RETROACTIVE IMMIGRANT INVESTOR LAW IS
HIGHLY IMPROBABLE and PROBABLY UNLAWFUL
By Joseph P. Whalen (Friday, December 4, 2015)
I have noticed a growing chorus of alarmists publishing articles and blogs
warning about potential, probable, or impending harmful, negative, retroactive:
(1.) increases to the minimum investment amounts required for EB-5 purposes;
and (2.) changes to the requirements for targeted employment area (TEA)
designation. It is obvious to me that these fears arise from some harsh language
in various bills recently floated around Capitol Hill. If such changes are made as
part of an extension bill or preferably a bill to make the EB-5 Regional Center
Program a permanent part of the Immigration and Nationality Act (INA), they are
much less likely to be retroactive than some folks might believe. In my opinion,
it is merely grandstanding and political rhetoric. I say this because there have
been less drastic bills floating around much longer and these have gained much
more consensus over a much longer period of time. In the current mad rush
atmosphere, it has been easy for some less vested members to try to steal some
of the EB-5 spotlight as they embark on their campaign trails. Do not be fooled!
From a legal perspective, I do not believe that such draconian measures
would survive a court challenge. Previously, the judiciary refused to allow the
four EB-5 AAO Precedent Decisions of 1998, to be applied retroactively. Why
would anyone believe that any court would allow Congress to do this? Besides
the mere issue of fairness, retroactive application is against Circuit Court and
Supreme Court Precedent, and a little thing called the Constitution.
Retroactivity was notably addressed in Montgomery Ward & Co., Inc. v.
FTC, 691 F. 2d 1322, 1333 (9th Cir. 1982) [Montgomery Ward], thusly:
Page 1 of 10
“The FTC also argues that this case involves a cease and desist order that
applies prospectively only. While we agree that a cease and desist order
leads only to future sanctions, we also note that those sanctions would
not be possible except for Wards's conduct prior to the Commission's
explanation of ready access in its order. If the FTC had utilized its rulemaking proceedings to define ready access, this retroactivity problem
would not exist. [19] We must therefore examine the retroactive effect of the
order relating to the placement of the binders.
In balancing a regulated party's interest in being able to rely on the terms
of a rule as it is written, against an agency's interest in retroactive
application of an adjudicatory decision, a good framework for analysis is
set forth in Retail, Wholesale and Department Store Union v.
NLRB, 466 F.2d 380, 390-93 (D.C.Cir.1972). [20]
Among the considerations that enter into a resolution of the
problem 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.
Id. at 390.”
Montgomery Ward1 at 1333. [Slight reformatting for clarity.]
Footnotes from original:
In Litton we noted that a cease and desist order is enforceable in the district
court. 676 F.2d at 371. In an enforcement action, the court may assess up to
$10,000 in fines for each violation. 15 U.S.C. Sec. 45(l) (made applicable by 15
U.S.C. Sec. 2310(b), which makes a violation of the Act a violation of 15 U.S.C.
Sec. 45(a)(1))
19
The Retail Union test has been used in McDonald v. Watt, 653 F.2d 1035, 104346 (5th Cir.1981); E.L. Wiegand Division v. NLRB, 650 F.2d 463, 471 & n. 5 (3d
Cir.1981), cert. denied, --- U.S. ----, 102 S.Ct. 1429, 71 L.Ed.2d 649 (1982);
Standard Oil Co. v. Department of Energy, 596 F.2d 1029, 1063-64
(Temp.Emer.Ct.App.1978); Lodges 743 and 1746 v. United Aircraft Corp., 534 F.2d
422, 452-54 (2d Cir.1975), cert. denied, 429 U.S. 825, 97 S.Ct. 79, 50 L.Ed.2d 87
(1976).
20
1
https://law.resource.org/pub/us/case/reporter/F2/691/691.F2d.1322.81-7421.html
Page 2 of 10
The five considerations stated above are very useful ones but Montgomery
Ward was neither the first nor the last major case of interest on this subject
matter. For instance, Landgraf v. USI Film Products, 511 U. S. 244 (1994),2 is
very enlightening. Landgraf tells us about the general legal principles from our
Constitution which favor prospective application of laws; the impropriety of
singling out disfavored persons for unfair treatment, such as punishing past
conduct; especially when those individuals have vested property rights and; when
such retroactive application impairs the Obligation of Contracts.
