Path Am. Kingco LLC v. U.S. Dep't of Homeland Sec.
| Decision Date | 12 December 2019 |
| Docket Number | CASE NO. C17-1485 RSM |
| Citation | 426 F.Supp.3d 770 |
| Parties | PATH AMERICA KINGCO LLC, et al., Plaintiffs, v. UNITED STATES DEPARTMENT OF HOMELAND SECURITY, et al., Defendants. |
| Court | U.S. District Court — Western District of Washington |
Edward F. Ramos, Pro Hac Vice, Ian K. Shaw, Pro Hac Vice, Kurzban Kurzban Weigner Tetze & Pratt, P.A., Miami, FL, Ira J. Kurzban, Pro Hac Vice, John P. Pratt, Pro Hac Vice, Kurzban Kurzban Tetzeli & Pratt, P.A., Coral Gables, FL, Robert H. Gibbs, Gibbs Houston Pauw, Seattle, WA, for Plaintiffs.
Glenn M. Girdharry, Elizabeth D. Kurlan, Kathryne M. Gray, Elizabeth D. Kurlan, US Department of Justice, Washington, DC, for Defendants.
This matter comes before the Court on the parties' Cross Motions for Summary Judgment. Dkts. #49 and #53. Plaintiffs in this case are 157 individuals seeking to immigrate to this country under the EB-5 Visa Program; Defendants are those government agencies and individuals who issued decisions that have interfered with Plaintiffs' visa applications. Plaintiffs filed this action challenging those decisions as arbitrary and capricious under the Administrative Procedures Act ("APA"). For the reasons stated below, the Court GRANTS Plaintiffs' Motion and DENIES Defendants' Motion.
In 1990, Congress amended the Immigration and Nationality Act to provide for classification of "employment creation immigrants who invest capital in new commercial enterprises in the United States that create full-time employment of United States workers" (referred to as the "EB-5 program"). See Immigration Act of 1990, Pub. L. No. 101-649, § 121(a) (Nov. 29, 1990) (codified at 8 U.S.C. § 1153(b)(5) ). The amount of investment required was originally set at $1,000,000, but foreign nationals may qualify by investing at least $500,000 in a "targeted employment area." 8 U.S.C. §§ 1153(b)(5)(B)(ii), (C) ; 8 C.F.R. § 204.6(f). The investment must "create fulltime employment for not fewer than [ten] United States citizens or aliens lawfully admitted for permanent residence or other immigrants lawfully authorized to be employed in the United States[.]" 8 U.S.C. § 1153(b)(5)(A)(ii). If USCIS determines that a foreign national's investment qualifies under the employment creation program, the agency may then grant permanent resident status to the qualifying foreign national for a conditional two-year period. See 8 U.S.C. § 1186b(a)(1).
In 1992, Congress further expanded this 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) ( 8 U.S.C. § 1153 ). This program allows economic entities to seek regional center status with USCIS for the purpose of soliciting and pooling funds from foreign national investors and other private or public investors, to fund development projects in targeted employment areas. See 58 Fed. Reg. 44,606 ; 44,608 (former Immigration and Naturalization Service ("INS")) (Aug. 24, 1993).
A prospective EB-5 foreign national investor starts the process by filing a Form I-526 with USCIS ("I-526 petition" or "EB-5 petition"). 8 C.F.R. § 204.6(a), (c). This petition must include evidence that the petitioner has invested or is actively in the process of investing "lawfully obtained capital in a new commercial enterprise in the United States which will create full time positions for not fewer than [ten] qualifying employees." 8 C.F.R. § 204.6(j). Petitioners who invest in a new commercial enterprise associated with an approved regional center still are required to demonstrate that their investment will result in the creation of at least ten full time positions, but they may rely on indirect job creation. See 8 C.F.R. § 204.6(m)(7). Indirect jobs are those that are held outside of the new commercial enterprise, but which are created as a result of the petitioner's investment into the new commercial enterprise. 8 C.F.R. §§ 204.6(j)(4)(iii), (m)(3), (m)(7).
EB-5 petitioners must demonstrate their eligibility throughout adjudication. 8 C.F.R. § 103.2(b)(1). An I-526 petition will not be approved if, after filing, the petitioner becomes ineligible under a new set of facts or circumstances. See Matter of Izummi , 22 I. & N. Dec. 169, 176 (Assoc. Comm. 1998). USCIS may deny the petition if, inter alia , an EB-5 investor fails to demonstrate that that they have "placed the required amount of capital at risk for the purpose of generating a return on the capital placed at risk." 8 C.F.R. § 204.6(j)(2). If the regional center does not submit certain required information, or the agency determines that it no longer serves the purposes of the EB-5 program, USCIS may terminate the regional center's designation. 8 C.F.R. § 204.6(m)(6)(ii). USCIS's termination of a regional center's status results in the loss of EB-5 visas for the foreign national investors associated with the terminated center.
