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Herguan University v. Immigration and Customs Enforcement

United States District Court, N.D. California, San Jose Division

June 28, 2017



          LUCY H. KOH United States District Judge.

         Plaintiff Herguan University (“Plaintiff) brings the instant suit against Defendants Immigration and Customs Enforcement (“ICE”) and Student and Exchange Visitor Program (the “Exchange Program” or “SEVP”) (collectively, “Defendants”). Before the Court is Defendants' Motion to Dismiss. ECF No. 39 (“Mot.”). Having considered the parties' briefing, the relevant law, and the record in this case, the Court GRANTS Defendants' Motion to Dismiss with prejudice.

         I. BACKGROUND

         This case involves an Administrative Procedure Act (“APA”) challenge to the Exchange Program's decision to withdraw Plaintiffs certification to enroll foreign nonimmigrant students. The APA claim specifically challenges the Exchange Program's Appeals Team's (“Appeals Team's”) September 1, 2016 decision to affirm the Exchange Program's withdrawal of certification. ECF No. 1-1 (“Appeals Team Decision”). Plaintiff also seeks a declaratory judgment that the Exchange Program's decision was wrong. Finally, Plaintiff asserts that Defendants committed an equal protection violation. The facts set forth below are found in the administrative record, Plaintiff's complaint, and documents from related federal cases.

         A. Statutory Background and Plaintiff's Certification to Enroll Foreign Students

         Plaintiff is a private university that enrolls foreign nonimmigrant students on student visas. ECF No. 38, First Amended Complaint (“FAC”) ¶ 23. In order to enroll foreign nonimmigrant students, a university must be certified to do so by the Exchange Program. 8 C.F.R. § 214.3(a). To obtain certification, a university must apply by submitting Form I-17 to the Exchange Program, which is entitled “Petition for Approval of School for Attendance by Nonimmigrant Students.” Id. The Exchange Program will certify a school to enroll foreign nonimmigrant students if the school shows that it is a “bona fide school, ” it “possesses the necessary facilities, personnel, and finances to conduct instruction in recognized courses, ” and “is, in fact, engaged in instruction in those courses.” Id. § 214.3(a)(3)(i). The certification is provided for a school's particular degree program, not necessarily for every course and degree program at a school. Id.

         As part of the I-17 application, the university assigns a person to be the Principal Designated School Official (“Principal Designated Official”), who serves as the main point of contact with the Exchange Program and carries out responsibilities related to the Exchange Program. Id. The school can also appoint other Designated School Officials (“Designated Officials”) to carry out other Exchange Program related activities. The Designated Officials have access to, and maintain records in, the Student and Exchange Visitor Information System (“SEVIS”). Designated Official access to SEVIS is necessary to continue admitting foreign nonimmigrant students and to ensure that students maintain their visa status. Designated Officials are in charge of issuing Form I-20, the form students need to obtain or update their F-1 or M-1 student visas.

         A school that has obtained certification to issue Form I-20 can lose that certification in a number of ways. First, a university must apply for recertification every two years and that recertification can be denied for a number of reasons set forth in 8 C.F.R. § 214.4(a)(2). Second, if the Exchange Program obtains information that a school is no longer eligible for certification because of one of the reasons set forth in § 214.4(a)(2), the Exchange Program may initiate an “out-of-cycle” review. To withdraw certification after such an out-of-cycle review, the Exchange Program must first provide the school a Notice of Intent to Withdraw Certification at least 30 days before withdrawal and an opportunity to challenge the bases for withdrawal. Id. § 214.4(b). The Exchange Program may then withdraw the school's certification. Id.

         On February 14, 2008, the Exchange Program certified Plaintiff to issue Form I-20 for F-1 visas for foreign nonimmigrant students for a degree program in Chinese Medicine. FAC ¶ 4. Plaintiff's owner and president is named Ying Wang. Appeals Team Decision at 2. Ying Wang appointed his son, Jerry Wang, to serve as the Principal Designated Official. FAC ¶ 8. Jerry Wang was also the Chief Executive Officer (“CEO”) of Plaintiff. Id. No other Designated Official was appointed. Id.

         B. Exchange Program Investigation, Jerry Wang's Criminal Charges, and Other Events in 2010-2012

         On November 17, 2010, the Exchange Program conducted a site visit and began an investigation as to whether Plaintiff was complying with Exchange Program regulations. Id. ¶ 5.[1]The Exchange Program made multiple requests for evidence to Plaintiff over the following year as part of its investigation. Id. ¶ 6-8.

