Behring Regional Center LLC v. WolfBehring Regional Center LLC v. Wolf
ORDER GRANTING SUMMARY JUDGMENT IN PLAINTIFF‘S FAVOR ON CLAIM FOUR
Behring Regional Center, LLC, a California-based Regional Center that sponsors capital investment projects using funds from foreign investors who are EB-5 Immigrant Investor Program applicants, brings this Administrative Procedures Act (“APA“) action against the Department of Homeland Security.1 Plaintiff contends
At the hearing on Plaintiff‘s motion for a preliminary injunction, the parties agreed to convert Plaintiff‘s motion to summary judgment on its fourth claim—that the Final Rule was promulgated “in excess of statutory authority” because Former Acting Homeland Security Secretary Kevin McAleenan was not prоperly serving in his position when he promulgated the Final Rule in July 2019. See
Following the hearing, the current Secretary of Homeland Security, Alejandro Mayorkas, ratified the Final Rule. (Dkt. No. 34-1.) The government argues that this cures any defect in Mr. McAleenan‘s promulgation of the Final Rule. Having considered the parties’ arguments and the relevant legal authority, and having had the benefit of oral argument on May 13, 2021, the Court GRANTS summary judgment in Plaintiff‘s favor on its Fourth Claim for Relief. McAleenan was not lawfully serving as Homeland Security Secretary when he promulgated the Final Rule, and therefore, under the Federal Vacancies Reform Act of 1998 (FVRA),
BACKGROUND
A. The Appointments Clause and Federal Vacancies Reform Act
Under the Appointments Clause, the President is granted the power to nominate Officers of the United States, such as Homeland Security Secretary.
Under Section 3345(a) of the FVRA, the general rule is that the first assistant to a vacant office shall become the acting officer, “[b]ut there is an ‘unless‘—Congress сrafted exceptions to that exclusivity.” Guedes, 920 F.3d at 11;
On December 23, 2016, Congress amended the Homeland Security Act in two relevant ways. See National Defense Authorization Act for Fiscal Year 2017, Pub. L. No. 114-328, § 1903, 130 Stat. 2000, 2672 (2016). First, the amendment established that the Under Secretary for Management would “serve as the Acting Secretary if by reason of absence, disability or vacancy in office, neither the Secretary nor the Deputy Secretary is available to exercise the duties of the Office of Secretary.”
As relevant here, the last Senate-confirmed Homeland Security Secretary under the Trump administration, Kirstjen Nielsen, resigned on April 10, 2019. Prior to her resignation, Secretary Nielsen purportedly amended the Order of Succession for Homeland Security Secretary to move the Commissioner of Customs and Border Protection from 14th to third in line for succession to assume the position of Acting Secretary after Deputy Secretary and Under Secretary for Management. See Department of Homeland Security Delegation No. 00106 (Revision No. 08.5), DHS Orders of Succession and Delegations of Authorities for Named Positions § II.B (Apr. 10, 2019); (Dkt. No. 21-2). However, Sеcretary Nielsen‘s amendment dealt exclusively with temporary vacancies occurring when the Secretary is “unavailable to act during a disaster or catastrophic emergency,” not following a resignation. Id. In particular, Secretary Nielsen amended Delegation No. 00106, Annex A, which identifies those with authority to act in the event of the Secretary‘s “unavailab[ility] to act during a disaster or catastrophic emergency“, rather than Executive Order 13753, 81 Fed. Reg. 90667 (Dec. 9, 2016), which sets forth the “orderly succession of officials” following “the Secretary‘s death, resignation, or inability to perform.” See La Clinica de la Raza v. Trump, No. 19-CV-04980-PJH, 2020 WL 6940934, at *13 (N.D. Cal. Nov. 25, 2020) (discussing the ordеrs of succession and delegation in detail).
