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Preliminary injunction puts EB-5 regional centers back in business

In the Behring Regional Center lawsuit, the judge granted an order for a preliminary injunction to stop USCIS from treating regional centers as deauthorized. The Immigration Service’s decision to deauthorize previously approved regional centers was “almost certainly legal error.”  The plaintiff is “exceedingly likely, if not certain, to prevail.” It is important to note that a summary judgment in favor of the plaintiff will not strip USCIS of the power to require compliance with new Reform and Integrity Act provisions.

The history of the case

The EB-5 Reform and Integrity Act of 2022 (RIA) was enacted by Congress in March, and the U.S. Citizenship and Immigration Services (USCIS) interpreted the RIA to mean the deauthorization of all previously authorized regional centers. This impacted over 600 regional centers.

New pooled EB-5 investors have not been able to submit I-526 petitions without the reauthorization of regional centers, and thus faced a potentially lengthy wait time before filing.

Behring Regional Center sued the agency arguing that such a decision was arbitrary and capricious under the Administrative Procedure Act (APA). The regional center moved for a motion for preliminary injunction so that it and other EB-5 regional centers could — until a final court decision — be recognized as authorized and allowed to do business.

‘Almost certainly legal error’

The judge in the Behring case has now declared that USCIS’s actions were “almost certainly legal error, because it is unclear whether the Integrity Act deauthorized existing regional centers or allowed them to continue operating under Congress’s new regime.”

So USCIS made, in the view of the this judge, a mistake in deauthorizing EB-5 regional centers based on its interpretation of the RIA.

A faulty argument for shutting down regional centers

The Immigration Service’s shutdown of the over 600 regional centers was predicated on the agency’s interpretation that the Reform and Integrity Act “repealed” the original pilot program that authorized the operation of regional centers.

The use of the word “repeal” in the Reform and Integrity Act is as follow: "Section 610 of the Departments of Commerce, Justice, and State, the Judiciary, and Related Agencies Appropriations Act, 1993 (8 U.S.C. 1153 note) is repealed.”

However, unlike USCIS, the judge in the Behring case does not interpret the word “repeal” as clearly indicating the deauthorization of the entire Regional Center Program.

What USCIS wanted: shutdown until I-956 approval (with adjudications possibly within 6 months)

In USCIS’s interpretation of the new legislation, formerly approved regional centers would be deauthorized until they filed and received approval of a new Form I-956. 

How long could this take? The preliminary order states: “USCIS interprets the Integrity Act as setting a non-binding target date of six months by which the agency should process any new I‐956 application.”

Much of the EB-5 industry had dire predictions for the processing time of  I-956 petitions and six months is more optimistic than many expected; but it should be remembered that even though the agency has acknowledged  that it is aiming for a six-month I-956 processing time, this target is still non-binding. 

A preliminary injunction

A preliminary injunction happens at the beginning of a court case, as an “extraordinary remedy,” that stops a harmful action by the defendant in a lawsuit. And this stoppage of an act, if granted, will be in effect until final resolution of a lawsuit.

In the Order Granting Plaintiff’s Motion For A Preliminary Injunction, the judge explains the criteria the plaintiff must show for securing an injunction: 

  1. Likely to succeed on the merits

  2. Likely to suffer irreparable harm in the absence of preliminary relief

  3. Balance of equities for plaintiff is greater than hardships for the defendant

  4. Is in the public interest

Likelihood of success on the merits 

The APA declares that a court must “hold unlawful and set aside agency action . . . found to be . . . arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law.” As such, “an erroneous view of the law” cannot be maintained by an agency. 

The judge repeatedly states in this order that USCIS “was almost certainly wrong in assuming that the Integrity Act affirmatively deauthorized existing regional centers.”

The judge also acknowledges the Reform and Integrity Act “is silent or ambiguous on the question” of whether regional centers should remain authorized or not, with “portions of the Act suggesting that Congress did not intend to deauthorize the existing centers.”

For example, the RIA declares that USCIS approval of a business plan “shall be binding” even if such approval happened before the Integrity Act became law. The continuing validity of business plans prior to the RIA becoming law is, in the judge’s view, a compelling argument that Congress did not intend to deauthorize the same regional centers that created those plans.

Another example the judge cites of Congress’ possible intent is that “the Act gives the Secretary multiple tools to ensure ongoing compliance with its provisions, suggesting that Congress may have considered that existing regional centers would retain their status.”

