Mirror Lake Village, LLC v. Johnson

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA

MIRROR LAKE VILLAGE, et al.,
Plaintiffs,
v. Civil Action No. 16-1955 (TFH)
KIRSTJEN NIELSON, Secretary of the
United States Department of Homeland

Security, et al.,

Defendants.

MEMORANDUM OPINION

The plaintiffs in this suit are Mirror Lake Village, LLC (“Mirror Lake”), a company
formed to develop a senior living community in Washington state, and seven Chinese nationals
who invested $500,000 each in Mirror Lake (the “plaintiff-investors”). They are challenging the
United States Citizenship and Immigration Services’ (“USCIS”) denial of the plaintiff-investors’
l-526 petitions for visas under the “EB-S” immigrant investor program, which provides visas for
individuals who make qualifying investments in American companies The main issue before the
Court is whether USCIS acted in an arbitrary and capricious manner by denying the plaintiff-
investors’ visas on the grounds that their investments in Mirror Lake were not “at risk” as
required by the applicable regulations The parties have filed cross motions for summary
judgment. [ECF Nos. 18 and 21].
I. Regulatory Background

The Immigration and Naturalization Act (“INA”) authorizes USCIS to issue visas to

“qualified immigrants seeking to enter the United States for the purpose of engaging in a new

commercial enterprise . . . in which such alien has invested . . . capital.” 8 U.S.C. §
1153(b)(5)(A). In order to qualify for visas under the “EB-S program,” as it is known, the
investments must meet specific, employment-focused criteria. They must create “full-time'
employment for not fewer than 10 United States citizens” or other legal immigrants. Id. at §
1153(b)(5)(A)(ii). For investments in “targeted employment areas”-rural areas or those with
high unemployment_the investments must be at least $500,()00. Id. at § 1153(b)(5)(B)(ii); 8
C.F.R. § 204.6($(2).

Although the statute does not define the term “invest,” implementing regulations clarify
that to “invest” means “to contribute capital.” 8 C.F.R. § 204.6(e); see also 8 U.S.C. §§

1103 (a)(l); (a)(3) (charging the Secretary of Homeland Security with the “administration and
enforcement” of the INA, and giving him or her the authority to issue regulations “as he [or she]
deems necessary for carrying out his [or her] authority” under the INA). According to the
regulations, these contributions of capital must not be in the form of debts. See 8 C.F.R. §
204.6(e) (“A contribution of capital in exchange for a note, bond, convertible debt, obligation, or
any other debt arrangement between the alien entrepreneur and the new commercial enterprise
does not constitute a contribution of capital . . . . ”). Investors must demonstrate that they have
“placed the required amount of capital at risk for the purpose of generating a return on the capital
placed at risk.” 8 C.F.R. § 204.6(j)(2).

In addition to the regulations, Matter of Izummi, a 1998 decision by the Board of
lmmigration Appeals (“BIA”), provides further guidance on the agency’s requirement that
investments be “at risk.” Matter of lzummi, 22 I. & N. Dec. 169 (BIA 1998). In Matter of
lzummi, the agency upheld the denial of a Form I-526 petition because, inter alia, the petitioner’s

investment included a put option that allowed the investor to force the company to buy his

