Access the United States, LLC v. State, 75747-4-I

CourtCourt of Appeals of Washington
PartiesACCESS THE USA, LLC, a Washington limited liability company, 520 BRIDGE REPLACEMENT FUND II, LP, a Washington limited partnership, and PREMIER 520 BRIDGE REPLACEMENT FUND II, LP, a Washington limited partnership, Appellants, v. THE STATE OF WASHINGTON, a government entity; THE OFFICE OF THE TREASURER, a government entity and agency of the State of Washington; CITIGROUP GLOBAL MARKETS, a New York corporation, Respondents.
Docket NumberNo. 75747-4-I,75747-4-I
Decision Date09 April 2018

ACCESS THE USA, LLC, a Washington limited liability company,
520 BRIDGE REPLACEMENT FUND II, LP, a Washington limited partnership,
a Washington limited partnership, Appellants,
THE STATE OF WASHINGTON, a government entity;
THE OFFICE OF THE TREASURER, a government entity and agency of the State of Washington;
CITIGROUP GLOBAL MARKETS, a New York corporation, Respondents.

No. 75747-4-I


April 9, 2018


VERELLEN, C.J. — Access the USA, LLC formed limited partnerships with foreign investors under the EB-5 Immigrant Investor Program, intending to invest in State-issued bonds to fund construction of the new SR-520 Bridge. Access submitted applications to open accounts with Citigroup Global Markets, the lead underwriter. But on the bond pricing day, Citigroup had not opened accounts for the limited partnerships, who were therefore unable to purchase bonds. Access

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sued Citigroup on theories of violation of the Consumer Protection Act (CPA),1 breach of contract, promissory estoppel, and negligent misrepresentation. Access also sued the State, alleging tortious interference with business expectancy and negligent misrepresentation.

Because Access's alleged claims of deception are limited to its unique private interaction with Citigroup and no hypothetical facts support an impact on the public interest, the trial court properly dismissed its CPA claim under CR 12(b)(6).

Because Access fails to establish an enforceable contract, the trial court properly dismissed Access's breach of contract claim on summary judgment.

Access offers no facts or reasonable inferences of an actionable promise or reliance. The trial court properly dismissed Access's promissory estoppel claim against Citigroup.

Because Access cannot point to a false statement by Citigroup or the State of a presently existing fact, the trial court properly dismissed its claims for negligent misrepresentation.

Access establishes neither an intentional interference nor an improper purpose or means. The trial court properly dismissed Access's claim that the State intentionally interfered with its business expectancy.

Therefore, we affirm.

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The EB-52 Immigrant Investor Program (EB-5 Program) allows foreign investors and their families to obtain residency in the United States. The EB-5 Program is administered by the United States Citizenship and Immigration Service (USCIS). Qualifying investments must meet threshold requirements for job creation, term of investment, and risk. The investments are prepared by USCIS-approved regional centers.

Access is an approved regional center. Michael Mattox manages Access. He developed a municipal bond investment strategy. In this model, foreign investors participate in limited partnerships, which purchase municipal infrastructure bonds. Access served as general partner in these limited partnerships. Together with other requirements, each EB-5 applicant must invest at least $1,000,000.3 Access forms and manages the limited partnerships that serve as the "funding accounts" for foreign investments. As part of Access's effort to establish funding accounts for a May 2012 bond offering, Access and its investors established two Washington limited partnerships.

Washington bond sales are conducted pursuant to recognized procedures established by the legislature and the Office of the State Treasurer. The Office of the State Treasurer competitively selects underwriters and establishes a lead underwriter. Each selected underwriter has a long history of working with State

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bond offerings and extensive experience in municipal bond offerings. Through its bond offerings, the State sells its bonds to underwriters. The underwriters, pursuant to a contract with the State, select the investors to purchase the bonds.

To purchase bonds, an investor must open an account with an underwriter. The process of opening an account with the underwriter is called "onboarding." Citigroup was the lead underwriter for the bond offering at issue in this appeal. Each underwriter determines its own onboarding process. Citigroup conducts a process that complies with federal money laundering and other regulations.

