2002 WL 32100130 (9th Cir.)
For opinion see 345 F.3d 683
SPENCER ENTERPRISES, INC., Li-Hui Chang,
Petitioners-Appellants,
v.
Appellees.
No. 01-16391.
Appeal from Judgment of the
Brief of Petitioners and Appellants Spencer Enterprises,
Inc. and Li-Hui Chang
H. Ronald Klasko, Dechert,
Russell K. Ryan, Holland & Hart, LLP, 60 East South
Temple, Suite 2000, Salt Lake City, UT 84111, (801) 364-9124.
*i TABLE OF CONTENTS
I. INTRODUCTION ... 1
II. STATEMENT OF ISSUES PRESENTED ... 2
III. SUMMARY OF ARGUMENT ... 4
IV. STATEMENT OF JURISDICTION ... 7
V. STATEMENT OF THE CASE ... 7
VI. STANDARD OF REVIEW ... 8
VII. STATEMENT OF FACTS ... 9
A. STATUTORY BASIS FOR INVESTOR IMMIGRANT PETITIONS ... 9
B. PROCEDURE FOR OBTAINING CONDITIONAL PERMANENT RESIDENT
STATUS ... 10
C. INS REGULATIONS ... 11
D. SPENCER'S BUSINESS PLAN ... 12
E. INS' APPROVAL OF SPENCER BUSINESS PLAN AND SUBSEQUENT
CHANGE OF POSITION ... 15
F. APPELLANT CHANG'S INVESTMENT USING THE SPENCER BUSINESS
PLAN ... 15
G. EXPERT OPINIONS ATTESTING TO THE CREDIBILITY OF THE
BUSINESS PLAN ... 19
H. DENIAL OF CHANG'S INVESTOR PETITION ... 20
*ii VIII. ARGUMENT ... 22
A. THE DENIAL OF CHANG'S INVESTOR PETITION BASED UPON A
NEWLY-IMPOSED REQUIREMENT THAT THE EMPLOYMENT CREATED MUST BE PERMANENT AND
CONTINUOUS CONSTITUTES AN ERROR OF LAW AND IS INCONSISTENT WITH PRIOR
ADMINISTRATIVE INTERPRETATIONS ... 22
1. The Statute Requires "Full-Time" Employment --
not "Permanent and Continuous" Employment -- and the INS'
Interpretation of the Statutory Language is Reviewed by this Court De Novo ...
22
2. INS Regulations Also Require Only "Full-Time"
Employment ... 25
3. Administratively - Imposed Requirements Beyond
"Full-Time" Employment are Not Supportable in Law or in Policy ... 27
4. An Inconsistent Agency Interpretation is Subject to
Considerably Less Deference and Requires a Reasoned Explanation For the
Inconsistency ... 29
5. Even Though Not Legally Required, FMA's Business Plan
Will Produce Continuous and Permanent Employment for Ten Full-Time Employees
Within the Requisite Two-Year Period ... 32
B. INS' DENIAL OF CHANG'S PETITION BASED UPON FAILURE TO
INVEST THE REQUISITE AMOUNT OF CAPITAL IS CONTRARY TO ALL OF THE EVIDENCE ...
34
1.
2. Chang's Investment Capital Was Placed at Risk ... 38
3. Chang Invested $500,000 in the New Commercial
*iii C. INS' DENIAL OF CHANG'S PETITION BASED UPON FAILURE
TO PROVE THE LAWFUL SOURCE OF HER INVESTMENT FUNDS UTILIZED INCORRECT LEGAL
STANDARDS, WAS ARBITRARY AND CAPRICIOUS AND WAS NOT SUPPORTED BY SUBSTANTIAL
EVIDENCE ... 42
1. Chang Complied With All Regulatory Requirements Relating
to Proof of the Lawful Source of Her Investment Funds ... 42
2. Chang Traced Every Dollar Invested ... 45
D. THE CREDIBILITY OF CHANG AND HER BUSINESS PLAN IS
SUPPORTED BY ALL OF THE UNCONTROVERTED EVIDENCE IN THE RECORD, AND THE AAO
HOLDING TO THE CONTRARY IS NOT ENTITLED TO DEFERENCE AND NOT SUPPORTED BY
SUBSTANTIAL EVIDENCE ... 49
1. The AAO's Holding That Chang's Investor Petition Should
be Denied Because of Lack of Credibility is Arbitrary and Capricious ... 49
2. INS' Decision Questioning Chang's Credibility, Which Is
Based Upon A Paper Record And Upon Alleged Discrepancies That Do Not Go To The
Heart Of The Case, Should Not Be Accorded Deference And Should Be Overturned
... 52
3. This Court Should Not Give Deference to INS Opinions
Outside of the Agency's Expertise; viz., the Credibility of a Real Estate
Business Plan ... 57
4. The Credibility of FMA's Business Plan is Supported by
Substantial Uncontroverted Evidence ... 60
E. INS DECISIONS ISSUED SUBSEQUENT TO CHANG'S INVESTMENT
CANNOT BE APPLIED TO DENY CHANG'S PETITION ... 62
IX. CONCLUSION ... 67
*iv TABLE OF AUTHORITIES
FEDERAL CASES
Abovian v. INS, 219 F.3d 972 (9th Cir. 2000), amended, 228
F.3d 1127 (9th Cir. 2000) ... 53
Aguilera-Cota v. INS, 914 F.2d 1375 (9th Cir. 1990) ... 53,
54
Ayala-Chavez v. INS, 945 F.2d 288 (9th Cir. 1991) ... 59
Bahat v. Sureck, 637 F.2d 1315 (9th Cir. 1981) ... 65, 66
Bresgal v. Brock, 843 F.2d 1163 (9th Cir. 1987) ... 24
Ceballos-Castillo vs. INS, 904 F.2d 519 (9th Cir. 1990) ...
53
Central Ariz. Water Conservation District v. EPA, 990 F.2d
1531 (9th Cir. 1993) ... 8, 58
Chowdhury v. INS, 249 F.3d 970 (9th Cir. 2001) ... 8, 23
*v ConAgra, Inc. v. NLRB, 117 F.3d 1435 (D.C. Cir. 1997) ...
30
Damaize-Job v. INS, 787 F.2d 1332 (9th Cir. 1986) ... 54, 56
Davila-Bardales v.
INS, 27 F.3d 1 (1st Cir. 1994) ... 31
Great W. Bank v. Office of Thrift Supervision, 916 F.2d 1421
(9th Cir. 1990) ... 52
Hernandez-Montiel v. INS, 225 F.3d 1084 (9th Cir. 2000) ...
9
INS v. Cardoza Fonseca, 480
INS v. Yang, 519
Lal v. INS, 255 F.3d 998 (9th Cir. 2001) ... 27
M.M. & P. Maritime Advancement Training, Education &
Safety Prog. v. Department of Com., 729 F.2d 748 (Fed. Cir. 1984) ... 31
Martinez-Sanchez v. INS, 794 F.2d 1396 (9th Cir. 1986) ...
54
Masonry Masters, Inc. v. Thornburgh, 742 F. Supp. 682
(D.D.C. 1990) ... 31
*vi Montgomery Ward v. FTC, 691 F.2d 1322 (9th Cir. 1982)
... 27, 58
Omni Packaging, Inc. v. INS, 733 F. Supp. 500 (D.P.R. 1990)
... 31
Osorio v. INS, 99 F.3d 928 (9th Cir. 1996) ... 54
Pal v. INS, 204 F.3d 935 (9th Cir. 2000) ... 53
Parola v. Weinberger, 848 F.2d 956 (9th Cir. 1988) ... 59
Partridge v. Reich, 141 F.3d 920 (9th Cir. 1998) ... 8
Patel v. INS, 638 F.2d 1199 (9th Cir. 1980) ... 64
Pfaff v.
Ruangswang v. INS, 591 F.2d 39 (9th Cir. 1978) ... 47, 63,
64, 66
S. Cal. Edison Co. v. FERC, 770 F.2d 779 (9th Cir. 1985) ...
24
Saipan Stevedore Co. v. Director, Office of Workers' Comp.
Programs, 133 F.3d 717 (9th Cir. 1998) ... 58
Seldovia Native Association Inc. v. Lujan, 904 F.2d 1335
(9th Cir. 1990) ... 30
Shah v. INS, 220 F.3d 1062 (9th Cir. 2000) ... 55, 56
*vii
Tovar v.
Vilorio-Lopez v. INS, 852 F.2d 1137 (9th Cir. 1988) ... 54,
55, 56
Western States Petroleum Association v. EPA, 87 F.3d 280
(9th Cir. 1996) ... 30
INS DECISIONS
In re Ho, Int. Dec. No. 3362, 1998 WL 483979 (Exam. Comm.
In re Soffici, Int. Dec. No. 3359, 1998 WL 471519 (Exam.
Comm.
FEDERAL STATUTES
5 U.S.C. § 706(2)(A) ... 9
8 U.S.C. § 1153(b)(5) ... 9, 10, 22, 34
8 U.S.C. § 1186b ... 10, 11, 28
28 U.S.C. § 1291 ... 7
28 U.S.C. § 1331 ... 7
29 U.S.C. § 2101(a)(8) ... 27
8 U.S.C. § 1101(a)(15)(L) ... 24
*viii FEDERAL REGULATIONS
8 C.F.R. § 204.5(i)(3)(iii) ... 25
8 C.F.R. § 204.6 ... Passim
8 C.F.R. § 214.2(l)(1)(ii) (A) ... 26
8 C.F.R. § 214.2(l)(3)(iii) ... 26
8 C.F.R. § 216.6 ... 28, 39, 45
8 C.F.R. § 287.1(g) ... 25
8 C.F.R. § 287.5(c)(3)(iv) ... 25
MISCELLANEOUS
136 Cong. Rec. 17112 (1990) ... 9, 11, 24
56 Fed. Reg. 60897 at 60902 (
INS Operations Instruction 214.2(b)(11) ... 51
*1
Appellants Spencer Enterprises, Inc. ("Spencer")
and Li-Hui Chang ("Chang") seek reversal of summary judgment granted
to the U.S. Immigration and Naturalization Service ("INS") and the
denial of summary judgment to Appellants. Spencer is one of the largest
residential home builders in the
*2 II. STATEMENT OF ISSUES PRESENTED
A. Whether the INS erred as a matter of law in requiring
that the employment created by Chang's investment must be
"continuous" and "permanent" where the statute, the
regulation and previous INS interpretations require only that the employment be
"full-time?"
