Qureshi v. People's United Bank

Decision Date30 April 2020
Docket NumberCase No. 2:18-cv-00163
CourtU.S. District Court — District of Vermont
PartiesALMASOOD QURESHI, CARLOS ENRIQUE HILLER SANCHEZ, PHILLIP CALDERWOOD, JOSE ANTONIO PIETRI, JOSE R. CASSERES-PINTO, TONGYI WANG, and ALEXANDRE DACCACHE, on behalf of themselves and all others similarly situated, Plaintiffs, v. PEOPLE'S UNITED BANK, MITCHELL SILBERBERG & KNUPP, LLP, individually and as successor-in-interest to RICHARDSON & PATEL, LLP, DAVID B. GORDON, and DAVID B. GORDON, A PROFESSIONAL CORPORATION, Defendants.
OPINION AND ORDER DENYING MOTION FOR SANCTIONS OF PEOPLE'S UNITED BANK, GRANTING IN PART AND DENYING IN PART MOTION TO DISMISS OF PEOPLE'S UNITED BANK, GRANTING MOTION TO DISMISS OF MITCHELL SILBERBERG & KNUPP, LLP, DAVID B. GORDON, AND DAVID B. GORDON, A PROFESSIONAL CORPORATION, AND GRANTING LEAVE TO AMEND

(Docs. 85, 86, & 90)

Plaintiffs Almasood Qureshi, Carlos Enrique Hiller Sanchez, Phillip Calderwood, Jose Antonio Pietri, Jose R. Casseres-Pinto, Tongyi Wang, and Alexandre Daccache (collectively, "Plaintiffs") bring this suit against Defendants People's United Bank ("PUB") as well as against the law firm of Mitchell Silberberg & Knupp, LLP, individually and as successor-in-interest to Richardson & Patel, LLP, David B. Gordon, and David B. Gordon, a professional corporation (together, the "Law Firm Defendants") (collectively with PUB, "Defendants"), asserting individual and class action claims arising out of alleged misconduct in connection with development projects through the federal EB-5 Immigrant Investor Program. Pending before the court are PUB's motion for sanctions against Plaintiffs pursuant to Federal Rule of Civil Procedure 11 as well as two motions to dismiss filed by PUB and the Law Firm Defendants, respectively.

Plaintiffs are represented by Angelica M. Ornelas, Esq., Daniel C. Girard, Esq., Harley Tropin, Esq., Lisa B. Shelkrot, Esq., Maia Aron, Esq., Michael P. Bennett, Esq., Paul Aiello, Esq., Rachel Sullivan, Esq., and Tal J. Lifshitz, Esq. PUB is represented by James J. Stricker, Esq., and John J. Kennelly, Esq. The Law Firm Defendants are represented by Bridget C. Asay, Esq., John Durrant, Esq., and Michael N. Donofrio, Esq.

I. Procedural Background.

Plaintiffs filed their original Complaint on October 5, 2018. On December 21, 2018, PUB and the Law Firm Defendants moved to dismiss the Complaint. With the court's permission, Plaintiffs filed a consolidated response opposing both motions to dismiss on February 5, 2019, and PUB and the Law Firm Defendants both replied on February 26, 2019. The court held a hearing on the motions to dismiss on March 29, 2019, after which it granted the motions to dismiss and granted Plaintiffs leave to amend their Complaint.

Plaintiffs filed their Amended Class Action Complaint on May 9, 2019 (the "AC"), and PUB and the Law Firm Defendants filed separate motions to dismiss the AC on June 28, 2019. (Docs. 85 and 86.) Following the filing of the motions to dismiss, on July 11, 2019, Plaintiffs filed a Notice of Errata (the "Errata") to correct errors in five paragraphs of their eighty-page, 330-paragraph AC. The Errata states in relevant part:

Paragraph 63: [PUB] was initially restricted, based on the terms of the Limited Partnership Agreements and offering documents incorporated into the Investor Escrow Agreements, to transferring escrowed investor funds from the Limited Partnership escrow account to another bank account held in the name of that Limited Partnership.
Paragraph 87: Again, [PUB] neither sought nor received a credible explanation for these transfers, despite the fact that Quiros had not yet purchased the resort, and that the transfer of the $11 million to Raymond James (a non-bank institution) violated the requirement in Section 13.01 ofthe original Phase I Limited Partnership Agreement that investor funds be deposited in "a bank or banks whose deposits are insured by an agency of the federal government."
Paragraph 91: On July 1, 2008, [PUB] released $1 million directly from the Phase I escrowoperating account at [PUB] to Quiros's Q Resorts account at Raymond James.
Paragraph 93: [PUB] knew that each of its transfers to Raymond James in connection with Quiros's purchase of the resort violated the express prohibition of the applicablePhase II Limited Partnership Agreements on transferring investor funds to a non-bank entity such as Raymond James, and the requirement that any particular investor's funds be used only for the activities of the specific Limited Partnership in which he had invested.
Paragraph 216: Mr. Daccache learned the same in NovemberSeptember2015, Dr. Casseres-Pinto in April 2016, Mr. Qureshi in April 2016, Mr. Pietri in April 2016March 2014, and Mr. Wang in April 2016.