“… [T]he presumption against retroactive legislation is deeply rooted in our
jurisprudence, and embodies a legal doctrine centuries older than our
Republic. 17 Elementary considerations of fairness dictate that individuals
should have an opportunity to know what the law is and to conform their
conduct accordingly; settled expectations should not be lightly disrupted.
18 For that reason, the "principle that the legal effect of conduct should
ordinarily be assessed under the law that existed when the conduct took
place has timeless and universal appeal." Kaiser, 494 U.S., at 855, 110 S.
Ct., at 1586 (SCALIA, J., concurring). In a free, dynamic society, creativity
in both commercial and artistic endeavors is fostered by a rule of law that
gives people confidence about the legal consequences of their actions.
It is therefore not surprising that the anti-retroactivity principle finds
expression in several provisions of our Constitution. The Ex Post
Facto Clause flatly prohibits retroactive application of penal legislation.
19 Article I, § 10, cl. 1 prohibits States from passing another type of
retroactive legislation, laws "impairing the Obligation of Contracts." The
Fifth Amendment's Takings Clause prevents the Legislature (and other
government actors) from depriving private persons of vested property
rights except for a "public use" and upon payment of "just compensation."
The prohibitions on "Bills of Attainder" in Art. I, §§ 9-10, prohibit
legislatures from singling out disfavored persons and meting out summary
punishment for past conduct. See, e.g., United States v. Brown, 381 U.S.
437, 456-462, 85 S. Ct. 1707, 1719-1722, 14 L. Ed. 2d 484 (1965). The
Due Process Clause also protects the interests in fair notice and repose
that may be compromised by retroactive legislation; a justification
sufficient to validate a statute's prospective application under the Clause
"may not suffice" to warrant its retroactive application. Usery v. Turner
2
https://supreme.justia.com/cases/federal/us/511/244/case.pdf
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Elkhorn Mining Co., 428 U.S. 1, 17, 96 S.Ct. 2882, 2893, 49 L.Ed.2d 752
(1976).
These provisions demonstrate that retroactive statutes raise particular
concerns. The Legislature's unmatched powers allow it to sweep away
settled expectations suddenly and without individualized consideration.
Its responsivity to political pressures poses a risk that it may be tempted
to use retroactive legislation as a means of retribution against unpopular
groups or individuals. As Justice Marshall observed in his opinion for the
Court in Weaver v. Graham, 450 U.S. 24, 101 S. Ct. 960, 67 L. Ed. 2d 17
(1981), the Ex Post Facto Clause not only ensures that individuals have
"fair warning" about the effect of criminal statutes, but also "restricts
governmental power by restraining arbitrary and potentially vindictive
legislation." Id., at 28-29, 101 S. Ct., at 963-964 (citations omitted).20 “
Id. at 265-266.
Footnotes from original:
See Kaiser Aluminum & Chemical Corp. v. Bonjorno, 494 U.S. 827,
842-844, 855-856, 110 S.Ct. 1570, 1579-1581, 1586-1587, 108 L.Ed.2d
842 (1990) (SCALIA, J., concurring). See also, e.g., Dash v. Van Kleeck, 7
Johns. *477, *503 (N.Y.1811) ("It is a principle of the English common law,
as ancient as the law itself, that a statute, even of its omnipotent
parliament, is not to have a retrospective effect") (Kent, C.J.); Smead, The
Rule Against Retroactive Legislation: A Basic Principle of Jurisprudence,
20 Minn.L.Rev. 775 (1936).
17
See General Motors Corp. v. Romein, 503 U.S. ----, ----, 112 S.Ct.
1105, 1112, 117 L.Ed.2d 328 (1992) ("Retroactive legislation presents
problems of unfairness that are more serious than those posed by
prospective legislation, because it can deprive citizens of legitimate
expectations and upset settled transactions"); Munzer, A Theory of
Retroactive Legislation, 61 Texas L.Rev. 425, 471 (1982) ("The rule of law
. . . is a defeasible entitlement of persons to have their behavior governed
by rules publicly fixed in advance"). See also L. Fuller, The Morality of Law
51-62 (1964) (hereinafter Fuller).
18
Article I contains two Ex Post Facto Clauses, one directed to Congress
(§ 9, cl. 3), the other to the States (§ 10, cl. 1). We have construed the
Clauses as applicable only to penal legislation. See Calder v. Bull, 3 Dall.
