United States District Court, District of Columbia
G. SULLIVAN UNITED STATES DISTRICT JUDGE.
thirty years ago, Congress established the EB-5 Visa Program
(“the Program”) to stimulate the economy and
create jobs through foreign capital investment. Under the
Program, “alien investors” may become eligible to
immigrate to the United States in return for investing
certain qualifying amounts of capital in a commercial
enterprise in the United States. Plaintiffs in this case are
individual alien investors whose EB-5 visa petitions were
denied by the agency that oversees the Program: the United
States Citizenship and Immigration Services
(“USCIS”). Plaintiffs allege that their petitions
were denied based on USCIS' flawed interpretation of its
own regulation. As such, they challenge USCIS' decisions
to deny their petitions as arbitrary and capricious in
violation of the Administrative Procedure Act
(“APA”), 5 U.S.C. § 706, and the Immigration
and Nationality Act (“INA”), 8 U.S.C. §
1153(b)(5). Plaintiffs also claim that USCIS exceeded its
statutory authority under the INA by denying their petitions
and impermissibly applying its interpretation retroactively.
Finally, plaintiffs claim that USCIS engaged in improper
rulemaking without notice and comment, also in violation of
before the Court are: (1) plaintiffs' motion for summary
judgment; (2) USCIS' cross-motion for summary judgment;
(3) plaintiffs' motion to certify class; and (4)
plaintiffs' motion to amend the complaint. Upon
consideration of the motions, the responses and replies
thereto, the relevant case law, and the entire record herein,
the Court GRANTS IN PART plaintiffs'
motion for summary judgment, DENIES
USCIS' cross-motion for summary judgment,
GRANTS plaintiffs' motion to certify
class (albeit with a modified class definition), and
DENIES AS MOOT plaintiffs' motion to
amend the complaint. Rather than approve plaintiffs'
petitions, however, the Court instead
VACATES USCIS' denials of the class
members' petitions and REMANDS the
denials to USCIS for reconsideration consistent with this
Statutory and Regulatory Background
authorizes the United States to issue visas to certain
qualified immigrants. See Pub. L. No. 101-649 §
121(a) (codified as 8 U.S.C. § 1153(b)(5)(1990)). In
1990, Congress created the EB-5 Visa Program as one of five
categories of employment-based immigration preferences to
“create new employment for U.S. workers and to infuse
new capital into the country.” S. Rep. No. 101-55, at
21 (1989). To be eligible for an EB-5 visa, an alien must
“invest” a certain amount of
“capital” in a “commercial
enterprise” to “benefit the United States economy
and create full-time employment for not fewer than [ten]
United States citizens or aliens lawfully admitted . . .
.” 8 U.S.C. § 1153(b)(5)(A). An alien investor
must generally invest $1, 000, 000 of “capital”
into a new commercial enterprise, but in economically
depressed areas, or “targeted employment areas, ”
the required amount of capital may be reduced to $500, 000.
Id. § 1153(b)(5)(C); 8 C.F.R.
§204.6(f)(regulating the “required amounts of
1991, the Immigration and Naturalization Service
(“INS”)-USCIS' predecessor agency-promulgated
regulations to implement the EB-5 Program. See 8
C.F.R. § 204.6 (1991). Among other things, the
regulations set forth the criteria necessary to qualify for
an EB-5 visa preference. See Id. To apply, an alien
investor must first submit a Form I-526 immigration petition
(“petition” or “I-526 petition”).
Id. § 204.6(a). The petition must be
“accompanied by evidence that the alien has invested or
is actively in the process of investing lawfully obtained
capital in a new commercial enterprise in the United States
which will create full-time positions for not fewer than
[ten] qualifying employees.” Id. §
204.6(j). If the alien investor's I-526 petition is
approved, he or she may apply for a visa, which would allow
the alien and his or her spouse and children to be admitted
to the United States on a conditional basis. See 8
U.S.C. § 1202(a); 8 U.S.C. § 1186b(a)(1). If the
alien investor fulfills the EB-5 visa requirements within two
years, he or she may petition for permanent residence.