(Doc. 88 at 1-2.)

On July 12, 2019, PUB filed a motion seeking sanctions against Plaintiffs. (Doc. 90.) On August 20, 2019, Plaintiffs opposed Defendants' motions to dismiss in a consolidated response. On that same date, they opposed the motion for sanctions on August 6, 2019. PUB filed a reply in support of its motion for sanctions. On September 6, 2019, PUB and the Law Firm Defendants filed replies in support of their respective motions to dismiss. The court heard oral argument on October 29, 2019, at which time it took the pending motions under advisement.

II. The AC's Allegations.

In the AC, Plaintiffs amend their factual allegations and revise their legal claims to address concerns raised by Defendants in their prior motions to dismiss and previously addressed by the court regarding standing, failure to state a claim, causation, and the statute of limitations.

Plaintiffs are seven individuals, all but one of whom presently live in the United States, who invested in various phases of the Jay Peak projects. No plaintiff alleges that he invested in the Phase I or Phases IV-VI Limited Partnerships.

Plaintiff Phillip Calderwood is a United States citizen (formerly a citizen of the United Kingdom) who lives in Florida and is the sole plaintiff who entered into asubscription agreement for the purchase of a Limited Partnership interest in Jay Peak Hotel Suites Phase II LLP on or about July 17, 2008 (the "Phase II Plaintiff"). He admits that he did not execute a written escrow agreement. Plaintiffs allege that Phase II raised $75 million from 150 investors through an EB-5 offering that proposed to build a hotel, an indoor water park, an ice rink, and a golf clubhouse.

Plaintiff Alexandre Daccache is a United States citizen (formerly a citizen of Brazil) who lives in Florida and is the sole plaintiff who entered into a subscription agreement for the purchase of a Limited Partnership interest in Jay Peak Penthouse L.P. (Phase III) on or about August 13, 2010 (the "Phase III Plaintiff"). Plaintiffs allege that Phase III raised $32.5 million from sixty-five investors to build a fifty-five-unit penthouse suites hotel and an activities center.

Plaintiff Jose R. Casseres-Pinto is a citizen of Venezuela who resides in the State of Georgia and who entered into a subscription agreement for the purchase of a Limited Partnership interest in Jay Peak Biomedical Research Park L.P. (Phase VII) on or about February 11, 2013. Plaintiff Almasood Qureshi, a citizen of the Republic of India and a permanent resident of the State of Georgia, entered into a subscription agreement for Phase VII on or about March 1, 2013. Plaintiff Carlos Enrique Hiller Sanchez is a citizen of Venezuela who currently resides in Florida and who entered into a subscription agreement for Phase VII on or about April 17, 2013. Plaintiff Jose Antonio Pietri is a citizen of Venezuela who resides in Florida and who entered into a subscription agreement for Phase VII on August 20, 2013 (collectively, "the Phase VII Plaintiffs"). Plaintiffs allege that Phase VII raised approximately $83 million from 166 investors through an EB-5 offering that purported to fund a biomedical research facility for which AnC Bio Vermont GP Services, LLC ("AnC Bio") was the general partner.

Plaintiff Tongyi Wang is a citizen of Canada who lives in Canada and is the sole plaintiff who entered into a subscription agreement for the purchase of a Limited Partnership in Q Mountain Resort, Hotel, and Conference Center L.P. for Phase VIII on or about December 4, 2015 (the "Phase VIII Plaintiff"). Plaintiffs allege that Phase VIII raised approximately $53 million from 106 investors through an EB-5 offering to build ahotel with 112 rooms, a conference center, and an outdoor pool, and that each investor in Phase VIII became a Limited Partner in the Q Burke Limited Partnership.

In their AC, Plaintiffs seek to bring claims on their own behalf as well as on behalf of a proposed class (the "Jay Peak Class") and a proposed subclass (the "MSK/Gordon Subclass"). They define the Jay Peak Class as "[a]ll persons who invested in Phases II through VIII of the Jay Peak Limited Partnerships after June 23, 2008[,]" (Doc. 78-1 at 63, ¶ 239) which is the date Ariel Quiros purchased the Jay Peak resort. Plaintiffs allege the Jay Peak Class consists of more than 800 individuals.

With regard to the proposed MSK/Gordon Subclass, Plaintiffs assert that it will be comprised of more than forty individuals, and define it to include "[a]ll persons who invested in Phases VII and VIII of the Jay Peak Limited Partnerships after February 27, 2015[,]" id. at 64, ¶ 239, which is the earliest date on which the Law Firm Defendants allegedly joined Mr. Quiros's fraudulent scheme "by lying to the Vermont [Department of Financial Regulation (the "Vermont DFR")] on Quiros's behalf to forestall enforcement action that would have prevented further harm to investors." Id. at 11, ¶ 11.

In April of 2016, the United States Securities and Exchange Commission (the "SEC") filed a civil enforcement action against Mr. Quiros, Jay Peak executive William Stenger, and the Limited Partnerships (the "SEC action"). The court in the SEC action appointed a Receiver to manage the Limited...

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