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Doe v. McAleenan

United States Court of Appeals, Seventh Circuit

July 3, 2019

John Doe, Plaintiff-Appellant,
Kevin K. McAleenan, Acting Secretary of Homeland Security, et al., Defendants-Appellees.

          Argued March 28, 2019

          Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. l:15-cv-01387 - John Z. Lee, Judge.

          Before Ripple, Manion, and Sykes, Circuit Judges.


         John Doe, a native and citizen of Iran, obtained an immigrant visa through an employment-based visa program for investors, and, in due course, he successfully applied to adjust his status to that of a conditional permanent resident. At the conclusion of his two-year, conditional term, Mr. Doe petitioned to remove the conditions on his residency. The United States Citizenship and Immigration Services ("USCIS") denied his petition. Mr. Doe challenged the denial in the district court, claiming that the decision was arbitrary and capricious, exceeded the relevant statutory and regulatory authority, and deprived him of his due process rights under the Fifth Amendment. The district court granted summary judgment to the defendants. For the reasons below, we affirm the judgment of the district court.[1]




         Because the factual and procedural background of this case involves a visa system which is not frequently the subject of our cases, we begin by setting forth the statutory and regulatory framework.

         The EB-5[2] program, colloquially known as the "investor visa," is a program designed by Congress to encourage significant, job-creating investment in commercial enterprises in the United States, with special incentives related to rural or economically depressed communities where unemployment is at least 150% of the national average. The program, in its current iteration, [3] requires an alien investor to make an investment of at least $500, 000 for a new commercial enterprise located in a rural or high-unemployment area and up to $3, 000, 000 for a new commercial enterprise located in an area with an unemployment rate significantly below the national average.[4] The enterprise can be the creation of a new business, a purchase of an existing business with substantial restructuring or reorganization, or the substantial expansion of an existing business. The enterprise must create full-time employment for a minimum of ten qualified employees. See generally 8 U.S.C. § 1153(b)(5); 8 C.F.R. § 204.6.

         The process by which an alien obtains status under § 1153(b)(5) begins with a petition for classification as an alien entrepreneur. A petition must be accompanied by evidence "that the alien 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 10 qualifying employees." 8 C.F.R. § 204.6(j). Specifically, the petition must contain evidence of the existence or formation of the enterprise itself. To demonstrate "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." Id. § 204.6(j)(2). Financial documents showing deposits and expenditures must be submitted.

         Immigrant investors seeking to qualify for an EB-5 visa may make either direct investments into a business or can invest through a business designated by USCIS as a "regional center." Regional centers are essentially clearinghouses for eligible investment opportunities. As the USCIS Policy Manual states, "The regional center model can offer an immigrant investor already defined investment opportunities, thereby reducing the immigrant investor's responsibility to identify acceptable investment vehicles." USCIS Policy Manual, Volume 6, Part G, Chapter 3, (current as of June 6, 2019). With respect to the proof of capital at risk, direct investments and regional center investments have identical requirements. However, for the purpose of the job-creation requirement, direct investments and regional center investments have one important difference. Direct investment can only satisfy the job-creation requirement with the creation of direct jobs, i.e., new positions within the new commercial enterprise itself. For a petition filed on the basis of jobs already created, a petitioner submits relevant tax records, for example, documenting direct hires. 8 C.F.R. § 204.6(j)(4)(i)(A). By contrast, investments through regional centers allow EB-5 applicants to satisfy the job-creation requirement with either direct or indirect positions. An indirect job is one held outside of the new commercial enterprise but created as a result of the new commercial enterprise. An alien who chooses to rely on such indirect, economic-impact-based employment must use an approved economic methodology to establish that the requisite number of jobs have been or will be created. See id. § 204.6(m)(7)(ii).[5]For a petitioner like Mr. Doe, who files on the basis of an enterprise anticipated to create the required number of jobs, his petition must include "[a] copy of a comprehensive business plan showing that, due to the nature and projected size of the new commercial enterprise, the need for not fewer than ten (10) qualifying employees will result, including approximate dates, within the next two years, and when such employees will be hired." Id. § 204.6(j)(4)(i)(B).

         The approval of an EB-5 visa petition results in the issuance of an immigrant visa and permits the alien to file for permanent resident status on a conditional basis. See 8 U.S.C. §§ 1255(a), 1186b(a)(1). Conditional residency lasts for two years. Ninety days before the expiration of the conditional residency, an alien may apply to have the conditions on residence removed and become a lawful permanent resident. 8 U.S.C. § 1186b(d)(2)(A). At that time, USCIS must reevaluate the alien's investment and ensure that the alien:

(A) (i) invested, or is actively in the process of investing, the requisite capital; and
(ii) sustained the actions described in clause (i) throughout the period of the alien's residence in the United States; and
(B) is otherwise conforming to the requirements of section 1153(b)(5) of this title.