386, 390-391, 1 L.Ed. 648 (1798) (opinion of Chase, J.).
19
See Richmond v. J. A. Croson Co., 488 U.S. 469, 513-514, 109 S.Ct.
706, 732, 102 L.Ed.2d 854 (1989) ("Legislatures are primarily
policymaking bodies that promulgate rules to govern future conduct. The
constitutional prohibitions against the enactment of ex post facto laws and
bills of attainder reflect a valid concern about the use of the political
process to punish or characterize past conduct of private citizens. It is the
judicial system, rather than the legislative process, that is best equipped
20
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to identify past wrongdoers and to fashion remedies that will create the
conditions that presumably would have existed had no wrong been
committed") (STEVENS, J., concurring in part and concurring in
judgment); James v. United States, 366 U.S. 213, 247, n. 3, 81 S.Ct. 1052,
1052, n. 3, 6 L.Ed.2d 246 (1961) (retroactive punitive measures may reflect
"a purpose not to prevent dangerous conduct generally but to impose by
legislation a penalty against specific persons or classes of persons").
James Madison argued that retroactive legislation also offered special
opportunities for the powerful to obtain special and improper legislative
benefits. According to Madison, "[b]ills of attainder, ex post facto laws, and
laws impairing the obligation of contracts" were "contrary to the first
principles of the social compact, and to every principle of sound
legislation," in part because such measures invited the "influential" to
"speculat[e] on public measures," to the detriment of the "more industrious
and less informed part of the community." The Federalist No. 44, p. 301
(J. Cooke ed. 1961). See Hochman, The Supreme Court and the
Constitutionality of Retroactive Legislation, 73 Harv.L.Rev. 692, 693
(1960) (a retroactive statute "may be passed with an exact knowledge of
who will benefit from it").”
Specifically in the immigration context, we have certain useful guidance
from INS v. St. Cyr 533 U.S. 289 (2001), which, per the syllabus, held, in pertinent
part:
1. Courts have jurisdiction under 28 U. S. C. § 2241 to decide the
legal issue raised by St. Cyr’s habeas petition. Pp. 298–314.
*****
2. Section 212(c) relief remains available for aliens, like St. Cyr,
whose convictions were obtained through plea agreements and who,
notwithstanding those convictions, would have been eligible for § 212(c)
relief at the time of their plea under the law then in effect. Pp. 314–326.
(a) A statute’s language must require that it be applied retroactively.
Bowen v. Georgetown Univ. Hospital, 488 U. S. 204, 208. The first step in
the impermissible-retroactive-effect determination is to ascertain whether
Congress has directed with the requisite clarity that the law be applied
retrospectively. Martin v. Hadix, 527 U. S. 343, 352. Such clarity is not
shown by the comprehensiveness of IIRIRA’s revision of federal
immigration law, see Landgraf v. USI Film Products, 511 U. S. 244, 260–
261, by the promulgation of IIRIRA’s effective date, see id., at 257, or by
IIRIRA § 309(c)(1)’s “saving provision.” Pp. 314–320.
(b) The second step is to determine whether IIRIRA attaches new
legal consequences to events completed before its enactment, a judgment
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informed and guided by considerations of fair notice, reasonable reliance,
and settled expectations. Landgraf, 511 U. S., at 270. IIRIRA’s elimination
of § 212(c) relief for people who entered into plea agreements expecting
that they would be eligible for such relief clearly attaches a new disability
to past transactions or considerations. Plea agreements involve a quid pro
quo between a criminal defendant and the government, and there is little
doubt that alien defendants considering whether to enter into such
agreements are acutely aware of their convictions’ immigration
consequences. The potential for unfairness to people like St. Cyr is
significant and manifest. Now that prosecutors have received the benefit
of plea agreements, facilitated by the aliens’ belief in their continued
eligibility for § 212(c) relief, it would be contrary to considerations of fair
notice, reasonable reliance, and settled expectations to hold that IIRIRA
deprives them of any possibility of such relief. The INS’ argument that
application of deportation law can never have retroactive effect because
deportation proceedings are inherently prospective is not particularly
helpful in undertaking Landgraf’s analysis, and the fact that deportation
is not punishment for past crimes does not mean that the Court cannot
consider an alien’s reasonable reliance on the continued availability of
discretionary relief from deportation when deciding the retroactive effect of
eliminating such relief. That § 212(c) relief is discretionary does not affect
the propriety of this Court’s conclusion, for there is a clear difference
between facing possible deportation and facing certain deportation. Pp.