investment back at the original price, discounted by the amount the company had already repaid
the investor. Matter of Izummi found that the investment could not “be considered to have been
properly ‘invested”’ and was “not at risk” because “the petitioner . . . entered into an agreement
to pay $290,000 in exchange for a promise that he can receive the $290,000 back six months
later.” Izummz', 22 I. & N. Dec. at 188. Because the Department of Homeland Security has
designated Matter of Izummi as a precedential opinion, it “serve[s] as precedent[] in all
proceedings involving the same issue(s)” and, except if modified or overruled by later
precedential decisions, is “binding” on the agency. 8 C.F.R. § 103.3(c).
II. Factual Background
a. The Investments in Mirror Lake
According to Mirror Lake’s Limited Liability Company Operating Agreement
(hereinafter “the Agreement”), which outlines the terms of the plaintiffs’ investments in the
company, the seven plaintiff-investors_Yanxue Deng, Hui Ge, Lei Hu, Ge Li, Zhichun Li, Ying
Su, and Yue Wang, each invested $500,0()0 in Mirror Lake. J.A. at 18. Despite their equal
investments, they received different percentages of interests in the company, ranging from .5% to
3%. Id. The investors each have the right to exercise a put option allowing them to force the
company to buy back their interests at the purchase price. The Agreement sets forth the put
option as follows:
At the expiration of the At Risk Periodl applicable to a Class A Member, the
Company shall provide the Class A Member with a one-time right and option to
compel the Company to purchase, subject to the Company having sufficient
Available Cash Flow (excluding capital contributed by Members), all or any

portion of such Class A Member’s Interest at the purchase price thereof (e.g.,
the Capital Contribution made in respect of such Interest).

1According to the Agreement, the “At Risk Period” is defined as “the period of [a] Class A Member’s
conditional residency under the EB-S Program.” J.A. at 5. The plaintiff-investors are all Class A
members. Id. at 18.

J.A. at l2. The Agreement defines “Available Cash Flow” as “the total cash available to the
Company from all sources less the Company’s total cash uses before payment of debt service.”
Id. at 5.

Alongside the Agreement, Mirror Lake’s Confidential Offering Memorandum repeats the
details of the put option and emphasizes the risks associated with the investment, including the
risk that the company does not acquire sufficient financing and the risk that the plaintiff-
investors do not receive equity in proportion to their investments Id. at 24. The Offering
Memorandum also states that “[t]here can be no guarantee of the return of invested capital to any
EB-S Member.” Id.

b. The I-526 Petitions and Denials

The plaintiff-investors filed I-526 petitions in October and November of 2014. Compl. jj
79. USCIS issued Notices of Intent to Deny (“NOIDS”) each petition in December of 2015. Id. 11
81. The plaintiffs responded to the NOle in January of 2016, id. 1[ 86, and USCIS denied all
seven of the petitions in February of 2016, id. jj 91. The plaintiff-investors then filed “Motions
to Reopen and Reconsider a Denied Form I-526” in March of 2016. Id. jj 98. USCIS denied six
of the motions in May and June of 2016. Id. 1[ 104. Because the parties have asserted that the
petitions and denials were virtually identical, and have only filed the record associated with the
adjudication of Lei Hu’s petition, the Court treats that record as representative of the other
adjudications Defs.’ Mot. for Summ. J. at 5 [ECF No. 18]; Pls.’ Mot. for Summ. J. at 4-11 [ECF

No. 21].2

2 Zhichun Li’s Motion to Reopen and Reconsider a Denied Form I-526 remained unadjudicated at the
time the plaintiffs filed their complaint. Compl. 11 104; see also Pls.’ Mot. for Summ. J. at ll. As a result,
the Court shall order plaintiffs to show cause why the Court should not dismiss Zhichun Li’s complaint
without prejudice. See Clifton Power Corp. v. FERC, 294 F.3d 108, llO (D.C. Cir. 2002) (“Our cases
make clear that a petition seeking review of` . . . a non-final [agency] action is not only premature but

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ln its Notice of Intent to Deny plaintiff Lei Hu’s petition, USCIS concluded that the
record did “not demonstrate that the petitioner has placed the required amount of capital at risk
for the purpose of generating a return on the investment.” J.A. at 54. Citing Matter oflzummz',
USCIS noted that “[f] or the alien’s money truly to be at risk, the alien cannot enter into a
partnership knowing that he already has a willing buyer in a certain number of years, nor can he
be assured that he Will receive a certain price.” Icl. at 55. UCSIS did not mention the
Agreement’s condition that the company have available cash flow in order for the plaintiff-
investors to exercise their put option.

