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Carlsson v. United States Citizenship and Immigration Services

United States District Court, C.D. California

March 23, 2015


Ira Kurzban, Attorneys Present for Plaintiffs:

Sarah Maloney, Attorneys Present for Defendants:


CHRISTINA A. SNYDER, District Judge.


On September 13, 2012, plaintiffs Courtney Carlsson, et al., filed the instant complaint for declaratory and injunctive relief against defendants United States Citizenship and Immigration Services ("USCIS"); Janet Napolitano, Secretary of the U.S. Department of Homeland Security; Alejandro Mayorkas, Director of USCIS; and Rosemary Melville, Director of USCIS California Service Center. Dkt. No. 1. Plaintiffs are a group of immigrant investors who were denied conditional residency in the United States after USCIS denied or revoked their petitions to gain immigration status as alien entrepreneurs. On February 12, 2014, plaintiffs filed the operative First Amended Complaint ("FAC"). Dkt. No. 27.

On January 25, 2015, defendants filed a motion for an order affirming the agency's decisions, noticed for hearing on April 20, 2015. Dkt. No. 34. On February 23, 2015, plaintiffs filed a motion to hold in abeyance defendants' motion pursuant to Federal Rule of Civil Procedure 56(d), pending further discovery. Dkt. No. 38. Defendants filed an opposition on March 2, 2015, and plaintiffs replied on March 9, 2015. Dkt. Nos. 44, 46. On March 23, 2015, the Court held a hearing on the motion, at which counsel for the parties appeared and argued. After considering the parties' arguments, the Court finds and concludes as follows.


A. EB-5 Visas and the Immigrant Investor Pilot Program

Under the Immigration and Nationality Act of 1990 ("INA"), codified at 8 U.S.C. § 1153(b)(5), certain immigrant investors are eligible to obtain "EB-5 visas" and eventually, lawful permanent resident status.[1] See Chang v. United States, 327 F.3d 911, 916 (9th Cir. 2003). Immigrants are eligible if they (1) have invested or are in the process of investing a specified amount of capital in commercial enterprises, and (2) can demonstrate that the investment will create ten or more jobs for United States workers. In "targeted employment areas, " like the one at issue in this case, a minimum investment of $500, 000 is required. 8 U.S.C. § 1153(b)(5)(B)(ii), (b)(C)(ii); 8 C.F.R. § 204.6(f)(2). The burden of proof is on the petitioner. 8 U.S.C. § 1361; 8 C.F.R. § 204.6(m)(7).

Under amendments establishing the EB-5 program, immigrant investors may pool their capital in "regional centers, " or "any economic unit... which is involved in the promotion of economic growth, including... improved regional productivity, job creation, and increased domestic capital investment." 8 C.F.R. § 204.6(e); see id. § 204.6(m) (discussing the "Immigrant Investor Pilot Program" ["Pilot Program"]). Only regional centers that have been approved by USCIS are eligible to participate in the program.[2] 8 C.F.R. § 204.6(m)(4). The requirement that each participant investor directly create ten or more jobs is relaxed under 8 C.F.R. § 204.6(m)(7)(ii), which allows an immigrant investor to prove they have "indirectly" created jobs through "reasonable methodologies." Other than the acceptance of indirect job creation, described above, the Pilot Program "does not relieve individuals seeking to immigrate to this country as alien entrepreneurs from any of the other requirements of section 203(b)(5) of the [Immigration and Nationality] Act or 8 C.F.R. § 204.6." 58 Fed. Reg. 44, 607.

