Feng v. Walsh

• Docket Number: 19-24138-CIV-GAYLES/OTAZO-REYES
• Decision Date: 21 December 2021
• Parties: YUANXIAO FENG, et al., Plaintiffs, v. JOSEPH WALSH, et al., Defendants.
• Court: U.S. District Court — Southern District of Florida

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YUANXIAO FENG, et al., Plaintiffs, v. JOSEPH WALSH, et al., Defendants.

No. 19-24138-CIV-GAYLES/OTAZO-REYES

United States District Court, S.D. Florida

December 21, 2021

REPORT AND RECOMMENDATION

ALICIA M. OTAZO-REYES, UNITED STATES MAGISTRATE JUDGE

THIS CAUSE came before the Court upon Defendants Greystone Hotel Miami, LLC (“Greystone Hotel Miami”), United EB-5 LLC (“United EB-5”), Santa Barbara 230, LLC (“Santa Barbara 230”), Greystone Terra Firma, LLC (“Greystone Terra Firma”), VOS Holdings I, LLC (“VOS Holdings I”), VOS CRE I, LLC (“VOS CRE I”), ^[1] Greystone Hospitality, LLC (“Greystone Hospitality”), Greystone Holdco, LLC (“Greystone Holdco”), Greystone Managing Member LLC (“Greystone Managing Member”), Greystone Master Tenant, LLC (“Greystone Master Tenant”) Greystone Tenant, LLC (“Greystone Tenant”) Greystone Option Holder, LLC (“Greystone Option Holder”), Trans Inn Associates, LLC (“Trans Inn Associates”), VOS Hospitality, LLC (“VOS Hospitality”), BBM 3, LLC (“BBM 3”), BBM 3 II, LLC (“BBM 3 II”), James Vosotas (“J Vosotas”), Daniel Vosotas (“D. Vosotas”), and Branden Muhl's (“Muhl””) (collectively, “Greystone Defendants”) Motion to Dismiss First Partially Amended Complaint with Prejudice [D.E. 162].

This matter was referred to the undersigned pursuant to 28 U.S.C. § 636 by the Honorable Darrin P. Gayles, United States District Judge [D.E. 106]. The undersigned held a hearing on this matter on August 10, 2021 [D.E. 199]. For the reasons stated below, the undersigned respectfully recommends that the Greystone Defendants' Motion to Dismiss First Partially Amended Complaint with Prejudice [D.E. 162] be GRANTED and that the First Partially Amended Complaint [D.E. 148] be DISMISSED WITH PREJUDICE.^[2]

PROCEDURAL BACKGROUND

Plaintiffs Yuanxiao Feng, Kiu Chun Saxon Hui, Lai King Hui, Jing Kuang, Chuen Ping Ng, Minyang Tian, Hongsen Zhang, and Yan Zhang (collectively, “Plaintiffs”) are all foreign nationals who commenced this action on October 8, 2019. See Complaint [D.E. 1]. At the core of Plaintiffs' action is their allegation that they were defrauded out of millions of dollars they claim to have invested through Defendant Joseph Walsh (“Walsh”) in the Greystone Defendants' hotel project in order to obtain permanent resident visas through the federal EB-5 Immigrant Visa Investor Program (hereafter, “EB-5 Program”). Id. at 4-5.

On November 18, 2019, the Greystone Defendants filed their Motion to Dismiss Complaint for Lack of Subject Matter Jurisdiction, pursuant to Rule 12(b)(1) of the Federal Rules of Civil Procedure (hereafter, “Greystone Defendants' First Motion to Dismiss”) [D.E. 22]. On December 2, 2019, Plaintiffs timely amended their initial pleading as of right by filing their First Amended Complaint [D.E. 44].^[3] On December 10, 2019, Defendants PNC Bank, N.A. and Ruben Ramirez (collectively, “PNC Defendants”) filed their Motion to Dismiss the First Amended Complaint (hereafter, “PNC Defendants' Motion to Dismiss”) [D.E. 51]. On January 2, 2020, the Greystone Defendants filed their Motion to Dismiss the First Amended Complaint (hereafter, “Greystone Defendants' Second Motion to Dismiss”) [D.E. 68].

On September 24, 2020, the undersigned issued her Report and Recommendation as to the PNC Defendants' Motion to Dismiss and the Greystone Defendants' Second Motion to Dismiss, recommending dismissal with prejudice of Plaintiffs' federal and state Racketeer Influenced and Corrupt Organizations Act (“RICO”) claims against the PNC Defendants and the Greystone Defendants, and dismissal of the remaining counts against them without prejudice and with leave to replead. See Report and Recommendation [D.E. 112]. On September 30, 2020, the Court adopted the undersigned's Report and Recommendation. See Order Affirming and Adopting Report of Magistrate Judge (“Order”) [D.E. 113]. On December 28, 2020, the Court dismissed the claims against the PNC Defendants with prejudice after receiving a report that Plaintiffs had settled with those parties [D.E. 125 & 126].

On January 12, 2021, after noting the non-active status of the other Defendants in the case, the Court granted Plaintiffs leave to partially amend the First Amended Complaint as to Defendant Anthony Reitz (“Reitz”) and the Greystone Defendants only. See Order [D.E. 132].^[4] Although Reitz had appeared pro se and answered the Complaint on November 20, 2019, he was dismissed with prejudice on April 2, 2021 pursuant to Plaintiffs' Notice of Partial Settlement as to Reitz, which had been filed on February 2, 2021 [D.E. 24, 133, & 157].

