EB-5 Regional Center Lawsuit to Stop EB-5 Regional Center Deauthorization: Ruling Expected in Late July or August 2022

This article attempts to summarize key documents filed to date in the litigation for EB-5 regional center reauthorization and review the core legal arguments and positions of all involved parties.

First Lawsuit: List of Actions and Documents Filed as of June 23, 2022

In a lawsuit filed on April 22, 2022 (the “First Lawsuit”), in the U.S. District Court for the Northern District of California, Behring Regional Center LLC (“Plaintiff”), argued that the recently published website guidance related to the EB-5 regional center program from United States Citizenship and Immigration Service (“USCIS”), an agency within the Department of Homeland Security (“Defendant”) violates the the Administrative Procedure Act and the clear intent of Congress to reauthorize the EB-5 regional center program with a smooth transition.

Below is an index of key documents and events related to the First Lawsuit under Court Docket 3:22-cv-02487.

1. 4/22/22: Plaintiff’s Initial Complaint Seeking Declaratory Relief (Download)
2. 4/26/22: Plaintiff’s Notice of Motion; Motion for a Temporary Restraining Order and Order to Show Cause; Memorandum of Points and Authorities; Proposed Order to Show Cause Regarding Temporary Restraining Order (Download)
3. 5/4/22: Defendant’s Opposition to Plaintiff’s Motion for a Temporary Restraining Order (Download)
4. 5/6/22: Plaintiff’s Reply in Support of Motion for Temporary Restraining Order and Order to Show Cause (Download)
5. 5/10/2022: Hearing with Honorable Judge Vince Chhabria on Preliminary Injunction Motion
6. 5/18/22: Defendant’s Supplemental Brief in Support of Defendant’s Opposition to Plaintiff’s Motion for a Temporary Restraining Order (Download)
7. 5/23/22: Plaintiff’s Reply and Supplemental Submission in Support of Motion for Preliminary Injunction (Download)
8. 5/14/22: Brief of Invest in the USA Amicus Curiae in Support of Plaintiff (Download)
9. 6/2/22: Hearing with Honorable Judge Vince Chhabria on Preliminary Injunction Motion
10. 6/6/2022: Plaintiff’s Supplemental Brief (Download)
11. 6/6/2022: Defendant’s Supplemental Brief (Download)
12. 6/6/2022: Invest in the USA Supplemental Brief (Download)
13. 6/6/2022: Invest in the USA Motion to Intervene (Download)
14. 6/21/2022: USCIS Motion in Opposition to Intervention by Invest in the USA (Download)
15. 7/14/2022: Scheduled Hearing with Honorable Judge Vince Chhabria on Invest in the USA Motion to Intervene – 5:30 PM EDT (Click Here for Zoom Link)

In advance of the June 2, 2022, scheduled hearing, Judge Vince Chhabria released the following statement:

“The government should be prepared to address at the hearing whether Senator Grassley’s statements were made on the floor of the Senate before the passage of the Integrity Act or whether they were inserted into the record as a written statement. The parties should also be prepared to discuss whether that matters.”

Watch Senator Grassley’s EB-5 Reform and Integrity Act Floor Statement Video 

UPDATE: A Second Lawsuit was Filed on May 24, 2022; Invest in the USA Withdrew from this Second Lawsuit on June 5, 2022, and has filed a Motion to Intervene in the First Lawsuit Leveraging the Same Legal Arguments Originally Presented in the Second Lawsuit, See Above Items #13 and #14

In a lawsuit filed on May 24, 2022 (the “Second Lawsuit”), in the U.S. District Court for the District of Columbia, five EB5AN EB-5 regional center peers, including (i) EB5 Capital, (ii) Canam Enterprises, (iii) Golden Gate Global, (iv) Civitas Capital, and (v) Pine State, together with EB-5 regional center trade organization Investor in the USA (“IIUSA”), also argue that the recently published website guidance related to the EB-5 regional center program from USCIS is unlawful. The Second Lawsuit is pending in front of Judge Amit P. Mehta.

The Second Lawsuit was prepared by the same legal team (Paul W. Hughes of McDermott Will & Emery LLP and H. Ronald Klasko of Klasko Immigration Law Partners LLP) that prepared the above-referenced Brief of Invest in the USA Amicus Curiae in Support of Plaintiff (“Amicus Brief”). Unsurprisingly, most of the legal reasoning set forth in the Second Lawsuit is mirrored in the Amicus Brief.

