Most EB-5 cases proceed without issue beyond the inconvenience of long wait times. While no one anticipates the need to litigate, being aware of one’s legal rights in the United States can protect immigrant investors during their EB-5 investment process.
EB-5 investment deals are intentionally structured to be obtuse and offer little protection to the investor in the case of wrongdoing. Additionally, when a party actively undermines the best interest of an investor, litigation is oftentimes complex and long lasting for investors already going through the arduous EB-5 process. However in these cases, AIIA encourages investors to persevere in the face of adversity. Litigation can be a great method for investors to reclaim their agency against negligent or hostile corporate entities actively seeking to defraud or undermine investor protections.
Even the most conservative plans can go awry, which is why AIIA maintains relationships with attorneys who have experience in Securities, Civil or Criminal litigation and have demonstrated track records of getting problematic cases back on track. If you are in need of investment-related support, please contact AIIA for reference to an attorney who will be best suited for your specific case. Investors should also consider refreshing their knowledge on EB-5 project structure before seeking out investment support.
The “Right to Litigate” is not exclusive to American Citizens
In the United States, some rights enumerated in the federal Constitution are extended to non-citizens, such as the Equal Protection clause, which says “the state cannot deny any person within its jurisdiction the equal protection of the laws” including deprivation of “life, liberty and property”. This clause extends the protection of law to any individual living within the territorial boundaries of the United States, regardless of their citizenship or immigration status.
Additionally in the United States, the right to Due Process (meaning the fundamental right to pursue legal redress) is heavily protected throughout the U.S. Constitution. Although the Due Process clause strictly protects U.S. citizens, the right to pursue litigation is extended to any individual conducting their affairs on U.S. soil, including EB-5 investors. Many immigrants fear that pursuing litigation can harm their investment or immigration goals, yet they have a fundamental right to enter a lawsuit seeking reparations when wrongdoing is committed by another party.
Securities Law vs. Immigration Law
Investment and immigration procedures within the EB-5 process are separate from each other, governed by different bodies of law and handled by respective professionals in the field. Investments are generally protected by securities law and contractual agreements made between investors, their legal team, and the investment issuer, whereas the immigration process is governed by immigration law. The impact of litigation on the immigration process varies on a case-by-case basis. However, many investors fear that pursuing litigation will affect their immigration process and fail to bring suit against parties committing wrongdoing.
Pursuing litigation against an investment issuer can be necessary if corporate malfeasance affects an investor’s immigration process. A common fear of investors is whether or not the investor’s immigration process will be hindered if they pursue litigation against an investment issuer. In those situations, it may be advisable to work with a litigation attorney and an immigration attorney as a team.
In some cases, the investment issuer can unreasonably delay the repayment of the investment principal and interest. In particularly bad situations, an investment issuer can misappropriate an investor’s funds, which violates the terms agreed to between the investment issuer, investor, and USCIS upon filing the form I-526. Additionally, in financial misappropriation cases, it is extremely hard for an investor to prove the required jobs were created or the requirements for successful immigration have been met. In these cases, USCIS can deny an I-829 application, or request that the investor submit further documentation through an RFE or NOID. If USCIS does deny an investor’s immigration petition, there are ways to pursue litigation to both retrieve the investment funds from the investment issuer, as well as acknowledge the harm inflicted on an investor by the investment issuer’s misappropriation.
Typically when dealing with EB-5 cases in litigation….. <Enter Password to Read More>
Prematurely Pulling Investments from a Project
Immigrant investors considering pulling their investment capital out early should exercise good judgment when considering litigation to withdraw funds from a project, especially if the involved parties are acting in accordance with the signed contractual agreements. Some investors may qualify to pull their money out from a project prematurely, based on the response of the investment issuer to their withdrawal request. Denied withdrawal requests may have merit, and the “business judgment” of the party denying the request can be called into question within a court of law….. <Enter Password to Read More>
Preparing for Litigation
Documentation: the Key to Successful Litigation
In order to adequately prepare themselves for litigation against scams and frauds, investors should keep exhaustive records of ….. <Enter Password to Read More>
Looking for a Litigation Attorney
While it is important to find an attorney an investor can trust, investors should also look for an attorney with the necessary expertise who is observant and prepared to assist with litigation. Preparedness and organization is of utmost importance when selecting a trusted attorney, as documentation is an investor’s greatest asset when pursuing litigation. Therefore, an attorney who is familiar and understands the documentation filed with USCIS, thoroughly vets any legal documents investors are required to sign and understands the legal basis behind them, and can organize this information succinctly is a great choice for litigation against an investment issuer. It all comes down to the paperwork in a suit, and a good attorney is the best way to weaponize this paperwork in the favor of the investor.
Additionally, an attorney is ethically prohibited from providing guarantees of any kind to an investor. While providing estimates and “likelihoods” of successful litigation is considered fair game, investors should be wary of attorneys who provide promises and guarantees of winning a suit. Attorneys can be liable for providing misleading information to a client if they guarantee success. Therefore, when attorneys are willing to provide such promises, this should be a red flag to investors that the attorney may have suspicious motives.
EB-5 investors can reach out to AIIA for a referral to an EB-5 litigation attorney appropriate for their situation. Members of AIIA are also eligible to sign up for our regular Zoom sessions we host with these various attorneys and set up an individual complimentary consult.