Id. § 1186b(c)(1), (d)(2)(A). The burden of
proof to establish eligibility rests with the alien investor.
See 8 U.S.C. § 1361.
further delineate the general eligibility criteria, the EB-5
regulations define certain key terms that are otherwise
undefined in the INA. 8 C.F.R. § 204.6(e). For example,
to “invest” in the new commercial enterprise and
create employment, the alien investor must “contribute
[a qualifying amount of] capital” to that enterprise.
Id. “Capital” is defined as “cash,
equipment, inventory, other tangible property, cash
equivalents, and indebtedness secured by assets owned by the
alien entrepreneur, provided that the alien entrepreneur is
personally and primarily liable and that the assets of the
new commercial enterprise . . . are not used to secure any of
the indebtedness.” Id. To qualify as
“capital, ” the invested asset must have been
lawfully-obtained: “assets acquired, directly or
indirectly, by unlawful means . . . shall not be considered
capital.” Id. The regulations further clarify
that a “contribution of capital in exchange for a note
. . . obligation, or any other debt arrangement between the
alien entrepreneur and the new commercial enterprise does not
constitute a contribution of capital.” Id.
issue in this case is whether loan proceeds invested as cash
constitute “cash, ” as plaintiffs claim, or
“indebtedness, ” as USCIS claims. On April 22,
2015, USCIS' Immigrant Investor Program Office
(“IPO”) released remarks stating that invested
loan proceeds “may qualify as capital used for EB-5
investments, provided that the requirements placed
upon indebtedness by 8 C.F.R. § 204.6(e) are
satisfied.” See USCIS, Immigrant Investor
Program Office, EB-5 Telephonic Stakeholder Engagement: IPO
Deputy Chief's Remarks (Apr. 22, 2015), available at
(hereinafter referred to as “2015 IPO
Remarks”)(emphasis in original). The remarks
When using loan proceeds as EB-5 capital, a petitioner must
demonstrate first that they are personally and primarily
liable for the indebtedness. That is, they must demonstrate
that they bear primary responsibility under the loan
documents for repaying the debt that is being used to satisfy
the petitioner's minimum required investment amount.
In addition, the petitioner must demonstrate that the
indebtedness is secured by assets the petitioner owns and
that the value of such collateral is sufficient to secure the
amount of indebtedness that is being used to satisfy the
petitioner's minimum required investment amount.
Id. at 1. Plaintiffs argue that the 2015 IPO Remarks
“announced a change in [USCIS'] longstanding
adjudicatory practice concerning the classification of loan
proceeds.” Pls.' Mot. for Summ. J.
(“MSJ”), ECF No. 19 at 21. In so doing,
USCIS “fundamentally reworked the definition of
‘capital'” under 8 C.F.R. § 204.6(e).
Id. at 22. As such, plaintiffs challenge USCIS'
interpretation of the regulation and argue that cash obtained
from third-party loans and invested in an enterprise
qualifies as “cash” within the regulatory
definition of “capital” rather than
“indebtedness.” See generally Pls.'
MSJ, ECF No. 19.
Plaintiffs' I-526 Petitions
individually-named plaintiffs are two alien investors who
challenge USCIS' decision to deny their petitions on
behalf of a putative class of alien investors. Compl., ECF
No. 1 ¶ 1; see Pls.' Mot. for Class
Certification (“Pls.' Class Cert. Mot.”), ECF
No. 10. As certified below, the plaintiffs represent all Form
I-526 petitioners who: (1) invested cash in a new commercial
enterprise in an amount sufficient to qualify as an EB-5
investor; (2) obtained some or all of the cash invested in
the new commercial enterprise through a loan; (3) filed an
I-526 petition based on that investment; and (4) received
or will receive a denial of their I-526 petition
solely on the ground that the loan used to obtain
the invested cash fails the collateralization test described
in the USCIS 2015 IPO Remarks announcement.
plaintiff Huashan Zhang is a citizen of the People's
Republic of China seeking to immigrate to the United States
with his wife and children. Zhang Admin. R. (“Zhang
A.R.”), ECF Nos. 27-2, 27-3, 27-4. On December 23,
2013, Mr. Zhang filed an I-526 petition claiming that he
fulfilled the minimum capital requirement by investing $500,
000 in cash in a new commercial enterprise in Las Vegas,
Nevada. Zhang A.R., ECF No. 27-2 at 4-26. Mr. Zhang obtained
the invested $500, 000 via a loan from Shaanxi Northwest
Textile and Dyeing Company (“Shaanxi Northwest”).
