Zhang v. United States Citizenship and Immigration Services

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
______________________________
)
HUASHAN ZHANG, et al., )
)
Plaintiffs, )
)
v. ) Case No. 15-cv-995 (EGS)
)
UNITED STATES CITIZENSHIP AND )
IMMIGRATION SERVICES, et al., )
)
Defendants. )
______________________________)
MEMORANDUM OPINION
I. Introduction
Almost thirty years ago, Congress established the EB-5 Visa
Program (“the Program”) to stimulate the economy and create jobs
through foreign capital investment. Under the Program, “alien
investors” may become eligible to immigrate to the United States
in return for investing certain qualifying amounts of capital in
a commercial enterprise in the United States. Plaintiffs in this
case are individual alien investors whose EB-5 visa petitions
were denied by the agency that oversees the Program: the United
States Citizenship and Immigration Services (“USCIS”).
Plaintiffs allege that their petitions were denied based on
USCIS’ flawed interpretation of its own regulation. As such,
they challenge USCIS’ decisions to deny their petitions as
arbitrary and capricious in violation of the Administrative
1
Procedure Act (“APA”), 5 U.S.C. § 706, and the Immigration and
Nationality Act (“INA”), 8 U.S.C. § 1153(b)(5). Plaintiffs also
claim that USCIS exceeded its statutory authority under the INA
by denying their petitions and impermissibly applying its
interpretation retroactively. Finally, plaintiffs claim that
USCIS engaged in improper rulemaking without notice and comment,
also in violation of the APA.
Pending before the Court are: (1) plaintiffs’ motion for
summary judgment; (2) USCIS’ cross-motion for summary judgment;
(3) plaintiffs’ motion to certify class; and (4) plaintiffs’
motion to amend the complaint. Upon consideration of the
motions, the responses and replies thereto, the relevant case
law, and the entire record herein, the Court GRANTS IN PART
plaintiffs’ motion for summary judgment, DENIES USCIS’ cross-
motion for summary judgment, GRANTS plaintiffs’ motion to
certify class (albeit with a modified class definition), and
DENIES AS MOOT plaintiffs’ motion to amend the complaint. Rather
than approve plaintiffs’ petitions, however, the Court instead
VACATES USCIS’ denials of the class members’ petitions and
REMANDS the denials to USCIS for reconsideration consistent with
this Memorandum Opinion.
2
II. Background
A. Statutory and Regulatory Background
The INA authorizes the United States to issue visas to
certain qualified immigrants. See Pub. L. No. 101-649 § 121(a)
(codified as 8 U.S.C. § 1153(b)(5)(1990)). In 1990, Congress
created the EB-5 Visa Program as one of five categories of
employment-based immigration preferences to “create new
employment for U.S. workers and to infuse new capital into the
country.” S. Rep. No. 101-55, at 21 (1989). To be eligible for
an EB-5 visa, an alien must “invest[]” a certain amount of
“capital” in a “commercial enterprise” to “benefit the United
States economy and create full-time employment for not fewer
than [ten] United States citizens or aliens lawfully admitted .
. . .” 8 U.S.C. § 1153(b)(5)(A). An alien investor must
generally invest $1,000,000 of “capital” into a new commercial
enterprise, but in economically depressed areas, or “targeted
employment areas,” the required amount of capital may be reduced
to $500,000. Id. § 1153(b)(5)(C); 8 C.F.R. §204.6(f)(regulating
the “required amounts of capital”).
In 1991, the Immigration and Naturalization Service
(“INS”)—USCIS’ predecessor agency—promulgated regulations to
implement the EB-5 Program. See 8 C.F.R. § 204.6 (1991). Among
other things, the regulations set forth the criteria necessary
to qualify for an EB-5 visa preference. See id. To apply, an
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alien investor must first submit a Form I-526 immigration
petition (“petition” or “I-526 petition”). Id. § 204.6(a). The
petition must be “accompanied by evidence that the alien has
invested or is actively in the process of investing lawfully
obtained capital in a new commercial enterprise in the United
States which will create full-time positions for not fewer than
[ten] qualifying employees.” Id. § 204.6(j). If the alien
investor’s I-526 petition is approved, he or she may apply for a
visa, which would allow the alien and his or her spouse and
children to be admitted to the United States on a conditional
basis. See 8 U.S.C. § 1202(a); 8 U.S.C. § 1186b(a)(1). If the
alien investor fulfills the EB-5 visa requirements within two
years, he or she may petition for permanent residence. Id. §
1186b(c)(1), (d)(2)(A). The burden of proof to establish
eligibility rests with the alien investor. See 8 U.S.C. § 1361.
To further delineate the general eligibility criteria, the
EB-5 regulations define certain key terms that are otherwise
undefined in the INA. 8 C.F.R. § 204.6(e). For example, to
“invest” in the new commercial enterprise and create employment,
the alien investor must “contribute [a qualifying amount of]
capital” to that enterprise. Id. “Capital” is defined as “cash,
equipment, inventory, other tangible property, cash equivalents,
and indebtedness secured by assets owned by the alien
entrepreneur, provided that the alien entrepreneur is personally
4
and primarily liable and that the assets of the new commercial
enterprise . . . are not used to secure any of the
indebtedness.” Id. To qualify as “capital,” the invested asset
must have been lawfully-obtained: “assets acquired, directly or
indirectly, by unlawful means . . . shall not be considered
capital.” Id. The regulations further clarify that a
“contribution of capital in exchange for a note . . .
obligation, or any other debt arrangement between the alien
entrepreneur and the new commercial enterprise does not
constitute a contribution of capital.” Id.
At issue in this case is whether loan proceeds invested as
cash constitute “cash,” as plaintiffs claim, or “indebtedness,”
as USCIS claims. On April 22, 2015, USCIS’ Immigrant Investor
Program Office (“IPO”) released remarks stating that invested
loan proceeds “may qualify as capital used for EB-5 investments,
provided that the requirements placed upon indebtedness by 8
C.F.R. § 204.6(e) are satisfied.” See USCIS, Immigrant Investor
Program Office, EB-5 Telephonic Stakeholder Engagement: IPO
Deputy Chief’s Remarks (Apr. 22, 2015), available at
https://www.uscis.gov/sites/default/files/USCIS/Outreach/PED_IPO
_Deputy_Chief_Julia_Harrisons_Remarks.pdf (hereinafter referred
to as “2015 IPO Remarks”)(emphasis in original). The remarks
specifically mandated:
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When using loan proceeds as EB-5 capital, a
petitioner must demonstrate first that they
are personally and primarily liable for the
indebtedness. That is, they must demonstrate
that they bear primary responsibility under
the loan documents for repaying the debt that
is being used to satisfy the petitioner’s
minimum required investment amount.
In addition, the petitioner must demonstrate
that the indebtedness is secured by assets the
petitioner owns and that the value of such
collateral is sufficient to secure the amount
of indebtedness that is being used to satisfy
the petitioner’s minimum required investment
amount.
Id. at 1. Plaintiffs argue that the 2015 IPO Remarks “announced
a change in [USCIS’] longstanding adjudicatory practice
concerning the classification of loan proceeds.” Pls.’ Mot. for
Summ. J. (“MSJ”), ECF No. 19 at 21. 1 In so doing, USCIS
“fundamentally reworked the definition of ‘capital’” under 8
C.F.R. § 204.6(e). Id. at 22. As such, plaintiffs challenge
USCIS’ interpretation of the regulation and argue that cash
obtained from third-party loans and invested in an enterprise
qualifies as “cash” within the regulatory definition of
“capital” rather than “indebtedness.” See generally Pls.’ MSJ,
ECF No. 19.
1 When citing electronic filings throughout this Opinion, the
Court cites to the ECF page number, not the page number of the
filed document.
6
B. Plaintiffs’ I-526 Petitions
The individually-named plaintiffs are two alien investors
who challenge USCIS’ decision to deny their petitions on behalf
of a putative class of alien investors. Compl., ECF No. 1 ¶ 1;
see Pls.’ Mot. for Class Certification (“Pls.’ Class Cert.
Mot.”), ECF No. 10. As certified below, the plaintiffs represent
all Form I-526 petitioners who: (1) invested cash in a new
commercial enterprise in an amount sufficient to qualify as an
EB-5 investor; (2) obtained some or all of the cash invested in
the new commercial enterprise through a loan; (3) filed an I-526
petition based on that investment; 2 and (4) received or will
receive a denial of their I-526 petition solely on the ground
that the loan used to obtain the invested cash fails the
collateralization test described in the USCIS 2015 IPO Remarks
announcement.
Named plaintiff Huashan Zhang is a citizen of the People’s
Republic of China seeking to immigrate to the United States with
his wife and children. Zhang Admin. R. (“Zhang A.R.”), ECF Nos.
27-2, 27-3, 27-4. On December 23, 2013, Mr. Zhang filed an I-526
2 Plaintiffs’ proposed class definition seeks to include
petitioners who “filed an I-526 petition prior to April 22,
2015.” Because the Court need not resolve the retroactivity
claim, as USCIS’ interpretation is contrary to the regulation
and violative of the APA, this date limitation serves no
purpose. The Court has therefore modified the class definition
accordingly. See infra Sec. III.B.7.
7
petition claiming that he fulfilled the minimum capital
requirement by investing $500,000 in cash in a new commercial
enterprise in Las Vegas, Nevada. Zhang A.R., ECF No. 27-2 at 4-
26. Mr. Zhang obtained the invested $500,000 via a loan from
Shaanxi Northwest Textile and Dyeing Company (“Shaanxi
Northwest”). Id. at 22. Mr. Zhang owns 99 percent of Shaanxi
Northwest. Id. The loan was secured by his undistributed profits
held by the company, which greatly exceeded $500,000. Id. at 22-
25; Zhang A.R., ECF No. 27-3 at 4 (loan agreement between
Shaanxi Northwest and Mr. Zhang). Shaanxi Northwest wired the
loan proceeds to Mr. Zhang’s personal account. Zhang A.R., ECF
No. 27-2 at 20, 25-26. Mr. Zhang then converted the loan
proceeds into U.S. currency and wired the funds into an escrow
account earmarked for the new commercial enterprise. Id.
On May 28, 2015, USCIS denied Mr. Zhang’s I-526 petition,
asserting that Mr. Zhang did not place the required amount of
capital at risk for the purpose of generating a return on his
investment. Zhang A.R., ECF No. 27-4 at 175-85. Interpreting the
invested cash loan proceeds as “indebtedness,” USCIS determined
that Mr. Zhang’s investment did not qualify as “capital” because
the Shaanxi Northwest loan was not secured by his personal
assets. Id. at 179-80. Instead, Mr. Zhang’s loan was secured
solely by his undistributed profits, which belonged to Shaanxi
Northwest until distributed. Id. Because Mr. Zhang had not met
8
the requirements for “indebtedness,” USCIS concluded that he
“had not placed the required amount of capital at risk for the
purposes of generating a return on his investment as the
shareholder loan proceeds do not constitute qualifying capital
pursuant to 8 C.F.R. § 204.6(e).” Id. at 180 (emphasis added).
Second named plaintiff Mayasuki Hagiwara is a Japanese
citizen seeking to immigrate to the United States with his wife
though the EB-5 Program. Hagiwara Admin. R. (“Hagiwara A.R.”),
ECF No. 27-1. On March 17, 2014, Mr. Hagiwara filed his I-526
petition with USCIS, asserting eligibility based on his $500,000
cash investment in a new commercial enterprise in Tonopah,
Nevada. Id. at 4-14. Mr. Hagiwara obtained the invested $500,000
via a personal loan from J. Kodama, Inc., a Hawaiian corporation
of which Mr. Hagiwara is a majority shareholder. Id. at 10. The
loan was secured by Mr. Hagiwara’s stock holdings in the
corporation. Id. at 254. The funds were wired and “released” to
the new commercial enterprise “for deployment” in accordance
with its business plan. Id. at 11.
