Mirror Lake Vill. v. Nielson
345 F. Supp. 3d 56
| D.C. Cir. | 2018Background
- Seven EB-5 investors each contributed $500,000 to Mirror Lake and received equity interests (0.5%–3%); each agreement included a put option allowing the company to repurchase the investor's interest at purchase price, exercisable after the "At Risk Period" provided the company had "Available Cash Flow."
- Plaintiffs filed I-526 petitions in 2014; USCIS issued NOIDs in 2015 and denied all petitions in Feb. 2016; motions to reopen/reconsider were largely denied.
- USCIS concluded the investments were not "at risk" under 8 C.F.R. § 204.6 because the put option operated as a redemption agreement that insulated capital from risk.
- Plaintiffs argued Matter of Izummi was wrongly applied and that their put option was sufficiently conditional (contingent on available cash flow) so the capital remained at risk; they urged consideration of debt-vs-equity factors.
- The Court applied Auer deference to USCIS’s interpretation in Matter of Izummi, found the regulation ambiguous, and concluded USCIS’s denial was not arbitrary and capricious given the structure of the put option.
- The Court granted summary judgment to defendants for six fully adjudicated plaintiffs and ordered plaintiffs to show cause why the remaining plaintiff’s claim should not be dismissed without prejudice.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Validity/deference to Matter of Izummi interpretation of 8 C.F.R. § 204.6 | Izummi unlawfully requires investments be "indefinite" and conflicts with statute/regulations | Izummi fills a regulatory gap and is an agency interpretation entitled to deference under Auer | Court applied Auer deference and upheld Izummi as a reasonable agency interpretation |
| Whether USCIS acted arbitrarily/capriciously in denying I-526s | USCIS failed to analyze debt/equity factors and ignored that put option is contingent on available cash flow, so capital remained at risk | USCIS rationally focused on the put option’s redemption character; record supports conclusion that investors had an assured exit | Court found USCIS considered relevant arguments and evidence and its decision was not arbitrary and capricious |
| Whether Matter of Izummi was misapplied or overbroad by USCIS here | Plaintiffs: USCIS expanded Izummi beyond its proper scope (e.g., omitted Izummi’s promissory-note language) | Government: omission is immaterial; plaintiffs do not allege facts showing payment-completion timing invoked Izummi’s narrower phrasing | Court rejected plaintiff’s claim of misapplication; no reversible error shown |
| Procedural ripeness / claim of unadjudicated petitioner (Zhichun Li) | Plaintiffs included a petitioner whose motion to reopen was pending at filing | Defendants note non-final agency action is premature for judicial review | Court ordered plaintiffs to show cause why Zhichun Li’s claim should not be dismissed without prejudice |
Key Cases Cited
- Am. Bioscience, Inc. v. Thompson, 269 F.3d 1077 (D.C. Cir.) (standard for district court review under APA when acting as an appellate tribunal)
- Motor Vehicle Manufacturers Association v. State Farm Mutual Automobile Insurance Co., 463 U.S. 29 (U.S.) (arbitrary and capricious standard requires rational connection between facts and agency action)
- Auer v. Robbins, 519 U.S. 452 (U.S.) (deference to agency interpretation of its own regulations)
- Mellow Partners v. Commissioner, 890 F.3d 1070 (D.C. Cir.) (articulation of Auer factors)
- Chiayu Chang v. USCIS, 289 F. Supp. 3d 177 (D.D.C.) (prior D.D.C. decisions on agency review of I-526 denials)
- Doe v. USCIS, 239 F. Supp. 3d 297 (D.D.C.) (distinguishing call-option cases where agency denial was arbitrary)