344 F. Supp. 3d 32
D.C. Cir.2018Background
- Plaintiffs are EB-5 visa investors whose Form I-526 petitions were denied by USCIS after the agency treated cash obtained from third‑party loans as "indebtedness" rather than as "cash" under 8 C.F.R. § 204.6(e).
- USCIS' 2015 IPO Remarks instructed adjudicators that loan proceeds qualify only if the petitioner is personally and primarily liable and the loan is secured by assets owned by the petitioner (the "collateralization" test).
- Two named plaintiffs (Zhang and Hagiwara) invested $500,000 each via loans from entities they largely owned; USCIS denied their petitions for failure to show personal collateral for the indebtedness.
- Plaintiffs sued under the APA and INA, arguing USCIS misinterpreted its regulation, unlawfully promulgated a de facto rule without notice and comment, and applied the interpretation retroactively; they moved for summary judgment and class certification.
- The Court held USCIS' interpretation was "plainly erroneous" (contravening the regulation's plain meaning), concluded the IPO Remarks effected a legislative rule without notice-and-comment (APA violation), vacated the denials, and remanded for reconsideration; it certified a modified nationwide class of similarly situated petitioners.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether loan proceeds invested as cash count as "cash" or as "indebtedness" under 8 C.F.R. § 204.6(e) | Loan proceeds are ordinary "cash" when contributed to the enterprise; the regulation lists cash separately and requires only lawful source | USCIS contends longstanding interpretation treats third‑party loan proceeds as indebtedness that must be personally collateralized to ensure capital is truly "at risk" | Court: Regulation unambiguous; ordinary meaning of "cash" covers loan proceeds; USCIS interpretation is plainly erroneous and not entitled to Auer deference |
| Whether USCIS' 2015 IPO Remarks constituted a legislative (notice‑and‑comment) rule | Remarks changed agency practice and added a collateralization requirement, so they are substantive and required notice-and-comment | USCIS says the Remarks merely clarified longstanding policy and are interpretive guidance exempt from § 553 | Court: The Remarks effectively amended the rule, created binding directives to adjudicators, and are legislative; APA notice-and-comment was required and not followed |
| Whether plaintiffs' APA claim is time‑barred | Challenge targets the 2015 interpretation (timely filed within six years of announcement) | USCIS argued challenges to the underlying 1991 regulation would be time‑barred, but did not prevail on timeliness of challenge to 2015 action | Court: Claim timely as it challenges the 2015 interpretation, not the 1991 rule |
| Appropriate remedy (approval vs. remand) | Plaintiffs sought petition approvals | USCIS opposed; agency expertise and further fact evaluation warranted | Court: Vacated denials and remanded for reconsideration consistent with the opinion (no outright approvals) |
Key Cases Cited
- Auer v. Robbins, 519 U.S. 452 (1997) (deference to agency interpretations of its own ambiguous regulations unless plainly erroneous)
- Christensen v. Harris County, 529 U.S. 576 (2000) (Auer deference only where regulation is genuinely ambiguous)
- Thomas Jefferson Univ. v. Shalala, 512 U.S. 504 (1994) (substantial deference to agency interpretations of its own regulations when ambiguous)
- Motor Vehicle Mfrs. Ass'n v. State Farm, 463 U.S. 29 (1983) (arbitrary and capricious standard for agency actions)
- Wal‑Mart Stores, Inc. v. Dukes, 564 U.S. 338 (2011) (Rule 23 commonality requirement)
- Am. Mining Cong. v. Mine Safety & Health Admin., 995 F.2d 1106 (D.C. Cir. 1993) (multi‑factor test to determine whether agency action is legislative or interpretive)