Plaintiffs, as limited partners, have little control over Lucky's operations or finances. Instead, full "management, operation and control of" Lucky's is "vested exclusively in the General Partner," a company named LFM Stores, LLC. AR 18, 101-02. The general partner can distribute profits to the limited partners "at such times as determined by the General Partner in its sole discretion," up to a maximum 1% annual return on their original investments. AR 92, 99-100. The Lucky's Limited Partnership Agreement ("LPA") also includes two sections regulating the redemption of plaintiffs' investments. The first provision, Section 3.3, prohibits plaintiffs from exercising a sell option unless they are denied EB-5 eligibility. AR 95 ("Except in the case where a Limited Partner's EB-5 Immigrant Petition Form I-526 has been denied by USCIS, no Partner shall have the right to withdraw from the *181Partnership or require that the Partnership purchase all or any portion of such Partner's Interest. No Partner shall have a right to receive a return of its Capital Contributions or a dividend in respect of such Partner's Interest ...."). The second, Section 3.4, provides the general partner with a call option (also known as a "buy option"):
Notwithstanding anything to the contrary in Section 3.3, during the following periods, the General Partner may cause a Limited Partner's withdrawal from the Partnership by paying to such Limited Partner its (i) unpaid Preferred Return through the date of withdrawal and (ii) Unrecovered Capital Contribution:
(a) Prior to such Limited Partner's participation in the Loan through its Investment Contribution; or
(b) At any time after final adjudication of such Limited Partner's Form I-829, Petition to Remove Conditions, if applicable.
AR 95. Thus, under the LPA, the general partner can buy out a limited partner either before her investment is used to provide the loan to the Market Resources Center or after she becomes a lawful permanent resident, but not in between.
Plaintiffs each filed a Form I-526 petition between December 2013 and September 2014 based on their Lucky's investments. Compl. [ECF No. 1] ¶ 38. USCIS issued each plaintiff a Request for Evidence in late July or August 2015, asking plaintiffs to provide more documentation to prove that Lucky's would create at least ten new jobs per applicant.
Plaintiffs, Lucky's counsel, and Lucky's senior vice president all responded to the NOID, stating that the call option did not guarantee plaintiffs anything, and that plaintiffs' capital was indeed "at risk" as required by DHS's regulations. Compl. ¶¶ 43-50; AR 1524-37, 1545-54. Plaintiffs also argued that USCIS's rationale for denying their petitions "would constitute an impermissible retroactive application of agency policy." Compl. ¶ 48. Nonetheless, USCIS issued final decisions between April and June 2016 denying plaintiffs' petitions, relying on substantially the same grounds set out in its NOIDs.
II. LEGAL STANDARD
"Summary judgment is the proper mechanism for deciding, as a matter of law, whether an agency action is supported by the administrative record and consistent with the APA standard of review." Blue Ocean Inst. v. Gutierrez,
Although the scope of review under this standard is narrow, courts must consider "whether the agency acted within the scope of its legal authority, whether the agency has explained its decision, whether the facts on which the agency purports to have relied have some basis in the record, and whether the agency considered the relevant factors." Fund for Animals v. Babbitt,
III. DISCUSSION
The parties dispute each of plaintiffs' six claims against USCIS, but the nub of this case is whether USCIS's actions were arbitrary and capricious. Plaintiffs assert that the evidence provided to USCIS proved that the call option did not qualify as a debt arrangement, both because it could not be used if the company were not profitable and because exercising the call option was the general partner's choice rather than plaintiffs' right. USCIS contends that it correctly read its own regulations *183and the reasoning of Matter of Izummi ; that, under these authorities, the LPA's call option is more debt-like than equity-like; and that plaintiffs therefore did not place their capital at risk. For the reasons explained below, plaintiffs have the better of the argument.