         8 U.S.C. § 1186b(d)(1); see also 8 C.F.R. § 216.6(a). The alien bears the burden of demonstrating that he satisfies all eligibility criteria by a preponderance of the evidence. Matter of Chawathe, 25 I. & N. Dec. 369, 375 (BIA 2010).

         Mr. Doe successfully navigated each of the steps of this process until the final one, the petition to remove the conditions on his residence. In its consideration of that petition, USCIS identified two potential issues with respect to his application: whether his investment was sustained, at risk, through the duration of his residency, and whether the project would create the requisite number of jobs within a reasonable period of time. USCIS was required to engage in this inquiry and to consider the state of affairs as of the time of the final petition even though it previously had found the same requirements satisfied. See 8 C.F.R. § 216.6(c)(1).[6] Its resolution of these matters is the subject of Mr. Doe's appeal.


         In 2011, Mr. Doe became one of twenty-four indirect immigrant investors in a proposed project to build Elgin Memory Care, Inc., a 110-unit assisted living facility in Elgin, Illinois. Each individual investor would contribute a minimum of $500, 000 to be used for the project and, if additional statutory and regulatory requirements were satisfied, by virtue of their investment would become eligible for an EB-5 visa.

         While Mr. Doe's initial capital investment was held in escrow, he self-petitioned for his EB-5 visa (the "1-526 petition"). His petition included a then-current business plan, which represented that, with the $12 million investment as the total project cost, construction of the facility would begin in 2010 and the facility would be operational by 2011. The plan also claimed that the project would create more than 270 full-time jobs. USCIS approved the 1-526 petition in June 2011. One month later, Mr. Doe's $500, 000 investment was transferred to Elgin Memory Care, and three days after the transfer, on August 1, 2011, Elgin Memory Care purchased a parcel of land on which it intended to build the assisted living facility. Elgin Memory Care paid $1.1 million for the land.

         With an approved immigrant visa in hand, Mr. Doe was eligible to apply for adjustment of status.[7] His application for adjustment was approved in 2011, and he was granted conditional resident status for a two-year period. See 8 U.S.C. § 1186b. Approximately one month before the expiration of his conditional residency in October 2013, Mr. Doe filed a petition to remove the conditions on his residence (the "1-829 petition"), as permitted by the statute.[8]

         In response to his petition, in August 2014, Mr. Doe received the first indication that USCIS was beginning to have concerns about the investment that formed the basis of his visa: USCIS issued a thorough and detailed seven-page Request for Evidence to Mr. Doe. The Request sought further evidence that his investment satisfied two critical grounds of EB-5 eligibility, both significant to the disposition of the present appeal. First, the agency requested certain information to confirm that Mr. Doe's capital investment with the EB-5 Fund had been sustained throughout his two-year conditional residency period. In addition to seeking relevant financial documents and tax records that Mr. Doe had not provided, the Request specifically noted that, in searching a property records database, it had discovered something questionable about the land transaction that was the supposed purpose of Mr. Doe's capital investment. USCIS had learned that Elgin Memory Care purchased the parcel of land for $1.1 million from an entity called UIS Development, LLC, on the very same day that UIS itself had purchased the parcel from Nesler & Lake CRE, for nearly half the amount, $630, 000. The Request gave examples of potential evidence to overcome deficiencies related to whether Mr. Doe's in- vestment was placed "at risk/' including an explanation of the prior sale "with supporting evidence."[9]

         In addition to articulating the specific concerns about the land transaction funded with Mr. Doe's investment, the Request also raised potential issues about the evidence concerning job creation. The Request noted that, between the initial submissions in support of the visa and this most recent petition to remove conditions, Mr. Doe had revised his projected job-creation figures downward by nearly fifty percent without any explanation. Beyond the particular deficiencies identified, the Request reflects plainly a concern from the agency that the project had not met any of its projected benchmarks and that no updated timelines for completion and operation had been submitted. The agency requested that, in response to its concerns, Mr. Doe provide further information on whether the project remained a going concern and whether he had sustained his qualifying investment in it. It also sought information on revisions to the anticipated job creation, because the deadlines in the plan submitted had not been met by the project. It listed a series of documents that might help satisfy those requests and invited Mr. Doe to submit anything else relevant to these concerns. Mr. Doe responded to the Request with various additional documents, the sufficiency of which is relevant to this appeal.

         On January 16, 2015, USCIS denied Mr. Doe's 1-829 petition to remove the conditions on his residence. The nine-page denial letter cited two alternate and independent grounds for the decision: namely, the "at risk" ground, related to the suspicious land transaction, and the "job-creation" ground, related to whether the ...

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