Sugule v. Frazier

United States Court of Appeals
FOR THE EIGHTH CIRCUIT
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No. 10-2129
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Abdulaziz M. Sugule and *
AMS & Associates, Inc., *
*
Appellants, *
* Appeal from the United States
v. * District Court for the
* District of Minnesota.
Denise Frazier, Field Office, District *
Director, USCIS; Gerard Heinauer, *
Director, Nebraska Service Center, *
USCIS; Emilio Gonzales, Director, *
USCIS; Eric H. Holder, Jr., *
Attorney General of the United States; *
Janet Napolitano, Secretary, United *
States Department of Homeland *
Security; and Robert S. Mueller, *
Director, FBI, *
*
Appellees. *
___________

Submitted: December 14, 2010
Filed: April 4, 2011
___________

Before LOKEN, ARNOLD and BYE, Circuit Judges.
___________

BYE, Circuit Judge.
 After the Department of Labor (DOL) had granted an alien employment
certification to AMS & Associates, Inc., thereby clearing a path for its employee
Abdulaziz Sugule to apply for an immigrant visa, the Department of Homeland
Security (DHS) revoked the DOL’s certification on the ground of fraud. The DHS
based its finding on three documents in which Sugule represented to two private
parties he was the sole owner of AMS. For various reasons, the DHS disregarded
eighteen items of evidence which Sugule offered in support of his assertion he never
held any interest in AMS and misrepresented his ownership status in an attempt to
embellish his financial status. Because none of the DHS’s reasons withstands
scrutiny, we find its actions arbitrary and capricious and its findings not supported by
substantial evidence. Accordingly, we reverse the grant of summary judgment in
favor of the governmental defendants and remand to the district court with
instructions to vacate the DHS’s revocation of labor certification and further remand
the case to the agency.

I

On September 17, 2002, Minneapolis accounting firm AMS & Associates, Inc.,
filed Form ETA-750, Application for Alien Employment Certification, on behalf of
its staff accountant Abdulaziz Sugule, a citizen of Canada. As part of that form, AMS
certified it had advertised the position in a Minneapolis newspaper of general
circulation for the requisite number of weeks and received no qualified applicants
ready, willing, and able to take the job.1

The DOL certified the application on February 11, 2003. Implicit in the DOL’s
certification was its finding that “(1) sufficient United States workers are not able,

1
AMS represented it has difficulty attracting qualified United States workers
because of its primary clientele: Minneapolis’s large Somali community. In that
sense, AMS maintains, Sugule, an ethnic Somali, fits the firm’s needs uniquely well.

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willing, qualified, and available for a particular job; and (2) employment of a
particular alien will not adversely [affect] the wages and working conditions of
United States workers similarly employed.” Ramirez v. Holder, 609 F.3d 331, 333
(4th Cir. 2010) (citation omitted); see 8 U.S.C. § 1182(a)(5)(A)(i). After receiving
the certification, AMS turned to the DHS to petition for an immigrant work visa on
Sugule’s behalf by filing Form I-140, Immigrant Visa Petition for Alien Worker.
Contemporaneous with AMS’s filing of I-140, Sugule filed Form I-485, Application
to Register Permanent Residence or Adjust Status, to obtain green cards for himself,
his wife, and his four foreign-born children.

After four years of waiting, the DHS approved AMS’s I-140 petition on August
12, 2007, only to issue a Notice of Intent to Revoke the approval three weeks later.
The sudden change of heart was caused by the agency’s discovery of three documents
in which Sugule listed AMS as his asset. These documents caused the DHS to
suspect Sugule owned AMS and therefore committed fraud on the DOL by failing to
disclose his interest in the sponsoring entity when applying for labor certification.
The three documents at issue, all signed by Sugule under the threat of perjury, were:

(1) Uniform Residential Contract application submitted on
January 11, 2005, to Guidance Residential, LLC in connection with
Sugule’s efforts to finance the purchase of a house. Sugule listed AMS
as his employer and checked the adjacent “self-employed” box;

(2) Surety Bond Application signed by Sugule on August 31,
2005, and submitted to Scott Insurance in connection with his efforts to
obtain insurance for a new money transfer business. On the resume
attached to the application, Sugule indicated he had been the owner of
AMS since December 1997;

(3) Personal Financial Statement signed by Sugule on the same
day as the Surety Bond Application (August 31, 2005) and likewise
submitted to Scott Insurance in an attempt to obtain insurance for a

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 money transfer business. On this statement, Sugule listed AMS among
his assets and assessed its market value at $250,000.

In response to the DHS’s notice, Sugule denied his ownership of AMS. He
maintained the self-employed box on the Uniform Residential Contract application
was checked by a bank employee in error and, although he admitted to
misrepresenting his ownership of AMS on the two documents submitted to Scott
Insurance, he explained he did so in a “desperate and foolish attempt to show [he] had
a strong financial background.”

