The Below Article was published in the recent Reauthorization Edition of the IIUSA Regional Center Business Journal!
By Matthew Galati, Principal, The Galati Law Firm
EB-5 petitions/applications are sometimes denied. It happens. Nobody goes into the EB-5 process expecting a denial. And many times, denials are not the applicant’s fault. Yet the statistics show that denials happen more often than one might think. According to Fiscal Year 2020 data from USCIS shown in the table below, a significant number of applicants faced denials.
Surprise denials are hardly uncommon throughout the program’s history. A case in point are the loan collateral cases in the mid 2010s where whether they admitted it or not, USCIS changed its policies regarding the adjudication of the use of loan proceeds for EB-5 capital seemingly overnight, with no warning to investors, attorneys, and agents. Investment strategies that were long accepted as valid were suddenly leading to mass denials. Only after significant litigation – heading all the way to the D.C. Circuit Court of Appeals – did USCIS finally relent and apply the plain meaning of the regulations to its adjudication policies. Similar situations have occurred in EB-5 history such as when USCIS was forced to back track on what was accepted as kosher, for example: the reversal of the use of tenant occupancy as an input to economic modeling, as well as the use of third-party currency exchangers as opposed to traditional banks (most notably among Vietnamese investors).
Denials happen. Hopefully they won’t happen to you or your company’s petition. However, if a denial does occur, this article addresses the options available to applicants, the pros and cons of each, and some specific nuances relating to some types of denials and the various paths forward.
What options are legally available?
In contesting a denial, one is faced with two basic options: 1) fight the denial with USCIS or 2) fight the denial in federal court. Importantly, EB-5 stakeholders are not usually required to exhaust administrative remedies before going to federal court. In the seminal case Darby v. Cisneros, the Supreme Court of the United States held that unless a statute or regulation requires “exhaustion of administrative remedies,” an aggrieved applicant may take his or her suits to federal court. Fortunately, most immigration-related applicants facing a denial need not exhaust the administrative remedies discussed below.
There presently is no requirement that an administrative appeal be filed for a denied I-924 or I-526. An I-829 is a little more complicated. Upon an I-829 denial, the regulations require USCIS to issue a “Notice to Appear” which is essentially an indictment/summons commencing immigration court proceedings. Federal law generally limits federal courts from intervening from the removal, i.e., the deportation process. In other words, convincing a federal court to entertain jurisdiction of a case where an applicant is in removal proceedings is quite difficult. But USCIS does not uniformly attempt to deport every denied I-829 investor. Notably, in an important 2011 case (Kyu Seock Lee v. USCIS,, 2011 WL 10858556 ) a court held that narrow exceptions exist regarding the challenging of I-829 denials, specifically acts occurring before removal proceedings begin and questions raised that exceed the scope of an immigration court’s authority. This could be in essence also establishing a race to the particular courthouse – investors to federal courts and USCIS to immigration courts…