Employing the same general reasoning as in Mr. Zhang’s
case, USCIS denied Mr. Hagiwara’s I-526 petition on March 27,
2015. Id. at 392-95. USCIS found that Mr. Hagiwara’s investment
did not qualify as “capital” pursuant to 8 C.F.R. § 204.6(e)
because he invested cash loan proceeds that were not secured by
personal assets. Id. at 394-95. Although Mr. Hagiwara protested
9
that he had invested “cash” and not “indebtedness,” USCIS
reasoned that investing loan proceeds is tantamount to investing
indebtedness, which must be secured by the petitioner’s personal
assets under the regulation. Id. at 395. USCIS concluded that
the regulation “clearly precluded” characterizing “all unsecured
third-party loans” as contributions of cash and denied his
petition. Id.
C. Procedural History
Plaintiffs filed their complaint on June 23, 2015 and all
pending motions were ripe for review by June 2016. However, the
Court stayed the case in March 2017 when the parties indicated
that they were amenable to settlement assistance from the
Court’s mediation program. Mediation efforts failed, and the
pending motions are ready for adjudication.
III. Analysis
Pending before the Court are: (1) plaintiffs’ motion for
summary judgment; (2) USCIS’ cross-motion for summary judgment;
(3) plaintiffs’ motion to certify class; and (4) plaintiffs’
motion to amend the complaint. The Court first considers the
cross-motions for summary judgment. The Court analyzes two of
plaintiffs’ four claims: (1) that USCIS’ interpretation of 8
C.F.R. § 204.6, the EB-5 regulation, is erroneous because it
contravenes the regulation’s plain meaning; and (2) that USCIS
violated the APA because its interpretation is a legislative
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rule promulgated without notice and comment. Because the Court
agrees with plaintiffs on these two claims, it need not assess
plaintiffs’ two other claims: (1) that USCIS’ application of its
interpretation has been impermissibly applied retroactively; 3 and
(2) that USCIS’ interpretation is ultra vires and exceeds its
statutory authority conferred by the INA. The Court then
considers plaintiffs’ motion to certify class. Because the Court
grants in part plaintiffs’ motion for summary judgment and
motion to certify class, it need not consider the pending motion
to amend the complaint.
A. Cross-Motions for Summary Judgment
Though each of plaintiffs’ four claims against USCIS is
disputed, the essential issue is whether lawfully-obtained, loan
proceeds invested in the enterprise as cash are properly
characterized as “cash” or as “indebtedness” pursuant to 8
C.F.R. § 204.6(e). Because the Court agrees that USCIS’
interpretation of its regulation is plainly erroneous, denying
plaintiffs’ petitions pursuant to that interpretation was
arbitrary and capricious. Moreover, the Court finds that USCIS’
3 Plaintiffs agree that the retroactivity analysis need not be
reached if the Court finds that USCIS’ interpretation is
arbitrary and capricious. See Pls.’ MSJ, ECF No. 19 at 51
(“Indeed, the retroactivity analysis starts with the assumption
that the policy or interpretation at issue is not arbitrary and
capricious. If a rule is arbitrary and capricious, the issue of
retroactivity is moot because the rule cannot be applied
prospectively, much less retroactively.”).
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interpretation effectively amends a regulation without notice
and comment, violating the APA.
1. USCIS’ Interpretation of 8 C.F.R. § 204.6(e) is Plainly
Erroneous
a. The Parties’ Arguments
Plaintiffs argue that USCIS’ interpretation 4—that third-
party loan proceeds invested as cash in a commercial enterprise
are properly characterized as “indebtedness” within the meaning
of “capital”—is plainly erroneous. Plaintiffs contend that
USCIS’ interpretation, as articulated in the 2015 IPO Remarks,
“ignores the plain language, structure, history, and purpose of
the regulation on which it purports to be based.” Pls.’ MSJ, ECF
No. 19 at 30. They argue that the plain meaning of the word
“cash” encompasses cash loan proceeds and the definition of
“capital” in the regulation mandates that lawfully-obtained
“cash” necessarily qualifies as “capital” without further
collateral prerequisites. Id. at 31-33 (“[C]ash obtained from a
loan is no less ‘cash’ than cash obtained from any other
source.”). Because plaintiffs invested the requisite amount of
4 Plaintiffs refer to USCIS’ interpretation of the regulation as
the “collateralization rule.” See, e.g., Pls.’ MSJ, ECF No. 19.
While the Court finds that USCIS’ interpretation was in fact a
legislative rule subject to the APA’s notice and comment
procedures, the Court will not refer to it as a “rule” and will
instead use the term “interpretation” for consistency and
clarity.
12
lawfully-obtained cash, they argue that they satisfactorily
invested “capital.” Id. at 30-35.
Plaintiffs also argue that cash loan proceeds cannot be
characterized as “indebtedness,” the only form of “capital” that
must be secured by assets owned by the alien investor. Id. at
33-34. Because indebtedness means the “condition of being
indebted,” plaintiffs contend that investing indebtedness is
only “an asset of value to the new commercial enterprise” when
“it describes an investor’s obligation to make monetary payments
to the enterprise at a later date.” Id. at 33 (emphasis added).
Thus, “indebtedness” is not a debt to an unrelated third-party
lender, but rather a debt to the enterprise itself. Id. at 33-
35. Plaintiffs also argue that USCIS’ interpretation is
inconsistent with the history and structure of the regulation
and the INA. See id. at 36-37. Finally, plaintiffs argue that
USCIS did not provide a rational explanation for its
interpretation and that USCIS ignored the unfair effect of
applying its interpretation retroactively to plaintiffs’ cases. 5
Id. at 37-38.
USCIS responds that its decision to deny plaintiffs’
petitions was “reasonable.” Defs.’ MSJ & Opp’n, ECF No. 22 at
5 The Court need not reach these additional arguments because it
finds that USCIS’ interpretation was contrary to the plain
meaning of its regulation.
13
13. According to USCIS, its decisions were based on its
“longstanding interpretation of its regulation” that cash loan
proceeds invested in an enterprise are properly characterized as
“indebtedness,” and thus must be personally collateralized to
qualify as “capital.” Id. at 24. Therefore, to qualify, a
petition must establish that the alien investor “secured the
loan using assets for which they own and are personally and
primarily liable.” Id.
USCIS also argues that its interpretation is not erroneous
because it “aligns with the foundational requirements that the
alien investor must demonstrate that he is placing capital he
owns directly at risk.” Id. at 25 (citing 8 C.F.R. §
204.6(j)(2),(3)). According to USCIS, an alien investor must
provide different evidence to show that his or her investment is
“at risk” depending on the source of that investment. See id. at
26. Because plaintiffs obtained their capital from loan
proceeds, USCIS argues that they must provide evidence of “any
loan . . . agreement . . . which is secured by assets of the
petitioner” to show that the investment is at risk. Id. (quoting
8 C.F.R. § 204.6(j)(2)(v)). USCIS further contends that if it
simply reduced all financial arrangements to “their tangible end
product – ‘cash,’” as plaintiffs argue, the agency would be
unable to investigate an investor’s ownership and source of
funds. Id. at 27.
14
Finally, USCIS argues that because the agency is
interpreting its own regulation, it is entitled to “even greater
deference than the Chevron standard,” which plaintiffs have
failed to overcome. Id. at 24 (quoting Consarc Corp. v. U.S.
Treas. Dep’t, 71 F.3d 909, 915 (D.C. Cir. 1995)).
b. Standard of Review
“Summary judgment is the proper mechanism for deciding, as
a matter of law, whether an agency action is supported by the
administrative record and consistent with the APA standard of
review,” which “requires a reviewing court to ‘hold unlawful and
set aside agency action, findings, and conclusions found to be .
. . arbitrary, capricious, an abuse of discretion, or otherwise
not in accordance with the law.’” UPMC v. Sebelius, 793 F. Supp.
2d 62, 67 (D.D.C. 2011)(quoting 5 U.S.C. § 706(2)(A)). However,
due to the limited role of a court in reviewing the
administrative record, the typical summary judgment standards
set forth in Federal Rule of Civil Procedure 56(c) are not
applicable. Stuttering Found. Of Am. V. Springer, 498 F. Supp.
2d 203, 207 (D.D.C. 2007) (internal citation omitted). Rather,
“[u]nder the APA, it is the role of the agency to resolve
factual issues to arrive at a decision that is supported by the
administrative record, whereas ‘the function of the district
court is to determine whether or not as a matter of law the
evidence in the administrative record permitted the agency to
15
make the decision it did.’” Id. (quoting Occidental Eng’g Co. v.
INS, 7523 F.2d 766, 769-70 (9th Cir. 1985)). A reviewing court
will “hold unlawful and set aside agency action, findings, and
conclusions found to be . . . arbitrary, capricious, an abuse of
discretion, or otherwise not in accordance with the law.” Ludlow
v. Mabus, 793 F. Supp. 2d 352, 354 (D.D.C. 2001) (quoting 5
U.S.C. § 706(2)(A)); see also Tenet Healthsystems Healthcorp. v.
Thompson, 254 F.3d 238, 243 (D.C. Cir. 2001).
The arbitrary and capricious standard of review is
“narrow,” and “a court is not to substitute its judgment for
that of the agency.” F.C.C. v. Fox Television Stations, Inc.,
556 U.S. 502, 513-14 (2009)(citations and quotations omitted).
An agency rule will be found to be arbitrary and capricious “if
the agency has relied on factors which Congress has not intended
it to consider, entirely failed to consider an important aspect
of the problem, offered an explanation for its decision that
runs counter to the evidence before the agency, or is so
implausible that it could not be ascribed to a difference in
view or the product of agency expertise.” Motor Vehicle Mfrs.
Ass'n of U.S., Inc. v. State Farm Mut. Auto. Ins. Co., 463 U.S.
29, 43 (1983).
A reviewing court “must give substantial deference to an
agency’s interpretation of its own regulations.” Thomas
Jefferson Univ. v. Shalala, 512 U.S. 504, 512 (1994)(citations
16
omitted). However, such deference “is warranted only when the
language of the regulation is ambiguous.” Christensen v. Harris
County, 529 U.S. 576, 588 (2000)(emphasis added). If the
regulation is ambiguous, the agency's interpretation must be
given “controlling weight unless it is plainly erroneous or
inconsistent with the regulation.” Thomas Jefferson Univ., 512
U.S. at 512 (citations and quotations omitted). However, if an
“‘alternative reading is compelled by the regulation's plain
language or by other indications of the Secretary's intent at
the time of the regulation's promulgation,’” the Court need not
defer to the agency’s interpretation. Id. (quoting Gardebring v.
Jenkins, 485 U.S. 415, 430 (1988)).
c. USCIS’ Interpretation is Plainly Erroneous
The Court first considers whether USCIS’ interpretation—
that loan proceeds invested as cash are properly characterized
as indebtedness—is inconsistent with the plain meaning of the
regulation. If the regulation is clear that cash loan proceeds
are invested as “cash,” USCIS’ interpretation of 8 C.F.R. §
204.6(e), as set forth in the 2015 IPO Remarks, is “plainly
erroneous or inconsistent with the regulation” itself. Auer v.
Robbins, 519 U.S. 452, 461 (1997). As such, USCIS’ decisions to
deny plaintiffs’ petitions based solely on that interpretation
would also be erroneous. See id.; see also 2015 IPO Remarks at
1; See Zhang A.R., ECF No. 27-4 at 179-80 (“[P]etitioner has not
17
demonstrated that he has placed the required amount of capital
at risk . . . as the shareholder loan proceeds do not constitute
qualifying capital pursuant to 8 C.F.R. § 204.6(e).”); Hagiwara
A.R., ECF No. 27-1 at 394-96 (“Petitioner has failed to
establish by a preponderance of the evidence that his unsecured
loan . . . meets the regulatory definition of capital.”).