To participate in the EB-5 program, prospective immigrant investors must file I-526 petitions based upon their investment and business plans, which upon approval, grant immigrant investors the right to enter the country as conditional legal permanent residents. Chang, 327 F.3d at 916; 8 C.F.R. § 204.6(a). Under the Pilot Program, the petition must prove that the alien has invested or "is actively in the process of investing" the required amount of capital within an approved regional center, and that this capital has been placed "at risk" by the investment. 8 C.F.R. § 204.6(j)(4)(2), (3). The petition must also show "that the investment will create full-time positions for not fewer than 10 persons either directly or indirectly." Id . § 204.6(j)(4)(iii). If USCIS approves the petition, the alien entrepreneur and their spouse and children, if under the age of 21 at the time the I-526 petition was filed, are eligible for conditional legal permanent resident status. 8 U.S.C. § 1186b(a)(1); see id. § 1153(h)(1). USCIS may not revoke the I-526 approval except for "good and sufficient cause, " after providing notice to the petitioner. 8 U.S.C. § 1155; 8 C.F.R. § 205.2(c).

Thereafter, the alien entrepreneur must file USCIS Form I-829 in order to remove the "conditional" nature of his or her lawful permanent resident status. 8 U.S.C. § 1186b(c); 8 C.F.R. § 216.6(a). The I-829 approval procedure is "intended to confirm that the petitioner fulfilled the plan set out in the I-526 petition." Chang, 327 F.3d at 927. The petition must demonstrate that the alien: (1) "invested, or is actively in the process of investing" the required amount of capital; (2) "sustained" the investment throughout the conditional period; and (3) is otherwise "conforming to the requirements" set forth in § 1154(b)(5), including that of job creation. 8 U.S.C. § 1186b(d)(1); 8 C.F.R. § 216.6(a)(4). If the petition is denied, the alien's resident status is terminated as of the date of that determination

B. The Administrative Proceedings Underlying This Case

On December 15, 2008, American Life Development Company ("ALDC") submitted a proposal for regional center designation. FAC ¶ 39. According to plaintiffs, the proposal noted that in many cases, developers working through the regional center would develop a property in anticipation of future tenants; in such cases, the direct job creation impacts of the future tenants would be estimated based on generic building design specifications from the National Institute of Building Sciences, and those direct job creation estimates would become inputs in a model known as "Impact Analysis for Planning" ("IMPLAN"), a method for estimating indirect job creation impacts. Id . On June 23, 2009, USCIS approved ALDC's regional center proposal under the Pilot Program. Id . ¶ 40. On October 12, 2010, USCIS approved an amended designation for ALDC, altering the scope of targeted investment industries to include "Light Industry/Warehouse" development, and expanding its geographic scope to include all of Riverside County, California. Id . ¶ 42. The amendment application also noted that the regional center would sponsor development projects for which the tenants would not initially be known, and that future tenants' job-creation impacts would be estimated using IMPLAN. Id . ¶ 43. Plaintiffs allege that both of these approvals stated that an I-526 application based on investment in ALDC "need not show that the new commercial enterprise created ten new jobs indirectly" because that determination for purposes of the I-526 stage was "established by way of USCIS'[s] acceptance of the final economic analysis that is contained as part of the approved Regional Center proposal." Id . ¶¶ 41, 44.

On January 7, 2011, a limited partnership named 14575 Innovation Drive Limited Partnership ("Innovation LP") was established to acquire and develop a parcel of real property in Riverside, California. At the time plaintiffs' I-526 petitions were submitted, the project's sponsor anticipated that this property's then-unknown future tenants would use the two single-story buildings on the property for a mix of office, industrial, or warehouse use. Id . ¶¶ 45, 47. The partnership attracted twenty-three investors and raised $11, 500, 000. Id . ¶ 46. Although plaintiffs anticipated having multiple tenants, they subsequently leased the entire property to a single tenant, who relocated from Los Angeles County, California and used the property for warehouse and office space. Id . ¶¶ 50-53. Plaintiffs maintain that this tenant has "created jobs for 249 workers, " and that the "total number of indirect jobs projected to be created in Riverside County is estimated at 288." Id . ¶ 54. Plaintiffs submitted I-526 petitions based on this project.