Id. at 22. Mr. Zhang owns 99 percent of Shaanxi
Northwest. Id. The loan was secured by his
undistributed profits held by the company, which greatly
exceeded $500, 000. Id. at 22-25; Zhang A.R., ECF
No. 27-3 at 4 (loan agreement between Shaanxi Northwest and
Mr. Zhang). Shaanxi Northwest wired the loan proceeds to Mr.
Zhang's personal account. Zhang A.R., ECF No. 27-2 at 20,
25-26. Mr. Zhang then converted the loan proceeds into U.S.
currency and wired the funds into an escrow account earmarked
for the new commercial enterprise. Id.
28, 2015, USCIS denied Mr. Zhang's I-526 petition,
asserting that Mr. Zhang did not place the required amount of
capital at risk for the purpose of generating a return on his
investment. Zhang A.R., ECF No. 27-4 at 175-85. Interpreting
the invested cash loan proceeds as “indebtedness,
” USCIS determined that Mr. Zhang's investment did
not qualify as “capital” because the Shaanxi
Northwest loan was not secured by his personal assets.
Id. at 179-80. Instead, Mr. Zhang's loan was
secured solely by his undistributed profits, which belonged
to Shaanxi Northwest until distributed. Id. Because
Mr. Zhang had not met the requirements for
“indebtedness, ” USCIS concluded that he
“had not placed the required amount of capital at risk
for the purposes of generating a return on his investment
as the shareholder loan proceeds do not constitute
qualifying capital pursuant to 8 C.F.R. §
204.6(e).” Id. at 180 (emphasis added).
named plaintiff Mayasuki Hagiwara is a Japanese citizen
seeking to immigrate to the United States with his wife
though the EB-5 Program. Hagiwara Admin. R. (“Hagiwara
A.R.”), ECF No. 27-1. On March 17, 2014, Mr. Hagiwara
filed his I-526 petition with USCIS, asserting eligibility
based on his $500, 000 cash investment in a new commercial
enterprise in Tonopah, Nevada. Id. at 4-14. Mr.
Hagiwara obtained the invested $500, 000 via a personal loan
from J. Kodama, Inc., a Hawaiian corporation of which Mr.
Hagiwara is a majority shareholder. Id. at 10. The
loan was secured by Mr. Hagiwara's stock holdings in the
corporation. Id. at 254. The funds were wired and
“released” to the new commercial enterprise
“for deployment” in accordance with its business
plan. Id. at 11.
the same general reasoning as in Mr. Zhang's case, USCIS
denied Mr. Hagiwara's I-526 petition on March 27, 2015.
Id. at 392-95. USCIS found that Mr. Hagiwara's
investment did not qualify as “capital” pursuant
to 8 C.F.R. § 204.6(e) because he invested cash loan
proceeds that were not secured by personal assets.
Id. at 394-95. Although Mr. Hagiwara protested that
he had invested “cash” and not
“indebtedness, ” USCIS reasoned that investing
loan proceeds is tantamount to investing indebtedness, which
must be secured by the petitioner's personal assets under
the regulation. Id. at 395. USCIS concluded that the
regulation “clearly precluded” characterizing
“all unsecured third-party loans” as
contributions of cash and denied his petition. Id.
filed their complaint on June 23, 2015 and all pending
motions were ripe for review by June 2016. However, the Court
stayed the case in March 2017 when the parties indicated that
they were amenable to settlement assistance from the
Court's mediation program. Mediation efforts failed, and
the pending motions are ready for adjudication.