320–326.
While § 212(c) relief is discretionary, I do not believe that a fact-based
determination as to meeting statutorily and regulatorily defined eligibility
requirements based upon the evidence submitted could be so characterized. The
“EB-5 investors” and their Regional Center, U.S. business, and individual
“partners” all have reasonable expectations when they enter into multi-million
dollar deals. To allow Congress to pull the rug out from underneath them is unAmerican behavior contrary to long held practices; and to principles in our
Constitution and the common-law.
We are fortunate that the question of impermissible retroactivity has
already been expressly addressed within the EB-5 context. We can at the very
least seek guidance from the Spencer Enterprises, Inc. case from the E.D
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California (2001)3, affirmed by the 9th Circuit in (2003)4, which includes the
following analysis.
Applying § 1252(a)(2)(B)(ii) here, we find that the authority to issue a visa
under the immigrant investor program is not specified by any statute to
be discretionary. Instead, the authority comes directly from § 1153(b)(5),
which both mandates issuance of such visas, see 8 U.S.C. § 1153(b)(5)(A)
(“Visas shall be made available to qualified immigrants seeking to enter
the United States for the purpose of engaging in a new commercial
enterprise․” (emphasis added)), and sets out a series of standards for
eligibility that the visa petitioner must meet. Although, like the statute in
Matsuk, § 1154(b) does allow the Attorney General to “determine” the
petitioner's eligibility, the determination here is clearly guided by the
eligibility requirements set out in § 1153(b)(5), whereas the discretionary
determination in Matsuk is unguided.
Moreover, as noted above, §
1154(b) directs that the Attorney General “shall ․ approve the petition” of
any visa petitioner who is determined to be eligible. This language is very
distinct from the discretionary language in the asylum context, which
allows the Attorney General to deny asylum even to those applicants who
meet the statutory eligibility requirements.4 We conclude that §
1252(a)(2)(B)(ii) does not preclude judicial review of the decision whether
to issue a visa pursuant to § 1153(b)(5).”
Footnote from original:
The dissent argues that 8 U.S.C. § 1155, allowing visa petitions to be
revoked for “good and sufficient cause,” indicates that visa decisions are
wholly discretionary. But the decision at issue here is not a revocation
under § 1155, and in any case we have previously interpreted the words
“good and sufficient cause” to require INS to produce “substantial evidence
supporting its determination” that a petition should be revoked.
Tongatapu Woodcraft Hawaii, Ltd. v. Feldman, 736 F. 2d 1305, 1309 (9th
Cir. 1984).5 Thus the text of § 1155 no more specifies visa decisions to
be in the unfettered discretion of the Attorney General than does the text
of §§ 1153(b)(5) and 1154(b).”
4.
While I must argue that the 9th Circuit erred in stating that the statute
“mandates issuance of [EB-5] visas” when all that is actually required is the
preliminary step of approving the visa petition. This can be chalked up to clumsy
3
https://www.courtlistener.com/opinion/2396866/spencer-enterprises-inc-v-united-states/?
http://caselaw.findlaw.com/us-9th-circuit/1330636.html
5
https://law.resource.org/pub/us/case/reporter/F2/736/736.F2d.1305.83-1826.html
4
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phraseology in an otherwise good and sound decision. Spencer is not the only
decision that relates directly to EB-5, but I will only cite to this one court case
for the sake of brevity. Those who have read my prior articles will already know
that brevity is not my strongest skill when I write about EB-5.
Rather than try to defeat the fearmongering by building a huge legal
defense against imaginary draconian retroactive worst case scenarios, I’d like to
examine some of the actual language in the bipartisan, bicameral compromise
bill. This bill, “S.__ MDM15J00 [Discussion Draft] S.L.C.”6 found, here, includes
some provisions which are much more investor-friendly than earlier versions.
For example, an earlier version contained an unusable provision relating to a
limit on the percentage of indirect jobs that could be used by Regional Center
affiliated EB-5 investors, that limit was, and remains, 90%. In other words, they
could count nine (9) indirect jobs towards their minimum of ten (10). The earlier
version did not redefine what would satisfy the single remaining job. Current
EB-5 law defines a “direct” job as, in short, an on-the-books, lawfully authorized
U.S. worker, with certain exclusions. E-Verify is a smart move for EB-5
employers, but is not a legal requirement under current law.
