the Department of Homeland Security.
A. The EB-5 Program
20. The EB-5 program was created in 1990 by Congress to encourage the flow of capital
into the U.S. economy and to promote employment in the United States. Foreign investors are
offered the prospect (but not the guarantee) of lawful permanent residence in the U.S. (evidenced
by an issued green card) if they invest a minimum of $500,000 in a new commercial enterprise in
the U.S., and that investment results in the creation or maintenance of at least ten full-time jobs in
the U.S. for American citizens.
21. The EB-5 Program is regulated by USCIS. USCIS’ EB-5 Program regulations
require applicants’ investments to be “at risk”— i.e., subject to the possibility of gain or loss.
B. The EB-5 Visa Process
22. The primary steps in the EB-5 visa process are as follows:
The foreign investor invests in a new commercial enterprise (the “NCE,” here,
Harbourside Funding) in the U.S. The NCE may be affiliated with a regional center
(here, the Regional Center), which allows it to deploy the proceeds of the EB-5
investments, as debt or equity, to a job creating enterprise (here, the Developer),
which will use the funds to directly or indirectly create at least ten full-time jobs for
U.S. workers per investor.
In this situation, the investment was held in escrow pending approval of an
immigrant investor’s I-526 Petition, which the investor files with USCIS in order
to be designated as an “alien entrepreneur” under the EB-5 program.
Case 9:20-cv-80102-AMC Document 99 Entered on FLSD Docket 05/17/2021 Page 16 of 28
17
Upon approval of the investor’s I-526 Petition by USCIS, the investor presents
himself or herself to be interviewed under oath by a U.S. State Department Consular
Officer, during which the Officer determines whether the investor has complied
with all of the EB-5 requirements, that the investment is at risk and not guaranteed,
and the entire package of investment documents is reviewed again. After U.S. State
Department approval, the investor is granted an immigrant visa, and upon entering
the U.S. with that visa the investor becomes a conditional permanent resident
(“CPR”). CPR status is initially granted for a two-year period, during which time
the investor must maintain the investment in the NCE and satisfy numerous other
requirements to qualify for permanent residency status.
Between 21 and 24 months after the date of becoming a CPR, the investor must file
an I-829 petition with USCIS to remove the conditions on the investor’s residency.
The approval of the I-829 petition generally requires the investor to demonstrate
that the requirements under the EB-5 program have been fulfilled during the prior
two-year period, including showing that the job creating enterprise (in this case,
Harbourside Place) has created a minimum of ten permanent jobs per investor as a
result of the investment and that the investor’s investment in the NCE has been
sustained “at risk” for the entire two year CPR period.
If the I-829 Petition is approved, the investor and qualifying family members will
be granted unconditional permanent resident status in the U.S., and they are issued
green cards. They may also apply for U.S. citizenship after approximately five
years of residency. If denied, the investor and family members will be placed in
removal proceedings, where they may lose their immigration status and face
deportation.
Case 9:20-cv-80102-AMC Document 99 Entered on FLSD Docket 05/17/2021 Page 17 of 28
18
C. The Transaction Documents
23. Before submitting an application to become an immigrant investor in Harbourside
Funding, the Counterclaim Defendants each prepared, signed and submitted an investor suitability
questionnaire. This certified that the Counterclaim Defendants were accredited investors with
more than $1 million of investable assets (exclusive of their residence) and otherwise qualified
both to invest in Harbourside Funding and to immigrate to the United States. Each Counterclaim
Defendant expressly certified in writing that they are millionaires, and both satisfied the
parameters to be an accredited investor.
24. After submission of an acceptable investor suitability questionnaire and
confirmation that the Counterclaim Defendants facially qualified for the EB-5 Program,
Counterclaim Defendants were given the opportunity to apply for membership in the Harbourside
Funding partnership by submitting a Subscription Agreement and other critical documents.
25. In order to ensure that each prospective investor had a single identifiable set of
investment information upon which both the investor and the Counterclaim Defendants would
rely, Harbourside Funding created a packet of offering materials, consisting of an Offering
Memorandum and other critical documents, including the Subscription Agreement and Limited
Partnership Agreement. Those documents contained investment information, explained the
investment and immigration process, disclosed risks and described the commitments and
obligations required of each investor.
26. Each Counterclaim Defendant signed and delivered to the Counterclaim Plaintiffs
the Subscription Agreement.