As discussed below, the Court first finds that the
regulation is unambiguous and USCIS’ interpretation contravenes
its plain meaning. The Court also concludes that USCIS’
interpretation is inconsistent with its own precedent and the
context and history of the EB-5 Program. As such, the Court
concludes that USCIS’ decisions to deny plaintiffs’ petitions
were arbitrary and capricious.
i. The EB-5 Regulation is Unambiguous
The INA mandates that visas must be made available when an
alien “has invested . . . capital” in a specified amount to
“benefit the United States economy and create full-time
employment for not fewer than [ten] United States citizens . . .
.” 8 U.S.C. § 1153(b)(5). Congress did not define “invest” or
“capital” in the statute. See id. In 1991, USCIS’ predecessor
agency, the INS, published regulations defining both:
Invest means to contribute capital. 6
6 The definition of “invest” further provides that “[a]
contribution of capital in exchange for a note, bond,
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Capital means cash, equipment, inventory,
other tangible property, cash equivalents, and
indebtedness secured by assets owned by the
alien entrepreneur, provided that the alien
entrepreneur is personally and primarily
liable and that the assets of the new
commercial enterprise upon which the petition
is based are not used to secure any of the
indebtedness. All capital shall be valued at
fair market value in United States dollars.
Assets acquired, directly or indirectly, by
unlawful means (such as criminal activities)
shall not be considered capital for the
purposes of section 203(b)(5) of the Act.
8 C.F.R. § 204.6(e)(emphasis added and alphabetical order
reversed).
“Capital” is therefore the type of asset that is invested
or “contributed” to the commercial enterprise for the purpose of
creating employment. See id.; 8 U.S.C. § 1153(b)(5). To be
considered “capital,” an invested asset must meet only two
requirements: (1) it must be contributed in one of the six
acceptable forms; and (2) it must be lawfully acquired. See 8
C.F.R. § 204.6(e). The definition approves six forms of
“capital”: “[1] cash, [2] equipment, [3] inventory, [4] other
tangible property, [5] cash equivalents, and [6] indebtedness
[so long as the invested indebtedness is secured by assets owned
convertible debt, obligation, or any other debt arrangement
between the alien entrepreneur and the new commercial enterprise
does not constitute a contribution of capital for the purposes
of this part.” 8 C.F.R. § 204.6(e). USCIS has not suggested that
plaintiffs entered into a “debt arrangement” with the enterprise
or that the enterprise guaranteed repayment of the invested
capital. See generally A.R., ECF No. 27.
19
by the investor, such that the investor is personally and
primarily liable, and that the enterprise is not used to secure
the debt].” Id.
The regulation does not define “cash” or “indebtedness”
within the definition of “capital.” However, the text plainly
directs the agency to view the transaction between the alien
investor and the enterprise to identify the particular asset
actually “contributed” to the enterprise. Id. (“invest means to
contribute capital”); 8 U.S.C. § 1153(b)(5)(visas shall be made
available to aliens who invest capital in an enterprise to
benefit the economy and create employment). USCIS must therefore
determine whether that contributed asset meets the definition of
“capital,” i.e., whether it was: (1) contributed in an
acceptable form; and (2) lawfully acquired. See id. In
plaintiffs’ cases, it is undisputed that the assets actually
contributed to the enterprises were cash loan proceeds. See
Hagiwara A.R., ECF No. 27-1 at 394-95; Zhang A.R., ECF No. 27-4
at 179-80. The Court must therefore determine whether the
regulation is unambiguous as to the central question: whether
cash loan proceeds are invested as “cash,” as plaintiffs argue,
or as “indebtedness,” as USCIS contends.
To resolve this question, the Court looks to the ordinary
meaning of cash. “When a word is not defined by statute, [the
court] normally construe[s] it in accord with its ordinary or
20
natural meaning.” Smith v. United States, 508 U.S. 223, 228
(1993). The plain and ordinary meaning of “cash” compels the
conclusion that loan proceeds invested in the form of cash must
be characterized as “cash” within the unambiguous definition of
“capital” set forth in the regulation.
First, the plain and ordinary meaning of “cash” is “money
or its equivalent” such as “currency or coins.” Cash, Black’s
Law Dictionary (10th ed. 2014); see Smith, 508 U.S. at 228-29
(determining the ordinary meaning an undefined statutory term by
turning to the Black’s Law Dictionary definition). Accordingly,
an investment was made in “cash” if the investor transferred
“money or its equivalent” to the investee. Cash, Black’s Law
Dictionary (10th ed. 2014). How the investor came up with the
cash to invest—whether through a loan, a bank account, or any
other source—does not affect whether the investment itself is
cash. Put differently, that the cash was obtained from proceeds
from a third-party loan does not make it anything other than
cash. See Davis v. Connecticut Cmty. Bank, 937 F. Supp. 2d 217,
224-25 (D. Conn. 2013) (“cash is an inherently fungible good”);
Hoxworth v. Blinder, Robinson & Co., 903 F.2d 186, 195–96 (3d
Cir. 1990) (“[I]f a debtor with $100,000 cash in its general
coffers owes $10,000 to someone, there is no meaningful
distinction among which of those dollars is actually paid to
21
satisfy the debt.”). Nothing in the ordinary meaning of the word
“cash” suggests that it excludes cash proceeds from a loan.
Cash loan proceeds, or the cash “received upon selling,
exchanging, collecting, or otherwise disposing of collateral,”
Proceeds, Black’s Law Dictionary (10th ed. 2014), are not
transformed from cash into another asset when invested. Indeed,
cash loan proceeds are commonly characterized as “cash,”
consistent with the word’s ordinary meaning. See Pls.’ MSJ, ECF
No. 19 at 32 n.11 (pointing to “dozens of federal judicial
decisions . . . refer[ring] to the ‘cash’ proceeds of a loan”
and citing Drew v. Ocwen Loan Servicing, LLC, 2015 WL 5637569,
at *2 (M.D. Fla. Sept. 17, 2015), among other authority).
Moreover, USCIS itself has described the assets a borrower
receives from a loan as “cash proceeds.” See In re: Petitioner
[Redacted], 2012 WL 8524530, at *4 (AAO Aug. 14, 2012)
(unpub.)(analyzing an employment-based nonimmigrant visa
petition for a religious worker). 7
The “words of statutes or regulations must be given their
‘ordinary, contemporary common meaning.’” FTC v. Tarriff, 584
7 USCIS argues that these cited cases are “inapposite because
none of them address ‘cash’ with regards to the EB-5 program
definition of ‘capital’ found at 8 C.F.E. § 204.6(e).” Defs.’
MSJ & Opp’n, ECF No. 22 at 25 n.10. The Court disagrees. As
discussed, the definition of cash is undefined in the EB-5
regulation and, as such, the Court must turn to the term’s
ordinary, common meaning. Plaintiffs’ cited cases reflect the
common meaning of the word “cash.”
22
F.3d 1088, 1090 (D.C. Cir. 2009) (quoting Williams v. Taylor,
529 U.S. 420, 431 (2000))(examining the unambiguous common
meaning of the word “shall”). Because lawfully-acquired cash
unambiguously qualifies as “capital” under the regulation,
USCIS’ interpretation that cash loan proceeds do not qualify as
a “cash” investment is untenable. See Ass’n of Private Sector
Colleges and Univs. V. Duncan, 681 F.3d 427, 450 (D.C. Cir.
2012)(holding that an agency may not “reinterpret[] [a]
regulation in a way the text does not support”). Therefore, its
denials of plaintiffs’ petitions on that basis was erroneous as
contrary to the language of the regulation. 8 C.F.R. §
204.6(e)(“Capital means cash”).
USCIS neither offers its own definition of “cash,” nor
explains why cash proceeds from third-party loans are not
invested as “cash.” See generally Defs.’ MSJ & Opp’n, ECF No.
22; Defs.’ Reply, ECF No. 26. Instead, it emphasizes the
deference it is purportedly owed and concludes that its
interpretation is not clearly erroneous. See Defs.’ MSJ & Opp’n,
ECF No. 22 at 24. Indeed, without providing any support that the
provision is ambiguous, USCIS repeatedly asserts that the Court
should defer to its interpretation of its own regulation because
it is owed “an even greater degree of deference than the Chevron
standard, and must prevail unless plainly inconsistent with the
regulation.” Id. at 24-27 (citing Auer, 519 U.S. at 461;
23
Consarc, 71 F.3d at 915). However, such deference is only
warranted if the regulation at issue is ambiguous. Christensen,
529 U.S. at 588 (“But Auer deference is warranted only when the
language of the regulation is ambiguous.”); Thomas Jefferson
Univ., 512 U.S. at 512 (“[W]e must defer to the Secretary's
interpretation unless an alternative reading is compelled by the
regulation's plain language or by other indications of the
Secretary's intent at the time of the regulation’s
promulgation.”)(internal citations omitted). The Court concludes
that the regulation’s plain meaning is clear. As such, deference
to USCIS is unwarranted.
Moreover, USCIS’ interpretation is not one of several
“permissible constructions,” as it suggests. Defs.’ Reply, ECF
No. 26 at 13 (citing Holly Farms Corp. v. NLRB, 517 U.S. 392,
398-99 (1996) (analyzing an agency’s interpretation of an
ambiguous statute)). Instead, USCIS is “seeking to overcome the
regulation’s obvious meaning.” Christensen, 529 U.S. at 588; see
also In re Sealed Case, 237 F.3d 657, 667 (D.C. Cir. 2001)(“In
this case, the . . . regulation at issue [is] unambiguous and
directly address[es] the issue presented in this case. The[]
plain meaning therefore controls our decision.”). For example,
by attempting to regulate how an alien investor acquires
invested cash—beyond ensuring that the cash was legally acquired
and that the cash was not derived from the enterprise itself—
24
USCIS adds an additional requirement to the regulatory
definition of “capital” not found within the text. See 8 C.F.R.
§ 204.6(e). To illustrate, under USCIS’ interpretation,
“capital” does not include lawfully-acquired cash, but lawfully-
acquired cash not derived from a third-party loan. See 2015 IPO
Remarks; see also Zhang A.R., ECF No. 27-4 at 179-80
(determining that a lawfully-acquired, cash investment did not
qualify as capital based on Mr. Zhang’s method of obtaining it);
Hagiwara A.R., ECF No. 27-1 at 395-96 (same). As previously
discussed, the regulation sets forth only two conditions for a
cash asset to qualify as capital: (1) it was invested as cash
and (2) it was lawfully-acquired. See 8 C.F.R. § 204.6(e). The
fact that the regulation includes these two conditions
necessarily implies that no other conditions are necessary for a
cash investment to constitute capital. District of Columbia Fin.
Responsibility & Mgmt. Auth. v. Concerned Senior Citizens of the
Roosevelt Tenant Ass’n., Inc., 129 F. Supp. 2d 13, 16 (D.D.C.
2000) (“One of the most firmly established canons of
interpretation is expressio unius est exclusio alterios, that
is, the expression of one is the exclusion of the other.”)
(citing Marbury v. Madison, 5 U.S. (1 Cranch) 137, 2 L. Ed. 60
(1803) (“[a]ffirmative words are often, in their operation,
negative of other objects than those affirmed”)).
25
In so doing, USCIS impermissibly creates “de facto another
regulation.” Christensen, 529 U.S. at 588. In Christensen v.
Harris County, the Supreme Court declined to defer to the
agency’s interpretation of its regulation in part because the
agency sought to add an additional requirement not found within
the regulation, contrary to the regulation’s “obvious meaning.”
