Xiongen Jiao v. Ningbo Xu, No. 20-20106 (5th Cir. 2022)
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After assignors and assignees of membership interests in Dongtai Investment Group filed suit against Dongtai's managing member, the district court granted injunctive and declaratory relief, ordering the managing member to turn over his remaining Dongtai membership units partially to satisfy the judgment.
The Fifth Circuit affirmed and first concluded that it has jurisdiction to address the rulings challenged by the managing member in this case. In regard to the managing member's motion to dismiss, the court concluded that at least one group, if not both, have sufficient membership interest in Dongtai to confer standing to bring a derivative proceeding; the district court did not err in declining to dismiss plaintiffs' securities fraud claims; the district court properly denied the managing member's argument that plaintiffs did not satisfy the requisite heightened pleading standard; the district court properly overruled the managing member's contention that plaintiffs' securities fraud claims should be dismissed; the complaint lacks evidence that the membership units were purchased in the United States; and the managing member's contention that none of the securities fraud allegations specifically implicate LCL Company are simply untrue. The court also concluded that the district court did not abuse its discretion in granting a preliminary injunction where plaintiffs have established a substantial threat they would suffer irreparable injury if an injunction was not granted. Finally, the court discerned no error in the declaratory relief fashioned by the district court and the district court did not abuse its discretion in ordering the managing member to turn over his remaining membership interest in Dongtai.
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