Chiayu Chang v. U.S. Citizenship & Immigration Servs.
289 F. Supp. 3d 177
| D.C. Cir. | 2018Background
- Plaintiffs are EB-5 investors who invested in Lucky's Farmers Market LP as limited partners; the General Partner (LFM Stores, LLC) retained exclusive management and discretion over distributions.
- The partnership agreement (LPA) limited limited-partner distributions to at most 1% annually and contained a sell restriction (§3.3) and a partnership-held call/buy option (§3.4) allowing the general partner to redeem limited partners either before the loan closed or after final adjudication of I-829.
- Plaintiffs filed Form I-526 petitions (Dec 2013–Sep 2014). USCIS issued RFEs, plaintiffs responded, but USCIS then issued NOIDs and ultimately denied the petitions (Apr–Jun 2016), citing the LPA call option as a prohibited "debt arrangement."
- USCIS relied on Matter of Izummi and the regulatory exclusion of "contribution of capital in exchange for ... any other debt arrangement" to characterize the call option as debt-like and conclude plaintiffs' capital was not "at risk."
- Plaintiffs sued under the APA and related grounds; the central dispute is whether USCIS's denial was arbitrary and capricious. The court grants summary judgment to plaintiffs on that claim and remands for reconsideration rather than ordering approval.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the partnership-held call (buy) option renders the investment a prohibited "debt arrangement" so capital is not "at risk" | Call option is not a guaranteed repayment or right of the investor; it vests the partnership with a buy right and thus does not make the investment debt-like | The call option functions like debt because it yields a fixed redemption and caps returns; Matter of Izummi permits scrutiny of substance over form to catch such debt-like features | Court: USCIS's characterization is arbitrary and capricious; call option here differs materially from the sell-option/debt arrangements in Izummi and does not show investors had a contractual right to repay |
| Proper interpretation of 8 C.F.R. §204.6(e) catch-all "any other debt arrangement" | The catch-all should be read ejusdem generis with listed items (notes, bonds, obligations) and does not cover company-held buy options where investor has no right to demand repayment | The catch-all allows case-by-case analysis to exclude equity investments with debt features, including buy options that effectively guarantee repayment | Court: ejusdem generis and record evidence limit the catch-all; USCIS overstretched the regulation to proscribe the buy option at issue |
| Deference to agency/precedential adjudication (Matter of Izummi) | Even if Izummi receives deference, it is consistent with the narrower textual reading and does not support treating buy options as per se prohibited | USCIS: Izummi and agency expertise warrant deference and support denial | Court: Auer and Izummi do not save USCIS here—agency interpretation cannot be stretched beyond the record and text; court retains final interpretive role |
| Remedy after finding APA violation | Plaintiffs: court should order approval of I-526 petitions | Defs: case should be remanded to USCIS for reconsideration | Court: remand to USCIS for further consideration (remedy appropriate absent rare circumstances for direct grant) |
Key Cases Cited
- Motor Vehicle Mfrs. Ass'n v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29 (standard that agency must supply rational connection between facts and decision)
- Auer v. Robbins, 519 U.S. 452 (deference to agency interpretation of its own regulations)
- Christopher v. SmithKline Beecham Corp., 567 U.S. 142 (use of ejusdem generis to interpret catchall language)
- Dist. Hosp. Partners, L.P. v. Burwell, 786 F.3d 46 (agency explanations cannot run counter to the evidence)
- Doe v. U.S. Citizenship & Immigration Servs., 239 F. Supp. 3d 293 (D.D.C. 2017) (similar EB-5 call-option denial held arbitrary and capricious)