B. Whether the District Court erred in accepting the INS'
finding that Chang's investment would not create "continuous and permanent
employment" for ten full-time employees, when all of the uncontroverted
evidence, including three expert opinions, confirm that such employment would
be created?
C. Whether the INS erred as a matter of law in denying
Chang's petition based upon new requirements not in existence when Chang made
her investment?
D. Whether the District Court erred in accepting an INS
finding that
*3 E. Whether the District Court erred in affirming the INS
determination that Chang failed to invest the required amount when Chang
invested 100% of the statutorily-required amount?
F. Whether the District Court erred in accepting the INS
finding that Chang did not adequately prove the source of her investment funds
when the regulation requires one of four alternative means of evidence and
Chang produced all four forms of evidence?
G. Whether the District Court erred in upholding the INS
finding that Chang failed to trace the source of every dollar she invested when
the regulations do not require such tracing and when Chang nevertheless traced
the funds from their overseas source to
H. Whether the District Court erred in accepting the INS
finding that Chang's business plan was not credible, when the only basis in the
record to question the credibility of the business plan is INS speculation, and
when three expert opinions confirm its credibility?
I. Whether the District Court erred in failing to require
the INS to rationalize its denial of Chang's investor petition with the
approval of seventeen other investor petitions that use the same business plan?
*4 J. Whether the INS and the District Court improperly
applied new and extra-regulatory requirements to Chang's petition based on INS
precedent decisions issued subsequent to Chang's investment?
III. SUMMARY OF ARGUMENT
The INS Decision denying Chang's investor petition, affirmed
by the District Court, is based on application of incorrect legal standards, is
arbitrary, capricious, not supported by substantial evidence and an abuse of
discretion.
Both the statute and INS regulations require that the
investor create "full-time employment" for ten U.S. workers. Neither
the statute nor regulations require that the employment be
"continuous" or "permanent," even though such requirements
are contained in other statutory and regulatory provisions within the Immigration
and Nationality Act. The imposition of such a requirement on Chang constitutes
an error of law. In any event, Chang produced substantial evidence, including
three expert witnesses opinions, that Chang's Business Plan would create
employment for ten full-time employees on a continuous and permanent basis. The
record contains no evidence, and no expert opinion, to controvert Chang's
evidence on this point.
*5 The INS found that
The INS also determined that 100% of Chang's investment
capital was not "at risk" and that she did not invest 100% of the
required $500,000. Despite only being required to be "actively in the
process" of investing $500,000 and not having to complete the investment
for two years, Chang invested more than the required $500,000.
Another basis for the denial of Chang's petition is failure
to document the source of her funds. In fact, Chang provided evidence in full
satisfaction of all four of the alternative regulatory requirements. If the INS
decision requires documentation beyond the regulatory requirements, it
constitutes an error of law. In any event, Chang went far beyond the regulatory
requirements in tracing every dollar of the $500,100 she invested from its
source overseas to the
Finally, the INS questions Chang's credibility and the
credibility of her Business Plan. INS questions her credibility based upon a
typographical error or a misdesignation of one of the eight real estate lots to
be purchased. The designation of any specific lot is of no relevance to Chang's
petition since the Business Plan envisions purchasing lots on an ongoing basis
as lots become available. With respect to the credibility of the Business Plan,
Chang produced testimony from three expert witnesses, all of whom concur that
the Business Plan is credible, comprehensive and in conformity with industry
standards. The INS produced no contrary evidence, but simply made an
uncorroborated finding that the Business Plan is "highly unusual."
Because Chang met all statutory and regulatory requirements,
and because the petition denial is based on errors of law and findings of fact
for which no substantial evidence exists, the denial of the petition must be
reversed.
*7 IV. STATEMENT OF JURISDICTION
On
The District Court had jurisdiction over Plaintiffs'
Complaint under 28 U.S.C. § 1331. This Court has jurisdiction over
this appeal under 28 U.S.C. § 1291.
V. STATEMENT OF THE CASE
On August 4, 1999, Appellants and three other Plaintiffs
filed in the Eastern District of California a complaint seeking a declaration,
inter alia, that the INS denial of Appellant Chang's investor petition was not
supported by substantial evidence, was arbitrary and capricious, constituted an
abuse of discretion and was based upon errors of law. [E.R. 1-28] On
On
FN1. The Order
only related to Plaintiffs Spencer and Chang. The District Court deferred
ruling with regard to three other plaintiffs, who are not appellants in this
action.
VI. STANDARD OF REVIEW
The District Court's grant of summary judgment is reviewed
de novo. Partridge v. Reich, 141 F.3d 920, 923 (9th Cir. 1998). An
administrative agency's interpretation of a statute is a question of law
reviewed de novo. Chowdhury v. INS, 249 F.3d 970, 972 (9th Cir. 2001). Although
deference should generally be granted to the administrative agency, such
deference is based on an agency's expertise; and deference should not be
granted when an administrative decision is not within the agency's expertise.
Central
VII. STATEMENT OF FACTS
A. STATUTORY BASIS FOR INVESTOR IMMIGRANT PETITIONS
The Immigration and Nationality Act ("Act")
allocates visas for "employment creation" immigrants seeking to enter
the
*10 The Act makes permanent residence status available to
foreign nationals entering the
B. PROCEDURE FOR OBTAINING CONDITIONAL PERMANENT RESIDENT
STATUS
An alien seeking conditional permanent resident status as an
investor must file an I-526 petition ("investor petition") with the
INS accompanied by evidence that the investment conforms with the requirements
discussed above. Thereafter, the alien has two years to complete the required
investment and employment. See generally, 8 U.S.C. § 1186b; 8 C.F.R. §
204.6. Upon INS approval of the petition, the alien and her dependents may
apply for conditional permanent residence status good for two years.
*11 The immigrant may petition to have the conditional
status removed before the second anniversary of her permanent residence. 8
U.S.C. § 1186b(c)(1). This petition must demonstrate that the alien
has invested the required capital and created the requisite employment. 8
U.S.C. § 1186b(d)(1).
C. INS REGULATIONS
Recognizing that INS is not a business regulatory body and
lacks expertise in regulating commercial businesses, Congress expressly
encouraged INS to consult with the Departments of Commerce and State for
assistance in administering investor regulations. 136 Cong. Rec. 17112 (1990).
The INS promulgated regulations (located at 8 C.F.R. §
204.6) to administer the immigrant investor program. The regulations establish
that a "qualifying employee" is any employee in a position that
requires at least 35 working hours per week and that the requirement to create
ten full-time positions for
*12 The regulations require the investor to produce any one
of four categories of documents -- foreign business registration records, tax
returns, evidence identifying any other sources of capital or certified copies
of any judgments or criminal actions -- to show that the capital invested was
obtained through lawful means. 8 C.F.R. § 204.6(j)(3). The regulations
do not require that all funds be traced to their original source, so long as
one of the four categories of documents identifying the source of capital is
produced.
D. SPENCER'S BUSINESS PLAN
Spencer, a well-established and highly reputable residential
real estate developer in the
The details of the program are straightforward. The alien
entrepreneur, an established businessperson or professional, establishes a
corporation which initially purchases seven or eight developed lots at market
value (normally $40,000-$60,000 per lot) in a subdivision in
*15 E. INS' APPROVAL OF SPENCER BUSINESS PLAN AND SUBSEQUENT
CHANGE OF POSITION
Prior to Chang's investment, seventeen investors filed
investor petitions based on $500,000 investments under the Spencer business
plan. [E.R. 96-110, 180-197] Each petition was approved by the INS, and the
investors became conditional permanent residents. [E.R. 180-197] All seventeen
businesses continue to meet or exceed the law's requirements. [E.R. 180-197,
203-208]
In 1998, the INS issued four "precedent decisions"
with the goal of establishing new substantive requirements for immigrant
investor petitions. [E.R. 283, 284] Although all seventeen petitions previously
filed under the Spencer plan were approved, the INS has not approved one
petition filed under the same plan subsequent to these decisions. [E.R. 96-110]
F. APPELLANT CHANG'S INVESTMENT USING THE SPENCER BUSINESS
PLAN
Spencer identified Chang as an ideal investor given her
available capital, real estate background and desire to immigrate to the United
States. [E.R. 372- 374] Chang and her husband have accumulated substantial
wealth both through real estate holdings and through employment. [E.R. 371,
379-432] Chang has worked for at least sixteen years in increasing level
positions for the Taiwan Business Bank following graduation from the National
Chung Hsing University *16 Department of Economics. [E.R. 515-519] Her husband
has worked for at least seventeen years for the Chinese Petroleum Corporation
and is presently the Manager of Export and Processing Department. [E.R.
515-519] Their tax returns, approved by the Taiwanese tax authorities, show six
figure incomes (U.S. equivalent) yearly. [E.R. 376-377, 520-539] In addition,
Chang and her husband own valuable real estate in Taiwan, including a ten story
rental property and two floors of a building. [E.R. 379-432]
Relying upon INS regulations and INS approval of the
seventeen investor petitions, Chang established and became President of FMA Enterprises,
Inc., ("FMA") and invested $500,000 in the corporation. [E.R.
223-224, 341-342, 344- 359, 475-483, 494] The investment was placed in an
irrevocable escrow account to be released upon approval of her immigrant
petition. [E.R. 495] Chang wired $100 to the escrow account on May 21, 1997,
followed by wire transfers of $9,983, $99,983.00, and $389,985 in August and
November 1997, amounting to a total investment, less wire transfer fees, of
$500,051. [E.R. 495-504] Chang utilized the same business plan and the same
Spencer management agreement used by the seventeen approved investors. [E.R.
