Behring Reg'l Ctr. LLC v. Wolf

• Citation: 544 F.Supp.3d 937
• Decision Date: 22 June 2021
• Docket Number: Case No. 20-cv-09263-JSC
• Parties: BEHRING REGIONAL CENTER LLC, Plaintiff, v. Chad WOLF, et al., Defendants.
• Court: U.S. District Court — Northern District of California

544 F.Supp.3d 937

BEHRING REGIONAL CENTER LLC, Plaintiff,

v.Chad WOLF, et al., Defendants.

Case No. 20-cv-09263-JSC

United States District Court, N.D. California.

Signed June 22, 2021

Todd Alexander Pickles, Greenberg Traurig, LLP, Sacramento, CA, Brett A. Castellat, Michael R. Sklaire, Greenberg Traurig, LLP, McLean, VA, Sarah M. Matthews, Greenberg Traurig, LLP, Denver, CO, for Plaintiff.

August Flentje, Glenn M. Girdharry, Vanessa Molina, United States Department of Justice, Civil Division, Washington, DC, for Defendants.

ORDER GRANTING SUMMARY JUDGMENT IN PLAINTIFF'S FAVOR ON CLAIM FOUR

JACQUELINE SCOTT CORLEY, United States Magistrate Judge

Behring Regional Center, LLC, a California-based Regional Center that sponsors capital investment projects using funds from foreign investors who are EB-5 Immigrant Investor Program applicants, brings this Administrative Procedures Act ("APA") action against the Department of Homeland Security.¹ Plaintiff contends that Homeland Security violated the APA when it promulgated a final rule in July 2019 amending its regulations for the EB-5 Program ("the Final Rule").

At the hearing on Plaintiff's motion for a preliminary injunction, the parties agreed to convert Plaintiff's motion to summary judgment on its fourth claim—that the Final Rule was promulgated "in excess of statutory authority" because Former Acting Homeland Security Secretary Kevin McAleenan was not properly serving in his position when he promulgated the Final Rule in July 2019. See 5 U.S.C. §§ 706(2)(A), 706(2)(C), 706(2)(D). (Dkt. No. 32.² ) Following the hearing, the current Secretary of Homeland Security, Alejandro Mayorkas, ratified the Final Rule. (Dkt. No. 34-1.) The government argues that this cures any defect in Mr. McAleenan's promulgation of the Final Rule. Having considered the parties’ arguments and the relevant legal authority, and having had the benefit of oral argument on May 13, 2021, the Court GRANTS summary judgment in Plaintiff's favor on its Fourth Claim for Relief. McAleenan was not lawfully serving as Homeland Security Secretary when he promulgated the Final Rule, and therefore, under the Federal Vacancies Reform Act of 1998 (FVRA), 5 U.S.C. § 3345 et seq., the Final Rule is void. Further, neither Secretary Mayorkas's after-the-fact ratification nor the de-facto officer doctrine save the Rule.

BACKGROUND

A. The Appointments Clause and Federal Vacancies Reform Act

Under the Appointments Clause, the President is granted the power to nominate Officers of the United States, such as Homeland Security Secretary. U.S. Const., Art. II, § 2, cl.2. That power is counterbalanced by "[t]he Senate's advice and consent power ... a critical structural safeguard of the constitutional scheme." N.L.R.B. v. SW Gen., Inc. , ––– U.S. ––––, 137 S.Ct. 929, 935, 197 L.Ed.2d 263 (2017) (" SW Gen. II ") (internal quotations, alterations and citations omitted). However, because the constitutional process of Presidential appointment and Senate confirmation can take time, "the responsibilities of an office requiring Presidential appointment and Senate confirmation—known as a ‘PAS’ office—may go unperformed if a vacancy arises and the President and Senate cannot promptly agree on a replacement." SW Gen., II , 137 S.Ct. at 934. Recognizing this reality, Congress has "authoriz[ed] the President to direct certain officials to temporarily carry out the duties of a vacant PAS office in an acting capacity, without Senate confirmation." Id. The FVRA "is the latest version of that authorization." Id. The FVRA sets forth the exclusive means of temporarily filling vacancies in PAS offices. See Guedes v. Bureau of Alcohol, Tobacco, Firearms & Explosives , 920 F.3d 1, 12 (D.C. Cir. 2019), judgment entered , 762 F. App'x 7 (D.C. Cir. 2019), and cert. denied , ––– U.S. ––––, 140 S. Ct. 789, 206 L.Ed.2d 266 (2020).

Under Section 3345(a) of the FVRA, the general rule is that the first assistant to a vacant office shall become the acting officer, "[b]ut there is an ‘unless’—Congress crafted exceptions to that exclusivity." Guedes , 920 F.3d at 11 ; 5 U.S.C. § 3347(a)(1)(A)-(B) ("unless – ... a statutory provision expressly – ... authorizes the ... head of an Executive department, to designate an officer or employee to perform the functions and duties of a specified office temporarily in an acting capacity; or ... designates an officer or employee to perform the functions and duties of a specified office temporarily in an acting capacity."). The Homeland Security Act provides such an exception here; namely, that the Deputy Secretary "shall be the Secretary's first assistant for purposes of" the FVRA, thereby expressly incorporating the "first assistant" language used in the FVRA. Pub. L. No. 107-296, § 103, 116 Stat. 2135, 2144 (2002) (codified at 6 U.S.C. § 113(a)(1)(A) ).