before the Court are: (1) plaintiffs' motion for summary
judgment; (2) USCIS' cross-motion for summary judgment;
(3) plaintiffs' motion to certify class; and (4)
plaintiffs' motion to amend the complaint. The Court
first considers the cross-motions for summary judgment. The
Court analyzes two of plaintiffs' four claims: (1) that
USCIS' interpretation of 8 C.F.R. § 204.6, the EB-5
regulation, is erroneous because it contravenes the
regulation's plain meaning; and (2) that USCIS violated
the APA because its interpretation is a legislative rule
promulgated without notice and comment. Because the Court
agrees with plaintiffs on these two claims, it need not
assess plaintiffs' two other claims: (1) that USCIS'
application of its interpretation has been impermissibly
applied retroactively; and (2) that USCIS' interpretation is
ultra vires and exceeds its statutory authority
conferred by the INA. The Court then considers
plaintiffs' motion to certify class. Because the Court
grants in part plaintiffs' motion for summary judgment
and motion to certify class, it need not consider the pending
motion to amend the complaint.
Cross-Motions for Summary Judgment
each of plaintiffs' four claims against USCIS is
disputed, the essential issue is whether lawfully-obtained,
loan proceeds invested in the enterprise as cash are properly
characterized as “cash” or as
“indebtedness” pursuant to 8 C.F.R. §
204.6(e). Because the Court agrees that USCIS'
interpretation of its regulation is plainly erroneous,
denying plaintiffs' petitions pursuant to that
interpretation was arbitrary and capricious. Moreover, the
Court finds that USCIS' interpretation effectively amends
a regulation without notice and comment, violating the APA.
USCIS' Interpretation of 8 C.F.R. § 204.6(e) is
The Parties' Arguments
argue that USCIS' interpretation-that third-party loan
proceeds invested as cash in a commercial enterprise are
properly characterized as “indebtedness” within
the meaning of “capital”-is plainly erroneous.
Plaintiffs contend that USCIS' interpretation, as
articulated in the 2015 IPO Remarks, “ignores the plain
language, structure, history, and purpose of the regulation
on which it purports to be based.” Pls.' MSJ, ECF
No. 19 at 30. They argue that the plain meaning of the word
“cash” encompasses cash loan proceeds and the
definition of “capital” in the regulation
mandates that lawfully-obtained “cash”
necessarily qualifies as “capital” without
further collateral prerequisites. Id. at 31-33
(“[C]ash obtained from a loan is no less
‘cash' than cash obtained from any other
source.”). Because plaintiffs invested the requisite
amount of lawfully-obtained cash, they argue that they
satisfactorily invested “capital.” Id.
also argue that cash loan proceeds cannot be characterized as
“indebtedness, ” the only form of
“capital” that must be secured by assets owned by
the alien investor. Id. at 33-34. Because
indebtedness means the “condition of being indebted,
” plaintiffs contend that investing indebtedness is
only “an asset of value to the new commercial
enterprise” when “it describes an investor's
obligation to make monetary payments to the
enterprise at a later date.” Id. at 33
(emphasis added). Thus, “indebtedness” is not a
debt to an unrelated third-party lender, but rather a debt to
the enterprise itself. Id. at 33-35. Plaintiffs also
argue that USCIS' interpretation is inconsistent with the
history and structure of the regulation and the INA. See
Id. at 36-37. Finally, plaintiffs argue that USCIS did
not provide a rational explanation for its interpretation and
that USCIS ignored the unfair effect of applying its
interpretation retroactively to plaintiffs'
cases.Id. at 37-38.
responds that its decision to deny plaintiffs' petitions
was “reasonable.” Defs.' MSJ & Opp'n,
ECF No. 22 at 13. According to USCIS, its decisions were
based on its “longstanding interpretation of its
regulation” that cash loan proceeds invested in an
enterprise are properly characterized as “indebtedness,
” and thus must be personally collateralized to qualify
as “capital.” Id. at 24. Therefore, to
qualify, a petition must establish that the alien investor
“secured the loan using assets for which they own and
are personally and primarily liable.” Id.
also argues that its interpretation is not erroneous because
it “aligns with the foundational requirements that the
alien investor must demonstrate that he is placing capital he
owns directly at risk.” Id. at 25 (citing 8
C.F.R. § 204.6(j)(2), (3)). According to USCIS, an alien
investor must provide different evidence to show that his or
her investment is “at risk” depending on the
source of that investment. See Id. at 26. Because
plaintiffs obtained their capital from loan proceeds, USCIS
argues that they must provide evidence of “any loan . .