199-202, 221-236, 475-483, 494]
*17 Chang submitted a comprehensive business plan of FMA's
proposed construction activities with her petition. [E.R. 221-236]. Chang agreed
and is contractually obligated to purchase from Spencer subdivided lots in
Fresno at market value. [E.R. 134-142, 221-236] The remaining portion of the
$500,000 initial capital will pay for expenses incurred during construction of
single family homes. [Id.] FMA's Business Plan is to purchase additional lots
as houses are sold and to build additional homes with profits realized from the
sales. [E.R. 231-236]
The initial investment amount left after the purchase of the
first lots, coupled with sales revenues, is more than sufficient to construct
homes. [E.R. 112-120, 221-236] In fact, utilizing this plan, FMA has more
capital available to it than most residential real estate developers in the
Fresno area. [E.R. 112-120, 221-236] The Business Plan includes marketing
strategies, organizational structure, experience of FMA Management, staffing
requirements, job descriptions, sales costs, income projections, and hiring
timetable. [E.R. 221-236] FMA's strategy is to provide completed inventory lots
"on a repeat, steady and ongoing basis." [E.R. 221-236]
*18 The FMA Business Plan calls for Spencer's management
services for a five-year period with sales of at least six lots per year to FMA
on an ongoing basis. [E.R. 134-142, 221-236] The FMA Business Plan also includes
a detailed analysis of the numbers and types of employees required to build the
houses and the approximate dates during the initial two-year period when each
employment position would be required. [E.R. 230-231] The Business Plan
realistically projects the need for at least ten to fourteen full-time
employees working together both during the two-year period and thereafter.
[Id.]
These workers will be direct employees of FMA compensated
solely by FMA. [E.R. 142, 149, 199, 221-236] They will construct the homes with
subcontractors providing only limited services. [E.R. 134-142, 142-149,
221-236] FMA obtained a business permit, purchased workers' compensation
insurance and registered with the California Unemployment Department. [E.R.
493, 540]
The Business Plan does not provide for ten new employees
from the beginning. [E.R. 221-236] Rather, the Business Plan envisions an
initial mixture of employees and subcontractors with a phasing-out of
subcontractors on later houses. [E.R. 221-236] In this way, the company can
build a team of employees on an ongoing basis. [Id.]
*19 G. EXPERT OPINIONS ATTESTING TO THE CREDIBILITY OF THE
BUSINESS PLAN
Chang submitted an expert opinion from Joseph J. Penbera,
Ph.D. [FN2] Dr. Penbera concludes that FMA's "locational and pricing
strategy is highly competitive and workable within the conditions of the
[Fresno] marketplace." [E.R. 115] He observes that the Business Plan's use
of a local builder to provide guidance and management oversight "is an
ideal situation" and "greatly enhances the viability of the
business." [E.R. 114-115] Dr. Penbera notes that "the expectation of
building a house over a 5 month period and 4 houses per year to employ 10
workers is reasonable in this [the Fresno] market and consistent with current
building practices." [E.R. 117] Not only does Dr. Penbera find the
investment program is "extremely workable" for the Fresno market, he
also finds the business plan is "credible and comprehensive" and
"conforms with both industry standards" and the requirement of a
comprehensive business plan in INS regulations. [E.R. 114, 118] Dr. Penbera
provides a cash flow analysis explaining how Chang's investment is not only
sufficient to buy necessary inventory and build the initial homes, but through
profits and the return of building and construction costs, will provide Chang
with substantial capital to purchase *20 additional lots and build additional homes.
[E.R. 117] He also notes that less than 2% of home builders in the Fresno area
have the level of capitalization available to Chang. [E.R. 117] Dr. Penbera
concludes that there is a "realistic likelihood and probability" that
FMA's business and the employment generated by FMA will continue on an ongoing
basis. [E.R. 114 - 119]
FN2. Dr. Penbera's
expert credentials are set forth at ER 121-129.
Chang also provided expert industry opinions from two other
established home builders in the Fresno area. [E.R. 243-272, 273] These home
builders concur that FMA's Business Plan will require the employment of ten
full-time employees. [E.R. 243-244, 273] In fact, employment would be provided
where it is needed most -- lesser skilled U.S. citizen workers, many of
Hispanic origin, whose unemployment rate is among the highest. [E.R. 243-244,
273] The INS has not produced any evidence to contradict any of the three
expert opinions.
H. DENIAL OF CHANG'S INVESTOR PETITION
On January 27, 1999, subsequent to the issuance of the
above-noted precedent decision, the INS' Western Service Center denied Chang's
petition, despite finding that Fresno is a targeted employment area and that
Chang invested the required $500,000 of lawfully-obtained capital. [E.R.
279-300] The INS decision was certified for review to the INS Administrative
Appeals Office *21 ("AAO"). [E.R. 279-300] Chang submitted
substantial documentation and legal briefing to address the five specific
reasons given as the sole bases for denial. [E.R. 301-338]
On April 26, 1999, the AAO denied Chang's petition. [E.R.
280] The AAO did not address the five specific grounds for denial, which
Chang's counsel extensively briefed. [E.R. 279-300] Rather, the AAO set forth
all new grounds for denial, which Chang had no opportunity to address. [E.R.
279-300] In fact, the AAO reversed three specific findings of the Western
Service Center: (1) the "evidence of record indicates that the investor
will hire ten employees" [E.R. 284]; (2) "Fresno County, California
... is a targeted employment area therefore qualifying the petitioner to make a
reduced capital investment of $500,000" [E.R. 280]; and (3) Chang had made
the requisite investment of $500,000. [E.R. 280] These reversals occurred with
no notice and no opportunity for Chang to rebut.
The AAO, relying on the precedent decisions, also indicated
an intent to deny or revoke the pending petitions filed by fourteen other
investors utilizing the Spencer Business Plan. [E.R. 100-107] The AAO failed to
address or mention that seventeen other investors utilizing the same business
plan were previously approved. [E.R. 279-300]
*22 VIII. ARGUMENT
A. THE DENIAL OF CHANG'S INVESTOR PETITION BASED UPON A
NEWLY-IMPOSED REQUIREMENT THAT THE EMPLOYMENT CREATED MUST BE PERMANENT AND
CONTINUOUS CONSTITUTES AN ERROR OF LAW AND IS INCONSISTENT WITH PRIOR
ADMINISTRATIVE INTERPRETATIONS
1. The Statute Requires "Full-Time" Employment --
not "Permanent and Continuous" Employment -- and the INS'
Interpretation of the Statutory Language is Reviewed by this Court De Novo.
The statutory section at issue, 8 U.S.C. §
1153(b)(5)(A)(iii), requires that the investment "create full-time
employment" for at least ten employees. The AAO decision was based, in
part, upon a newly-imposed requirement -- not contained in the statute or the
regulations -- that employment created by the investment must not only be
"full-time," but also "continuous" and
"permanent." [FN3] This is an incorrect legal standard as a matter of
statutory interpretation and legislative history. It is also inconsistent with
the duly-promulgated regulation. It is incorrect as a matter of administrative
law. It is illogical as a matter of employment law.
FN3. Neither the
INS nor the District Court questioned that the employment created by this Business
Plan will be "full-time."
*23 The District Court held that the AAO did not abuse its
discretion in creating this new and unprecedented legal standard. In doing so,
it applied the wrong standard of review. [E.R. 585-560] The issue of whether
the statute requires "continuous and permanent" employment is not a
matter of discretion, but a question of law.
Questions of law that can be answered with "traditional
tools of statutory construction" are within the special expertise of
courts, not agencies, and are therefore reviewed by this Court de novo. INS v.
Cardoza-Fonseca, 480 U.S. 421, 446 (1987) (quoting Chevron U.S.A., Inc. v.
Natural Res. Def. Council, Inc., 467 U.S. 837, 843 n.9 (1984)); Chowdhury v.
INS, 249 F.3d 970, 972 (9th Cir. 2001). This is consistent with Chevron,
U.S.A., Inc. v. Natural Res. Def. Council, Inc., 467 U.S. 837, 843 n.9 (1984),
in which the Supreme Court stated that "[t]he judiciary is the final
authority on issues of statutory construction and must reject administrative constructions
which are contrary to clear congressional intent." Thus, legal issues are
reviewed on a de novo basis; and no deference is given to the agency's
decision. California Cosmetology Coalition v. Riley, 110 F.3d 1454, 1458, 1460
(9th Cir. 1997) (if the intent of Congress is clear, no inquiry should be made
regarding whether the administrative interpretation is permissible); Pfaff v.
U.S. Dep't. of Hous. and Urban Dev., 88 F.3d 739, 744 (9th Cir. 1996) (review
of *24 an agency's conclusions of law de novo); Bresgal v. Brock, 843 F.2d
1163, 1168 (9th Cir. 1987) (courts are final authorities on issues of statutory
interpretation); S. Cal. Edison Co. v. FERC, 770 F.2d 779, 782 (9th Cir. 1985)
(court is the final authority on statutory construction and must reject
administrative constructions inconsistent with the statutory mandate).
Congress did not require that any employment be permanent or
continuous, only "full-time." Significantly, when Congress intended
to require that employment be "continuous" in the Immigration and
Nationality Act, it did so expressly. See 8 U.S.C. § 1101(a)(15)(L)
(2001), which provides that an alien must have been "employed
continuously" for one year to receive an L-1 visa.
The legislative history on this subject is expressly
contrary to the INS interpretation. Speaking on behalf of the Senate
Subcommittee on Immigration and Refugee Affairs, the proponent of the
legislation, Senator Simon of Illinois stated, "[t]he only guideline is
that the investment minimums must be satisfied and the venture must employ at
least 10 people for 2 years." 136 Cong. Rec. 17112 (1990).
The overall Congressional purpose was to create ten
full-time jobs for U.S. workers for at least two years. No Congressional
purpose could be or has *25 been advanced that would require that the ten U.S.
workers be the same U.S. workers at all times. Certainly, the legislative
history and the statutory scheme are directly contrary to any requirement that
the employment be "permanent and continuous."
2. INS Regulations Also Require Only "Full-Time"
Employment.
The INS regulation requires that the new enterprise create
ten "full-time positions." 8 C.F.R. § 204.6(j)(4)(i). No
"continuous" or "permanent" requirement exists in the
regulations. Rather, 8 C.F.R. § 204.6(e) defines "full-time
employment" as employment in a position that "requires a minimum of
35 working hours per week." An investor could meet this regulatory
requirement by creating ten full-time positions, even if different employees
will occupy these positions at different times and even if the employees are
not "continuous" or "permanent."