Thus, on March 29, 2021, Plaintiffs filed their “First Partially Amended Complaint as to Greystone Defendants” (hereafter, “FPAC”) [D.E. 148]. Now before the Court is the Greystone Defendants' Motion to Dismiss First Partially Amended Complaint with Prejudice (hereafter, “Greystone Defendants' Third Motion to Dismiss”), wherein the Greystone Defendants seek dismissal with prejudice of all nineteen counts asserted against them in the FPAC. See Greystone Defendants' Third Motion to Dismiss [D.E. 162].

THE FPAC

In the FPAC, Plaintiffs note that the First Amended Complaint [D.E 44] continues to be the operative pleading against Defendants Walsh, Joseph Walsh, Jr. (“Walsh, Jr.”), Greystone EB-5 LLLP (“Greystone EB-5”), SARC, USREDA, LLC (“USREDA”), USREDA Holdings, LLC (“USREDA Holdings”), USREDA Management, LLC (“USREDA Management”), and WWB Trust, LLC (“WWB”), and further state that:

Although this First Partially Amended Complaint is as to the Greystone Defendants only, the allegations against all Defendants from the First Amended Complaint (D.E. 44) are incorporated herein to the maximum extent possible, as that is the operative complaint as to the Defaulted Defendants, as defined herein. However, given that the Greystone Defendants have already moved to dismiss the First Amended Complaint (D.E. 44) as a shotgun pleading, allegations against all Defendants are made herein in accordance with the United [States] Magistrate Judge's Report and Recommendation (D.E. 112) and the Court's Order affirming the same (D.E. 113).

See FPAC [D.E. 148 at 2-3 n. 1 & 2]. Plaintiffs then allege that, since 2010, Walsh, “his entities, and coconspirators” have defrauded investors participating in the EB-5 Program. See FPAC [D.E. See Order [D.E. 132 at 2-3]. 148 at 3]. According to Plaintiffs, the Walsh entities are: SARC, WWB, USREDA, USREDA Holdings and USREDA Management. Id. ¶ 65. Plaintiffs define the term “co-conspirators” as including but not limited to: Walsh, Walsh, Jr., SARC, WWB, USREDA, USREDA Holdings, D. Vosotas, J. Vosotas, Muhl, BBM 3, BBM 3 II and “the Vosotas Entities”, which are further defined as consisting of Greystone EB-5, Greystone Hotel Miami, United EB-5, Santa Barbara 230, Greystone Terra Firma, VOS Holdings I, VOS CRE I, Greystone Hospitality, Greystone Holdco, Greystone Managing Member, Greystone Master Tenant, Greystone Tenant, Greystone Option Holder, Trans Inns Associates, and VOS Hospitality. Id. at 3 n.3 & ¶ 67. Thus, all of the “Vosotas Entities” are Greystone Defendants except for Greystone EB-5, which Plaintiffs characterize as the platform for the alleged fraud. Id. at 4. Plaintiffs further allege that:

• Walsh, through Greystone EB-5, offered and sold limited partnership units to foreign investors seeking to participate in an approved EB-5 Program. Id. at 3-4.

• The Greystone Defendants, in tandem with Walsh, developed a platform for fraud through an EB-5 investment project advertised as Greystone EB-5. Id. at 3-5, 20.

• Walsh and the Greystone Defendants engaged in an elaborate, fraudulent scheme to induce Plaintiffs into investing in United States real estate to obtain EB-5 immigrant visas. Id. at 3-5, 22-30.

• Walsh and the Greystone Defendants falsely represented to investors that Greystone EB-5 would develop, renovate, and operate two adjacent properties in Miami Beach, Florida (“Greystone Properties”), one of which would become the Greystone Hotel (“Greystone Hotel Project”). Id. at 4-5.

• Each Greystone EB-5 partnership unit required an investment of $500, 000 and an additional $60, 000 in administrative and legal fees, which monies were collectively authorized to be spent for the renovation and development of the Greystone Properties. Id. at 5, 17, & 22.

• J. Vosotas co-managed Greystone EB-5 with Walsh; D. Vosotas is the father of J. Vosotas and manages the Vosotas Entities with J. Vosotas; Muhl is a business partner and associate of D. Vosotas and J. Vosotas. They and the other Greystone Defendants conspired with Walsh to form a fake escrow account that allowed them to misappropriate Plaintiffs' funds outside the terms of investment portfolio agreements. Id. at 5, 8-15.

• As a result, Plaintiffs lost their investments and the federal government denied Plaintiffs' EB-5 resident visa applications on the basis that they did not financially benefit the Greystone Hotel Project. Id. at 5, 23, 28, & 41.

• After the fraud against Plaintiffs came to fruition, J. Vosotas, D. Vosotas, and Muhl moved the Greystone Properties to new shell entities and trusts in Delaware to further conceal and misrepresent the truth. Id. at 7 & 26.

• Walsh and some of the Greystone Defendants travelled to China where they knowingly made false statements about the Greystone Hotel Project to persuade Plaintiffs to invest in Greystone EB-5. Id. at 28, 60, 71, & 74.

• Plaintiffs, relying on the false statements made during those in-person meetings, executed transactional documents and, in exchange for the required investment fees and costs, received one unit each, consisting of a limited partnership interest in Greystone EB-5. Id. at 22.

In the FPAC, Plaintiffs re-assert all of their claims against the Greystone Defendants...