Opinion
Case No. 2:21-cv-01893-FLA (PLAx)
2022-10-27
Nguyen Chan NGUYEN, et al., Plaintiffs, v. UNITED STATES CITIZENSHIP AND IMMIGRATION SERVICES, et al., Defendants.
Jonathan David Weiss, Law Offices of Hwang and Weiss, Pasadena, CA, for Plaintiffs. Joshua Samuel Press, Office of Immigration Litigation, District Court Section, Washington, DC, for Defendants.
Jonathan David Weiss, Law Offices of Hwang and Weiss, Pasadena, CA, for Plaintiffs. Joshua Samuel Press, Office of Immigration Litigation, District Court Section, Washington, DC, for Defendants. ORDER DENYING PLAINTIFFS' MOTION FOR SUMMARY JUDGMENT AND GRANTING SUMMARY JUDGMENT IN FAVOROF DEFENDANTS [DKT. 18] FERNANDO L. AENLLE-ROCHA, United States District Judge
RULING
Before the court is Plaintiffs Nguyen Chan Nguyen, Chau Van Toan Nguyen, Hung Quac Le, and Tung Xuan Phan's (collectively, "Plaintiffs") Motion for Summary Judgment ("Motion"). Dkt. 18 ("Mot."). Defendants United States Citizenship and Immigration Services ("USCIS" or the "Agency"), Tracy Renaud, Donna P. Campagnolo, and Todd P. Young (collectively, "Defendants") oppose the Motion and request the court grant summary judgment in Defendants' favor instead. Dkt. 21.
On September 13, 2021, the court found this matter appropriate for resolution without oral argument and vacated the hearing set for September 17, 2021. Dkt. 33; see Fed. R. Civ. P. 78(b); Local Rule 7-15. For the reasons stated herein, the court DENIES Plaintiffs' Motion and GRANTS summary judgment in favor of Defendants.
BACKGROUND
Plaintiffs filed this action on March 1, 2021. Dkt. 1 ("Compl."). Plaintiff Nguyen Chan Nguyen ("Nguyen") is a foreign-national seeking an immigrant visa through the employment-based, fifth preference ("EB-5") immigrant-investor visa program ("EB-5 Program"). Dkt. 35 (Certified Administrative Record, "CAR") at 309. As part of the investment process, in early 2018, Nguyen hired the Harvey Law Group ("HLG") to assist him with his EB-5 Petition. Dkt. 18-1 ("Mot. Br.") at 4; CAR 196. To facilitate the currency swap, Nguyen deposited 12,893,695,415 Vietnamese Dong (VND) with the Vietnam office of HLG on March 9, 2018. Id. at 159, 241, 245-46. Nguyen's currency swap partner, Rainbow Shuzhuang Industrial Limited ("Rainbow"), then released $552,920.08 United States Dollars (USD) to HLG's offices in Hong Kong. Id. at 156-160, 251 & 255-58. HLG released the Vietnamese currency to Rainbow's representative in Vietnam and transferred the U.S. currency to Nguyen's investment project in the United States. Id. at 160, 251, 260-62, 264.
For purposes of economy, the parties have stipulated that Plaintiff Nguyen will serve as a representative plaintiff on behalf of all Plaintiffs, as USCIS denied his EB-5 Petition on substantially identical grounds as the remaining Plaintiffs' Petitions. Dkt. 14 at 3-4. Thus, while the court's discussion concerns the specific facts of Nguyen's Petition, the court's analysis applies equally to all Plaintiffs' EB-5 Petitions.
On March 23, 2018, Nguyen submitted Form I-526 Immigrant Petition for Alien Entrepreneur ("EB-5 Petition") and accompanying evidence asserting that he invested $500,000 into Lighthouse Point Project, LP, the new commercial enterprise ("NCE"). Id. at 280-93. On November 14, 2019, Defendant USCIS issued a Request for Evidence ("RFE") asking for further clarification regarding the lawful source of the investment funds, particularly the funds HLG obtained from Rainbow to facilitate the transaction. Id. at 266-73. Nguyen responded to the RFE on February 18, 2020. Id. at 152. After reviewing the additional evidence in Nguyen's response, USCIS issued a Notice of Intent to Deny ("NOID") on June 1, 2020. Id. at 137. The NOID noted Nguyen's funds never left Vietnam, the funds (in USD) that entered into the United States were from HLG, and that there was nothing in the record to show the funds that were actually invested were derived from a lawful source. Id. at 144. Nguyen responded to the NOID on September 4, 2020. Id. at 28. On February 3, 2021, USCIS denied Nguyen's EB-5 Petition ("NOD"). Id. at 2-13.