In her response to the agency’s NOID, Lei Hu pointed to the Agreement and the Offering
Memorandum and emphasized that the “right of investors to exercise the Put Option . . . is
expressly contingent upon the availability of cash flow.” J.A. at 59 (emphasis in original). She
also emphasized that she exchanged capital for a 2% ownership interest in the company_the
“hallmark of an equity investment, not of debt.” Id. at 64.

In its February 2016 denial of Lei Hu’s petition, USCIS characterized the plaintiff-
investors’ position that the put option is contingent upon available cash flow as “arguing that her
capital is at risk only insofar as [Mirror Lake] is not profitable,” and noted that, if Mirror Lake is
“profitable and ha[s] sufficient cash flow, the Put Option was clearly written as an exit strategy
for the investor to compel [Mirror Lake] to purchase the member’s interest.” Id. at 70. USCIS
concluded that, because the petitioner’s investment was made in exchange for a redemption

agreement, it was not “invested” and was not “at risk.” Ia'.

incurably so: ‘subsequent action by the agency on a motion for reconsideration does not ripen the petition
for review . . . .”’) (quoting United Transp. Union v. ICC, 871 F.2d 1114, 1116 (D.C. Cir. 1989).

In Lei Hu’s Motion to Reopen and Reconsider a Denied Form I-526, filed on March 14,
2016, she again argued that her investment was not a debt arrangement because “Petitioner has
no guarantee that her interest will be purchased by [Mirror Lake] in a certain number of years or
at a certain price.” J.A. at 74. She also emphasized that because a company can control its
available cash flow, even if Mirror Lake became profitable, she might not be able to exercise her
option. Id. at 82. Lei Hu also submitted evidence to support her motion. She included charts of
U.S. Department of State visa processing times to demonstrate that she would need to “maintain
her investment . . . for nearly a decade” due to long visa processing times Io'. at 76-80. She also
cited statistics on the high failure rates of new businesses to demonstrate the risky nature of her
investment Id. at 81-82. Finally, she attached a letter from a certified public accountant stating
that Mirror Lake recognized petitioner’s investment as an increase in equity, not a liability. Id. at
83; 85-86.

In its final denial of her motion, USCIS found that “despite the new evidence and
arguments presented” regarding the survival rates of new businesses and visa processing times,
Lei Hu still “neglect[ed] to contemplate [Mirror Lake’s] potential success and consequent
obligation to return the capital to the petitioner on demand.” J.A. at 91.

III. Legal Standard

The plaintiffs challenge the denial of their visa applications under the Administrative
Procedures Act, 5 U.S.C. § 701, et seq.. “Summary judgment is the proper mechanism for
deciding, as a matter of law, Whether an agency action is supported by the administrative record
and consistent with the APA standard of review.” Chiayu Chang v. USCIS, 289 F. Supp. 3d 177,
182 (D.D.C. 2018) (internal quotations omitted). When considering challenges to agency action

under the APA, instead of applying Federal Rule of Civil Procedure 56(a)’s summary judgment

standard, “the district judge sits as an appellate tribunal. The entire case on review is a question
of law.”Am. Bz`oscience, Inc. v. Thompson, 269 F.3d 1077, 1083 (D.C. Cir. 2001) (intemal
quotations omitted).

The APA requires courts to set aside agency actions that are “arbitrary, capricious, an
abuse of discretion,- or otherwise not in accordance with law.” 5 U.S.C. § 706(2)(A). “The scope
of review under the ‘arbitrary and capricious’ standard is narrow, and a court is not to substitute
its judgment for that of the agency.” Motor Veh. Mfrs. Ass ’n v. State Farm Mut. Auto. Ins. Co.,
463 U.S. 29, 43 (1983).

IV. Discussion

a. Matter of Izummi’s Interpretation of the Regulations is Entitled to
Substantial Deference

The plaintiffs first challenge the validity of Matter of Izummi, arguing that it exceeds the
bounds of the EB-5 statute and implementing regulations by requiring that investments be
“indefinite” in order to qualify for the EB-5 program. Pls.’ Mot. for Summ. J. at 35. According to
the plaintiffs, Matter of Izummi “purports to create a requirement for an EB-5 investment that
simply does not exist in the statute or regulations and in fact contradicts the timing component
of the regulations and current, published USCIS policy.” Id. at 41.

