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Case number 19-21, Fulishang Zhang et al.

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versus the United States Citizen and Immigration Forces et al.

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appellants.

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Mr. Bates for the appellants, Mr. Kershmein for the police.

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Good morning, Your Honors, and may it please the Court.

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Christopher Bates for the appellants.

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I'd like to reserve three minutes for rebuttal.

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The EB-5 program is an immigration program that provides visas to individuals who invest, who have invested, or who are actively in the process of investing capital in a new commercial enterprise.

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This case is about whether a person can use a loan secured by someone else

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or not secured at all to obtain a visa.

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The agency here has properly interpreted its own regulation to determine that the answer to that question is no because loan proceeds must be secured by the petitioner's own assets in order to qualify as qualifying capital for purposes of the EB-5 program.

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The agency's definition

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that it is promulgated to define capital, sets forth various categories of investments that can qualify as capital.

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One of those categories is cash.

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One is indebtedness.

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The agency has interpreted its regulation to treat loan proceeds as indebtedness such that the additional restrictions that apply to indebtedness must be satisfied by a petitioner seeking to use an investment of cash to obtain an EB-5 visa.

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This is confirmed by various contextual indications in the embassy's regulation.

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We've identified a number of these in our brief.

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I would highlight just a few for the court.

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The first is the requirement.

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Can we just, before we get to context, can we talk about text?

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The loan proceeds are cash, right?

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So if I

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take out a loan because I need money to buy various things.

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I get the loan and then I use the cash to buy things.

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So that's, I think, sort of going to the ultimate question in this case, Your Honor.

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Certainly the way that the investments are often made in these cases are through a wire transfer to the new commercial enterprise or often placement of funds in an escrow account for the new commercial enterprise.

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So it's not, you know,

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a suitcase of bills that are being sent.

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It's not a suitcase of bills, but it's cash in the sense the entity takes it free and clear of encumbrances, right?

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So it is clear that the new commercial enterprise does receive it without encumbrances.

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As we explain in our briefs, the agency

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takes a look at the transactions here from the perspective of the investor.

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Again, because this is an immigration program, it's about providing visas to the investors.

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And so it makes sense to take a look at the transaction.

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In order to invest in this country, in US enterprises, right?

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In order to invest in US enterprise, that's correct.

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And another important aspect of the program is the requirement that the capital be placed at risk.

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And as we've explained, there's a difference in terms of, from the perspective of the investor, whether that capital is truly at risk for that investor for talking about a wire transfer that is not the proceeds of a loan versus loan proceeds.

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When the investor gets the loan, right, on the investor's balance sheet, the cash will be an asset and the

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obligation to the bank will be a liability.

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He takes the asset and transfers it to a U.S.

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entity.

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So that's at risk.

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It's his cash.

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If the U.S.

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enterprise fails, the investor will be out of that cash and then he's going to have problems owing the bank the amount of the loan.

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That's correct, Your Honor.

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The distinction comes into play with sort of what happens to the investor after that.

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So yes, the investor doesn't get the cash back, but if the loan is secured by the investor's own assets, then the investor is on the hook for repaying that loan to the bank or whatever the source was of that loan.

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If the loan is secured by the third party's assets,

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or not secured at all, then the investor is not on the hook for repaying that loan in the way that the investor would be if it was just free and clear.

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And so this goes to that at-risk requirement.

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Are people not obligated to pay back unsecured loans and have legal consequences if they don't?

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If I don't have to pay my credit card this month, it would be incredibly helpful.

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So individuals are obligated to pay back unsecured loans, Your Honor.

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And then legal consequences flow if they don't.

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That is correct.

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And they can lose property.

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The program requires a certain investment amount.

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The statute originally set $500,000 or a million dollars, depending on what the type of investment was.

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It recently changed to $900,000 or $1.8 million.

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And so it's not just is there some amount that the investor's on a hook, but the investor needs to be on the hook or have their assets at risk for the full amount of that investment.

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And so one problem with the non-secure loans, so yes, the investor in that instance is going to be, you know, have an obligation, have a legal obligation to repay, but the full amount of the required investment isn't necessarily going to be at risk because, you know, that's going to depend on how many assets the investor has.

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Do they have $500,000 or a million dollars worth of assets that are subject to seizure?

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These are foreign nationals, and so the seizure.

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Well, this interpretation that you're suggesting might make sense as a reading of the word capital in the statute, but doesn't seem to make sense as a reading or an interpretation of this regulation, which just uses the word cash.

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So the regulation sets forth various categories.

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And so the question here is, are these properly treated as cash?

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or are they properly treated as indebtedness?

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So the agency, of course, here has interpreted this scenario to place loan proceeds in the indebtedness bucket.

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What does indebtedness mean in regulation?

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I mean, there's not a lot of really helpful understanding of that in the briefs.

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So the agency has not promulgated the definition of cash or a definition of indebtedness, which is one reason why we did not point to that.

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This question here is, which of those buckets does this fall into?

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It has promulgated the definition of statutory term, but it hasn't, I guess, promulgated the definition of a further definition of regulatory terms.

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So this question is, how does the agency interpret regulation that has promulgated into which bucket those loan proceeds fall into?

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by looking to sort of other contextual clues in the regulation, in particular the at-risk requirement.

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We talk about how the additional restrictions that are placed on indebtedness that under the plaintiffs... I don't mean to catch you off, but I just want to be clear what term you're talking about.

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So there's two terms in your regulation that issue cash,

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and indebtedness.

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And for you to have any authority to interpret those terms, arguable if they're possible authority, they have to be ambiguous.

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Are you arguing that cash is ambiguous?

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So we're arguing that the proper reading of the regulation is to treat... You have to have an ambiguous word to interpret it.

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I'm trying to figure out what it is that you think you're interpreting in adopting this rule.

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Is it that the word cash is ambiguous or that the word indebtedness is ambiguous or both or neither?

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So we believe that the best reading of the regulation is to treat them as indebtedness in terms of

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Treat what as indebtedness?

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Treat loan proceeds as indebtedness.

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So that's your interpretation.

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So I take it from that that you're saying that the word indebtedness is ambiguous in your regulation, and that's what you're interpreting here.

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That's what this dispute is about, is what indebtedness means.

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But you're not arguing that cash is ambiguous.

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I mean, I guess I'm a little... Is cash ambiguous?

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So I guess I'm a little confused, Your Honor, because the question here is which bucket does it go in?

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So it's not a question of... I thought you were trying to... I thought you were trying to relate to your question.

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Well, I was just going to say the regulations don't have to be ambiguous in order for you to interpret cash loan proceeds to go into one bucket or another.

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I mean, the question of ambiguity just turns on whether we would have to defer to your interpretation.

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So we do believe that this is the proper and the best interpretation of the regulation.

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Certainly at this court... You have to be interpreting indebtedness to sweep in things that would otherwise unambiguously be cash.

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The loan proceeds are cash.

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And your theory has to be that some idea that the specific qualifies the general, and if cash is also indebtedness, it counts as indebtedness.

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So that, again, Your Honor, does sort of go to the ultimate question.

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I know that plaintiffs point out that in the final rule promulgating the regulation that the agency added indebtedness and cash equivalence as an additional category, and say that that

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that narrowed the category of investments that could qualify.

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We point out that that assumes the conclusion that loan proceeds would count as cash in the absence of indebtedness.