Plaintiffs appeal the NOD on the grounds that USCIS violated the Administrative Procedures Act ("APA"), 5 U.S.C. § 551 et seq., and present the following issues:
1. Whether USCIS acted ultra vires in promulgating a regulation defining the term "capital" as excluding unlawfully-sourced
assets and putting the burden of proof of lawfulness on petitioners;Compl.; Dkt. 18-1 ("Mot. Br.") 1-2, 7-8.
2. Whether USCIS' current interpretation of the "lawful source" requirement for invested funds constitutes a new rule requiring notice and comment before it can be applied to Plaintiffs;
3. Whether Plaintiffs have a reliance interest on USCIS' prior interpretation of the "lawful source" requirement;
4. Whether it is arbitrary and capricious for USCIS to require intermediaries for a "currency swap" to be properly licensed under foreign law while not requiring the same when an applicant transfers investment funds from his or her home country to the United States through multiple "friends and family" in his or her home country, given that both methods are used by petitioners to bypass foreign currency export controls;
5. Whether USCIS' denial of Plaintiffs' EB-5 Petitions was arbitrary and capricious and contrary to the applicable regulations; and
6. Whether USCIS' denial of Plaintiffs' EB-5 Petitions was arbitrary and capricious because the Agency failed to give reasoned consideration to probative or potentially dispositive evidence.
DISCUSSION
I. Standard of Review
Under the APA, "the underlying agency action may be set aside only if [it was] 'arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law.' " Kazarian v. U.S. Citizenship & Immigr. Servs., 596 F.3d 1115, 1118 (9th Cir. 2010) (quoting 5 U.S.C. § 706(2)(A)). An agency's action is "an abuse of discretion . . . if there is no evidence to support the decision or if the decision was based on an improper understanding of the law." Id. (internal quotation marks and citation omitted). An agency's decision is arbitrary and capricious if "the agency has relied on factors which Congress has not intended it to consider, entirely failed to consider an important aspect of the problem, offered an explanation for its decision that runs counter to the evidence before the agency, or is so implausible that it could not be ascribed to a difference in view or the product of agency expertise." Beno v. Shalala, 30 F.3d 1057, 1073 (9th Cir. 1994) (quoting Motor Vehicle Mfr. Ass'n v. State Farm Ins., 463 U.S. 29, 44, 103 S.Ct. 2856, 77 L.Ed.2d 443 (1983)).
II. Analysis
"The immigrant investor program, or EB-5 program, established by the Immigration and Nationality Act ('INA'), allows aliens to receive permanent resident status upon the investment of a specified amount of capital and the creation of at least ten full-time jobs in the United States." Spencer Enters., Inc. v. United States, 345 F.3d 683, 686 (9th Cir. 2003) (citing 8 U.S.C. § 1153(b)(5) ("Section 1153(b)(5)")). As part of the application process for an EB-5 visa, an investor must submit documentation "that the investment is made from the alien's own lawfully acquired funds." Id. (citing 8 C.F.R. § 204.6(j) ("Section 204.6(j)")). "As interpreted by USCIS, EB-5 investors cannot satisfy the requirements of 8 C.F.R. § 204.6(j)(3) without sufficiently documenting the source and path of their investment funds." Zhang v. Nielsen, Case No. 2:18-cv-09799-JFW (JPRx), 2019 WL 5303276, at *7 (C.D. Cal. Oct. 17, 2019) (citations omitted). "Thus, EB-5 investors must present documentary evidence of the lawful source of the funds they invest, as well as evidentiary support for the assertion that the funds are their own." Id. (citations omitted).
A. Whether USCIS Acted Ultra Vires in Promulgating a Regulation Restricting the Term "Capital" to Assets or Money from Lawful Sources
Plaintiffs contend USCIS cannot require immigrant investors to submit evidence relating to the lawfulness of their source or path of investment funds, because the regulations that authorize this inquiry conflict with the unambiguous language of the agency's enabling statute. Mot. Br. 19. According to Plaintiffs, Section 1153(b)(5) only requires an applicant to invest "capital," and USCIS acted ultra vires by restricting the definition of "capital" to assets or money from lawful sources in Section 204.6(e) and (j)(3), and placing the burden of proving lawfulness on petitioners. Mot. Br. 19.
In considering the validity of a regulation, the court applies the two-step analysis articulated by Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 842-43, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984):
First, always, is the question whether Congress has directly spoken to the precise question at issue. If the intent of Congress is clear, that is the end of the matter; for the court, as well as the agency, must give effect to the unambiguously expressed intent of Congress. If, however, the court determines Congress has not directly addressed the precise question at issue, the court does not simply impose its own construction on the statute, as would be necessary in the absence of an administrative interpretation. Rather, if the statute is silent or ambiguous with respect to the specific issue, the question for the court is whether the agency's answer is based on a permissible construction of the statute.In conducting this inquiry, the court employs "traditional tools of statutory interpretation" and must construe a statute "in accordance with its ordinary and natural meaning." S.F. Herring Ass'n v. U.S. Dep't of Interior, 33 F.4th 1146, 1152 (9th Cir. 2022).