Although the legal reasoning of the Second Lawsuit is more complete than that of the First Lawsuit, a Court ruling in the First Lawsuit is likely to happen first and would provide the same relief sought in the Second Lawsuit. However, the Amicus Brief, which contains the more comprehensive legal reasoning of the Second Lawsuit, will bolster the First Lawsuit.

Second Lawsuit: Summary of the Initial Complaint

The Second Lawsuit argues that USCIS’s interpretation of the Act is unlawful and must be set aside entirely.

In summary, the Second Lawsuit argues that USCIS’s website update deauthorizing all 600+ EB-5 regional centers contravenes the clear statutory text of the Act and clear legislative intent from Congress for the EB-5 regional center program to continue with changes—not to be effectively shut off for several years.

The Second Lawsuit argues that the new anti-fraud and integrity measures of the Act effectively add to and clarify the preexisting EB-5 regional center program and do not directly contradict the preexisting EB-5 regional center program. This distinction is important since USCIS’s supplemental brief takes the position that the language of the Act is so different from the original statutory language that the Act repeals the original statutory language.

The Second Lawsuit also argues that congressional intent with respect to the Act was to shore up the EB-5 regional center program and provide further protections for EB-5 investors, not to leave thousands of current EB-5 investors in a worse position with all regional center oversight removed.

Additionally, the Second Lawsuit argues that preexisting regional centers already meet the requirements of the definition of a “regional center” as written within the Act—meaning the Act does not impose a different set of requirements for new regional centers to be established that are not in alignment with the requirements used to approve the existing 600+ EB-5 regional center licenses.

The Second Lawsuit argues that since the Act includes language that allows for preexisting regional center business plans to be binding in future adjudications, preexisting regional centers must, therefore, remain authorized.

Similarly, the Second Lawsuit argues that the grandfathering provisions of the Act confirm that preexisting regional center designations must survive passage of the Act. Since USCIS must continue to process and approve I-526 petitions from EB-5 investors sponsored by preexisting regional centers, those regional centers must remain authorized.

The Second Lawsuit also argues that the enforcement mechanisms of the Act are designed to individually deauthorize existing noncompliant regional centers, which presupposes preexisting regional centers are not unilaterally deauthorized.

The Second Lawsuit argues that the 60-day pause period following passage of the Act clearly indicates that Congress intended for the regional center program to continue, otherwise it would not have arbitrarily implemented a 60-day pause for the filing of new I-526 petitions if USCIS was going to just implement a completely new regional center designation process from scratch.

Additionally, the Second Lawsuit argues that the use of the word “reauthorization” in the Act indicates that the intent of the Act is to reauthorize the existing program with reforms, not authorize a new program altogether.

The Second Lawsuit also argues that the repealed section of the old EB-5 regional center program does not result in all preexisting EB-5 regional centers no longer being authorized. Specifically, the Second Lawsuit argues that no logical connection exists between Section 103(a) (which repealed the prior EB-5 regional center program) and the deauthorization of all preexisting EB-5 regional centers. Importantly, the Second Lawsuit clarifies that, as a matter of law, Section 103(a) was not the enabling text that allowed USCIS to designate regional center licenses but was rather only connected to the set-aside allocation of visas (green cards) for EB-5 regional center investors. Therefore, since the repealed statute itself did not certify preexisting EB-5 regional centers, its repeal cannot mean that all preexisting EB-5 regional centers are now no longer approved.

Finally, the Second Lawsuit argues that USCIS failed to comply with a required notice and comment period and that USCIS’s position is substantively arbitrary and capricious and fails to address serious reliance interests from EB-5 industry regional centers, EB-5 investors, and other key stakeholders. Specifically, the Second Lawsuit argues that the USCIS interpretation is in direct contradiction with the clear intent from Congress to implement integrity measures that will protect EB-5 investors.

Second Lawsuit: Summary of Motion for Preliminary Injunction or Summary Judgement with Memorandum of Support

On June 16, 2022, the Plaintiffs filed a Motion for Preliminary Injunction or in the Alternative Summary Judgment; this document contains a detailed memorandum in support of the requested relief that includes a number of declarations from the principals of the Plaintiff regional centers as well as other supporting reports and statistical information related to USCIS processing times. There is no surprise that this document is largely reliant on the same arguments and supporting evidence found in the Amicus Brief filed by IIUSA in the First Lawsuit.

The court has ordered that the parties meet and confer and, by June 22, 2022, submit a Joint Status Report proposing a schedule for briefing Plaintiff’s Motion for a Preliminary Injunction or in the Alternative Summary Judgment.

