Federal Court Litgation of EB-5 Cases (Vol. 2, Issue 1, March 2014, Pgs. 24-25 )
By Ira J. Kurzban, Kurzban, Kurzban, Weinger, Tetzeliand Pratt, P.A.
Why litigate an EB-5 case in federal court? There are clearly other administrative options. A client confronted with a denial of an I-526 petition can file a motion to reopen. Alternatively, she can file an appeal of the denial to the Administrative Appeals Office (“AAO”) within USCIS. A client denied an I-829 petition might have time to ask for reconsideration, or could battle the case out with district counsel in a removal hearing before the immigration judge.
The best course of action among these options is never obvious. Filing a motion to reopen delays resolution of the case. It gives the government an opportunity to explain its decision further, at times providing an avenue for USCIS to offer new, different, and more reasonable grounds for their denial. Appealing cases to the AAO is fraught with the same dangers and the time delay may be far greater than litigation. On the other hand, litigation is time consuming, expensive, and offers no guarantees of success.
So how to decide whether to litigate in federal court? To answer the question, we must first know what we are litigating, what issues can be resolved through litigation, what does the litigant hope to accomplish strategically at the end of the process, and whether the fight will be worth it.
One of the major problems facing regional centers and their investor clients is simply the waiting time the USCIS takes to adjudicate their cases. Delays in adjudications cause hardship to regional centers, project enterprises, and investors. Projects cannot be funded if the EB-5 capital is sitting in escrow. The clients are understandably unhappy with the waiting time. Even cases where the funds have already been invested to the commercial enterprise pose problems; the lack of certainty about adjudication leaves open the possibility that investors may elect to withdraw at a time when funds are not easily accessible. Similarly, a person who has received his conditional residency and is waiting over a year to have the condition removed finds herself uncertain as to when or if the condition will be removed or whether she will be placed in a removal proceeding.
In these circumstances, a federal court petition for mandamus to compel the government to take action makes good sense. A mandamus action seeks to compel the government to render a decision. A litigant may also seek the same result through the Administrative Procedure Act which requires that the government not “unreasonably delay” a decision on the merits of an application. When either or both mechanisms are invoked, the government is put to the test of explaining why a case has been pending for a substantial period of time. Generally, the courts are reluctant to intervene when the time period is less than a year but each case turns on its own merits and the government’s own “processing times” may be used against them when those times have already run.
The greatest advantage of the mandamus remedy is that the government often will make a decision regarding the investor’s case within the 60-day period it was otherwise required to answer the mandamus complaint under the Federal Rules of Civil Procedure. Thus, rather than give excuses or defenses for their failure to adjudicate the I-526 or I-829 petition, USCIS will simply go ahead and address the merits of the case—the exact remedy the regional center or investor seeks in bringing the action.
Clients are often fearful that bringing a mandamus action will result in the government denying the case out of sheer exasperation in being pressured to make a decision, or out of anger at having to answer the suit. My experience suggests otherwise. The government may deny cases that they were inclined to deny anyway. More often than not, the cases get approved in quick succession.
Review of a Merits Denial
Federal court review of a denial on the merits is a far more complex problem. Whether a client should file suit will turn on the nature of the denial, the likelihood of success in litigation, and the client’s willingness to endure what may be a long battle.
The details of the denial will often be a good indicator of whether the government may be willing to resolve the case quickly in the litigant’s favor, reopen the case and take a second look, or fight the case on the merits. One of the most important indicators is the number of reasons USCIS offers in its denial. If the case involves one issue, such as whether the funds are “at risk” or the arrangement constitutes a “redemption agreement,” the government may be more willing to settle the case if the issue can be resolved by refiling or simply making changes that do not constitute “material changes” in the documentation. In other cases, USCIS engages in the strategy of “death by a thousand cuts.” They offer so many reasons for the denial, many petty, erroneous, or legally insufficient, that the lawyer is faced with the difficult task of unthreading the mosaic USCIS has created. In these cases, it may be more likely that the government will fight the case with its seemingly unlimited resources. However, our experience is that in many circumstances these cases can be pared down, simplified, and either fought on limited grounds or settled with USCIS.
Faced with the denial, the investor must realistically ask what are the alternatives? She can withdraw and invest the money with another EB-5 project. But then she may be waiting an additional 16 to 18 months to have the new case adjudicated. The second adjudication is no more secure than the first and the idea that simply hopping from one regional center project to another will give you a better result is misleading. Children may have “aged-out” and there may be no method to include the child in their new petition, absent winning the lawsuit based on the initial I-526 petition. In contrast to these untenable outcomes, federal court litigation might be completed in a relatively short period of time if the government is willing to reopen and approve the case or at least take a serious second look at the denial.
Likelihood of Success Versus Cost
The regional center and the investor also must weigh the likelihood of success versus the cost of litigation. These EB-5 cases are complex and commercial, economic, securities, corporate and immigration issues are woven into the disputes in each and every case. Consequently it is impossible to reduce the likelihood of success to some formula. But there may be a better chance of success than the regional center or investor perceives. The other side of the complexity is that the USCIS decision may be indefensible in ways that the government would least expect. Often the cases involve retroactive application of principles that USCIS announces spontaneously. Often cases turn on a misperception of a relatively simple issue such as the nature of the inputs into IMPLAN or the miscalculation of the source of employment. At times, the cases will turn on a legal interpretation of one or two issues. Litigation works best in the EB-5 context when we can narrow the issues and present clear, coherent arguments to a federal judge on limited issues. You cannot successfully challenge a USCIS decision on every incorrect factual or legal ground. The likelihood of success rises as the number of issues you must address is narrowed to clear statements of fact or law.
Cost is always an issue in litigation, and it is difficult to predict ahead of time the likely total cost of litigating a case in federal court. An experienced litigator should be able to provide ranges of cost for particular phases of litigation. But inaction, or simply filing endless motions to reopen or appeal, is also a costly exercise. Consider, too, that the federal court litigant might recover attorneys’ fees in certain limited circumstances. The Equal Access to Justice Act provides that litigants whose incomes are below a certain level may recover their attorneys’ fees from the government in federal litigation if the government fails to demonstrate that its position in the litigation, and its underlying actions, were not substantially justified.
At the present time there is on-going litigation in many areas of the EB-5 program. Litigation has arisen in the form of mandamus, review of I-526 and I-829 petition denials, review of regional center denials, and defense of securities law violations. In a highly regulated field such as EB-5, and as the federal government looks more closely at the details of each regional center and investment program, it is likely that such litigation will continue.
Mr. Kurzban is a partner in the law firm of Kurzban, Kurzban, Weinger, Tetzeliand Pratt, P.A. of Miami, Florida and is the author of Kurzban’s Immigration Law Source-book, the most widely used single volume work on immigration law. He has litigated over 50 federal cases involving immigration matters, has argued cases in the United States Supreme Court, and is currently litigating a substantial numberof EB-5 cases.
RCBJ Retrospective articles are reprinted from IIUSA’s Regional Center Business Journal trade magazine. Opinions expressed within these articles do not necessarily represent the views of IIUSA and are provided for educational purposes.