27. Each Subscription Agreement provides that as a “material inducement” for the
Partnership to enter into the Subscription Agreement and “to accept” each Counterclaim
Case 9:20-cv-80102-AMC Document 99 Entered on FLSD Docket 05/17/2021 Page 18 of 28
19
Defendant’s subscription, each Counterclaim Defendant expressly represented and warranted to
Counterclaim Plaintiffs as follows:
6.5 Independent Advice. The Subscriber has had the opportunity to consult with
competent and independent advisors of the Subscriber’s choice with respect to
the suitability of the investment based on the Subscriber’s individual
circumstances and is making an investment in Units solely on the basis of those
consultants and the Subscriber’s own analysis of the Partnership . . .
***
6.9 Accredited Investor. The Subscriber is an “Accredited Investor” as defined in
the Offering memorandum and is a sophisticated investor by virtue of Subscriber’s
education, training and numerous prior investments made on Subscriber’s own
behalf or through entities which Subscriber controls. The Subscriber is
knowledgeable and experienced in financial and business matters and is capable
of evaluating the merits and risks of an investment in the Units and has the
capacity to protect Subscriber’s own interests in connection with the purchase of
the Units, either alone or in conjunction with Subscriber’s professional advisors,
who are unaffiliated with and who are not compensated, directly or indirectly, by
the Partnership or any affiliate of the Partnership . . .
6.10 Risk Assumption. Subscriber has received and reviewed the Offering
Documents. The Subscriber assumes full responsibility for making an
investment in the Units and has received full independent advice regarding the
risks associated with this investment. The Subscriber acknowledges that (i) the
Partnership is a newly-formed limited partnership proposing to fund the purchase,
development, construction and operation of Harbourside Place, with all the
attendant business and financial risks of a newly-formed partnership, (ii) the
investment in the Partnership contemplated herein is a speculative investment and
involves substantial risks, including the potential loss of the Subscriber’s entire
investment. The Subscriber is able to hold the Units for an indefinite period of
time and can bear the economic risk of Subscriber’s investment in the
Partnership, including the loss of the Subscriber’s entire investment in the Units.
6.11 Access to Information. The Subscriber acknowledges the receipt of a copy
of the Offering Documents. The Subscriber reads and understands English or
has had the Offering Documents translated by a competent translator into a
language the Subscriber understands. The Subscriber has fully read all the
Offering Documents, including this Agreement, which describe certain material
information concerning the Partnership and has carefully reviewed them and
understands the information contained therein. The Subscriber acknowledges
that the Offering Documents do not purport to contain all the information that
would be contained in a registration statement under the Securities Act. The
Partnership has agreed to make, and has made, available to the Subscriber prior to
any acquisition of the Units all information necessary to enable the Subscriber to
evaluate the risks and merits of an investment in the Partnership. The Subscriber
Case 9:20-cv-80102-AMC Document 99 Entered on FLSD Docket 05/17/2021 Page 19 of 28
20
has received all information which Subscriber has requested regarding the
Partnership and its current and proposed business and operations, and the
Subscriber has been given reasonable opportunity to speak and meet with
representatives of the Partnership for the purpose of asking questions of, and
receiving answers from, such representatives concerning the foregoing and an
investment in the Partnership, and the Partnership has responded to all such
questions and inquiries to the satisfaction of the Subscriber. Notwithstanding the
foregoing, the Subscriber has not relied upon any representation or other
information other than as contained in the Offering Documents.
***
6.13 No General Solicitation. The Subscriber is unaware of and is no way
relying on any form of general solicitation or general advertising in connection
with the Offering in the United States or in any other jurisdiction . . .
***
6.23 Survival of Representations, Warranties, Covenants and
Acknowledgements. The Subscriber makes the representations, warranties,
covenants and acknowledgments set forth in this Section 4 with the intent that
they be relied upon by the Harbourside Parties in determining the Subscriber’s
suitability as a limited partner in the Partnership, and the Subscriber hereby
agrees that all such representations, warranties, covenants and acknowledgments
shall survive the consummation of the transactions contemplated by this
Agreement.
(Emphasis added).
28. The Subscription Agreement expressly provides that the Counterclaim Defendants’
representations and warranties survive the consummation of the transactions described in the
Subscription Agreement.
29. Representations and warranties similar to those in Subscription Agreement were
made by each Counterclaim Defendant in the Limited Partnership Agreement, including at
Sections 19.13 and 19.14.
