Shoumin Zhang, an individual v. AMERICAN FRANCHISE REGIONAL CENTER, LLC, a California limited liability company;

NOT FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
SHOUMIN ZHANG, an individual,
Plaintiff-Appellant,
v.
AMERICAN FRANCHISE REGIONAL
CENTER, LLC, a California limited
liability company; et al.,
Defendants-Appellees,
AMERICANA ONE, LLC,
Intervenor-Defendant-
Appellee.
No. 17-55641
D.C. No. 2:15-cv-09583-PJW
MEMORANDUM*
SHOUMIN ZHANG, an individual,
Plaintiff-Appellee,
v.
AMERICAN FRANCHISE REGIONAL
CENTER, LLC, a California limited
liability company; et al.,
No. 17-55730
D.C. No. 2:15-cv-09583-PJW
FILED
MAR 14 2019
MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
* This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.

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Defendants,
and
AMERICANA ONE, LLC,
Intervenor-Defendant-
Appellant.
SHOUMIN ZHANG, an individual,
Plaintiff-Appellant,
v.
JOHN DEYONG HU, an individual and
HU & ASSOCIATES, LLC, a California
limited liability company,
Defendants-Appellees.
No. 17-56577
D.C. No. 2:15-cv-09583-PJW
Appeal from the United States District Court
for the Central District of California
Manuel L. Real, District Judge, Presiding
Submitted February 4, 2019**
Pasadena, California
** The panel unanimously concludes this case is suitable for decision
without oral argument. See Fed. R. App. P. 34(a)(2).
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Before: WARDLAW and BEA, Circuit Judges, and DRAIN,*** District Judge.
This case concerns Plaintiff-Appellant Shoumin Zhang’s agreement to invest
$500,000 in the Tustin Project lead by Americana One, LLC in exchange for its
support of Zhang’s I-526 petition to the United States Citizenship and Immigration
Services (“USCIS”) to obtain permanent residency through the EB-5 Visa Program.
As the parties are familiar with the details of this case, we do not restate them here.
We have jurisdiction under 28 U.S.C. § 1291, and we apply California law to
this diversity action. We AFFIRM in part and REVERSE in part.
1. We review de novo the district court’s grant of summary judgment to
Americana One, LLC (“Americana One”). Velarde v. PACE Membership Warehouse,
Inc., 105 F.3d 1313, 1317 (9th Cir. 1997).
Summary judgment is proper in a breach of contract dispute where there is no
genuine issue of material fact as to whether (1) a contract exists; (2) the party alleging
breach of contract performed or is excused for nonperformance; (3) the other party
breached the contract; and (4) the moving party suffered damages as a result of the
other party’s breach. Beck Park Apartments v. U.S. Dep’t of Hous. & Urban Dev.,
*** The Honorable Gershwin A. Drain, United States District Judge for
the Eastern District of Michigan, sitting by designation.
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695 F.2d 366, 368 (9th Cir. 1982); Oasis West Realty, LLC v. Goldman, 250 P.3d
1115, 1121 (Cal. 2011).
The district court properly granted Americana One summary judgment on its
breach of contract claim. First, neither party disputes that the Subscription Agreement
is a valid contract. Second, Americana One performed by providing Zhang with
necessary documentation for her I-526 petition. Third, Zhang breached the
Subscription Agreement because she withdrew her I-526 petition, despite the fact that
the agreement states her subscription was irrevocable. Finally, Americana One
suffered damages because it lost the use of Zhang’s $500,000 investment as a result.
2. We review de novo the district court’s selection of the proper legal standard
for measuring damages, Gayle Manufacturing Co. v. Federal Savings & Loan
Insurance Corp., 910 F.2d 574, 578 (9th Cir. 1990), and we conclude that the district
court erred in awarding Americana One $250,000 in damages under a prejudgment
interest theory.1
First, the district court incorrectly interpreted section 2(e) of the Subscription
Agreement, which the parties agree is a liquidated damages clause. Under California
law, contracts must be interpreted “as to give effect to the mutual intention of the
1 We need not separately address Zhang’s breach of contract claim against
Americana One alleging that it failed to adhere to the liquidated damages clause
because we necessarily resolve that issue here.