1. Chevron Step 1
On the first step of the Chevron analysis, the court finds Congress has not directly spoken to the precise question at issue. Section 1153(b)(5)(A)(i) states "[v]isas shall be made available . . . to qualified immigrants seeking to enter the United States for the purpose of engaging in a new commercial enterprise . . . (i) in which such alien has invested . . . or, is actively in the process of investing, capital in an amount not less than the amount specified . . . ." Neither Section 1153(b)(5) nor the INA, in general, define the term "capital." The court, therefore, looks to the ordinary meaning of the term. See Chevron, 467 U.S. at 860, 104 S.Ct. 2778. Black's Law Dictionary defines "capital" as "[m]oney or assets invested, or available for investment, in a business." Capital, BLACK'S LAW DICTIONARY (11th ed. 2019). The plain and ordinary meaning of the term "capital" does not discuss lawfulness. See Mot. Br. 19.
Chevron, 467 U.S. at 843, 104 S.Ct. 2778, and its progeny recognize that a statute's silence or ambiguity on a particular issue that falls within an agency's generally conferred authority establishes a presumption that Congress has delegated gap-filling authority to the agency. United States v. Home Concrete & Supply, LLC, 566 U.S. 478, 486, 132 S.Ct. 1836, 182 L.Ed.2d 746 (2012); Oregon Rest. & Lodging Ass'n v. Perez, 816 F.3d 1080, 1088-89 (9th Cir. 2016). Section 1153(b)(5)'s silence on the question of whether capital must have been lawfully obtained for a potential immigrant to qualify for the EB-5 Program leaves room for USCIS to issue regulations to clarify this point. See id.
Plaintiffs cite Shalom Pentecostal Church v. Acting Secretary, United States Department of Homeland Security, 783 F.3d 156 (3d Cir. 2015), to argue that USCIS acted ultra vires by promulgating regulations that imposed a "lawfulness" requirement on petitioners. Mot. Br. 19-20. According to Plaintiffs, Section 204.6(e) and (j)(3) are ultra vires because they impermissibly alter the multi-step process Congress established for a prospective immigrant to obtain a visa under the EB-5 Program by adding a lawful source requirement. Mot. Br. 21-22. The court disagrees.
In Shalom Pentecostal, 783 F.3d at 165, the district court denied an alien investor's petition for special immigrant religious worker status under 8 U.S.C. § 1101(a)(27)(C)(iii) on the grounds that the petitioner failed to demonstrate he was in lawful immigration status in the United States during the relevant period, as required by 8 C.F.R. § 204.5(m)(4) and (11). The Third Circuit held that 8 C.F.R. § 204.5(m)(4) and (11) were ultra vires because the regulation's requirement that an alien must have worked "either abroad or in lawful immigration in the United States, and . . . continuously for at least the two-year period immediately preceding the filing of the petition" to be eligible for classification as a special immigrant religious worker conflicted with the INA's definition of the term "immigrant," which, "by its plain terms includes aliens in both legal and illegal immigration status." Shalom Pentecostal, 783 F.3d at 160, 164-66. Shalom Pentecostal, id., also noted that the "[r]egulation's requirement that qualifying work under § 1101(a)(27)(C)(iii) be 'in lawful immigration status' would render another section of the INA . . . largely, if not entirely superfluous." The Third Circuit, thus, held 8 C.F.R. § 204.5(m)(4) and (11) were inconsistent with the clear and unambiguous terms of the statute and did not survive the first step of the Chevron analysis. Id. at 167.
Here, unlike in Shalom Pentecostal, the lawful source requirement of 8 C.F.R. § 204.6(e) and (j)(3) does not clearly and unambiguously conflict with the plain text of the INA. Plaintiffs do not identify any provision of the INA that addresses whether capital must have been acquired by lawful means to satisfy the requirements of Section 1153(b)(5). See Mot. Br. 19-24. Accordingly, Plaintiffs fail to demonstrate that Congress has spoken directly to the precise question at issue. See Chevron, 467 U.S. at 842, 104 S.Ct. 2778. Shalom Pentecostal is inapposite, and Plaintiffs' argument fails.
Accordingly, the court finds the lawful source requirement of Section 204.6(e) and (j)(3) satisfy step one of the Chevron analysis.
