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Wang v. United States Citizenship and Immigration Services

United States District Court, District of Columbia

April 19, 2019

TINGZI WANG, Plaintiff,
v.
UNITED STATES CITIZENSHIP AND IMMIGRATION SERVICES et al., Defendants.

          MEMORANDUM OPINION

          TIMOTHY J. KELLY, UNITED STATES DISTRICT JUDGE

         Plaintiff Tingzi Wang, a Chinese national, sought a visa for entry into the United States through the EB-5 Immigrant Investor Program, which grants legal resident status to qualified foreign nationals that invest capital in a new commercial enterprise. Wang applied for the visa based on his million-dollar investment in a Florida restaurant, for which he received an equity stake. Wang claimed that his investment was fully “at risk” as required by the EB-5 regulations. However, the United States Customs and Immigration Services (USCIS) denied his petition because his investment agreement included a guarantee that the other restaurant owners would purchase his stake whenever he wished to end his investment, thereby returning a portion of his capital to him. This sell option, USCIS concluded, eroded his capital contribution below the minimum amount required to be “at risk.” This case is about whether USCIS reached that determination lawfully. Before the Court are the parties' cross-motions for summary judgment. For the reasons explained below, the Court will grant Defendants' Amended Cross-Motion for Summary Judgment, ECF No. 26, and deny Wang's Amended Motion for Summary Judgment, ECF No. 25.[1]

         I. Background

         A. The EB-5 Immigrant Investor Program

         In 1990, the Immigration and Nationality Act (INA) established the EB-5 Immigrant Investor Program, which provides visas to aspiring immigrants who make qualifying investments in U.S. commercial projects. 8 U.S.C. § 1153(b)(5). To qualify for an EB-5 visa, an individual must invest at least $1, 000, 000 of capital into a new, restructured, or expanded business or commercial project in the United States and that investment must create at least ten full-time jobs for U.S. workers.[2] Id. Once the individual, or “petitioner, ” makes the required capital investment, she may submit a Form I-526 petition to USCIS to obtain status as a legal U.S. resident, along with her spouse and children, on a conditional basis for two years. 8 C.F.R. § 204.6(a). After two years, a petitioner seeking permanent resident status may submit a Form I-829 petition to USCIS to show that she has satisfied all capital investment and job-creation requirements of the program. See 8 C.F.R. § 216.6(c). If a petitioner fails to meet these requirements, or neglects to file an I-829 petition, USCIS must terminate the petitioner's conditional immigrant visa. See 8 U.S.C. § 1186b(b)(1); 8 C.F.R. §§ 216.6(a)(5), 216.6(d)(2).

         The EB-5 program imposes specific requirements, through regulations promulgated by the Department of Homeland Security (DHS), about how, and under what conditions, petitioners must invest their capital to qualify for a conditional visa. Under those regulations, a petitioner must place “the required amount of capital at risk for the purpose of generating a return.” 8 C.F.R. § 204.6(j)(2). To be “at risk, ” the petitioner must “show actual commitment of capital.” Id. “Evidence of mere intent to invest, or of prospective investment arrangements entailing no present commitment, will not suffice to show that the petitioner is actively in the process of investing.” Id. And any capital contribution cannot be made “in exchange for a note, bond, convertible debt, obligation, or any other debt arrangement.” 8 C.F.R. § 204.6(e).

         Under DHS regulations, a petitioner for an immigration benefit “must establish that he or she is eligible for the requested benefit at the time of filing the benefit request and must continue to be through adjudication.” 8 C.F.R. § 103.2(b)(1). Any additional evidence submitted in connection with a benefit request at a later date, including evidence responding to a request from USCIS, must also establish a petitioner's “eligibility at the time the benefit request was filed.” 8 C.F.R. § 103.2(b)(12). Under this rule, USCIS will deny a petition if the petitioner becomes eligible only after the petition was filed. Id.

