Foreign Investors Nab Partial Victory In EB-5 Dispute

A D.C. federal court partly sided with a group of foreign nationals challenging a decision that rejected their petitions under the EB-5 visa program, finding Friday that some aspects of U.S. Citizenship and Immigration Services’ adjudication were “arbitrary and capricious.” 

U.S. District Judge Colleen Kollar-Kotelly partly granted summary judgment to the plaintiffs, who are mostly Chinese citizens who submitted petitions with the agency for permanent residence under the EB-5 program. The program allows foreign nationals who invest at least $500,000 in a U.S. business to obtain green cards.

The investors had initially sued USCIS in 2015, claiming the agency arbitrarily decided their $500,000 investments in mines in Idaho and Montana were not at risk because of a redemption option in their agreement with Quartzburg Gold Co. LP.

On Friday the judge agreed with the investors that the agency’s adjudication of their applications was both arbitrary and capricious. Specifically, the court found the reasoning undergirding USCIS’ rejection of an initial group of petitions was arbitrary, as well as “counter to the evidence before USCIS.”

And the court said that USCIS’ decision to “treat the petitions of certain plaintiffs differently than others, despite the fact that all of the plaintiffs presented effectively equivalent petitions,” without giving an explanation, was also “arbitrary and capricious.”

In particular, the court zeroed in on a part in the Quartzburg Gold limited partnership agreement known as the “call option,” which let the partnership “buy back” certain interest at an increased value, according to the opinion.

The so-called call option allowed Quartzburg Gold to choose to withhold distributions to investors and redeem their interest in the company, either through a $550,000 payment or through 400 ounces of gold. USCIS said this deal negated the risks associated with the investment, making the investors ineligible under the EB-5 program.

But the judge found that the call option was “not a guaranteed return” that restricted the investors’ investment risk.

“The call option gave Quartzburg Gold’s general partner the right to repurchase the plaintiffs’ interests if the business was successful, but that right did not limit the substantial risk that plaintiffs’ investment could be wholly lost if the business was unsuccessful,” Judge Kollar-Kotelly wrote.

However, the court declined to order that the plaintiffs’ petitions be granted and instead remanded the case to USCIS. 

Robert C. Divine, representing the plaintiffs, said he was “pleased that the court agreed that the original denials about the call option were wrong, so bringing the suit was fully justified.”

Nicole Navas, a spokesperson with the U.S. Department of Justice, said that the department was declining to comment "on this pending matter."

The investors are represented by Mindy Rattan, Robert Divine and J. David Folds of Baker Donelson Bearman Caldwell & Berkowitz PC.

The federal government is represented by Benjamin Mizer, William Peachey and Glenn Girdharry of the U.S. Department of Justice.

The case is Does 1-72 v. U.S. Citizenship and Immigration Services et al., case number 1:15-cv-00273, in the U.S. District Court for the District of Columbia.

https://www.law360.com/immigration/articles/900735/foreign-investors-nab-partial-victory-in-eb-5-dispute

Mentions

• Quartzburg Gold, LP
• U.S. Citizenship and Immigration Services
• U.S. Department of Justice
• Robert Divine
• Baker, Donelson, Bearman, Caldwell & Berkowitz, PC

States

• New York