Other unrelated sections of the INS regulations expressly
require "permanent" or "continuous" employment. [FN4] For
example, *268 C.F.R. § 204.5(i)(3)(iii)(B) and (C) requires that employment
be in a "permanent" research position. 8 C.F.R. §
214.2(l)(1)(ii) (A) and 8 C.F.R. § 214.2(l)(3)(iii) require employment
"continuously" for intracompany transferee qualification. This
distinction in the regulations is both intentional and logical since the
express permanent or continuous employment requirements concern an individual
employee's ability to obtain a working visa or permanent resident status in the
United States. The regulation at issue here, however, relates to the ability of
an investor to create full-time employment, no matter which U.S. citizen or
permanent resident is employed at any given time.
FN4. The INS uses
the term "permanent" more than 50 times -- not counting references to
permanent residence -- in its regulations. In fact, in at least two sections --
8 C.F.R. § 287.1(g) and 8 C.F.R. § 287.5(c)(3)(iv) -- it
refers to "permanent full-time" employees.
This newly-imposed requirement of "permanent"
employment is also inconsistent with the INS regulations relating to investments
in a "troubled business." The only mention of duration of employment
is a requirement that an investor in a troubled business present evidence of
maintenance of "the number of existing employees" for at least two
years. 8 C.F.R. § 204.6(j)(4)(ii). It is incongruous and in
contravention of Congressional intent for the INS to require some investors to
employ a certain number of employees for two years while requiring this
investor to employ specific employees for a permanent period.
*27 No deference should be given to a regulatory
interpretation that is inconsistent with the statute and with the clear
regulatory language. See Lal v. INS, 255 F.3d 998, 1004 (9th Cir. 2001) (court
need not defer to agency interpretation when the plain language of a regulation
indicates a contrary meaning); Montgomery Ward v. FTC, 691 F.2d 1322, 1331 (9th
Cir. 1982) (close court review required when agency's interpretation ignores
commonly understood meanings of words in the rule).
3. Administratively - Imposed Requirements Beyond
"Full-Time" Employment are Not Supportable in Law or in Policy.
The INS interpretation that "full-time" employment
requires "permanent" and "continuous" employment conflicts
with federal employment law. Pursuant to the Federal Worker Adjustment and
Retraining Notification Act, an employee who works more than six months during
a twelve-month period is considered "full-time." 29 U.S.C. §
2101(a)(8) (2001).
Not surprisingly, an INS official confirmed to Spencer that
the type of employment created in the investment program qualified. [E.R.
95-110] If the AAO's decision is upheld, any time an employee quit or was
terminated, an investor would lose eligibility for permanent resident status,
irrespective of any fault of the investor, despite investing the qualifying
amount and meeting all other *28 statutory requirements. Such uncertainty works
directly against Congressional intent to attract foreign investment.
The District Court did not cite to any statutory, regulatory
or even precedential authority as support for the AAO's new requirements.
Perhaps aware of the lack of support for its holding, the District Court
stated, "[e]ven assuming arguendo, that the AAO abused its discretion by
adding an additional factor, Chang's build out/employment plans show that
employment of 10 qualifying full-time employees is speculative." [E.R.
559]
This is yet a further new requirement, also completely
inconsistent with the statutory and regulatory scheme. An investor who invests
the requisite amount of capital is granted conditional residence status. That
investor has two years to create the requisite employment and to file a
petition to remove conditions and obtain permanent residence status. 8 U.S.C. §
1186b. Thus, the regulations first require only a plan exhibiting the need for
ten employees within two years. 8 C.F.R. § 204.6(j)(4)(i)(B). Even
after two years, the conditions can be removed if the investor "can be
expected to create within a reasonable time ten full-time jobs for qualifying
employees." 8 C.F.R. § 216.6(a)(4)(iv). Perhaps after two years,
the speculative nature of an investment plan's job creation could be judged.
*29 Certainly it is premature to deny a petition based on its speculative
nature before employment has commenced. Such denial is especially premature
given that the record contains three expert opinions that conclude that FMA's
Business Plan will require at least ten full-time employees. [E.R. 112-120,
243-272, 273]
4. An Inconsistent Agency Interpretation is Subject to
Considerably Less Deference and Requires a Reasoned Explanation For the
Inconsistency.
The INS concedes that Chang's Business Plan is the same as
at least seventeen other investors whose petitions INS approved, yet has denied
Chang's petition without explaining this inconsistency. [E.R. 95-99]
The Supreme Court stated that an "agency interpretation
of a relevant provision which conflicts with the agency's earlier
interpretation is entitled to considerably less deference than a consistently
held agency view." INS v. Cardoza-Fonseca, 480 U.S. 421, 447 (1987)
(quotations omitted). The presumption is that an agency will follow settled
policies, absent which the agency has a "duty to explain its departure
from prior norms" in a manner which is "clearly set forth so that the
reviewing court may understand the basis of the agency's action and so may
judge the consistency of that action with the agency's mandate."
*30Atchison, Topeka and Santa Fe Ry. Co. v. Wichita Bd. of Trade, 412 U.S. 800,
808 (1973). Specifically, where the INS follows a settled course of
adjudication, a departure without a rational explanation is arbitrary and
capricious. INS v. Yang, 519 U.S. 26, 32 (1997) (holding the INS did not
disregard general policy but took a narrower view).
In this Circuit, the case of Western States Petroleum Ass'n
v. EPA, 87 F.3d 280 (9th Cir. 1996), is on point. In that case, the EPA
rendered eight decisions contrary to the decision in the case being reviewed.
Id. at 283-84. This Court rejected the EPA's position that it approved eight
other states' programs before it conducted a thorough review as it has now
done. Id. at 284. The Court stated that, although the EPA could adjust its
policies and rulings, it must clearly explain the departure for the Court to
render an informed judgment. Id. This explanation must be supported by
"reasoned analysis" over and above that which is required for an
interpretation in the first instance, absent which the Court "need not
defer to the ... anomalous interpretation." Id. at 284-85; see also Seldovia
Native Ass'n. Inc. v. Lujan, 904 F.2d 1335, 1345 (9th Cir. 1990) ("[w]hen
an agency reverses a prior policy or statutory interpretation, its most recent
expression is accorded less deference than is ordinarily extended..." and
the agency must provide a reasonable rationale supporting its departure);
ConAgra, Inc. v. NLRB, 117 F.3d 1435, 1443-44 (D.C. Cir. 1997) (declining to
enforce portions of an order *31 that were inconsistent with the agency's prior
decision because the departure was not adequately explained); M.M. & P.
Maritime Advancement Training, Educ. & Safety Prog. v. Dept. of Com., 729
F.2d 748, 755 (Fed. Cir. 1984) ("[a]n agency is obligated to follow
precedent, and if it chooses to change, it must explain why").
This Circuit and other circuits have applied this less
deferential standard of review to the INS. See, e.g., Israel v. INS, 785 F.2d
738, 740-41 (9th Cir. 1986) (reversing Board of Immigration Appeals decision
for abusing its discretion when it failed to follow its own prior rulings in
cases involving similar circumstances); Davila-Bardales v. INS, 27 F.3d 1, 5-6
(1st Cir. 1994) (there is "no earthly reason why the mere fact of
nonpublication should permit an agency to take a view of the law in one case
that is flatly contrary to the view it sent out in earlier (yet contemporary)
cases, without explaining why it is doing so."). Furthermore, courts have
reversed INS denials of employer petitions that are inconsistent with prior
approvals. See, e.g., Masonry Masters, Inc. v. Thornburgh, 742 F. Supp. 682,
686-88 (D.D.C. 1990) (holding that inconsistent INS adjudications on two
employer I-140 petitions for the same position is an abuse of discretion); Omni
Packaging, Inc. v. INS, 733 F. Supp. 500, 502, 504 (D.P.R. 1990) (holding INS
abused its discretion where it failed to apply standards consistently in
approving L-1 petitions, stating that the INS must explain the departure from
previous *32 decisions during the second adjudication and not in a "post
hoc rationalization by counsel" or by the agency).
In the present case, INS provides no explanation for the
inconsistent rulings on the same employment plans.
5. Even Though Not Legally Required, FMA's Business Plan
Will Produce Continuous and Permanent Employment for Ten Full-Time Employees
Within the Requisite Two-Year Period.
If this Court holds that the proper legal standard is
"continuous and permanent employment," the record reveals that FMA's
Business Plan qualifies. The Business Plan envisions a work force of a minimum
of ten to fourteen employees who work together. [E.R. 231-232]. These will be
full-time employees, working a minimum of 35 hours per week. [E.R. 231, 310]
The Business Plan does not provide for ten new employees from the beginning.
Rather, the Business Plan calls for a mixture of employees and subcontractors
working on the first houses, with subcontractors phased-out and replaced by
employees on later houses. [E.R. 230-231]
In two years, the company will always employ at least ten
full-time employees. The District Court misinterprets the build-out/employment
plan when it comments that the numbers of each category of employee will
fluctuate. [E.R. *33 235, 560] In reality, construction workers do not
specialize in only one function. The fact that three employees will perform one
function during one month and no employees will perform that function during
another month does not signify three terminations, but simply means employee
transfers to perform different functions. Thus, the employment would be
permanent and continuous -- functions would change, employees would not. [E.R.
235]
Three expert witnesses and industry trade sources concur.
[E.R. 112-120, 243- 272, 273] Larry Bacowski, Vice President of Wathen Brothers
Enterprises, citing the National Association of Home Builders, stated, "to
complete those trades only and construct four or more houses/year of a random
mix of house types, will require 10 - 12 competent trades people working at
least 35 hours/week each year." [E.R. 243]
Also, Stanley Spano, President of Spano Enterprises, a
builder for more than 30 years in the Central Valley of California, explained,
"[b]ased on my extensive experience as a builder, it is my professional
opinion that it will require no less than 10 full-time construction workers to
build one of these houses over a period of three to five months." [E.R.
273] Dr. Penbera found similarly:
*34 [T]he expectation of building a house over a 5 month
period and 4 houses per year to employ 10 workers is reasonable in this market
and consistent with current building practices ... I conclude that the Business
Plan provides a realistic likelihood and probability that full-time employment
for 10 employees on an on-going basis will be created by this business venture.