8 C.F.R. § 204.6
Petitions for employment creation aliens.7
*
*
*
*
*
*
*
(e) Definitions. As used in this section:
*
*
*
Employee means an individual who provides services or labor for
the new commercial enterprise and who receives wages or other
remuneration directly from the new commercial enterprise. In the case of
the Immigrant Investor Pilot Program, “employee” also means an individual
who provides services or labor in a job which has been created indirectly
through investment in the new commercial enterprise. This definition shall
not include independent contractors.
6
http://www.leahy.senate.gov/imo/media/doc/MDM15J00.pdf
http://www.ecfr.gov/cgi-bin/textidx?SID=6bc4a7f7941f10957548561605d6a2fb&mc=true&node=pt8.1.204&rgn=div5#se8.1.204_16
7
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Full-time employment means employment of a qualifying employee
by the new commercial enterprise in a position that requires a minimum
of 35 working hours per week. In the case of the Immigrant Investor Pilot
Program, “full-time employment” also means employment of a qualifying
employee in a position that has been created indirectly through revenues
generated from increased exports resulting from the Pilot Program that
requires a minimum of 35 working hours per week. A job-sharing
arrangement whereby two or more qualifying employees share a full-time
position shall count as full-time employment provided the hourly
requirement per week is met. This definition shall not include
combinations of part-time positions even if, when combined, such
positions meet the hourly requirement per week.
*
*
*
*
*
Qualifying employee means a United States citizen, a lawfully
admitted permanent resident, or other immigrant lawfully authorized to
be employed in the United States including, but not limited to, a
conditional resident, a temporary resident, an asylee, a refugee, or an alien
remaining in the United States under suspension of deportation. This
definition does not include the alien entrepreneur, the alien entrepreneur's
spouse, sons, or daughters, or any nonimmigrant alien.
*
*
*
*
*
*
*
(j) Initial evidence to accompany petition.
*
*
*
(4) Job creation—
(i) General. To show that a new commercial enterprise will create
not fewer than ten (10) full-time positions for qualifying employees, the
petition must be accompanied by:
(A) Documentation consisting of photocopies of relevant tax records,
Form I-9, or other similar documents for ten (10) qualifying employees, if
such employees have already been hired following the establishment of the
new commercial enterprise; or
(B) 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.
*
*
*
Page 9 of 10
*
*
(iii) Immigrant Investor Pilot Program. To show that the new
commercial enterprise located within a regional center approved for
participation in the Immigrant Investor Pilot Program meets the statutory
employment creation requirement, the petition must be accompanied by
evidence that the investment will create full-time positions for not fewer
than 10 persons either directly or indirectly through revenues generated
from increased exports resulting from the Pilot Program. Such evidence
may be demonstrated by reasonable methodologies including those set
forth in paragraph (m)(3) of this section.
Panic was starting to set in when the earlier version of a reform bill did
nothing to offset the definition of a direct employee. In the later petition filed as
the aliens’ two-year anniversary approaches the distinction remains the same.
The bottom line is that since most Regional Center job creation is “indirect” to
the aliens, the earlier bill essentially made nearly ALL current Regional Center
affiliated investors ineligible to remove the conditions from their status! The more
recent bill has now recognized the distinction and conformed the 10% direct
jobs requirement to mirror to the economic models’ use of the term “direct” jobs.
Specifically, the newer version of the bill includes:
“…An employee of the new commercial enterprise or job-creating entity may be
considered to hold a job that has been directly created.”
We can all breathe easier now! Other questions are also being answered in
a useful manner. The inclusion of tenants’ jobs is affirmatively accepted while
relocated jobs are affirmatively prohibited. As I previously advocated, facilitation
by the investors through the creation or remodeling of specific commercial space,
gives the investor the right to count the new employees that work in that space.
“… the Secretary may include jobs estimated to be created under a
methodology whereby jobs are attributable to prospective tenants
occupying commercial real estate created or improved by capital
investments, but only if the number of such jobs estimated to be created
has been determined by an economically and statistically valid
methodology and such jobs are not existing jobs that have been
relocated.”
The current bill is 100 pages long, I have not digested it all yet. If another
article is warranted, I will write one. That my two-cents, for now.
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