Under Secretary Nielsen‘s amendment to the Order of Succession, Kevin McAleenan, who was serving as the Customs and Border Protection Commissioner at the time, purportedly became the Acting Secretary of Homeland Security upon Secretary Nielsen‘s resignation because the offices of Deputy Secretary and Under Secretary for Management were both vacant. Six months later, McAleenan resigned, and in November 2019, on his way out of office, he purported to again amend the Order of Succession to move the Under Secretary for Strategy, Policy, and Plans up to fourth in line on the Homeland Security succession list behind the Commissioner of Customs and Border Protection. On November 13, 2019, the Senate confirmed Chad Wolf as the Under Secretary for Strategy, Policy, and Plans, and because all three positions ahead of him in the Homeland Security Order of Succession signed by Mr. Kevin McAleenan were vacate, he became the Acting Secretary of Homeland Security.
B. The EB-5 Program
The EB-5 Immigrant Investor Program was established as part of the Immigration
In 1992, Congress expanded the EB-5 program by establishing the regional center “pilot program,” which authorized “regional center[s] in the United States for the promotion of economic growth, including increased export sales, improved regional productivity, job creation, or increased domestic capital investment.” See Departments of State, Justice, and Commerce, the Judiciary and Related Agencies Appropriations Act of 1992, Pub. L. No. 102-395, § 610(a) (Oct. 6, 1992) (codified at
C. The 2019 Final Rule
Until 2017, Homeland Security maintained the standard EB-5 investment threshold at $1 million and the reduced investment threshold at $500,000, as originally set by the INA in 1990. See
D. This Lawsuit
Plaintiff, an EB-5 regional center, filed this APA lawsuit on December 21, 2020. (Complaint, Dkt. No. 1.) It alleges that the Final Rule has had “devasting effects on the Program‘s participants and the ability to raise capital for job creating development projects.” (Id. at ¶ 58.)
Plaintiff brings four claims under the APA: (1) the Final Rule is arbitrary and capricious in violation of
Two days after Plaintiff filed the complaint, it moved for a preliminary injunction. (Dkt. No. 10.) A month later, before briefing on that motion was complete, Defendants moved to transfer the action to the U.S. District Court for the District of Columbia where a similar action is pending, Florida EB5 Inv., LLC v. Wolf et al., Case 1:19-cv-03573-RJL (D.D.C. filed Nov. 26, 2019). (Dkt. No. 18.) The Court heard argument regarding both motions on March 25, 2021. The Court subsequently denied Defendants’ motion to transfer, and, after giving the parties notice, converted Plaintiff‘s motion for preliminary injunction in part into a motion for summary judgment on Plaintiff‘s fourth claim for relief: that Defendants lacked authority to promulgate the Final Rule in violation of
DISCUSSION
The issue presented is whether the Final Rule must be set aside as contrary to law because neither Mr. McAleenan, Mr. Wolf, nor Mr. Cuccinelli was lawfully serving in his role at the time the Final Rule issued. In particular, Plaintiff insists that because Secretary Nielsen amended the wrong succession order, her amendment appointing Mr. McAleenan to Acting Secretary did not have the force of law, and Mr. McAleenan‘s appointment of Mr. Wolf as his successor likewise lacked the force of law. Similarly, because Congress never authorized the establishment of the newly-created position “Principal Deputy Director of USCIS“, Mr. Cuccinelli‘s appointment to that position was also invalid. For purposes of the current motion for summary judgment, the focus is on Mr. McAleenan‘s appointment.
Plaintiff‘s claim arises under the FVRA and the Homeland Security Act. The FVRA “authorizes the President, a court, or the head of an Executive department, to designate an officer or employee to perform the funсtions and duties of a specified office temporarily in an acting capacity.”
Resolution of Plaintiff‘s claim turns on two initial questions: (1) was Mr. McAleenan lawfully serving in conformity with the FVRA, and (2) if not, whether the power to prescribe a regulation that changes the investment amount for the EB-5 Program is an action taken in performance of a function or duty of the vacant office in violation of the FVRA.
