No Injunction Against Florida Alien Ownership Law

After briefly enjoining the enforcement of Florida’s SB 264, the Eleventh Circuit has reversed course in Shen v. Simpson. The court of appeals held that most of the plaintiffs lack Article III standing and that those with standing are unlikely to succeed on the merits of their claims.  It thus affirmed the district court’s denial of a preliminary injunction, although it did so for somewhat different reasons and over one dissent.

Background

States legislatures are increasingly regulating property ownership by foreign nationals. Foreign nationals hold almost 45 million acres of American agricultural land, and at least 29 states have issued some restriction on foreign ownership. Florida passed SB 264 in 2023, which Governor Ron Desantis described as “the strongest legislation in the nation to date to counteract the influence of the United States’ greatest economic, strategic, and security threat—the Chinese Communist Party.” SB 264 identifies seven “countries of concern” whose residents are subject to an arsenal of regulations: China, Russia, Iran, North Korea, Cuba, Venezuela, and Syria. It seeks to circumscribe foreign influence in several ways: enhancing prohibitions on exportation of personal identifying information and medical records; restricting government entities’ contracts with foreign nationals; limiting government incentives offered to foreign entities; prohibiting foreign nationals domiciled in countries of concern from purchasing new property after July 1, 2023; requiring foreign nationals to register their existing property within 10 miles of a “military installation” or “critical infrastructure” with the state; and mandating an affidavit attesting compliance with SB 264 signed by anyone purchasing property in the state.

Plaintiffs are four Chinese nationals residing in Florida on temporary visas, as well as a real estate company. Yifan Shen and Yongxin Liu are employees on H1-B work visas, Zhiming Xu arrived on a tourist visa and now seeks political asylum, and Xinxi Wang has a student visa. Multi-Choice Reality LLC is a real estate broker primarily serving Chinese-speaking clients. The plaintiffs challenged the purchase provision, the registration provision, and the affidavit provision. They sought a preliminary injunction in federal court for the Northern District of Florida. Chief Judge Allen Winsor denied the motion, holding that although the plaintiffs had standing, they had not shown a substantial likelihood of success on the merits of their claims.

Standing

The Eleventh Circuit, in an opinion by Judge Luck, held that none of the plaintiffs had standing to challenge the purchase provision because none of them suffered an injury in fact from the property purchase provision. The provision restricts only foreign nationals “domiciled” in a country of concern. After a long analysis of Florida law governing domicile, the court held that all the individual plaintiffs except Xinxi Wang are domiciled in the United States, so the statute would not apply to their purchases. Neither Xinxi Wang nor Multi-Choice Realty presented adequate evidence of an actual or imminent property purchase affected by the provision, so they also lacked standing. Both the district court and Judge Wilson (writing in dissent) disagreed with the majority’s analysis of domicile under Florida law, in part because two plaintiffs had temporary work visas, which arguably foreclosed them from forming the requisite intent to stay in Florida indefinitely, meaning that they were still domiciled in China.

With respect to SB 264’s other requirements, the court of appeals held that one plaintiff had standing to challenge the registration requirement and another had standing to challenge the affidavit requirement. Because Xinxi Wang, a student still domiciled in China, owns property in Florida within 10 miles of a military installation, the Eleventh Circuit found that the law’s provision requiring registration of ownership affected her. The court found that the costs of registration (in terms of both time and money) constituted a “concrete and particularized” injury adequate to confer standing. Similarly, Yongxin Liu adequately alleged that he intended to purchase property, that the purchase was imminent, that the provision requiring an affidavit of compliance with SB 264 would apply to the purchase, and that compliance would impose costs.

For the two plaintiffs with standing, the court of appeals evaluated their likelihood of success on the merits. The plaintiffs raised four challenges to the registration and affidavit requirements: equal protection and due process based on the U.S. Constitution, federal statutory preemption, and statutory violations of the Fair Housing Act, 42 U.S.C. §§ 3601-3619.

Equal Protection

Plaintiffs argued that SB 264 violates the Fourteenth Amendment’s Equal Protection Clause because it involves a facial classification by national origin and alienage or, in the alternative, that even if the statute is facially neutral, it constitutes intentional discrimination. Either way, according to the plaintiffs, the law is subject to strict scrutiny, an exacting standard that the law does not meet. The Eleventh Circuit rejected both theories.

