Zhang v. United States Citizenship and Immigration Services
Civil Action No. 2015-0995
| D.D.C. | Nov 30, 2018Background
- The EB-5 Program permits foreign investors to obtain U.S. immigration benefits by investing qualifying "capital" in a U.S. commercial enterprise and creating at least ten jobs; regulations define "capital" to include "cash" and certain "indebtedness."
- Plaintiffs (individual EB-5 investors) invested required amounts as cash that originated from third‑party loans and submitted Form I-526 petitions; USCIS denied those petitions treating loan proceeds as "indebtedness" that must be personally and primarily collateralized by the investor.
- USCIS published the Immigrant Investor Program Office (IPO) remarks on April 22, 2015, directing adjudicators to deny petitions where loan proceeds were not secured by the petitioner; plaintiffs challenged that interpretation as contrary to 8 C.F.R. § 204.6(e) and violative of the APA.
- The named plaintiffs’ loans were from entities they substantially owned; USCIS denied both petitions on the collateralization theory set forth in the IPO remarks.
- The district court reviewed cross-motions for summary judgment, found USCIS’ interpretation contrary to the regulation and a substantive rule issued without notice-and-comment, vacated the denials and remanded for reconsideration, and certified a class of similarly-situated petitioners (with a limited modification).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether loan proceeds invested as cash qualify as "cash" or must be treated as "indebtedness" under 8 C.F.R. § 204.6(e) | Loan proceeds are ordinary "cash" when transferred to the enterprise; the source of cash does not change its character | Loan-proceed investments are effectively "indebtedness" and thus must meet the regulation's collateralization requirements to show capital at risk | Held for plaintiffs: the regulation unambiguously treats lawfully-obtained cash as capital; USCIS' collateralization test is plainly erroneous |
| Whether USCIS' IPO Remarks and adjudicator instructions amounted to a legislative rule subject to notice-and-comment under the APA | The IPO Remarks created a binding, new requirement (collateralization) and thus are substantive rulemaking requiring notice-and-comment; plaintiffs' challenge is timely | USCIS contends its interpretation clarified longstanding policy and did not create a new rule; also raises a statute-of-limitations defense | Held for plaintiffs: the IPO Remarks effectuated a substantive change (effectively amended the regulation) and required notice-and-comment; plaintiffs timely challenged the interpretation |
| Whether USCIS' interpretation could be sustained under deference doctrines (Auer/agency deference) | Deference is unwarranted because the regulation is unambiguous and the agency's view is plainly erroneous | Agency entitled to deference interpreting its own regulation and its longstanding practice | Held for plaintiffs: regulation is unambiguous; Auer deference not applied because interpretation is contrary to plain text and precedent |
| Appropriate remedy (remand vs. ordering approvals) | Plaintiffs sought outright approval of their petitions | USCIS argued reconsideration / deference to agency process; generalized interest in consistent adjudication | Court vacated USCIS denials and remanded for reconsideration consistent with the opinion (declined to grant immediate approvals) |
Key Cases Cited
- Auer v. Robbins, 519 U.S. 452 (1997) (deference to agencies' interpretation of their own regulations unless plainly erroneous)
- Christensen v. Harris County, 529 U.S. 576 (2000) (Auer deference is warranted only when a regulation is ambiguous; agencies may not add requirements inconsistent with a rule)
- Thomas Jefferson Univ. v. Shalala, 512 U.S. 504 (1994) (substantial deference to agency interpretation of regulations when ambiguous)
- Motor Vehicle Mfrs. Ass'n v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29 (1983) (arbitrary and capricious standard in administrative review)
- Florida Power & Light Co. v. Lorion, 470 U.S. 729 (1985) (remand to agency is generally the proper remedy where the record does not support agency action)
- Wal‑Mart Stores, Inc. v. Dukes, 564 U.S. 338 (2011) (class certification: commonality requirement and when a single ruling resolves class members' claims)
- Judulang v. Holder, 565 U.S. 42 (2011) (repetition of arbitrary agency action does not make it permissible)