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And if you didn't have indebtedness,

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How could you read the reg to say that loan proceeds are not cash?

[00:12:02] Speaker 01:
So in the final rule, the agency said that, speaking of the NPRM, the definition of capital was limited in the proposed rule by excluding all types of intangible property, cash equivalents, and debt financing arrangements.

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So the agency in promulgating the final rule said that

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The proposal which said cash flow indebtedness excluded debt financing arrangements.

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I think one could reasonably understand investment loan proceeds to qualify as a debt financing arrangement such that it wouldn't have fallen within... Do you have a definition of indebtedness?

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Would you have?

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I'm trying to follow up on Judge Rao's question.

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You have a regulation here that begins with nouns.

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cash equipment, inventory, tangible property, cash equivalents, and indebtedness.

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But of course, I don't give my state of being indebted to a company.

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That would be of no help to the company.

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So you all must have meant something, and it sounds like, at least from the briefs, the competing interpretations we have are indebtedness means

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indebtedness to the company.

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You owe the company, like a promissory note, you're going to pay them money.

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That seems to be one interpretation.

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So this, they would read that as fitting with the things went before.

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And then your argument is that indebtedness means if you have to take out a loan, is it indebtedness to the company you're investing in or is it indebtedness to someone else or both?

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So again, it usually has a promulgated, so this is me speaking here at the podium.

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But if you put the two together, so you've referenced indebtedness to the company.

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The reason that loan proceeds would fit within that as well is because it's a financing arrangement where the investor is on the hook or obligated to repay another party.

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But they're not indebted to the company, they're invested.

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So when I say to the company, I mean the new company, the one they're supposed to be investing

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something in, whether it's cash, equipment, inventory, or this indebtedness.

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So a promissory note would be, or a form of accounts receivable in the hands of the new company would be giving them a form of an ordinary parlance capital.

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It would be a thing of legal value.

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It would say, I'm entitled to this income stream from Judge Millett.

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She's going to pay me

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10,000 a month for however many years, and that's a valuable thing that it has.

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Might be able to sell it to someone else or take out loans against it that's collateral, but that's something the company would hold.

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If I'm indebted to the bank for the cash that I give to the company I'm investing in, all that company, the new company has is cash.

[00:15:11] Speaker 01:
So again, that's considering the transaction from the perspective of the new commercial enterprise.

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So which way does the agency look at it?

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it reads it to encompass both situations.

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So the regulation does not say indebtedness to the new commercial enterprise, the regulation simply says indebtedness.

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So if you take the two situations we're talking about here, the promise to pay the new commercial enterprise and the agency also reading it to say that it encompasses situations where the investor is indebted to a third party, then you put those together, then it would be indebtedness means

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an investment that is based on a financing arrangement where the investor has an obligation to pay a third party.

[00:15:57] Speaker 00:
It just doesn't make any sense because the point of the visa program is you get the visa by making a substantial investment in a U.S.

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enterprise, which can take the form of any number of assets like cash,

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tangible property, cash equivalence, right?

[00:16:20] Speaker 00:
You don't get the visa by transferring a liability to a US company, right, the indebtedness in the sense that the investor owes something to his or her bank.

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You get the visa by transferring an asset, which would be Judge Millett's promissory note, and then everything makes sense.

[00:16:45] Speaker 01:
So the program awards visas to individuals who invest their assets in a new commercial enterprise here.

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When we're talking about a loan that is secured by a third party, if the new commercial enterprise goes under and the investor defaults on the loan, secured by a third party, then... Defaults on the loan, but so what?

[00:17:10] Speaker 00:
The U.S.

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enterprise has the cash.

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The bank comes after the investor, not the U.S.

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enterprise.

[00:17:16] Speaker 01:
The U.S.

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enterprise has the cash, but the individual, it's not really their money that they've invested.

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It's money that they've gotten from somebody else that they're not even really on the hook for.

[00:17:28] Speaker 02:
You could have situations where you had a person... How are they not on the hook for a bank loan?

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What does that even mean in ordinary terms?

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How are they not on the hook for that?

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because the loan is not secured by their own assets.

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So if they default on a loan.

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Isn't your broader argument like even more problematic for the fact that the agency has included the word indebtedness as part of capital?

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I mean a cash loan proceeds to me seem like more of an investment made by the, you know, made by the visa applicant than a promissory note in the indebtedness category.

[00:18:06] Speaker 05:
Which would you rather have if you were trying to get a company up?

[00:18:10] Speaker 02:
I mean, it might be that indebtedness is not within the statutory definition of capital at all.

[00:18:18] Speaker 01:
Okay.

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So the question being, Your Honor, why is indebtedness even, where does the agency have the statutory authority to include indebtedness

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in its regulation.

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So this issue was not fully briefed here.

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I understand.

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But that is the term you're relying on.

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So I'm speaking here without the opportunity for full briefing on that question.

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I believe the answer would be that a promissory note is considered capital generally.

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So perhaps

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from a perspective of a new commercial enterprise, getting a wire transfer may be something they feel like is a more secure investment than a promissory note.

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But I'll confer with my co-counsel to make sure that I'm not speaking out of turn here.

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But I would anticipate that the agency, one reason the agency included indebtedness such as to cover promissory notes would be because

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in the world at large that promissory notes are treated as capital.

[00:19:41] Speaker 02:
And so are cash loan proceeds.

[00:19:44] Speaker 01:
That's true.

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And the agency treats them as capital provided that they meet the additional restrictions that the agency has placed on them.

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If I'm donating equipment and I'm donating 500 or a million, a hundred thousand or a million dollars worth of

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equipment and inventory, forklifts, a warehouse, pallets, all these things for Amazon to use somewhere, something like that.

[00:20:13] Speaker 05:
All right.

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I meet the dollar amount.

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I'm donating all that equipment.

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Do you ask whether I had to take any loans to get that equipment or do you just value the equipment?

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So the agency investigates the source of any investment.

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So it's perfectly, you've discovered that it's perfectly lawful.

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But I had to take a loan out to get half of the inventory.

[00:20:35] Speaker 01:
So the agency investigates the source of the funds, and so if the agency discovered that... Have you done this for equipment?

[00:20:42] Speaker 05:
Have you offered the same definition for equipment, that it's not equipment if you had to take a loan to get it?

[00:20:49] Speaker 01:
That's obviously not the factual scenario here.

[00:20:51] Speaker 05:
I am asking you how and whether you're consistent in this interpretation.

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That's all.

[00:20:55] Speaker 01:
So I spoke with the agency about that.

[00:20:59] Speaker 01:
They were not aware offhand of that happening, that scenario occurring, but that if it did, that they would treat it the same, that they would investigate the source of the funds.

[00:21:08] Speaker 05:
Have you had people donate equipment?

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or inventory or other tangible property to meet this definition in the past?

[00:21:17] Speaker 01:
So that's a very rare occurrence.

[00:21:19] Speaker 05:
It may be rare, but you've had it happen in the past?

[00:21:24] Speaker 01:
So the agency has told me that it's rare.

[00:21:25] Speaker 05:
Which means never, not never.

[00:21:29] Speaker 01:
The agency has told me that it's rare.

[00:21:30] Speaker 01:
They have not told me that it's never.

[00:21:33] Speaker 05:
OK.

[00:21:33] Speaker 05:
And then in the cases where it's happened, they've looked behind.

