EB-5 Litigation Update Post #4: DHS Secretary Mayorkas Ratifies 2019 EB-5 Modernization Rule
Behring’s case against DHS challenging the validity of the 2019 EB-5 Immigrant Investor Program Modernization Rule is currently pending in federal district court. The next court date is May 6, 2021 when the court is expected to issue a final ruling.
When last in court on March 25, 2021, US magistrate judge converted Behring’s motion for a preliminary injunction to that of summary judgment on the legal issue whether the 2019 EB-5 Modernization Rule is invalid because it was promulgated by acting DHS officials who were appointed in violation of the Federal Vacancies Reform Act of 1998 (“FVRA”). The court asked the parties to submit written briefs on the applicability of the de facto officer doctrine and on the appropriate remedies should the court vacate the rule.
In the interim, on April 1, 2021, DHS notified the court that newly appointed DHS Secretary Alejandro Mayorkas made a last-minute ratification of the action of former acting DHS secretary Kevin McAleenan, i.e. affirming the EB-5 Final Rule. Mayorkas stated that this was done in recognition of recent court decisions holding that acting DHS officials, including McAleenan, were unlawfully appointed, and therefore, any actions taken by them are invalid.
Notably, DHS Mayorkas has not ratified any of the other actions invalidated by the other courts.
Behring Argues the Federal Vacancies Reform Act of 1998 Does Not Allow Ratification
Behring, through its attorneys at Greenberg Traurig, has notified the court that it does not agree the ratification is valid and submitted arguments against DHS’s ratification and de facto officer defense. The next court date is May 6, 2021 unless the magistrate judge decides to rule on the briefs alone without further oral argument.
In short, Behring argues that the FVRA does not allow prior actions of an unlawfully appointed official in violation of the FVRA to be ratified. Congressional anticipated such post-hoc efforts by the Executive Branch to try to correct prior violations, and in enacting the FVRA in 1998, Congress expressly stated in the Act that if “any person” performs “any function or duty” of a vacant office covered by the FVRA, without validly serving as an acting officer under the FVRA or an agency’s succession statute (here, the Homeland Security Act (HSA)), then that action “shall have no force or effect” and “may not be ratified.” See 5 U.S.C. § 3348(d)(1)-(2).
Here, McAleenan’s designation as Acting Secretary of DHS was not in compliance with the order of succession in effect as authorized under the HSA. This has been confirmed by 5 other courts. Moreover, McAleenan’s actions in promulgating the 2019 Rule changing the investment criteria for the EB-5 Program was a “function or duty” under the FVRA, i.e. those function or duties that were expressly designated as non-delegable. In the 2019 EB-5 Rule, Acting DHS Secretary asserted that the exclusive authority to change the EB-5 investment criteria resides exclusively in the DHS Secretary. Thus, McAleenan’s actions fall within the express provisions of the FVRA and may not be subsequently ratified.
Even if the DHS Secretary’s ratification is accepted by the court as valid, it does not impact Behring’s additional claims that the 2019 EB-5 Rule violated the Administrative Procedure Act and the Regulatory Flexibility Act when, among other problems, DHS failed to adequately consider the economic effects the 2019 EB-5 Rule as well as the failure to consider the absence of certainty created by an unworkable TEA designation process.
Behring wholly supports comprehensive EB-5 reform, but such reform must provide meaningful change to enhance the EB-5 Program, viz. by reducing USCIS processing times, solving retrogression, protecting against child age-out, and implementing integrity measures to strengthen investor protections. The 2019 EB-5 Modernization Rule is unsustainable in its current form and fails to cure address these issues.
Behring hopes that a favorable decision from the court will provide EB-5 stakeholders a new opportunity to work with Congress and DHS to find a meaningful solution to these challenges.
An overview of Behring’s USCIS lawsuit can be viewed here Click here.
If the EB-5 regulations are invalidated and the $500,000 investment amount is restored, it is likely only for a limited time. The sunset date for the EB-5 Regional Center Program is June 30, 2021. New legislation is expected to change the required investment amounts.
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