         USCIS may designate certain decisions issued by the Board of Immigration Appeals (BIA) as “precedent decisions” that are binding in future proceedings. 8 C.F.R. § 103.3(c). The BIA has designated four such decisions relating to USCIS adjudications of petitions under the EB-5 program. Relevant here is the BIA's decision in Matter of Izummi, 22 I. & N. Dec. 169 (BIA 1998). In that decision, the BIA held that an investment made to support an I-526 petition “cannot be said to be at risk” if it was “guaranteed to be returned, regardless of the success or failure of the business.” 22 I. & N. Dec. at 184. Further, in that decision, the BIA held that a petitioner “may not make material changes to a petition that has already been filed in an effort to make an apparently deficient petition conform to Service requirements.” Id. at 175.

         B. Wang's Petition for an EB-5 Visa

          In June 2014, Wang filed an I-526 petition for EB-5 visas for himself and his wife, daughter, and son-all of whom, like Wang, are Chinese nationals. JA 4. Wang asserted his eligibility under the EB-5 program based on his $1, 000, 000 investment in Boca Restaurant, Inc., d/b/a Community Table (“Boca Restaurant” or “the Corporation”), a restaurant in Boca Raton, Florida. JA 5-7. The month beforehand, Wang had completed his investment by transferring $1, 000, 000 in cash to Boca Restaurant's operating account. Id. According to Wang's petition, his capital investment in Boca Restaurant created 18 new jobs for U.S. workers. JA 3. Wang also submitted an executed shareholder's agreement (the “Agreement”) as part of his petition, dated February 28, 2014, that governed the terms of his investment. JA 20-30. In exchange for his capital investment, as set forth in the Agreement, Wang received equity shares in Boca Restaurant worth 40% of the company. JA 20.

         Section 6.01 of the Agreement, titled “Transfer of Shares, ” contained the terms by which investor-shareholders could transfer their shares to Boca Restaurant. JA 23. Under that section, “the Corporation shall purchase and the Shareholder or his or her estate shall sell to the Corporation, at the price set forth in Section 6.11, all of the shares in the Corporation legally or beneficially owned by the Shareholder” upon the occurrence of any of these events:

(a) the death of a Shareholder,
(b) the termination of [a] Shareholder's employment with the Corporation, or
(c) the voluntary retirement of a Shareholder . . . .

Id. Section 6.11 of the Agreement defined the purchase price “to be paid for the interest of a Shareholder”:

The value of each share of stock in the Corporation shall be equal to its book value plus an amount equal to (1) 70 percent of the accounts of the Corporation as of the end of the most recently completed fiscal quarter that precedes the event causing the sale of the shares, divided by (2) the number of outstanding shares of the Corporation as of the Purchase Date.”

JA 26. Section 6.13 of the Agreement further defined the term “book value” as “the value of the capital stock of the Corporation as of the valuation date.” JA 27. And under the Agreement, this value is calculated as follows:

“[B]ook value” shall be defined to be the value of the stock of the Corporation after deducting the sum of all the liabilities of the Corporation from the sum of all the assets and property of the Corporation as shown on the books of the Corporation, except that the capital stock of the Corporation shall not be deducted as a liability, nor shall any surplus or undivided profits or any reserve fund representing the surplus or undivided profits be deducted.

Id.[3] Upon the event of a sale under Section 6.01, the “book value” of the shares sold is calculated “30 days after the date of the event precipitating the sale.” Id.

         In October 2015, USCIS responded to Wang's I-526 petition by sending him a Request for Evidence (RFE), which noted that he had “not established that [he was] eligible” for a temporary EB-5 visa and asked him to submit additional evidence to remedy “deficiencies in the existing record.” JA 79-84. Specifically, USCIS alleged, Wang had not established that his investment capital was “at risk for the purpose of generating a return in accordance with applicable law.”[4] JA 82. Because Sections 6.01 and 6.11 of the Agreement provided Wang “the option to withdraw and/or sell back his shares at any time he desires and receive all or a portion of his investment capital in return, ” the RFE stated, “there appear[ed] to be a guaranteed return agreement and a lack of risk.” Id. To remedy this deficiency, the RFE permitted Wang to submit additional evidence to show that the Agreement “does not have a guaranteed return of capital that erodes [Wang's] capital contribution below the minimum amount.” JA 83.