2. Chevron Step 2
"At Chevron step two, [courts] must determine if [an agency's] interpretation is reasonable." Oregon Rest., 816 F.3d at 1089. "This is a generous standard, requiring deference 'even if the agency's reading differs from what the court believes is the best statutory interpretation.' " Id. Courts may reject an agency's construction "only if it is arbitrary, capricious, or manifestly contrary to the statute." Id. (citing Chevron, 467 U.S. at 844, 104 S.Ct. 2778). To determine whether the agency's interpretation is reasonable, "we look to the plain and sensible meaning of the statute, the statutory provision in the context of the whole statute and case law, and to the legislative purpose and intent." Id.
After considering the text of Section 1153(b)(5), the INA, the relevant legislative history, and the parties' arguments, the court finds that USCIS' interpretation of the term "capital" to include only funds and assets that were lawfully sourced, is a reasonable construction of the statute and well within USCIS' authority. Similarly, the court finds it was reasonable for USCIS to place the burden of proof of lawfulness on petitioners. It was reasonable for USCIS to determine that Congress intended only to allow petitioners to obtain special immigrant visas for investing lawfully acquired assets and funds, and to exclude petitioners from qualifying if they sought to invest illegally acquired capital or could not prove that the capital was acquired lawfully. This construction of Section 1153(b)(5) also conforms to the legislative history of the statute, which states that "processing of an individual visa [should] not continue under this section if it becomes known to the Government that the money invested was obtained by the alien through other than legal means . . . ." S. Rep. No. 101-55, at 21 (1989), cited in 56 Fed. Reg. 60,904 (Nov. 29, 1991).
Accordingly, the court finds the lawful source requirement of Section 204.6(e) and (j)(3) satisfy step two of the Chevron analysis.
3. Conclusion
Having found that the lawful source requirement of Section 204.6(e) and (j)(3) satisfy both steps of the Chevron analysis, the court finds USCIS did not act ultra vires by promulgating this regulation and requiring Plaintiffs to prove their investment funds were derived from a lawful source.
B. Whether the Agency's Current Interpretation of the "Lawful Source" Regulation Required Notice and Comment
Plaintiffs argue Defendants had an established practice of permitting EB-5 petitioners to circumvent foreign countries' currency export controls through currency swaps, by which a prospective immigrant investor with funds located in a country with currency export controls could find a partner with funds located in a jurisdiction that did not have currency export controls and transfer his or her funds to an escrow agent in his or her home country, in exchange for the partner's agreement to transfer funds located in the other jurisdiction for use in a qualifying EB-5 project. Mot. Br. 3. According to Plaintiffs, USCIS' settled adjudicatory practice was not to require petitioners to present evidence of how the currency exchange partners obtained the currency at issue. Id. (citing CAR 68, 72, 74-75).
Plaintiffs cite articles regarding the EB-5 Program to argue that USCIS "suddenly and without warning" began requiring petitioners to document how their currency swap partners acquired their funds and demonstrate that the representatives of the parties to the currency swap were licensed under foreign law. Id. at 4 (citing CAR 69, 72, 75, 89-90). Although the articles cited by Plaintiffs state that USCIS began this practice in early 2017, CAR 72, Plaintiffs contend the first public document "fully delineating" the Agency's new policy was a public adjudicatory decision that was issued on August 30, 2019 - after Nguyen filed his petition. Mot. Br. 4, 10.
According to Plaintiffs, USCIS's "new Currency Swap policy" should have been promulgated through notice-and-comment rulemaking and that the Agency's application of this purported policy constitutes an impermissible retroactive application of the August 30, 2019 decision. Id. at 19. Defendants respond that the requirement that third-party funding must be adequately sourced is neither new nor a legislative rule requiring notice and comment. Opp'n 20-22.
Under Section 553 of the APA, agencies are required "to submit all proposed 'legislative rules' to a notice and comment period. Agencies, however, need not follow such a course before adopting 'interpretive rules.' " R.L. Inv. Ltd. Partners v. I.N.S. (RLILP), 86 F. Supp. 2d 1014, 1024 (D. Haw. 2000), aff'd and adopted in full, 273 F.3d 874 (9th Cir. 2001) (citation omitted). "Interpretive rules are those 'which merely clarify or explain existing laws or regulations." Id. "Those rules are essentially hortatory and instructional in that they go more to what the administrative officer thinks the statute or regulation means, when applied in particular, narrowly defined, situations." Id. "A rule that 'effects a change in existing law or policy' is legislative." Id. (brackets omitted).
Plaintiffs cite Gill v. United States Department of Justice, 913 F.3d 1179, 1186 (9th Cir. 2019), for the proposition that "[a] rule is legislative if it carries the force of law and does not 'leave[ ] the agency, or its implementing official, free to exercise discretion to follow, or not follow, the [announced] policy in an individual case." Mot. Br. 18. The quoted language of Gill, 913 F.3d at 1186, concerned the difference between a legislative rule and an agency directive setting forth a general statement of policy. Gill did not discuss the difference between a legislative rule and an interpretive rule, and is inapposite to the issue at hand.