[E.R. 117, 119]
Whether this level of employment will actually happen should
only be examined at the end of the statutory two-year period. In the meantime,
the record contains no evidence -- and certainly not substantial evidence -- to
rebut these expert opinions.
B. INS' DENIAL OF CHANG'S PETITION BASED UPON FAILURE TO
INVEST THE REQUISITE AMOUNT OF CAPITAL IS CONTRARY TO ALL OF THE EVIDENCE.
1. Fresno is a Targeted Employment Area, which Requires a
Reduced Investment Amount of $500,000.
To qualify, an investor must invest, or be actively in the
process of investing, $1,000,000. 8 U.S.C. § 1153(b)(5)(C)(i). This
amount is reduced to $500,000 for a "targeted employment area," which
is defined as "an area which has experienced unemployment of at least 150
percent of the national average rate." 8 U.S.C. §
1153(b)(5)(C)(ii); 8 C.F.R. § 204.6(e); 8 C.F.R. §
204.6(f)(2). To meet this requirement, an investor must submit:
*35 (A) Evidence that the metropolitan statistical area ...
or the county ... in which the new commercial enterprise is principally doing business
has experienced an average unemployment rate of 150 percent of the national
average rate; or
(B) A letter from an authorized body of the government of
the state in which the new commercial enterprise is located which certifies
that the geographic or political subdivision ... in which the enterprise is
principally doing business has been designated a high unemployment area.
8 C.F.R. § 204.6(j)(6)(ii).
Fresno is a targeted employment area because its
unemployment rate during all relevant times has substantially exceeded 150% of
the national average. [E.R. 507-510] In fact, between 1996 and 1998, the INS
approved seventeen other investor petitions in Fresno based upon $500,000
investments. [E.R. 180-197, 304-307]
In the present case, the INS' Western Service Center stated,
"[t]he company has been established in Fresno County, California which is
a targeted employment area, thereby qualifying the petitioner to make a reduced
capital investment of $500,000." [E.R. 280] Based upon this express finding,
the Appellant did not provide further evidence of Fresno's status as a targeted
employment area to either the Western Service Center or the AAO. In fact, the
AAO's decision marked the first time the issue of Fresno's status as a targeted
*36 employment area was raised. [E.R. 295] Thus, Plaintiffs were not given any
opportunity to rebut or provide further evidence.
Nevertheless, the District Court upheld the AAO
determination. [E.R. 563-565] This decision should be reversed because the
evidence, including 1998 unemployment rates for Fresno, meets the requirement
of 8 C.F.R. § 204.6 (j)(6)(ii)(A). See, e.g., Expert Opinion of Joseph
J. Penbera, Ph.D., citing California Trade and Commerce Department report of
13.9% unemployment rate for Fresno for the fourth quarter of 1998;
Fresno/Clovis Annual Housing Report "1999" (13.97% unemployment rate
for Fresno in 1998 based upon California Economic Development Department data).
[E.R. 112-120, 165-175] In addition, Plaintiff submitted official 1995
California state data confirming that Fresno is a targeted employment area
based upon a 14.3% unemployment rate, far in excess of 8.4%, which was 150% of
the national average. [E.R. 507-510]
The lower court cited In re Soffici, Int. Dec. No. 3359,
1998 WL 471519 (Exam. Comm. June 30, 1998), for the proposition that this
official State of California data is not acceptable because the 1995 data was
not from the same year as the petition. However, in In re Soffici, the INS
independently obtained unemployment information for the relevant year. In that
case, even though the data *37 was outdated, the INS "nevertheless
independently obtained current employment information from the Florida Department
of Labor and Employment Security." The INS did not follow its own practice
in this case. Furthermore, the INS possessed a formal designation from the
State of California for 1998 confirming that Fresno is a targeted employment
area pursuant to 8 C.F.R. § 204.6(i) and 8 C.F.R. §
204.6(j)(6)(ii). See Exhibit C to the Request for Judicial Notice filed
herewith.
Even if the INS did not possess this information, and even
if the INS failed to follow its practice of independently obtaining this
information, and even if Plaintiff's evidence did not meet the regulatory
requirements, the District Court -- and this Court -- should take judicial
notice both of Fresno's targeted employment area designation by the State of
California and that the 1998 national unemployment rate was 4.5%. See
Statistical Abstract of the United States published by the U.S. Department of
Commerce, attached as Exhibit B to the Request for Judicial Notice.
To fail to take judicial notice of this fact would be to
base a decision on Fresno County not being a targeted employment area, which is
plainly erroneous. Such a finding should not stand. This is especially true in
a situation *38 where Chang was previously advised by the administrative agency
that her evidence was sufficient and then did not have an opportunity to rebut
a negative finding on the same point.
2. Chang's Investment Capital Was Placed at Risk.
The District Court relied on In re Ho, Int. Dec. No. 3362,
1998 WL 483979 (Exam. Comm. July 31, 1998), in determining that Chang did not place
her capital at risk. [E.R. 567] In Ho, the BIA determined that capital was not
at risk because the alien had not undertaken business preparations. In Ho, the
petitioner had not purchased any inventory nor office equipment, had not
identified or entered into negotiations with potential suppliers, buyers or
local utilities, had not explained how the business would spend the $500,000
investment, and had only deposited money into a corporate bank account.
In contrast, Chang identified and contracted with a
management company, identified and contracted for the purchase of specific
lots, developed an exceedingly comprehensive business plan, created Labor and
Employment Directives, obtained workers compensation insurance for her
employees, and registered with the California Employment Department as a
corporate employer. [E.R. 199-201, 221-236, 540] She did everything imaginable
to be ready to *39 commence business immediately upon the approval of her
petition; however, until such approval, she has no authorization to conduct
business in the United States.
The lower court apparently found dispositive that the
Appellant had designated seven lots for purchase with a total sales price of
$363,000. [E.R. 567-568] The lower court concluded Chang had only placed $363,000
at risk -- and not $500,000. This finding is incorrect for a number of reasons.
First, the lower court disregarded the regulation that the
investor must prove only that she "is actively in the process of
investing" the required amount. 8 C.F.R. § 204.6 (g)(1); 8 C.F.R.
§ 204.6(j). Even if Chang hadn't placed $500,000 at risk, she
certainly meets and exceeds the lesser regulatory standard of being actively in
the process of investing the required amount. [E.R. 308] Under the statutory
scheme, Chang has two years to put the entire amount of required capital at
risk to have the conditions on permanent residence removed. Even after two
years, she would only have to prove substantial compliance. 8 C.F.R. §
216.6(a)(4)(iii).
Second, the distinction of whether seven or eight lots were
identified for purchase initially is not dispositive. There is substantial
evidence that Chang's business is an ongoing business and that she intends to
purchase lots on a *40 continuing and ongoing basis indefinitely. [E.R. 134-142,
221-236] Chang has entered into a five year Sales and Construction Management
Agreement with Spencer which states the "expressed policy of FMA
Enterprises, Inc. to reinvest into inventory lots as initial inventory lots are
sold and to construct thereon residential houses which are either already sold
or built for sale." [E.R. 134-142] Spencer is obligated to "locate,
offer and hold available to FMA Enterprises, Inc. additional inventory lots to
replace those sold." [Id.] Spencer will provide no fewer than six lots per
year to FMA. [Id.] FMA's Business Plan also states that Spencer will make lots
available on an ongoing basis (Section 1.0), and FMA will reinvest profits by
purchasing additional lots as houses are sold and built (Section 2.0, 5.0, 6.2,
7.0). FMA's strategy is to provide completed inventory lots "on a repeat,
steady and ongoing basis" (Section 5.3). [E.R. 227-236]
That the Business Plan keeps some of the investment
available for construction costs is consistent with the capital-at-risk requirement.
It would defy common and business sense to do otherwise. In fact, the INS
originally stated that Chang had not set aside sufficient capital after the
purchase of the lots to finance the construction of homes, pay the salaries of
employees, and pay other miscellaneous expenses. [E.R. 282] As Dr. Penbera
described, "the risk assumed *41 by the Petitioner is ever-present and is
inherent in the large capital investment that has been made." [E.R. 115]
3. Chang Invested $500,000 in the New Commercial Enterprise.
The AAO determined Chang did not invest $500,000, but rather
only $499,951, after deducting wire transfer fees. [E.R. 295] Even if wire
transfer fees should be deducted, the evidence contradicts the AAO's finding.
Chang originally wired $100 to her escrow account in Fresno on May 21, 1997.
[E.R. 495] The president of the title company maintaining the escrow account
verified receipt from FMA of this $100 (which is significant since the AAO
found no evidence to "verify" the source of this $100 deposit) and
all other deposits. [E.R. 495] Plaintiff then wire transferred $9,983 on August
21, 1997, $99,983 on November 25, 1997, and $389,985 on November 28, 1997; for
a total investment of $500,051, even after deducting $49 in wire transfer fees.
[E.R. 495, 496- 504] The president of the title company verified receipt of all
of these amounts. [E.R. 495] There is no evidence to support the INS' finding
of an investment of less than $500,000.
*42 C. INS' DENIAL OF CHANG'S PETITION BASED UPON FAILURE TO
PROVE THE LAWFUL SOURCE OF HER INVESTMENT FUNDS UTILIZED INCORRECT LEGAL
STANDARDS, WAS ARBITRARY AND CAPRICIOUS AND WAS NOT SUPPORTED BY SUBSTANTIAL
EVIDENCE.
1. Chang Complied With All Regulatory Requirements Relating
to Proof of the Lawful Source of Her Investment Funds
Under the rubric of "source of funds," and without
citing to any regulatory section, the District Court affirmed the AAO's
determination that Chang did not meet the "hypertechnical
requirements" to trace the path of every dollar invested. [E.R. 562].
Neither the District Court nor the AAO could cite to any regulatory section
containing such a requirement because none exists. Rather, the regulations only
provide that "[a]ssets acquired, directly or indirectly, by unlawful means
(such as criminal activities) shall not be considered capital ..." 8
C.F.R. § 204.6(e).
