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Doe v. Johnson

United States District Court, N.D. Illinois, Eastern Division

March 28, 2017

JOHN DOE, Plaintiff,
JEH JOHNSON, Secretary of the U.S. Department of Homeland Security; LEON RODRIGUEZ, Director of U.S. Citizenship and Immigration Services; and NICHOLAS COLUCCI, Chief of the Immigrant Investor Program Office, Defendants.


          John Z. Lee United States District Judge.

         On June 29, 2011, the United States Citizenship and Immigration Services (“USCIS”) approved Plaintiff John Doe's application for conditional permanent resident status under the Immigration and Nationality Act's visa program for aliens investing in qualified job creation projects in the United States (commonly known as the “EB-5 program”).[1] On September 16, 2013, Plaintiff filed an I-829 petition to remove the conditions and become a permanent resident, but the petition was denied. Plaintiff now sues Jeh Johnson, Secretary of the U.S. Department of Homeland Security, Leon Rodriguez, Director of U.S. Citizenship and Immigration Services, and Nicholas Colucci, Chief of the Immigrant Investor Program Office (“Defendants”), challenging that denial. His eleven-count complaint alleges that USCIS's decision was arbitrary and capricious under the Administrative Procedure Act (“APA”), 5 U.S.C. § 706(2)(A), exceeded its statutory and regulatory authority under 5 U.S.C. § 706(2)(C), failed to provide him with procedural due process, and violated his First Amendment rights.

         The parties have filed cross-motions for summary judgment. For the reasons that follow, Defendants' motion [82] is granted, and Plaintiff's motion [78] is denied.


         I. The EB-5 Program

         Under the EB-5 program, visas are specifically allocated for “qualified immigrants seeking to enter the United States for the purpose of engaging in a new commercial enterprise, ” where (i) the immigrant invests a set amount of capital in the enterprise, and (ii) the enterprise benefits the U.S. economy by “creat[ing] fulltime employment for not fewer than 10 [qualified employees].” 8 U.S.C. § 1153(b)(5). Where an investment is made in a “targeted employment area, ” as in this case, the relevant amount of investment capital is $500, 000. Id. § 1153(b)(5)(C)(ii); 8 C.F.R. § 204.6(f)(2).

         To obtain a visa under the EB-5 program, an investor must proceed in two steps. First, the investor must file a “Form I-526, Immigrant Petition by Alien Entrepreneur” with USCIS. 8 C.F.R. § 204.6(a). This petition must be accompanied by evidence that the investor has invested or will invest the required capital in a new commercial enterprise that meets the EB-5 program's job creation requirement. Id. § 204.6(j). As to the capital investment requirement, “the petition must be accompanied by evidence that the [investor] has placed the required amount of capital at risk for the purpose of generating a return.” Id. § 204.6(j)(2). USCIS regulations list different types of evidence that is permissible for this purpose. Id. As to the job creation requirement, an investor must produce evidence documenting the number of hired employees, or “[a] copy of a comprehensive business plan showing that, due to the nature and projected size of the new commercial enterprise, the need for not fewer than ten (10) qualifying employees will result, including approximate dates, within the next two years, and when such employees will be hired.” Id. § 204.6(j)(4). If USCIS approves the investor's I-526 petition, the investor is given lawful permanent resident status on a conditional basis. 8 U.S.C. § 1186b(a)(1).

         Once the I-526 petition is approved, the investor may seek to remove the conditional status by filing a “Form I-829, Petition by Entrepreneur to Remove Conditions” within the ninety-day period that precedes the investor's two-year anniversary of becoming a conditional permanent resident. 8 C.F.R. § 216.6(a). In evaluating the I-829 petition, USCIS determines whether the investor (i) established a commercial enterprise, (ii) “invested or was actively in the process of investing the requisite capital, ” (iii) “sustained” these actions throughout the investor's residency by “substantially me[eting] the capital investment requirement of the statute and continually maintain[ing] his or her capital investment over the two years of conditional residence, ” and (iv) “created or can be expected to create with a reasonable period of time ten full-time jobs to qualifying employees.” Id. § 216.6(c). It is the investor's burden to demonstrate these requirements by a preponderance of the evidence. Matter of Chawathe, 25 I. & N. Dec. 369, 375 (BIA 2010).

         If USCIS approves the I-829 petition, the investor is granted permanent residency. On the other hand, if USCIS denies the petition, the investor's conditional permanent resident status is terminated. 8 C.F.R. § 216.6(d).

         II. Plaintiff's EB-5 Petitions

         Plaintiff is an Iranian national who sought to achieve lawful permanent residency through the EB-5 program by investing in a new commercial enterprise that would construct and operate an assisted living facility in Elgin, Illinois. Pl.'s LR 56.1(a)(3) Stmt. ¶¶ 1, 7, ECF No. 78-2; see Defs.' LR 56.1(a)(3) Stmt. ¶ 5, ECF No. 82-2. This enterprise was structured such that Plaintiff made an initial capital investment of $500, 000 into the “Elgin Assisted Living EB-5 Fund, LLC” (“EALEF”), which maintained his funds in an escrow account while his I-526 petition was pending. See Pl.'s LR 56.1(a)(3) Stmt. ¶ 7. EALEF was created to pool the capital investments of twenty-four investors, generating a total of $12 million to invest in the assisted living facility. Defs.' LR 56.1(a)(3) Stmt. ¶ 1.

