Written by EB5AN managing partner Sam Silverman and vice president Ahmed Khan, Esq, with quotes from H. Ronald Klasko, chairman and founder of Klasko Immigration Law Partners.
On June 28, 2024, the U.S. Supreme Court overturned a landmark 1984 ruling known as the “Chevron doctrine.”
The Chevron doctrine directed U.S. courts to defer to federal agencies on the interpretation of unclear laws and on establishing related policies.
By overturning the Chevron doctrine, the Supreme Court has created a judicial environment where federal agencies like USCIS will lose much of their authority to establish new policies according to their interpretation of the law.
Instead of deferring to federal agencies, U.S. courts will now have the final say in interpreting such laws and setting policies. Recognizing the significance of the ruling, The Economist calls the Supreme Court decision “a mighty blow against the American administrative state.”
Crucially, this ruling may impact the outcome of a pending lawsuit seeking to change a key EB-5 policy: the minimum investment period for EB-5 funds (known in the EB-5 industry as the “sustainment period”).
Invest in the USA (IIUSA), an EB-5 trade association, filed this federal lawsuit against USCIS in March 2024.
The lawsuit seeks to overturn USCIS’s October 2023 policy update on the EB-5 sustainment period.
In this post, we explore the potential impact of the Supreme Court ruling on the IIUSA lawsuit.
Overview of the Supreme Court Ruling
Overview of the IIUSA Lawsuit
How the Supreme Court Ruling Could Impact the IIUSA Lawsuit
EB-5 Investors Await the Outcome of the IIUSA Lawsuit
Further Reading
Overview of the Supreme Court Ruling
The Chevron doctrine was established by the Supreme Court in the 1984 case Chevron U.S.A., Inc., v. Natural Resources Defense Council, Inc.
In this case, an environmental advocacy group challenged the Environmental Protection Agency’s (EPA’s) interpretation of an ambiguous term in an anti-pollution law.
The Supreme Court ruled in favor of the EPA. Based on this ruling, U.S. courts were ordered to defer to federal agencies as long as an agency’s interpretation of the law was “reasonable.”
As a result, the Chevron doctrine was established.
The Chevron doctrine granted federal agencies significant freedom in modifying their policies. U.S. courts typically upheld such policy changes.
“For decades,” The Economist notes, “Chevron justified countless rules and regulations; under it, agencies […] made expansive use of the vague authorities delegated to them by Congress.”
The June 28 ruling reversed this judicial principle. Now, the authority to interpret unclear laws and approve related policies rests largely with the courts.
According to Chief Justice John Roberts, the courts will “exercise their independent judgment in deciding whether an agency has acted within its statutory authority.”
“Federal judges,” adds law professor Craig Green, “will now have the first and final word about what statutes mean.″
Overview of the IIUSA Lawsuit
USCIS originally required EB-5 funds to remain invested until the end of an investor’s two-year conditional residency period. In other words, the sustainment period began when investors received their conditional U.S. Green Card and ended two years later.
Historically, EB-5 investors had to wait for several months or years before receiving their conditional Green Cards—and for the sustainment period to begin.
The October 2023 policy update changed the sustainment period to two years starting at the time an investor’s funds are deployed to an EB-5 project.
Under this policy, the sustainment period can potentially begin earlier than under the original rules. Due to this change, many EB-5 projects are now offering shorter repayment timelines.
USCIS based the new policy on its interpretation of the EB-5 Reform and Integrity Act of 2022 (the RIA), which was signed into law in March 2022.
Challenging the policy update, the IIUSA lawsuit claims that USCIS failed to follow proper rulemaking procedures established by the Administrative Procedures Act (APA). USCIS is accused of violating the APA by implementing the new policy unilaterally, without public input from the EB-5 industry.
The complaint states that USCIS carried out the policy update “without providing advance notice in the Federal Register or giving interested stakeholders the opportunity to comment” and that “its promulgation without notice and comment violates the Administrative Procedures Act.”