This requirement carries out Congress' instruction that
"processing of an individual visa 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 (such as money received through the sale
of illegal drugs)." 56 Fed. Reg. 60897 at 60902 (Nov. 29, 1991).
*43 To document the source of the capital was not criminal
activity, an investor must include any one of the following categories of
documents: (1) foreign business registration records; or (2) tax returns filed
within 5 years; or (3) evidence identifying any other source of capital; or (4)
certified copies of any judgments or evidence of pending civil or criminal
actions. 8 C.F.R. § 204.6(j)(3).
Even though only one category of documents is required,
Chang produced documents in all four categories: foreign business records; and
tax records; and evidence of other sources of capital; and a police certificate
confirming no record of criminal conduct. [E.R. 367-431, 513-514, 520-539]
Nevertheless, the District Court affirmed an AAO
determination that Chang failed to meet the regulatory requirement because she
did not "designate the nature of her employment for three of her four
jobs, and did not submit tax information for five years as the regulations
require." [E.R. 562] As noted, tax returns are one of four alternative
types of documentation; and the tax returns must have been filed "within
five years" -- rather than all tax returns during the last five years. 8
C.F.R. § 204.6(j)(3)(ii).
It defies logic to hold that Chang did not prove the lawful
nature of her assets. There is certainly no evidence to determine otherwise.
There is *44 substantial evidence of the lawful source of Chang's funds,
including evidence of long-term employment in significant positions with
significant salaries, substantial real estate holdings, securities investments,
and bank accounts. See pp. 15-16, supra.
In addition to the assets previously described, Chang and
her family own stock of various companies, including Taiwan Business Bank.
[E.R. 414, 416-427] Chang also held certificates of deposits at the Royal Bank
of Canada totaling in excess of $200,000. [E.R. 367-342] In addition, Chang
submitted her available tax returns - those for the 1994 to 1996 tax years
[E.R. 520-539] These tax returns showed income (U.S. equivalence) in excess of
$100,000 each year. [FN5] [E.R. Id.] The tax returns expressly reflect approval
by the Taiwanese tax authorities. [Ibid.] Finally, the family produced a police
certificate confirming no criminal conduct. There is absolutely no implication
of criminal activity involving this investor, nor is any alleged.
FN5. The AAO
incorrectly found that the U.S. dollar equivalent of Chang's family income for
1994 through 1996 ranged between $56,000 and $63,000. [E.R. 293] Using the
proper exchange rate for those 3 years, gross income of the family ranged
between $103,000 and $114,000. See Reporter's Transcript of Proceedings
(September 8, 2000) at 44-45. In fact, even the after-tax income of this family
exceeded $100,000. [E.R. 520-539] The exchange rate is also the subject of the
Request for Judicial Notice.
*45 It is logical that the regulations do not require more
documentation because the I-526 petition is merely the first of three steps in
the immigration process. The approval of the petition provides no benefit, but
merely allows filing of an application for conditional permanent residence.
This second step requires an FBI and CIA security clearance. If any implication
of criminal activity arises through the security clearance procedures, the
petitioner is denied conditional permanent resident status. Two years later,
the investor must file a petition to remove the conditional basis of the
permanent resident status. As part of this process, if "it becomes known
to the government that the entrepreneur obtained his or her investment funds
through other than legal means (such as through the sale of illegal drugs),"
the investor is given a chance to overcome such derogatory information. 8
C.F.R. § 216.6(c)(2). It is curious to note that both this regulation
and the legislative history cited previously put the burden on the investor to
prove that the funds were not obtained through unlawful activity only if it
"becomes known to the government" that the investment funds may have
been obtained through other than legal means.
2. Chang Traced Every Dollar Invested
Despite the regulatory specification of the documents that
show, at the petition stage, that investment capital was not obtained through
unlawful means, *46 the AAO and District Court imposed an extra-regulatory
requirement on Chang to trace every dollar invested through every bank account.
[E.R. 560-563] There are two problems with this requirement: (1) it does not
exist in the regulations; and (2) a thorough analysis of the record confirms
that Chang actually did trace every dollar invested.
As previously explained, no such regulatory requirement
exists. [FN6] Certainly, the cited legislative history gives no indication of a
Congressional intent to require documentation of every debit and every credit,
which bears no relationship to proving that the funds were not acquired through
criminal activity.
FN6. The District
Court Judge himself appeared to be puzzled by the source of this requirement:
Obviously, here
the AAO questions the source and questions the legitimacy of the funds, but
does not explain the basis on which that is done. There is no criminal history
for the applicant and there is no evidence in the record that the INS provided
that the applicant, Ms. Chang, has been engaged in any kind of suspected ...
unlawful activity that would be producing proceeds.
Reporter's
Transcript of Proceedings (September 8, 2000) at 51.
The District Court cited In re: Soffici, Int. Dec. No. 3359,
1998 WL 471519 (Exam. Comm. June 30, 1998) and In re: Ho, Int. Dec. No. 3362,
1998 WL 483979 (Exam. Comm. July 31, 1998), in support of its position. No
logical *47 reading of these decisions requires the level of documentary
specificity imposed by the AAO and the District Court. If these decisions do
require such an impractical degree of documentary specificity, then the
decisions would be unenforceable because they impose an extra-regulatory
requirement. [FN7] See Thomas Jefferson Univ. v. Shalala, 512 U.S. 504, 512
(1994); Ruangswang v. INS, 591 F.2d 39 (9th Cir. 1978).
FN7. See section
VIII, E, infra at p. 62. See also note 12, infra, reciting the District Court's
assertion, and the INS' confirmation, that
the case should be
decided based on the regulations without reference to any changes or
supplementary requirements contained in the subsequently - issued precedent
decisions.
Finally, even if this extra-regulatory requirement is
applied to Chang, the evaluation of the documentary evidence Chang produced was
flawed and incorrect. Chang's extensive documentary evidence meets even the
"hypertechnical requirements" that the District Court seeks to
impose. [E.R. 562] Chang's evidence tracing every dollar of the $500,100
transferred funds is summarized below:
AMOUNT
SOURCE
1. $390,000.00 [E.R. 498] Exchange Memo dated 11/28/97 Remitter:
Li-Hui Chang
Beneficiary: Li-Hui Chang/FMA Enterprises Received by
WestAmerica Bank
[E.R.
497] Taiwanese Bank Ordering Customer: Li-Hui Chang
Beneficiary: Li-Hui Chang/FMA Enterprises Received by
WestAmerica Bank
[E.R.
496] Incoming Message dated 12/9/97 Received by
WestAmerica Bank $389,985 on 11/28/97 From: Li-Hui Chang To:
Li-Hui Chang/FMA Enterprises Received by Central Title
Company
[E.R.
595] Central Title Letter Receipt of $389,985 on
11/28/97
2. $100,000.00 [E.R. 500] Bank Document dated 11/25/97
Ordering Customer:
Li-Hui Chang Received by: WestAmerica Bank Beneficiary:
Li-Hui Chang/FMA Enterprises
[E.R.
499] Federal Funds Transfer on 11/25/97 $99,983.00
transferred From: Sender Li-Hui Chang (Royal Bank of Canada)
To:
West America Bank Received by: Central Title for credit
to
account of FMA Enterprises
3. $10,000.00 [E.R. 503] 8/21/97 Sender: Royal Bank of
Canada Beneficiary:
Central Title Company and West America Bank For Account of
Li-Hui Chang/FMA Enterprises
[E.R.
502] Incoming Message dated 8/21/97 Sender: Royal Bank
of
Canada $9,983.00 Received by: WestAmerica Bank for
Central Title for Escrow Account of Li-Hui Chang/FMA
Enterprises
[E.R.
495] Central Title received from Li-Hui Chang $9,983.00
on 8/21/97
4. $100.00 [E.R. 495] Central Title received from
Li-Hui Chang $100.00 on
8/1/97
*49 In sum, the regulations specify the documents required
for an investor to document lawful sources of capital. Chang met all the
requirements, and INS does not allege any unlawful source of funds. Even though
Chang met the extra-regulatory requirements, such requirements should not be
upheld.
D. THE CREDIBILITY OF CHANG AND HER BUSINESS PLAN IS
SUPPORTED BY ALL OF THE UNCONTROVERTED EVIDENCE IN THE RECORD, AND THE AAO
HOLDING TO THE CONTRARY IS NOT ENTITLED TO DEFERENCE AND NOT SUPPORTED BY
SUBSTANTIAL EVIDENCE.
1. The AAO's Holding That Chang's Investor Petition Should
be Denied Because of Lack of Credibility is Arbitrary and Capricious.
The INS bases its lack of credibility finding on a
typographical error on one document in a 559 page record that resulted in a
misdesignation of one of the lots that Spencer proposed to sell to FMA. The AAO
stated that reference in the documentation to FMA's proposed purchase of
"lot 22" (which may have been *50 sold to a different company) in
itself "destroys the credibility of her petition." [FN8] [E.R. 285]
The specific lots to be purchased by FMA will depend upon which lots are available
when Chang's petition is approved. The essence of FMA's Business Plan is not
the purchase of any specific lot, but the ongoing purchase of available lots
for home construction. Basing a finding of lack of credibility on such a
slender thread, and then denying the entire investor petition on this basis, is
not only arbitrary and capricious but truly defies logic. [FN9]
FN8. The AAO also
makes reference to a possible discrepancy in the date of the Sales and
Construction Management Agreement prepared by Spencer and to prior counsel
having inserted into the record two copies of a stock certificate of Chang's
husband valued at approximately $3,000 (U.S. equivalent) as affecting Chang's
credibility. [E.R. 283, 292] The stock certificate was a de minimis part of the
extensive documentation of the source of the $500,100 investment, which
included bank accounts, tax returns, employment income, real estate holdings
and rental properties. The date of Spencer's Agreement is not relevant to any
issue in this case.
FN9. For the
District Court's cogent summary of the absence of logic and reality in basing a
credibility finding on this issue, see Reporter's Transcript of Proceedings
(September 8, 2000) at 38-40.
