Court Opinion

ID: 4405994
Source: CourtListenerOpinion
Date Created: 2019-06-12 19:00:23.820612+00
Date Added: 2024-06-11T14:24:26.233462
License: Public Domain

PUBLISHED

                      UNITED STATES COURT OF APPEALS
                          FOR THE FOURTH CIRCUIT

                                       No. 18-2194

XIA BI; NIAN CHEN; YUANYUAN CHEN; QINGLI CHENG; YING CHENG;
DONGSHENG HU; JUN HUANG; KUI LE; CHUNGSHENG LI; ZHONGHUI
LI; LIN LIN; LAN LIU; LING LIU; ZHENG QIN; MEIMING SHEN; YUNPING
TAN; BIXIANG TANG; XIAONAN TANG; CHUN WANG; RUI WANG;
YAHONG WANG; YUE WANG; JIAN WU; LEI YAN; JUNPING YAO; JIN
YOU; ZHEN YU; HOUQIAN YU; NIANQING ZHANG; XUEMEI ZANG;
HUIBIN ZHAO; YAN ZHAO,

            Plaintiffs – Appellants,

      v.

TERRY MCAULIFFE; ANTHONY RODHAM,

            Defendants – Appellees

      and

XIAOLIN CHARLES WANG; AMERICAN IMMIGRATION CENTERS, LLC, a
Virginia limited liability company; CAPITAL WEALTH HOLDINGS LIMITED,
a British Virgin Islands company; GREENTECH AUTOMOTIVE CAPITAL A-3
GP, LLC, a Delaware limited liability company; GREENTECH AUTOMOTIVE,
INC., a Mississippi corporation; GULF COAST FUNDS MANAGEMENT, LLC,
a Louisiana limited liability company; WM INDUSTRIES CORP, a Virginia
corporation; DOES 1-100,

            Defendants.

Appeal from the United States District Court for the Eastern District of Virginia, at
Alexandria. Claude M. Hilton, Senior District Judge. (1:17-cv-01459-CMH-IDD)
Argued: May 7, 2019                                        Decided: June 12, 2019

Before WILKINSON and NIEMEYER, Circuit Judges, and DUNCAN, Senior Circuit
Judge.

Affirmed by published opinion. Judge Wilkinson wrote the opinion, in which Judge
Niemeyer and Senior Judge Duncan joined.

ARGUED: Gerard Patrick Fox, Marina Vladimir Bogorad, GERARD FOX LAW P.C.,
Los Angeles, California, for Appellants. Marc Erik Elias, PERKINS COIE LLP,
Washington, D.C., for Appellees. ON BRIEF: Scott M. Abeles, GERARD FOX LAW
P.C., Washington, D.C., for Appellants. Bruce V. Spiva, Amanda R. Callais, PERKINS
COIE LLP, Washington, D.C., for Appellees.

                                        2
WILKINSON, Circuit Judge:

       Twenty-seven Chinese investors appeal from the dismissal of their claims against

Terry McAuliffe and Anthony Rodham stemming from failed investments in an electric

vehicle startup. For the reasons that follow, we affirm.

                                             I.

                                             A.

       We accept as true the following facts, which come from plaintiffs’ amended

complaint. Plaintiffs-Appellants are a group of twenty-seven Chinese citizens who

invested $500,000 each in a partnership that loaned their money to GreenTech

Automotive. GreenTech, founded in 2008, was a Mississippi corporation that wanted to

enter the hybrid and electric vehicle markets. Initially, GreenTech planned to produce the

“MyCar,” a vehicle that would travel at low speeds and thus be subject to lower levels of

regulatory scrutiny.

       This ambitious plan required a great deal of capital. GreenTech sought to raise

some funds from foreign investors who might qualify under the Employment-Based

Immigration Fifth Preference, or EB-5, Program. See 8 U.S.C. § 1153(b)(5). This

program offered a path to permanent residency for foreign investors whose investments

in American projects created or preserved at least ten jobs for American workers. While

the program ordinarily required a $1 million investment, investments of $500,000 in

certain rural areas or areas with high unemployment may also qualify under the EB-5

program.

                                             3
       GreenTech thus planned to build a new manufacturing facility in Tunica,

Mississippi to take advantage of the lower investment threshold. The company collected

funds from potential EB-5 immigrants through several different investment platforms.