         USCIS approved Plaintiff's I-526 petition on June 29, 2011. See Pl.'s LR 56.1(a)(3) Stmt. ¶ 7. He became a conditional permanent resident shortly thereafter on October 3, 2011. Defs.' LR 56.1(a)(3) Stmt. ¶ 2. As part of his I-526 petition, Plaintiff submitted a business plan, which projected that construction of the assisted living facility would begin in 2010 and the facility would be completed and operational in 2011. Id. ¶ 5. Using the “RIMS II economic model, ”[3] Plaintiff's business plan projected that a total of 278 direct and indirect jobs would be created by the new commercial enterprise.[4] Defs.' LR 56.1(a)(3) Stmt. ¶ 6.

         On July 29, 2011, one month after USCIS approved Plaintiff's I-526 petition, EALEF transferred Plaintiff's $500, 000 capital investment to Elgin Memory Care, LLC (“EMC”), which held the enterprise's operating account. Pl.'s LR 56.1(a)(3) Stmt. ¶¶ 7-8. Three days later-on August 1, 2011-EMC purchased a piece of real estate, on which it intended to build the assisted living facility, for $1, 100, 000. Id. ¶ 13. EMC purchased the land from an entity called UIS Development, LLC (“UIS”). Id. Earlier on the same day, UIS had purchased the land from another entity-Nesler & Lake-CRE, LLC (“Nesler”)-for only $630, 000. Id. ¶ 11. Plaintiff maintains that EMC used his capital investment to purchase the land from UIS. See CAR at 8, ECF No. 32-1; Pl.'s Reply & Resp. at 23, ECF No. 86.

         The projections in the business plan that Plaintiff submitted with his I-526 petition proved to be grossly inaccurate. Construction was severely delayed as EMC sought zoning, architectural, engineering, and landscaping approval. Pl.'s LR 56.1(a)(3) ¶ 15. Ultimately, EMC did not receive a final construction permit for the facility until October 6, 2014. Id. ¶ 20. As of October 2014, no structures had been built on the site of the facility. Id. ¶ 23. Plaintiff maintains that EMC had “beg[un] its site work” by that time, including the “installation of [a] sanitary sewer system[] and demolition of existing buildings.” Id. But photographs of the site that Plaintiff provided as part of his later I-829 application revealed no structures or other apparent progress in building construction. Defs.' LR 56.1(a)(3) ¶ 10; see CAR 2528- 33, ECF No. 37-5.

         Plaintiff filed his I-829 petition on September 16, 2013. Defs.' LR 56.1(a)(3) ¶ 3. On August 15, 2014, prior to ruling on Plaintiff's petition, USCIS issued a Request for Evidence (“RFE”), noting that “[b]ased upon [its] review of the initial record of evidence, ” USCIS “[could not] conclude that [Plaintiff] ha[d] established eligibility for removal of conditions.” CAR at 12. The RFE explained that Plaintiff's I-829 petition had failed to demonstrate that he had invested and sustained the necessary amount of capital during his period of conditional permanent residency. Id. It specifically asked Plaintiff to provide additional details about EMC's purchase of the land, because USCIS could not determine whether his investment “ha[d] been made available to [the enterprise] and placed at risk for the purpose of generating a return.” Id. at 13. Specifically, the RFE requested, among other items, “[a]n explanation, with supporting evidence, to explain the prior sale between [Nesler] and [UIS]” for the land that EMC purchased, a description of the relationship among the parties, and “[a]ny other evidence deemed appropriate by [Plaintiff] to overcome the deficiencies” identified in the RFE. Id. at 14.

         In addition to requesting evidence about Plaintiff's investment, the RFE sought evidence that he had complied with the job creation requirement (i.e., that the enterprise had created or would create at least ten full-time jobs for qualifying employees). Id. In this regard, the RFE noted various problems with the impact reports that Plaintiff had submitted with his I-829 petition.

         First, USCIS was concerned that Plaintiff was attempting to use a methodology that would permit him to take credit for indirect jobs “based on operation of the facility and jobs based on construction and development.” Id. at 15 (emphasis added). This methodology was different from the one that Plaintiff had used to support his I-526 petition. Id. Furthermore, noting the difficulties EMC had faced in getting the facility up and running, the RFE stated that “[i]t appears that the Form I-526 may have been filed prematurely, and [Plaintiff] is now attempting to compensate for the premature filing by modifying the job creation methodology to suit the delay.” Id. at 16. Accordingly, the RFE requested “independent objective evidence” such as “invoices, canceled checks and contracts, to substantiate the claimed spending to date on the project”; “[a] revised economic impact analysis that properly breaks out construction soft costs from hard costs”; “[e]vidence that all regulatory approvals have been received . . . and that construction on the project has commenced, or will commence in a timely manner”; and “[a] revised time line for completion and operation” of the facility. Id. at 16-17. Plaintiff responded to the RFE with various evidence and documentation on October 31, 2014. Id. at 18.