Plaintiffs argue that USCIS' practice regarding currency swap partners is a new legislative rule that is irreconcilable with the existing regulations that went through notice and comment rulemaking. Mot. Br. 18-19. In particular, Plaintiffs contend the regulatory scheme that governs the adjudication of immigrant investor petitions makes a distinction between the source and path of funds. Id. at 16. According to Plaintiffs, Section 204.6(j)(2) requires evidence of the transfer of funds from the petitioner to the qualifying investment, whereas subdivision (j)(3) requires evidence that the petitioner's funds were obtained through "lawful means." Id. Plaintiffs further argue that the lack of "lawful means" language in subdivision (j)(2) demonstrates that a "lawful means" analysis should not be applied to the path of funds, and that USCIS' practice of requiring petitioners to present evidence of the lawful path of funds, in addition to the lawful source of funds, constitutes an attempt to amend those regulations that required notice and comment rulemaking. Id. at 17-18 (citing Zhang v. U.S. Citizenship & Immigr. Servs., 344 F. Supp. 3d 32, 58 (D.D.C. 2018). The court disagrees.
Section 204.6(j)(2) states:
To show that the petitioner has invested or is actively in the process of investing the required amount of capital, the petition must be accompanied by evidence that the petitioner has placed the required amount of capital at risk for the purpose of generating a return on the capital placed at risk. Evidence of mere intent to invest, or of prospective investment arrangements entailing no present commitment, will not suffice to show that the petitioner is actively in the process of investing. The alien must show actual commitment of the required amount of capital. . . .
Section 204.6(j)(3) states:
To show that the petitioner has invested, or is actively in the process of investing, capital obtained through lawful means, the petition must be accompanied, as applicable, by: [evidence].
Contrary to Plaintiffs' arguments, Section 204.6(j)(2) does not concern the path of a petitioner's invested capital, and instead requires a petitioner to place the requisite amount of capital at risk, while specifying that a mere intent to invest is insufficient. Subdivision (j)(3), in turn, makes clear that any such capital must have been obtained through lawful means. These two provisions are not in conflict and together require an alien to invest actually or put at risk capital that was obtained through lawful means to obtain special immigrant investor status.
In adopting in full RLILP, 86 F. Supp. 2d at 1026, the Ninth Circuit recognized that "[t]he plain language of section 204.6(j)(3) makes it clear that petitioners have always been obligated to document the source of investment funds." Under the Administrative Appeals Office's ("AAO") precedent decisions, a petitioner must document the path of the funds to meet his burden on an EB-5 Petition. In re Izummi, 22 I. & N. Dec. 169, 195 (B.I.A. 1998) (holding because "petitioner ha[d] not documented the path of funds, . . . the petitioner . . . failed to meet his burden of establishing that the initial [investment] . . . were his own funds"); In re Soffici, 22 I. & N. Dec. 158, 164-65 (B.I.A. 1998) (finding petitioner failed to demonstrate he satisfied Section 204.6(j)(2) & (3) because he failed to document adequately the source of funds he sought to invest).
The AAO's precedent decisions "were designated pursuant to regulation to 'serve as precedents in all proceedings involving the same issue(s). Except as these decisions may be modified or overruled by later precedent decisions, they are binding on all Service employees in the administration of the Act. Precedent decisions must be published and made available to the public.' " RLILP, 86 F. Supp. 2d at 1018 (citing 8 C.F.R. § 103.3(c) (1999)).
Izummi is also commonly known as Izumii by immigration specialists. RLILP, 86 F. Supp. 2d at 1018.
The requirement that a petitioner present evidence demonstrating that a currency swap partner's funds were obtained through lawful means does not constitute a substantive change in the law and, at most, effects only an interpretive change regarding the requirement of proof set forth in section 204.6(j)(3). See RLILP, 86 F. Supp. 2d at 1026 (holding the Agency's requirement of documentation of the source of a petitioner's funds did not need to be implemented through notice and comment rulemaking because it "[did] not effect a substantive change in the law; at most, it enforce[d] the requirement of proof set forth in section 204.6(j)(3)"). Accordingly, USCIS' practice of requiring petitioners to establish the lawfulness of funds provided by currency swap partners is an interpretive rule for which notice and comment were not required.