First Lawsuit: Detailed Summary of Actions and Documents Filed as of June 23, 2022

Since the filing of the First Lawsuit, a hearing was held on May 10, 2022, with the Honorable Judge Vince Chhabria in which both the Plaintiff and Defendant made oral arguments in support of their respective positions (the “Hearing”).

During the Hearing, USCIS argued that the Act repealed the prior regional center program, thus requiring all EB-5 regional centers to be fully redesignated. USCIS included the following language to support their position:

“Congress explicitly put the proverbial ‘nail in the coffin’ and established a clean slate for the new Regional Center Program.”

USCIS also relied on remarks from Senator Chuck Grassley to further support its position that EB-5 regional center redesignation was the goal of the Act. USCIS included the following language to support their position:

“The bill, which Senator Leahy and I primarily authored, formally repeals the pilot program created by Congress in 1992 and codifies in its place a new regional center program reflecting a number of reforms that we’ve pursued for many years…”

“All EB-5 regional centers that operated under the lapsed and repealed pilot program will be expected to seek a new regional center designation.”

First Lawsuit: Specific Exchanges of Important Discussion Points During the Hearing

Exchange related to the assumption of future USCIS processing times for Form I-956 adjudication:

Judge Chhabria: But do you really think that the USCIS’s intent is to shut everybody down and then make everybody wait two to four years before they can get up and running so that there will be no regional centers up and running for four years? I mean, how could I adopt such a fantastical assumption?

Regional Center Attorney: Sure. That’s a fair question, and we have no idea. USCIS hasn’t told us when, how, why, who, what.

Exchange related to the infringement of a natural right:

Judge Chhabria: The fact that no new investment is allowed to be taken in by regional centers doesn’t matter, right?

Regional Center Attorney: Well it does.

Judge Chhabria: I mean Behring Regional Center doesn’t have some like, you know, natural right to exist and get money through the federal government to engage in economic activity.

Exchange related to a letter from Congressional leaders:

Regional Center Attorney: We filed the letter last night from the senate majority leader, the two ranking members, and the house leader.

Judge Chhabria: I don’t see how I can give that consideration. I don’t see how it would be appropriate to consider statements of members of Congress, you know, nine months after legislation was enacted, explaining what the legislation meant.

Following the Hearing, Judge Chhabria requested additional research briefs from both Plaintiff and Defendant. Specifically, he asked for details of prior statutory reorganizations and how they were completed to gain a more informed perspective on the use of the word “repeal.”

First Lawsuit: USCIS Submitted Supplemental Brief in Support of Its Position on May 18, 2022

USCIS argues that Congress explicitly “repealed” the old EB-5 regional center program to start completely fresh with a new EB-5 regional center program. USCIS argues that the language of the Act is clearly a “repeal,” not an amendment or reorganization as argued by the Plaintiff.

USCIS also argues that the sheer breadth of Section 103 of the Act, which results in a complete transformation of the EB-5 regional center program, makes it clear that Congress wants a completely new program, not just a reauthorization of the old regional center program.

In direct contrast with the Plaintiff, USCIS argues that the changes of the Act are so comprehensive and not complementary to the original statutory language that the enactment of the Act means that the former statutes (i.e., the old EB-5 regional center program) are thus repealed.

USCIS also argues that since it has published Form I-956 for regional center designation and Plaintiff has not filed a Form I-956 (although it appears this statement was not accurate), Plaintiff should not be eligible for injunctive relief.

USCIS goes on to argue that an injunction in favor of Plaintiff would pose significant hardships to other EB-5 regional centers who are relying on the new EB-5 regional center designation process with Form I-956. USCIS also argues that a ruling in favor of Plaintiff would hinder USCIS’s ability to meet or beat the statutory goal of processing new Form I-956 EB-5 regional center designation forms within 180 days.

Finally, USCIS argues that EB-5 investors who filed I-526 petitions prior to March 15, 2022, will continue to be adjudicated, regardless of the status of the formerly associated EB-5 regional center; USCIS points to a recent approval of an EB-5 investor who had invested under Plaintiff’s regional center as evidence that Plaintiff and its associated EB-5 investors have not suffered any irreparable harm.

First Lawsuit: Plaintiff Submitted Supplemental Brief in Support of Its Position on May 23, 2022

Plaintiff argues that the deauthorization of its EB-5 regional center license has effectively driven it out of business and that this action by USCIS rises to the level of irreparable harm since the “threat of being driven out of business is sufficient to establish irreparable harm.”

Plaintiff goes on to argue that the fact that it cannot raise capital from EB-5 investors to earn income translates into a loss of business opportunity that is a “cognizable irreparable harm.”