On December 23, 2016, Congress amended the Homeland Security Act in two relevant ways. See National Defense Authorization Act for Fiscal Year 2017, Pub. L. No. 114-328, § 1903, 130 Stat. 2000, 2672 (2016). First, the amendment established that the Under Secretary for Management would "serve as the Acting Secretary if by reason of absence, disability or vacancy in office, neither the Secretary nor the Deputy Secretary is available to exercise the duties of the Office of Secretary." 6 U.S.C. § 113(g)(1). Second, the Secretary has the authority, notwithstanding the FVRA, to "designate such other officers of the Department in further order of succession to serve as Acting Secretary." 6 U.S.C. § 113(g)(2).

As relevant here, the last Senate-confirmed Homeland Security Secretary under the Trump administration, Kirstjen Nielsen, resigned on April 10, 2019. Prior to her resignation, Secretary Nielsen purportedly amended the Order of Succession for Homeland Security Secretary to move the Commissioner of Customs and Border Protection from 14th to third in line for succession to assume the position of Acting Secretary after Deputy Secretary and Under Secretary for Management. See Department of Homeland Security Delegation No. 00106 (Revision No. 08.5), DHS Orders of Succession and Delegations of Authorities for Named Positions § II.B (Apr. 10, 2019); (Dkt. No. 21-2). However, Secretary Nielsen's amendment dealt exclusively with temporary vacancies occurring when the Secretary is "unavailable to act during a disaster or catastrophic emergency," not following a resignation. Id. In particular, Secretary Nielsen amended Delegation No. 00106, Annex A, which identifies those with authority to act in the event of the Secretary's "unavailab[ility] to act during a disaster or catastrophic emergency", rather than Executive Order 13753, 81 Fed. Reg. 90667 (Dec. 9, 2016), which sets forth the "orderly succession of officials" following "the Secretary's death, resignation, or inability to perform." See La Clinica de la Raza v. Trump , No. 19-CV-04980-PJH, ––– F.Supp.3d ––––, ––––, 2020 WL 6940934, at *13 (N.D. Cal. Nov. 25, 2020) (discussing the orders of succession and delegation in detail).

Under Secretary Nielsen's amendment to the Order of Succession, Kevin McAleenan, who was serving as the Customs and Border Protection Commissioner at the time, purportedly became the Acting Secretary of Homeland Security upon Secretary Nielsen's resignation because the offices of Deputy Secretary and Under Secretary for Management were both vacant. Six months later, McAleenan resigned, and in November 2019, on his way out of office, he purported to again amend the Order of Succession to move the Under Secretary for Strategy, Policy, and Plans up to fourth in line on the Homeland Security succession list behind the Commissioner of Customs and Border Protection. On November 13, 2019, the Senate confirmed Chad Wolf as the Under Secretary for Strategy, Policy, and Plans, and because all three positions ahead of him in the Homeland Security Order of Succession signed by Mr. Kevin McAleenan were vacate, he became the Acting Secretary of Homeland Security.

B. The EB-5 Program

The EB-5 Immigrant Investor Program was established as part of the Immigration and Nationality Act ("INA") of 1990. See Pub. L. No. 101-649, § 121(a) (Nov. 29, 1990) (codified at 8 U.S.C. § 1153(b)(5) ). The Program offers foreign nationals the opportunity to obtain a visa when they invest money in American businesses that create at least ten American jobs. See 8 U.S.C. § 1153(b)(5). The statute specifies that "the amount of capital required" to obtain such a visa is $1,000,000, but notes that the Secretary of Homeland Security "may from time to time prescribe regulations increasing the dollar amount specified." Id. § 1153(b)(5)(C)(i). If investors make investments in "targeted employment areas," the threshold amount of capital required is lowered to $500,000. Id. § 1153(b)(5)(C)(ii). A targeted employment area (TEA) subject to the reduced threshold may be either "an area which has experienced high unemployment (of at least 150 percent of the national average rate)" or a "rural area," which is "any area other than an area within a metropolitan statistical area or within the outer boundary of any city or town having a population of 20,000 or more." Id. § 1153(b)(5)(B)(ii)–(iii). The Act allocates 9,940 immigrant visas each fiscal year to foreign nationals participating in the EB-5 program, and at least 3,000 of the visas must be reserved for persons investing in TEAs. See 8 U.S.C. §§ 1151(d), 1153(b)(5)(B)(i).

In 1992, Congress expanded the EB-5 program by establishing the regional center "pilot program," which authorized "regional center[s] in the United States ... for the promotion of economic growth, including increased export sales, improved regional productivity, job creation, or increased domestic capital investment." See Departments of State, Justice, and Commerce, the Judiciary and Related Agencies Appropriations Act of 1992, Pub. L. No. 102-395, § 610(a) (Oct. 6, 1992) (codified at 8 U.S.C. § 1153 ). Congress has authorized United...