[00:21:36] Speaker 05:
to see whether the people had loans.

[00:21:37] Speaker 05:
We don't call it a forklift anymore, but it was purchased with a loan.

[00:21:41] Speaker 01:
So the agency has told me that they always investigate the source of the funds and... For the lawfulness, they have to do that.

[00:21:47] Speaker 05:
Have they, I guess what I'm trying to ask is when they, in the one or two cases throughout the history of this statute, when someone donated equipment, inventory, or other tangible property, did they look behind, and it was all lawful, clean, nothing to worry about there, did they look behind

[00:22:06] Speaker 05:
to see how it was financed.

[00:22:08] Speaker 01:
So my understanding is the answer to that is yes, Your Honor.

[00:22:10] Speaker 01:
Both matter of Ho and matter of Safice, which are two of the presidential decisions, state that the petitioner must establish that the investment was the petitioner's own.

[00:22:22] Speaker 01:
And that means that the agency investigates the source of the funds.

[00:22:25] Speaker 01:
And so in the scenario that you posit.

[00:22:27] Speaker 05:
Well, showing that it's my own as opposed to I'm a funnel for somebody else is not the same thing as saying it's my own.

[00:22:36] Speaker 05:
even if I have a loan.

[00:22:37] Speaker 05:
Is my house not my own if I have a mortgage?

[00:22:42] Speaker 01:
I mean, so these go to definitional questions, Your Honor.

[00:22:45] Speaker 01:
So mortgage, I'm not a homeowner, so I'm not an expert on this process, but the title is held by the bank, correct?

[00:22:55] Speaker 05:
I could have sworn I had property rights.

[00:23:00] Speaker 01:
So that's true, Your Honor.

[00:23:02] Speaker 05:
I thought I might even be able to take out a second mortgage.

[00:23:04] Speaker 05:
But the agency investigates the source of the funds to ensure that... So you're representing that in however many few cases where someone's donated equipment, inventory, or other tangible property, you're representing that affirmatively they checked not just for the legality, the lawfulness, but they actually checked to see whether the person who donated that may have had to take out a loan for some of the property.

[00:23:26] Speaker 05:
Not whether it's theirs, as in it's someone else's property, but whether they had to take out a loan.

[00:23:30] Speaker 05:
That's your representation?

[00:23:31] Speaker 01:
That's my understanding from the agency, Your Honor.

[00:23:33] Speaker 05:
If it's different, you'll send a letter to the court telling us about that?

[00:23:37] Speaker 01:
Yes.

[00:23:38] Speaker 05:
You also mentioned the at-risk requirement.

[00:23:45] Speaker 05:
But in every regulation, what makes something at risk is whether you've

[00:23:50] Speaker 05:
invested it, actually invested it in this new enterprise, which of course new enterprises are inherently risky because the at risk, the contrast is, have you put it at risk, evidence of mere intent to invest or perspective investment is not going to satisfy the at risk requirement.

[00:24:12] Speaker 05:
That's very different than saying it's not at risk just because I also have an unsecured loan.

[00:24:22] Speaker 05:
It's at risk as soon as I take whatever that asset is and let go of it and release it into this company for the company's purposes in the hopes that it will generate jobs and be a successful business.

[00:24:34] Speaker 05:
That is a form of risk, is it not?

[00:24:36] Speaker 01:
So you would not get those funds back, Your Honor, but this goes back to the question of what happens in the event that the new commercial enterprise goes under and the investor defaults on the loan.

[00:24:49] Speaker 05:
That's the type of risk you're talking about in the regulation.

[00:24:53] Speaker 05:
that you put the money in, I'm not going to get it back.

[00:24:58] Speaker 01:
That includes that, Your Honor.

[00:25:02] Speaker 05:
And it also includes, where's the word there in front of property in your regulation?

[00:25:12] Speaker 05:
Invest means to contribute capital, it doesn't stay your personal capital.

[00:25:17] Speaker 01:
So the EB-5 program awards visas to individuals who invest capital in the United States.

[00:25:23] Speaker 01:
The idea is to incentivize and to reward people who invest capital.

[00:25:30] Speaker 01:
I suppose this perhaps goes to an ambiguity that may exist in the statute, but the purpose of the program is to award visas to individuals with an immigration program.

[00:25:39] Speaker 01:
And the idea is that if folks invest their capital, they get a visa.

[00:25:44] Speaker 01:
The idea is not for

[00:25:45] Speaker 01:
Somebody go get capital from somebody else and invest that and then, you know, reward their use of somebody else's capital.

[00:25:55] Speaker 02:
Sorry, that just goes to my question of, I mean, perhaps this is something the agency, this interpretation is one that the agency could have adopted through amending the regulation because it's consistent with the statute.

[00:26:05] Speaker 02:
But that doesn't necessarily mean it's consistent with the regulation that has in fact been promulgated.

[00:26:11] Speaker 01:
I understand, Your Honor.

[00:26:12] Speaker 01:
And again, our position is that the definition sets forth various buckets of categories of investment.

[00:26:19] Speaker 01:
This case is about which bucket do loan proceeds fall within and that the agency has interpreted some regulations to mean that loan proceeds fall in the indebtedness bucket rather than in the cash bucket.

[00:26:29] Speaker 05:
You talked about, there's lots of talk about past practice of the agency.

[00:26:34] Speaker 05:
And the petitioners put in declarations

[00:26:37] Speaker 05:
of two individuals who talked about literally hundreds and hundreds of petitions being granted for their clients prior to this phone call without any, even though it was when they investigated the source of the funds, there had been loans behind them and they were granted without so much as a word being spoken.

[00:27:04] Speaker 05:
Did you dispute in the record those declarations?

[00:27:06] Speaker 05:
Do you think those declarations are all just wrong?

[00:27:09] Speaker 01:
So I believe, Your Honor, those declarations were attached to an amended, so that, kind of, soughtly to amend their complaint below and attached those declarations to their amended complaint.

[00:27:21] Speaker 01:
I don't, I don't believe that the court ever ruled on that motion.

[00:27:26] Speaker 05:
So I, they are in the record to the extent that they were- Do you deny, I'm just saying, do you, I'm just asking,

[00:27:33] Speaker 05:
As a matter of fact, you talk about a couple unpublished, sorry, non-presidential decisions.

[00:27:40] Speaker 05:
Does the agency dispute that, at least prior to this phone call, hundreds and hundreds of people got these petitions, even though some, maybe all of the money they contributed came from loans?

[00:27:58] Speaker 01:
So I'm not sure that we can see that there were hundreds and hundreds.

[00:28:02] Speaker 05:
These were attached as declarations to many... You all know, if you don't want to look at their declarations, you all know what was happening before the phone call.

[00:28:13] Speaker 05:
And again, there's some scattered references of past practice, but I didn't hear the agency either, I didn't see them put in a declaration or represent in their briefs that in fact, although they said this has been the definition all along, that in fact,

[00:28:27] Speaker 05:
the agency had always enforced this examination of loan scrutinization on the EB-5 program.

[00:28:38] Speaker 05:
Is that your position that they have always done that?

[00:28:42] Speaker 01:
I cannot say that the agency has never approved a petition based on an investment of loan proceeds like we're talking about here.

[00:28:53] Speaker 01:
Approximately 10,000 EB-5 visas are available every year.