         On July 24, 2012, a federal grand jury returned an indictment against Jerry Wang, Plaintiff's Principal Designated Official, for (1) conspiracy to commit visa fraud in violation of 18 U.S.C. § 371, (2) four counts of visa fraud in violation of 18 U.S.C. § 1546, (3) unauthorized access to a government computer in violation of 18 U.S.C. § 1030, (4) seven counts of use of a false document in violation of 18 U.S.C. § 1001, and (5) two counts of aggravated identity theft in violation of 18 U.S.C. § 1028A. See United States v. Wang, N.D. Cal. Case No. 12-CR-00581-EJD (“Criminal Case”) ECF No. 1.

         On August 2, 2012, the Exchange Program issued Plaintiff a Notice of Intent to Withdraw Certification (“2012 Notice”). FAC ¶ 8. On the same day, Jerry Wang was removed as the Principal Designated Official, his access to the SEVIS system was revoked, and he was arrested on the above-mentioned criminal charges. Id; see also Criminal Case ECF No. 3 (initial appearance on August 2, 2012).

         On August 20, 2012, Jerry Wang and Plaintiff filed an ex parte application for a temporary restraining order (“TRO”). See Herguan Univ. v. Immigration & Customs Enf't, N.D. Cal. Case No. 12-CV-04364-EJD (“Herguan I ”) ECF No.1. The application for a TRO sought to reinstate access to SEVIS “until the criminal proceedings [against Jerry Wang] ha[d] been completed.” Id. ECF No. 9 (“Order Denying Herguan I TRO”) at 2. The Herguan I court denied Jerry Wang and Plaintiffs application for a TRO because Jerry Wang and Plaintiff had failed to file a complaint with their application for a TRO. Id. The failure to file a complaint with an application for a TRO violated the Civil Local Rules and also precluded a finding of subject matter jurisdiction because there were no asserted claims or an amount in controversy that satisfied the requirements of federal question or diversity jurisdiction. Id.

         On August 22, 2012, Jerry Wang and Plaintiff filed a second ex parte application for a TRO. Herguan Univ v. Immigration & Customs Enf't, N.D. Cal. Case No. 12-CV-4403-PSG (“Herguan II ”) ECF No. 1. The same day, Magistrate Judge Paul Grewal denied the application for a TRO because “Plaintiffs have not established that they are likely to succeed on the claim that Defendants have violated rights redressible under the Administrative Procedure Act by terminating Wang's SEVIS ID and password prior to withdrawal of the University's I-17 certification.” Id. ECF No. 8 (“Order Denying Herguan II TRO”).

         The FAC alleges that on September 18, 2012, the Exchange Program withdrew Plaintiffs certification, but that the Exchange Program “rescinded its withdrawal” in October 2012. FAC ¶¶ 9-10.

         C. Exchange Program Withdrawal of Certification, Plaintiff s Appeal, and Jerry Wang's Change of Plea

         For the next two-and-a-half years, the Exchange Program allowed Plaintiff to continue issuing I-20 forms for F-1 nonimmigrant student visas for its Chinese Medicine degree program, but did not allow Plaintiff to add any new programs for which student visas could be issued. Id. ¶ 11. The Appeals Team indicates that the delay occurred because of the criminal proceedings pending against Jerry Wang. Appeals Team Decision at 4 (“Due to the potential complications arising from the overlapping issues in the criminal and civil cases, [the Exchange Program] allowed the criminal case to proceed first while continuing to monitor the school and permitting it to operate.”). On March 31, 2015, the Exchange Program withdrew Plaintiffs certification based on the factual bases described in the 2012 Notice. Id. ¶ 12.

         On April 9, 2015, Jerry Wang agreed “to plead guilty to Count Twelve of the captioned Superseding Indictment charging [him] with using a false document, in violation of 18 U.S.C. § 1001(a)(3).” Criminal Case ECF No. 168 (“Plea Agmt.”) ¶ 1. Jerry Wang's plea agreement provided the following factual basis:

I agree that I am guilty of the offense to which I am pleading guilty, and I agree that the following facts are true: On or about December 16, 2010, I was the Chief Executive Officer and sole Designated School Official for Herguan University, located in Sunnyvale, California. On this date, I knowingly made and used a false document, specifically an Academic Warning Letter for Herguan University, knowing that it contained a materially false, fictitious, or fraudulent statement, in a matter within the jurisdiction of the U.S. Department of Homeland Security, part of the executive branch of the United States, by providing it to DHS's Student and Exchange Visitor Program ([the Exchange Program]).
I agree that I also participated in a scheme to commit visa fraud, which involved more than one hundred immigration-related documents known as Forms I-20. I further agree that I knowingly and intentionally assisted Herguan employees in accessing, without government authorization, [the Exchange Program's] nonpublic computer database known as the Student and Exchange Visitor Information System (SEVIS). I agree that this computer was used nonexclusively by or for the United States Government, but that the unauthorized access that I facilitated affected that computer's use by or for the United States Government.

