United States District Court, District of Columbia
F. Hogan, Senior United States District Judge
plaintiffs in this suit are Mirror Lake Village, LLC
("Mirror Lake"), a company formed to develop a
senior living community in Washington state, and seven
Chinese nationals who invested $500, 000 each in Mirror Lake
(the "plaintiff-investors"). They are challenging
the United States Citizenship and Immigration Services'
("USCIS") denial of the plaintiff-investors'
1-526 petitions for visas under the "EB-5"
immigrant investor program, which provides visas for
individuals who make qualifying investments in American
companies. The main issue before the Court is whether USCIS
acted in an arbitrary and capricious manner by denying the
plaintiff-investors' visas on the grounds that their
investments in Mirror Lake were not "at risk" as
required by the applicable regulations. The parties have
filed cross motions for summary judgment. [ECF Nos. 18 and
I. Regulatory Background
Immigration and Naturalization Act ("INA")
authorizes USCIS to issue visas to "qualified immigrants
seeking to enter the United States for the purpose of
engaging in a new commercial enterprise ... in which such
alien has invested ... capital." 8 U.S.C. §
1153(b)(5)(A). In order to qualify for visas under the
"EB-5 program," as it is known, the investments
must meet specific, employment-focused criteria. They must
create "full-time employment for not fewer than 10
United States citizens" or other legal immigrants.
Id. at § 1153(b)(5)(A)(ii). For investments in
"targeted employment areas"-rural areas or those
with high unemployment-the investments must be at least $500,
000. Id. at § 1153(b)(5)(B)(ii); 8 C.F.R.
the statute does not define the term "invest,"
implementing regulations clarify that to "invest"
means "to contribute capital." 8 C.F.R. §
204.6(e); see also 8 U.S.C. §§ 1103(a)(1);
(a)(3) (charging the Secretary of Homeland Security with the
"administration and enforcement" of the INA, and
giving him or her the authority to issue regulations "as
he [or she] deems necessary for carrying out his [or her]
authority" under the INA). According to the regulations,
these contributions of capital must not be in the form of
debts. See 8 C.F.R. § 204.6(e) ("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....
"). Investors must demonstrate that they have
"placed the required amount of capital at risk for the
purpose of generating a return on the capital placed at
risk." 8 C.F.R § 204.6(j)(2).
addition to the regulations, Matter of Izummi, a
1998 decision by the Board of Immigration Appeals
("BIA"), provides further guidance on the
agency's requirement that investments be "at
risk." Matter of Izummi, 22 I. & N. Dec.
169 (BIA 1998). In Matter of Izummi, the agency
upheld the denial of a Form I-526 petition because, inter
alia, the petitioner's investment included a put
option that allowed the investor to force the company to buy
his investment back at the original price, discounted by the
amount the company had already repaid the investor.
Matter of Izummi found that the investment could not
"be considered to have been properly
'invested'" and was "not at risk"
because "the petitioner ... entered into an agreement to
pay $290, 000 in exchange for a promise that he can receive
the $290, 000 back six months later." Izummi,
22 I. & N. Dec. at 188. Because the Department of
Homeland Security has designated Matter of Izummi as
a precedential opinion, it "serve[s] as precedent in
all proceedings involving the same issue(s)" and, except
if modified or overruled by later precedential decisions, is
"binding" on the agency. 8 C.F.R. § 103.3(c).
The Investments in Mirror Lake
to Mirror Lake's Limited Liability Company Operating
Agreement (hereinafter "the Agreement"), which
outlines the terms of the plaintiffs' investments in the
company, the seven plaintiff-investors-Yanxue Deng, Hui Ge,
Lei Hu, Ge Li, Zhichun Li, Ying Su, and Yue Wang, each
invested $500, 000 in Mirror Lake. J.A. at 18. Despite their
equal investments, they received different percentages of
interests in the company, ranging from .5% to 3%.
Id. The investors each have the right to exercise a
put option allowing them to force the company to buy back
their interests at the purchase price. The Agreement sets
forth the put option as follows:
At the expiration of the At Risk Period applicable to a
Class A Member, the Company shall provide the Class A Member
with a one-time right and option to compel the Company to
purchase, subject to the Company having sufficient Available
Cash Flow (excluding capital contributed by Members), all or
any portion of such Class A Member's Interest at the
purchase price thereof (e.g., the Capital Contribution made
in respect of such Interest).
J.A. at 12. The Agreement defines "Available Cash
Flow" as "the total cash available to the Company
from all sources less the Company's total cash uses
before payment of debt service." Id. at 5.
the Agreement, Mirror Lake's Confidential Offering
Memorandum repeats the details of the put option and
emphasizes the risks associated with the investment,
including the risk that the company does not acquire
sufficient financing and the risk that the
plaintiff-investors do not receive equity in proportion to
their investments. Id. at 24. The Offering
Memorandum also states that "[t]here can be no guarantee
of the return of invested capital to any EB-5 Member."
The I-526 Petitions and Denials
plaintiff-investors filed 1-526 petitions in October and
November of 2014. Compl. ¶ 79. USCIS issued Notices of
Intent to Deny ("NOIDs") each petition in December
of 2015. Id. U 81. The plaintiffs responded to the
NOIDs in January of 2016, id. ¶ 86, and USCIS
denied all seven of the petitions in February of 2016,
id. ¶ 91. The plaintiff-investors then filed
"Motions to Reopen and Reconsider a Denied Form
1-526" in March of 2016. Id. f98. USCIS denied
six of the motions in May and June of 2016. Id.
¶ 104. Because the parties have asserted that the
petitions and denials were virtually identical, and have only
filed the record associated with the adjudication of Lei
Hu's petition, the Court treats that record as
representative of the other adjudications. Defs.' Mot.
for Summ. J. at 5 [ECF No. 18]; Pls.' Mot. for Summ. J.
at 4-11 [ECF No. 21].
Notice of Intent to Deny plaintiff Lei Hu's petition,
USCIS concluded that the record did "not demonstrate
that the petitioner has placed the required amount of capital
at risk for the purpose of generating a return on the
investment." J. A. at 54. Citing Matter of
Izummi, USCIS noted that "[f]or 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." Id. at 55. UCSIS did
not mention the Agreement's condition that the company
have available cash flow in order for the plaintiff-investors
to exercise their put option.
response to the agency's NOID, Lei Hu pointed to the
Agreement and the Offering Memorandum and emphasized that the
"right of investors to exercise the Put Option ... is
expressly contingent upon the
availability of cash flow." J. A. at 59 (emphasis in
original). She also emphasized that she exchanged capital for
a 2% ownership ...