Id.; see also Appalachian Power Co. v. Envtl. Protection Agency,
249 F.3d 1032, 1048 (D.C. Cir. 2001)(“ The Supreme Court recently
held that we should not defer to an agency's interpretation
imputing a limiting provision to a rule that is silent on the
subject . . . [in] cases in which the agency’s interpretation
postdated its adoption of the rule and was not itself subject to
the rigors of notice and comment.”) (citing Christensen, 529
U.S. at 588)). So here too. Had USCIS intended to further
regulate lawfully-acquired, loan proceeds invested in the
enterprise as “cash,” it could have explicitly done so or
amended the regulation. 8 As drafted, however, there is no textual
basis for USCIS’ interpretation. See 8 C.F.R. § 204.6.
USCIS also argues that its definition is compelled by other
sections of the regulation and by its own binding precedent. As
8 Indeed, USCIS has recently proposed changes to 8 C.F.R. § 204.6
to increase the required capital contribution, in part because
the EB-5 Program is “oversubscribed.” See Proposed Rule EB-5
Immigrant Investor Program Modernization, 82 Fed. Red. 4738
(Jan. 13, 2017).
26
will be explained in further detail below, the Court disagrees.
See infra Secs. III.A.1.c.ii,iii. Ultimately, the Court
concludes that the regulation is clear: an investor indeed
invests “capital” by contributing lawfully-acquired cash loan
proceeds to an enterprise. USCIS’ interpretation that “capital”
does not include lawfully-acquired “cash,” but rather only
includes lawfully-acquired cash not derived from third-party
loans contravenes the regulation’s plain meaning.
ii. USCIS’ Interpretation is Not Supported by the Text
USCIS argues that its interpretation is supported by the
regulation’s text in three ways. First, it argues that loan
proceeds are invested as “indebtedness” pursuant to the
regulation’s definitional section, 8 C.F.R. § 204.6(e). See
Defs.’ MSJ & Opp’n, ECF No. 22 at 24-27. Next, it argues that
its interpretation “aligns with the foundational requirements
that the alien investor must demonstrate that he is placing
capital he owns directly at risk” pursuant to 8 C.F.R. §
204.6(j)(2). Id. at 25. Third, it argues that its interpretation
is necessary to ensure that the alien investor derived his or
her invested funds from a lawful source pursuant to 8 C.F.R. §
204.6(j)(3). Id. at 25, 27. The Court will address each argument
in turn.
27
(1) Cash Loan Proceeds are Not Invested as
Indebtedness
In arguing that cash loan proceeds are invested as
indebtedness, USCIS suggests that it must examine the manner in
which the investor acquired the invested asset (beyond ensuring
the asset was lawfully-acquired, which it is undisputedly
obligated to do) pursuant to 8 C.F.R. § 204.6(j)(3). See
generally Defs.’ MSJ & Opp’n, ECF No. 22. As discussed, USCIS
neither offers its own interpretation of the key terms, nor
explains why cash proceeds are invested as “indebtedness.” See
generally id.; Defs.’ Reply, ECF No. 26.
The regulation, 8 C.F.R. § 204.6, does not define the term
“indebtedness.” Instead, the regulation offers it as an
alternative asset to cash, qualifying as “capital” only if the
invested indebtedness is secured by assets that the alien
investor owns, such that the investor is personally and
primarily liable for the debt. 8 C.F.R. § 204.6(e). The assets
of the enterprise may also not be used to secure any of the
indebtedness. Id. Because indebtedness is undefined in the
regulation, it must be construed “in accordance with its
ordinary or natural meaning.” FDIC v. Meyer, 510 U.S. 471, 476
(1994) (citing Smith, 508 U.S. at 228). To that end,
“indebtedness” means “the quality, state, or condition of owing
money.” Indebtedness, Black’s Law Dictionary (10th ed. 2014).
28
Of course, an individual who takes out a loan is indebted
in a generic sense: the borrower is indebted to the lender to
whom he or she owes money. However, as discussed, the regulation
requires USCIS to consider the transaction between the alien
investor and the enterprise. In so doing, USCIS must identify
the asset actually contributed to the enterprise. See 8 C.F.R. §
204.6(e) (“invest means to contribute capital [to the
enterprise]”). Here, it is clear that the alien investor is not
contributing debt to the enterprise, but is contributing cash.
See Zhang A.R., ECF No. 27-2 at 20, 25-26; Hagiwara A.R., ECF
No. 27-1 at 11. The enterprise is free to deploy that invested
cash to create jobs for Americans. Indeed, an investor can only
contribute indebtedness if the investor’s “state of being
indebted” is to the enterprise itself. See 8 C.F.R. § 204.6(e).
In that sense, the indebtedness is an asset of value because the
investor is obligated to make payments to the enterprise at a
later date.
This reading is confirmed by USCIS’ longstanding, binding
precedent. While the Court will further examine the precedent,
see infra Sec. III.A.1.c.iii, USCIS published four “precedent
decisions,” which are binding on the agency. See Matter of Ho,
22 I. & N. Dec. 206 (BIA 1998); Matter of Hsiung, 22 I. & N.
Dec. 201 (BIA 1998); Matter of Izummi, 22 I. & N. Dec. 169 (BIA
1998); Matter of Soffici, 22 I. & N. Dec. 158 (BIA 1998). In
29
Matter of Izummi, USCIS considered an arrangement whereby an
investor promised to pay an enterprise in the future via a
promissory note. USCIS confirmed that such an arrangement can
constitutes investing “capital” pursuant to the regulation so
long as the alien investor was personally and primarily liable
for the indebtedness to the enterprise. See 22 I. & N. Dec. 169
(BIA 1998)(finding that the alien investor invested indebtedness
by promising to pay the enterprise in the future); see also
Matter of Hsiung, 22 I. & N. Dec. 201, 201 (BIA 1998) (“A
promissory note secured by assets owned by a petitioner can
constitute capital under 8 C.F.R. § 204.6(e) if: the assets are
specifically identified as securing the note; the security
interests in the note are perfected in the jurisdiction in which
the assets are located; and the assets are fully amenable to
seizure by a U.S. note holder.”). Under that arrangement, the
need for personal collateralization is entirely clear: when the
asset actually contributed to the enterprise is merely a
promise, the enterprise requires security. See Hsiung, 22 I. &
N. Dec. at 202 n.1 (“merely ‘identifying’ assets as securing a
loan, without perfecting the security interest, is not
meaningful since the note holder cannot be assured that the
identified assets will remain available for seizure in the event
of default.”). As here, however, when the enterprise receives
30
lawfully-acquired cash it can readily deploy, no security
interest is necessary. 9
Finally, the Court’s conclusion is also supported by a
USCIS policy memorandum released in May 2013. See USCIS, EB-5
Adjudications Policy (PM-602-0083)(May 30, 2013), available at
https://www.uscis.gov/sites/default/files/USCIS/Laws/Memoranda/2
013/May/EB-5_Adjudications_PM_Approved_as_final_5-30-13.pdf. In
clarifying the definition of capital, USCIS stated: “the
definition of ‘capital’ is sufficiently broad that it includes
not only such things of value as cash, equipment, and other
tangible property, but it can also include the immigrant
investor’s promise to pay (a promissory note).” Id. at 3. USCIS
substitutes a “promise to pay” for the word in the regulation:
“indebtedness.” USCIS goes on to clarify that a “promise to pay”
may only be considered “capital” if it meets the indebtedness
requirements: “[capital] include[s] the immigrant investor’s
9 USCIS does not argue that the plaintiffs used or will use the
enterprise’s assets as collateral for the third-party loans. See
generally Defs.’ MSJ & Opp’n, ECF No. 22. However, assuming this
is a concern, USCIS could easily deny a petition based on an
investment of cash loan proceeds if the underlying loan was
secured by the enterprise. See 8 C.F.R. § 204.6(j)(2). As
explained more thoroughly below, USCIS must ensure that the
capital invested was “actually committed” to the enterprise. See
id.; infra Sec. III.A.1.c.ii.(2). If an alien investor invested
cash in the enterprise that could be seized by a lending third-
party, the investor has not truly “committed” the cash to the
enterprise. This is not to say that a loan must be secured by
the alien investor’s assets, rather that the loan must not be
secured by the enterprise’s assets.
31
promise to pay (a promissory note), as long as the promise is
secured by assets the immigrant investor owns, the immigrant
investor is liable for the debt, and the assets of the immigrant
investor do not for this purpose include assets of the company
in which the immigrant is investing.” Id.
(2) The “At Risk” Provision Does Not Support
USCIS’ Interpretation
USCIS argues that its interpretation that cash loan
proceeds are invested as indebtedness is necessary to ensure
that alien investors comply with the regulation’s “foundational
requirements that the alien investor . . . is placing capital he
owns directly at risk.” Defs.’ MSJ & Opp’n, ECF No. 22 at 25
(citing 8 C.F.R. § 204.6(j)(2),(3)); see also 2015 IPO Remarks.
In so arguing, however, USCIS conflates two separate regulatory
requirements.
In addition to establishing that the alien investor
invested a qualifying amount of “capital” in the new commercial
enterprise for the purpose of creating employment, the investor
must also demonstrate that the capital was put “at risk” “for
the purpose of generating a return on the capital.” See 8 C.F.R.
§ 204.6(j)(2). The regulation is clear that this requirement
ensures that the capital has actually been contributed, or
“invest[ed],” in the enterprise. See id. Specifically, the
provision requires that the investor show the “actual commitment
32
of the required amount of capital.” Id.; see also Matter of
Izummi, 22 I. & N. Dec. 169, 170-71, 186 (BIA 1998)(finding that
the alien investor had not placed his investment “at risk”
because the enterprise had given him the right to sell his
partnership interest back for the original price: “for the
alien’s money truly to be at risk, the alien cannot enter into a
partnership knowing that he already has a willing buyer in a
certain number of years, nor can be assured that he will receive
a certain price. Otherwise, the arrangement is nothing more than
a loan [to the enterprise].”); Matter of Ho, 22 I. & N. Dec.
206, 209-10 (BIA 1998)(finding the alien investor had not placed
his investment at risk because he maintained control over the
invested money); Chang v. USCIS, 289 F. Supp. 3d 177, 180, 187-
88 (D.D.C. 2018)(finding USCIS’ denial arbitrary and capricious
because the alien investors had placed their money at risk;
there was “no security that [the investors] would ever see
[their] money again”); Doe v. USCIS, 239 F. Supp. 3d 297, 306
(D.D.C. 2017)(finding USCIS’ denial arbitrary and capricious
because the alien investors had placed their money at risk; they
“were not guaranteed to receive any of their capital
contributions back, let alone make any return on their
investments”).
The “at risk” provision lists the types of documentation
that may establish the alien investor’s “actual commitment” of
33
capital. The list includes, but is not limited to, bank
statements showing that cash has been deposited into the
enterprise’s bank account, assets purchased by the alien
investor for use by the enterprise, and evidence of any “loan
agreement” or “other evidence of borrowing, which is secured by
assets of the petitioner, other than those of the new commercial
enterprise, for which the petitioner is personally or primarily
liable.” Id. § 204.6(j)(2)(i-v).
USCIS relies on these examples to argue that its
“interpretation of its regulation is not plainly erroneous
because the evidentiary requirements necessary to demonstrate
owned capital is ‘at risk’ are different based on how the
capital is obtained.” Defs.’ MSJ & Opp’n, ECF No. 22 at 26
(citing 8 C.F.R. § 204.6(j)(2)(v)). Because plaintiffs obtained
their capital from third-party loan proceeds, USCIS argues that
they must provide evidence of any loan agreement which is
secured by assets of the petitioner for which the petitioner is
personally and primarily liable. Id.