Also, the title of the act’s section 103 “Reauthorization and Reform of the Regional Center Program,” particularly with the word “reauthorization,” may be a further indication “that Congress did not mean to strip existing centers of their authorization.”

USCIS case ‘almost exclusively dependent’ on a single word

The judge weighed all of this against USCIS’s argument that was “almost exclusively” dependent on the word “repeal”: the agency believes that to repeal the original language of the 1992 appropriations act is to imply the deauthorization of all regional centers.

But the judge does not share the government’s reasoning here. He believes the government was simply moving the statutory language from the 1992 appropriations bill which first created the program, and moving it to the “more stable” text of 8 U.S.C. § 1153. 

If Congress wanted reauthorization it could have said so

“If Congress had intended to take the seemingly dramatic step of cutting off revenue for hundreds of longstanding regional centers,” the judge declares, “it could have done so far more transparently. It could have said something like: ‘All regional centers are deauthorized and must petition the agency for new approval pursuant to the terms of this statute’.” 

The lack of such explicit direction to deauthorize regional centers may be the lynchpin to the summary judgment in this case.

Grassley argument is flimsy

Another argument of USCIS in defending its action points to a statement made by Senator Charles Grassley, one of the Reform and Integrity Acts chief architects: “All regional centers which operated under the lapsed and repealed pilot program will be expected to seek a new regional center designation in compliance with the new requirements and reforms laid out in our bill.” 

USCIS claimed that this statement was made by Grassley on the Senate floor before passage of the legislation; however, “that does not appear to be correct,” observes the judge; he goes on to say that Grassley’s comments “carry little if any interpretive weight.” In fact, the “agency’s heavy reliance on this questionable sliver of legislative history only underscores that the statute itself is ambiguous or silent on the question.”

During ‘sunset’ USCIS regulated regional centers and required fees

Yet another argument in favor of the regional center authorization is that during the “grey zone” of the program expiry — from July 1, 2021, until the act’s enactment on March 15, 2022 — USCIS appeared to still regulate regional centers and require the payment of fees.

This appears to the judge to support the position that “in the agency’s view, existing regional centers therefore retained their authorized status following the sunset date, even though the agency refused to process new visa applications.”

Both the plaintiff and defendant in this lawsuit appear to acknowledge that regional centers remained authorized throughout the program’s sunset period. As such, the judge views the burden of proof to rest with USCIS that the legislation clearly deauthorized regional centers. 

“In short,” says the judge, “the Integrity Act does not clearly answer the question whether Congress meant to strip existing regional centers of their authorization.”

Plaintiff is ‘exceedingly likely, if not certain, to prevail’

While the preliminary order is temporary, the judge states, “Behring is exceedingly likely, if not certain, to prevail on the merits of its claim that the agency’s decision is arbitrary and capricious under the Administrative Procedure Act.”

‘Compelling’ case for irreparable harm

The second criterion required to grant a preliminary injunction is to show irreparable harm would occur in the absence of the requested relief. The plaintiff argues that without being authorized it cannot raise capital or fulfill financing commitments for new projects. In fact, its very existence is threatened by deauthorization. 

The judge believes the plaintiff’s case here to be “compelling” and states, “This is one of those unusual cases where financial harm alone constitutes irreparable harm, because Behring will be unable to recoup its financial losses from the government.”

Balance of equities and hardships/public interest lean in favor of authorization

The case for regional centers to remain authorized entails multiple interests. The public interest in having laws that comply with APA requirements “tilts in favor of granting preliminary relief,” according to the judge. 

“Given Behring’s likelihood of success, the danger of irreparable harm, and the public interest in seeing federal agencies follow the APA, Behring has met the bar for a preliminary injunction.”

Which regional centers will benefit?

Using plain and impartial logic, the judge acknowledges that the appropriate relief in this case cannot merely apply to the plaintiff, a single regional center, but must apply to all of the 600-plus regional centers involved in the EB-5 program.

To do otherwise would be to grant the plaintiff a “windfall” while the rest of the industry suffers idly by. And if relief were limited to only the plaintiff, this would be difficult to reconcile with a section of the APA which states that when an agency’s actions violate the law, the “ordinary result” is the action is “vacated” and not that the “application to the individual petitioners is proscribed.” 

In plain terms, an unlawful agency action must be removed and apply to everyone, not just the plaintiff in lawsuit.