Focusing on the text of the statute, the court reasoned that the word “domicile” does not discriminate based on national origin and that strict scrutiny was thus not appropriate. The court explained that although the plaintiffs “simply assumed, without evidence, that Chinese domicile and Chinese national origin are the same thing,” in fact someone can be domiciled in China without being of Chinese origin. As to alienage, although the statute’s registration requirement does classify based on alienage, the court cited a series of cases culminating in Terrace v. Thompson  (1923), in which the Supreme Court held that land ownership is a narrow exception to the typical strict scrutiny for facial classifications and  states may deny non-citizens the right to own land as long as the decision is not arbitrary or capricious.  The dissent reasoned that Supreme Court has since expanded strict scrutiny protections for aliens, suggesting that Terrace has been undermined or implicitly overruled. But the majority reasoned that rational basis review would apply regardless of whether Terrace remains good law and held that the plaintiffs were unlikely to succeed on a facial classification theory.

Plaintiffs also failed to make an adequate showing that the registration and affidavit requirements are “intentionally discriminatory.” The court was not convinced that the history of the statute showed an intent to discriminate against Asian people or Chinese nationals because the “plaintiffs rely on the statement of a single state senator,” and because the record shows that “national, individual, land, and food security concerns,” rather than racial animus, motivated the statute. The distinction between people domiciled in China and Chinese nationals played a role here, too. The court reasoned that the state’s interest in restricting the land owned by people domiciled in China was not the same as discrimination against people of Chinese origin.

Fair Housing

The court quickly dispensed the plaintiffs’ claim under §3604(a) of the Fair Housing Act. Because the provisions at issue – registration and affidavit – do not actually limit who can own property, they do not restrict home ownership or housing access in ways prohibited by the Fair Housing Act.

Due Process

The plaintiffs argued that SB 264 is unconstitutionally vague under the Fourteenth Amendment’s Due Process Clause. Specifically, they challenged the terms “military installation,” “critical infrastructure,” and “domicile.” The court made short work of this claim, reasoning that the first two terms are extensively defined in the statute. The court also reasoned that “domicile” is a common term of art that is “easily discernible from common understanding and practice” – a point somewhat in tension with the difficulty the court had in applying the term “domicile” to the facts of this case.

Preemption

Finally, the court agreed with the district judge that the plaintiffs are unlikely to succeed on their claim that the affidavit and registration provisions of SB 264 are preempted by federal law. The plaintiffs argued that the federal foreign investment regime constitutes “field preemption” that expresses a congressional intent to exclude any state regulation. They relied on Supreme Court precedent in Crosby v. National Foreign Trade Council (2000), which prevented Massachusetts from imposing its own sanctions on Burma. The Eleventh Circuit reasoned that Crosby does not apply because Florida’s registration and affidavit requirements do not prohibit transactions in the way Massachusetts law did. Instead, the requirements of the Florida law support compliance with federal law by enhancing the documentation process that already exists at a federal level. The majority further noted that, although the dissent does identify possible conflicts between the purchase provision of the statute and the federal regime, none of the plaintiffs have standing to challenge it.

The dissent disagreed. Congress has already promulgated extensive registration requirements for foreign investors in the Foreign Investment Risk Review Modernization Act, the dissent reasoned, expressing Congress’s intent to regulate the whole field of foreign investment. The dissent correctly noted that in Crosby, too, the state and federal laws were pursuing the same objective. Crosby reasoned that “‘conflicts are not rendered irrelevant’ just because the state and federal government ‘share the same goals.’” According to the dissent, Florida’s regulation thus occupies a space in which the the federal government has sought to speak with a unified voice meaning that the plaintiffs are likely to succeed on their preemption claim.

Conclusion

As Shen v. Simpson illustrates, plaintiffs around the country face many hurdles as they seek to challenge state-level restrictions on land ownership by foreign nationals. A Texas district court has rejected a challenge to Texas’s SB 17, which restricts property ownership by individuals “aligned” with China, Russia, Iran, and North Korea, holding that the plaintiffs lacked standing. The difficulty finding plaintiffs with standing means that courts are not fully engaging with these lawsuits on their merits, but it may also mean that the statutes are not (yet) having a significant impact on actual purchasing decisions.