Some Chinese investors, for example, purchased preferred shares directly from

GreenTech. The plaintiffs in this lawsuit, however, invested their money in GreenTech

Automotive Partnership A-3, LP (the “A-3 partnership”), which was created to collect

capital and then loan it to GreenTech. Plaintiffs’ investments were governed by a series

of documents, including “the private placement memorandum, the subscription

agreement, the limited partnership agreement, a construction loan agreement, [and] a

power of attorney agreement.” J.A. 155. These documents were distributed to plaintiffs in

English only, not Chinese.

       Plaintiffs allege that they signed the subscription documents “without reviewing

any version” and do not claim to have translated the documents into their native

language. Id. at 181, 186. Pursuant to those written agreements, each of the twenty-seven

plaintiffs paid $500,000 for a partnership share in A-3 sometime between July 2012 and

December 2013. They each also remitted an “Administrative Fee” of $60,000 or $61,000

to Gulf Coast Funds Management, LLC, a GreenTech affiliate that managed the A-3

partnership.

       In total, the A-3 partnership collected $500,000 from each of eighty-six investors,

and then loaned the total of about $43 million to GreenTech. The loan terms were “not

the result of arm’s length negotiations.” Id. at 169. The Private Placement Memorandum

reveals that the loan, which was non-recourse, “specifically exclude[d] customary

                                            4
provisions designed to protect the interests of lenders.” Id. at 278. GreenTech would

make interest-only payments to the A-3 partnership at a 4% interest rate; of that amount,

1.5% would be used to pay Gulf Coast yearly management fees. Id. at 257.

      Defendants-appellees are Terry McAuliffe and Anthony Rodham. 1 McAuliffe was

the co-founder and former Chairman of GreenTech. Rodham was the CEO of both the

A-3 partnership and another entity that was formed to serve as A-3’s general partner,

GreenTech Automotive Capital A-3 GP, LLC. Rodham also served as President and CEO

of Gulf Coast, the management company that received plaintiffs’ administrative fees.

      Plaintiffs claim that Rodham and McAuliffe made a series of false statements

relating to the A-3 partnership’s fundraising efforts. The complaint alleges that Rodham

made the following misstatements:

     (1) On April 25, 2011, Rodham claimed that EB-5 funds accounted for only
         7.8% of GreenTech’s capital during an event in Beijing, China.

     (2) At this same event, Rodham expressed that Gulf Coast “chose”
         GreenTech as a suitable investment.

The complaint alleges that these statements were false because (1) far more than 7.8% of

GreenTech’s funds came from EB-5 investors; and (2) Gulf Coast could not choose

GreenTech since they were under joint ownership and management.

      The plaintiffs also allege that McAuliffe made four misstatements:

1
  We note that defendant Anthony Rodham passed away on June 7, 2019. Inasmuch as
plaintiffs have failed to prevail against any appellee in this action, his passing has no
bearing on the resolution of this appeal.

                                           5
     (1) On November 11, 2011, McAuliffe told a CNBC interviewer that
         GreenTech “ha[d] only sold 11,000 cars, but it’s still a new business for
         us.” J.A. 154.

     (2) On January 14, 2012, McAuliffe informed Jan Paynter during an
         interview that GreenTech’s first-year’s production of electric vehicles
         would be sold to the country of Denmark.

     (3) On July 23, 2012, McAuliffe said in an interview with three Chinese
         reporters that GreenTech was the first corporation to mass produce low-
         speed electric cars.

     (4) On December 5, 2012, McAuliffe stated in an interview with a local
         NBC station that GreenTech “had a thousand employees.” J.A. 155.

The complaint alleges that each of those statements was false when made because

GreenTech (1) had not sold 11,000 cars; (2) did not have a contract with Denmark; (3)

had not mass-produced any electric vehicles; and (4) had fewer than one hundred

employees.

      Plaintiffs allege that they each “relied on some or all of the statements in these

newsletters, statements on GreenTech’s websites and social media, and statements made

by Mr. McAuliffe [and] Mr. Rodham . . . during roadshows, in interviews, and in written

materials they authorized before signing the subscription agreement . . . .” J.A. 162. But

there are no specific allegations that any individual plaintiff encountered any of those

alleged misstatements in promotional materials or on Greentech’s website. Twenty-two

plaintiffs, moreover, allege that they moved to the United States on provisional visas in

reliance on defendants’ misrepresentations.