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parties as it existed at the time of contracting,” Cal. Civ. Code § 1636, “ascertained
from the writing alone, if possible,” id. § 1639. Additionally, “[t]he whole of a
contract is to be taken together, so as to give effect to every part, if reasonably
practicable, each clause helping to interpret the other.” Id. § 1641.
In relevant part, section 2(e) of the Subscription Agreement states:
[I]f the I-526 application is denied by the USCIS . . . and such said
denial[ is] due to Subscriber’s . . . abandonment of or refusal to file [an]
application by the Subscriber, the Company shall return the Purchase
Price within 60 calendar days but the Company shall charge fifty
thousand U.S. Dollars by directly deduct[ing] from the investment
amount and [pay it] to AFRC as reimbursement or compensation for the
work done by AFRC.
The district court interpreted “denied by the USCIS” to mean an action by the USCIS
amounting to an official denial. When read in isolation, that interpretation makes
sense. But when read in context with the rest of the sentence, “denied by the USCIS”
cannot mean an action by the USCIS amounting to an “official denial” because the
contract specifically contemplates that a denial by the USCIS may be due to
“abandonment of” or “refusal to file [an] application by the Subscriber.” If a
subscriber abandons or refuses to file an I-526 petition, the USCIS would never act
to provide an official denial because there would be no I-526 petition to deny. Thus,
“denial by the USCIS” in section 2(e) logically must mean “not granted by the
USCIS,” even if the reason it was not granted was that the petition was withdrawn or
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abandoned by the petitioner.
Zhang’s I-526 petition was not granted by the USCIS because she withdrew her
petition from the USCIS. Thus, Zhang’s withdrawal falls within the conduct
contemplated by section 2(e).
Second, the district court erred by not applying the liquidated damages clause.
Under California law, “parties to a contract may use a liquidated damages clause to
determine the measure of damages in advance.” Allen v. Smith, 114 Cal. Rptr. 2d 898,
903 (Ct. App. 2002). “[A] provision in a contract liquidating the damages for the
breach of the contract is valid unless the party seeking to invalidate the provision
establishes that the provision was unreasonable under the circumstances existing at
the time the contract was made.” Cal. Civ. Code § 1671(b). Neither party argues that
the liquidated damages clause is invalid or unreasonable. Thus, the district court
should have applied the liquidated damages clause to award Americana One $50,000
in damages.
3. We also reverse the district court’s denial of attorney fees to Americana One
under section 5 of the Subscription Agreement. Under California law, we review “de
novo a determination of an award of attorney fees under a contractual provision
where, as here, no extrinsic evidence has been offered to interpret the contract, and the
facts are not in dispute.” Kangarlou v. Progressive Title Co., 27 Cal. Rptr. 3d 754,
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755 (Ct. App. 2005).
Relevant here, if possible, “the court should give effect to every provision” in
the contract. City of El Cajon v. El Cajon Police Officers’ Ass’n, 56 Cal. Rptr. 2d 723,
727 (Ct. App. 1996) (citation omitted). “An interpretation which renders part of the
instrument to be surplusage should be avoided.” Id.; see also Cal. Civ. Code § 1652
(“Repugnancy in a contract must be reconciled, if possible, by such an interpretation
as will give some effect to the repugnant clauses, subordinate to the general intent and
purpose of the whole contract.”). Further, “where a general and a particular provision
of a written instrument are inconsistent, the particular controls the general . . . .”
MacDonald & Kruse, Inc. v. San Jose Steel Co., 105 Cal. Rptr. 725, 730 (Ct. App.
1972).
On cross-appeal, Americana One argues that it is entitled to attorneys’ fees
under section 5 of the Subscription Agreement because Zhang breached the contract.
Section 5 states:
The Subscriber agrees to indemnify and hold harmless the Company . .
. from and against all losses, liabilities, claims, damages, costs, fees and
expenses whatsoever (including, but not limited to, any and all expenses
incurred in investigating, preparing or defending against any litigation
commenced or threatened) based upon or arising out of . . . [a] breach
by the Subscriber of any covenant or agreement made by the Subscriber
in this Agreement . . . .