A. McAleenan‘s Appointment was Invalid
This Court joins the numerous other courts which have held that because Secretary Nielsen amended the wrong Order
The Government Accountability Office (“GAO“) has reached a similar conclusion. GAO, Homeland Security, File B-331650, (Aug. 14, 2020), https://www.gao.gov/assets/710/708830.pdf. In its August 2020 decision, the GAO concluded that although “Mr. McAleenan assumed the title of Acting Secretary upon the resignation оf Secretary Nielsen, [] the express terms of the existing designation required another official to assume that title. As such, Mr. McAleenan did not have the authority to amend the Secretary‘s existing designation.” Id. at 10.
Accordingly, at the time the Final Rule was approved, Mr. McAleenan was not properly serving as the Acting Secretary of Homeland Security.
B. Promulgating the Rule Violated the FVRA
The Court thus turns to the second question, whether given Mr. McAleenan‘s unlawful appointment, promulgating the regulation to change the investment amount was an action taken in performance of a function or duty of the vacant office. The government‘s argument here is three-fold. First, that the EB-5 statute does not say that “only” thе Secretary can change the investment amount. Second, that unless a duty is explicitly non-delegable, it is delegable in accordance with the “Homeland Security Act [and] the longstanding presumption of delegability.” Third, even if specific non-delegability is not required, the Secretary nonetheless did delegate the authority here. None of these arguments are availing.
1) Section 1153 Falls Under the FVRA
The EB-5 Program was established as part of the Immigration Act of 1990. It is codified at
In promulgating the Final Rule, the government cited as legal authority, among other things, the statute that created the EB-5 Program. See 84 Fed. Reg. 35,750 (July 24, 2019) (citing
In 1990, Congress set the minimum investment amount for the program at $1 million and authorized the Attorney General (now the Secretary of Homeland Security) to increase the minimum investment amount, in consultation with the Secretaries of State and Labor. INA section 203(b)(5)(C)(i),
8 U.S.C. 1153(b)(5)(C)(i) .
84 FR 35,750, at 35762 (emphasis added). Given that it was not a lawful Acting Secretary who specified the amount of capital required under the Final Rule (McAleenan), the question is whether the Final Rule is valid. For this, the Court turns to the FVRA.
As noted supra, under the FVRA‘s vacant-office provision, if a persоn is not lawfully serving in conformity with the FVRA, “[a]n action taken” by that person “in the performance of any function or duty of [the] vacant office ... shall have no force or effect” and “may not be ratified.”
(2) the term “function or duty” means any function or duty of the applicable office that—
(A) (i) is established by statute; and
(ii) is required by statute to be performed by the applicable officer (and only that officer).
As a threshold matter, there can be no dispute that prescribing a regulation to increase the investment amount in accordance with
The Court is unpersuaded. The EB-5 program statute—
The government‘s insistence that the Secretary of Homeland Security‘s ability to delegate functions, including the function of increasing the required EB-5 program investment amount, means that increasing the investment amount is not a “function or duty” within the meaning of the FVRA is no more availing. The government observes that the Homeland Security Act allows the Secretary of Homeland Security to delegate “any” function. See
The government‘s “approach would require us to ignore the provision‘s plain language—a cardinal sin of statutory interpretation.” United States v. Pocklington, 792 F.3d 1036, 1041 (9th Cir. 2015). Section 1153 falls squarely within the plain language of the FVRA‘s definition of function or duty—a statute that designates one officer and only that officer to perform the duty or function. The FVRA does not define function or duty as required by “a statute that designates one officer to perform a non-delegable duty or function.”
Further, as one district court has noted regarding this precise issue, “Defendants’ construction of the vacant-office provision is at odds with the statutory purpose of the FVRA.” L.M.-M. v. Cuccinelli, 442 F. Supp. 3d 1, 34 (D.D.C. 2020), judgment entered, No. CV 19-2676 (RDM), 2020 WL 1905063 (D.D.C. Apr. 16, 2020), appeal dismissed, No. 20-5141, 2020 WL 5358686 (D.C. Cir. Aug. 25, 2020). Nearly every cabinet-level department has a version of a vesting statute like Section 112(b)(1). Id.