      GreenTech, along with a web of related corporate entities, eventually failed to

manufacture and sell vehicles according to its business plan. GreenTech defaulted on the

                                              6
loan from the A-3 partnership, and the plaintiffs have not recovered their $500,000

investments. As of the filing of the amended complaint, GreenTech and several of the

related entities had filed for bankruptcy. Plaintiffs now seek, inter alia, to recover the

losses from their failed investments in the A-3 partnership.

                                              B.

       Plaintiffs filed their original complaint in Virginia state court. After removing the

suits to the Eastern District of Virginia, McAuliffe and Rodham filed motions to dismiss.

The district court granted the motions under Federal Rule of Civil Procedure 12(b)(6).

With respect to the fraud claims so central to the complaint, it held that the plaintiffs had

failed “to identify the facts needed to adequately plead claims . . . with particularity,” J.A.

134, including allegations over “the manner in which [any false statements] misled the

plaintiff[s], and the manner in which plaintiff[s] relied on the statements.” Id. at 133-34.

Plaintiffs were allowed twenty days to file an amended complaint.

       The amended complaint honed plaintiffs’ allegations by reducing the number of

claims and dropping from the case several corporate defendants, which by that point had

filed for bankruptcy and thus stayed any actions against them. The amended complaint

raised claims against both McAuliffe and Rodham for fraud in the inducement (Count I);

fraud (Count II); federal securities fraud (Count III); and conspiracy to commit fraud and

breach fiduciary duties (Count VII). Plaintiffs also brought claims against Rodham for

breach of fiduciary duty (Count IV); accounting (Count V); aiding and abetting a breach

of fiduciary duty (Count VI); unjust enrichment (Count VIII); and negligence (Count IX).

                                              7
       McAuliffe and Rodham again moved to dismiss the claims against them for failure

to state a claim under Rule 12(b)(6). And the district court again granted the motion, this

time with prejudice. As to the fraud claims, the court noted that “[p]laintiffs do not state

which of the named [p]laintiffs claims to have relied on each statement, or where or how

any specific [p]laintiff heard or learned of the alleged statements.” J.A. 478-79. For that

reason, plaintiffs still had failed to plead reliance with the particularity required under the

Rules of Civil Procedure. See Fed. R. Civ. P. 9(b). The court also noted that any reliance

on the alleged misstatements was unreasonable because plaintiffs by their own admission

did not read or review the offering documents.

       The court also dismissed the claims for breach of fiduciary duty, unjust

enrichment, and negligence because plaintiffs were not the appropriate party to bring

these claims, which properly should have been brought by the partnership itself or as

derivative claims. The subscription documents included a Delaware choice-of-law

provision. See J.A. 351. Whether a claim is direct or derivative under Delaware law turns

on whether the partnership suffered the alleged injury and whether it would receive the

benefit of any recovery. El Paso Pipeline GP Company, L.L.C. v. Brinckerhoff, 152 A.3d
1248, 1256-65 (Del. 2016).

       As the district court put it, “[p]laintiffs still lack standing to assert such a claim . . .

because any alleged injury that was suffered was suffered by the Limited Partnership and

not by the [p]laintiffs directly” and because “[a]ny recovery to be had would be to the

Limited Partnership and not to the individual [p]laintiffs.” J.A. 481-82, 483-84. This was

true, in part, because the subscription documents did not provide plaintiffs with a right to

                                                8
withdraw their money from the partnership. See J.A. 334. The aiding and abetting a

breach of fiduciary duty claim failed for the same reason. The district court dismissed the

conspiracy claim along with the underlying breach of fiduciary duty and fraud claims.

Finally, it dismissed the accounting claim because plaintiffs asserted no right to an

accounting under the partnership agreement. Plaintiffs now appeal the district court’s

order dismissing their claims. 2

                                            II.

       Review of the district court’s dismissal involves the special pleading standards

applicable to claims of fraud. All complaints in federal court must, at a minimum, “state a

claim to relief that is plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)

(quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007)). Federal Rule of

Civil Procedure 9(b) heightens pleading standards for claims of fraud, so that “a party

must state with particularity the circumstances constituting fraud,” except that

“conditions of a person’s mind may be alleged generally.” Fed. R. Civ. P. 9(b). Plaintiffs’

federal securities fraud claim must also comply with the Private Securities Litigation

Reform Act of 1995, Pub. L. No. 104-67, 109 Stat. 737. The PSLRA leaves in place the

general requirements of Rule 9(b), but requires pleadings to demonstrate, inter alia, “the

2
  The appeal chiefly concerns fraud claims based on alleged misstatements by Rodham
and McAuliffe. We have reviewed the record and affirm the dismissal of plaintiffs’ other
claims for the reasons stated by the district court. With respect to plaintiffs’ federal
securities fraud claim, while we do not endorse the district court’s statement that “the
PSLRA[] prohibits the amendment of complaints,” J.A. 480-81, the district court did in
fact allow the complaint to be amended and any additional amendments would have been
futile for the reasons set forth herein.