[00:28:57] Speaker 01:
The program's been in existence for

[00:28:58] Speaker 01:
I don't know the total number of visas that have been awarded during that time, but it's, I think, well over 100 and perhaps well over 200,000 visas.

[00:29:06] Speaker 01:
There are roughly around 100 adjudicators, so there's a significant volume that goes through, and it may have been the case that there were some number of

[00:29:16] Speaker 01:
petitions that were approved in comprehension of the agency's position as to this issue.

[00:29:21] Speaker 05:
How did those people that are administering, that are making these decisions out on the ground, I guess you have to have people probably all over the country doing this, was there, again I was just surprised, is there a manual that tells them here's what you do, that you need to look behind, not just for lawfulness of course, and to make sure they're not simply a strawman,

[00:29:45] Speaker 05:
But you also, if it isn't a fact, they've given cash, you need to know whether or not that's the product of a loan.

[00:29:54] Speaker 05:
You must give instructions to these folks.

[00:29:58] Speaker 05:
Is that correct?

[00:29:58] Speaker 05:
They can't just be left off on their own, right?

[00:30:01] Speaker 01:
So we've identified a few things, Your Honor.

[00:30:05] Speaker 01:
There's the 1995 Office of General Counsel.

[00:30:07] Speaker 05:
memorandum there are the various... Would that have been sent out to all these people that are administering this program?

[00:30:13] Speaker 05:
How do you train the people that are making the decision on the ground about EB-5?

[00:30:19] Speaker 05:
I mean... I get they have a big volume to do.

[00:30:21] Speaker 05:
There must be some guidance given to them.

[00:30:25] Speaker 01:
There certainly is guidance given to them, Your Honor.

[00:30:26] Speaker 01:
I don't know the details of that program.

[00:30:29] Speaker 05:
The... Well, does that guidance include the requirement?

[00:30:33] Speaker 05:
Or did it at least prior to the 2015 phone call?

[00:30:37] Speaker 05:
include some requirement that they check whether or not the cash is the proceeds of an unsecured loan?

[00:30:45] Speaker 05:
Or just check it to see whether it's secured or unsecured?

[00:30:48] Speaker 05:
Is that guidance to them?

[00:30:50] Speaker 01:
So the administrative office appeal decisions certainly do state that.

[00:30:55] Speaker 01:
That's not my question.

[00:30:56] Speaker 05:
You said they gave guidance.

[00:30:57] Speaker 05:
So is it in their guidance?

[00:30:59] Speaker 05:
It seems like a really important thing to have been in the guidance.

[00:31:03] Speaker 01:
So plaintiffs have

[00:31:06] Speaker 01:
pointed to some guidance that was dated, I believe.

[00:31:11] Speaker 01:
This is in the JAA.

[00:31:12] Speaker 01:
I don't know the site.

[00:31:13] Speaker 01:
It might have been 2014 discussing this issue.

[00:31:16] Speaker 01:
So to answer your question, yes, in terms of when the earliest was that such guidance may have come out, I don't know the details of the guidance program.

[00:31:27] Speaker 05:
Nobody checked for this?

[00:31:29] Speaker 01:
For folks.

[00:31:30] Speaker 01:
So I don't know, to the extent that there may have been an official guidance document that came out

[00:31:35] Speaker 01:
20 years earlier, I don't know the answer to that question, Your Honor.

[00:31:40] Speaker 05:
I just have one more question just to make sure I understand how this works.

[00:31:43] Speaker 05:
If I have a bank account and I have $500,000 in there of my hard-earned cash and $500,000 in there of an interest-free loan from my parents, and it's all mixed in one bank account,

[00:32:05] Speaker 05:
and I invest $500,000 cash in a company here in the U.S.

[00:32:11] Speaker 05:
Does that count or not?

[00:32:13] Speaker 01:
So if we're talking about pre-recent rulemaking that increased the amount, and if we're talking about a... Yeah, I'm sorry, I'm just doing things.

[00:32:21] Speaker 01:
That's what I was talking about.

[00:32:21] Speaker 05:
Whatever the requisite amount is, I have that amount, double that amount in my account, half of which is an unsecured loan from parents, and half of which is my own hard-earned money.

[00:32:33] Speaker 05:
And it's, of course, all mingled together in a bank account.

[00:32:36] Speaker 05:
What happens?

[00:32:37] Speaker 01:
So if you have an amount that is free and clear and that is sufficient to meet the investment amount, then that would satisfy the requirements.

[00:32:55] Speaker 01:
Thank you, Your Honors.

[00:33:12] Speaker 04:
May it please the court.

[00:33:13] Speaker 04:
My name is Ira Kurzman.

[00:33:15] Speaker 04:
I'm here representing the plaintiffs.

[00:33:18] Speaker 04:
And I'd like to begin by just giving you one example.

[00:33:21] Speaker 04:
And the court could treat it as a hypothetical, I guess, or treat it as the real case.

[00:33:27] Speaker 04:
But this is the case that was joined with this case, which was Xi Xingwang's case.

[00:33:32] Speaker 04:
And then the government decided to dismiss the appeal.

[00:33:35] Speaker 04:
And I want to bring that to the court's attention, because it's so dramatically

[00:33:39] Speaker 04:
demonstrates why the government's position really makes no sense.

[00:33:45] Speaker 04:
Xi Xing Wang got a loan from a bank.

[00:33:48] Speaker 04:
She put up $250,000 as collateral.

[00:33:52] Speaker 04:
She had a property.

[00:33:53] Speaker 04:
And it was obvious that the property was given to her by her father.

[00:33:57] Speaker 04:
Her father had another property, which was worth $250,000.

[00:34:00] Speaker 04:
And they used both of those properties as collateral for the $500,000 loan.

[00:34:10] Speaker 04:
The government said that that was not sufficient because her father's loan was his money, and therefore she hadn't made a $500,000 cash investment, even though obviously she got the cash and invested it into what we call the new commercial enterprise.

[00:34:29] Speaker 05:
And what makes this even more ridiculous is that if the- To be clear, the government has not appealed

[00:34:38] Speaker 05:
that case, so it's not assertive that position anymore.

[00:34:42] Speaker 04:
That's right, Your Honor, but just taking it as a hypothetical.

[00:34:44] Speaker 05:
So it's hard to say that that's evidence of ridiculousness.

[00:34:46] Speaker 05:
Well, it's not, I guess, I take it it's not their position anymore.

[00:34:50] Speaker 05:
That that wouldn't count.

[00:34:51] Speaker 04:
Well, their position actually in the district court is that they're waiting for this court's decision.

[00:34:56] Speaker 04:
They refuse to do anything in that case.

[00:34:58] Speaker 04:
But to make it more ridiculous, and whether it's Xi Xing Wang or anyone else, if the

[00:35:06] Speaker 04:
If a father actually gave her a gift, a $500,000, that would be okay.

[00:35:17] Speaker 04:
If the father put up the collateral for the $500,000, it's not okay under the government's reading.

[00:35:25] Speaker 04:
And the reason why none of this makes sense is that I think, as Judge Katz has pointed out,

[00:35:32] Speaker 04:
Really, and that's the thing I never understood in this case from the very beginning, which is cash is cash.

[00:35:39] Speaker 05:
Can I point you to, in the regulation, J to little Roman V?

[00:35:46] Speaker 04:
Yeah.