30. Additionally, in Section 10 of the Subscription Agreement, Counterclaim
Defendants specifically and unequivocally agreed to indemnify the Counterclaim Plaintiffs in any
suit or proceeding arising from or by reason of any misrepresentation or misstatement of facts
Case 9:20-cv-80102-AMC Document 99 Entered on FLSD Docket 05/17/2021 Page 20 of 28
21
made by Counterclaim Defendants concerning Counterclaim Defendants, in connection with the
offering and sale of the units in Harbourside Funding, whether actual or alleged:
10. Indemnification. The Subscriber shall defend, indemnify and hold harmless
the Harbourside Parties who were or are a party to, or are threatened to be made
a party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative, by reason of, or arising
from any actual or alleged misrepresentation or misstatement of facts, or
omission to represent or state facts, made by the Subscriber to the Partnership
concerning the Subscriber or Subscriber’s financial position, in connection with
the offering and sale of the Units, against losses, liabilities and expenses actually
incurred by a Harbourside Party (including without limitation attorneys’ fees,
judgments, fines and amounts paid in settlement) in connection with such action,
suit or proceeding.
(Emphasis added).
31. In reliance on the express representations and warranties set forth in the
Subscription Agreement, Harbourside Funding, acting through its General Partner, accepted each
Counterclaim Defendant as a limited partner in the partnership. Counterclaim Defendants’
investment was accepted, and each Counterclaim Defendant obtained the benefits of the
partnership and the EB-5 Program.
32. Shortly thereafter each Counterclaim Defendant submitted her I-526 Petition to
USCIS. In their I-526 Petitions, Counterclaim Defendants incorporated and attached a copy of the
Offering Documents, including the executed Subscription Agreements containing the Defendants’
(now known to be false) representations and warranties. Each I-526 Petition was sworn under
penalty of perjury by each Counterclaim Defendant:
I certify under penalty of perjury under the laws of the United States of America,
that this petition and the evidence submitted with it is all true and correct. I
authorize the release of any information from my records that U.S. Citizenship and
Immigration Services needs to determine eligibility for the benefit I am seeking.
33. Thereafter, each Counterclaim Defendant’s I-526 was approved by the USCIS,
each Counterclaim Defendant received her and her family’s conditional permanent residence in
the United States and each Counterclaim Defendant and her family received the ultimate
Case 9:20-cv-80102-AMC Document 99 Entered on FLSD Docket 05/17/2021 Page 21 of 28
22
immigration prize—their coveted green cards, entitling them to permanent residency in the United
States of America. All thanks to their status as investors in the Partnership’s new commercial
enterprise, the development of Harbourside Place and the creation of thousands of new jobs.
34. Additionally, due to their status as limited partners of Harbourside Funding, each
Counterclaim Defendant has received contractual returns on her investment from the Partnership,
totaling, to date $53,608.31 to Ms. Peng and $56,955.66 to Ms. Fu.
D. Counterclaim Defendants’ Sworn Deposition Testimony in this Action
35. Counterclaim Defendants’ sworn deposition testimony in this action reveals the
following misrepresentations and breaches of warranty:
i. Contrary to the express representations and warranties that each Counterclaim
Defendant received, read and understood English or had the Offering Materials
translated, each Counterclaim Defendant now claims that she did not read or
understand English and did not have the Offering Materials translated prior to
signing the Subscription Agreement. [Dkt No. 91-1, Fu Tr. 15:21-17:7, 18:2-4,
22:12-17; Dkt. No. 91-2, Peng Tr. 34:16-35:12].
ii. Contrary to the express representations and warranties that each Counterclaim
Defendant relied only on the Offering Materials when deciding to invest, each
Counterclaim Defendant now claims that she did read the Offering Materials and
therefore could not have relied on the Offering Materials in deciding to invest in
Harbourside Funding. [See id.]
iii. Contrary to the express representations and warranties that they were each
accredited investors who had conducted their own analysis of Harbourside
Funding, each Counterclaim Defendant testified that she was not capable of
Case 9:20-cv-80102-AMC Document 99 Entered on FLSD Docket 05/17/2021 Page 22 of 28
23
conducting, and did not conduct, her own analysis of Harbourside Funding. [See
id.]
36. Each Counterclaim Defendant, under oath at deposition, provided confirmation of
her deception.
37. Had Counterclaim Defendants not provided the express representations and
warranties in the Subscription Agreement, neither would have been admitted into the Harbourside
Funding partnership. Thus, through their deceit, Counterclaim Defendants were admitted into the
partnership, received contractual distributions totaling in excess of $100,000 and obtained green
cards for themselves and their families.
COUNT I - FRAUD
38. Each Counterclaim Defendant, through the execution and delivery of the
Subscription Agreement made the representations and warranties to Counterclaim Plaintiffs
described above in ¶¶ 26-31, to induce Counterclaim Plaintiffs to sign the Subscription Agreement
and to accept each Counterclaim Defendant into the partnership.