During the fourth quarter of 2011, USCIS approved eight of the I-526 petitions filed by Innovation LP investors. Id . ¶ 59. Carlsson's was approved on November 18, 2011. A.R. 2173-79, 2788. In April 2012, however, USCIS began issuing "Notices of Intent to Revoke" the previous approvals, and "Requests for Evidence" for investors whose petitions had not yet been approved. FAC ¶ 59; A.R. 2788-96. Plaintiffs allege that these notices and requests were "virtually identical." FAC ¶ 59. In August 2012, defendants began denying the petitions of investors who had received Requests for Evidence, and revoking petitions they had previously approved. FAC ¶¶ 60, 62. Carlsson's approval was revoked on August 3, 2012. Defendants submit that the approval was revoked because of inconsistencies in submitted documentation and a failure to provide a reasonable and adequately explained methodology for predicting indirect job growth. A.R. 2123-35. Plaintiffs contend that this change of course was based on "numerous incorrect assumptions regarding Plaintiffs' investment and job creation, " and was otherwise improper. See, e.g., FAC ¶¶ 60, 61.

This litigation commenced on September 13, 2012. Pursuant to mediation efforts, defendants reopened the petitions in July 2013 and requested additional evidence, but issued new denials on all plaintiffs' petitions on November 27, 2013. Id . ¶¶ 63-64. Defendants contend that Carlsson (like the other plaintiffs) failed to demonstrate that she "placed the full amount of EB-5 capital at risk" and did not "carr[y] her burden of establishing the requisite job creation" because she "failed to submit... documentation on which to base the commercial enterprise's ability to create 10 positions for qualifying employees within the next two years" or "demonstrate that the enterprise has the potential to meet the job creation requirement through the use of reasonable methodologies to show indirect job creation." Dkt. No. 44 at 3-4 (citing A.R. 2106-19). Plaintiffs contend that these new denials, too, were factually and legally erroneous. FAC ¶¶ 65-70.

The operative FAC advances four claims for relief. Count I asserts that defendants retroactively applied new rules, policies, and criteria in the adjudication of plaintiffs' I-526 applications, specifically departing from the adjudicatory standards regarding job-creation that were in effect at the time plaintiffs invested in the ALDC regional center. Plaintiffs allege that this retroactive application violated standards set forth in Montgomery Ward v. FTC, 691 F.2d 1322 (9th Cir. 1982), Chang v. United States, 327 F.3d 911 (9th Cir. 2003), and Garfias-Rodriguez v. Holder, 702 F.3d 504 (9th Cir. 2012) (en banc). Id . ¶¶ 95-107. Counts II and III claim that the agency decisions should be overturned under the Administrative Procedures Act ("APA") as arbitrary and capricious and exceeding the statutory authority allocated to USCIS. Id . ¶¶ 108-21. Count IV maintains that defendants denied plaintiffs' due process rights by retroactively applying new policies, failing to consider certain evidence, and citing alleged defects in plaintiffs' final denials without affording plaintiffs an opportunity to meaningfully respond. Id . ¶¶ 122-28.

C. Defendants' Motion for an Order Affirming the Agency's Decisions

On January 26, 2015, defendants filed a motion for an order affirming the agency's decisions on plaintiffs' I-526 petitions under the agency review standards of the APA. Dkt. No. 34.[3] Defendants argue that these denials should be affirmed on the basis of three independently sufficient reasons offered in support thereof, because each reason is based on the plain language of the relevant statute or, in the alternative, a permissible interpretation of a statute or agency regulation entitled to deference under Chevron USA, Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984), or Auer v. Robbins, 519 U.S. 452, 461 (1997).

First, defendants contend that the denials are supported by the agency's conclusion that investors may not fulfill the EB-5 visa program's job creation requirements by relocating jobs already in existence elsewhere, and that virtually all of the jobs at issue were relocated from Los Angeles County. Dkt. No. 34 at 10-17. Second, defendants argue that USCIS correctly concluded that independent contractors cannot be used as qualifying employees in calculating indirect job creation. Id. at 17-21. Third, defendants submit that USCIS correctly concluded that only full-time, permanent employment may be used to satisfy the job creation requirement, and that plaintiffs did not provide sufficient evidence to support their claim that independent contractor truck drivers who work seasonally with schedules that fluctuate based on demand should be counted as full-time, permanent employees. Id. at 21-25.


A. The Record for Review of Agency Action ...

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