[00:35:49] Speaker 04:
Because I think that's the government, and I think your honor was, I think, trying to get at that with what's their definition of indebtedness.

[00:35:58] Speaker 05:
So they say, they just say upfront,

[00:36:02] Speaker 05:
If you're doing, this is about what documentation you have to have with your petition, evidence of any loan or mortgage agreement, promissory note, security agreement, or other evidence of borrowing, then you have to, which is security, you have to show the secured assets.

[00:36:23] Speaker 05:
Why isn't that dead on what they're arguing here?

[00:36:27] Speaker 04:
Okay.

[00:36:27] Speaker 04:
The reason why it isn't is the following.

[00:36:32] Speaker 04:
First of all, that part of the regulation along with the indebtedness part was not in the original proposed regulation.

[00:36:41] Speaker 05:
I understand this helps to inform their definition of indebtedness.

[00:36:45] Speaker 05:
This helps to tell us this came in with indebtedness and tells us what they think indebtedness is.

[00:36:50] Speaker 05:
It could be a promissory note or it could be a promissory note plus evidence of borrowing.

[00:36:56] Speaker 04:
But in other words, that's just an evidentiary requirement and if you look at that,

[00:37:02] Speaker 05:
Why would you have that evidentiary requirement regarding loans and any type of borrowing if all you were talking about is promissory notes?

[00:37:12] Speaker 04:
Well, because the way the regulation, both regulations are written, 204.6e, the definitional section, and then 204.6j2v, the section you're talking about, is they're basically saying to provide proof of cash

[00:37:31] Speaker 04:
or all the other things listed, including embeddedness, you can provide one of these things under 204.6 J2V.

[00:37:44] Speaker 04:
And the first thing under 204.6 J2V makes it clear.

[00:37:50] Speaker 05:
I'm sorry.

[00:37:52] Speaker 05:
This may well be the limits.

[00:37:54] Speaker 05:
This is going to reveal the limits of my imagination here, but how would alone

[00:38:01] Speaker 05:
be a form, I assume it's a loan by the individual, be a form of indebtedness, a gift to the company.

[00:38:13] Speaker 05:
It won't be an example of that.

[00:38:14] Speaker 05:
It's not a promissory note.

[00:38:16] Speaker 04:
Right.

[00:38:17] Speaker 04:
We believe all of those things listed in 204.6 J2V are promises to pay.

[00:38:25] Speaker 04:
In other words, originally the regulation

[00:38:28] Speaker 04:
just said cash and said other things.

[00:38:31] Speaker 04:
And then they expanded it for people who may not have had the full $500,000 in cash to give them an opportunity to still buy into a new commercial enterprise.

[00:38:42] Speaker 04:
So a promissory note is obvious.

[00:38:45] Speaker 04:
That is, we're giving a prom.

[00:38:47] Speaker 05:
Let's just deal with the loan right now.

[00:38:48] Speaker 05:
If I make a loan to the company, it's going to be secured by my assets?

[00:38:54] Speaker 05:
That's kind of weird.

[00:38:54] Speaker 05:
And wouldn't the loan just be cash?

[00:38:56] Speaker 05:
I just don't understand what the loan means.

[00:38:59] Speaker 05:
unless they're talking about what the interpretation they've given us today.

[00:39:03] Speaker 04:
I think this is what it means.

[00:39:04] Speaker 04:
If you go to a furniture store and you buy furniture and they say, we'll give it to you as a loan, that is, you get the furniture right away and you have to pay us a loan.

[00:39:17] Speaker 04:
It's the same thing with the new commercial enterprise.

[00:39:20] Speaker 04:
That is, we're giving you the equity interest or whatever that interest is in the new commercial enterprise, the stock,

[00:39:28] Speaker 04:
the property, whatever it is, in the new commercial enterprise.

[00:39:32] Speaker 04:
And in exchange, you have to pay off this loan to us.

[00:39:36] Speaker 04:
So in that way, it's like a promissory note.

[00:39:39] Speaker 04:
And the same thing is true of a mortgage.

[00:39:41] Speaker 05:
How would that type of loan be secured by the assets of the petitioner?

[00:39:46] Speaker 04:
No, it's not secured by the assets.

[00:39:47] Speaker 05:
It has to be under V. It has to be a loan that's secured by the assets of the petitioner.

[00:39:55] Speaker 04:
By the assets of the petitioner.

[00:39:57] Speaker 04:
Right.

[00:39:57] Speaker 04:
And what that means is whatever assets the petitioner.

[00:40:00] Speaker 05:
How would they be securing?

[00:40:02] Speaker 05:
I'm just not understanding.

[00:40:05] Speaker 05:
This is my fault.

[00:40:06] Speaker 05:
My brain's not working well enough here.

[00:40:08] Speaker 05:
How would their assets, the petitioner's assets, somehow be securing the loan of furniture to the company?

[00:40:16] Speaker 04:
OK.

[00:40:17] Speaker 04:
No.

[00:40:18] Speaker 04:
No?

[00:40:18] Speaker 05:
I misunderstood you then.

[00:40:20] Speaker 04:
To me, it's like a promissory note.

[00:40:22] Speaker 04:
If I can just start with that, I understand what your honor is asking.

[00:40:25] Speaker 04:
If you have a promissory note,

[00:40:28] Speaker 04:
They're saying with the promissory note, you have to have your own assets to back that up in case you can't pay the promissory note.

[00:40:36] Speaker 04:
A loan is the same thing.

[00:40:37] Speaker 04:
We're giving you the NCE, the new commercial enterprise.

[00:40:41] Speaker 04:
It's just another form of a promise to pay.

[00:40:45] Speaker 05:
Just like if you go... In the loan example, what is the petitioner giving to the new company?

[00:40:54] Speaker 04:
The petitioner has to...

[00:40:56] Speaker 04:
just like a promissory note.

[00:40:58] Speaker 04:
He's getting a loan from the new company, and he's backing it up with his own assets.

[00:41:04] Speaker 05:
He's getting a loan?

[00:41:05] Speaker 05:
How is getting a loan from the company an investment in the company?

[00:41:09] Speaker 04:
Because he has the security interest.

[00:41:12] Speaker 04:
They've given him whatever that, just like a promise, it's a promise to pay.

[00:41:17] Speaker 05:
No, the promise to pay runs from the petitioner to the company.

[00:41:20] Speaker 05:
I thought you just said the loan runs from the company to the petitioner.

[00:41:25] Speaker 05:
Did I misunderstand?

[00:41:26] Speaker 04:
OK, no, I think that's right.

[00:41:29] Speaker 04:
In other words, let's look at a promissory note.

[00:41:32] Speaker 04:
What is a promissory note saying?

[00:41:33] Speaker 04:
It's saying, give me the property now, and I promise to pay you in the future this promissory note, $10,000 a month, or whatever the example you gave before.

[00:41:46] Speaker 04:
A loan is just another form of a promissory note.

[00:41:50] Speaker 04:
It's saying, give me the property now, and I will pay off this loan.

[00:41:57] Speaker 04:
to you in the future.

[00:41:59] Speaker 04:
And I have to have assets that secure that.

[00:42:03] Speaker 04:
You're right.

[00:42:04] Speaker 05:
Why wouldn't they call that a promissory note?

[00:42:06] Speaker 04:
I'm sorry?

[00:42:06] Speaker 05:
Why wouldn't they call that a promissory note?