It was the pervasive use of those vesting-and-delegation statutes, along with ‘the lack of an effective enforcement process,’ that convinced Congress of the need to enact the FVRA. Senate Report at 7. Yet, if Defendants were correct that the mere existence of these vesting-and-delegation statutes (and the absence of an express statutory bar on vesting and delegating a specific function or duty) were sufficient to negate the enforcement mechanisms Congress included in the FVRA, Congress would have done little “to restore [the] constitutionally mandated procedures that must be satisfied before acting officials may serve in positions that require Senate confirmation.” Senate Report at 8; see also U.S. Telecom Ass‘n v. FCC, 359 F.3d 554, 565 (D.C. Cir. 2004) (“When a statute delegates authority to a federal officer or agency, subdelegation to a
subordinate federal officer or agency is presumptively permissible absent affirmative evidence of a contrary congressional intent.“).
Id. Congress enacted the FVRA to “recla[im its] Appointments Clause power” SW Gen., Inc. v. N.L.R.B., 796 F.3d 67, 70 (D.C. Cir. 2015), “in the face of the long-standing Department of Justice ‘position that, in many instances, the head of an executive agency had independent authority apart from the Vacancies Act to tеmporarily fill vacant offices,‘” L.M.-M., 442 F. Supp. 3d at 29 (quoting N.L.R.B. v. SW Gen., Inc., 137 S. Ct. 929, 935 (2017)). “Congress was concerned, most notably, that the Attorney General and other department heads had made frequent use of organic vesting and delegation statutes to assign the duties of PAS offices to officers and employees, with little or no check from Congress.” L.M.-M., 442 F. Supp. 3d at 29. Under the government‘s interpretative theory, the FVRA did not address these concerns. The Court is not persuaded that the FVRA is so weak.
The government‘s lament at oral argument that Congress also recognized that the government cannot come to a halt when there is not a Senate confirmed officer to perform a function or duty and thus has allowed the Secretary of Homeland Security (and other cabinet-level secretaries) to delegate functions is not well-taken. If Secretary Nielsen had amended the proper order of succession there would be no issue here; the problem arises because she did not do so and as a result, Mr. McAleenan was not lawfully serving as the Acting Secretary of Homeland Security. If the individual who was actually next in line on the Order of Succession had signed the Final Rule, Plaintiff would not have a claim. But that is not what happened.
2) The 2003 Delegation Does Not Apply
Next, the government argues that the Secretary in fact delegated the authority to prescribe the Final Rule at issue here. In particulаr, the government relies on a 2003 Delegation to Deputy Secretary by then Homeland Security Secretary Tom Ridge (“the 2003 Delegation“). (Dkt. No. 39-1.) In the 2003 Delegation, Secretary Ridge delegated certain delineated responsibilities including “Acting for the Secretary to sign, approve, or disapprove any proposed or final rule, regulation or related document” to the Deputy Secretary of Homeland Security. (Id. at Sec. II.G.) This delegation, however, does not apply as there was no Deputy Secretary of Homeland Security for which the authority to sign the Final Rule could be delegated. Indeed, the vacancy in the Deputy Secretаry position is what led to the purported appointment of Mr. McAllenan‘s—the Customs and Border Protection Commissioner—as Secretary of Homeland Security.
For this reason, among others, Nw. Immigrant Rts. Project v. U.S. Citizenship & Immigr. Servs. (“NWIRP“), 496 F. Supp. 3d 31 (D.D.C. 2020), appeal dismissed, No. 20-5369, 2021 WL 161666 (D.C. Cir. Jan. 12, 2021), is not persuasive. The NWIRP court never grappled with the fact that the 2003 delegation (assuming it was still in effect in 2019) delegated certain authority to the Deputy Secretary. Further, the NWIRP court relied on an interpretation of
***
C. Ratification
The government next argues that even if McAleenan‘s approval of the Final Rule has no force or effect, current (and lawfully Senate confirmed) Secretary of Homeland Sеcurity Mayorkas’ ratification of the Final Rule in March of this year cures any defect arising from Mr. McAleenan‘s improper appointment. The government‘s argument is foreclosed by the FVRA‘s plain and unambiguous language: “An action that has no force or effect under paragraph (1) may not be ratified.”