C. Whether Plaintiffs Have a Reliance Interest in USCIS' Prior Practice
Plaintiffs next argue the denial of their EB-5 Petitions constituted a prohibited retroactive application of a policy that was first publicly announced in August 2019—after Nguyen filed his petition in reliance of prior Agency practice. Mot. Br. 8-14. Plaintiffs cite Chang v. United States, 327 F.3d 911, 928 (9th Cir. 2003), to argue that when an agency has an established history of accepting certain petitioner practices, it is reasonable for stakeholders to rely on the policy established by that history and that an agency can only announce retroactive policy changes through adjudications after considering the factors set forth in Montgomery Ward & Co. v. FTC, 691 F.2d 1322, 1333 (9th Cir. 1982). Mot. Br. 8-9.
The Montgomery Ward factors are: "(1) whether the particular case is one of first impression, (2) whether the new rule represents an abrupt departure from well established practice or merely attempts to fill a void in an unsettled area of law, (3) the extent to which the party against whom the new rule is applied relied on the former rule, (4) the degree of the burden which a retroactive order imposes on a party, and (5) the statutory interest in applying a new rule despite the reliance of a party on the old standard."
In Chang, 327 F.3d at 915-17, the Ninth Circuit held that EB-5 petitioners had an enforceable reliance interest that prevented retroactive application of new rules for EB-5 applicants established by AAO precedent decisions, because the agency had already approved the plaintiffs' EB-5 petitions before changing the rules of the EB-5 program, and the plaintiffs had sold businesses and moved to the United States with their dependents relying on that approval. Id. at 926, 928.
In reaching its decision, Chang, 327 F.3d at 926, expressly distinguished the plaintiffs' circumstances in that case from RLILP, 86 F. Supp. 2d 1014, in which the Ninth Circuit had adopted in full the district court's ruling that precedent decisions were binding on EB-5 petitioners, finding the RLILP plaintiffs had no protectable reliance interest that prevented the application of precedent decisions because their EB-5 petitions had not been approved. Here, like in RLILP and unlike in Chang, it is undisputed that Plaintiffs' EB-5 Petitions were not previously approved by USCIS before they were denied. Accordingly, the portion of Chang on which Plaintiffs rely is inapposite, as Plaintiffs do not have a protectable reliance interest. See Chang, 327 F.3d at 926. Plaintiffs' argument, thus, fails.
Furthermore, even if the court were to assume, arguendo, that Plaintiffs could have a reliance interest in the Agency's established practice regarding the documentation required for funds transferred through a currency swap, Plaintiffs fail to demonstrate that USCIS' current practice represents an abrupt departure from well-established practice or that they reasonably relied on the Agency's prior practice. See Montgomery Ward, 691 F.2d at 1333.
As stated, the Ninth Circuit has recognized "[t]he plain language of section 204.6(j)(3) makes it clear that petitioners have always been obligated to document the source of investment funds." RLILP, 86 F. Supp. 2d at 1026, aff'd and adopted in full, 273 F.3d 874. In cases predating the filing of Plaintiffs' EB-5 Petitions, courts have held that USCIS properly denied EB-5 petitions where the petitioners failed to submit evidence to establish the lawful source of investment funds transferred from China through a third-party's bank accounts. E.g., Lei v. U.S. Citizenship & Immigr. Servs., Case No. 2:15-cv-09654-FMO (PJWx), 2017 WL 5957641, at *5-6 (C.D. Cal. Mar. 23, 2017), aff'd, 740 F. App'x 578 (9th Cir. 2018) (granting summary judgment for USCIS and against plaintiff where plaintiff failed to document complete path of funds where plaintiff transferred funds from one Chinese bank account to a third-party's Chinese bank account and the third-party subsequently transferred funds from a separate account to an account at another bank controlled by plaintiff).
Furthermore, the articles Plaintiffs cite in support of their argument that USCIS changed its practice regarding currency swaps either predate the filing of Nguyen's Petition on March 23, 2018, or expressly note that the Agency began requiring petitioners to establish the lawful source of funds involved in currency swaps in 2017. See CAR 71 (article dated February 16, 2018); id. at 78 (stating that "[p]rior to 2017, the use of currency swap was not heavily scrutinized by USCIS . . . [b]ut more recently, USCIS . . . is now routinely issuing more rigorous RFEs that probe deeper into the different facets of the currency swap transactions," and requiring documentation to demonstrate the legitimacy of the exchanger's funds). Also, Defendants present evidence that the then-USCIS Deputy Chief discussed this practice in February 2016, stating:
We received quite a few questions regarding source of funds. Specifically we were asked if we accept private currency exchange. We will accept private currency exchange. The thing that is important to remember about this is that lawful source of funds must be shown, and the path of funds must be clearly documented and demonstrated. Also, depending on the specific circumstances, we may require evidence from the petitioner to validate the lawful source of third party funds involved in the transaction.CAR 1159 (emphasis added).
