Xia Bi v. McAuliffe

927 F.3d 177 (2019) United States Court of Appeals for the Fourth Circuit 2019-06-12

private EB-5 investment action; dismissal of amended complaint under Rules 12(b)(6) and 9(b); federal and state fraud analyzed together (result: claimant-lost)

Facts

  1. 3 Materially false statement or misleading half-truth satisfied pleaded
    (1) On April 25, 2011, Rodham claimed that EB-5 funds accounted for only 7.8% of GreenTech's capital during an event in Beijing, China.
  2. 3 Materially false statement or misleading half-truth satisfied pleaded
    (1) On November 11, 2011, McAuliffe told a CNBC interviewer that GreenTech "ha[d] only sold 11,000 cars, but it's still a new business for us." J.A. 154.
  3. 3 Materially false statement or misleading half-truth satisfied pleaded
    The complaint alleges that each of those statements was false when made because GreenTech (1) had not sold 11,000 cars; (2) did not have a contract with Denmark; (3) had not mass-produced any electric vehicles; and (4) had fewer than one hundred employees.
  4. 3 Materially false statement or misleading half-truth satisfied pleaded
    The problem for defendants, however, is that their alleged misstatements go beyond mere projections or puffery.
  5. 3 Materially false statement or misleading half-truth satisfied pleaded
    Plaintiffs' allegation thus counts as an assertion of fact under the case law in this circuit.
  6. 9 Private investor transaction causation not pleaded
    We accept as true the following facts, which come from plaintiffs' amended complaint. Plaintiffs-Appellants are a group of twenty-seven Chinese citizens who invested $ 500,000 each in a partnership that loaned their money to GreenTech Automotive. GreenTech, founded in 2008, was a Mississippi corporation that wanted to enter the hybrid and electric vehicle markets. Initially, GreenTech planned to produce the "MyCar," a vehicle that would travel at low speeds and thus be subject to lower levels of regulatory scrutiny.
  7. 9 Private investor transaction causation not pleaded
    But there are no specific allegations that any individual plaintiff encountered any of those alleged misstatements in promotional materials or on Greentech's website.
  8. 9 Private investor transaction causation not pleaded
    Federal law similarly requires that an investor "justifiably relied" on particular misstatements in an action under Rule 10b-5.
  9. 9 Private investor transaction causation not pleaded
    Plaintiffs' complaint fails to adequately plead justifiable reliance, instead relying only on general and conclusory allegations.