In December 2020, a lawsuit was filed in federal court challenging the EB-5 Modernization Rule which went into effect in November 2019. If successful, the lawsuit could help restore the $500,000 EB-5 minimum investment and more liberal targeted employment area (“TEA”) designation rules. The likelihood of that success, though, now seems low.

In Behring Regional Center v. Wolf, the Plaintiffs alleged that the Department of Homeland Security violated the law in issuing the EB-5 Modernization Rule, by failing to examine a regulatory flexibility analysis and by exceeding statutory authority. The result is a rule the plaintiffs characterize as arbitrary and capricious. Finally, and perhaps most importantly, the plaintiffs alleged that DHS lacked the authority to enact the rule in the first place.

As a practical matter, the argument that DHS did not have the authority to enact the rule seemed likely to succeed. There have been several federal court decisions the court in Behring could look to for precedent, finding that former DHS Secretaries Chad Wolf and Kevin McAleenan, as well as former USCIS Chief Cuccinelli, were all illegally appointed.

However, at the preliminary injunction hearing, the judge made a surprising decision to go straight to summary judgment and asked the current DHS Secretary Mayorkas to confirm his position on the rule. In doing so, the judge alluded that the court accepted the unlawful appointment argument, but if the current lawfully appointed DHS Secretary supported the rule, this argument would not need to be considered. Secretary Mayorkas acted swiftly, filing a brief ratifying the November 2019 rule. DHS followed, submitting a supplemental brief stating that, “given the ratification of the rule at issue here by Secretary Mayorkas, it is no longer necessary for this Court to address the propriety of the appointment of Mr. McAleenan or the de facto officer doctrine.”

This is certainly a setback for those hopeful the lawsuit will succeed, as DHS Secretary Mayorkas’ support of the rule means the court will likely be reluctant to disrupt and interfere with USCIS on this matter. At any rate, the final determination of this case could take years, as either side is likely to appeal. As of now, it does seem likely the EB-5 Modernization Rule is here to stay, but ILBSG will continue to keep its clients up to date on any new developments.

If you have questions about the EB-5 Modernization Rule, possible impacts on your EB-5 investment, or other questions related to this development, please reach out to an ILBSG attorney today. We work with you to ensure you get the right advice for your specific situation.

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