Additionally, IIUSA claims that the October 2023 policy update misinterprets the RIA. The petition argues that the RIA’s intent was for the sustainment period to remain the same: two years starting when an investor receives a conditional Green Card.
The lawsuit seeks for USCIS to overturn the new two-year sustainment period. Additionally, IIUSA proposes a five-year investment period starting from the time EB-5 funds are disbursed to an EB-5 project.
A Higher Risk of Redeployment for EB-5 Investors
If successful, how could the IIUSA lawsuit impact EB-5 investors?
One outcome could be that USCIS repeals the October 2023 policy update and adopts IIUSA’s proposed five-year investment period.
Conversely, USCIS may revert to its original policy on the sustainment period. Once again, this sustainment period would begin at the start of an investor’s two-year conditional Green Card period.
Either outcome could be harmful to EB-5 investors and put their invested funds at greater risk.
Under the October 2023 sustainment policy, many EB-5 investors have already committed to projects with a shorter repayment timeline.
However, if the sustainment period is increased, any EB-5 project with a repayment term of less than five years would likely have to redeploy investors’ funds. Specifically, the funds would need to be redeployed into a second EB-5 project until the five-year period is complete—or longer, depending on the second project’s timeline.
Similarly, if USCIS reverts to its original sustainment policy—starting when an investor receives a conditional Green Card—the funds are more likely to be redeployed.
Critically, redeployment can put EB-5 funds at a higher risk.
Generally, EB-5 investors are not allowed to decide the project their EB-5 funds will be redeployed to. The second EB-5 project may have a higher risk profile, and investors may have to wait for several additional years before recovering their funds.
Moreover, the longer EB-5 funds remain invested, the more likely it is for a project to encounter financial difficulties. In addition to the risks related to redeployment, requiring the sustainment period to last longer can significantly increase this risk.
Risks for Indian and Chinese Investors in Urban EB-5 Projects
Indian and Chinese nationals who invested in urban EB-5 projects since 2022 are at a higher risk of having their funds redeployed.
USCIS data released to date shows that approximately double the number of EB-5 investors have joined Urban TEA projects compared to Rural TEA projects. However, it will be some time in the future before the Department of State, which determines visa quota backlogs via its monthly visa bulletin, reflects any visa backlog for either the urban or rural set-aside visas. Once the supply of urban set-aside visas runs out, Indian and Chinese investors will be subject to substantial delays before receiving their conditional Green Cards.
If the original sustainment policy is reinstated, these Chinese and Indian investors will likely have to wait several years for their sustainment period to begin. In the meantime, their capital must be redeployed into different EB-5 projects.
In contrast, the rural set-aside visa category enjoys an ample supply of visas. A rural set-aside visa allows Indian and Chinese investors to avoid backlog-related delays.
Regardless of their nationality, most investors in rural projects are receiving I-526E approvals in approximately 12 months—sometimes even quicker.
Investing in a rural project is the safest way for Chinese and Indian applicants to avoid the need for redeployment or a prolonged investment period.
How the Supreme Court Ruling Could Impact the IIUSA Lawsuit
It’s unclear whether the reversal of the Chevron doctrine could strengthen IIUSA’s case against USCIS.
As mentioned above, the IIUSA lawsuit is based mainly on the claim that USCIS did not follow APA procedures when implementing its policy update.
Therefore, the Supreme Court ruling may not have a direct bearing on this aspect of the lawsuit.
IIUSA Challenges USCIS’s Interpretation of the Law
Nevertheless, other claims made against USCIS could arguably be related to the agency’s policymaking authority—and the overturning of the Chevron doctrine.
The lawsuit argues that USCIS’s policy change is “contrary to the statute’s [the RIA’s] plain text and Congress’s intent.” As mentioned previously, IIUSA is claiming that the RIA’s intent was to retain the original sustainment period that started with an investor’s conditional Green Card.