[00:42:09] Speaker 04:
I'm sorry.

[00:42:09] Speaker 05:
Does that normally get called a loan rather than a promissory note?

[00:42:13] Speaker 04:
No.

[00:42:13] Speaker 04:
I'm just saying, I think what they did in this regulations.

[00:42:16] Speaker 05:
So your view is that loan means, so that what V says is evidence of any promissory note, promissory note, promissory note, promissory note, or other evidence of promissory note.

[00:42:27] Speaker 05:
That's how you're reading that?

[00:42:29] Speaker 04:
Just to be clear.

[00:42:30] Speaker 04:
I understand what you're asking.

[00:42:32] Speaker 04:
I think we're reading it as these are all promises to pay in the future.

[00:42:38] Speaker 04:
And it was designed for the purpose of allowing people who didn't have the $500,000 in cash to still be able to get involved in these projects by expanding the range of people who could be involved.

[00:42:57] Speaker 04:
And in fact, we're not alone.

[00:42:59] Speaker 04:
And I want to just point out to you, Your Honor, the government, as late as 2013, in a memo, in one of their own memos in 2013, which we note, a policy memo of March 2013, which is noted in our brief,

[00:43:27] Speaker 04:
says just that.

[00:43:29] Speaker 04:
That is they say, capital is cash, and we mean to broadly define it.

[00:43:37] Speaker 04:
And then they go on and say, but there are other promises to pay.

[00:43:41] Speaker 04:
They use that very language.

[00:43:43] Speaker 04:
They say promises to pay.

[00:43:46] Speaker 05:
They just say promissory note.

[00:43:47] Speaker 05:
They don't tell me what they mean by all those other words.

[00:43:51] Speaker 05:
If you're talking about page three of that memo.

[00:43:55] Speaker 03:
Yes.

[00:43:56] Speaker 05:
Right.

[00:43:57] Speaker 05:
a promissory note, and I'm asking what loan, mortgage agreement, security agreement mean in there.

[00:44:04] Speaker 04:
But they characterize those as promises to pay.

[00:44:09] Speaker 05:
I guess it's, I understand what you're saying is just normally if you're writing a regulation that says promissory note and by promissory note we mean all these other things too.

[00:44:20] Speaker 05:
You would go say promissory note including and then you list the other things but instead it's just a list of items separated by commas of which promissory note is one in the middle.

[00:44:29] Speaker 04:
I agree with you.

[00:44:30] Speaker 04:
I don't think it was particularly artfully written.

[00:44:33] Speaker 04:
I think what it meant to say is

[00:44:36] Speaker 04:
Here are just different examples of promises to pay a mortgage, a loan, a promissory note.

[00:44:44] Speaker 04:
So I think what they were saying about indebtedness was these are examples of it, but it has to be secured with your own money.

[00:44:54] Speaker 04:
Now, the point is that that is totally different than cash.

[00:44:59] Speaker 04:
I mean, every rule of statutory construction here

[00:45:04] Speaker 04:
There's no ambiguity about cash.

[00:45:06] Speaker 04:
Every dictionary defines capital as cash.

[00:45:11] Speaker 04:
The regulation says cash.

[00:45:14] Speaker 04:
It doesn't say cash with some kind of form of indebtedness, which is what the government seems to be arguing.

[00:45:21] Speaker 04:
It just says cash.

[00:45:23] Speaker 04:
And cash means what it means.

[00:45:25] Speaker 04:
And I think the point that I think all three of the judges have made here is that

[00:45:34] Speaker 04:
The cash actually goes into the investment.

[00:45:40] Speaker 04:
Whatever the responsibility is of the individual who got the cash, that's his responsibility, but he's actually put cash in the investment.

[00:45:49] Speaker 04:
And the government has a whole series of hypotheticals, you know, Visa mills and so forth.

[00:45:55] Speaker 04:
That's all taken care of by the other provision under tool 4.6E that says in defining capital, it cannot be

[00:46:04] Speaker 04:
capital that's unlawfully obtained directly or indirectly.

[00:46:11] Speaker 00:
Could we talk for a minute about class certification?

[00:46:17] Speaker 00:
Yeah.

[00:46:18] Speaker 00:
So gosh, I see a lot of problems with this class.

[00:46:21] Speaker 00:
I mean, it seems to me it's not ascertainable.

[00:46:24] Speaker 00:
It's open ended.

[00:46:27] Speaker 00:
And the relief is not indivisible.

[00:46:30] Speaker 00:
So I don't see how you satisfy B2.

[00:46:33] Speaker 00:
Why shouldn't we rule in your favor on the substantive point, which seems pretty strong for you, but just let this go forward in the normal way of people who are denied visas seek review case by case?

[00:46:50] Speaker 04:
Well, I think, first of all, it's a red herring in this case, Your Honor, for the following reason.

[00:46:55] Speaker 04:
As part of our agreement with the government,

[00:46:58] Speaker 04:
to stay the effect of the decision, the government agreed to look back at its own files and make a determination as to who was covered.

[00:47:07] Speaker 04:
So this argument that somehow it's open ended and they have to go back 30 years, they've already done that and there's only 134 people who are part of this class.

[00:47:18] Speaker 04:
Secondly... I'm sorry, what's the agreement you're talking about?

[00:47:21] Speaker 04:
Okay, initially there was no stay so the government had to

[00:47:27] Speaker 04:
in effect, go back and look at all these cases and make new decisions.

[00:47:33] Speaker 04:
And we agreed with the government that they don't have to do that until this court makes a decision.

[00:47:40] Speaker 04:
But as part of that agreement, they would go back and ascertain the cases that are involved in the class.

[00:47:49] Speaker 04:
In other words, who are the class members?

[00:47:51] Speaker 06:
Within the statute of limitations or outside the statute of limitations?

[00:47:54] Speaker 04:
I'm sorry?

[00:47:54] Speaker 06:
Within the statute of limitations or outside the statute of limitations?

[00:47:58] Speaker 04:
Both.

[00:47:58] Speaker 04:
I mean, no one made any issue over that.

[00:48:02] Speaker 04:
And the second, I think.

[00:48:04] Speaker 00:
But they clearly have appealed the over breadth of the class to the extent it sweeps in time barred claims.

[00:48:15] Speaker 00:
Are you saying that that argument in their brief is in violation of agreement?

[00:48:19] Speaker 04:
I think it's moot.

[00:48:21] Speaker 04:
I'm not saying the government tried to do anything improper.

[00:48:23] Speaker 04:
I just think it's moot at this point, because we've identified who those people are.

[00:48:28] Speaker 04:
I suppose they could still argue.

[00:48:31] Speaker 00:
The question is whether they get relief.

[00:48:34] Speaker 00:
Someone whose application was denied 20 years ago should get relief.

[00:48:41] Speaker 04:
Well, with respect to that, the government had the opportunity to object to the class initially.

[00:48:51] Speaker 04:
And that part of the class was still the same.

[00:48:54] Speaker 04:
In other words, they said, well, the judge broadened the class.

[00:48:56] Speaker 04:
But the judge didn't broaden the class going back 30 years.

[00:49:01] Speaker 04:
In fact, the judges broadened the class from 2015 forward.

[00:49:05] Speaker 04:
And in other respects, the judge narrowed the class obviously.

[00:49:11] Speaker 00:
Petitioners with time-barred claims, you have a forfeiture argument based on their failure to brief.