This evidence demonstrates that USCIS's vetting of third-party funds is consistent with the agency's established practices that predate the filing of Nguyen's EB-5 Petition. Plaintiffs, in turn, do not present any evidence to establish they reasonably believed the USCIS did not require evidence of the lawful source of funds involved in a currency swap or that they took any specific actions in reliance of such belief. Plaintiffs, thus, fail to demonstrate that the Agency's current practice regarding its treatment of currency swap funds constitutes an abrupt departure from a prior established practice on which they reasonably relied.
In sum, Plaintiffs fail to demonstrate USCIS' current practice regarding its treatment of investment funds transferred through a currency swap is an impermissible retroactive application of a new rule.
D. Whether the Agency's Decision Was Arbitrary and Capricious
An agency's decision is arbitrary and capricious if "the agency has relied on factors which Congress has not intended it to consider, entirely failed to consider an important aspect of the problem, offered an explanation for its decision that runs counter to the evidence before the agency, or is so implausible that it could not be ascribed to a difference in view or the product of agency expertise." Beno, 30 F.3d at 1073. "The scope of review under the 'arbitrary and capricious' standard is narrow and a court is not to substitute its judgment for that of the agency." Motor Vehicle, 463 U.S. at 43, 103 S.Ct. 2856.
Furthermore, an "agency's factual findings are reviewed for substantial evidence." Family Inc. v. U.S. Citizenship & Immigr. Servs., 469 F.3d 1313, 1315 (9th Cir. 2006) (internal citation omitted). Accordingly, a court "will not disturb the agency's findings under this deferential standard unless the evidence presented would compel a reasonable finder of fact to reach a contrary result." Id. (internal quotation marks and citation omitted). "[J]udicial review of agency action is limited to 'the grounds that the agency invoked when it took the action.' " Dep't of Homeland Sec. v. Regents of the Univ. of Cal., — U.S. —, 140 S. Ct. 1891, 1907, 207 L.Ed.2d 353 (2020).
Plaintiffs contend USCIS' denial of their EB-5 Petitions was arbitrary and capricious for three primary reasons. First, Plaintiffs argue it is illogical to treat the currency swap method of currency exchange different from the other standard method petitioners use to avoid foreign currency export controls and bring investment funds into the United States. Mot. Br. 14. Second, Plaintiffs argue USCIS demands more evidence than is authorized by Section 11153(b)(5) and the implementing regulations. Id. at 17. Third, Plaintiffs argue USCIS misrepresented and failed to consider key evidence in the record and that the denial decision runs counter to the evidence that was before the Agency. Id. at 7. The court will address each argument in turn.
1. Whether the Agency's Practice is Illogical
Plaintiffs assert USCIS has historically accepted two methods of circumventing currency export controls and it is illogical to treat these two methods differently. Mot. Br. 3. Under the first method, known as "friends and family," a foreign national entrusts friends and family to transfer funds to the United States. Id. Under the second method, a "currency swap," which is the method Nguyen used, a foreign national transfers funds domestically to a third-party partner, who has funds in a jurisdiction that is not subject to currency export controls, and the partner then transfers funds from that jurisdiction to the United States. Id. Plaintiffs note that one reason USCIS provided for the denial of their EB-5 Petitions was that HLG was not properly licensed under foreign law, and argue it is arbitrary and capricious for the Agency to require currency swap participants to be properly licensed, while not requiring the same of a petitioner's friends and family. Id. at 14. According to Plaintiffs, the friends and family method "directly violates foreign currency export laws" of other countries, and "if the Agency is concerned with money laundering risk, it should direct its scrutiny at the Friends and Family approach too." Id. at 14-15.
Defendants contend USCIS treats friends and family transactions in the same manner as currency swaps, and that "[t]he key inquiry for USCIS is whether there is anything irregular in the record to raise suspicion." Opp'n 19. Defendants also note USCIS has denied EB-5 petitions where family members' source of funds were not documented appropriately. See Nielsen, 2019 WL 5303276, at *7-8 (denying EB-5 petition where source of funds provided by plaintiff's father was not sufficiently documented); Lei, 2017 WL 5957641, at *3-5 (denying EB-5 petition where source of funds provided by plaintiff's husband was not sufficiently documented).
Plaintiffs do not cite any legal authority to establish USCIS has imposed different documentation requirements for petitioners who have used the friends and family method and those who have engaged in currency swaps. See Mot. Br. 14-15; Dkt. 23 ("Reply") 9-10. As this was an independent basis for the Agency's denial decision, the court need not address Plaintiffs' arguments regarding whether USCIS' licensure requirements for currency swap partners is arbitrary and capricious.
2. Whether the Agency's Decision Was Supported by the INA and Implementing Regulations
Next, Plaintiffs argue there is no basis in the INA and supporting regulations for USCIS to examine the legality of the path of Nguyen's funds. Mot. Br. 16. The court disagrees.