39. Counterclaim Plaintiffs reasonably relied on each Counterclaim Defendant’s
representations and warranties, and entered into the Subscription Agreement and accepted each
Counterclaim Defendant into the partnership.
40. Each Counterclaim Defendant thereafter swore to the USCIS that the evidence
attached to her I-526 petition was “true and correct,” including the Subscription Agreement.
41. As now admitted in Counterclaim Defendants’ deposition testimony, the
representations and warranties above were false.
42. Counterclaim Plaintiffs were harmed by the misrepresentations by accepting each
Counterclaim Defendant into the partnership, paying each Counterclaim Defendant a return on
Case 9:20-cv-80102-AMC Document 99 Entered on FLSD Docket 05/17/2021 Page 23 of 28
24
their investment and assisting the Counterclaim Defendants and their families in obtaining their
green cards.
43. As a result of the foregoing, Counterclaim Plaintiffs are entitled to and hereby
demand judgment against the Counterclaim Defendants for such affirmative and/or offset relief as
is appropriate, including but not limited to, money damages, including the refund of contractual
returns or partnership distributions made and damages relating to and arising from the Plaintiffs’
breaches, disassociation from Harbourside Funding, and such other relief as is just and equitable.
COUNT II – NEGLIGENT MISREPRESENTATION
44. Each Counterclaim Defendant, through the execution and delivery of the
Subscription Agreement and the Partnership Agreement, made the representations and warranties
to Counterclaim Plaintiffs described above in ¶¶ 26-31, to induce Counterclaim Plaintiffs to sign
the Subscription Agreement and to accept each Counterclaim Defendant into the partnership.
45. Counterclaim Plaintiffs reasonably relied on each Counterclaim Defendant’s
representations and warranties, and entered into the Subscription Agreement and accepted each
Counterclaim Defendant into the partnership.
46. Each Counterclaim Defendant thereafter swore to the USCIS that the evidence
attached to her I-526 petition was “true and correct,” including the Subscription Agreement.
47. As now admitted in the Counterclaim Defendants’ deposition testimony, the
representations and warranties above were false.
48. Counterclaim Plaintiffs were harmed by the misrepresentations by accepting each
Counterclaim Defendant into the partnership, paying each Defendant a return on their investment
and assisting the Counterclaim Defendants and their families in obtaining their green cards.
49. As a result of the foregoing, Counterclaim Plaintiffs are entitled to and hereby
demand judgment against the Counterclaim Defendants for such affirmative and/or offset relief as
Case 9:20-cv-80102-AMC Document 99 Entered on FLSD Docket 05/17/2021 Page 24 of 28
25
is appropriate, including but not limited to, money damages, including the refund of contractual
returns or partnership distributions made and damages relating to and arising from the
Counterclaim Defendants’ breaches, disassociation from Harbourside Funding, and such other
relief as is just and equitable.
COUNT III – BREACH OF WARRANTY
50. Each Counterclaim Defendant, through the execution and delivery of the
Subscription Agreement and the Partnership Agreement, made the representations and warranties
to Counterclaim Plaintiffs described above in ¶¶ 26-31, to induce Counterclaim Plaintiffs to sign
the Subscription Agreement and to accept each Counterclaim Defendant into the partnership.
51. Counterclaim Plaintiffs reasonably relied on each Counterclaim Defendant’s
representations and warranties, and entered into the Subscription Agreement and accepted each
Counterclaim Defendant into the partnership.
52. Each Counterclaim Defendant thereafter swore to the USCIS that the evidence
attached to her I-526 petition was “true and correct,” including the Subscription Agreement.
53. As now admitted in the Counterclaim Defendants’ deposition testimony, the
representations and warranties above were breached.
54. Counterclaim Plaintiffs were harmed by the breaches of warranties by accepting
each Counterclaim Defendant into the partnership, paying each Counterclaim Defendant a return
on their investment and assisting the Counterclaim Defendants and their families in obtaining their
green cards.
55. As a result of the foregoing, Counterclaim Plaintiffs are entitled to and hereby
demand judgment against the Counterclaim Defendants for such affirmative and/or offset relief as
is appropriate, including but not limited to, money damages, including the refund of contractual
returns or partnership distributions made and damages relating to and arising from the
Case 9:20-cv-80102-AMC Document 99 Entered on FLSD Docket 05/17/2021 Page 25 of 28
26
Counterclaim Defendants’ breaches, disassociation from Harbourside Funding, and such other
relief as is just and equitable.
