Mexican & Taiwanese Plaintiffs Cheated by Companies Promising EB-5 & E-2, But Lawsuit Failed. Why?

Promised 100% success rate on EB-5 greencard through investment and E-2 but then the terms of the contract meant the foreign nationals would not qualify for a greencard. Promised 11% annual return on their investment, but then the profits were turned over to a third party, falsely claimed to provide franchises, and then provided only licenses. Did not disclose to investors that they would be excluded from the management of their companies. Defendants Martinez, Rhino Linings Corp, RhinoPro and others schemed to defraud foreign nationals, mostly in Mexico, Taiwan, Vietnam, who were dreaming to get their greencards.

But the case filed by two of the victims, Jorge Croswell from Mexico and Gloria Wang from Taiwan, was dismissed by the Fifth Circuit. See, Croswell v. Rodriguez, Dkt. No. 23-20535 (5th Cir. 10/17/2024) Why? How did these dastardly defendants get the case against them dismissed?

Simply, the complaint was not thorough enough and did not include all the elements required for a RICO claim, nor did it include all the elements for the various Texas fraud claims. The lesson of the story is, attorneys need to spend plenty of time on the complaint, and not rush to file in federal court.? The complaint was thus dismissed under Rule 12(b)(6) for failure to state a claim.

Regarding the RICO cause of action, under 18 U.S.C. 1962(c), the Fifth Circuit found that the plaintiffs failed to properly show the element of an “enterprise” in the complaint:

“We agree with the district court's conclusion that the plaintiffs failed to plead a RICO enterprise,…because these general allegations lack plausible support in the pleaded facts. Instead, the facts pleaded demonstrate a sequence of unfavorable transactions orchestrated by Martinez, at times accompanied by defendant and nonparty corporate entities, and the complaint is bereft of facts that define any structure or organization or other…connection among Martinez and these entities. Accusing a group of defendants comprising one natural person and a collection of legal fictions as undertaking a set of acts together, without providing any detail as to?how?they acted together, fails to provide a factual basis from which to plausibly infer the connected structure of an association…”

Here we see that the Plaintiffs’ attorney did not do enough research on the companies involved and their connections among each other, and how they acted together. The Plaintiff has to show the existence of an enterprise that is distinct from the racketeering activity. Or, perhaps they did this research, but did not include this information in the complaint. It is essential to review each element of whatever cause of action one is trying to prove, and provide sufficient facts in the complaint to back up each one.?

RICO claims are rather complex and take a lot of work to prove, and there are also policy reasons why the federal courts make it difficult for civil actions under RICO, as RICO provides for treble damages, attorneys’ fees awards, and the RICO claim itself can damage reputations, although these considerations were not discussed by the Fifth Circuit in its opinion here.?

Second, regarding the state Texas fraud and Deceptive Trade Practices Act claims, “The Federal Rules require "circumstances constituting fraud" to be pleaded "with particularity." FED. R. CIV. P. 9(b). "At a minimum, Rule 9(b) requires allegations of the particulars of `time, place, and contents of the false representations, as well as the identity of the person making the misrepresentation and what he obtained thereby.'” Unfortunately, the Plaintiffs did not manage to even adequately plead the fraud claims in their complaint.

Third, the Plaintiffs did not comply with the deadline to submit an amended complaint. So they realized too late that they needed to write up a more comprehensive complaint, and missed the court’s scheduling order deadline. Moreover, when Plaintiffs filed a motion for leave to amend the complaint, they failed to include the amended complaint with their motion.

Fourth, the Fifth Circuit affirmed the lower court’s dismissal of the claims against two of the defendants for lack of proper service of process.?

This case was dismissed because the attorneys for the Plaintiffs failed to comply with basic rules for federal court litigation: 1) Service of process, under Rule 4 of the F.R.C.P.; 2) Detailed complaint addressing each element of the claims to be able to overcome a motion to dismiss under Rule 12(b)(6); and 3) Failing to timely file an amended complaint, under Rule 15 of the F.R.C.P. and failing to comply with the judge’s scheduling order.

This article is for informational purposes only and is not meant as legal advice. Copyright 2024 ? Heidi J Meyers, all rights reserved.

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