Matter of Izummi found that an investment agreement allowing the investor to exercise a
put option at a set price and time did not satisfy 8 C.F.R. § 204.6’s requirement that investments
be “at risk.” Izummi, 22 I. & N. Dec. at 183. The agency emphasized that it did “not find that an
alien investor may never sell back his partnership interest,” but instead require[d] that “prior to
completing all his cash payments under a promissory note . . ., an alien investor may not enter
into any agreement granting him the right to sell his interest back to the partnership.” Id. at 186.

In this way, Matter of Izummi focused on the intent of investors signing investment agreements

See id. (“To enter into a redemption agreement at the time of making an ‘investment’ evidences a
preconceived intent to unburden oneself of the investment as soon as possible after unconditional
permanent resident status is attained.”).

Matter of Izummi ’s interpretation does not conflict with the EB-5 statute. The EB-5
statute does not address the structure investments must have to qualify for the visa program, or
the length of time that investments must be maintained See 8 U.S.C. § 1153(b)(5) (requiring
only that the investments create full-time employment for at least 10 United States citizens, and
that the investments in targeted employment areas be a minimum of $500,000). The statute’s
failure to address the structure of investments “simply means that there is a gap for the agency to
fill,” which the agency has done via regulations and Matter of Izummi ’s interpretation of those
regulations Visz`nscaia v. Beers, 4 F. Supp. 3d 126, 135 (D.D.C. 2013).

“When reviewing an agency’s interpretation of its own regulation, [courts] accord
‘substantial deference to the agency’s interpretation,’ giving it ‘controlling weight unless it is
plainly erroneous or inconsistent with the regulation.”’ Mellow Partners v. Comm ’r of Internal
Revenue Serv., 890 F.3d 1070, 1079 (D.C. Cir. 2018) (quoting Thomas Jererson Univ. v.
Shalala, 512 U.S. 504, 512 (1994)); accordAuer v. Robbins, 519 U.S. 452, 461 (1997). Courts
generally apply this level of deference_commonly known as Auer deference_when the
following three factors are satisfied: 1) the language of the regulation in question is
“ambiguous”; 2) there is “no reason to suspect that the interpretation does not reflect the
agency’s fair and considered judgment on the matter in question”; and 3) “the agency’s reading
of its regulation [is] fairly Supported by the text of the regulation itself, so as to ensure that
adequate notice of that interpretation is contained within the rule itself.” Mellow Partners, 890

F.3d at 1070 (internal quotations omitted).

Because all three Auer factors are met, the Court Will apply substantial deference to
Matter of Izummi’s interpretation of 8 C.F.R. § 204.6. As to the first Auer factor, the regulation is
ambiguous as to whether an investment agreement with a put option qualifies as an at-risk
contribution of capital. The regulation’s catchall phrase “or any other debt agreement” provides
the agency room to interpret which investment agreements constitute debt arrangements aside
from those explicitly listed in the regulation. See 8 C.F.R. § 204.6(e) (“A contribution of capital
in exchange for a note, bond, convertible debt, obligation, or any other debt arrangement
between the alien entrepreneur and the commercial enterprise does not constitute a contribution
of capital for the purposes of this part.”).