         III. USCIS's Decision on Plaintiff's I-829 Petition

         On January 16, 2015, USCIS issued its decision denying Plaintiff's I-829 petition. It concluded, “based upon a preponderance of the evidence, ” that Plaintiff had not met his burden of establishing eligibility for removal of the conditions on his permanent residency. Id. at 4.

         USCIS offered two “independent and alternative” grounds for its denial. Id. at 9. First, USCIS found that Plaintiff had failed to demonstrate that he had met and sustained the capital investment required by the EB-5 program. Id. at 6. It explained that, in order to satisfy the capital investment requirement, Plaintiff needed to show that his capital had been “placed at risk for the purpose of generating a return, ” meaning that “‘the full amount of [his] money [was] made available to the business(es) most closely responsible for creating the employment upon which'” Plaintiff's petition was based. Id. at 4 (quoting In Re Izummi, 22 I. & N. Dec. 169, 179 (BIA 1998)). After reviewing the record, USCIS determined that Plaintiff had not made this showing, because he could not show that his investment was not “simply being used for purposes unrelated to job creation.” Id. at 6.

         In arriving at this determination, USCIS focused on the land transaction, explaining that “the same-day land transaction and the doubling of the price cast doubt on the legitimacy of the transaction.” Id. Although Plaintiff had submitted affidavits disclaiming any prior relationship among EMC, UIS, and Nesler, the agency did not consider them sufficient to explain the terms of the sale, particularly given Plaintiff's failure to provide a copy of the UIS-Nesler sales agreement or an independent appraisal of the land. Id. Thus, USCIS concluded that Plaintiff had not satisfied his burden to prove that his investment “was truly made available to [EMC] and placed at risk for the purpose of generating a return.” Id. at 5-6.[5]

         USCIS also determined that Plaintiff had failed to demonstrate that he had complied with the job creation requirement. Id. at 7-9. USCIS noted that the various business plans and employment impact reports Plaintiff had submitted provided varying estimates for the project. For example, the 2010 business plan stated that construction would commence on 2010 and the facility would be fully operational by 2011. Id. at 8. The revised 2011 business plan stated that the facility would be completed by 2012. Id. And the revised 2012 business plan stated that the facility would be completed by 2014. Id. USCIS observed that, as of the date of the denial, “contrary to the projections in the business plans provided by [Plaintiff], construction of the [facility] has yet to begin.” Id. This problem was made worse, in USCIS's view, by Plaintiff's failure to provide a revised, updated timeline for the facility's completion and operation. Id. USCIS therefore declined to rely on the job projections in Plaintiff's impact reports. Instead, it performed its own analysis of Plaintiff's “documented expenses, ” finding that “[t]he only documented expenses so far are soft construction cost expenses for architectural and engineering designs, legal and accounting services[, ] etc. for which total proof of payment has been provided for $736, 046.” Id. at 9. USCIS then summarized these expenses in a table and calculated that thirteen jobs-four direct and nine indirect-had been generated from those investments. Id. But, in light of Plaintiff's failure to “establish[] that construction will last at least two years, ” USCIS found that “these jobs”-without specifying whether it meant the direct jobs, indirect jobs, or both-could not be counted in Plaintiff's favor. Id. (citing Spencer Enters., Inc. v. United States, 229 F.Supp.2d 1025, 1038-39 (E.D. Cal. 2001)).

         Legal Standard

         Where a court reviews an agency decision under 5 U.S.C. § 706, it must “decide all relevant questions of law, interpret constitutional and statutory provisions, and determine the meaning or applicability of the terms of an agency action.” 5 U.S.C. § 706.[6] “The factfinding capacity of the district court is thus typically unnecessary to judicial review of agency decisionmaking.” Fla. Power & Light Co. v. Lorion, 470 U.S. 729, 744 (1985). For this reason, “judicial review of an agency's final determination follows standards quite different from those applied in a typical summary judgment proceeding.” J.N. Moser Trucking, Inc. v. U.S. Dep't of Labor, 306 F.Supp.2d 774, 781 (N.D. Ill. 2004). Review is based solely on the record in the administrative proceeding below, and the court does not take or consider new evidence. Hunger v. Leininger, 15 F.3d 664, 669 (7th Cir. 1994).

         Thus, “[w]hen a party moves for summary judgment in such a judicial-review proceeding, he does not implicitly reserve a right to a trial if the motion is denied; there is no right to a trial in a review proceeding, as contrasted with an original proceeding. The motion for summary judgment is simply the procedural vehicle for asking the judge to decide the case on the basis of the administrative record. It informs the judge that he should resolve the case as a matter of law; that there are no triable issues of fact.” Id. (internal citation omitted).


         The Court first addresses Plaintiff's contentions that USCIS's decision is arbitrary and capricious under 5 U.S.C. § 706(2)(A). The Court then considers Plaintiff's claim that USCIS's decision exceeded the agency's statutory and regulatory authority under 5 ...

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