However, USCIS’ argument fails because it contradicts the
definition of capital, which unambiguously includes lawfully-
acquired cash, see 8 C.F.R. § 204.6(e), and “the definition of a
term in the definitional section of a statute controls the
construction of that term,” United States v. E-Gold, Ltd., 550
F. Supp. 2d 82, 91 (D.D.C. 2008) (quotations and citations
34
omitted); see also Texas Children’s Hosp. v. Burwell, 76 F.
Supp. 3d 224, 237 (D.D.C. 2014)(finding that the definitional
section “controls”). Indeed, the “at risk” requirement does not
modify the definition of “capital” in the definition subsection.
Instead, the non-exhaustive list of satisfactory evidence is
included to provide examples of “evidence” that an alien
investor may use to “show actual commitment of required
capital.” 8 C.F.R. § 204.6(j)(2). As plaintiffs’ correctly point
out, the “at risk” requirement “says what an investor must do
with ‘capital’ (i.e. place it ‘at risk’ for the purpose of
generating a return)—not what ‘capital’ is,” which is the issue
at hand here. Pls.’ Reply, ECF No. 24 at 22.
As such, the “at risk” provision does not provide USCIS
with a basis for its interpretation. Whether an alien investor
obtained the lawfully-acquired cash from a third-party loan is
irrelevant to whether that cash was actually committed to the
enterprise for the purpose of generating a return.
(3) USCIS Retains the Authority to Ensure That
Invested Assets are Derived From Lawful
Sources
USCIS also argues that classifying loan proceeds as cash
would “effectively cut off” the agency’s ability to look into
the petitioner’s “source of investment funds.” Defs.’ MSJ &
Opp’n, ECF No. 22 at 27. Not so. Regardless of the form of
capital invested, an asset will not qualify as “capital” if
35
“acquired, directly or indirectly, by unlawful means (such as
criminal activities).” 8 C.F.R. § 204.6(e). In that sense, no
asset—whether cash, indebtedness, or otherwise—will satisfy the
definitional requirement if obtained directly or indirectly by
unlawful means. See id.
The Court’s decision does not impact USCIS’ ability to
investigate whether the petitioner’s invested cash loan proceeds
were lawfully-acquired. As USCIS articulated in its 2015 IPO
Remarks, the agency may determine whether the loan proceeds were
obtained unlawfully or if the cash actually invested did not
likely come from the loan itself. See 2015 IPO Remarks at 2
(“Where the petitioner obtains a loan from a lawful source (such
as a reputable bank), the loan proceeds may, nevertheless, be
unlawful if the capital was obtained by unlawful means (such as
fraud on a loan application).”). And, notwithstanding the
Court’s decision, the burden of proof continues to remain with
the petitioner to establish eligibility. Matter of Brantigan, 11
I. & N. Dec. 493, 493 (BIA 1966)(“ the burden of proof required
of an applicant for United States citizenship never shifts”).
Thus, an investor investing cash loan proceeds must still
demonstrate that the proceeds were lawfully acquired.
36
iii. USCIS’ Interpretation is Not Supported by its
Binding Precedent
Looking beyond the text, USCIS argues that agency precedent
compels its interpretation. Defs.’ MSJ & Opp’n, ECF No. 22 at
25-26. While “[a]rbitrary agency action becomes no less so by
simple dint of repetition,” Judulang v. Holder, 565 U.S. 42, 61
(2011), its arguments are nonetheless unpersuasive because the
only case it discusses as support, Matter of Soffici, is readily
distinguishable. Moreover, the Court finds that USCIS’ binding
precedent supports its decision.
In Matter of Soffici, the alien investor owned the
commercial enterprise in which he invested. 22 I. & N. Dec. 158,
161-62 (BIA 1998). Like the plaintiffs, the investor attempted
to invest third-party loan proceeds. See id. However, unlike the
plaintiffs here, the investor obtained the third-party loan in
the enterprise’s name and secured the loan with the enterprise’s
assets. Id. at 162. In so doing, the alien investor attempted
to, as USCIS puts it, “take credit” for the loan by arguing that
he had invested cash into the enterprise. See id.; Defs.’ MSJ &
Opp’n, ECF No. 22 at 25-26. USCIS denied the alien investor’s
petition because the alien had not invested any capital at all;
rather, he loaned the money to the enterprise, which took out
the loan in its own name. Soffici, 22 I. & N. Dec. at 162.
Moreover, the loan was secured by the enterprise’s assets,
37
meaning that the alien investor did not invest new “capital” to
create jobs. Id. In that regard, to the extent the alien
investor invested any capital at all, he invested indebtedness
because the investor was indebted to the enterprise itself. See
id. (“even if it were assumed, arguendo, that the petitioner and
[the enterprise] were the same legal entity for purposes of this
proceeding, indebtedness that is secured by assets of the
enterprise is specifically precluded from the definition of
‘capital.’”).
By contrast, plaintiffs here seek to invest cash obtained
from third-party loans into new commercial enterprises. See
generally Zhang A.R., ECF No. 27-4; Hagiwara A.R., ECF No. 27-1.
The primary difference between this case and Soffici is that
plaintiff-investors are not indebted to the enterprise, but to
third-party lenders. See id. Unlike Soffici, the new commercial
enterprises here received plaintiffs’ “new” capital to create
American jobs. See id. Unlike the enterprise in Soffici, which
bore the risk of loss, here, the enterprises received cash and
bear no risk of loss (as the loans were not collateralized by
the enterprises’ assets). See id.
Moreover, two other binding USCIS decisions support the
Court’s conclusion that investing “indebtedness,” pursuant to 8
C.F.R. § 204.6(e), involves promising to pay the enterprise in
the future via a promissory note. See Matter of Izummi, 22 I. &
38
N. Dec. 169 (BIA 1998)(finding that the alien investor invested
indebtedness by promising to pay the enterprise in the future);
Matter of Hsiung, 22 I. & N. Dec. 201, 201 (BIA 1998) (“A
promissory note secured by assets owned by a petitioner can
constitute capital under 8 C.F.R. § 204.6(e) if: the assets are
specifically identified as securing the note; the security
interests in the note are perfected in the jurisdiction in which
the assets are located; and the assets are fully amenable to
seizure by a U.S. note holder.”). Such precedent is consistent
with the Court’s conclusion that an investor invests
“indebtedness” when he or she is indebted to the enterprise
itself. The special conditions imposed only on indebtedness also
support this conclusion; because the asset actually contributed
to the enterprise is merely a promise, the enterprise requires
security in the form of personal collateralization. See Hsiung,
22 I. & N. Dec. at 202 n.1 (“[M]erely ‘identifying’ assets as
securing a loan, without perfecting the security interest, is
not meaningful since the note holder cannot be assured that the
identified assets will remain available for seizure in the event
of default.”). This security interest is necessary to guarantee
an actual investment in exchange for a visa preference. When the
enterprise receives cash, however, no security interest is
necessary.
39
USCIS does not dispute that Matter of Hsiung provides that
a promissory note constitutes “indebtedness,” so long as the
note is personally collateralized. See Defs.’ Reply, ECF No. 26
at 15-16. Instead, it contends that Matter of Hsiung does not
limit its ability “to analyze indebtedness under any other EB-5
loan financing arrangement when interpreting the regulatory
definition of capital.” Id. at 15 (emphasis in original).
However, USCIS’ argument does not acknowledge that in Matter of
Hsiung, USCIS used the term indebtedness to refer to financial
arrangements between the alien investor and the commercial
enterprise. See 22 I. & N. Dec. at 201-02. Here, USCIS uses the
term indebtedness to refer to financial arrangements between the
alien investor and an unrelated third party, allowing USCIS to
inquire into the source of the invested cash (beyond whether the
cash was lawfully acquired and that the cash was not derived
from the enterprise itself). Such an interpretation runs
contrary to Matter of Hsiung and the plain meaning of “capital.”
iv. The Context and History of the Regulation Further
Undermine USCIS’ Interpretation
“Language, of course, cannot be interpreted apart from
context.” Smith v. United States, 508 U.S. 223, 229 (1993).
While the plain language of the regulation controls, the
regulatory and statutory context and the history of the EB-5
Visa Program bolsters the Court’s conclusion. See Roberts v.
40
Sea-Land Servs., Inc., 566 U.S. 93, 101 (2012) (“It is a
fundamental cannon of statutory construction that words in a
statute must be read in their context and with a view to their
place in the overall statutory scheme.”).
As stated above, “indebtedness” only qualifies as “capital”
if it is “secured by assets owned by the alien entrepreneur,”
for which the “alien entrepreneur is personally and primarily
liable,” and “the assets of the new commercial enterprise upon
which the petition is based are not used to secure any of the
indebtedness.” 8 C.F.R. § 204.6(e). The requirement that capital
be secured by assets owned by the investor applies only to
“indebtedness” and only serves a purpose if the alien investor
is indebted to the enterprise. See Matter of Hsiung, 22 I. & N.
Dec. 201, 202 n.1 (BIA 1998) (“[M]erely ‘identifying’ assets as
securing a loan, without perfecting the security interest, is
not meaningful since the [enterprise] cannot be assured that the
identified assets will remain available for seizure in the event
of default.”). These conditions ensure that the enterprise
actually receives the investment, achieving the statutory goal
of bringing new investments to the United States to create jobs.
See S. Rep. No. 101-55, at 21 (1989). The interpretation serves
no purpose when an alien investor has invested lawfully-acquired
cash, regardless of how the investor obtained that cash, so long
as the cash was not contributed in exchange for a debt from the
41
enterprise. As discussed, the enterprise is free to deploy the
cash loan proceeds invested.
Thus, not only is USCIS’ interpretation without a textual
or structural basis, but it is also unmoored from the purposes
animating the EB-5 Program itself. See 8 U.S.C. § 1153(b)(5).
The EB-5 Program was intended to “create new employment for U.S.
workers and to infuse new capital into the country.” S. Rep. No.
101-55, at 21 (1989). Following the enactment of the statute,
the INS originally proposed a definition of capital that did not
include indebtedness. See Proposed Rule Employment-Based
Immigrants, 56 Fed. Reg. 30703, 30713 (July 5, 1991).
Indebtedness was added to the definition of capital when the
agency promulgated its final rule. See Final Rule, 56 Fed. Reg.
60897, 60902 (Nov. 29, 1991). The agency explained that it
intended to expand the definition of capital because “Congress
intended the definition [of capital] to be broad.” Id. Indeed,
both parties agree that “indebtedness” was added to 8 C.F.R. §
204.6(e) in order to expand the assets that qualify as
“capital.” See Pls.’ MSJ, ECF No. 19 at 36-37; Defs.’ Reply, ECF
No. 26 at 11 (“during the rulemaking process, the agency
indicated that it made the definition of capital broad”).
However, USCIS’ interpretation narrows the assets that qualify
as capital. In its view, “cash” only qualifies as “capital” if
not derived from an uncollateralized, third-party loan. This
42
interpretation transforms the definition of “capital” from
“capital means cash” (among other things) to “capital means cash
not obtained from an uncollateralized, third-party loan.” See 8
C.F.R. § 204.6(e).
With Congress’ intent in mind, USCIS’ interpretation is at
odds with Congress’ broad statutory purpose because it narrows
the definition of capital. It may well be that USCIS has other
policy reasons for not wanting to accept lawfully-obtained cash
investments obtained from uncollateralized, third-party loans.
Whatever those reasons may be, USCIS’ interpretation is divorced
from the language of its own regulation and the statutory
purpose animating the EB-5 Program. As such, its interpretation
is plainly erroneous, and its denials based on that
interpretation are arbitrary and capricious.