Relatedly, as to the third Auer factor, Matter of Izummi’s conclusion that the redemption
agreement made the investments “debt arrangements” is supported by the text of the regulation,
which contemplates that the agency will make determinations about debt arrangements that are
not specifically listed. See Mellow Partners, 890 F.3d at 1080 (internal quotations omitted)
(finding that a “catchall” phrase in the regulation “expressly contemplate[d] its application
beyond the specific enumerated forms” and satisfied the third Auer factor); Chz`ayu Chong, 289
F. Supp. 3d at 185 (commenting that the phrase “or any other debt arrangement” in 8 C.F.R. §
204(e) “ensures that a broad set of arrangements similar to the listed examples will be
prohibited”). Moreover, although the regulations require that an investor “continuously
maintain[] his or her capital investment over the two years of conditional residence,” Matter of
Izummi does not prevent investors from selling their investments after the end of` the two-year

period, or create requirements that extend beyond that period. 8 C.F.R. § 216.6(c)(1)(iii).3

3 For the same reason, Matter of Izummz' does not contradict the section of the USCIS Policy Manual cited
by the plaintiffs which provides that investors demonstrate that they sustained their investments
throughout the conditional residence period. USCIS Policy Manual, Volume 6, Part G, Ch. 5, § A(2).

9

The second Auer factor is also satisfied because the Court has no reason to conclude that
the agency’s interpretation in Matter of Izummi does not constitute its “fair and considered
judgment on the matter.” Mellow Partners, 890 F.3d at 1080 (intemal quotations omitted). There
is no evidence that the agency has waivered from its interpretation of Malter of Izummi . Id.; see,
e.g., R.L. Inv. Ltd. Partners v. INS, 86 F. Supp. 2d 1014, 1023 (D. Haw. 2000) (hereinafter
“R.L.I.L.P.”) (declining to disturb Matter of Izummi ’s interpretation that “for purposes of
meeting the statutory and regulatory definition of ‘invest’ (or ‘contribution of capital’), an alien
may not enter into an agreement before the end of his two-year conditional residence period that
grants him the right to sell his interest back to the partnership.”).

Matter of Izummi does not require that investments continue beyond the two-year,
conditional residence period. It requires that when investors sign investment agreements they do
not have a guaranteed way to trigger their own exit from their investments There is no indication
that a different interpretation of the regulations is “compelled by the regulation’s plain language
or by other indications of the agency’s intent at the time of the regulation’s promulgation.”
Grossmont Hosp. Corp. v. Burwell, 797 F.3d 1079, 1085-86 (D.C. Cir. 2015) (intemal quotations
omitted). Accordingly, the Court defers to Matter of Izummi’s interpretation of 8 C.F.R. § 204.6.

The plaintiffs argue that prohibiting investors from exiting their investments can cause
companies to fraud investors and “misuse” the investments for “purposes that are not in the
interests of the investors.” Pls.’ Mot. for Summ. J. at 41. They also argue that, because some
businesses may become operational and self-sustaining after the conditional residence period
ends it “makes little sense” to require investors to maintain their investments in businesses that

do not need that capital. la'. at 40.

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Of course, Matter of Izummi does not prevent investors from selling their stake in a
company after the conditional period expires lt prevents them from arranging such a sale with a
company when they invest. More importantly, “[t]he [C]ourt is not the arbiter of immigration
policy.” R.L.I.L.P., 86 F.Supp.2d at 1022. The agency has determined that investors are more
inclined to help companies succeed when they know the returns on their investments are
uncertain. Defs.’ Mot. for Summ. J. at 15; see R.L.I.L.P., 86 F. Supp. 2d at 1024 (finding that the
agency’s definition of risk “rationally advances the job-creation purposes of the statute” because
“[i]f the alien has placed his money fully at risk with no expectation of reimbursement, he is
more likely to be involved in the enterprise . . . and his entrepreneurial talents are more likely to
be brought to bear on advancing the enterprise’s success with the concomitant creation of jobs
that Congress envisioned.”). This definition of risk rationally advances the statute’s job-creation
purpose. It is not the Court’s “task . . . to decide which among several competing interpretations
best serves the regulatory purpose.” Thomas Jejj’erson Univ., 512 U.S. at 512; see also Decker v.
Northwest Envtl. Def Ctr., 568 U.S. 597, 613 (2013) (“It is well established that an agency’s
interpretation need not be the only possible reading of a regulation_or even the best one_to
prevail.”).

b. USCIS’s Decisions were not Arbitrary and Capricious
i. USCIS’s Decisions are Entitled to Deference