Plea Agmt. ¶ 2; see also Appeals Team Decision (relying on Plea Agreement).

         The “Academic Warning Letter” referred to in Jerry Wang's plea agreement was a letter sent to students after the Exchange Program began to initiate its investigations. Appeals Team Decision at 3. Plaintiff had been allowing students to take classes online without sufficient in-person classes under Exchange Program regulations. Id. When the Exchange Program informed Plaintiff of the issue, Jerry Wang drafted the Academic Warning Letter, which stated that students would be required to attend in-person classes at the end of the school year. Id. Jerry Wang sent the letter to Exchange Program officials, but never sent it to students, and never held the promised classes. Id. Plaintiff's plea agreement confirms that the Academic Warning Letter was fraudulent.

         On April 15, 2015, Plaintiff appealed the March 31, 2015 withdrawal of its certification. FAC ¶ 14. On July 7, 2015, the Appeals Team remanded the withdrawal of certification to the Exchange Program because the withdrawal occurred before Jerry Wang's guilty plea, which the Appeals Team held was “previously unavailable and relevant information” that should be considered by the Exchange Program. ECF No. 1-2.[2]

         D. Final Withdrawal of Certification and Appeal

         On November 9, 2015, following remand, the Exchange Program issued another Notice of Intent to Withdraw Certification (“2015 Notice”). ECF No. 1-4 at 1. On June 13, 2016, the Exchange Program withdrew Plaintiff's certification. Id. (“June 13, 2015 Withdrawal of Certification”); FAC ¶ 16. The withdrawal of certification provided the following reason for withdrawing Plaintiff's certification:

The felony violation of Jerry Wang, who was both the [Principal Designated Officer] and CEO for Herguan University, as well as the son of the school's owners, and his admissions in the plea agreement that he participated in a scheme to commit visa fraud, demonstrate a failure by Herguan University to comply with federal regulations governing [Exchange Program] certification.
. . . .
The Exchange Program also finds Herguan University facilitated the unauthorized access of SEVIS-a nonpublic official governmental database. Jerry Wang admitted to knowingly and intentionally assisting unauthorized Herguan University employees in accessing SEVIS. . . . Allowing unapproved school officials to access SEVIS is a violation of [Exchange Program] regulations. Schools found to violate these regulations are subject to withdrawal pursuant to 8 CFR 214.4(a)(2)(viii) and (ix).
. . . .
Though the school insists Wang acted alone, the lack of institutional control to prevent his criminal acts as well as his admission that he was a “participant in a scheme” renders the school culpable if not for his criminal acts then an institutional failure to comply with the regulations. As such, [the Exchange Program] finds the school is subject to withdrawal pursuant to 8 CFR 214.4(a)(2)(vi), (viii) and (xi).

June 13, 2015 Withdrawal of Certification at 3-5.

         On September 1, 2016, the Appeals Team affirmed the Exchange Program's withdrawal of certification (hereafter, “Appeals Team Decision”). See Appeals Team Decision. The Appeals Team relied on 8 C.F.R. § 214.4(a)(2)(vi), which provides that certification will be withdrawn “for any valid and substantive reason including, but not limited to . . . (vi) conduct on the part of a [Designated Official] that does not comply with the regulations.” Id. at 5. The Appeals Team determined that the Exchange Program had correctly withdrawn Plaintiffs certification because Jerry Wang's actions as Plaintiffs Principal Designated Official “clearly constitute ‘valid and substantive' reasons for withdrawing the school's [Exchange Program] certification.” Id.