To buttress his claims, Sugule submitted eighteen items of evidence reduced
to the following categories:

• Sugule’s own affidavit containing his explanation as described
above.

• AMS’s income tax returns for the 2002-06 period. The
corporation’s 2002-05 returns were signed by Omar Ali in the
capacity of a president, and Ali was listed as the owner of 100
percent of AMS’s stock on Schedule K-1 to the 2004 and 2005
returns. AMS’s 2006 return was signed by Idiris Mohamud as its
president, with the accompanying K-1 Schedule indicating
Mohamud owned seventy-five percent of AMS’s shares and Omar
Ali the remaining twenty-five;

• Omar Ali’s 2004-06 individual tax returns and Idiris Mohamud’s
2006 individual tax return reporting income from AMS on
respective Schedules E;

• Secretary of State Certificate of Assumed Name filed with the
state of Minnesota on November 21, 1997, designating Abdi A.
Mohamed as a person conducting business under AMS’s name
and Sugule as a contact person, and the Amendment to Certificate
of Assumed Name filed with the state of Minnesota on November

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 6, 1998, showing Omar M. Ali as a person conducting business
under AMS’s name and Sugule still as a contact person;

• Application for Employer Identification Number signed on
November 5, 1998, by Omar Ali as the sole proprietor of AMS,
and another such application dated October 5, 2000, signed by Ali
as a corporation’s “principal officer, general partner, grantor,
owner or trustor”;

• Application for the Articles of Incorporation and the Certificate
of Incorporation issued to AMS on April 12, 2000, listing Omar
Ali as AMS’s incorporator, and the Amendment of Articles of
Incorporation filed with the state of Minnesota on March 24,
2006, and signed by Idiris Mohamud;

• Certificate of ownership for 1,000 AMS shares issued to Idiris
Mohamud, AMS’s President, on March 24, 2006;

• Affidavit of Abdi Mohamed stating he formed AMS on
November 21, 1997, and sold it to Omar Ali in November 1998;
affidavit of Omar Ali stating he purchased AMS from Abdi
Mohamed in November 1998 and incorporated it on April 12,
2000; affidavit of Idiris Mohamud stating he purchased all
outstanding shares of AMS’s common stock (1,000 shares) from
Omar Ali on March 26, 2006; and a letter from AMS’s attorney,
Walter M. Baker, stating the entire stock of AMS & Associates
had belonged to Omar Ali until March 2006, at which time Idiris
Mohamud became AMS’s sole owner. All four individuals
specifically disclaimed Sugule’s ownership of AMS at any time;

• Letter from Guidance Residential, LLC, stating the self-employed
box on the Uniform Residential Contract application was checked
“as the result of a clerical error.”

Sugule’s voluminous submission notwithstanding, the DHS revoked the DOL’s
certification, which triggered the automatic revocation of the previously-approved

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I-140 and denial of I-485 on March 11, 2008. The DHS compared the evidence
referenced in its Notice of Intent to Revoke with the evidence provided by Sugule in
his response and found the former to be more convincing in character. The agency
discounted Sugule’s explanation as “self-serving” and lacking persuasive value and
credited Sugule’s representations in the three documents referenced above.
Appellants App’x at 11. The agency found the “evidence and circumstances in this
record raise serious credibility questions,” and Sugule “has not sustained” his burden
of proof in the proceedings. Appellants App’x at 11, 13.

Next, Sugule filed Form I-290B, Notice of Appeal or Motion, which the DHS
construed as a motion for reconsideration. On December 10, 2009, the DHS upheld
its initial decision, using the occasion to expand its statement of reasons. The DHS
stated that Sugule’s evidence was not “reliable [and] objective”; that “it is not
sufficient to submit stock certificates . . . without submitting the stock ledger
demonstrating that those certificates represent all transactions that have transpired”;
and that it is not “sufficient to submit self-prepared documents without evidence that
they were actually submitted to the relevant authorities and boards.” Appellees
App’x at 62. The revocation was without prejudice to Sugule’s filing of a new I-140
petition.

Sugule appealed to the district court. On March 31, 2010, the United States
District Court for the District of Minnesota granted summary judgment in favor of the
governmental defendants. The court concluded it was without jurisdiction to review
the revocation of I-140 and denial of I-485, and found the DHS did not act arbitrarily
or capriciously in invalidating the labor certification. The present appeal followed.

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 II

We first turn to the issue of jurisdiction. The Illegal Immigration Reform and
Immigrant Responsibility Act of 1996, Pub. L. No. 104-208, 110 Stat. 3009 (1996),
precludes judicial review of the two categories of discretionary decisions by the DHS:

(i) any judgment regarding the granting of relief under section
1182(h), 1182(i), 1229b, 1229c, or 1255 of this title, or

(ii) any other decision or action of the Attorney General or the
Secretary of Homeland Security the authority for which is specified
under this subchapter to be in the discretion of the Attorney General or
the Secretary of Homeland Security, other than the granting of relief
under section 1158(a) of this title.

