23 Jun Court Invalidates 2019 EB-5 Regulations
Washington, D.C., June 23, 2021: The Federal Court litigation seeking to invalidate the EB-5 Regulations (known as BEHRING REGIONAL CENTER LLC v. WOLF) resulted in an order invalidating the regulations.
Judge Corley of the Federal District Court in the Northern District of California accepted plaintiff’s core arguments in unequivocal terms. First, the court ruled that former acting DHS Secretary Kevin McAleenan was not properly serving in his position under the Federal Vacancies Reform Act when he promulgated the November 2019 EB-5 Modernization Final Rule. Second, the court also ruled that the Department of Homeland Security under the new Biden Administration could not ratify the 2019 EB-5 Regulations after the fact because it would violate the Federal Vacancies Reform Act.
Essentially, the court followed previous federal court jurisprudence on this matter, and confirmed that the improper appointment of acting DHS officials under the previous administration could not be cured in relation to rule-making. The court made express reference to previous litigation on this issue, stating: “This Court joins the numerous other courts which have held that because Secretary Nielsen amended the wrong Order of Succession when she purported to place the Customs and Border Protection Commissioner—Mr. McAllenan—third in line after the Deputy Secretary of Homeland Security and the Under Secretary of Management for succession to the Acting Secretary of Homeland Security position, Mr. McAllenan’s appointment was invalid.”
In a set-back for the plaintiff regional center, the court refused to issue an injunction preventing the Biden Administration from reinstating the 2019 regulations. Nevertheless, the Department of Homeland Security would have to follow the Administrative Procedures Act and thus typically be required to comply with rule-making procedures including notice and comment to the public.
The Department of Homeland Security is now faced with four possible choices:
(i) filing an appeal of the federal court’s decision and seeking an injunction on the return of the “old” regulations prior to November 2019;
(ii) reinstating the same November 2019 regulations through new rule-making;
(iii) proposing new and revised regulations through new rule-making, or
(iv) doing nothing.
There is a real possibility that the Department of Homeland Security could file an appeal of the lower court decision. Nevertheless, Donoso & Partners believes it is unlikely that the federal court would issue an injunction suspending the continuity of pre-November 2019 regulations because such an order would essentially suspend the entire EB-5 Regional Center program, which would be a sweeping interruption of an otherwise valid program.
In terms of the other options mentioned above, options (ii) and (iii) will take several months to complete, requiring notice and comment, and would likely only commence after Senate confirmation of the new USCIS director, Ur Jaddou.
For the time being, Regional Centers and investors are left with a strangely familiar regulatory landscape: (a) the investment amount in Targeted Employment Areas (TEAs) and Rural Areas returns to a minimum of $500,000 in lawful funds, and (b) states once again are authorized to issue letters verifying that an area qualifies as a TEA and are further authorized to use census tract aggregation for purposes of TEA determination.
Simultaneously, the issue of the Regional Center program’s extension past June 30, 2021 remains on-going. Donoso & Partners believes that the EB-5 Regional Center Program will likely be extended through a Continuing Resolution rather than through the Grassley/Leahy S.831 Bill. Yesterday, our law firm published news that Bill S. 831 was being pushed by Senators Grassley and Leahy for unanimous consent. We believe that is unlikely that there is enough support in the Senate for a stand-alone EB-5 bill. Rather, the initiative by Senators Grassley and Leahy may be indicative that the Senate’s Majority Leader, Senator Schumer, is not amenable to prioritizing a stand-alone EB-5 Bill while the rest of immigration reform remains entirely pending in the Democratic legislative agenda.
Donoso & Partners, a leading immigration law firm based in Washington, D.C., will continue to report on developments regarding the immigration law and policy through our news section of donosolaw.com.