         A few months later, Wang responded to the RFE in part by submitting an amended shareholder agreement (the “Amended Agreement”), with the following provision added:

Notwithstanding any provision of the Agreement to the contrary, this Amendment shall hereby amend all provisions contained in Section 6 of the Agreement with respect to the right of Wang to transfer his shares in the Company. In compliance with the legal and policy requirements of the United States Citizenship and Immigration Services' EB-5 Immigrant Investment Program, Wang cannot sell, transfer or assign, in any manner, all or any part of his shares in the Company, prior to receiving final adjudication of his Form I-829 Immigrant Petition for Entrepreneur . . . including but not limited to his premature death or disability. Further, neither the Company nor any Shareholder can acquire the shares of Wang until such time as Wang has received final I-829 Petition adjudication.

         JA 94. Wang stated in his response that his capital investment was “100% at risk” under the original terms of the agreement because it “never intended to guarantee a return to investors.” JA 86. All the same, Wang informed USCIS that the shareholders amended the Agreement “in order to conform to the [EB-5] program requirements that [Wang] shall not [] sell shares or withdraw from the company prior to receiving final adjudication of Form I-829.” JA 85-86. The Amended Agreement, according to Wang, was “not inconsistent” with the original terms of the Agreement and “d[id] not materially change” the Agreement. Id. Although Wang asserted that it was “the understanding among shareholders/partners” that he would not “withdraw from the company prior to receiving final adjudication of [his] Form I-829 [petition], ” he admitted in his response that this point was not “adequately addressed” by the original Agreement. Id. And he also asserted that Section 6 of the Agreement did not guarantee “all or part of” his “return on investment” because “the company ha[d] an obligation to purchase the shares at a fair market value” and “[m]arket value is dependent on the performance of the business at the time of transfer.” Id.

         On January 14, 2016, USCIS denied Wang's I-526 petition. JA 322-26. USCIS determined that Wang's capital investment was not “at risk” as required by 8 C.F.R. § 204.6(j)(2) because Section 6.01 of the Agreement guaranteed “a return of capital.” Id. In so finding, USCIS declined to consider the additional provision added to the Amended Agreement because, according to USCIS, it constituted a “material change” to his petition. JA 325. “Even if USCIS accepted the amendment as a non-material change, ” USCIS stated in the denial, “the purchase of shares by the company, per Section 6.11, is at ‘book value,' and not ‘fair market value.'” Id. As a result, USCIS concluded that Wang “made the investment with the knowledge that his shares will be worth the same amount for the life of the investment regardless of when he intends to sell them.” Id. For these reasons, USCIS determined that Wang “failed to establish by a preponderance of the evidence that the Form I-526 complies with applicable legal requirements.” Id. In accordance with 8 C.F.R. § 103.5, USCIS offered Wang the opportunity to appeal that decision and provide “additional evidence that shows [its] decision is incorrect.” Id.

         On February 15, 2016, Wang appealed USCIS's denial. JA 327-28. Wang argued that USCIS was “incorrect” when it stated that he had “made an investment with knowledge that his shares will be worth the same amount for the life of the investment.” JA 345. Unlike “the facts under Matter of Izzumi, ” on which USCIS relied, Wang argued that Section 6.01 was a “permissible redemption agreement” that only allowed him to redeem his shares based on their “book value, ” which “depends completely on the performance of the company.” JA 341-43. He also argued that the Amended Agreement did not constitute a material change to his petition because the new provision reflected a “mutual understanding” between the shareholders and “clarif[ied] the concerns [USCIS] raised.” JA 346.

         On July 15, 2016, USCIS dismissed Wang's appeal and affirmed its denial of his I-526 petition. JA 387-92. USCIS acknowledged Wang's argument that it erroneously concluded that he “made the investment with the knowledge that his shares will be worth the same amount for the life of the investment, ” but affirmed that he “still [had] not demonstrated that the required minimum amount of capital was placed at risk for the purpose of generating a return in accordance with applicable law.” JA 390-91.

         C. ...


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