         Specifically, the Appeals Team pointed to the fact that the Principal Designated Official is “the point of contact on any issues related to the school's compliance with the regulations.” Id. at 5 (quoting 8 C.F.R. § 214.3(1)(1)(ii)). Moreover, the Designated officials “may not delegate th[eir] designation to any other person.” Id. (citing 8 C.F.R. § 214.3(1)(1)). The Appeals Team relied on Jerry Wang's plea agreement and found that the regulations had been violated for the following reasons:

The evidence of record shows that Jerry Wang did not commit an isolated, insignificant, or unknowing violation of his responsibilities but, instead, flouted his obligations by admitting to participating in a scheme to commit visa fraud involving “more than one hundred immigration-related documents known as Forms I-20” and “knowingly and intentionally assisting Herguan employees in accessing . . . SEVIS” and that the “unauthorized access that I facilitated affected the computer's use by or for the United States.” Further, Jerry Wang admitted to “knowing[ly] mak[ing] and us[ing] a false document, specifically the Academic Warning Letter for Herguan University, knowing that it contained a materially false, fictitious, or fraudulent statement” and that “the statement was material to the activities or decision of the agency or department[.]

Id. (quoting Plea Agmt. ¶¶ 1-2).

         Plaintiff argued before the Appeals Team that the withdrawal of certification was barred by “laches and estoppel” because Jerry Wang's conduct occurred in 2010 and 2011, approximately 5 years before the withdrawal of certification. Id. at 6. However, the Appeals Team “reject[ed] Herguan's contention, ” and held that “[a]s in the context of recertification, ‘assessment by [the Exchange Program] of a school . . . will focus primarily on overall school compliance, but may also include examination of individual [Designated Official] compliance as data and circumstances warrant. Past performance of these individuals, whether or not they continue to serve as principal designated school officials . . . will be considered.'” Id. Moreover, the Appeals Team noted that “while this case has taken a long time to effectuate [the Exchange Program's congressionally mandated duty to monitor a school's compliance] because of related issues and litigations, [the Exchange Program] cannot permit such flagrant violations of the regulations without shirking its own duties.” Id.

         D. Herguan III Suit and Initial Stages of the Instant Suit, Herguan IV

         On June 27, 2016, before the Appeals Team Decision on September 1, 2016, Plaintiff filed a Bivens action for violation of the First, Fourth, and Fifth Amendments against Jason Kanno and Susanna Warner, the Exchange Program employees who were in charge of Plaintiff's case. See Herguan Univ. v. Kanno (“Herguan III”), N.D. Cal. Case No. 16-CV-3619-LHK ECF No. 1. In Herguan III, the Plaintiff alleged that Kanno and Warner attempted to conspire with accrediting agencies to revoke its accreditation in an attempt to force the Plaintiff to cease operations. Id. Plaintiff also alleged that Kanno and Warner had a “racist agenda to shut down Asian owned and operated [Exchange Program] certified universities such as Herguan.” Id. Herguan III was assigned to the undersigned judge. Id. ECF No. 12. On November 22, 2016, after filing the instant suit, Plaintiff voluntarily dismissed Herguan III. Id. ECF No. 22.

         On November 16, 2016, Plaintiff filed the instant suit against ICE and the Exchange Program. ECF No. 1 (“Compl.”) (“Herguan IV). In the original complaint, Plaintiff alleged four causes of action: (1) judicial review of the Appeals Team Decision pursuant to the Administrative Procedure Act, 5 U.S.C. §§ 551-59; (2) declaratory judgment that Defendants' actions were unlawful, that Plaintiffs certification should be reinstated, and that Defendants should approve the addition of new courses and degree programs for which I-20 forms for F-1 nonimmigrant student visas may be issued; (3) writ of mandamus requiring Defendants to allow Plaintiff to add new courses and degree programs; and (4) violation of equal protection on the same bases described in Herguan III. Compl. ¶¶ 26-39.

         On November 17, 2016, Plaintiff filed an ex parte application for a TRO in the instant suit. ECF No. 7. On November 18, 2016, the instant suit was assigned to District Judge Beth Freeman. ECF No. 10. The ex parte application for a TRO sought to enjoin ICE and the Exchange Program from putting into effect the withdrawal of certification and revocation of access to SEVIS. Id. at 3. On November 22, 2016, Judge Freeman held a hearing and denied on the record Plaintiffs ex parte application for a TRO. ECF No. 15. Judge Freeman issued a written order on December 2, 2016, and held that Plaintiff had failed to show a likelihood of success on the merits. ECF No. 17 (“TRO Order”). Specifically, at the hearing, Judge Freeman stated: “Frankly, I would dismiss this complaint for failure to state a claim because it's so poorly drafted.” ECF No. 27 at 8.

         On December 2, 2016, Judge Freeman sua sponte referred the instant case, Herguan IV, to the undersigned judge to determine whether it is related to Herguan III. ECF No. 18. On December 12, 2016, ...

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