                                            9
reason or reasons why [each alleged] statement is misleading” and to provide facts

“giving rise to a strong inference” of scienter. 15 U.S.C. § 78u-4(b); see Teachers’ Ret.

Sys. of La. v. Hunter, 477 F.3d 162, 172 (4th Cir. 2007).

                                             A.

       Plaintiffs bring both common law fraud claims under Virginia law and statutory

fraud claims under federal law, here Rule 10b-5. See 15 U.S.C. § 78j; 17 C.F.R.

§ 240.10b-5 (Rule 10b-5). There are, no doubt, important legal differences between

federal and state fraud claims. The state claims, for example, need not involve the

“purchase or sale of a security” as required under Rule 10-5. Stoneridge Inv. Partners,

LLC v. Sci.-Atlanta, 552 U.S. 148, 157 (2008). Rule 10b-5 claims, moreover, sometimes

rely on legal theories that may not be available as a matter of Virginia common law.

Compare Erica P. John Fund, Inc. v. Halliburton Co., 563 U.S. 804 (2011) (applying the

fraud-on-the-market theory), with Fentress Families Tr. v. Va. Elec. & Power Co., 81

Va. Cir. 67 (2010) (rejecting application of that theory).

       This case, however, bottoms out on shared features of the state and federal fraud

claims. Both federal and state law require that each defendant made a material

misstatement. See Stoneridge, 552 U.S. at 157; Owens v. DRS Auto. Fantomworks, Inc.,

764 S.E.2d 256, 260 (Va. 2014). To support recovery on any theory, moreover, plaintiffs

must have justifiably relied on those same misstatements. See Miller v. Asensio & Co.,

Inc., 364 F.3d 223, 227 (4th Cir. 2004) (federal securities law); Jared & Donna

Murayama 1997 Tr. v. NISC Holdings, LLC, 727 S.E.2d 80, 86 (Va. 2012) (Virginia

common law). It is to these common elements that we now turn.

                                             10
                                              B.

       First, we consider whether the complaint alleges material misstatements.

Defendants argue that some of their alleged statements cannot be material misstatements

as a matter of law. They note that “an action based upon fraud must aver the

misrepresentation of present pre-existing facts, and cannot ordinarily be predicated on

unfulfilled promises or statements as to future events.” Abi-Najm v. Concord Condo.,

LLC, 699 S.E.2d 483, 490 (Va. 2010) (internal quotation marks omitted); see Raab v.

General Physics Corp., 4 F.3d 286, 289-90 (4th Cir. 1993) (forward-looking statements

are often immaterial under federal securities law). Similarly, courts have long accepted

that immaterial boasting and exaggerations, often called puffery, do not normally

constitute actionable fraud. See Longman v. Food Lion, Inc., 197 F.3d 675, 685 (4th Cir.

1999) (federal securities law); Tate v. Colony House Builders, Inc., 508 S.E.2d 597, 600

(Va. 1999) (Virginia common law).

       The above rules serve important purposes. Forward-looking statements provide

valuable information for investors in the securities marketplace, and they allow

contracting parties to make better-informed judgments. But as Yogi Berra observed, “It’s

tough to make predictions, especially about the future.” Even the most careful projections

will sometimes prove wrong. Pinning liability on forward-looking statements would risk

an influx of lawsuits concerning every major event, and would shut valuable projections

entirely out of the market. See 15 U.S.C. § 78u-5(c) (federal safe harbor for forward-

looking statements by certain issuers and their affiliates).

                                              11
       Puffery, too, serves an important role in the formation of contracts large and small.

There is little doubt that expressions of enthusiasm and use of superlatives are common

tools for skilled salespersons. See J.A. 155 (McAuliffe describing GreenTech as a “great

American success story”). These sorts of statements can help inspire confidence and trust

when those qualities are in short supply, and ultimately serve to encourage the free flow

of capital in the marketplace. There is, in the end, little reason to purge the market of all

optimism. Projections and puffery will thus rarely qualify as material misstatements

under federal and state law. See Longman, 197 F.3d at 685; Tate, 508 S.E.2d at 600.