[00:49:17] Speaker 00:
But that's different from what I'm hearing for the first time, which is a separate argument that that objection may be barred by an agreement.

[00:49:32] Speaker 00:
So let's just put forfeiture.

[00:49:34] Speaker 00:
Right.

[00:49:34] Speaker 04:
I understand.

[00:49:35] Speaker 04:
So I think we would say that they did waive it, they forfeited it, they had the opportunity to raise that before, and they failed to raise it.

[00:49:44] Speaker 04:
I really think it's kind of, I mean the court may want to rule on it, but I really think it's kind of insignificant because the reality is if somebody had an investment 30 years ago and they were denied 30 years ago,

[00:50:02] Speaker 04:
They're not here.

[00:50:03] Speaker 04:
I mean, these are all very current investments.

[00:50:05] Speaker 00:
I understand it's a legal matter.

[00:50:09] Speaker 00:
Maybe so, but as a conceptual matter, the proposition that individuals who were denied relief

[00:50:19] Speaker 00:
in agency adjudications can have a class certified with regard to a cross-cutting legal issue.

[00:50:28] Speaker 00:
It seems to me very problematic.

[00:50:30] Speaker 00:
I mean, someone denied a social security benefit can bring a B2 class of 5 million people whose benefits are denied on the same ground.

[00:50:40] Speaker 00:
I guess we don't do that.

[00:50:42] Speaker 04:
No, I understand.

[00:50:44] Speaker 04:
I guess what I would say is in this case on these facts,

[00:50:48] Speaker 04:
We believe they've waived it or forfeited it by not raising it originally and the truth is it really doesn't have great consequences so that the court could rule and simply say that in this case on these facts they forfeited it and it wouldn't make much of a difference.

[00:51:04] Speaker 04:
Thank you.

[00:51:07] Speaker 05:
Mr. Bates have any time for rebuttal?

[00:51:11] Speaker 05:
We'll give you two minutes.

[00:51:13] Speaker 01:
Thank you, Your Honor.

[00:51:15] Speaker 01:
I'd like to address a couple of the questions that the Court had for me that I conferred with my colleague about.

[00:51:21] Speaker 01:
As to the question about agency guidance, so there is a policy manual that is updated periodically.

[00:51:29] Speaker 01:
It's been in place for a number of years.

[00:51:30] Speaker 01:
I don't know from the very beginning of the program, but it's been in place for a number of years.

[00:51:33] Speaker 01:
It's called the Adjudicator's Field Manual.

[00:51:36] Speaker 01:
Some excerpts of it are cited.

[00:51:37] Speaker 01:
in the joint appendix at 203 and 249.

[00:51:40] Speaker 01:
I believe those are from more recent copies of the field manual.

[00:51:45] Speaker 01:
But there is a field manual.

[00:51:46] Speaker 06:
What was 2015?

[00:51:50] Speaker 01:
So the JA doesn't say what the dates are.

[00:51:52] Speaker 01:
I believe in the context it would be 2014 or 2015.

[00:51:55] Speaker 05:
But as for the proof of what the policy was before 2014, you got nothing.

[00:52:06] Speaker 01:
the field manual prior to 2014 is not in the record.

[00:52:13] Speaker 01:
As to, let's see here, as to Judge Rao's question about where indebtedness came from, in answering your question, I did neglect to mention that in the final rule, the agency pointed to the E2 investor program, which does

[00:52:32] Speaker 01:
for which the sub-regulatory guidance says that indebtedness can qualify as capital for purposes of the E-2 treaty investor program.

[00:52:39] Speaker 01:
So that is one basis that the agency looked to for coming up to add that.

[00:52:44] Speaker 02:
Is indebtedness further defined in that regulation or in that program?

[00:52:49] Speaker 01:
It is not.

[00:52:51] Speaker 01:
It is not.

[00:52:51] Speaker 01:
But it does appear in the sub-regulatory guidance for that program.

[00:52:55] Speaker 01:
And I just want to make sure, Judge Mollett, with regard to our colloquy about

[00:52:59] Speaker 01:
the agency's prior practice and whether they had ever in the past approved an investment that was based on equipment or inventory without looking back to determine what the source of the inventory or equipment was.

[00:53:14] Speaker 01:
I will confirm with the agency whether they are aware of that happening.

[00:53:16] Speaker 01:
There have been hundreds of thousands of petitions submitted and

[00:53:21] Speaker 01:
They don't have, like, a clear database of what all those were, but I will confer with the agency to see.

[00:53:25] Speaker 05:
Well, I don't mean to put people to tons of work looking.

[00:53:28] Speaker 05:
I just thought somebody would have some institutional knowledge, so.

[00:53:31] Speaker 01:
I will confer with the agency, and if they are aware of any, we will notify the court.

[00:53:36] Speaker 02:
Can you also speak to the agreement that Mr. Corson mentioned?

[00:53:41] Speaker 01:
So the agreement was that we would try to come up with a process for ascertaining the class, as we discussed.

[00:53:49] Speaker 01:
Sorry.

[00:53:50] Speaker 01:
For ascertaining the class.

[00:53:51] Speaker 01:
Um, as the, uh, declaration at the very end of it, Jane, uh, indicates this is a very, this would be a very difficult process given the number of adjudications through the years and the fact that there's no, you know, it's gonna take 30 years.

[00:54:03] Speaker 02:
He says there are 134 people.

[00:54:04] Speaker 02:
Is that your understanding as well?

[00:54:07] Speaker 01:
Of, um... Of people in the class.

[00:54:10] Speaker 02:
He says that that's been determined, so it doesn't really matter at this point.

[00:54:13] Speaker 01:
Uh, so, so, that's... Um, so, that is, uh,

[00:54:21] Speaker 01:
based on some investigation I believe that the plaintiffs have done on this issue.

[00:54:28] Speaker 01:
That's not based on going back through 30 years of agency records.

[00:54:34] Speaker 01:
That's based on some investigation that I don't recall the name of

[00:54:40] Speaker 01:
the organization, but declaration I believe that they attached to their motion for class certification perhaps, talking about efforts that had been undertaken to find members of the class.

[00:54:51] Speaker 01:
But by looking at some number of regional centers or some number of new commercial enterprises, they had determined that there were within that category they looked at 134, but that was not exclusive.

[00:55:02] Speaker 02:
So that's not a number that the government necessarily agrees with.

[00:55:08] Speaker 01:
So may I have a moment, Your Honour?

[00:55:27] Speaker 01:
So the plaintiffs asserted that there were 134 within the statute of limitations based on that declaration that it submitted with its... Sorry, within the statute of limitations?

[00:55:38] Speaker 01:
Yes.

[00:55:39] Speaker 01:
Okay.

[00:55:39] Speaker 01:
Yes, yes, within the statute of limitations.

[00:55:42] Speaker 01:
That, I believe, again, was based on the investigation they had done on some sub-part of the program and, of course, does not go back all three years.

[00:55:50] Speaker 01:
And in regard to your question, Judge Katzis, we did agree to try and come up with a process for figuring out

[00:55:58] Speaker 01:
what the class is, but that part of the agreement was that that would be stayed during the OPA.

[00:56:04] Speaker 00:
Do you understand that agreement as giving up what I think would otherwise be a pretty good argument for the government that this class is not ascertainable?

