Court Denies Injunction Against Law Limiting Foreign Persons of Concern from Buying Real Property
- A federal district court on Aug. 17, 2023, declined to enjoin Florida's law limiting select persons from "foreign countries of concern" from directly or indirectly owning, having a controlling interest in or acquiring by purchase, grant, devise or descent any interest in real property in Florida.
- In Shen v. Simpson, the court determined that the plaintiffs have not shown a substantial likelihood of prevailing on the merits against Senate Bill 264.
A federal district court on Aug. 17, 2023, declined to enjoin Florida's law limiting select persons from "foreign countries of concern" from directly or indirectly owning, having a controlling interest in or acquiring by purchase, grant, devise or descent any interest in real property in Florida. The court determined that the plaintiffs have not shown a substantial likelihood of prevailing on the merits against Senate Bill 264 (Chapter 2023-33, Laws of Florida) (the Act).
The case is styled Shen v. Simpson, Case No. 4:23-cv-208-AW-MAF, before Judge Allen Winsor of the U.S. District Court for the Northern District of Florida.
The Court's Decision
The court began by rejecting several of the state's arguments for why the plaintiffs lack standing to challenge the Act. The state argued that the Act did not apply to the individual plaintiffs on the grounds that they are "domiciled" in the U.S. All live in Florida. They have property and work in Florida. One has no "plans to ever return to China." The state argued that their visa status was not pertinent, but the court disagreed. To obtain their visas, the plaintiffs had to declare that they did not intend to remain permanently or indefinitely in the U.S. Under Florida law, the best proof of domicile is where the individual says it is. The court ruled that at least one plaintiff has the likelihood of future concrete harm as to each claim, then proceeded to the merits.
The plaintiffs argued that the Act violates the Equal Protection Clause, Due Process Clause and Supremacy Clause of the U.S. Constitution and the Fair Housing Act (FHA). The court disagreed.
Beginning with the Equal Protection Clause and FHA, the court agreed with the state that the law classifies based on where an alien is domiciled rather than, as the plaintiffs argued, on grounds of race and national origin. The FHA does not apply in these circumstances.
In reliance on dated U.S. Supreme Court precedent that the plaintiffs argued was impliedly superseded and sought to distinguish, the court decided that the Fourteenth Amendment does not divest states of the power to deny to aliens the right to own land within their borders. In fact, the court determined that the Supreme Court has repeatedly declined to overturn this precedent. The court also rejected the plaintiffs' argument that racial, national origin or alienage discrimination motivated the new law for lack of any direct evidence of animus. In these circumstances, the court decided that rational basis review of the Act is required and met.
The court also rejected the plaintiffs' due process or void-for-vagueness claim because preenforcement vagueness challenges are cognizable when a statute prevents a litigant from engaging in constitutionally protected activity. The court ruled that the plaintiffs alleged none. In any event, the court disagreed that the language challenged in the Act such as "critical infrastructure facility," "military installation" or "domicile" was vague.
Last, the court disagreed that federal law enacting the Committee on Foreign Investment in the United States (CFIUS) or the Office of Foreign Assets Control (OFAC) preempted the Act. The plaintiffs relied on authority involving state infringements of federal diplomacy efforts, whereas the court ruled that the Act principally concerns security and addresses, according to the court, "one small part of the broader CFIUS regime" (i.e., real estate transactions). In addition, the court noted the history of state regulation of alien land ownership. Last, it was not lost on the court that when the U.S. submitted its "Statement of Interest" in support of the plaintiffs in this lawsuit, the U.S. did not argue preemption.
An appeal is possible. Meanwhile, the rulemaking required by the Act has already begun. The Florida Department of Economic Opportunity (DEO), now known as the Department of Commerce, issued its "Notice of Development of Rulemaking" to create a rule that prohibits the purchase of real property on or around military installations or critical infrastructure facilities by foreign principals. Likewise, the Florida Department of Business and Professional Regulation (DBPR) issued its Notice of Development of Rulemaking to adopt a rule that will implement a form for buyer's affidavits.
If you have questions about interpreting the Act or would like to participate in or comment on rulemaking, please contact the author or another member of the Florida Government Advocacy Team.
You may also consult Holland & Knight's previous alerts, "Briefs Illuminate Florida Law Limiting Foreign Persons from Acquiring Real Property," July 13, 2023, and "Florida Law Limits Persons from Foreign Countries of Concern from Acquiring Real Property," May 23, 2023.
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