A. ARBITRARY AND CAPRICIOUS REVIEW
USCIS rejected plaintiffs' Form I-526 petitions because, in its view, "[t]he call option in the LPA provides a fixed rate of return and redemption upon exercise that is irrespective of the income and fortunes of Lucky's Farmers Market, LP." AR 1560. In both its NOID and final Notice of Decision, USCIS read Matter of Izummi 's reasoning as implicitly extending beyond sell options, leaving open the potential boundaries of what constitutes a debt arrangement. AR 1522, 1561. For USCIS, this reading was consistent with the plain language of § 204.6(e)'s definition of "debt arrangement," which USCIS viewed as prohibiting "equity investments with debt features." AR 1522, 1561. As USCIS read the LPA, the call option constituted a debt feature because it gave plaintiffs a guaranteed redemption at a fixed price, and because the general partner's ability to exercise the option depended not on the general success of the business but rather only on whether the Market Resources Center repaid its highly-structured loan to Lucky's. AR 1522, 1561. Thus, "each of the investors has entered into their investment assured that they will be repaid at a fixed price dependent only on the corresponding fixed price repayment of the loan to Lucky's Farmers Market, LP." AR 1522. The fixed price of the call option also prevented plaintiffs' capital from being "at risk," USCIS asserted, because the option caps the total gain plaintiffs could receive. AR 1523 (quoting Matter of Izummi,
USCIS's characterization of the call option-and therefore its determination that the LPA constituted a debt arrangement-does not withstand scrutiny. "Although arbitrary and capricious review is 'highly deferential,' an agency decision will not be upheld if it 'is not supported by substantial evidence, or the agency has made a clear error in judgment.' " Doe,
USCIS claims both that "the plain language of the regulation must control," and that the agency should receive deference for its interpretation of its own regulations.
*184Defs.' Mot. at 17, 21. Neither tack aids USCIS here. The plain language of the regulation eliminates from DHS's definition of "invest" any "contribution of capital in exchange for a note, bond, convertible debt, obligation, or any other debt arrangement."
Start with the catch-all itself. It comes directly after a list of specific examples of debt arrangements, which provides guidance as to how the words "any other debt arrangement" should be read. See, e.g., Christopher v. SmithKline Beecham Corp.,
USCIS's emphasis on the phrase "any other debt arrangement," therefore, is unavailing. True, the catch-all includes "any," a word that sometimes indicates "an expansive meaning." Ali,
Other aspects of the regulatory language confirm that it does not extend to the buy option in plaintiffs' LPA. For instance, the definition of "invest" excludes contributions of capital made "in exchange for" certain debt arrangements.
Principles of deference get USCIS no further than does its appeal to the regulatory language. See Defs.' Mot. at 17, 20; Defs.' Reply [ECF No. 23] at 5. True, the agency's decision in Matter of Izummi is entitled to deference as a reasonable reading of the agency's own regulation. See Auer v. Robbins,
USCIS points to broader language in Matter of Izummi regarding the purpose of the investment requirement to support its position. AR 1522-23. Yet even the broadest language in that decision underlines the distinction between sell and buy options that USCIS now attempts to blur. Consider this statement, quoted in the NOID in this case: "For the alien's money truly to be at risk, the alien cannot enter into a partnership knowing that he already has a willing buyer in a certain number of years, nor can he be assured that he will receive a certain price." Matter of Izummi,
Similarly, the NOID points to this statement:
To enter into a redemption agreement at the time of making an "investment" evidences a preconceived intent to unburden oneself of the investment as soon as possible after unconditional permanent resident status is attained. This is conceptually no different from a situation in which an alien marries a U.S. citizen and states, in writing, that he will divorce her in two years. The focus here is on the green card and not on the business.
USCIS argues that such intent could still manifest itself through a buy option "coupled with assurances from the recipient company in other documentation that signals to the investor that there is a 'willing buyer' at a 'certain price' once the conditions on lawful permanent residence have been removed." Defs.' Mot. at 15-16. No doubt. The regulation clearly would allow USCIS to conduct a holistic examination of the applicant's investment agreement, and any other documentation, to determine whether a buy option has been effectively converted into a de facto sell option. But the record in this case contains no evidence of such assurances from Lucky's-indeed, quite the opposite. AR 1547-48, 1552, 1561. Without concrete indications of collusion between plaintiffs and Lucky's, or a determination-based on data and agency expertise-that investment agreements with buy options are highly likely to involve such collusion, USCIS's conclusion that "each of the investors has entered into their investment assured that they will be repaid at a fixed price," AR 1522; accord AR 1561, "runs counter to the evidence before the agency" and thus lacks a "rational connection between the facts found and the choice made." State Farm,
*187Indeed, another court in this district has recently held that USCIS acted in an arbitrary and capricious manner when it denied several Form I-526 petitions in a functionally identical case. See Doe,
USCIS attempts to distinguish Doe , but its arguments are unpersuasive. USCIS first claims that " Doe dealt with a buy option-not a sell option as in this case." Defs.' Mot. at 21. Doe did deal with a buy option, but so does this case-both cases, then, are unlike the sell option at issue in Matter of Izummi . USCIS also claims that Doe involved only an agency decision that equated buy options with guaranteed returns, and that Doe thus had nothing to say about the general limits of Matter of Izummi . Id. at 21-22. This, too, is wrong. In Doe, USCIS had claimed that the call option was prohibited both because it gave a guaranteed return and because it was a redemption agreement.