       The problem for defendants, however, is that their alleged misstatements go

beyond mere projections or puffery. Rodham, for example, said that EB-5 funds

accounted for only 7.8% of GreenTech’s capital. This statement was not an expression of

optimism or speculation as to who might invest in the future; it was an assertion about

what funds had been raised in the past. McAuliffe’s alleged misstatements were even

more aggressive. GreenTech either had “sold 11,000 cars,” or it had not; it had “a

thousand employees,” or not; and it had mass-produced electric cars, or not. Those

statements were plainly not forward-looking. See Malone v. Microdyne Corp., 26 F.3d
471, 472-80 (4th Cir. 1994) (discussing forward-looking statements).

       Even McAuliffe’s alleged statement that the first year of vehicle production would

be sold to the country of Denmark, which at first blush describes a future event, fails

closer inspection. Read in the light most favorable to the plaintiffs, this is no simple

statement of opinion or future intent; it claims that a named buyer had agreed to purchase

                                             12
specific vehicles at a particular time. Plaintiffs’ allegation thus counts as an assertion of

fact under the case law in this circuit. See Raab, 4 F.3d at 289-90.

       In toto, defendants’ statements ran in front of the facts on the ground. There are no

laurels in this case, no accolades to be bestowed. These are just the sort of misstatements

targeted by statutory and common law fraud causes of action. False information is not

useful to the market, and may lead investors to commit their resources in ways that will

prove harmful. See Rubin v. Coors Brewing Co., 514 U.S. 476, 496 (1995) (Stevens, J.,

concurring in judgment). Far from building investor confidence, misstatements like those

alleged in this case undermine public trust. We decline to whitewash the alleged

misstatements here.

                                              C.

       Defendants also argue that plaintiffs have failed to adequately plead justifiable

reliance on the alleged misstatements. We agree with the district court that plaintiffs’

complaint falls far short of plausibly pleading justifiable reliance.

                                              1.

       Under Virginia common law, plaintiffs must allege “reasonable or justifiable

reliance” on a defendant’s misrepresentations. Murayama 1997 Tr., 727 S.E.2d at 86

(internal quotation marks omitted). “[T]he touchstone of reasonableness” under Virginia

law “is prudent investigation.” Hitachi Credit Am. Corp. v. Signet Bank, 166 F.3d 614,

629 (4th Cir. 1999). Federal law similarly requires that an investor “justifiably relied” on

particular misstatements in an action under Rule 10b-5. Miller, 364 F.3d at 227 (internal

quotation marks omitted). As with Virginia common law, federal securities law “requires

                                              13
plaintiffs to invest carefully” and conduct at least “minimal diligence.” Banca Cremi, S.A.

v. Alex. Brown & Sons, Inc., 132 F.3d 1017, 1028 (4th Cir. 1997) (internal quotation

marks and alterations omitted). Plaintiffs cannot recover, in other words, if they

“possess[] information sufficient to call a misrepresentation into question but

nevertheless close [their] eyes to a known risk.” Id. (internal quotations marks and

alterations omitted).

       Plaintiffs invite the court to assess the element of justifiable reliance without

turning to Rule 9(b)’s heightened pleading standards. See Fed. R. Civ. P. 9(b). But our

circuit has previously held that “[r]easonable, detrimental               reliance upon a

misrepresentation is an essential element of a cause of action for fraud . . . and such

reliance must be pleaded with particularity.” Learning Works, Inc. v. The Learning

Annex, Inc., 830 F.2d 541, 546 (4th Cir. 1987) (citing Rule 9(b)). Indeed, Rule 9(b) itself

provides that “a party must state with particularity the circumstances constituting

fraud . . . .” Fed. R. Civ. P. 9(b). How and whether a party relied on a misstatement is

every bit as much a “circumstance[] constituting fraud” as any other element. Id. And

when Congress or the Federal Rules intend for an element of fraud to be pleaded under a

different standard, they tell us so explicitly. Rule 9(b), for example, specifically instructs

that “[m]alice, intent, knowledge, and other conditions of a person’s mind may be alleged

generally.” Id. Plaintiffs can point to no similar language placing the element of reliance

beyond the reach of Rule 9(b). With equal clarity, the PSLRA requires pleadings to

include facts “giving rise to a strong inference” of scienter, 15 U.S.C. § 78u-4(b), while

leaving Rule 9(b)’s background pleading standards in place for the other elements of

                                             14
fraud. See Hunter, 477 F.3d at 172. There is, in sum, no textual basis to give plaintiffs

extra wiggle room in pleading the reliance elements of their state and federal fraud

claims.