. agreement . . . which is secured by assets of the
petitioner” to show that the investment is at risk.
Id. (quoting 8 C.F.R. § 204.6(j)(2)(v)). USCIS
further contends that if it simply reduced all financial
arrangements to “their tangible end product -
‘cash, '” as plaintiffs argue, the agency
would be unable to investigate an investor's ownership
and source of funds. Id. at 27.
USCIS argues that because the agency is interpreting its own
regulation, it is entitled to “even greater deference
than the Chevron standard, ” which plaintiffs
have failed to overcome. Id. at 24 (quoting
Consarc Corp. v. U.S. Treas. Dep't, 71 F.3d 909,
915 (D.C. Cir. 1995)).
Standard of Review
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, ” which “requires a reviewing court to
‘hold unlawful and set aside agency action, findings,
and conclusions found to be . . . arbitrary, capricious, an
abuse of discretion, or otherwise not in accordance with the
law.'” UPMC v. Sebelius, 793 F.Supp.2d 62,
67 (D.D.C. 2011)(quoting 5 U.S.C. § 706(2)(A)). However,
due to the limited role of a court in reviewing the
administrative record, the typical summary judgment standards
set forth in Federal Rule of Civil Procedure 56(c) are not
applicable. Stuttering Found. Of Am. V. Springer,
498 F.Supp.2d 203, 207 (D.D.C. 2007) (internal citation
omitted). Rather, “[u]nder the APA, it is the role of
the agency to resolve factual issues to arrive at a decision
that is supported by the administrative record, whereas
‘the function of the district court is to determine
whether or not as a matter of law the evidence in the
administrative record permitted the agency to make the
decision it did.'” Id. (quoting
Occidental Eng'g Co. v. INS, 7523 F.2d 766,
769-70 (9th Cir. 1985)). A reviewing court will “hold
unlawful and set aside agency action, findings, and
conclusions found to be . . . arbitrary, capricious, an abuse
of discretion, or otherwise not in accordance with the
law.” Ludlow v. Mabus, 793 F.Supp.2d 352, 354
(D.D.C. 2001) (quoting 5 U.S.C. § 706(2)(A)); see
also Tenet Healthsystems Healthcorp. v. Thompson, 254
F.3d 238, 243 (D.C. Cir. 2001).
arbitrary and capricious standard of review is “narrow,
” and “a court is not to substitute its judgment
for that of the agency.” F.C.C. v. Fox Television
Stations, Inc., 556 U.S. 502, 513-14 (2009)(citations
and quotations omitted). An agency rule will be found to be
arbitrary and capricious “if the agency has relied on
factors which Congress has not intended it to consider,
entirely failed to consider an important aspect of the
problem, offered an explanation for its decision that runs
counter to the evidence before the agency, or is so
implausible that it could not be ascribed to a difference in
view or the product of agency expertise.” Motor
Vehicle Mfrs. Ass'n of U.S., Inc. v. State Farm Mut.
Auto. Ins. Co., 463 U.S. 29, 43 (1983).
reviewing court “must give substantial deference to an
agency's interpretation of its own regulations.”
Thomas Jefferson Univ. v. Shalala, 512 U.S. 504, 512
(1994)(citations omitted). However, such deference “is
warranted only when the language of the regulation
is ambiguous.” Christensen v. Harris County,
529 U.S. 576, 588 (2000)(emphasis added). If the regulation
is ambiguous, the agency's interpretation must be given
“controlling weight unless it is plainly erroneous or
inconsistent with the regulation.” Thomas Jefferson
Univ., 512 U.S. at 512 (citations and quotations
omitted). However, if an “‘alternative reading is
compelled by the regulation's plain language or by other
indications of the Secretary's intent at the time of the
regulation's promulgation, '” the Court need
not defer to the agency's interpretation. Id.