The Reform and Integrity Act still requires regional center compliance 

It must be understood that neither a preliminary injunction nor a summary judgment favoring the plaintiff means the new EB-5 legislation has no authority. The RIA remains binding — and regional centers must still comply with the new requirements and standards regardless of this case.

The judge is careful to be clear about this point: “The agency may do whatever is reasonably necessary to ensure that the existing regional centers comply with the Integrity Act, but those centers must presently be permitted to operate within the regime created by the Act. This includes processing new I‐526 petitions from immigrants investing through previously authorized regional centers.”

How long will the injunction remain in place?

The court case is still pending and the injunction is a temporary measure of relief. The judge outlined two scenarios for how long the injunction would be in effect:

“The preliminary injunction will remain in place until the earlier of: (1) a ruling on summary judgment by this Court; or (2) a reasoned decision by the agency about how regional centers should be treated given the Integrity Act’s ambiguity.”

If USCIS follows APA protocol, could it try to deauthorize regional centers later on?

While a summary judgment that declares all regional centers are authorized will be a victory, it may not be a final act in this drama. The judge acknowledges that the Immigration Service can still deauthorize previously authorized regional centers later on if it follows the proper APA procedures:

“Perhaps, after engaging in a reasoned decision‐making process and considering the competing policy factors, the agency could conclude that Behring and the other previously authorized regional centers can no longer operate until they have successfully reapplied by submitting new I-956 petitions.”

Could USCIS use a ‘reasoned decision-making process’ to deauthorize regional centers? 

What exactly is the proper protocol that complies with the APA that USCIS could use to legitimately shut down regional center operations and when could this potentially happen? And could such an action be challenged and stopped?

Lawyer Paul Hughes, representing industry association IIUSA in the matter, responded to these questions in an IIUSA webinar on the preliminary injunction. Hughes explained that “reasoned decision-making” most often requires a notice and comment period. The government, he speculated, could argue otherwise, but he was confident in the belief that if USCIS wanted to proceed with trying to deauthorize regional centers, it would do so with a notice and comment period.

And such a process doesn’t happen quickly. “That is not something that they could just snap their fingers and do. Either they have to go through the notice process, give [the opportunity for] comments, respond to those comments. That is usually a year, and often is a multi-year process.”

Alternatively, if USCIS issued a new regulation pursuant to the “good cause” exception to notice and comment rule-making, Hughes contends that decision would be very susceptible to being struck down as an unlawful use of the good cause exception; he referenced several similar cases where the government lost each time. 

These legal precedents makes Hughes believe USCIS would be very reluctant to try this route, and if they did his team would have a “very strong legal argument” against it. It may be worthwhile to remember that when a federal judge ruled that USCIS’s authority to implement the 2019 regulations was invalid, the agency did not pursue an appeal and ultimately accepted the decision.

USCIS options: keep the program going with or without a filed I-956 application

The judge listed two other possible routes the Immigration Service may choose: One option is for USCIS is to allow regional centers to operate as authorized while remaining compliant with the Reform and Integrity Act, but also reapplying with a Form I-956.

Another option is to allow regional centers to operate without having to reapply with a Form I-956 so long as compliance with the new legislation is maintained.

We believe the Immigration Service will likely not appeal the summary judgment but will require operating regional centers to file Form I-956 to explain their RIA-compliance strategy.

‘The order’s content has been misrepresented’

Regional centers and EB-5 stakeholders are celebrating this temporary injunction, but some have promoted the false narrative that this court case means the integrity measures of the RIA do not have to be followed. 

Be clear about this point: Compliance with the new legislation is mandatory regardless the outcome of this lawsuit.

“The order’s content has been misrepresented in the PR I’ve seen about it so far, so caution is needed,” says EB-5 business plan writer and industry pundit Suzanne Lazicki.

She reminds us that while many firms are “urging potential immigrants to invest with them immediately and file an I-526 right away” such projects may not ultimately comply with the new legislation. 

Lazicki asks this rhetorical question: “But who cares about that risk, if the investors’ money can be banked today, and deployed regardless of USCIS decisions?”

Veteran immigration lawyer and former USCIS Acting Director Robert Divine offers this advice to investors: “Demand to see proof the regional center filed form I-956, and better yet demand to see evidence that the new commercial enterprise has set up a controlled ‘separate account’ at a U.S. bank and its agreement with the fund administrator who must approve any release from such account.”

EB-5 has returned. And the EB-5 business, as per usual, carries the element of risk. Protect yourself.

Read the Suzanne Lazicki blog "Behring injunction shifts compliance risks"

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