Prior to termination, USCIS will issue a "Notice of Intent to Terminate" and give the regional center thirty days to submit a response. 8 C.F.R. §§ 204.6(m)(6)(iii)-(iv). After a termination, the applicant may appeal to USCIS's Administrative Appeals Office ("AAO"). See 8 C.F.R. § 204.6(m)(6)(v). If the AAO dismisses the appeal, the applicant may file a motion to reopen and reconsider the AAO's decision. See 8 C.F.R. § 103.5(a).
This case involves 157 EB-5 investors who contributed $78.5 million to build a mixed-use tower in downtown Seattle. These investors made their individual $500,000 capital contributions through a regional center called Path America KingCo, LLC ("Path America KingCo").
On August 24, 2015, the SEC filed a complaint in this district court against Path America, several related entities, and Path America's principal, Lobsang Dargey. See Path America, Case No. 2:15-cv-1350. The SEC alleged defendants sold securities to finance several specific real estate development projects, but that Mr. Dargey then misappropriated or diverted millions of dollars in investor funds for other real estate projects or his personal use. Id. In a September 2015 filing, the SEC argued that Mr. Dargey's fraud had seriously jeopardized the Tower Project. Id . In October 2015, the district court froze the assets of Path America KingCo and its related entities and appointed a receiver to manage those assets. Id.
Four months later, on December 24, 2015, USCIS issued a Notice of Intent to Terminate Path America KingCo's regional center designation. Dkt. #40 (Certified Administrative Record, herein "A.R."), 3384-98. In the Notice, USCIS discussed the district court's temporary restraining order, asset freeze, preliminary injunction, and the appointment of a receiver to manage Path America KingCo following Mr. Dargey's diversion of investor funds for personal use or other real estate projects. A.R. at 3384-98. USCIS stated that all of this supported the conclusion that Path America KingCo failed to fulfill its management responsibilities as detailed in its regional center designation approval letter. Id. The agency also concluded that all of this indicated that Path America KingCo no longer served the purpose of promoting economic growth. Path America KingCo responded to the Notice on January 20, 2016. A.R. 3470-77.
On March 23, 2016, USCIS terminated Path America KingCo's regional center designation. A.R. 3479-3502. USCIS determined that Path America KingCo (1) was no longer serving the purpose of promoting economic growth, (2) had diverted funds from job creating purposes, and (3) had not met the monitoring and oversight responsibilities set forth in its designation letter. Id. The agency also concluded that Path America KingCo had not set forth sufficient reasons in its response to delay the termination decision. Id.
Path America KingCo appealed to the AAO. A.R. 3542-3719. It submitted documentation indicating that Mr. Dargey no longer controlled Path America KingCo or related investor funds, and that a new management company, EB-5 Group, LLC ("EB-5 Group"), would take permanent control over Path America KingCo. Id. Path America KingCo also pointed out that the district court in the SEC action had approved a proposal for restructuring the transactions for the Tower Project. Id. The court-approved proposal was submitted by Bianjiang, a previous equity partner, and PH Seattle Tower I, LLC ("Molasky Group"). Id. The district court's order provided for the transfer of 100% ownership interest in Path America KingCo to Molasky, which would turn over management of the Tower Project to the EB-5 Group. Id. The proposal also gave Path America KingCo's EB-5 investors the option to opt-in to the proposed restructuring plan. Id.
On November 2, 2016, the AAO dismissed Path America KingCo's appeal and found that USCIS had properly terminated Path America KingCo's regional center designation. A.R. 5146-54. Path America KingCo filed a motion to reopen and reconsider on December 1, 2016. A.R. 5183-5921.
In January 2017, Mr. Dargey pled guilty to two federal felonies related to his actions while principal of Path America KingCo and agreed to pay over $24 million in restitution. A.R. 7584-85. Mr. Dargey was sentenced to four years in prison for defrauding immigrant investors and federal regulators in the EB-5 program. A.R. 7586-88.
On June 9, 2017, the AAO denied Path America KingCo's motions to reopen and reconsider. A.R. at 5922-28. The AAO found no error in its previous decision to dismiss Path America KingCo's appeal. The AAO also...
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