Plaintiff also argues that the Act does not specifically permit grandfathering of I-526 petitions filed prior to March 15, 2022, but that USCIS has made a “policy decision” to continue to process such pending I-526 petitions even though the associated regional centers are claimed by USCIS to have been deauthorized. Plaintiff argues that USCIS cannot, on one hand, interpret that all pending I-526 petitions will be processed (even though those I-526 petitions are associated with a regional center) and, on the other hand, that those associated regional centers no longer exist.

Plaintiff argues that when analyzing the use of the word “repeal” by Congress, the court should consider the fact that the original authorizing statute of the EB-5 regional center program is not inconsistent with the Act, and so most of the cases relied upon by USCIS are irrelevant. Plaintiff also states that USCIS fails to consider the presence of the words “authorization” and “amend,” essentially arguing that that Court must read the statute in the context of the Act, and not just focus on the section that uses the word “repeal.”

Plaintiff also argues that Senator Grassley’s March 10, 2022, statement stands alone and goes against the legislative history associated with the passage of the Act, which traces its roots to 2013. No prior version of any similar EB-5 reauthorization bill mentioned the deauthorization of all existing EB-5 regional centers.

First Lawsuit: IIUSA Petitioned the Court to Allow Submission of Amicus Brief on May 23, 2022, Which the Court Granted the Following Day.

For a summary of IIUSA’s Amicus Brief, please refer to the summary of the Second Lawsuit that appears earlier in this article.

First Lawsuit: Supplemental Brief Filed by Plaintiff on June 6, 2022

In this Supplemental Brief, Plaintiff provides additional legal analysis in support of its position and requests that the Court issue an order that forces USCIS to recognize that all previously approved EB-5 regional centers are not deauthorized and to begin to accept new I-526 petitions for new EB-5 investors immediately without further delay.

First Lawsuit: Supplemental Brief Filed by Defendant on June 6, 2022

In this Supplemental Brief, USCIS provides additional legal analysis in support of its position that a preliminary injunction is not an appropriate action by the Court and requests that the Court deny the Plaintiff’s motion for a preliminary injunction.  USCIS also states that as of June 6, 2022, 56 EB-5 regional center I-956 applications for new EB-5 regional center designation have already been filed with USCIS. It is highly likely that many previously approved Eb-5 regional centers are among these 56 applicants and that there is a strong belief that USCIS approval of Form I-956 applications will be the fastest way for EB-5 regional centers to get “back in business” and be able to accept new EB-5 investors into EB-5 regional center sponsored projects.

First Lawsuit: Supplemental Brief and Motion to Intervene Filed by Invest in the USA on June 6, 2022

In this Supplemental Brief, Invest in the USA argues that a preliminary injunction that is tailed to only benefit the Plaintiff would be inappropriate because it would effectively create a monopoly for a period of time and directly harm hundreds of other EB-5 regional centers. Invest in the USA has also filed a Motion to Intervene in the First Lawsuit and a hearing has been set to address this issue for early July 2022.

First Lawsuit: Opposition to Motion to Intervene by Invest in the USA filed by USCIS on June 21, 2022

In its Opposition to Motion to Intervene, USCIS argues that IIUSA is not eligible to intervene in the First Lawsuit because it has the ability to seek relief in a separate venue and will not be prejudiced by an action taken by the court.  USCIS also argues that the remedy sought by both parties is essentially the same and so the motion to intervene should fail because IIUSA is “arguing over a distinction without a difference”. EB5AN agrees with the USCIS position and believes it is unlikely that IIUSA will be permitted to intervene, and even if intervention is granted, it is very likely that the court will restrict both parties to file only one set of pleadings as a single party.

Conclusion and Expected Timing of Court Action: Late July or August

We do not expect a ruling on the motion for a preliminary injunction in the First Lawsuit or the Second Lawsuit until the end of July or August after a hearing is held on July 14, 2022 and a decision is made on IIUSA’s motion to intervene. When making this ruling, Judge Chhabria or Judge Mehta will consider all documents filed as of the time of the ruling.

If a preliminary injunction is granted in the First Lawsuit or Second Lawsuit, EB5AN’s Saltaire Project, which qualifies for the new 10% high unemployment TEA visa set aside, and EB5AN’s Twin Lakes Georgia Project, which qualifies for the new 20% rural TEA visa set aside and faster I-526 petition processing, will be immediately available for new EB-5 investors with a minimum investment of $800K. Investors from countries experiencing or expected to experience EB-5 visa retrogression (e.g., China) will particularly benefit from the new visa set-asides for rural and high unemployment EB-5 visas.