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The district court disagreed with Americana One’s argument. It held that
section 5 of the Subscription Agreement directly conflicts with section 17(c), which
states, under the title “Miscellaneous”:
Each of the parties to this Agreement shall pay its own fees and expenses
(including the fees of any attorneys, accountants, appraisers or others
engaged by such party) in connection with this Agreement and the
transactions contemplated by this Agreement, whether or not the
transactions contemplated by this Agreement are consummated.
The district court concluded that because these two provisions directly conflict, and
because “contract ambiguities are construed against the drafter, the agreement shall
be construed to provide that each party bears [its] own costs of litigation.”
While there is some conflict between the two provisions, we construe
ambiguities against the drafter only if the ambiguity cannot be removed through other
rules of contract interpretation. Cal. Civ. Code § 1654. Here, section 5 specifically
states that the subscriber must pay Americana One’s attorneys’ fees incurred in the
event she breaches the contract, while section 17(c) addresses general attorneys’ fees
that may arise in connection with the Subscription Agreement. Because section 5 is
more particular than section 17(c), it controls. Additionally, to give effect to both
provisions, we interpret section 5 as an exception to section 17(c) in cases where the
subscriber breaches the agreement. Thus, because Zhang breached the Subscription
Agreement, Zhang owes Americana One attorneys’ fees pursuant to section 5.
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4. The district court did not abuse its discretion by denying Zhang leave to
amend her fraud claim. “We review the denial of leave to amend for an abuse of
discretion, but we review the question of futility of amendment de novo.” United
States v. United Healthcare Ins. Co., 848 F.3d 1161, 1172 (9th Cir. 2016) (internal
citations omitted).
The first element required to plead a fraud claim successfully is a
misrepresentation. Lazar v. Superior Court, 909 P.2d 981, 984 (Cal. 1996). But here,
Zhang has not alleged any misrepresentation by the defendants; rather, her allegations
are based on her own misunderstanding of the written marketing materials.
Zhang argues that the defendants misrepresented that the Tustin Project
property “costs” $8,281,000 even though Americana One paid only $2,300,000 to
purchase it. Substituting $2,300,000 for $8,281,000 in the total project costs
calculation, Zhang argues that the EB-5 investors’ shares amount to approximately
80% of the total project costs instead of 52% as the defendants represented. Zhang
further argues that had she known this, she would not have invested in the Tustin
Project, and as a result, she suffered damages of $500,000.
But the marketing materials never state that the property was purchased for
$8,281,000. Rather, they state that the value of the property is $8,281,000 based on
an attached appraisal that states the estimated sale price if sold within 30 days. That
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figure is then used to represent the “total project costs” to show investors the value of
their contributions versus the value of Americana One’s contribution. Thus, the
defendants did not misrepresent the “cost” to Americana One of the Tustin Project
property. Because Zhang does not allege an actual misrepresentation, amendment
would be futile.
5. The district court did not err in granting Hu and Hu & Associates
(collectively, “Hu”) summary judgment on Zhang’s breach of fiduciary duty and
fraudulent concealment claims.
As to Zhang’s fraudulent concealment claim, she offered no evidence that Hu
intentionally concealed or suppressed information with the intent to defraud Zhang—a
necessary element of that claim. See Davis v. HSBC Bank Nev., N.A., 691 F.3d 1152,
1163 (9th Cir. 2012) (applying California law). As to Zhang’s breach of fiduciary
duty claim, she offered no evidence to support her allegations that Hu simultaneously
represented Americana One and her, or that she suffered damages by not seeing the
EB-5 Immigration Service Agreement. In fact, prior to entering the Subscription
Agreement, Hu sent Zhang an email apprising her of his dealings with Americana
One. Hence, Zhang would have already been aware of any materials contained within
the EB-5 Immigration Service Agreement. Zhang also offered no evidence that Hu
placed a lien on her funds in escrow, and even if he had, Zhang did not argue or
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explain how placing such a lien on her funds was a breach of Hu’s fiduciary duty of
loyalty. Thus, the district court properly granted Hu’s motion for summary judgment.
We therefore AFFIRM in part, REVERSE in part, and REMAND to the
district court with instructions to award Americana One $50,000 in liquidated
damages and to determine the amount of attorneys’ fees to which Americana One is
entitled for Zhang’s breach. Each party shall bear its own costs on appeal.
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