11th Circuit Enjoins Enforcement of Florida Statute on Alien Ownership of Property

Foreign ownership of agricultural property in the United States has become more common over the past decades, leading to increased efforts to limit the practice. The U.S. Court of Appeals for the Eleventh Circuit is currently waiting to hear oral arguments in Shen v. Simpson a challenge to a Florida statute (SB 264) that restricts foreign principals from acquiring certain property in Florida. Although the plaintiffs lost before the district court, the Court of Appeals granted a preliminary injunction pending appeal. The injunction prohibits the enforcement of the statute based on federal preemption. One judge would have also granted the injunction on equal protection grounds.

Legal Limits on the Foreign Ownership of Property

Foreign persons from over 100 countries hold more than 43.4 million acres of U.S. agricultural land. For instance, Maine has the highest percentage of foreign-owned agricultural land, at 21.1%, followed by Hawaii at 12.8% and Alabama and Michigan each at 8.6%. Given how much foreign investment there is in U.S. property, many states have enacted laws restricting the purchase by foreign nationals of agricultural land or land near military installations. North Dakota, for example, enacted HB 1135 and 2371 in April 2023, which restricts the purchase of agricultural land by foreign governments, foreign government-controlled entities, and business entities of a country designated as a foreign adversary. Similarly, in May 2023, Indiana enacted SB 477, which restricts individuals or entities of China, Iran, North Korea, Russia, or any other country designated by Indiana as a “threat to critical infrastructure” from buying property near military installations. According to The National Agriculture Law Center, 24 states have some kind of limits on the purchase of land by foreigners.

On the federal level, the U.S. monitors foreign investment in U.S. land through the Agricultural Foreign Investment Disclosure Act of 1978, but no federal law restricts foreign persons from acquiring or holding land in the United States. In 2022, Congress considered legislation that would do so, including the Countering Communist China Act (H.R. 4792), the Prohibition of Agricultural Land for the People’s Republic of China (H.R. 7892), and the Securing America’s Land from Foreign Interference Act (H.R. 3847).  Similar proposals are currently pending.

The Florida Statute

The Florida statute at issue in Shen restricts those defined as foreign principals from acquiring agricultural land and real property located within ten miles of a military installation or critical infrastructure facility. The statute defines a foreign principal as anyone “domiciled in a foreign country of concern and not a citizen or lawful permanent resident of the United States.” The “countries of concern” include China, Russia, Iran, North Korea, and several others. Florida will grant exceptions for residential property under two acres and not within five miles of any military installations, if the foreign principal has a non-tourist visa or the federal government granted them asylum.

Plaintiffs challenged the Florida statute as preempted by federal law and as a violation of their due process and equal protection rights.  The court’s decision is being closely watched, with the federal government and several states filing amicus briefs.

Equal Protection

Shen argues that the statute violates the Equal Protection Clause of the 14th Amendment.  Because it classifies individuals based on their national origin and race, it uses a suspect classification that is reviewed under strict scrutiny. The motionfor a preliminary injunction argues that the statute fails this test because the state does not advance a legitimate interest and “sweeps far more broadly than necessary.” It also argues that although Florida claims that it enacted the statute for national security reasons, there is no evidence that foreign property buyers are also agents working for a foreign adversary, and therefore, the statute is overbroad. Finally, plaintiffs argue that the law was motivated by discriminatory intent because its purpose is to “counteract the malign influence of the Chinese Communist Party in the state of Florida.” When signing the bill, Gov. DeSantis stated that “Florida is taking action to stand against the United States’ greatest geopolitical threat—the Chinese Communist Party… We are following through on our commitment to crack down on Communist China.”

The district court rejected these arguments. The court noted that the statute applies to those who are domiciled in a country of concern and are not a citizen of the United States or lawful permanent residents. Therefore, the statute distinguishes people based on their domicile and residence status, not on their nationality or race. The court further noted that a state may lawfully restrict land ownership on the basis of alienage. The court relied on Terrace v. Thompson, whichheld that “states could deny aliens ownership interest in land within their respective borders absent an arbitrary or unreasonable basis.”

Due Process

Plaintiffs also argue that the statute violates procedural due process because it fails to define keywords such as “critical infrastructure facility,” “military installation,” and “domicile.” It, therefore, does not provide sufficient notice to persons whose property may be subject to the law’s classifications. The law also fails to provide notice as to where the 10-mile exclusion zones tied to the critical infrastructure facilities and military installations begin and end. Because SB 264 does not adequately identify sites or clearly define the boundaries resulting from exclusion zones, a person of “ordinary intelligence” does not know that their property is subject to the law’s prohibitions, the plaintiffs maintain.