       The plaintiffs’ argument also fails as a matter of common sense. Rule 9(b) seeks

“to provide defendants with fair notice of claims against them and the factual ground

upon which they are based . . . .” McCauley v. Home Loan Inv. Bank, F.S.B., 710 F.3d
551, 559 (4th Cir. 2013). This rationale applies with special force to allegations of

reliance, which inherently rest on information within a plaintiff’s possession. See Evans

v. Pearson Enters., Inc., 434 F.3d 839, 852-53 (6th Cir. 2006). Whereas defendants are

likely to know facts that will allow them to contest the falsity of their own statements or

their own state of mind, they have little reason to know how a plaintiff learned of any

misstatements or what role they played in a plaintiff’s investment decisions. Particular

allegations of reliance thus lie at the core of Rule 9(b)’s mandate.

                                             2.

       Plaintiffs’ complaint fails to adequately plead justifiable reliance, instead relying

only on general and conclusory allegations. Paragraph 103 of the amended complaint

provides a prime example:

       Each of the Plaintiffs relied on some or all of the statements in these
       newsletters, statements on GreenTech’s websites and social media, and
       statements made by Mr. McAuliffe [and] Mr. Rodham . . . during
       roadshows, in interviews, and in written materials they authorized before
       signing the subscription agreement and transferring their $500,000
       investment and $60,000 or $61,000 Administrative Fee.

                                             15
         As the district court noted, “[p]laintiffs do not state which of the named [p]laintiffs

claims to have relied on each statement, or where or how any specific [p]laintiff heard or

learned of the alleged statements.” J.A. 478-79. The only information provided that is

specific to any given plaintiff is the individual’s name, citizenship, current residence, and

the dates of his subscription agreement and money transfer. A list of names and

investment dates may be important, but it does nothing to show how any plaintiff learned

of a given misstatement, or whether any plaintiff even relied on a given misstatement at

all. The district court was correct to dismiss the complaint because these general

allegations do not satisfy us that the plaintiffs have “substantial prediscovery evidence of

those facts.” Harrison v. Westinghouse Savannah River Co., 176 F.3d 776, 784 (4th Cir.

1999).

         The facts of this case make those omissions particularly glaring. Most of the

alleged misstatements, for example, were made in English—a language that many of the

plaintiffs allege they do not understand. What is more, many of those alleged

misstatements were made to American media, sometimes of the local variety. It is far

from clear how or whether plaintiffs learned of these statements. This is not to say that

statements to media sources, even local ones in distant lands, cannot form the basis of a

meritorious fraud claim. Far from it. We live in a day and age where news travels fast and

vast amounts of information are easily accessible online. But the realities of the Internet

do not alter the fundamental need for plaintiffs to plead reliance with particularity, and

the amended complaint falls short of that bedrock requirement.

                                               16
       Even if plaintiffs had properly described who relied on each misstatement and how

that person heard of it, they fail to plead justifiable reliance. Investments often boil down

to a series of written contracts. In this case, those contracts included “the private

placement memorandum, the subscription agreement, the limited partnership agreement,

a construction loan agreement, [and] a power of attorney agreement.” J.A. 155. The

written offering documents must control, and here they in fact contradicted the sorts of

stray media statements attributed to Rodham and McAuliffe.

       The Private Placement Memorandum, for example, made clear that GreenTech

was “a development stage company,” J.A. 243, that was raising money to “design, build,

and commence production” of vehicles at a new production facility, J.A. 274 (emphasis

added). It also warned that the underlying loans from the partnership to GreenTech did

“not contain market terms and specifically exclude[d] customary provisions designed to

protect the interests of lenders.” Id. at 278. It said, in all capital letters, that “AN

INVESTMENT IN THE PARTNERSHIP IS SPECULATIVE AND INVOLVES A

SIGNIFICANT DEGREE OF RISK.” J.A. 237. It also described how GreenTech had

already raised capital from investors under the EB-5 program, id. at 275, and that “[n]o

assurance can be given that an investor will receive a conditional or permanent lawful

resident status in the U.S. or that an investment in the Partnership will comply with the

EB-5 [p]rogram,” J.A. 259 (internal emphasis omitted). In short, the plaintiffs plainly

“possesse[d] information sufficient to call [the alleged] misrepresentation[s] into

question.” Banca Cremi, 132 F.3d at 1028 (internal quotations marks and alterations

omitted).