The plaintiffs argue that the agency’s decisions should not receive any deference because
the agency has “no particular expertise in interpreting investment agreements or determining
what constitutes a debt arrangement.” Pls.’ Reply at 10 [ECF No. 26]. The government counters
that the plaintiffs are asking this Court to “engage in its own de novo analysis of the regulation,”

which is “the exact opposite of the deference this district court normally shows to agencies

ll

interpreting their own regulations.” Defs.’ Opp’n at 7 [ECF No. 24]. They also contend that
deference to agencies is not just a factor of expertise alone, but also a result of Congress’
delegation of authority to administrative agencies and separation of powers principles Id. at 8.

There are a handful of justifications for judicial deference to the decisions of executive
agencies including an agency’s expertise. See Perez v. Mor!gage Bankers Ass ’n, 135 S. Ct.
1199, 1222 (2015) (Thomas, J., concurring) (listing different justifications cited for deference,
including “agency expertise in administering technical statutory schemes,” and Congress’
“delega[tion] to agencies the authority to interpret their own regulations” 4); Thomas Jejj%rson
Univ, 512 U.S. at 504 (finding deference to administrative agencies “all the more warranted
when . . . the regulation concerns a complex and highly technical regulatory program, in which
the identification and classification of relevant criteria necessarily require significant expertise
and entail the exercise of judgment grounded in policy concerns.”) (internal quotations omitted).
In the immigration context, deference is “especially appropriate” because “officials exercise
especially sensitive political functions that implicate questions of foreign relations.” INS v.
Aguirre-Aguirre, 526 U.S. 415, 425 (1999) (internal quotations omitted).

Regardless of the justification for deference, the test for determining whether to defer to
an agency decision is not, as the plaintiffs suggest, to determine whether the agency has the

requisite expertise to make the decision.5 Rather, when examining agency decisions the Court

4 Note, however, that Justice Thomas finds “none” of the justifications “persuasive.” Perez, 135 S. Ct. at
1222.

5 The only authorities the plaintiffs cite to support their proposition are inapposite. They pertain to
instances where courts have declined to defer to agency interpretations of criminal statutes not agency
regulations See, e.g., Bobb v. Att’y Gen. ofthe United States, 458 F.3d 213, 217 n.4 (3rd Cir. 2006)
(declining to defer to the BIA’s determination of whether a “particular federal criminal offense is an
aggravated felony” because that determination required the court to “interpret federal criminal law and
[the court’s] own appellate jurisdiction, matters outside the authority or expertise of the BIA.”); T rung
Thanh Hoang v. Holder, 641 F.3d 1157, 1163-64 (9th Cir. 2011) (“While we defer to the BIA’s

12

must ensure that an agency “examin[ed] the relevant data and articulate[d] a satisfactory
explanation for its action including a rational connection between the facts found and the choice
made.” State Form, 463 U.S. at 43. Even if a decision is based on an agency’s “purported
expertise,” the Court must examine the logic behind the decision and ensure that an agency
provides a “clear and coheren ” explanation. Tripoli Rocketry Ass ’n, Inc. v. ATF, 437 F.3d 75, 81
(D.C. Cir. 2006); see Fox v. Clinton, 684 F.3d 67, 75 (D.C. Cir. 2012) (finding that “no
deference is owed . . .where the agency’s explanation for its action lacks any coherence.” )
(intemal quotations omitted).

ii. USCIS Examined the Evidence and Satisfactorily Explained its
Decisions

The plaintiffs contend that USCIS acted in an arbitrary and capricious manner when it did
not evaluate “debt and equity factors” to determine the nature of their investment, such as the
investment’s lack of a fixed maturity date, investor voting rights and Mirror Lake’s debt to
equity ratio. Pls’ Mot. for Summ. J. at 28 (citing PepsiCo P.R., Inc. v. Comm ’r of Internal
Revenue, 2012 WL 4207299, at * 19 (U.S. Tax Ct. 2012) (applying a 13-factor framework to
resolve "debt-versus-equity-inquiries”). According to the plaintiffs the defendants “failed to
consider whether the Put Option was an unconditional, contractual promise to repay investors
regardless of the success or failure of the business or an at-risk investment, subject to partial or
total loss depending on business fortunes.” Pls.’ Opp’n at 7 [ECF No. 22]. In response, the
defendants argue that the Court should not supplant the agency’s interpretation merely by