Finally, according to the plaintiffs, the statute fails to properly define “domicile.” Because domicile in a country of concern is one of the requirements for the statute to apply to an individual, domicile must have a clear definition. For example, the statute does not say whether the subjective intent to stay in the United States is enough to change domicile. One plaintiff is an asylum seeker who has not received a final decision regarding his application – he argues that it is unclear whether the statute applies to him. Two other plaintiffs are on H-1B visas but plan to seek permanent legal residency, and they make the same argument. Other applications could be DACA recipients, who have lived in the country since childhood but have not been granted permanent residence.

The district court disagreed, reasoning that “critical infrastructure facilities” and “military installations” were sufficiently defined. The plaintiffs want a catalog of every facility that the statute covers, the court wrote, but that is far more than due process requires. Further, “domicile” has a clear meaning throughout Florida case law. Just because the statute does not independently define it, does not mean it is unclear. Finally, plaintiffs are confused about whether their property falls within the statute, but that ambiguity is because of the Plaintiffs’ own uncertainty about the facts, not because the statute is unclear.

Federal Preemption

Finally, the motion for preliminary injunction claimed that federal law preempted the statute. The Committee for Foreign Investment in the United States (CFIUS), established by President Ford pursuant to the Defense Production Act (DPA), has the power to review foreign investments that impact national security, and suspend or prohibit certain transactions. The Foreign Investment Risk Review Modernizations Act of 2018 (FIRRMA) expanded CFIUS’s power to include authorization to suspend or prohibit certain real estate transactions. The plaintiffs allege SB 264 disregards CFIUS’s review of specific transactions on a case-by-case basis by broadly prohibiting a specific group of foreign investors from purchasing property within Florida.

The district court rejected the preemption argument, too. The court looked at Congress’ intent when it enacted the DPA and, subsequently, FIRRMA. It reasoned that because the Florida statute governs land ownership, which is not a uniquely federal area of regulation, and because there is a history of state restrictions on alien land ownership, Congress would have expressly preempted state law if it thought it posed an obstacle to CFIUS’s purpose. Further, CFIUS covers much more than just real estate transactions, including mergers and acquisitions, suggesting that SB 264 does not “interfere directly with a primary purpose of the federal regime.” The court also noted that the U.S. submitted a “Statement of Interest” addressing the equal protection claim but did not take a position on the preemption claim. Had the U.S. government thought SB 264 was an obstacle to the “full implementation of federal law, the United States would have said so in that filing.”

Eleventh Circuit Grants Injunction Pending Appeal

After the district court denied their preliminary injunction, the plaintiffs appealed to the Eleventh Circuit, which granted a partial preliminary injunction on February 1, 2024. The court determined that the plaintiff was likely to succeed on the merits of their preemption claim based on FIRRMA. Through FIRRMA, CFIUS monitors and then reviews transactions involving foreign investors and real property. CFIUS’s review includes determining if the transaction could threaten national security. If so, CFIUS can take action to minimize that threat. The Eleventh Circuit agreed with the appellant that this suggests Congress reserved the power to regulate foreign investments in real property to the federal government. The court granted an injunction on behalf of the two appellants at the most risk of irreparable harm.

Circuit Judge Abudu wrote a concurrence, reasoning that the appellants are also likely to succeed on the merits of their equal protection claim. She noted that while SB 264 restricts people domiciled in a “country of concern” from purchasing land within ten miles of any military installation or critical infrastructure facility, it increases this restriction to land anywhere in the state if the person is domiciled in China and not a U.S. citizen or lawful permanent resident. This heightened standard for Chinese persons, combined with the statements made by Gov. DeSantis when he signed the bill into law, showed that the “prohibition blatantly violates the Fourteenth Amendment’s protection against discrimination.” Judge Abudu also rejected the district court’s reliance on Terrace because the type of alien-based restriction permissible in 1923 is no longer permissible today. The Supreme Court has not outright overruled it, but the Court has long since questioned the validity of its holding.

Although the Eleventh Circuit granted a preliminary injunction to only two of the appellants, it is still a significant victory that signals less deference to the state than the district court afforded. The Eleventh Circuit is set to hear oral arguments the week of April 15, 2024.