As stated, "[t]he plain language of section 204.6(j)(3) makes it clear that petitioners have always been obligated to document the source of investment funds." RLILP, 86 F. Supp. 2d at 1026. It is undisputed that Nguyen placed his funds, which were in Vietnamese Dong, in an escrow account with HLG in Vietnam. Mot. Br. 4. Nguyen's funds never left Vietnam and were transferred to Rainbow in Vietnam. The funds Nguyen attempted to use in the investment project were a separate set of funds provided by Rainbow, in United States Dollars, which originated from outside of Vietnam. Id. at 4-5. Nguyen expressly states he engaged in a currency swap, rather than a direct transfer, to avoid his home country's currency export controls. See Mot. Br. 2-5. In other words, Nguyen did not go to his bank in Vietnam, convert the Vietnamese Dong in his account to United States Dollars, and then use the converted funds for a qualifying EB-5 investment.
As the investment funds used here originated from Rainbow outside of Vietnam, thereby causing a clear break in the source, custody, and ownership of Plaintiff's funds in Vietnam, it was reasonable for USCIS to find that Rainbow - not Nguyen - was the source of the qualifying investment funds and require Nguyen to prove the Rainbow funds were obtained from a lawful source, pursuant to Section 204.6(j)(3). Plaintiffs' argument, thus, fails. See Beno, 30 F.3d at 1073.
3. The Agency's Consideration of the Record
Finally, Plaintiffs contend USCIS' denial was arbitrary and capricious because the Agency's written decision was sloppy and did not address all of the key evidence and legal arguments in the record. Mot. Br. 7-8. According to Plaintiffs, the Agency misrepresented the record when it denied the EB-5 Petition, including by stating that Nguyen had not listed a depositing party or entity in connection with the March 9, 2018 deposit of $552,920.08 USD in HLG's account, when, in fact, Nguyen had produced a wire transfer receipt listing Rainbow as the depositing party. Id. at 7. Plaintiffs, however, do not demonstrate that any purported misrepresentations of the evidence in record were material.
While Plaintiffs challenge USCIS' description of the evidence Nguyen submitted in his RFE response, id. at 7, it is undisputed the Agency was aware Rainbow was the source of Nguyen's investment funds. See Mot. Br. 5 (recognizing USCIS requested additional information regarding Rainbow's source of funds).
Plaintiffs do not dispute that Nguyen's funds never left Vietnam or that the funds entered the United States through a currency swap with an unrelated third-party in another country. Mot. Br. 4-5. In its NOD, the Agency cited multiple reasons it was concerned about the lawful source of funds, including "several inconsistencies found in the supporting documents submitted in [the] RFE response, such as rapid accumulation of USD funds of a company incorporated less than six months prior to the alleged transfer of funds to HLG, lack of business activity or business transactions, lack of physical office, and resignation of major business position." CAR 10.
Plaintiffs argue a third-party due diligence report commissioned for the purpose of responding to the RFE explained that Rainbow participated in a multi-million dollar transaction in February 2018, which would have provided it with the currency needed for Nguyen's currency swap. Mot. Br. 7. As courts have recognized, however, an EB-5 petitioner must establish that the actual capital invested came from a lawful source, and not simply that the capital could have been provided from lawful funds. See Lei, 2017 WL 5957641, at *4 n. 2 ("[A] plaintiff cannot establish that she is eligible for an EB-5 visa merely by showing that her husband was financially capable of affording her capital investment via lawfully obtained funds; she must establish that the actual capital invested was obtained through lawful means.") (emphasis in original).
As Nguyen's funds never left Vietnam, it was reasonable for USCIS to require him to establish that the funds transferred from his currency swap partner, Rainbow, came from a lawful source, and find that Nguyen's evidence that Rainbow had previously participated in a transaction that exceeded the amount of the investment funds was insufficient. See Soffici, 22 I. & N. Dec. at 165 (Documentation of the source of funds "is relevant to the question of whether the funds have been lawfully obtained, which is a requirement under 8 C.F.R. § 204.6(j)(3)."). Therefore, the denial was reasonable based on the facts before USCIS and not arbitrary or capricious. See Beno, 30 F.3d at 1073.
CONCLUSION
Having reviewed and considered the parties' arguments and the administrative record, the court concludes USCIS's decision was not arbitrary, capricious, an abuse of discretion, not in accordance with law, or unsupported by substantial evidence. The court, therefore, DENIES Plaintiffs' Motion for Summary Judgment and GRANTS Summary Judgment in favor of Defendants. Defendants' request to strike extra-record evidence, Opp'n 12-13, is DENIED as moot.
Defendants shall submit a proposed Judgment within fourteen (14) days of this Order.
IT IS SO ORDERED.