Behring Regional Center LLC v. Wolf

Background

Behring Regional Center LLC, a California-based regional center that sponsors investment projects funded by foreign investors applying through the EB-5 Immigrant Investor Program, sued the Department of Homeland Security under the Administrative Procedure Act (APA). The company challenged a July 2019 final rule that increased the standard EB-5 investment amount from $1 million to $1.8 million and the reduced amount for targeted employment areas from $500,000 to $900,000.

Behring brought four APA claims. The fourth alleged that the defendants lacked authority to issue the rule because Kevin McAleenan was not lawfully serving as Acting Secretary of Homeland Security when he approved it. At a hearing on Behring’s request for a preliminary injunction, the parties agreed to treat part of that request as a motion for summary judgment on claim four. The court had previously denied the defendants’ motion to transfer the case.

Court’s Analysis

The court held that McAleenan’s appointment as Acting Secretary was invalid. It concluded that former Secretary Kirstjen Nielsen had amended the wrong succession order when she purported to place McAleenan in line to become Acting Secretary after Nielsen’s resignation. Because McAleenan was not lawfully serving, he lacked authority to approve the Final Rule.

The court also held that approving a regulation increasing the EB-5 investment amount was a statutory function or duty covered by the Federal Vacancies Reform Act (FVRA). The relevant EB-5 statute authorized the Attorney General, now the Secretary of Homeland Security, to prescribe regulations increasing the required investment amount. The court rejected the government’s arguments that this authority was not exclusively assigned to the Secretary or that it could be delegated in a way that avoided the FVRA.

The court rejected the government’s reliance on a 2003 delegation to the Deputy Secretary because there was no Deputy Secretary to whom the authority could have been delegated. It also held that Secretary Alejandro Mayorkas’s later ratification could not correct the defect because the FVRA states that an action having no force or effect under the Act may not be ratified. Finally, the court rejected the government’s argument that the common-law de facto officer doctrine could preserve the rule.

Disposition

The court granted Behring’s cross-motion for summary judgment on its fourth claim. It held that the Final Rule had no force or effect under the FVRA, set the Final Rule aside, and remanded the matter to the agency for further action. The court declined to issue the requested injunction because vacating and remanding the rule provided the remedy supported by the record. The court dismissed Behring’s remaining causes of action without prejudice because vacating the Final Rule made them moot. A separate judgment was to be entered in Behring’s favor.