2. USCIS Violated the APA’s Notice and Comment Requirement
Plaintiffs also argue that USCIS’ interpretation, as
articulated in the 2015 IPO Remarks, violates the APA’s notice
and comment requirement. Pls.’ MSJ, ECF No. 19 at 44-49. They
contend that USCIS’ interpretation is a “substantive” or
“legislative” rule necessitating notice and comment procedures
because it “carries the force of law” and is applied “with full
force in every case in which a petitioner uses the cash proceeds
of a loan as EB-5 investment capital.” Id. at 45. As evidence,
plaintiffs point to USCIS’ instructions ordering adjudicators to
43
deny cases in which a petitioner invested cash loan proceeds
unless that petitioner established that he or she is personally
liable for the loan. Id. at 46-47.
USCIS argues that it did not violate the APA’s notice and
comment procedures, putting forward two arguments. Defs.’ MSJ &
Opp’n, ECF No. 22 at 30-34. First, USCIS argues that plaintiffs
are time-barred from challenging the definition of “capital” as
procedurally deficient because the regulation is over twenty-
four years old, and the APA has a six-year statute of
limitations. Id. at 31. Second, USCIS argues that its
interpretation does not constitute a legislative rule requiring
notice and comment. Instead, USCIS posits that the
interpretation in the 2015 IPO remarks merely “clarified the
agency’s longstanding policy on how alien investors can satisfy
the definition of ‘capital’ . . . when investing loan proceeds.”
Id. at 32. Because its interpretation “sensibly conforms to the
words of a statute or existing legislative rule,” USCIS contends
that it did not establish a legislative rule requiring notice
and comment. Id. at 33. As such, it did not violate the APA.
Plaintiffs respond that their claim is not time-barred
because they do not challenge the existing regulation, as
codified in 8 C.F.R. § 204.6(e). Pls.’ Reply, ECF No. 24 at 39.
Instead, plaintiffs challenge USCIS interpretation as announced
in its 2015 IPO Remarks. Because plaintiffs filed suit within a
44
“few months” of the 2015 IPO Remarks, plaintiffs argue that
their claim is timely. Id. Plaintiffs also contend that USCIS’
interpretation is a legislative rule because it adopts a new
position inconsistent with existing regulations. Id. at 40-41.
a. Plaintiffs’ Claims are Not Time-Barred
As an initial matter, the Court agrees that plaintiffs’ APA
claims are not barred by the applicable six-year statute of
limitations. True, the APA provides a six-year window for
plaintiffs to challenge agency rules, see James Madison Ltd. by
Hecht v. Ludwig, 82 F.3d 1085, 1094 (D.C. Cir. 1996)
(recognizing the APA carries a six-year statute of limitations),
but it is abundantly clear that plaintiffs challenge USCIS’
interpretation of the regulation, not the underlying regulation
itself. See generally Pls.’ MSJ, ECF No. 19.
Indeed, plaintiffs do “no[t] dispute that the regulation
defining ‘capital’ was promulgated only after notice published
in the Federal Register and an opportunity for public comment.”
Pls.’ Reply, ECF No. 24 at 39. Instead, they challenge USCIS’
interpretation of that regulation as erroneous and violative of
the APA. See generally Pls.’ MSJ, ECF No. 19. Plaintiffs sued
USCIS on June 23, 2015, see Compl., ECF No. 1, just two months
after USCIS announced its interpretation on April 22, 2015, see
2015 IPO Remarks. As such, plaintiffs filed their APA claim well
within the applicable six-year statute of limitations.
45
b. USCIS’ Interpretation is a Legislative Rule Subject to
the APA’s Notice and Comment Requirement
The APA requires federal agencies to publish “[g]eneral
notice of proposed rulemaking” in the Federal Register, 5 U.S.C.
§ 553(b), and “give interested persons an opportunity to
participate in the rule making through submission of written
data, views, or arguments,” 5 U.S.C. 553(c); Air Transp. Ass'n
of Am., Inc. v. F.A.A., 291 F.3d 49, 55 (D.C. Cir. 2002).
Section 553, however, exempts “interpretative rules, general
statements of policy, or rules of agency organization,
procedure, or practice.” 5 U.S.C. § 553(b). These exemptions are
to be “narrowly construed and only reluctantly countenanced.”
State of N. J., Dep't of Envtl. Prot. v. U.S. Envtl. Prot.
Agency, 626 F.2d 1038, 1045 (D.C. Cir. 1980). If an agency does
not follow proper rule-making procedures when required, a court
can “hold unlawful and set aside agency action, findings, and
conclusions found to be ... without observance of procedure
required by law.” 5 U.S.C. § 706(2)(D).
Determining whether a given agency action is interpretive
or legislative is an “extraordinarily case-specific
endeavor.” Am. Hosp. Ass'n v. Bowen, 834 F.2d 1037, 1045 (D.C.
Cir. 1987). Indeed, the APA does not define “interpretive rule,”
and “its precise meaning is the source of much scholarly and
judicial debate.” Perez v. Mortg. Bankers Ass'n, 135 S. Ct. 1199,
46
1204 (2015); see General Motors Corp. v. Ruckelshaus, 742 F.2d
1561, 1565 (D.C. Cir. 1984) (en banc) (describing the
distinction as “enshrouded in considerable smog”). “The D.C.
Circuit, however, has recognized a four-part test for
determining if a rule is legislative or interpretive.” Texas
Children's Hosp. v. Azar, 315 F. Supp. 3d 322, 337 (D.D.C.
2018)(citing Am. Mining Cong. v. Mine Safety and Health Admin.,
995 F.2d 1106, 1112 (D.C. Cir. 1993)). Whether “the purported
interpretive rule has ‘legal effect’” is determined by:
(1) [W]hether in the absence of the rule there
would not be an adequate legislative basis for
enforcement action or other agency action to
confer benefits or ensure the performance of
duties; (2) whether the agency has published
the rule in the Code of Federal Regulations;
(3) whether the agency has explicitly invoked
its general legislative authority; and (4)
whether the rule effectively amends a prior
legislative rule. If the answer to any of
these questions is affirmative, we have a
legislative rule.
Am. Mining Cong., 995 F.2d at 1112. The court must make this
determination itself; it cannot accept an agency’s
characterization of its own action: “it is well established that
an agency may not label a substantive change to a rule an
interpretation simply to avoid the notice and comment
requirements.” Air Transp. Ass’n, 291 F.3d at 55 (citing
Appalachian Power Co. v. EPA, 208 F.3d 1015, 1024 (D.C. Cir.
2000)).
47
The second and third factors are not contested here: USCIS’
interpretation was not published in the Federal Register and
USCIS does not invoke its general rulemaking authority. See
generally Pls.’ MSJ, ECF No. 19; Defs.’ MSJ & Opp’n, ECF No. 22.
Evaluating the fourth factor, however, clearly suggests that
USCIS’ interpretation is a legislative rule. “With respect to
the fourth factor, ‘[t]he practical question inherent in the
distinction between legislative and interpretive regulations is
whether the new rule effects a substantive regulatory change to
the statutory or regulatory regime.’” Texas Children’s Hosp.,
315 F. Supp. 3d at 337 (quoting Elec. Privacy Info. Ctr. v. U.S.
Dep't of Homeland Sec., 653 F.3d 1, 6–7 (D.C. Cir. 2011)). As
has been extensively discussed, supra Sec. III.A.1.c, the Court
finds that USCIS’ interpretation was plainly erroneous because
it contradicted the plain meaning of the EB-5 regulation. By
requiring investors to personally collateralize loan proceeds
invested as cash, USCIS added an additional requirement to the
regulatory definition of “capital” not found within the text. In
so doing, USCIS impermissibly created “de facto another
regulation.” Christensen, 529 U.S. at 588.
It is well-settled that a policy that adds a requirement
not found in the relevant regulation is a substantive rule that
is invalid unless promulgated after notice and comment. See
Cent. Texas Tel. Co-op., Inc. v. F.C.C., 402 F.3d 205, 211 (D.C.
48
Cir. 2005) (“If a second rule repudiates or is irreconcilable
with a prior legislative rule, the second rule must be an
amendment of the first; and, of course, an amendment to a
legislative rule must itself be legislative.”)(citations and
quotations omitted); Air Transp. Ass’n, 291 F.3d at 56 (“As the
United States Supreme Court has noted, APA rulemaking is
required if an interpretation ‘adopt[s] a new position
inconsistent with ... existing regulations.’”)(quoting Shalala
v. Guernsey Mem'l Hosp., 514 U.S. 87, 100 (1995)); Nat'l Family
Planning & Reprod. Health Ass'n, Inc. v. Sullivan, 979 F.2d 227,
236 (D.C. Cir. 1992)(“[The agency] may not constructively
rewrite the regulation, which was expressly based upon a
specific interpretation of the statute, through internal
memoranda or guidance directives that incorporate a totally
different interpretation and effect a totally different
result.”); Nebraska Dep't of Health & Human Servs. v. U.S. Dep't
of Health & Human Servs., 340 F. Supp. 2d 1, 17 (D.D.C.
2004)(“Changing the interpretation of a regulation requires a
notice and comment period.”)(citing Paralyzed Veterans of
America v. D.C. Arena, 117 F.3d 579, 586 (D.C. Cir. 1997)). As
an example, USCIS has recently proposed increasing the required
capital contribution to qualify for an EB-5 visa, which would
amend a requirement found in 8 C.F.R. § 204.6. Understanding
that such a change would require notice and comment procedures,
49
USCIS proposed the amendment in the Federal Register. See
Proposed Rule EB-5 Immigrant Investor Program Modernization, 82
Fed. Red. 4738 (Jan. 13, 2017).
Moreover, USCIS’ interpretation creates a “binding norm
that is finally determinative of the issues or rights to which
it is addressed.” CropLife Am. V. EPA, 329 F.3d 876, 881 (D.C.
Cir. 2003)(citations and quotations omitted). To illustrate,
about a month before issuing the IPO Remarks, USCIS issued
instructions for adjudicators regarding “capital derived from
indebtedness.” See Hagiwara A.R., ECF No. 27-1 at 399-401; Zhang
A.R., ECF No. 27-4 at 183-185. In the instructions, USCIS states
that adjudicators “must” follow its interpretation by ensuring
that the petitioner has established that he or she is personally
and primarily liable for the loan when investing loan proceeds.
Id. If the petitioner is unable to demonstrate eligibility under
USCIS’ interpretation, an adjudicator “will” deny the petition.
Id. USCIS’ instructions make clear that its interpretation
carries the force of law: adjudicators are not free to exercise
discretion and the interpretation is binding on all petitions.
USCIS’ choice of words is of “great[] importance,” as the D.C.
Circuit has “given decisive weight to the agency’s choice
between the words ‘may’ and ‘will’” when determining whether an
interpretation or policy is binding. Brock v. Cathedral Bluffs
Shale Oil Co., 796 F.2d 533, 537–38 (D.C. Cir. 1986). Indeed, it
50
is clear that USCIS’ interpretation created a “binding norm that
is finally determinative of the issues or rights to which it
[was] addressed.” CropLife Am., 329 F.3d at 881; see also Am.
Bus Ass'n v. United States, 627 F.2d 525, 529 (D.C. Cir. 1980)
(“If it appears that a so-called policy statement is in purpose
or likely effect one that narrowly limits administration
discretion, it will be taken for what it is, a ... rule of
substantive law.”)(quotations and citations omitted). As such,
USCIS’ interpretation is a legislative, substantive rule subject
to notice and comment procedures. See 5 U.S.C. § 553(b),(c).