8 U.S.C. § 1252(a)(2)(B).

The first of these categories forecloses our review of the denial of adjustment
of status, see Toby v. Holder, 618 F.3d 963, 967 (8th Cir. 2010), and the second
precludes our review of the revocation of the approved I-140 petition, see
Abdelwahab v. Frazier, 578 F.3d 817, 821-22 (8th Cir. 2009). Both parties agree,
however, that the jurisdictional bar of § 1252(a)(2)(B) does not deprive us of
jurisdiction to review the DHS’s invalidation of the labor certification. Under the
recent Supreme Court decision in Kucana v. Holder, 130 S.Ct. 827 (2010), the
“discretionary nature of the decision must be set forth in the statute itself to trigger
the [jurisdictional] bar.” Ginters v. Frazier, 614 F.3d 822, 827 (8th Cir. 2010).
Because it is the agency regulation, not an act of Congress, that empowers the DHS
to invalidate the labor certification, see 20 C.F.R. § 656.30(d), the court retains its
jurisdiction to review invalidation of the labor certification.

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 III

In reviewing the merits of Sugule’s claim, we look to both the DHS’s initial
ruling and its December 10, 2009, denial of Sugule’s motion for reconsideration. Cf.
Khrystotodorov v. Mukasey, 551 F.3d 775, 781 (8th Cir. 2008) (stating that, where
the Board of Immigration Appeals supplants the reasoning of the immigration judge,
the court reviews both). We review the district court’s grant of summary judgment
de novo, Nyari v. Napolitano, 562 F.3d 916, 920 (8th Cir. 2009), evaluating whether
the DHS’s “‘action, findings, and conclusions [are] arbitrary, capricious, an abuse of
discretion, or otherwise not in accordance with law.’” Falk v. United States ex rel.
Dep’t of Interior, 452 F.3d 951, 953 (8th Cir. 2006) (quoting 5 U.S.C. § 706(2)(A)).
“The arbitrary and capricious standard is a narrow one that reflects the deference
given to agencies’ expertise within their respective fields.” Henry v. U.S. Dep’t of
Navy, 77 F.3d 271, 272 (8th Cir. 1996). One aspect of the arbitrary and capricious
review is an inquiry into whether the agency “offered an explanation for its decision
that runs counter to the evidence before the agency, or is so implausible that it could
not be ascribed to a difference in view or the product of agency expertise.” Watkins
v. Nat’l Transp. Safety Bd., 178 F.3d 959, 961 (8th Cir. 1999) (internal quotation
marks and citations omitted). By contrast to legal questions, we review the agency’s
findings of fact under a deferential substantial-evidence standard. Sultani v.
Gonzales, 455 F.3d 878, 881-82 (8th Cir. 2006) (stating that the agency’s findings of
fact are not supported by substantial evidence only where the evidence “not only
supports a contrary conclusion but compels it”).

Generally, it is the DOL’s prerogative to evaluate conditions of the domestic
labor market – i.e., whether there are able, willing, qualified, and available United
States workers for the job offered to the alien and whether the alien’s employment
would have a negative effect on the wages and working conditions of similarly
situated United States workers. K.R.K. Irvine, Inc. v. Landon, 699 F.2d 1006, 1009
(9th Cir. 1983). Once the DOL makes the necessary findings and certifies the

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application, the only avenue for the DHS to invalidate it is upon finding “fraud or
willful misrepresentation of a material fact involving the labor certification
application.” 20 C.F.R. § 656.30(d) (“[A]fter issuance, a labor certification is subject
to invalidation by the DHS . . . upon a determination . . . of fraud or willful
misrepresentation of a material fact involving the labor certification application.”);
see Madany v. Smith, 696 F.2d 1008, 1012 (D.C. Cir. 1983); Joseph v. Landon, 679
F.2d 113, 116 (7th Cir. 1982). To establish fraud necessary to revoke the DOL’s
certification in this case, the DHS relied on the finding that Sugule was AMS’s
owner, and he defrauded the DOL by failing to reveal his ownership of the
sponsoring entity on Form ETA-750, Application for Alien Employment
Certification. See Appellants App’x at 11 (alleging “the beneficiary . . . has implicitly
signed under oath that he is not the owner of that company,” and “[t]here is no
evidence that during the certification process, the beneficiary revealed to the
Department of Labor that he was the owner of the petitioning entity”).