But USCIS's case of choice can be. USCIS repeatedly points to R.L. Investment Limited Partners v. INS,
In the end, USCIS has acted in a manner that conflicts with the plain language of its regulations, that is not compelled by statutory or regulatory purpose, that unreasonably stretches the rationale of Matter of Izummi , and that runs counter to the evidence in the record. This action accordingly cannot survive review. See Perez v. Mortg. Bankers Ass'n, --- U.S. ----,
B. REMEDY AND OTHER CLAIMS
The parties dispute the proper remedy in the case of an APA violation. Plaintiffs ask the Court to direct USCIS to approve their Form I-526 petitions. Pls.' Mot. at 27, 43; Pls.' Opp'n to Defs.' Mot. for Summ. J. [ECF No. 21] at 21. USCIS counters that a remand to the agency for reconsideration is the only appropriate remedy. Defs.' Reply at 12-14. The Court agrees with USCIS that remand is appropriate. "If the record before the agency does not support the agency action, ... the proper course, except in rare circumstances, is to remand to the agency for additional investigation or explanation." Fla. Power & Light Co. v. Lorion,
This leaves the question of what to do with plaintiffs' five remaining claims. Because their applications will be remanded to USCIS for reconsideration, the Court will not address them now. Should USCIS deny their petitions a second time, plaintiffs can seek review again and raise whatever claims they believe appropriate at that point.
CONCLUSION
For the reasons explained above, the Court will grant in part and deny in part plaintiffs' motion for summary judgment and deny defendants' cross-motion for summary judgment. This matter will be remanded to the agency for further consideration of plaintiffs' petitions. A separate order will issue on this date.
As "call option" and "buy option" mean the same thing, this opinion uses the terms interchangeably.
The RFE sent to Chang also asked for clarification as to whether a sum of $545,000 given to Chang by her father-which provided the capital that Chang then invested in Lucky's-was a gift (such that the capital was being placed at risk) or a loan (so that it was not). AR 918-19. However, this issue appears to be unique to Chang.
Plaintiffs requested oral argument on these motions, but the Court in its discretion has determined that this case does not warrant oral argument. See LCvR 7(f).
It is not entirely clear whether USCIS still views the cap on gains as part of the reason why the call option is a debt arrangement, independent of the fact that the option provides a fixed price. While discussed in the NOID, USCIS did not bring up this issue again in its final Notice of Denial. It also clarified that it "does not view this call option as a guaranteed return," but rather only as "a redemption agreement that constitutes a debt arrangement prohibited under the regulations." AR 1560 n.3. However, to the extent this argument remains, it is insufficient to deny plaintiffs' petitions. Plaintiffs do not know whether they will be able to sell their shares, since they have no control over whether the general partner exercises its call option. If they sell their shares to a third party, the price could be "surprising[ly] high and more than what [they] paid" if Lucky's has done well, or "disappointingly low" if Lucky's has done poorly. Matter of Izummi,
See Bond , Black's Law Dictionary (10th ed. 2014) ("A written promise to pay money or do some act if certain circumstances occur or a certain time elapses; a promise that is defeasible upon a condition subsequent ...."); Convertible Debt , Black's Law Dictionary ("A debt whose security may be changed by a creditor into another form of security."); Note , Black's Law Dictionary ("A written promise by one party (the maker ) to pay money to another party (the payee ) or to bearer."); Obligation , Black's Law Dictionary ("A formal, binding agreement or acknowledgment of a liability to pay a certain amount or to do a certain thing for a particular person or set of persons; esp., a duty arising by contract.").
It is also notable that, although the same agreement included a buy option that the partnership could exercise, the BIA only mentioned this twice in passing and focused entirely on the sell option. See
At times, USCIS suggests that it should receive deference for its interpretation of Matter of Izummi . See Defs.' Mot. at 14-16. Auer does not extend this far. It is one thing to defer to an agency's interpretation of a statute it enforces, and another to defer to the agency's precedential opinion that interprets its own regulation, which in turn interprets the statute. But it cannot be deference all the way down, lest the courts abdicate their constitutional role. An interpretation of an interpretation of an interpretation must rest on its own bottom.