“identifying alternative findings that could be supported by substantial evidence.” Defs.’ Opp’n

definitions of ambiguous terms in the INA, we do not defer to the BIA’s every conclusion that a particular
crime is a removable offense.”).

13

at 7 (internal quotations omitted). They contend that the agency’s decision was rational and
supported by the evidence before it.

USCIS’s decision was not, as the defendants argue, “a lengthy explanation of how
structurally the arrangement operates much like a debt arrangement.” Defs.’ Reply at 5 [ECF No.
23]. USCIS’s total analysis of the investment spanned a few brief paragraphs and focused
entirely on the put option. However, the agency conducted a satisfactory analysis of the risks the
plaintiffs raised. After examining the put option provisions of the Agreement and Offering
Memorandum, USCIS considered the plaintiff-investors’ argument that their right to exercise the
option was contingent on the availability of cash flow. The agency concluded that, despite that
condition, the option was a debt arrangement because if Mirror Lake was “profitable and ha[d]
sufficient cash flow, the Put Option was clearly written as an exit strategy for the investor to
compel [Mirror Lake] to purchase the member’s interest.” J.A. at 70. Further, the agency
considered the plaintiffs-investors’ argument that Mirror Lake might not return the investment in
light of high failure rates of new businesses and concluded that it “neglects to contemplate
[Mirror Lake’s] potential success and consequent obligation to return the capital to the petitioner
on demand.” J.A. at 91; see Izummz`, 22. I. & N. Dec. at 185 (finding that “[t]he risk that the
petitioner might not receive payment if the Partnership fails is no different from the risk any
business creditor incurs.”). The agency also found that the plaintiff-investors’ contention that the
company has the discretion to control the availability of capital_and thus Whether it repays
investors_would constitute an illusory promise that the agency does not recognize. Id.; see
Izummi, 22. I. & N. Dec. at 185 (dismissing argument that option was dependent on partnership’s
ability and willingness to pay and concluding that it “cannot endorse illusory promises and does

not recognize this type of ‘risk’ as the kind of risk contemplated by 8 C.F.R. § 204.6@)(2)”).

14

Given the structure of the put option, USCIS found “such relevant evidence as a reasonable mind
might accept as adequate to support” the agency’s finding that the plaintiffs’ investments
constituted a debt arrangement United Steel, Paper & Forestry, Rul)ber, Mfg., Energy, Alliea1
Indus. & Serv. Workers Int’l Union v. Pension Benefz`t Guaranty Corp., 707 F.3d 319, 325 (D.C.
Cir. 2013) (internal citations omitted).

This case is notably distinct from two recent decisions in this district finding that USCIS
acted in an arbitrary and capricious manner when it denied form I-526 petitions Doe v. USCIS,
239 F. Supp. 3d 297, 299 (D.D.C. 2017); Chiayu Chang, 289 F. Supp. 3d at 182-188. In both
cases the investment agreements at issue included call options not put options Because those
options were “owned by the partnership” and came with “no guarantee that the partnership
would exercise it,” both courts found that the agency failed to adequately consider the structure
of the options when concluding that the investments were debt arrangements Chz`ayu Chang, 289
F. Supp. 3d at 187; see also id. at 183 (finding that “[t]he evidence before the agency indicated
that the call option [did] not provide plaintiffs with a guaranteed redemption, and that it
differ[ed] in critical ways from the debt arrangements that Matter of Izummi determined were
banned by regulations.”); Doe, 239 F. Supp. 3d at 306 (finding that the record before the agency
made clear that the “Plaintiffs were not guaranteed to receive any of their capital contributions
back, let alone make any return on their investments.”) (emphasis in original). In contrast to the
call options Matter of Izummz' ’s put option “insulated the petitioner’s capital from risk because it
provided the petitioner with a right to receive its capital back at a set price.” Doe, 239 F. Supp.
3d at 307; see also Chz`ayu Chang, 289 F. Supp. 3d at 178 (contrasting Doe and Chiayu Chang’s
call options with Matter of Izummi ’s put option). The plaintiffs here emphasize throughout their

briefing that because the option in their Agreement is more conditional than the option in Matter