Before any SR-520 bond offering, Mattox contacted Ellen Evans, the deputy treasurer for debt management at the Office of the State Treasurer, asking for a private sale of those State bonds. Evans declined, explaining that the State "has a long-standing history of raising money exclusively through public sales of State securities and . . . we value the transparency of the public marketplace."4 Evans learned that Mattox had reached out to other State officials "to promote his investment program,"5 which made her wary. Evans advised members of the finance team and other State officials to respond that the State finances its capital projects with public sales of securities. Evans was concerned about the potential impact an EB-5 Program investment could have on the purchase of the bonds. Evans did not understand how State bonds qualify for the EB-5 program because of the low risk due to the State's excellent credit rating and because an investor's purchase would not itself create jobs.

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Evans was also cautious of the potential impact an EB-5 investment could have on the volatility of the Washington bond market—if the federal government did not approve Mattox's proposed EB-5 investment plan, all the bonds purchased on behalf of those investors would likely be placed on the secondary market for noneconomic reasons.

I. First Bond Offering

In October 2011, Access purchased $48,000,000 in bonds in a State bond offering for the SR-520 project (2012C). J.P. Morgan Securities LLC served as the lead underwriter. USCIS had not previously approved a purchase of publicly-issued bonds as a qualifying EB-5 investment.

State employees were aware of Access's interest in the bonds and communicated with J.P. Morgan representatives about its vetting process. Evans was involved in this communication, telling J.P. Morgan she did not understand how the State's bonds would fit within the EB-5 program because there was little risk involved, and the investor's bond purchase was not itself creating jobs. Evans encouraged J.P. Morgan to perform due diligence on Access and its investors. J.P. Morgan completed its account creation process and sold some of the 2012C bonds to Access.

II. Second Bond Offering

The State scheduled a second bond offering for May 22, 2012, called GARVEE6 2012F (2012F) with Citigroup Global Markets as the lead underwriter.

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In November 2011, Access, together with its investors, established two Washington limited partnerships7 (the LP Funds) and placed the limited partnership assets in escrow. Mattox intended that the LP Funds would purchase $143,000,000 in bonds. Mattox received millions from investors, all before any communication with Citigroup about the offering.

Mattox initially contacted representatives from J.P. Morgan to onboard the 2012F LP Funds, but was advised "to place its order through Citigroup."8

Mattox called Citigroup's director of institutional sales, John Leahy, on Apri 9, 2012. Mattox told Leahy he wanted to open new client accounts with Citigroup and place an order in the anticipated 2012F offering. According to Mattox, Leahy said "he would begin the account opening process at Citigroup so that Access the USA and the 2012F Limited Partnerships could participate in the 2012F Offering."9

Leahy e-mailed Mattox on April 16, 2012, asking if "there's someone we can call to get the paperwork started."10 On April 30, Mattox sent electronic copies of Access's information to Leahy to "facilitate the account setup."11 Over the following weeks, Mattox and Leahy communicated regarding onboarding

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issues. Leahy e-mailed Mattox on May 9 asking for his percentage of ownership interest. And up to two business days before the offering, Mattox sent Citigroup documents for the onboarding process. The stated investment purpose raised concerns with Citigroup and the Office of the State Treasurer.

Representatives from the State, including Evans, worked with representatives from Citigroup leading up to the 2012F bond offering to facilitate the sale. Similar to her position before the first bond offering, Evans remained concerned whether State bonds were appropriate for the EB-5 program because of their low risk and whether EB-5 investors owning State bonds would increase volatility in the State bond market. Evans expressed her concerns in meetings which Citigroup representatives attended.

According to Jay Wheatley,12 Citigroup's underwriter responsible for allocating the bonds, he had never talked to anyone with the State about Mattox or Access and acknowledged that there "were some concerns, but nothing to the degree of we don't want their interest."13 Citigroup employees Leahy and Jerry Bobo acknowledged they were aware of Evans' concern but they had their own concerns about the relationship between the bonds and the EB-5 program.

Citigroup was unable to complete the onboarding for the LP Funds before the offering date, and accounts were never opened. Therefore, the LP Funds were unable to purchase any bonds in the 2012F bond offering.

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On the evening of the failed purchase, Mattox e-mailed the State Treasurer saying he learned the State directed the underwriters not to sell bonds to his "company because of the concern of negative publicity of our investors."14 In the e-mail, Mattox does not include any suggestion that Access had a contract with Citigroup to buy bonds or that Citigroup had promised to sell them bonds. Mattox e-mailed the agents for his investors and Citigroup, repeating his belief that they had been discriminated against. According to Mattox, Leahy told him in a phone call that there was nothing he could do, and "things are going on in the back room that I can't tell you about,...

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