Consider the following excerpts from the complaint.
- “Congress is understood to have adopted and codified USCIS’s existing regulation.”
- “Congress did not intend for USCIS to abandon its existing sustainment regulation that was entirely compatible with the outcome Congress sought to achieve. Instead, Congress harmonized the statute with USCIS’s regulation, which ties the sustainment period to conditional residence.”
- “The most natural reading of the statute is that Congress intended to retain the existing calculation of the sustainment period, rather than silently jettison it.”
- “If Congress had wanted a result inconsistent with binding regulation, it would have written a statute with a different, express result.”
Could the reversal of the Chevron doctrine lend weight to these arguments? It’s certainly true that the reversal of the Chevron doctrine can only strengthen IIUSA’s position, and the judge presiding over the case will certainly consider the Supreme Court ruling.
Indeed, the Supreme Court is generally shifting authority away from federal agencies toward the courts.
Relatedly, on July 1, the Supreme Court significantly extended the statute of limitations for challenging federal agencies against the APA. This ruling may empower cases like the IIUSA lawsuit.
Past Lawsuits Against USCIS Policy Updates Have Succeeded
In the past, members of the EB-5 industry have successfully litigated against USCIS in very similar cases.
One noteworthy example is the April 2022 lawsuit arguing that USCIS violated the APA by suspending the regional center program.
In June 2022, the court issued a preliminary injunction that forced USCIS to allow regional centers to resume operations.
USCIS ultimately settled with the plaintiffs and fully reauthorized the regional center program.
Interestingly, IIUSA also participated in this successful lawsuit.
And, like the current litigation, the April 2022 lawsuit argued that USCIS had both violated APA guidelines in implementing its policy and misinterpreted the intent of the RIA.
Could this precedent support the case against USCIS?
EB-5 Investors Await the Outcome of the IIUSA Lawsuit
The IIUSA lawsuit may impact the repayment of thousands of EB-5 investors. Foreign nationals considering an EB-5 investment would do well to consider the possible outcomes of the lawsuit and plan accordingly.
“We just cannot know yet how the lawsuit will turn out,” says EB5AN managing partner Sam Silverman. “So the uncertainty will remain for a while. The lawsuit could take at least a year to be resolved, and any proposed federal rule change requires a minimum notice and comment period.”
In the meantime, EB5AN vice president Ahmed Khan advises, “EB-5 investors should pay close attention to how the lawsuit progresses.” Khan also notes that EB5AN’s rural and urban EB-5 projects “feature repayment periods of different lengths. This variety allows us to offer safe projects that lower our investors’ financial risk, regardless of the verdict in the IIUSA lawsuit.”
H. Ronald Klasko, chairman and founder of Klasko Immigration Law Partners, says the following: “The ruling in the IIUSA lawsuit may impact the investment timelines of thousands of EB-5 investors, and I encourage both immigration attorneys and EB-5 investors to closely follow the developments.”
“It’s important to keep in mind,” Klasko concludes, “that the Chevron ruling may not have a significant impact on the outcome, which is still very much uncertain.”
For further information on how to plan your EB-5 investment in advance of the verdict, we invite you to schedule a free consultation with EB5AN.
Further Reading
- H. Ronaldo Klasko: The USCIS Guidance on Sustainment: Investors Beware
- H. Ronaldo Klasko: EB-5 Investments: A Two-Year Sustainment Period? Not So Fast
- EB5AN Analysis: From Two Years to Five: New Lawsuit Could Change EB-5 Investment Period
- EB5AN Analysis: IIUSA Sues USCIS and Proposes Five-Year EB-5 Minimum Investment Period: Possible Impacts and How to Minimize Your Risk
- The Economist: What the Chevron Ruling Means for the Next US President
- EB5AN Analysis: USCIS Updates Minimum EB-5 Investment Period: What this Means for EB-5 Investors
- Legal Complaint Filed by IIUSA