“[W]hen the statute‘s language is plain, the sole function of the courts—at least where the disposition required by the text is not absurd—is to enforce it according to its terms.” Hartford Underwriters Ins. Co. v. Union Planters Bank, N.A., 530 U.S. 1, 6 (2000) (internal citation omitted). The FVRA plainly states that actions taken without authority cannot be ratified.
C. De Facto Officer Doctrine
At the March 25, 2021 hearing, the government requested the opportunity to submit additional briefing regarding whether the common law de facto officer doсtrine applies to salvage the Final Rule. “The oft-forgotten doctrine has ‘feudal origins,’ dating back to the 15th century.” SW Gen., Inc. v. N.L.R.B., 796 F.3d 67, 81 (D.C. Cir. 2015), aff‘d, 137 S. Ct. 929 (2017) (internal citation omitted). “The de facto officer doctrine ‘confers validity upon acts performed by a person acting under the color of official title even though it is later discovered that the legality of that person‘s appointment or election to office is deficient.‘” Hooks v. Kitsap Tenant Support Servs., Inc., 816 F.3d 550, 564 n.13 (9th Cir. 2016) (quoting Nguyen v. United States, 539 U.S. 69, 77 (2003)).
The Ninth Circuit has noted that “[t]he continued vitality of the de facto officer doctrine is in serious doubt.” Silver v. U.S. Postal Serv., 951 F.2d 1033, 1036, n. 2 (9th Cir. 1991).
D. Remedy
As a remedy for the FVRA violation, Plaintiff seeks (1) a declaratory judgment that the Final Rule is without force and effect, and (2) an injunction barring Secretary Mayorkas from reinstating the rule absent compliance with the APA‘s rule-making process. The government counters that the proper remedy is at most to set aside the part of the rule that is procedurally defective and remand it to agency for consideration. The government also suggests that the Court could remand without vacatur and that it should do so because (1) vacating the rule would be extremely disruptive, and (2) Secretary Mayorkas has ratified the rule which signals that any defects “are at best technical deficiencies.” (Dkt. No. 39 at 15.) However, if the Court enters any kind of vacatur order, the government requests a stay to allow the agency time to address the issue.
Because the Final Rule “ha[s] no force or effect,”
Here, while there would certainly be some disruption if the Rule is vacated given the length of time the Rule has been in effect, the government has made no specific showing of harm beyond asserting that it would be “extraordinarily disruptive.” (Dkt. No. 39 at 14.) See Ctr. for Food Safety v. Vilsack, 734 F.Supp.2d 948, 951 (N.D. Cal. 2010) (“[T]he Ninth Circuit has only found remand without vacatur warranted by equity concerns in limited circumstances, namely serious irreparable environmental injury.“). Remand with vacatur—the default remedy for a rule that lacks the force of law is thus appropriate here.
With respect to Plaintiff‘s request for an injunction, as the court in L.L.-M. noted when considering the proper remedy there for the FVRA violation, “the Supreme Court has cautioned that a district court vacating an agency action under the APA should not issue an injunction unless
Accordingly, the Court sets aside the Final Rule and remands the matter to the Agency.4 The Court declines to address the government‘s one-sentence request for a stay which was only raised in a footnote in its brief. (Dkt. No. 39 at 15 n.9.)
CONCLUSION
For the reasons stated above, Plaintiff‘s cross-motion for summary judgment on its fourth claim is GRANTED. The Final Rule is VACATED and the matter is REMANDED to the Agency for further action.
As vacating the Rule moots Plaintiff‘s remaining causes of action, they are dismissed without prejudice. Separate judgment will be entered in Plaintiff‘s favor.
IT IS SO ORDERED.
Dated: June 22, 2021
JACQUELINE SCOTT CORLEY
United States Magistrate Judge