Breaking News: Judge Chhabria’s Ruling Puts Regional Centers Back in Business

Breaking News: Judge Chhabria’s Ruling Puts Regional Centers Back in Business

BY: David Hirson, Esq. and Mona Shah, Esq.

“The agency is enjoined from treating the existing regional centers as deauthorized while this litigation is pending (or until the agency engages in a reasoned decision-making process regarding how to treat these centers under the Integrity Act).”

United States District Judge Vince Chhabria brought a smile of relief to the EB-5 Industry last Friday, with his decision to reverse USCIS’ (under the Department of Homeland Security) decision deauthorizing existing regional centers. The Reform and Integrity Act, signed into law by President Biden on March 15, was interpreted by USCIS as deauthorizing all existing regional centers, essentially cutting off their revenue streams. Judge Chhabria, in his excellent, well-reasoned decision, opined that USCIS’ action: “… was almost certainly legal error, because it is unclear whether the Integrity Act deauthorized existing regional centers or allowed them to continue operating under Congress’s new regime. The agency was therefore required to weigh competing interests before deciding whether the existing regional centers should be deauthorized. And the agency’s treatment of the previously authorized regional centers is harming them irreparably, in a manner that is contrary to the public interest.”

Background to the Case

Read a full report of the pending lawsuits against USCIS in our blog piece “Federal Judge States USCIS “May Have Committed Legal Error” By Requiring Recertification Of RCs

Legal Error and Violation of Agency Rule Making

Judge Chhabria ruled that: “…USCIS was almost certainly wrong in assuming that the Integrity Act affirmatively deauthorized existing regional centers, so the agency was almost certainly wrong to announce that the centers are no longer authorized”. RIA is actually silent on the issue of de-authorizing existing regional centers. In his opinion, Judge Chhabria dismissed as nonsensical, USCIS’ interpretation that all regional centers provide a proposal even if they have been in existence for years. Judge Chhabria opined several reasons for this stance, including examining RIA for indications of Congressional intent. The Judge stated that even the title of the statute, “Reauthorization and Reform of the Regional Center Program,” does not automatically deauthorize existing regional centers. Other factors included filing of Exemplar petitions along with the multiple tools to ensure ongoing compliance, as indicative of Congress’ intent not to de-authorize existing approved regional centers.

“After all, if Congress had intended to take the seemingly dramatic step of cutting off revenue for hundreds of longstanding regional centers, it could have done so far more transparently. It could have said something like: “All regional centers are deauthorized and must petition the agency for new approval pursuant to the terms of this statute,” Judge Chhabria said.

Please refer to our podcast with the litigation expert John Pratt (from Kurzban Kurzban Tetzeli & Pratt) for a discussion of legal error.

Implications for Investors and Regional Centers

The good news is that regional centers can now start taking in capital from Investors and filing I-526 petitions. RIA did stipulate that before a filing, the regional center must file an Exemplar petition. The Exemplar must incorporate the new rules as laid out in the new Act. A filing must include a Receipt Notice. Arguably, there is an indication that previously filed Exemplars are sufficient (if supplemented with the new capital investment amount) as the instructions to Form I-956F specifically relates to RCs designated after March 15, 2022. Notwithstanding, it is not recommended to take a chance to see if USCIS accepts the filing.

What Will the Agency Do Next?

Judge Chhabria’s ruling was extraordinarily well-reasoned. This would make any possible appeal to the California Court of Appeals challenging. For example, the showing of irreparable harm to regional centers is systematically described. Further, the Agency will find it difficult to defend the obvious breach of the APA (Administrative Procedure Act). The APA mandates how a government agency decision making should be conducted. In general, new regulations must go through a notice and comment period, which can take 30 to 60 days at a minimum. Historically, it takes at least 12 to 18 months for complex new regulations to move from proposed rule to final rule. In the instant matter, USCIS simply omitted any notice and comment period.

New Rules Immediately via Interim Final Rules?

The procedure governing ‘Interim Final Rules’ does allow USCIS to publish new regulations immediately, but only if there is “good cause”. Good cause is typically cases where there is 1) an emergency, 2) where prior notice would subvert the underlying statutory scheme, or 3) where Congress has shown it intends to waive notice and comment requirements. Judge Chhabria’s ruling does put a dampening on the likelihood of success on a showing of “good cause”. Undoubtedly should USCIS attempt this route, they would be met with a bevy of lawsuits.

Senator Grassley’s Voice from the Floor

Much has been said about Senator Grassley’s speech from the Senate floor. The Senator explicitly stated that “…all EB-5 regional centers that operated will be expected to seek a new RC Designation…” USCIS took these words literally in formulating their policy. Judge Chhabria pointed out that Senator’s Grassley’s statement was made after the legislation had been passed and merely added to the record. After examining the Act, the Judge dismissed USCIS’ interpretation, asserting that: “Senator Grassley’s remarks carry little if any interpretive weight. Indeed, the agency’s heavy reliance on this questionable sliver of legislative history only underscores that the statute itself is ambiguous or silent on the question.”

The EB-5 Industry has long been advocating for USCIS to accept an Attestation from existing regional centers, stating that they are in compliance with the RIA. Perhaps now, the Agency may just pay attention to our many letters and pleas. It is frustrating that the industry’s ideas and opinions are continually ignored. It is certainly more efficient and cost effective to read the opinions of Industry Stakeholders rather than a District Court Judge!

To listen to an in-depth analysis and expert opinion of this situation, subscribe to our website to catch our forthcoming podcast episode where our attorneys sit down again with John Pratt, Esq. (Kurzban Kurzban Tetzeli & Pratt) and other experts to offer expert insights into the possible consequences of the Decision!

About the Authors

David Hirson, Esq. David is the partner, chairman, and founder of David Hirson & Partners, LLP. He has nearly 40 years of experience in the practice of immigration law. His focus is on EB-5 investment immigration law. He has been certified as a Specialist in Immigration and Nationality Law by the State Bar of California, Board of Legal Specialization continuously since 1990. David Hirson & Partners, LLP offers national and international clients nearly 40 years of experience in immigration law. Their practice provides a full range of legal services with a strong focus in the areas of business, investment and family immigration as well as immigration litigation. David is nationally recognized for his professional leadership role in immigration law on the West Coast, across the United States and around the world.

Mona Shah, Esq. U.K. born and a former British Crown Prosecutor, Mona has over 28 years of legal experience with extensive knowledge of all facets of U.S. immigration law. Recognized as one of the industry leaders in EB-5, tackling complex issues, Mona has received many accolades for her work, including being voted a top 25 EB-5 attorney in the U.S. seven years in a row; top Global Migration Lawyer (U-Global), Top lawyer by Who’s Who International; and Top attorney of North America. A part-time adjunct professor at Baruch College, Mona is also a published author, and Lexis Nexis Practice Editor. Mona regularly speaks worldwide and has been interviewed by mainstream news channels, including Fox Business News and Al Jazeera, and quoted in major newspapers, including the New York Times, Bloomberg and Axios. Mona hosts and produces Global Investment Voice Podcast series (145+ episodes). MSA have worked with the top echelon within the industry and have been instrumental in the success of numerous projects. Marketing overseas for many years, MSA have successfully raised millions of dollars in investor capital.