(quoting Gardebring v. Jenkins, 485 U.S. 415, 430
USCIS' Interpretation is Plainly Erroneous
Court first considers whether USCIS' interpretation- that
loan proceeds invested as cash are properly characterized as
indebtedness-is inconsistent with the plain meaning of the
regulation. If the regulation is clear that cash loan
proceeds are invested as “cash, ” USCIS'
interpretation of 8 C.F.R. § 204.6(e), as set forth in
the 2015 IPO Remarks, is “plainly erroneous or
inconsistent with the regulation” itself. Auer v.
Robbins, 519 U.S. 452, 461 (1997). As such, USCIS'
decisions to deny plaintiffs' petitions based solely on
that interpretation would also be erroneous. See
id.; see also 2015 IPO Remarks at 1;
See Zhang A.R., ECF No. 27-4 at 179-80
(“[P]etitioner has not demonstrated that he has placed
the required amount of capital at risk . . . as the
shareholder loan proceeds do not constitute qualifying
capital pursuant to 8 C.F.R. § 204.6(e).”);
Hagiwara A.R., ECF No. 27-1 at 394-96 (“Petitioner has
failed to establish by a preponderance of the evidence that
his unsecured loan . . . meets the regulatory definition of
discussed below, the Court first finds that the regulation is
unambiguous and USCIS' interpretation contravenes its
plain meaning. The Court also concludes that USCIS'
interpretation is inconsistent with its own precedent and the
context and history of the EB-5 Program. As such, the Court
concludes that USCIS' decisions to deny plaintiffs'
petitions were arbitrary and capricious.
The EB-5 Regulation is Unambiguous
mandates that visas must be made available when an alien
“has invested . . . capital” in a specified
amount to “benefit the United States economy and create
full-time employment for not fewer than [ten] United States
citizens . . . .” 8 U.S.C. § 1153(b)(5). Congress
did not define “invest” or “capital”
in the statute. See Id. In 1991, USCIS'
predecessor agency, the INS, published regulations defining
Invest means to contribute
Capital means cash, equipment, inventory,
other tangible property, cash equivalents, and
indebtedness secured by assets owned by the alien
entrepreneur, provided that the alien entrepreneur is
personally and primarily liable and that the assets of the
new commercial enterprise upon which the petition is based
are not used to secure any of the indebtedness. All capital
shall be valued at fair market value in United States
dollars. Assets acquired, directly or indirectly, by unlawful
means (such as criminal activities) shall not be considered
capital for the purposes of section 203(b)(5) of the Act.
8 C.F.R. § 204.6(e)(emphasis added and alphabetical
is therefore the type of asset that is invested or
“contributed” to the commercial enterprise for
the purpose of creating employment. See id.; 8
U.S.C. § 1153(b)(5). To be considered “capital,
” an invested asset must meet only two requirements:
(1) it must be contributed in one of the six acceptable
forms; and (2) it must be lawfully acquired. See 8
C.F.R. § 204.6(e). The definition approves six forms of
“capital”: “ cash,  equipment, 
inventory,  other tangible property,  cash equivalents,
and  indebtedness [so long as the invested indebtedness is
secured by assets owned by the investor, such that the
investor is personally and primarily liable, and that the
enterprise is not used to secure the debt].”
regulation does not define “cash” or
“indebtedness” within the definition of
“capital.” However, the text plainly directs the
agency to view the transaction between the alien investor and
the enterprise to identify the particular asset actually
“contributed” to the enterprise. Id.
(“invest means to contribute capital”); 8 U.S.C.
§ 1153(b)(5)(visas shall be made available to aliens who
invest capital in an enterprise to benefit the economy and
create employment). USCIS must therefore determine whether
that contributed asset meets the definition of
“capital, ” i.e., whether it was: (1)
contributed in an acceptable form; and (2) lawfully acquired.
See Id. In plaintiffs' cases, it is undisputed
that the assets actually contributed to the enterprises were
cash loan proceeds. See Hagiwara A.R., ECF No. 27-1
at 394-95; Zhang A.R., ECF No. 27-4 at ...