[00:56:18] Speaker 01:
No, Your Honor.

[00:56:18] Speaker 01:
We do argue that.

[00:56:21] Speaker 00:
You sort of hinted at that in your brief, but not very directly.

[00:56:26] Speaker 01:
So we did argue that ascertaining the class here would require unmanageable individualized inquiries.

[00:56:38] Speaker 05:
So the district court confined the class to people who were denied solely because of this interpretation about the social loans.

[00:56:49] Speaker 05:
So what would be individualized as soon as you see another reason there out?

[00:56:58] Speaker 05:
If they were solely denied because of that, you wouldn't have to redo a whole new inquiry.

[00:57:06] Speaker 01:
I'm just trying to find a JAA site here, Your Honor.

[00:57:12] Speaker 01:
So the declaration we submitted at the beginning of the JAA 326 talks about what would be required to ascertain the classroom.

[00:57:21] Speaker 01:
So you are correct.

[00:57:22] Speaker 00:
that the district judge did, limited to individuals whose denials were based solely on that basis, that that is going to require the agency to go back through 30 years of records and figure out why those... Figure out whether or not there's an alternative ground of decision, go through hypotheticals like Judge Millett's about what happens if there's partial indebtedness on the balance sheet of the applicant,

[00:57:51] Speaker 00:
It seems like there's a lot more work to be done here to figure out who's in the class than your normal class of students in the segregated schools or people injured in the mass accident.

[00:58:10] Speaker 00:
That's correct, Your Honor.

[00:58:11] Speaker 05:
Which is why it's altogether flabbergasting.

[00:58:15] Speaker 05:
that you didn't raise the statute of limitations objection to the class as formulated by plaintiffs, as amended going forward not backwards by the district court judge, and that you submitted this whole declaration about how hard it's going to be in district court without even a rule 59 motion or argument about the statute of limitations.

[00:58:39] Speaker 05:
The government's a very sophisticated litigating entity.

[00:58:43] Speaker 05:
So my assumption is that when it doesn't raise something, it doesn't raise it for a reason.

[00:58:50] Speaker 05:
Why, on what possible ground should we jump into your shoes as advocate and raise an argument for the first time here on appeal that you had every opportunity and you even documented the costs of doing but didn't raise?

[00:59:11] Speaker 01:
So as we explained in our briefs, Your Honor, this was an issue that was not really an issue in the district court briefing.

[00:59:18] Speaker 05:
That doesn't make sense to me.

[00:59:21] Speaker 05:
It wasn't an issue because you didn't raise it.

[00:59:22] Speaker 05:
The formulation that the plaintiffs had about the class, right?

[00:59:27] Speaker 05:
This is how it works.

[00:59:28] Speaker 05:
Plaintiffs come forward and they say, here's our defined class.

[00:59:31] Speaker 05:
And then the other side, in addition to saying, you're all wrong on the merits and we shouldn't have a class, says, and that class

[00:59:38] Speaker 05:
is too broad for whatever, wrong for whatever reasons, which could certainly include you're going back 30 years and the law only lets you go back six and you didn't do that.

[00:59:50] Speaker 05:
And then the district court reformulated it going forward so you had a second shot.

[00:59:55] Speaker 05:
And it's not briefed because you didn't raise it.

[00:59:57] Speaker 05:
They're not going to raise it on their own.

[01:00:00] Speaker 05:
And then you went and you figured out how much work it's going to take to go back without a statute of limitations

[01:00:07] Speaker 05:
limitation and you told us how much work it would be and that that would be unworkable but again you never said you should have a statute of limitations in the class.

[01:00:19] Speaker 05:
So it doesn't work for me at least to say it wasn't briefed.

[01:00:22] Speaker 05:
That's exactly my point.

[01:00:25] Speaker 05:
So why are we supposed to play lawyer now and raise the claim for you?

[01:00:31] Speaker 01:
I understand your honor.

[01:00:36] Speaker 01:
The entire theory of the plaintiff's case here was that the April 2015 rule announced a new policy.

[01:00:43] Speaker 05:
That wasn't the entire theory because one of the plaintiffs here, I'm not going to get the name wrong.

[01:00:51] Speaker 01:
Maybe Mr. Haguaro?

[01:00:56] Speaker 05:
Yes, I keep hearing the first name.

[01:00:57] Speaker 05:
Mr. Haguaro was denied in 2014, so that's not the entire theory of the plaintiff's case.

[01:01:02] Speaker 01:
Well, and looking at

[01:01:05] Speaker 01:
the complaint, what they say is that the agency abruptly adopted this, what they characterize as a new policy, they say long after plaintiffs made their investments and filed their petitions.

[01:01:20] Speaker 00:
And what you say is that that was a restatement of, nothing more than a restatement of rules that had been settled for a couple of decades.

[01:01:31] Speaker 00:
That's correct, Your Honor.

[01:01:31] Speaker 05:
So you knew in your theory you'd been doing this for decades.

[01:01:35] Speaker 01:
applying this term of duplication.

[01:01:37] Speaker 01:
For decades.

[01:01:37] Speaker 05:
So you knew that, under your theory at least, it wasn't a problem that started in 2015 or even 2014.

[01:01:44] Speaker 01:
That's correct, Your Honor.

[01:01:47] Speaker 05:
Which again makes it even more surprising, breathtakingly surprising to me that statute of limitations wasn't mentioned.

[01:01:56] Speaker 01:
I understand, Your Honor.

[01:01:58] Speaker 05:
And you haven't even argued plain error to this Court.

[01:02:02] Speaker 01:
We have argued that to the extent that this court finds that this issue was not presented below as it should have been, that this court hasn't.

[01:02:12] Speaker 05:
To the extent we find, you agree it was not presented below at any point.

[01:02:16] Speaker 01:
I'm sorry, Your Honor.

[01:02:16] Speaker 05:
You said to the extent we find, you agree that it was not remotely presented below at any of the opportunities you had, correct?

[01:02:24] Speaker 01:
That's correct.

[01:02:25] Speaker 01:
We did not present it below.

[01:02:26] Speaker 05:
OK, so as I was finding, we're taking your word that you didn't raise this below.

[01:02:30] Speaker 01:
We have argued that.

[01:02:33] Speaker 01:
that the court still does have discretion to reach the issue here.

[01:02:37] Speaker 01:
And again, that plaintiff's argument was that this was a new rule that was announced in the 2015 telephone marks.

[01:02:46] Speaker 01:
They don't expressly say when they think the new rule went into place.

[01:02:50] Speaker 01:
From how they stated their complaint, it would have been sometime between 2014 and 2015.

[01:02:54] Speaker 01:
And so it was all about

[01:02:56] Speaker 01:
a new policy.

[01:02:57] Speaker 01:
And so the question of going back to folks who didn't have time barred claims.

[01:03:01] Speaker 05:
To be clear, I'm sorry, but your argument was no, we've always been doing this.

[01:03:05] Speaker 05:
So it wasn't though you thought, your whole theory was that we've always been doing it.

[01:03:10] Speaker 05:
So if it's wrong, we've been wrong a long time.

[01:03:14] Speaker 05:
That was your legal position way before 2014 or 2015.

[01:03:17] Speaker 01:
It's our position as the agency's practice went back a very long time.

[01:03:25] Speaker 05:
Thank you.

[01:03:26] Speaker 05:
Thank you very much the case is submitted.