An v. Shan

Background

The plaintiffs alleged that Weijian Shan and Bo Leilei Shan acted as unregistered agents of either the People’s Republic of China or the Chinese Communist Party, in violation of the Foreign Agents Registration Act (FARA), 22 U.S.C. §§ 611–621. The opinion states that the plaintiffs are Chinese nationals residing in the United States. Weijian Shan is identified as the Executive Chairman of Pacific Alliance Group, which manages Pacific Alliance Opportunity Fund L.P.; Bo Leilei Shan is identified as Weijian Shan’s son.

The lawsuit arose in the context of litigation involving nonparty Ho Wan Kwok, Pacific Alliance Opportunity Fund L.P., and Mr. Kwok’s bankruptcy proceeding. The court described other lawsuits filed by plaintiffs against people involved in those matters and cited bankruptcy-court orders concerning harassment, protests, and doxing. The opinion states that one plaintiff admitted participating in demonstrations against the defendants and that another plaintiff was found by the Bankruptcy Court to be an agent of Mr. Kwok.

Motion to Dismiss

The defendants moved under Federal Rule of Civil Procedure 12(b)(1) for lack of subject-matter jurisdiction and under Rule 12(b)(6) for failure to state a claim. The court held that FARA does not provide a private right of action. FARA assigns enforcement of its registration requirements to the Department of Justice, and the court found no indication that Congress intended to allow private lawsuits under the statute.

The court also held that, even if FARA provided a private right of action, the plaintiffs lacked Article III standing. Standing requires an injury in fact, a connection between that injury and the challenged conduct, and a likelihood that a favorable court decision would remedy the injury. The court found that the plaintiffs had not adequately alleged a concrete and particularized injury caused by the defendants’ alleged failure to register. It dismissed the complaint under Rule 12(b)(1) for lack of subject-matter jurisdiction and stated that it did not need to reach the defendants’ personal-jurisdiction arguments.

Sanctions

The defendants separately sought sanctions under Rule 11. Rule 11 permits sanctions when a filing lacks a reasonable legal or factual basis or is submitted for an improper purpose, such as harassment or increasing litigation costs.

The court found that the FARA claims were objectively frivolous because the plaintiffs conceded that FARA does not provide a private right of action, identified no supporting precedent, and offered no reasonable argument for changing the law. The court also concluded that the lawsuit was filed to harass the defendants. In reaching that conclusion, it considered the plaintiffs’ alleged coordination with supporters of Mr. Kwok, the existence of other similar lawsuits, the plaintiffs’ conduct after a bankruptcy-court injunction, and their refusal to withdraw the claims after conceding the lack of a private right of action.

Disposition

Judge Andrew L. Carter, Jr. granted the defendants’ motion to dismiss and motion for sanctions. The complaint was dismissed with prejudice under Rule 12(b)(1) for lack of subject-matter jurisdiction. The defendants were awarded reasonable attorneys’ fees and costs, imposed jointly and severally upon the plaintiffs and their counsel. The defendants were directed to file an application for fees and costs within fourteen days of the order, and the clerk was directed to close the pending motions.