Astoundingly, the AAO decision also criticizes Chang's
"refusal to undertake any concrete business activity whatsoever until her
petition is approved" and uses that as a basis to question her
credibility. [E.R. 299] In reality, until the petition is approved, Chang has
no legal immigration status that would allow her to *51 work or conduct
business in the United States. See INS Operations Instruction 214.2(b)(11)
(alien entering as a visitor for business cannot "perform productive labor
or actively participate in the management of the business ....").
Apparently, to pass the INS' credibility test, Chang would have to violate U.S.
immigration laws.
Also, the INS expressly allows the placement of investment
money in escrow with no concrete business activity until approval of the
petition. See, e.g., Memorandum from Robert L. Bach, INS Executive Associate
Commissioner, dated August 28, 1998, HQ 40/6.1.3 attached as Exhibit E to
Request for Judicial Notice. Following the INS' own rule apparently creates a
basis for the INS to question an investor's credibility. Additionally, INS' own
regulation requires the submission of a "comprehensive business plan"
to show that ten qualifying employees will be employed within the next two
years. 8 C.F.R. § 204.6(j)(4)(i)(B).
Chang could not have done more prior to the INS approval of
her petition and grant of her legal employment status in the United States.
Among other things, Chang formed a corporation, entered into an Agreement to
purchase lots for development, chose lots, contracted with a general contractor
to assist in *52 the sales and management of the construction business,
established an escrow account with the required funds to purchase the lots and
begin construction activities, purchased workers' compensation insurance,
registered with the Employment Development Department to employ employees and
pay employment taxes, established labor and employment directives to manage the
Company's employees in accordance with normal employment practices and
developed a detailed business plan. [E.R. 134-142, 221-236, 475-494, 540]
2. INS' Decision Questioning Chang's Credibility, Which Is
Based Upon A Paper Record And Upon Alleged Discrepancies That Do Not Go To The
Heart Of The Case, Should Not Be Accorded Deference And Should Be Overturned
The INS' "credibility" determination relating to
Chang based solely on documentary evidence is entitled to considerably less
deference than a credibility decision that is based upon review of a witness'
demeanor. Unlike virtually all credibility issues that come before this Court,
in this case no witness testimony has been evaluated by a finder of fact.
Rather, all evidence is based upon a paper record. In this type of appeal,
"[d]istrict court review of agency action is generally accorded no
particular deference, because the district court, limited to the administrative
record, is in no better position to review the agency than the court of
appeals." *53Great W. Bank v. Office of Thrift Supervision, 916 F.2d 1421,
1426 (9th Cir. 1990) (quoting Asarco, Inc. v. EPA, 616 F.2d 1153, 1161 (9th
Cir. 1980)). This Court is in as good a position as the AAO or the District
Court to review the credibility of Chang and the Business Plan. Cf. Abovian v.
INS, 219 F.3d 972, 978 (9th Cir. 2000) (explaining that deference to an
immigration judge who sees the witness' demeanor does not apply to BIA paper
determinations), amended, 228 F.3d 1127 (9th Cir. 2000). [FN10]
FN10. Furthermore,
in Abovian, this Court found a due process violation where the BIA raised the
credibility issue for the first time and did not afford an opportunity to
explain any alleged inconsistencies. Abovian, 219 F.3d at 980. Likewise, in the
present case, credibility was raised for the first time, without notice, in the
decision of the AAO.
Even in cases where credibility determinations are based
upon testimony, this Court has consistently held that a lack of credibility
determination cannot survive unless the reasons for finding of lack of
credibility are "substantial" and "bear a legitimate nexus to
the finding." Aguilera-Cota v. INS, 914 F.2d 1375, 1381 (9th Cir. 1990).
To satisfy this standard, the decision must list reasons for a finding of lack
of credibility that go to the "heart" of the plaintiff's case. Pal v.
INS, 204 F.3d 935, 940 (9th Cir. 2000); Ceballos-Castillo vs. INS, 904 F.2d 519,
520 (9th Cir. 1990). This Court must evaluate the reasons given for an adverse
*54 credibility finding to determine whether those reasons are valid grounds.
Vilorio-Lopez v. INS, 852 F.2d 1137 (9th Cir. 1988). As stated in
Aguilera-Cota:
We do not accept blindly an IJ's conclusion that a
petitioner is not credible. Rather, we examine the record to see whether
substantial evidence supports that conclusion, and determine whether the reason
employed by the IJ is fatally flawed. It is not enough that the IJ has arrived at
point B from point A, or that others might also; the question we must answer
is: Was it reasonable to do so?
Aguilera-Cota, 914
F.2d at 1381. "[W]hen the stated reasons for an
adverse credibility finding are inadequate, this court will not find that an adverse
credibility finding is supported by substantial evidence." Vilorio-Lopez,
852 F.2d at 1142. There must be a "rational and supportable
connection" between the reason cited and the conclusion that the
petitioner is not credible. Aguilera-Cota, 914 F.2d at 1381. "[M]inor
inconsistencies or misrepresentations of unimportant facts cannot constitute
the basis for an adverse credibility finding." Id. at 1382; see also
Martinez-Sanchez v. INS, 794 F.2d 1396, 1400 (9th Cir. 1986) (overturning the
BIA's adverse credibility finding and describing few inconsistencies as minor).
Thus, neither unimportant contradictions nor "trivial errors" are
proper grounds for an adverse credibility finding. Osorio v. INS, 99 F.3d 928,
931-32 (9th Cir. 1996); Damaize-Job v. INS, 787 F.2d 1332, 1337-38 (9th Cir.
1986).
*55 The Ninth Circuit Court of Appeals has held on several
occasions that discrepancies in dates which reveal nothing about the issue are
insubstantial to a credibility determination. Shah v. INS, 220 F.3d 1062 (9th
Cir. 2000); Vilorio-Lopez, 852 F.2d at 1142. In Shah, a plaintiff sought asylum
from political and religious persecution. She submitted a copy of the death
certificate of her husband, whom she alleged had been murdered for his beliefs.
Shah, 220 F.3d at 1066. The BIA found that the plaintiff's story not credible
partly because the death certificate contained two dates. Id. at 1067. Although
the dates on the certificate were over seven months apart, the Court held that
this was an improper basis for an adverse credibility finding. The Court noted
that the discrepancy could have been a typographical or clerical error.
Further, the Court stated that if discrepancies "cannot be viewed as
attempts by the [plaintiff] to enhance his claims ..., [they] have no bearing
on credibility." Id. at 1068, quoting Damaize-Job, 787 F.2d at 1337
(holding that minor discrepancies in dates due to typographical errors have no
bearing on credibility).
Since minor inconsistencies, such as discrepancies in dates,
do not merit a lack of credibility finding, one minor discrepancy regarding one
of the *56 specific lots to be purchased does not affect the credibility of the
FMC Business Plan. [FN11] The issue is whether the investor intends and is
contractually committed to buy lots and employ construction workers. The issue
is not specific lots, since if a particular lot is sold, the investor can buy
another lot. Due to the delay in the approval of Chang's petition, it is
inevitable that some of the lots FMA intended to buy will be sold by the time
her visa is granted.
FN11. Both the AAO
and the District Court questioned Chang's credibility because of
"ever-changing" business plans. However, new plans were not
submitted; the comprehensive plan was provided in response to a request from
the INS, whereas prior to that time the INS had only required an executive
summary of the plan. [E.R. 293]
Further, Chang can incur no benefit from misdesignating the
exact lots she intends to purchase. Her intent to purchase Lot 22 instead of
Lot 99 does not enhance her claim, and thus it should have no bearing on
credibility. Accord, Damaize-Job v. INS, 787 F.2d at 1337.
As to any possible discrepancy in the date of the Sales and
Construction Management Agreement, Vilorio-Lopez and Shah provide that dates
are usually not considered substantial to a credibility determination. This is
especially true of dates which only convey a document preparation date. The
date *57 of this document, which Chang did not prepare, has no relevance to the
credibility of Chang or FMA's Business Plan.
The material issues in this case are whether Chang invested
the requisite capital and whether the investment will create the requisite
full-time jobs. A discrepancy in the date of the Sales and Construction
Management Agreement or a possible misdesignation of one of the eight lots to
be purchased is not material or substantial, and does not go to the heart of
the case. These would be, at most, minor inconsistencies or discrepancies
relating to unimportant facts, which are not the proper basis for an adverse
credibility finding.
3. This Court Should Not Give Deference to INS Opinions
Outside of the Agency's Expertise; viz., the Credibility of a Real Estate
Business Plan.
In reality, this case has nothing to do with the credibility
of this particular Plaintiff. Since the INS has not approved any investor
utilizing this business plan since it approved the first seventeen petitions,
the real issue is the business plan.
The AAO questioned whether the Business Plan's projection of
at least ten employees is "realistic." [E.R. 287] The AAO, based
solely on it is own judgment and without introducing any expert opinion,
denigrates the Business Plan *58 as "highly unusual" and therefore
not credible. [E.R. 288] This baseless finding is contradicted by the opinions
of three real estate experts, all of whom conclude that the Business Plan,
including the employment plan, is credible.
The basis for traditional deference to an agency's
interpretations is the court's "respect for the special competence of an
administrative agency to interpret a statutory provision concerning its own
area of expertise." Saipan Stevedore Co. v. Dir., Office of Workers' Comp.
Programs, 133 F.3d 717, 723 (9th Cir. 1998). In other words, "[t]he
principle of deference to the exercise of administrative authority is derived
from the court's recognition that agencies possess a body of knowledge that
uniquely suits them to accommodate conflicting policies concerning matters
within their own areas of skill and mastery." Tovar v. U.S. Postal Serv.,
3 F.3d 1271, 1276 (9th Cir. 1993). It is therefore incumbent upon the
administrative agency to demonstrate the source of the agency's knowledge on a
particular subject that is not clearly within its area of expertise. Montgomery
Ward & Co. v. FTC, 691 F.2d 1322, 1331 (9th Cir. 1982). A reviewing court
"should not defer to the agency where it simply has not exercised its
expertise." Central Ariz. Water Conservation Dist. v. EPA, 990 F.2d 1531,
1540 (9th Cir. 1993).