Pooled Litigation
Investors may wish to soften the steep costs associated with a decent legal team by bringing in other investors from their chosen New Commercial Enterprise (NCE) into the lawsuit. In this case, investors can divide the cost of an attorney across all parties wishing to pursue litigation against a defendant. However, the smaller number of investors needed to be a part of a suit, the less expensive the overall cost of litigating will be….. <Enter Password to Read More>
Creating a “Pool” of Litigants
In the case that an investor finds a group of investors also looking to litigate against an investment issuer, the investors must find “commonality” which unites all the investors in their litigation goals. Ethically, attorneys can only represent all players in a lawsuit if their interests align for the entirety of the litigation period. Therefore, investors must establish commonality with each other through a variety of factors, including….. <Enter Password to Read More>
Choosing a Leader or Leadership Committee
An attorney representing a group of investors will make each investor sign a retention agreement, which outlines the unified position of all investors involved in the suit, as agreed to by the committee. The language in this agreement asks that all investors continue making unanimous decisions and act in a unified manner. This agreement will include indemnity clauses for investors who chose to dissent against the agreed terms of the litigation suit, and usually require them to pay a fee to the investor group before leaving the lawsuit completely.
Before a suit can formally proceed, investors figure out logistics, including….. <Enter Password to Read More>
Class Litigation
In contrast to a lawsuit where several investors are “pooled” together and join in a single lawsuit against an investment issuer, there is also the option of one or more investors filing a “class action” lawsuit where a single investor can serve as the representative of a “class” of all other “similarly situated” investors….. <Enter Password to Read More>
Cost of Litigation
Cost of litigation can be very high and it is always better for investors in a particular project to work together if they wish to pursue litigation against the parties they have invested with. Most attorneys (including litigators) charge for their services using an hourly rate. These rates are frequently many hundreds of dollars per hour and given the unpredictable nature of litigation, there may be hundreds of hours involved. In these instances, the client usually also has to pay for the expenses associated with the litigation, including court fees, travel, translations, experts, etc. However, certain litigation attorneys who litigate cases whose sole purpose is to collect money will agree to handle the matter on a contingency basis. In other words, these attorneys cover all of the costs associated with the litigation and will forgo any reimbursement or compensation until the case is resolved. And only if the case is successful will they be reimbursed (for the expenses they laid out) and paid (for their time and effort) from the amount that is recovered. In addition, some attorneys will agree to a “hybrid” fee structure, which may include a fee cap, a fixed budget, or a lower hourly rate with a lower contingency fee.
Funding for a Good Legal Team
Many investors will hesitate to hire another attorney, given the large sum of investment money they have already invested into the NCE and the other sunk costs paid for their EB-5 petition. However, if the lost investment funds total more than the cost of hiring an attorney to assist in litigation, the cost is oftentimes worth it. Given that EB-5 investment issuers shield themselves from liability in their complex legal documents, litigation attorneys are a necessary protection against ….. <Enter Password to Read More>
Arbitration
Many investors who wish to litigate against an issuer or other party will have to go through arbitration for resolution of their dispute. Even though courts exist to provide an impartial forum for the resolution of legal disputes, most PPMs require investors to sign mandatory arbitration clauses which require investors to arbitrate cases with their issuer before going to court. Investors required to arbitrate must do so in a “forum”, which is typically designated in the project documents signed by the investor.….. <Enter Password to Read More>
“Privity” in Litigation
Pursuing litigation against a party in the EB-5 process is made intentionally complex by issuers and developers. Investment issuers, general partners and other parties “in privity” with (meaning contractually attached to) investors make extremely complex deal structures to discourage investors from pursuing litigation. Any investor brave enough to continue with litigation may still face an uphill legal battle against an exploitative entity….. <Enter Password to Read More>
Derivative Suits
For many investors, pursuing multiple litigation cases at once may be necessary to address all the wrongdoing conducted against an investor’s interests….. <Enter Password to Read More>
Threat of Retaliation
If an investor is faced with threats from an investment issuer, partner, or other party in the EB-5 process, documentation is critical. If investors threaten litigation against a party which has acted against the investor’s interests, they may face threats of losing their green cards. These threats are oftentimes oral, rather than written, to avoid giving the investor evidence to use in court. In whatever manner they are delivered, however, they are usually baseless and should be documented and then ignored.
When an investor has been threatened like this, the best course of action is to ….. <Enter Password to Read More>
Redeployment
Redeployment is a common reason investors pursue litigation against an investment issuer. The “at risk” requirement enforced by USCIS often means that when a project returns the investment capital to the NCE, the NCE manager (investment issuer) is at liberty to “redeploy” or reinvest those funds anywhere in the United States until an investor’s conditional residency period is over. Investors usually sign away their rights against redeployment in the projects Private Placement Memorandum (PPM). However, even if the NCE manager is not required to consult an investor before reinvesting their funds, they still must exercise sound business judgment in selecting a redeployment project. Just because a manager has discretion to make business decisions does not mean they can do so carelessly….. <Enter Password to Read More>
Filing Complaints with the SEC
Some investors may wish to file complaints or tips with the U.S. Securities and Exchange Commission (SEC) for financial mismanagement or intentionally misleading investors. Assuming the wrongdoing is subject to oversight by the SEC, submitting a complaint or tip can be very beneficial. In fact, the SEC recently enacted a whistleblower program that encourages individuals to submit, sometimes anonymously, tips to the SEC.….. <Enter Password to Read More>
Other Considerations
- State laws generally provide for your right to inspect books and records on demand, notwithstanding contrary language in LP or LLC agreements….. <Enter Password to Read More>