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of Izummi, USCIS’s decision was arbitrary and capricious They have not demonstrated, as the
plaintiffs did in Doe and Chiayu Chang, that the agency’s decision was contrary to the evidence
before it. lnstead, they ask the Court to insert its judgment for the agency’s in determining the
extent of risk involved in the investment. The Court declines to do so.

As to the plaintiffs’ claim that the agency did not consider “debt and equity factors” the
plaintiffs cite no regulatory or statutory authority requiring the agency to consider the factors
they list. See Akpan v. Cissna, 288 F. Supp. 3d 155, 164 (D.D.C. 2018) (finding that an agency’s
failure to review factors presented by plaintiff did not make the decision arbitrary and capricious
where no statutory or regulatory authority required the agency to consider those factors). In fact,
Matter of Izummi determined that apparently similar factors were not relevant to determining
whether an agreement qualifies as a debt arrangement The agency considered a 1997 opinion
from its Office of General Council which “engaged in a lengthy discussion of the factors
evidencing debt and equity in the context of tax law,” and found that “[a] discussion of the
numerous debt and equity factors set forth in the tax cases unnecessarily complicates the attempt
to ascertain the true substance of the transaction.” 6 Izummi, 22. I. & N. Dec. at 184. The agency
also noted that “the businesses examined in [the tax cases cited by the Office of General Council]
were standard businesses not created for the purpose of enabling aliens to obtain immigration
benefits” Ia'. at 184. Rather, Matter of Izurnmi found that “very simply,” the investment at issued
“constitute[d] a straight loan . . The risk that the petitioner might not receive payment if the
Partnership fails is no different from the risk any business creditor incurs.” Ia'. at 185. In light of

Matter of Izummi ’s decision that debt and equity factors were not relevant to its determination of

6 Matter of lzummi did not specifically list the factors

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the nature of the agreement and USCIS’s consideration of the structure of the put option, USCIS
did not act in an arbitrary and capricious manner by failing to consider those factors here.
c. USCIS did not Misconstrue Matter of Izummi

Finally, the plaintiffs emphasize that USCIS “unreasonably expanded and misconstrued”
Matter of Izummi. Pls’ Mot. for Summ. J. at 22. They argue that Matter of Izummi did not
“categorically prohibit” an investor to agree to sell his interest back to the company after the
expiration of the conditional residence period, but rather prohibited such agreements only “prior
to completing all his cash payments under a promissory note (whether to the partnership or to
some third party-lender).” Id. at 22. Although it is true that USCIS left this language out of its
decision, it is not clear why that is important to the adjudication of the plaintiffs’ claims They do
not claim that they made their Agreement after they completed payment.

CONCLUSION

For the foregoing reasons the defendants’ motion for summary judgment [ECF No. 18]
will be granted as to Mirror Lake and the six individual plaintiffs whose petitions were fully
adjudicated at the time plaintiffs filed their complaint_Yanxue Deng, Hui Ge, Lei Hu, Ge Li,
Ying Su and Yue Wang, and the plaintiffs’ cross motion for summary judgment [ECF No. 21]
will be denied as to those same plaintiffs The Court will order plaintiffs to show cause Why
Zhichun Li’s complaint should not be dismissed without prejudice. An appropriate order

accompanies this opinion.

December/61 2018 iv f 764/7&/¢

Thomas F. Ho n
SENIOR UNITED STATES DISTRICT JUDGE

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