*59 This Court has frequently applied this tenet of judicial
review in cases involving the INS. See, e.g., Avala-Chavez v. INS, 945 F.2d
288, 294 (9th Cir. 1991). For example, this Court refused to give deference to
a postal regulation prohibiting employment of temporary resident aliens because
"whether temporary resident aliens ... would perform less satisfactorily
than permanent residents is a question not closely related to the agency's
essential competence." Tovar, 3 F.3d at 1276; see also Parola v. Weinberger,
848 F.2d 956, 959 (9th Cir. 1988) (General Accounting Office's decision
regarding propriety of bid and bid decision process not entitled to deference
because not based upon particulars of federal contract provisions and
practices, but on a statutory interpretation outside GAO's expertise).
The INS has not demonstrated expertise in real estate law or
real estate development practices that would entitle its analysis of the
Business Plan to deference. In fact, the record is conspicuously devoid of any
expert opinion or testimony contradicting the three expert opinions introduced
by Plaintiff Chang. [E.R. 112-120, 243-272, 273] The record does not contain
any information as to the qualifications of the adjudicator or the AAO to
review a real estate development business plan, nor is there any reference to
any outside entities the INS consulted in concluding that the Business Plan is
not credible.
*60 4. The Credibility of FMA's Business Plan is Supported
by Substantial Uncontroverted Evidence.
There is no evidence to contradict the credibility of the
Business Plan's projected need for ten full-time employees. On the other hand,
three expert opinions confirm the credibility of the Business Plan's intention
to employ ten full-time workers.
Stanley Spano stated that FMA's Business Plan to directly
employ workers to do most of the construction work (with only specialized work
performed by subcontractors) "has been used successfully by myself and
other builders. It can be a very workable and effective method of house
construction." [E.R. 273] The opinion of Wathen Brothers Enterprises,
another builder in the Fresno area, states that ten to twelve tradespeople
working at least 35 hours per week would be required to implement FMA's
Business Plan. [E.R. 243-272]
Dr. Penbera, whose expert credentials are unassailable,
notes that the "locational and pricing strategy is highly competitive and
workable within the conditions of the marketplace." [E.R. 115] He notes
that the Business Plan's model of using a local home builder to provide
guidance and general management oversight "is an ideal situation" and
greatly enhances the viability of the business." [E.R. 114-115] Dr.
Penbera opines that "the expectation of building a house over a *61 5
month period and 4 houses per year to employ 10 workers is reasonable in this
market and consistent with current building practices." [E.R. 117] In
addition, he analyzes the Business Plan's projected financial statements and
concludes "based upon my experience and knowledge of this market, that the
return and profitability analysis contained in the Business Plan represent
reasonable projections." [E.R. 115] He adds: "the investment program
being utilized by the Petitioner is extremely workable for this market."
[E.R. 114] Dr. Penbera concludes that, "[m]y finding is that the Business
Plan is credible and comprehensive and that it conforms both with industry
standards for a comprehensive business plan and with standards for a
comprehensive business plan as set forth in the matter of Ho." [E.R. 118]
Specifically, with respect to the Business Plan's
credibility relating to ten full-time employees, Dr. Penbera concludes:
Given the availability of capital provided by the investor,
the expected turnover of houses, the normal time that is required to build a
house, the availability of labor, the housing marketplace in this area and
other factors contained in the Business Plan and discussed in this opinion, I
conclude that the Business Plan provides a realistic likelihood and probability
that full-time employment for 10 employees on an on-going basis will be created
by this business venture.
*62 [E.R. 119]
The AAO arbitrarily and completely disregards the three
expert opinions confirming the Business Plan's credibility. Certainly, the INS
cannot claim any inherent expertise in real estate to which this Court should
defer.
E. INS DECISIONS ISSUED SUBSEQUENT TO CHANG'S INVESTMENT
CANNOT BE APPLIED TO DENY CHANG'S PETITION
Chang's petition is not only in full compliance with the
statute and regulations, but also with the aforementioned INS precedent
decisions. [FN12] However, application of any new requirement in these
subsequent decisions to Chang's petition would be an error of law and arbitrary
and capricious.
FN12. Both the
District Court Judge and the INS attorney confirmed that the AAO decision was
based on the statute and regulations, that the precedent decisions issued after
Chang's investment are not relevant and that this case should be decided based
on the regulations without reference to the precedent decisions. See Reporter's
Transcript of Proceedings (September 8, 2000) at 18, 27, 28, 57, 67, 68.
The problems presently experienced by Chang and other
investors following changes in INS interpretations of its investor regulations
are strikingly similar to problems experienced by investors in the 1970s, when
the INS similarly decided to change its policies by issuing precedent decisions
and applying them to *63 investors, like Chang, who had no notice of such
changes at the time they invested.
In a trilogy of cases involving investors in the 1970s, the
Ninth Circuit dealt with issues directly on point, and arguably determinative
of the issues presented here.
The first case is Ruangswang v. INS, 591 F.2d 39 (9th Cir.
1978). Mrs. Ruangswang commenced investing in January 1974. She completed
investing the statutorily-required amount in March 1974 and filed her investor
application in June 1974. The application was denied in 1975.
The application and the investment met the literal criteria
of the INS regulation promulgated in 1973. However, the INS, on January 25,
1974 (subsequent to the initial investment and prior to completion of the
investment and filing of the application), issued a precedent decision which
expanded upon the regulatory requirement. Mrs. Ruangswang's investment did not
meet the criteria and standards set forth in that precedent decision. The BIA
denied Mrs. Ruangswang's application based on failure to meet the new
standards.
The Ninth Circuit held that the denial of Mrs. Ruangswang's
investor petition was in error because the precedent decision should not apply
to Mrs. Ruangswang. The Ninth Circuit determined that the literal terms of the
regulation *64 of which Mrs. Ruangswang had notice when she commenced investing
were the only criteria that should apply. Id. at 43.
The Ninth Circuit focused on the date of Mrs. Ruangswang's
initial capital outlay and determined that she had no notice of the January 25,
1974 precedent decision. The Court expressly distinguished cases in which an investment
was commenced after the publication of the precedent decision. In Ruangswang,
INS argued, as it has here, that the precedent decision "attempted only to
clarify and strengthen the previous requirements for investor status" and
"did not change the congressional intent." Id. at 46 n. 12. However,
the Ninth Circuit concluded that, whether the precedent decision established
new standards by adjudication or merely interpreted the regulation, it was an
abuse of discretion to apply the precedent decision to Mrs. Ruangswang. The
Ninth Circuit explained, "[o]n balance, the ill effect on the Ruangswangs
from the Board's establishment of a standard without adequate notice outweighs
any possible mischief done to the statutory design by our literal reading of the
regulation based upon the facts of this case." Id.
In Patel v. INS, 638 F.2d 1199 (9th Cir. 1980), an investor
began investing in July 1974 and therefore had notice of the January 1974
precedent *65 decision. The investment met the literal language of the
regulatory requirement in effect when the investment was commenced, but did not
meet the requirements of the precedent decision. The Ninth Circuit held that
new broad, generally applicable criteria should be made by rulemaking. The
Court determined the INS abused its discretion by applying the precedent
decision to Mr. Patel:
In addition to our conclusion that Heitland [the precedent
decision] was an improper circumvention of rulemaking procedure, we also
conclude that the Board abused its discretion by applying the job-creation
criterion to Patel. Although Patel invested money and applied for the investor
exemption well after Heitland was decided, we doubt that he could have clearly
determined what he must do to qualify for the exemption. The INS had been
sending aliens confusing signals.
Id. at 1205.
Finally, in Bahat v. Sureck, 637 F.2d 1315 (9th Cir. 1981),
Mr. Bahat invested and filed his petition in 1976, long after the issuance of
the 1974 precedent decision. Nevertheless, the Ninth Circuit held that the
combination of the 1973 regulation and the 1974 precedent decision left the law
unclear. Holding that INS' application of a subsequent (1976) regulating and
precedent decision denied Mr. Bahat proper notice and was an improper
circumvention of rulemaking procedure, the Ninth Circuit overturned the denial
of Mr. Bahat's investor petition, stating, "[t]o hold otherwise could
result in a cruel hoax by encouraging *66 investments of lifetime earnings for
an illusory goal." Id. at 1320. The Court also quoted Judge Sneed's
concurrence in Ruangswang, which it found particularly pertinent:
Adjudication by an agency to establish a rule or policy
inconsistent with its recently adopted regulation suggests administrative
confusion and uncertainty. The costs of this inefficiency should not always be
borne by the individual being governed. An instance in which society should
bear these costs is where the individual had no reason to know that the word of
the regulations is not the will of the agency.
Id.
As in those three cases, Chang made her investment (in
August 1997) prior to the issuance of any of the four precedent decisions (in
August 1998). [E.R. 495-500, 502-503, 595] She invested knowing that the INS,
applying the literal language of the regulation, had approved seventeen
investors who made the same investments in exactly the same program. [E.R. 97,
180-197, 96-110] Just as Ruangswang, Patel and Bahat had no notice of an INS
change in policy, likewise Chang, at the time of her investment, had no notice
of the new standards. To allow the U.S. Government to publish rules providing
that investors who invest money in the U.S. and meet certain criteria will be
entitled to immigrant status, and then to change the rules after investors such
as Chang make their investments, would indeed be a "cruel hoax."
Bahat, 637 F.2d at 1320.
*67 If the INS argues that the precedent decisions are the
reason for the approval of seventeen investors using the same Spencer investor
program as Chang and the denial of Chang's petition, then the rulings in this
trilogy of Ninth Circuit cases are directly applicable. On the other hand, if
the INS argues -- as it told the District Court [FN13] -- that the precedent
decisions did not result in a change in adjudicatory standards or regulatory interpretation,
then its decision is arbitrary and capricious as being inconsistent with its
prior interpretations of its own regulations.
FN13. See note 12,
supra.
IX. CONCLUSION
For all of the above-stated reasons, the District Court
Order granting summary judgment to INS and against Plaintiffs Spencer and Chang
is erroneous as a matter of law and is not supported by substantial evidence
and should be reversed and remanded to the District Court with instructions to
approve the investor petition of Mrs. Chang. In addition, Plaintiffs
respectfully request an award of reasonable costs and attorneys fees.
*68 STATEMENT OF RELATED CASES
Pursuant to Fed. R. App. P. 28-2.6, there are no known cases
related to the instant case pending in this Court.