COUNT IV – INDEMNIFICATION
56. Each Counterclaim Defendant, through the execution and delivery of the
Subscription Agreement and the Partnership Agreement, made the representations and warranties
to Counterclaim Plaintiffs described above in ¶¶ 26-31, to induce Counterclaim Plaintiffs to sign
the Subscription Agreement and to accept each Counterclaim Defendant into the partnership.
57. In Section 10 of the Subscription Agreement, each Counterclaim Defendant
specifically and unequivocally agreed to indemnify the Counterclaim Plaintiffs, including for legal
fees, in any suit or proceeding arising from or by reason of any misrepresentation or misstatement
of facts made by Counterclaim Defendants concerning Counterclaim Defendants, in connection
with the offering and sale of units in Harbourside Funding, whether actual or alleged:
10. Indemnification. The Subscriber shall defend, indemnify and hold harmless
the Harbourside Parties who were or are a party to, or are threatened to be made
a party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative, by reason of, or arising
from any actual or alleged misrepresentation or misstatement of facts, or
omission to represent or state facts, made by the Subscriber to the Partnership
concerning the Subscriber or Subscriber’s financial position, in connection with
the offering and sale of the Units, against losses, liabilities and expenses actually
incurred by a Harbourside Party (including without limitation attorneys’ fees,
judgments, fines and amounts paid in settlement) in connection with such action,
suit or proceeding.
(Emphasis added).
58. As now admitted in the Counterclaim Defendants’ deposition testimony, the
representations and warranties made by Counterclaim Defendants in the Subscription Agreement
and the Partnership Agreement concerning Counterclaim Defendants were false.
59. As a result, Counterclaim Plaintiffs are entitled to recover from Counterclaim
Defendants their costs and attorneys’ fees in defending this action.
Case 9:20-cv-80102-AMC Document 99 Entered on FLSD Docket 05/17/2021 Page 26 of 28
27
COUNT V – DECLARATION OF DISSOCIATION OF LIMITED PARTNERS
60. Counterclaim Plaintiffs repeat and re-allege each of the allegations set forth in
paragraphs 1-59 of the Counterclaims.
61. The conduct described above by each Counterclaim Defendant was wrongful and
adversely affected the Partnership’s activities.
62. Additionally, as described above, each Counterclaim Defendant violated the
obligation of good faith and fair dealing under § 620.1305(2) Fla. Stat.
63. As a result of the foregoing, each Counterclaim Defendant should be declared to be
a disassociated limited partner under§ 620.1601(e) Fla. Stat. and deprived of her right to vote as a
limited partner or receive the benefits of partnership, including but not limited to, any return of her
investment in the partnership, because each Counterclaim Defendant joined the partnership under
false pretenses.
RELIEF REQUESTED
WHEREFORE, Defendants and Counterclaim Plaintiffs respectfully request this Court
enter a final judgment in favor of Defendants and Counterclaim Plaintiffs dismissing the remaining
Counts of the Complaint with prejudice, together with an award against Plaintiffs and
Counterclaim Defendants for (i) compensatory damages in an amount to be determined at trial,
including but not limited to $53,608.31 for Ms. Peng and $56,955.66 for Ms. Fu, plus interest at
the maximum rate allowable; (ii) indemnification and payment of Counterclaims Plaintiffs’ costs
and attorneys’ fees in defending this action; and (iii) an award of a declaration of dissociation as
limited partners of Harbourside Funding, along with such other relief that the Court deems just
and proper.
Case 9:20-cv-80102-AMC Document 99 Entered on FLSD Docket 05/17/2021 Page 27 of 28
28
Dated: May 17, 2021
AKERMAN LLP
777 South Flagler Drive
Suite 1100, West Tower
West Palm Beach, FL 33401
Tel.: (561) 653-5000 / Fax: (561) 659-6313
By: s/Eleni Kastrenakes Howard _
David P. Ackerman (FBN 374350)
Primary Email: david.ackerman@akerman.com
claudia.rodriguez@akerman.com
Eleni Kastrenakes Howard (FBN 0073073)
eleni.howard@akerman.com
dolores.block@akerman.com
and
Richard G. Haddad (Admitted Pro Hac Vice)
rhaddad@otterbourg.com
William M. Moran (Admitted Pro Hac Vice)
wmoran@otterbourg.com
OTTERBOURG P.C.
230 Park Avenue
New York, New York 10169
Tel: (212) 661-9100/ Fax: (212) 682-6104
Counsel for Defendants
Case 9:20-cv-80102-AMC Document 99 Entered on FLSD Docket 05/17/2021 Page 28 of 28
Recommended