23 Apr EB-5 Litigation Update: EB-5 Regulations
Washington, DC, April 23, 2021: A recent federal lawsuit offers a potential solution for EB-5 investors frustrated with the high investment amount and current Targeted Employment Area rules.
As we recently reported, a federal lawsuit in Behring Regional Center LLC v. Wolf et al. alleges that the 2019 EB-5 Regulations were improperly adopted by the Department of Homeland Security (DHS) in 2019 and are thus void. The theory of the lawsuit is that an improperly appointed Acting Secretary was not lawfully authorized to adopt the 2019 EB-5 Regulations, and, thus, the Regulations are void. The outcome sought is to return the EB-5 program to the rules in effect before the 2019 Regulations, which offered investments at US$500,000 in Targeted Employment Areas, and allowed US States to determine which geographic locations qualified as Targeted Employment Areas.
The lawsuit’s progress through federal court saw crucial developments during March and April 2021. First, the new Biden Administration decided to actively defend the lawsuit. Initially, it appeared that the Biden Administration would not defend Trump-era regulatory actions that have been held unlawful in previous similar lawsuits against DHS. Second, the new DHS Secretary, Alejandro Mayorkas, issued a notice that DHS was ratifying the EB-5 Regulation as of March 2021. Third, the federal government submitted written pleadings to the court arguing that the 2019 EB-5 Regulations are valid because of the “de facto” officer rule, which prohibits government action from being held void simply because of minor procedural defects.
In response, the plaintiff Behring Regional Center also filed written pleadings alleging that the “de facto” officer rule is inapplicable under the express provisions of the Federal Vacancies Reform Act, Administrative Procedures Act and Homeland Security Act – all of which require procedures that the Trump administration did not follow. Interestingly, the plaintiff’s argument includes references to previous lawsuits in which DHS tried – and failed – to convince courts that ratification of a regulation adopted in violation of the Federal Vacancies Reform Act is sufficient.
A potential court hearing on the issue of remedy is scheduled for May 6, 2021. The Court however may issue a decision ahead of that date based on the written arguments filed by the parties.
Donoso & Partners will continue to report on this important litigation regarding the EB-5 immigrant investor visa program.
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