United States District Court, District of Columbia
D. BATES UNITED STATES DISTRICT JUDGE.
law provides a path to the United States for foreign citizens
who finance American businesses. To become eligible for a
visa, however, an investor must actually invest.
That is, she must place her money at risk of loss in hopes of
potential gain. The question in this case is whether United
States Citizenship and Immigration Services (USCIS) acted in
an arbitrary and capricious manner when it declared
plaintiffs ineligible for visas because their investments
came with a “call option, ” which gave the
company in which they invested the choice to buy plaintiffs
out. Because the call option at issue here does not provide
the investors with any right to repayment, the Court answers
this question in the affirmative and grants partial summary
judgment to plaintiffs.
Immigration and Nationality Act (INA) authorizes the United
States to issue visas “to qualified immigrants seeking
to enter the United States for the purpose of engaging in a
new commercial enterprise (including a limited
partnership).” 8 U.S.C. § 1153(b)(5). As the fifth
category of employment-based preferences listed in §
1153(b), this provision is often referred to as the
“EB-5” visa program. To be eligible for EB-5
visas, applicants must have “invested . . .
capital” of a specified amount in a business
“which will benefit the United States economy and
create full-time employment for not fewer than 10 United
States citizens” or legal immigrants. Id.
§ 1153(b)(5)(A). Normally, someone looking for an EB-5
visa must invest $1 million, id. §
1153(b)(5)(C)(i), but only $500, 000 is required if the
investment is made “in a targeted employment area,
” id. § 1153(b)(5)(C)(ii); 8 C.F.R.
§ 204.6(f)(2). If multiple EB-5 applicants invest in the
same business, each must proffer at least $1 million (or
$500, 000), and each applicant's investment must create
at least ten new full-time jobs. 8 C.F.R. § 204.6(g)(1).
who meet the INA's requirements may file a Form I-526
petition, the approval of which allows them to apply for EB-5
visas. See 8 U.S.C. § 1202(a); 8 C.F.R. §
204.6(a). Those who are awarded visas are admitted as lawful
residents on a conditional basis, along with their spouses
and children. See 8 U.S.C. § 1186b(a)(1).
Within ninety days of the two-year anniversary of their
admission, if they are still fulfilling the EB-5
requirements, they may petition to remove the condition so
that they and their families can become lawful permanent
residents. See Id. § 1186b(c)(1), (d)(2)(A).
The EB-5 process thus consists of three steps: the Form I-526
petition, the initial visa application, and the application
to lift conditional status.
the entire EB-5 program is predicated on foreign investment,
the INA does not specify what it means to invest. But a
Department of Homeland Security (DHS) regulation does: it
defines “invest” as “to contribute capital,
” id. § 204.6(e), and requires
“evidence that the petitioner has placed the required
amount of capital at risk for the purpose of generating a
return on the capital placed at risk, ” id.
§ 204.6(j)(2). DHS has likewise clarified what the word
“invest” does not mean. “A
contribution of capital in exchange for a note, bond,
convertible debt, obligation, or any other debt arrangement
between the alien entrepreneur and the new commercial
enterprise does not constitute a contribution of capital for
the purposes of this part.” Id. §
204.6(e). Thus, debt arrangements like the examples given in
the regulation are not visa-worthy.
to its statutory and regulatory authority, see 5
U.S.C. § 301; 8 C.F.R. § 103.3(c), DHS has also
designated four decisions by the Board of Immigration Appeals
(BIA) as precedential, thus rendering particular readings of
the EB-5 provision and regulations binding on the agency,
see, e.g., Doe v. USCIS, 239 F.Supp.3d 297,
303 n.3 (D.D.C. 2017). One of these decisions, Matter of
Izummi, 22 I. & N. Dec. 169 (BIA 1998), rejected
Form I-526 applications from aliens whose investment
agreements contained a “sell option.” The sell
option gave the aliens the right to end their partnerships
with the business they had funded, in exchange for a
specified portion of their original investments plus profits.
The BIA determined that the sell option constituted a debt
arrangement because the investors' capital “cannot
be said to be at risk”: “it is guaranteed to be
returned, regardless of the success or failure of the
business.” Id. at 184. In other words, this
sort of redemption agreement “constitutes a straight
loan, ” id. at 185, and thereby does not count
as a qualifying investment under the applicable regulations.
are sixteen foreign nationals, each of whom invested $500,
000 to become a limited partner in Lucky's Farmers
Market, LP (“Lucky's”). AR 4 (Joint Appendix
[ECF No. 24]). Lucky's was a new commercial
enterprise at the time of plaintiffs' investments, and at
least one of its six planned grocery stores was to be located
in a targeted employment area. AR 25, 33, 36. Lucky's
used plaintiffs' investments to fund a loan to
Lucky's Farmers Market Resources Center LLC, guaranteed
by substantially all of the latter's assets; the Market
Resources Center in turn lent most of the money to each of
the Lucky's Markets stores to cover construction costs.
AR 33. The Market Resources Center managed the stores, while
the stores pledged substantially all of their assets as
security for the Market Resources Center's repayment of
its original loan to Lucky's. AR 33. Thus, Lucky's
wholly owns the individual stores, and plaintiffs'
investment funded the stores' construction and
management. AR 37.
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 Partnership 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
(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
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.
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. Id.
¶ 40; AR 914-17.
and Lucky's provided the asked-for evidence, AR 920-23,
931, which USCIS acknowledged receiving without any
suggestion of insufficiency, AR 1520. However, USCIS issued
each plaintiff a Notice of Intent to Deny
(“NOID”) their Form I-526 petitions in December
2015. AR 1518. The NOIDs were based, not on the agency's
initial objections, but instead on its previously undisclosed
concerns about the call option contained in the LPA. AR
1520-23. The “deficiency” created by the call
option, according to USCIS, was “revealed” during
“a final review of the petition[s].” AR 1520.
USCIS read Matter of Izummi as requiring immigration
officials to scrutinize “the substance of the
investment . . . over its form in order to determine if an
investment is really a prohibited ‘debt