For the reasons exhaustively discussed, the Court cannot
agree with USCIS that its interpretation is not a legislative
rule because it “sensibly conforms to the words of a statute or
existing legislative rule.” Defs.’ MSJ & Opp’n, ECF No. 22 at
33. Indeed, the Court has already found that USCIS’
interpretation does not conform to the text of 8 C.F.R. §
204.6(e). Similarly, the Court does not find that USCIS’
interpretation is merely a clarification of its long-standing
policy. USCIS’ interpretation may well be long-standing, but it
is not a mere clarification of the governing regulation. The
interpretation modifies the plain meaning of the EB-5
regulation, effectively amending the rule. As such, it is a
legislative rule. See Am. Mining Cong., 995 F.2d at 1109.
51
Because USCIS did not submit the non-exempt interpretation for
notice and comment, USCIS violated the APA.
3. Remand is the Proper Remedy
Plaintiffs request that the Court approve their petitions
outright. See Compl., ECF No. 1 at 27-28. The Court concludes
that such a remedy is not appropriate: “[a]s the Supreme Court
has instructed . . . where ‘the record before the agency does
not support the agency action, . . . the proper course, except
in rare circumstances, is to remand to the agency for additional
investigation or explanation.’” Cty. of Los Angeles v. Shalala,
192 F.3d 1005, 1023 (D.C. Cir. 1999) (quoting Florida Power &
Light Co. v. Lorion, 470 U.S. 729, 744, (1985)). A reviewing
court is “not generally empowered to conduct a de novo inquiry
into the matter being reviewed and to reach its own conclusions
based on such an inquiry.” Florida Power, 470 U.S. at 744. This
is especially the case “in the field of immigration,” where
“there may be sensitive issues lurking that are beyond the ken
of the court.” Fox v. Clinton, 684 F.3d 67, 80 (D.C. Cir. 2012).
Therefore, the “course of prudence” is to remand the case
to USCIS for reconsideration of the class members’ petitions.
Id. USCIS’ decisions to deny the class members’ petitions are
therefore VACATED and the denials are REMANDED to USCIS for
reconsideration consistent with this Memorandum Opinion.
52
B. Motion for Class Certification
Having determined that USCIS’ interpretation of its
regulation is erroneous and violates the APA, the Court must now
evaluate plaintiffs’ pending motion for class certification.
Pls.’ Class Cert. Mot., ECF No. 10. Plaintiffs seek
certification of the following class:
All Form I-526 petitioners who: (1) invested
cash in a new commercial enterprise in an
amount sufficient to qualify as an EB-5
investor; (2) obtained some or all of the cash
invested in the new commercial enterprise
through a loan; (3) filed a Form I-526
petition prior to April 22, 2015 based on that
investment; and (4) received or will receive
a denial of their I-526 petition on the ground
that the loan used to obtain the invested cash
fails the collateralization test described in
the announcement made by USCIS during its
April 22, 2015 EB-5 stakeholder engagement.
Id. at 1. Plaintiffs contend that the proposed class satisfies
the requirements of Federal Rule of Civil Procedure 23 because
the class members challenge the facial validity of USCIS’
interpretation of the EB-5 regulation. See generally id. The
class members all sought (or are seeking) to immigrate to the
United States via the EB-5 program but were denied (or will be
denied) for the same reason. See id.
USCIS opposes plaintiffs’ motion for class certification,
arguing that the proposed class lacks commonality and typicality
and, as such, class counsel may not fairly and adequately
represent all class members. See Defs.’ Class Cert. Opp’n, ECF
53
No. 13 at 11-15. USCIS also argues that plaintiffs do not seek
relief from an unlawful practice generally applicable to the
entire class. See id. at 15-16. Having carefully considered the
motions, the Court hereby GRANTS plaintiffs’ motion for class
certification, albeit with a slightly modified class definition,
discussed below.
1. Standard of Review
Class certification is governed by Federal Rule of Civil
Procedure 23 and proponents of the class action have the burden
of proof as to each of its requirements. See McCarthy v.
Kleindienst, 741 F.2d 1406, 1414, 1414 n.9 (D.C. Cir. 1984).
First, the party seeking certification must demonstrate that the
proposed class satisfies all four of the requirements listed in
Rule 23(a). See Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338,
345 (2011). Specifically, the party seeking certification must
demonstrate that: “(1) the class is so numerous that joinder of
all members is impracticable; (2) there are questions of law or
fact common to the class; (3) the claims or defenses of the
representative parties are typical of . . . the class; and (4)
the representative parties will fairly and adequately protect
the interests of the class.” Fed. R. Civ. P. 23(a). “Rule 23(a)
ensures that the named plaintiffs are appropriate
representatives of the class whose claims they wish to
litigate.” Wal-mart, 564 U.S. at 349. Its “four requirements—
54
numerosity, commonality, typicality, and adequate
representation—effectively limit the class claims to those
fairly encompassed by the named plaintiff's claims.” Id.
(quotations and citations omitted).
Second, plaintiffs must demonstrate that the proposed class
satisfies at least one of the three requirements listed in Rule
23(b). See id. at 345. Here, the plaintiffs argue the proposed
class satisfies Rule 23(b)(2) because “the party opposing the
class has acted or refused to act on grounds that apply
generally to the class, so that final injunctive relief or
corresponding declaratory relief is appropriate respecting the
class as a whole.” Fed. R. Civ. P. 23(b)(2). In evaluating a
class proposed under Rule 23(b)(2), the “key” inquiry is whether
the “injunctive or declaratory remedy warranted” is of a
“indivisible nature,” “such that [the conduct] can be enjoined
or declared unlawful only as to all of the class members or as
to none of them.” Wal-Mart, 564 U.S. at 360 (quotations and
citations omitted). “In other words, Rule 23(b)(2) applies only
when a single injunction or declaratory judgment would provide
relief to each member of the class.” Id.
2. The Class is Sufficiently Ascertainable
Although Rule 23 does not “specifically require plaintiffs
to establish that a class exists, this is a common-sense
requirement and courts routinely require it.” Pigford v.
55
Glickman, 182 F.R.D. 341, 346 (D.D.C. 1998)(citing Franklin v.
Barry, 909 F. Supp. 21, 30 (D.D.C. 1995); Lewis v. Nat'l
Football League, 146 F.R.D. 5, 8 (D.D.C. 1992)). This “common-
sense requirement” ensures that any class is “clearly defined
[and] is designed primarily to help the trial court manage the
class.” Id. (citing Hartman v. Duffey, 19 F.3d 1459, 1471 (D.C.
Cir. 1994)). It is not designed to be a “particularly stringent
test,” but “plaintiffs must at least be able to establish that
the general outlines of the membership of the class are
determinable at the outset of the litigation” such that “it is
administratively feasible for the court to determine whether a
particular individual is a member.” Id. (quotations and
citations omitted).
USCIS does not dispute that the plaintiffs have
sufficiently established that a class exists or that the general
outlines of membership are determinable. See generally Defs.’
Class Cert. Opp’n, ECF No. 13 at 2, 9-17 (stating that the Court
“should deny plaintiffs’ motion for failure to identify an
ascertainable class” but only arguing that the proposed class
does not meet the Rule 23(a) and (b)(2) requirements).
Regardless, the Court finds that the plaintiffs’ proposed class
is based on objective criteria that can be easily determined.
See Thorpe v. District of Columbia, 303 F.R.D. 120, 140 (D.D.C.
2014)(finding that the proposed class was ascertainable because
56
the definitions were “fairly specific” and not “vague”). As
such, the proposed class is ascertainable and well-defined: “by
looking at the class definition, counsel and putative class
members can easily ascertain whether they are members of the
class.” Pigford, 182 F.R.D. at 346.
Indeed, plaintiffs’ class is readily ascertainable to both
class members and counsel. As discussed above, when USCIS denies
an I-526 petition, it issues written notice with the agency’s
reasons for denying the petition. See 8 C.F.R. § 204.6(k)(“the
petitioner will be notified of the decision, and, if the
petition is denied, of the reasons for the denial”); Hagiwara
A.R., ECF No. 27-1 at 392-397 (Notice of Decision); Zhang A.R.,
ECF No. 27-4 at 177-181 (Notice of Decision). Therefore, to
determine whether an individual meets the class definition, one
need only read the Notice of Decision (or the preceding Request
for Evidence, see e.g., Hagiwara A.R., ECF No. 27-1 at 245-250).
If the investor filed an I-526 petition that was denied solely
based on USCIS’ erroneous interpretation that cash loan proceeds
are invested as indebtedness, the investor is a member of the
class.
3. The Class is Sufficiently Numerous
The Court finds, and USCIS does not dispute, that “the
class is so numerous that joinder of all members is
impracticable.” Fed. R. Civ. P. 23(a); see generally Defs.’
57
Class Cert. Opp’n, ECF No. 13. The numerosity requirement is
determined on a case-by-case basis and “imposes no absolute
limitations”. R.I.L-R v. Johnson, 80 F. Supp. 3d 164, 180
(D.D.C. 2015)(citations omitted). As such, plaintiffs “need not
prove exactly how many people fall within the class to merit
certification.” Id. (citing Kifafi v. Hilton Hotels Retirement
Plan, 189 F.R.D. 174, 176 (D.D.C.1999) (“So long as there is a
reasonable basis for the estimate provided, the numerosity
requirement can be satisfied without precise numbers.”)).
Generally speaking, “courts have found that a proposed class
consisting of at least forty members” satisfies Rule 23(a)’s
numerosity requirement. Johnson v. District of Columbia, 248
F.R.D. 46, 52 (D.D.C.2008).
Plaintiffs have provided a reasonable basis to assume there
are at least 134 EB-5 investors whose I-526 petitions have been
or will be denied based on USCIS’ erroneous interpretation of
its regulation that loan proceeds are invested as “indebtedness”
and not “cash.” See Peter D. Joseph Decl., ECF No. 10-6
(reporting that at least 134 investors from seven Regional
Centers received a Request for Evidence, Notice of Intent to
Deny, or Notice of Decision based on USCIS’ erroneous
interpretation). As such, the Court agrees that plaintiffs have
established the numerosity requirement.
58
4. There are Questions of Law Common to the Entire Class and
Claims Typical to the Entire Class
Plaintiffs argue that there are questions of law or fact
common to the class and the representatives’ claims are typical
of the class—as Rule 23(a)(2) and (3) require—because the
plaintiffs challenge USCIS’ “uniform policy or practice,” which
affected or will affect each member. Pls.’ Class Cert. Mot., ECF
No. 10 at 20-23. Because the class definition requires that the
investor’s I-526 petition has been denied (or will be denied)
based on USCIS’ erroneous interpretation, the Court’s decision
resolves the issue central to each class member’s claim. See id.
USCIS argues that plaintiffs have not established commonality
and typicality because the putative class is too broadly drawn,
“bringing within its ambit differing factual circumstances and
differing legal claims.” Defs.’ Class Cert. Opp’n, ECF No. 13 at
11; see id. 11-14. It contends that the proposed class includes
“groups of aliens whose legal and factual interests differ”
because there are “different factual basis for their claims.”
Id. at 11. USCIS points to the “different loan agreements at
issue in these various investment projects,” id. at 13, and
argues that the definition impermissibly “treats[] all debt,
regardless of structure, the same,” id. at 12.
“The commonality and typicality requirements often overlap
because both serve as guideposts to determine whether a class
59
action is practical and whether the representative plaintiffs'
claims are sufficiently interrelated with the class claims to
protect absent class members.” R.I.L-R v. Johnson, 80 F. Supp.
3d 164, 181 (D.D.C. 2015)(quotations and citations omitted).
Because USCIS’ principal challenge to class certification goes
to both, the Court considers them together.
To establish commonality, plaintiffs must demonstrate that
“there are questions of law or fact common to the class.” Fed.