To the extent the DHS relied on Sugule’s formal ownership of the corporation
to establish fraud, its findings are not supported by the record. Although the DHS
could also base its conclusions on Sugule’s control of AMS short of formal
ownership, nothing in its decision indicates the agency pursued that alternative
theory. We cannot “blindly defer to an agency decision that is . . . unexplained,”
Qwest Corp. v. Boyle, 589 F.3d 985, 998 (8th Cir. 2009) (internal quotation marks
and citation omitted), and will therefore focus on the only theory expressly
expounded upon by the DHS: that of formal ownership.

Prior decisions of the agency reinforce the axiom that a corporation is owned
by its shareholders. See In re Silver Dragon Chinese Rest., 19 I & N Dec. at 402-03;
In re M, 8 I & N Dec. 24, 42-44 (BIA 1958). The DHS erred in imputing the entire
ownership of AMS to Sugule, thereby disregarding the copious evidence that Sugule
did not hold any AMS stock and the absence of any objective evidence to the
contrary. The DHS also failed at explaining away the overwhelming evidence
negating its position. Cf. Motor Vehicle Mfrs. Ass’n of U.S., Inc. v. State Farm Mut.
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Auto. Ins. Co., 463 U.S. 29, 51-54 (1983) (the agency’s duty of reasoned
decisionmaking includes the responsibility to explain away significant evidence
undermining the agency’s position).

The DHS’s logic suffers from several flaws. Its reasons are conclusory,
frequently boiling down to the mere “because I said so” explanation. To the extent
the DHS identified specific issues with Sugule’s evidence, all of them are vulnerable
to serious criticisms. For example, the DHS professed to give preference to the
quality of the evidence over its quantity, intimating that the eighteen documents
produced by Sugule were not as trustworthy as the three documents marshaled by the
agency. As the agency went about criticizing Sugule’s evidence as “self-serving” and
“self-prepared,” however, it did not hesitate to hang its own hat on Sugule’s equally
self-serving and self-prepared representations in the bond application, the personal
financial statement, and the residential contract application. In the same vein, while
the DHS found the same three documents to be credible by virtue of having been
signed under the threat of perjury, it readily disregarded sworn affidavits from AMS’s
three owners and a letter from AMS’s counsel without any explanation.

The DHS’s emphasis on the numerosity of documents supporting its conclusion
appears even more artificial, given that the number of documents produced by Sugule
outweighs the number of documents supporting the DHS’s position by a six-to-one
ratio. The same double-standard charge applies to the DHS’s statement that the three
documents in its arsenal were “signed months apart from each other and were
submitted for different benefits.” In contrast to Sugule’s eighteen items of evidence
spanning several years and covering the most relevant period – that preceding the
issuance of the certification in 2003 – the three documents relied upon by the DHS
were created on just two occasions, both years after the grant of the certification.
Moreover, with respect to one of such occasions, Sugule produced a note from the
bank assuming the blame for the checked self-employed box on Sugule’s residential
contract application. As with many other evidentiary items in the record, the DHS
has not addressed the significance of this note anywhere in its discussion.
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 The DHS’s point about a stock certificate not being sufficient “without
submitting the stock ledger demonstrating that those certificates represent all
transactions that have transpired” is vulnerable to similar criticisms. For one, this
statement attacks one minor piece of evidence among many in Sugule’s defense.
More important, the DHS has not given a reasoned explanation or cited any authority
for its insistence on the stock ledger as the exclusive method of proving ownership.
Certainly, such insistence seems unduly formalistic in the face of multiple tax records,
state business filings, and sworn affidavits from AMS owners and counsel uniformly
disclaiming Sugule’s interest in AMS throughout the company’s existence.

We are also unpersuaded by the DHS’s observation that various tax and
incorporation records submitted by Sugule have low evidentiary value absent
“evidence that they were actually submitted to the relevant authorities and boards.”
This statement disregards the reality that many of these records bear the filing stamps
from the Minnesota Department of State and the Internal Revenue Service. Aside
from being factually incorrect, this statement seems disingenuous, particularly where
the agency chose to rely on the statements by Sugule which were never intended for,
or filed with, any official bodies.

In sum, we are compelled to conclude on the record before us the agency’s
conclusion “runs counter to the evidence before the agency.” Menorah Med. Ctr. v.
Heckler, 768 F.2d 292, 295 (8th Cir. 1985) (internal citation and quotation marks
omitted). It is unfathomable that a participant in any serious financial transaction
would rely on representations of a similar type in ascertaining one’s ownership of a
business entity. Because each of the agency explanations is deficient on some level,
as is the agency’s own evidence, the DHS’s decision failed to take the whole record
into account and is not supported by substantial evidence. See Zheng v. Gonzales,
440 F.3d 76, 79-80 (2d Cir. 2006) (holding that, where none of the reasons for the
immigration judge’s adverse credibility finding was free from error, his finding was
not supported by substantial evidence).

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 IV

We reverse the judgment of the district court and remand for further
proceedings.
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