United States District Court, N.D. Illinois, Eastern Division
LINA DOU, TINGYANG SHAO, YIXUAN TAO, XIUQUIN XING, EMMY GO, YANMING WANG, SHIYANG XIAO, LIHONG ZHAN, GELI SHI, and YING YAO, on behalf of themselves and all others similarly situated, Plaintiffs,
CARILLON TOWER/CHICAGO LP, FOREFRONT EB-5 FUND ICT LLC, TIZI LLC D/B/A LOCAL GOVERNMENT REGIONAL CENTER OF MINORS, TD BANK NA, SYMMETRY PROPERTY DEVELOPMENT II LLC, FORDHAM REAL ESTATE LLC, AND JEFFREY L. LAYTIN, Defendants.
CHARLES P. KOCORAS UNITED STATES DISTRICT JUDGE.
the Court is Defendant Fordham Real Estate, LLC's
(“Fordham”) motion to dismiss the Plaintiffs'
First Amended Complaint pursuant to Federal Rule of Civil
Procedure 12(b)(6). For the following reasons, the Court
grants Fordham's motion.
purposes of this motion, the Court accepts as true the
following facts from the amended complaint. Murphy v.
Walker, 51 F.3d 714, 717 (7th Cir. 1995). All reasonable
inferences are drawn in the Plaintiffs' favor. Tamayo
v. Blagojevich, 526 F.3d 1074, 1081 (7th Cir. 2008).
are Chinese citizens residing in China who invested
approximately $49.5 million in a development project in
downtown Chicago called “Carillon Tower”
(“the project”). Defendant Fordham is an Illinois
limited liability company that was to be a co-developer of
the project along with Defendants Symmetry Property
Development II LLC (“Symmetry”). The remaining
Defendants include Carillon Tower/Chicago LP
(“Carillon”), a New York limited partnership;
Forefront EB-5 Fund (ICT) LLC (“Forefront”), a
New York limited liability company acting as the general
partner of Carillon; Tizi LLC (“Tizi”), an
Illinois limited liability company that is authorized to help
developers raise money from foreigners under the EB-5
program; and Jeffrey L. Laytin (“Laytin”), the
managing partner of Forefront and the manager of Symmetry.
Plaintiffs were solicited to invest in an EB-5 project that
would offer the promise of a green card in return for their
investment. The Plaintiffs invested pursuant to a
“Confidential Private Offering Memorandum dated January
15, 2015” (the “PPM”), which stated that
the project was projected to be complete in October 2017.
Each of the Plaintiffs wired $550, 000 into an escrow account
at TD Bank. The PPM stated that TD Bank was to release $50,
000 of each investor's escrow funds to Carillon
immediately as an administrative fee. However, the remaining
funds were to be held until the “Holdback
Trigger” had been satisfied, meaning that (1) USCIS
approved the Form I-526 Petition of one subscriber for a unit
in the offering and (2) the project plan was formally
submitted to the Chicago Commissioner of Planning and
Development. The parties also entered into an Escrow
Agreement which stated that if the offering is cancelled, the
investors were entitled to a refund of their $550, 000.
the formal project plan submission never occurring, the
investors' funds were released from the escrow account.
Carillon then transferred the funds to Symmetry and Fordham.
The Plaintiffs assert that this created a “loop of
self-dealing” because Laytin had the authority to
notify TD Bank that the Holdback Trigger was satisfied,
causing the release of the investors' funds to Symmetry,
which is also managed by Laytin.
Plaintiffs further allege that the formal project plan can
never be submitted to the Chicago Commissioner of Planning
and Development because the project plan was rejected by
Alderman Brendan Reilly, whose approval is a prerequisite to
submission. Notwithstanding this potentially insurmountable
obstacle, the website the Defendants used to market the
project implies that it is active and ongoing. It also claims
that the project is “100% safe, ” and that each
investor has third-party insurance to obtain a return of
their money if they are ineligible for a green card due to
unforeseen circumstances. However, it is two years past the
time the project was to be completed, and yet not a single
shovel has been put into the ground.
on these events, the Plaintiffs filed a complaint on November
28, 2018, alleging securities fraud, breach of contract, and
breach of fiduciary duty, among others.
Plaintiffs amended their complaint on March 21, 2019. Fordham
filed the instant motion to dismiss pursuant to Federal Rule
of Civil Procedure 12(b)(6) on April 16, 2019.
motion to dismiss pursuant to Federal Rule of Civil Procedure
12(b)(6) “tests the sufficiency of the complaint, not
the merits of the case.” McReynolds v. Merrill
Lynch & Co., 694 F.3d 873, 878 (7th Cir. 2012).
Plaintiffs need not provide detailed factual allegations, but
they must provide enough factual support to raise their right
to relief above a speculative level. Bell Atlantic Corp.
v. Twombly, 550 U.S. 544, 555 (2007). A claim must be
facially plausible, meaning that the pleadings must
“allow…the court to draw the reasonable
inference that the defendant is liable for the misconduct
alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678
(2009). The claim must be described “in sufficient
detail to give the defendant ‘fair notice of what
the…claim is and the grounds upon which it
rests.'” E.E.O.C. v. Concentra Health Servs.,
Inc., 496 F.3d 773, 776 (7th Cir. 2007) (quoting
Twombly, 550 U.S. at 555). “Threadbare
recitals of the elements of a cause of action, supported by
mere conclusory statements, ” are insufficient to
withstand a 12(b)(6) motion to dismiss. Iqbal, 556
U.S. at 678.
Plaintiffs' amended complaint states two counts against
Fordham: (1) Count VII for fraud and (2) Count IX for
appointment of a third-party administrator. Fordham moves the
Court to dismiss these counts against it because the amended
complaint contains no allegations of wrongdoing as to
Fordham, but attributes to them the alleged wrongdoing of
other Defendants. Further, if the Court dismisses the fraud
count as to Fordham, we must also dismiss the administrator
appointment count, as such a claim cannot stand without an
underlying claim. The Court addresses each argument in turn.
Sufficiency of Count VII Fraud Claim
properly state a claim for fraud, the Plaintiffs must allege:
“(1) a false statement of material fact; (2) known or
believed to be false by the party making it; (3) intent to
induce the other party to act; (4) action by the other party
in justifiable reliance on the truth of the statement; and
(5) damage to the other party resulting from such
reliance.” Barille v. Sears Roebuck and Co.,
289 Ill.App.3d 171, 176 (1st Dist. 1997). This type of claim
is governed by the Rule 9(b) heightened pleading standard,
which dictates that claims must be stated “with
particularity.” Fed.R.Civ.P. 9(b). To meet this burden,