Calif. Atty, EB-5 Investor Settle Bitter Counterclaims

Calif. Atty, EB-5 Investor Settle Bitter Counterclaims

EB-5 Visa, EB5 Visa, EB-5 Investment

A California lawyer and a former client in China who sued each other over a $500,000 real estate investment gone wrong and an EB-5 investor visa that never materialized saw their dispute dismissed with prejudice Monday by a California federal judge. 

Shoumin Zhang, who lives in China, had accused her onetime attorney, John Hu of Hu & Associates, of encouraging her to invest in a commercial development project he valued at $8 million, and induced her to put in $500,000 with the promise of an EB-5 visa or free legal services for receiving her money back. She later discovered, however, that the project was worthless.

Zhang had accused Hu of fraud, breach of contract, conversion, unauthorized practice of law and breach of various duties, among other claims. Hu's counterclaim alleged breach of contract — for unpaid fees — libel and abuse of process.

On Friday, Chief U.S. Magistrate Judge Patrick J. Walsh dismissed Hu's contract claim, and on Monday, he issued a final order tossing all the remaining counterclaims after the parties reached a settlement. The dismissal orders did not include details of the deal.

Hu and Zhang had been engaged in settlement talks early last month when Zhang alleged that Hu sent her an email threatening to “go after Zhang’s family and have her husband thrown in jail,” according to court documents. That communication broke a magistrate’s order banning Hu from communicating with Zhang, justifying a contempt order, Zhang argued.

On Sept. 5, U.S. Magistrate John E. McDermott denied Zhang's request for the contempt order, saying Zhang and Hu had agreed to a settlement in which she was to pay $28,000 to end Hu’s fee claim.

But before the final details had been worked out, Zhang got an email from an address associated with Hu’s firm that “tried to extract payment from her with threats.”

Hu later said the email was sent by a former firm employee in China who used an “online virtual private network” to get around roadblocks on the use of Google Mail in China. He also apologized for the unsigned email.

Judge McDermott said the court order banning communication between Hu and Zhang had not been violated because the email didn’t purport to be from Hu personally. Moreover, Hu had submitted a declaration under oath and subject to penalty of perjury saying he did not write or send the email and that the employee sent the email without Hu’s knowledge and authorization.

Zhang filed the suit in December 2015 targeting an $8 million commercial development project in Tustin, California, and Hu. She claimed that after her EB-5 visa petition was denied, the entity’s management reneged on an agreement and refused to refund her full $500,000 investment unless she agreed to use about $38,000 of it to pay legal fees to Hu.

Hu countered in January 2016 that Zhang's claims about her visa petition were a “big lie,” saying she got cold feet on the project when she realized she wouldn’t be able to substitute her daughter for herself on the visa application.

Last October, Hu also shed fraud claims brought by Zhang.

The EB-5 program offers foreign nationals green cards in exchange for investments in American projects, as long as the investment creates at least 10 jobs.

Counsel for both parties did not immediately reply to messages Tuesday.

Zhang is represented by Jason Chuan and Mary M. Sun of the Law Office of Mary Sun.

Hu & Associates and John Hu are represented by Antonio Gonzalez of Gonzalez Law.

The case is Shoumin Zhang v. American Franchise Regional Center LLC et al., case number 2:15-cv-09583, in the U.S. District Court for the Central District of California.


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