                                             17
      But plaintiffs make clear in their complaint that they signed the subscription

documents “without reviewing any version.” J.A. 181, 186. Indeed, they allege that they

only recently discovered “the nature of the documents they signed.” Id. at 155. There is

no allegation in the complaint that they made any effort to translate the documents into

their native language, or even asked any English-speaking attorney or investment advisor

to review the documents for them.

      The question is whether plaintiffs could justifiably rely on the alleged

misstatements when they did not read, translate, or ask advisors to review the

subscription documents. Several factors may influence whether reliance was justifiable as

a matter of law. See Banca Cremi, 132 F.3d at 1028; Sweely Holdings, LLC v. Suntrust

Bank, 820 S.E.2d 596 (Va. 2018) (finding reliance unjustifiable as a matter of law). But

this case is not close. The investments in a start-up company on the edge of new

automotive technology obviously signaled a high degree of risk. Risk invites prudence;

prudence involves inquiry. The plaintiffs here were putting more than half a million

dollars in the hands of foreigners with whom they alleged no prior relationship. It was

unjustifiable to make such an investment in reliance on stray media statements without so

much as translating or even reviewing the subscription documents before signing them.

While everyone occasionally skips over the fine print in their day-to-day endeavors, it is

fair to expect some minimal level of due diligence before making this large an investment

in a company whose prospects were chancy and where sizeable returns were anything but

guaranteed.

                                           18
       Even so, plaintiffs ask this court to excuse any unjustifiable reliance on the basis

that defendants “divert[ed them] ‘from making the inquiries and examination which a

prudent man ought to make.’” Hitachi, 166 F.3d at 629 (quoting Horner v. Ahern, 153
S.E.2d 216, 219 (Va. 1967)). This argument also fails. Plaintiffs were clearly provided

the relevant offering documents. Nothing in plaintiffs’ amended complaint so much as

suggests that defendants prevented them from taking the modest step of reviewing the

operative offering documents that they signed. The defendants had no generalized duty to

translate the subscription documents for the benefit of foreign investors, especially when

translation would open a new avenue of dispute and the English version of those

documents would have been controlling in any event. J.A. 353. Imposing some invariable

new duty of translation on parties seeking to raise funds from foreign investors would

hike the costs of international financing for many nations, encourage new mistranslation

lawsuits, and open the door to additional forms of mischief. There is no plausible

allegation in the complaint that defendants diverted plaintiffs from conducting a prudent

and objectively reasonable investigation before investing. See Hitachi, 166 F.3d at 629.

       Our emphasis on reliance should come as little surprise: that element occupied the

lion’s share of the briefing in this court and was part of both the first and second orders to

dismiss from the district court. See J.A. 133-34, 478-79. Yet when the panel asked

plaintiffs’ lead counsel where the complaint adequately alleged reliance, he repeatedly

stated that his co-counsel would answer those questions on rebuttal. But the court was not

obligated to hold its questions on reliance for rebuttal, at which point the opposing party

would no longer have a fair opportunity to respond. Just as counsel may divide oral

                                             19
argument time, the court may expect lead advocates to be familiar with more than a tiny

corner of the complaint and parties to advance arguments when opposing counsel has the

chance to take issue with them. Our ultimate inquiry, of course, rests on the adequacy of

the complaint itself—but basic fairness must not become a casualty of the appellate

process at any stage.

                                               III.

       America has always relied on entrepreneurship and investment to propel her

economy forward. The EB-5 program was intended to recognize that immigrants can play

an integral role in that story, providing jobs for our society in exchange for the

opportunity to be a part of it. But the truth of the matter is that investments are inherently

risky, with the hope of reward weighed always against the fear of failure. Not every

failed investment can lead to a meritorious fraud lawsuit. The element of justifiable

reliance encourages a modicum of personal responsibility for investment decisions and

helps to distinguish those who were wrongly misled from those making post hoc attempts

to recoup market losses. Because the amended complaint failed to adequately allege

justifiable reliance, the district court’s decision to dismiss it is

                                                                                AFFIRMED.

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