R. Civ. P. 23(a)(2). To that end, class members' claims must
depend on a “common contention [that] . . . is capable of
classwide resolution—which means that determination of its truth
or falsity will resolve an issue that is central to the validity
of each one of the claims in one stroke.” Wal–Mart, 564 U.S. at
350. In other words, the representative plaintiffs must show
that the class members have “suffered the same injury.” Id.
(quotations omitted). Indeed, commonality is satisfied when
plaintiffs challenge “a uniform policy or practice that affects
all class members.” DL v. District of Columbia, 713 F.3d 120,
128 (D.C. Cir. 2013). To demonstrate typicality, plaintiffs must
establish that the class representatives’ claims or defenses are
“typical of the claims or defenses of the class.” Fed. R. Civ.
P. 23(a)(3). “Typicality means that the representative
plaintiffs must ‘possess the same interest and suffer the same
60
injury’ as the other class members.” R.I.L-R, 80 F. Supp. 3d at
181 (quoting Falcon, 457 U.S. at 156).
Here, it is clear that all members of the class “suffered
the same injury” or will suffer the same injury: denial of their
I-526 petition based on USCIS’ erroneous interpretation of 8
C.F.R. § 204.6 that cash loan proceeds are invested as
“indebtedness” and therefore must be personally collateralized.
Walmart, 564 U.S. at 350. Indeed, the challenged interpretation,
as announced in USCIS’ 2015 IPO Remarks, is a “uniform policy or
practice . . . [that] affects all class members.” R.I.L-R, 80 F.
Supp. 3d at 181 (quoting DL, 713 F.3d at 128). By terms of the
approved and modified class definition, USCIS’ erroneous
interpretation must be the sole basis for every class member’s
existing or forthcoming I-526 petition denial. This common
injury is “capable of classwide resolution” because the Court’s
decision resolves “each one of the claims in one stroke”—it
vacates and remands USCIS’ denials. Walmart, 564 U.S. at 350.
Petition-specific factual differences among class members
would not defeat commonality or typicality. Indeed,
“demonstrating typicality does not mean showing that there are
no factual variations between the claims of the plaintiffs.”
Bynum v. District of Columbia, 214 F.R.D. 27, 35 (D.D.C. 2003).
Here, the Court concludes that the named plaintiffs’ claims are
“based on the same legal theory as the claims of the other class
61
members,” namely that USCIS’ interpretation of 8 C.F.R. § 204.6
is erroneous and violates the APA. Id. As such, the typicality
requirement is satisfied as “the named plaintiffs' injuries”—
petition denials based on the erroneous interpretation—“arise
from the same course of conduct that gives rise to the other
class members' claims.” Id.
The Court is not persuaded by USCIS’ arguments to the
contrary. For example, USCIS points to the “different loan
agreements at issue” and argues that plaintiffs’ “overbroad”
definition lacks commonality and typicality because “the
structure of the third party loan invariably affects [USCIS’]
determination.” Defs.’ Class Cert. Opp’n, ECF No. 13 at 12-13.
But plaintiffs do not challenge USCIS’ interpretation as
erroneously applied in different circumstances. Instead,
plaintiffs’ challenge the facial validity of USCIS’
interpretation that cash loan proceeds are invested as
indebtedness. See generally Pls.’ MSJ, ECF No. 19. By
invalidating USCIS’ interpretation and vacating its denials
based on that interpretation, the Court’s decision resolves all
class members’ claims, as all class members received or will
receive denials solely based on USCIS’ erroneous interpretation.
Indeed, because USCIS’ interpretation is erroneous, the Court
disagrees that class certification “would quickly devolve into
hundreds of individualized inquiries about each plaintiff’s
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particular circumstances,” as USCIS contends. Defs.’ Class Cert.
Opp’n, ECF No. 13 at 13-14.
Finally, the Court rejects USCIS’ suggestion that
commonality and typicality cannot be satisfied because the
proposed class is “not limited in geographic scope.” Id. at 12.
“Nothing in Rule 23 . . . limits the geographical scope of a
class action that is brought in conformity with that Rule.”
Califano v. Yamasaki, 442 U.S. 682, 702 (1979). Instead, a court
must “take care to ensure that nationwide relief is indeed
appropriate in the case before it” to avoid “improperly
interfer[ing] with the litigation of similar issues in other
judicial districts.” Id. The Court has done so here. Plaintiffs
challenge a federal agency’s interpretation of its rule
established in the course of implementing a federal immigration
program. Any geographic limitation of the class would be
entirely arbitrary. See id. at 702-03 (affirming certification
of a nationwide class challenging the administration of a
federal program). Moreover, USCIS has not identified any ongoing
litigation regarding the same issue in other districts. See
generally Defs.’ Class Cert. Opp’n, ECF No. 13. As such, there
is no reason to believe that certifying a nationwide class would
foreclose adjudication by other courts.
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5. The Representative Plaintiffs and Counsel Will Fairly and
Adequately Protect the Interests of the Class
Plaintiffs argue that the representative parties will
fairly and adequately protect the interests of the class because
there is no conflict between the named plaintiffs and the rest
of the class and counsel is competent to represent the class.
Pls.’ Class Cert. Mot., ECF No. 10 at 24. USCIS does not dispute
that counsel is competent to represent the class, but instead
argues that the class representatives cannot fairly represent
the class because their “legal and factual circumstances . . .
are so distinct from the proposed class.” Defs.’ Class Cert.
Opp’n, ECF No. 13 at 14. Specifically, USCIS points to the fact
that the named plaintiffs obtained loans from businesses they
principally owned. Id. at 14-15.
As discussed, the class members all suffered or will suffer
the same injury: denial of their I-526 petitions based on USCIS’
erroneous interpretation of its regulation. As such, the
representative members’ interests are aligned with the rest of
the class. The Court again rejects USCIS’ argument that
plaintiffs have conflicting interests based on their specific
loan arrangements because plaintiffs do not challenge any
particular application of USCIS’ interpretation. Instead,
plaintiffs challenge USCIS’ interpretation of its regulation
generally.
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Finally, the Court finds that class counsel is more than
competent to represent the class. See, e.g., Kurzban Decl., ECF
No. 10-7. Counsel has decades of experience with both
immigration litigation and class actions. See generally id.
Based on the briefing in this case, counsel clearly devoted
substantial time and efforts to this litigation and will
continue to zealously represent all class members.
6. USCIS’ Erroneous Interpretation Applies Generally
Plaintiffs argue that they have established that USCIS
“acted or refused to act on grounds that apply generally to the
class, so that final injunctive relief or corresponding
declaratory relief is appropriate respecting the class as a
whole” pursuant to Rule 23(b)(2). Plaintiffs contend that all of
the class members’ I-526 petitions have been or will be denied
for the same reason. Pls.’ Class Cert. Mot., ECF No. 10 at 24-
25. USCIS argues that plaintiffs do not seek relief from a
generally applicable unlawful practice because USCIS’
interpretation of its regulation is not a “new eligibility
rule.” Defs.’ Class Cert. Opp’n, ECF No. 13 at 15. Instead,
USCIS contends that its interpretation is “longstanding,” and
therefore plaintiffs “have not shown that injunctive or
declaratory relief is appropriate.” Id. at 15-16.
Plaintiffs’ proposed class satisfies Rule 23(b)(2) because
USCIS’ interpretation of its regulation has been or will be
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applied generally to the entire class and plaintiffs seek
declaratory and injunctive relief that will benefit the class as
a whole. As in R.I.L-R v. Johnson, plaintiffs’ “suit challenges
a policy generally applicable to all class members.” 80 F. Supp.
3d at 182. As has been discussed, “a determination of whether
that policy is unlawful would resolve all class members’ claims
‘in one stroke.’” Id. (quoting Wal-Mart, 564 U.S. at 350).
USCIS’ arguments to the contrary are devoid of merit. Even
assuming USCIS’ interpretation is “longstanding” and is not a
“new eligibility rule,” it does not follow that certification is
inappropriate. First, the Court has indeed determined that
USCIS’ interpretation is a legislative rule subject to the APA’s
notice and comment procedures, lending support to the argument
that its interpretation is a formal “policy.” See supra Sec.
III.A.2. Second, “courts have never required [class
certification under 23(b)(2)] to turn on whether the party
opposing the class has adopted . . . a formal policy. Rather, it
is enough to show that a defendant ‘has acted in a consistent
manner toward members of the class so that his actions may be
viewed as part of a pattern of activity.’” Bynum, 214 F.R.D. at
37 (quoting 7A CHARLES ALAN WRIGHT, ARTHUR R. MILLER & MARY KAY
KANE, FEDERAL PRACTICE AND PROCEDURE § 1775 (2d ed. 1986)).
Indeed, USCIS cannot dispute that its purportedly “longstanding”
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interpretation is being applied consistently and to the
detriment of the proposed class.
7. Court Modification of the Class Definition
Accordingly, the Court finds that plaintiffs have
established that a class action is appropriate pursuant to
Federal Rule of Civil Procedure 23. As such, the Court GRANTS
plaintiffs’ motion for class certification, albeit with two
modifications to the class definition.
First, plaintiffs limit the proposed class to all investors
who “filed a Form I-526 petition prior to April 22, 2015.” Pls.’
Class Cert. Mot., ECF No. 10 at 1. Plaintiffs propose defining
the class in this manner so “all proposed class members would
benefit if the Court determines that the collateralization rule
cannot be applied retroactively (Count II).” Id. at 22. The date
is significant because USCIS publicly announced its erroneous
interpretation on April 22, 2015 and plaintiffs argue that USCIS
retroactively applied its interpretation to investors who
applied for an EB-5 visa prior to that announcement. See id. at
12-14. However, the Court ultimately does not reach plaintiffs’
retroactivity claim because it concludes that USCIS’
interpretation is plainly erroneous and violates the APA. 10
10Plaintiffs agree that the retroactivity analysis need not be
reached if the Court finds that the interpretation is arbitrary
and capricious. See Pls.’ MSJ, ECF No. 19 at 51 (“Indeed, the
retroactivity analysis starts with the assumption that the
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Therefore, because any denial based on USCIS’ interpretation is
erroneous, the date limitation strikes the Court as unduly
arbitrary.
Second, the Court amends the definition to clarify that
only investors who received a denial of their I-526 petition
solely based on the USCIS’ interpretation are included in the
class. The class does not include investors who received denials
for multiple reasons. As such, the Court certifies the following
class:
All Form I-526 petitioners who: (1) invested
cash in a new commercial enterprise in an
amount sufficient to qualify as an EB-5
investor; (2) obtained some or all of the cash
invested in the new commercial enterprise
through a loan; (3) filed a Form I-526
petition based on that investment; and (4)
received or will receive a denial of their I-
526 petition solely on the ground that the
loan used to obtain the invested cash fails
the collateralization test described in the
USCIS 2015 IPO Remarks announcement.
IV. Conclusion
For the foregoing reasons, the Court GRANTS IN PART
plaintiffs’ motion for summary judgment; DENIES USCIS’ cross-
motion for summary judgment; GRANTS plaintiffs’ motion to
policy or interpretation at issue is not arbitrary and
capricious. If a rule is arbitrary and capricious, the issue of
retroactivity is moot because the rule cannot be applied
prospectively, much less retroactively.”). Thus, plaintiffs’
proposed temporal limitation serves no purpose.
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certify class, albeit with a modified class definition; and
DENIES AS MOOT plaintiffs’ motion to amend the complaint. USCIS’
decisions to deny plaintiffs’ and class members’ petitions are
therefore VACATED and the denials are REMANDED to USCIS for
reconsideration consistent with this Memorandum Opinion. The
Clerk of Court is directed to close this case, with such closure
being without prejudice to a motion to re-open following further
USCIS proceedings. An appropriate Order accompanies this
Memorandum Opinion.
SO ORDERED.
Signed: Emmet G. Sullivan
United States District Judge
November 30, 2018
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