EB-5 Statute of Limitations: A Risk Guide for Investors
EB-5 projects can run a decade, but an investor's legal claims may expire in as little as three years. Learn when the clock starts — and what to do before it's too late.
EB-5 projects can run a decade, but an investor's legal claims may expire in as little as three years. Learn when the clock starts — and what to do before it's too late.
After our firm filed several arbitrations on behalf of EB-5 investors against project sponsors, many investors who have not yet joined those proceedings have written in with questions. Their biggest concern is that their I-829 petition has not yet been filed or approved, and they worry that taking legal action could jeopardize their EB-5 status.
First, we want to make clear that if the project at issue has already created the qualifying jobs required for EB-5 approval, pursuing litigation or arbitration purely over repayment will not affect an investor's EB-5 petition. Conversely, whether a project has created sufficient jobs is not a question that a court or arbitral tribunal is concerned with or will address. Pursuing legal action and pursuing an immigration petition are two separate tracks that do not interfere with each other. The issue investors really need to focus on when deciding whether to join legal action is the statute of limitations. In a number of prior EB-5 lawsuits, investors have had their claims dismissed by the courts on statute-of-limitations grounds (as in the George Washington Bridge case, among others), losing the legal tools to protect themselves entirely. Because we are asked about this so often, we are addressing it here in a single, comprehensive response.
Under U.S. law, a statute of limitations is the period within which a party must assert its rights through litigation, arbitration, or another legal proceeding. In simple terms, if an investor's legal rights have been violated but the investor fails to take appropriate action within the period set by law, a court or arbitral tribunal will no longer hear that investor's claim, even if the investor has in fact suffered real losses.
It is particularly important to note that the statute of limitations generally does not begin to run when an investor "decides" to pursue their rights, nor when the investor receives a green card or completes the EB-5 process. The key question is when the underlying legal claim actually arose. For example, a breach-of-contract claim may arise once a project loan matures and is not repaid as agreed; a claim may arise when a distribution obligation becomes due but is not paid; and for conduct by management that may harm investors, the relevant claim may require analyzing both when the conduct occurred and when the investor knew, or should have known, the relevant facts.
For EB-5 investors, then, the question that truly matters is not "when will my I-829 be filed or approved," but rather "when did the project sponsor engage in conduct that may give rise to legal liability?"
Many EB-5 projects take years — sometimes more than a decade — from initial investment through completion of the immigration process. But the statute of limitations governing an EB-5 investor's investment claims is often far shorter.
Under Delaware law, for example, claims arising from contract, debt, fiduciary duty, or fraud are generally subject to a three-year limitations period, while claims to enforce payment on a promissory note that satisfies the requirements of the Uniform Commercial Code and specifies a fixed payment date may be brought within six years of the maturity date or accelerated maturity date.
Investors often mistakenly assume that because a project is still operating, its assets have not yet been sold, or the immigration process is not yet complete, there is no need to think about legal issues now. Within the same project, the loan agreement, security documents, LLC or limited-partnership agreement, preferred-equity terms, and management obligations may each carry different limitations periods. What actually matters is not when the investor files an I-829 petition or receives an unconditional green card, but when the underlying legal claim came into existence.
For instance, once an EB-5 project loan matures and the borrower fails to repay as agreed, a breach-of-contract claim may already have arisen; if the loan is accelerated before its scheduled maturity date due to another event of default, the relevant period may begin running even earlier. For claims involving fraud, misrepresentation, improper distributions, or breach of management obligations, it may be necessary to further analyze when the conduct occurred and when the investor knew, or reasonably "should have known," the relevant facts. That "should have known" standard is determined by a judge or arbitrator. As a result, even where an investor did not carefully read key information buried within a large volume of documents from management, a judge or arbitrator may still find that the investor "should have known" of the harm as of a certain date — and rule that the statute of limitations has already run.
A project sponsor's repeated assurances after a loan matures — that it is "in the process of refinancing," that repayment will follow "once the assets are sold," or requests that investors "continue to wait" — do not, on their own, toll the statute of limitations. Ordinary negotiations, project updates, demand letters, or reservation-of-rights letters likewise do not stop the limitations clock from running. Whether to file a protective lawsuit or arbitration, or to enter into an effective tolling agreement with the relevant parties, should be assessed based on the specific project documents and facts.
In short, the statute of limitations is an extremely important — and extremely dangerous — issue for investors. In many of the cases we have handled, fund managers and project sponsors have used a variety of tactics to keep investors in a prolonged, boiling-frog-style waiting pattern that ultimately runs out the limitations clock. Among the cases our firm handles, many investors are already standing at the very edge of the limitations period without realizing they are about to lose all of their legal rights.
Reid & Wise LLP represents investors and lenders in complex commercial litigation and investment dispute resolution matters across the United States, with extensive experience in EB-5 investment litigation on behalf of immigrant investors — from arbitration and federal court litigation to judgment enforcement. For background on the EB-5 program itself, see USCIS's EB-5 Immigrant Investor Program page.
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