Recently, a group of Chinese citizens living in Florida and a real estate brokerage firm—whose clients are primarily Chinese and Chinese American—have filed a lawsuit (Shen v. Simpson, No. 4:23-cv-208 (N.D. Fla. 2023)) against the state of Florida alleging that the state’s new foreign ownership law, Senate Bill 264 (“SB 264”), violates the United States Constitution. According to the plaintiffs, SB 264 violates their equal protection rights promised under the Constitution because the law restricts their ability to purchase real property because of their race. They also allege SB 264 violates the Due Process Clause and the Supremacy Clause of the Constitution and the Fair Housing Act (“FHA”). The plaintiffs are seeking an injunction against the implementation of SB 264 before it goes into effect on July 1, 2023.

This is the first of two articles discussing the legal arguments raised by the plaintiffs in Shen. This article discusses the plaintiffs’ equal protection and due process claims.

Background

On May 8, 2023, Governor Ron DeSantis signed into law SB 264, which seeks to restrict certain foreign purchases and investments in specific types of real property located within the state. Specifically, the law restricts a “foreign principal” from directly or indirectly owning, holding, or acquiring “by purchase, grant, devise, or descent agricultural land or any interest…in such land, and land within 10 miles of any military installation or “critical infrastructure facility” located within the state.

A “foreign principal” includes governments, governmental officials, and political parties and its members of a “foreign country of concern.” The countries considered as a “foreign country of concern” under the law include China, Russia, Iran, North Korea, Cuba, Venezuela’s Nicolás Maduro regime, and Syria. Further, a business entity organized or having a principal place of business in a foreign country of concern is a foreign principal under the law. An individual “who is domiciled in a foreign country of concern” and is not a U.S. citizen or lawfully permitted to reside in the U.S. is a foreign principal subject to the restriction prescribed under the law. Last, any “entity or subsidiary formed for the purpose of owning real property” is a foreign principal when a controlling interest in the entity or subsidiary is held by a party that qualifies as a foreign principal.

Aside from the restriction on foreign principals, Florida’s new foreign ownership law restricts certain Chinese investments in the state’s real estate. Specifically, SB 264 restricts the Chinese government and its members, Chinese business entities, and individuals “domiciled in” China who non-U.S. citizens or lawfully permitted to reside in the U.S. from acquiring any interest in real property within the state. However, individual persons may purchase one residential property that is up to 2 acres if (1) the property is not within 5 miles of a military installation, (2) the individual has been granted asylum in the U.S. or holds a valid U.S. visa that is not limited to tourist-based travel, and (3) the purchase is in the name of the individual holding the visa or asylum documentation.

Foreign principals and Chinese investors that acquired an interest in real property before July 1, 2023, may continue holding that interest, but they may not acquire any additional real property within the state.

Chinese investors that hold or acquire an interest in Florida real property on or after July 1, 2023, are required to report this interest to the Florida Department of Economic Opportunity (“FDEO”). Foreign principals that hold or acquire an interest in agricultural land are required to report this interest to the Florida Department of Agriculture and Consumer Services (“FDACS”), and landholdings within 10 miles of a military installation or critical infrastructure are to be reported to FDEO. Parties that fail to file a disclosure are subject to a penalty of $1,000 each day the disclosure is late.

Land held by foreign principal or a restricted Chinese purchaser in violation of the restriction under SB 264 is subject to forfeiture to the state, meaning the state acquires title to the property. Further, it is a second-degree misdemeanor for foreign principals to purchase land and for persons to knowingly sell land to foreign principals in violation of SB 264. Additionally, Chinese purchases of land in violation of SB 264 constitutes a third-degree felony and persons that knowingly sell land to a Chinese purchaser in violation of the restriction law are subject to first-degree misdemeanor charges.

Shen v. Simpson

On May 22, 2023, four Chinese citizens—which hold nonimmigrant visas—who reside in Florida and Multi-Choice Realty, a Florida-based real estate firm, came together to bring a lawsuit against FDACS, FDEO, and the Florida Real Estate Commission (“FREC”) to challenge the state’s restriction on certain foreign investments in land created under SB 264. Specifically, the plaintiffs claim the state’s law is unconstitutional because it violates the plaintiff’s’ rights to equal protection and due process, rights under FHA, and is preempted by federal law. Accordingly, the plaintiffs are seeking the court to issue an injunction to prevent the state from implementing SB 264.

Equal Protection Claim

In general, the Equal Protection Clause of the Fourteenth Amendment guarantees that the government must treat a person in the same manner as others in similar situations. While a state can enact laws that discriminate, it must have a legitimate governmental interest for drawing distinctions between individuals under the law. According to the plaintiffs, SB 264 discriminates against them on the basis of their race, ethnicity, color, alienage, and national origin—also known as a “suspect classification”—because it prohibits land purchases on the basis of the plaintiffs’ Chinese alienage.

When a law discriminates against individuals based on a suspect classification, a court generally uses strict scrutiny to review the law to determine its constitutionality. For a law to pass strict scrutiny review, the state must prove the law was passed to advance a compelling governmental interest that is narrowly tailored to achieve that interest. The plaintiffs in Shen allege that the governmental interest advanced under SB 264 is to prevent certain foreign investments in real property located within the state, but the law is not narrowly tailored to meet this interest because it makes “impermissible classifications based on race, ethnicity, color alienage, and national origin that are not justified by” the state’s interest. The plaintiffs claim the law “invidiously targets” individuals based on a suspect classification and as a result, they “have and will continue to be discriminated against and subject to discriminate treatment…simply because they are Chinese persons within the meaning of the new law.”

Due Process Claim

In their complaint, the plaintiffs allege SB 264 violates their right to due process guaranteed under the Constitution. The Due Process Clause of the Fourteenth Amendment guarantees due process of law before the government may deprive someone of life, liberty, or property, which usually consists of notice and an opportunity to contest the government’s action. The plaintiffs claim SB 264 is unconstitutionally vague, indefinite, and ambiguous, and therefore fails to provide sufficient notice as required under the Due Process Clause. A law is unconstitutional vague, indefinite, and ambiguous if it “fails to provide a person of ordinary intelligence fair notice of what is prohibited….” United States v. Williams, 553 U.S. 285, 304 (2008).

According to the plaintiffs, SB 264 does not clearly define “critical infrastructure facility,” “military installation,” and “domicile,” and thus “fails to provide sufficient notice about which properties and persons are subject to” the restriction prescribed under the state’s law. Specifically, the individual plaintiffs, because of their nonimmigrant visa status, contend that it is unclear whether they are considered to be “domiciled in China” within the meaning of SB 264, and thus subject to the restriction prescribed under the law.

Conclusion

Shen v. Simpson is the first lawsuit filed that challenges a foreign ownership law enacted in 2023, but it is not the first time foreign ownership laws have been challenged. Foreign ownership laws that sought to restrict Asian acquisitions of farmland enacted by several states—particularly Pacific coast states—during the 1920’s and World War II faced multiple challenges throughout this period. Most states ultimately repealed their laws in the 1950s likely due, in part, to two U.S. Supreme Court decisions that concluded these laws specifically restricting Asian land ownership were vulnerable to equal protection and due process challenges. See Oyama v. California, 332 U.S. 633 (1948); Takahashi v. Fish & Game Comm’n, 334 U.S. 410 (1948). Additionally, some state courts invalided their foreign ownership laws targeting Asian land acquisitions. See Kenji Namba v. McCourt, 185 Ore. 579, 204 P.2d 569 (1949); Fujii v. State, 38 Cal. 2d 718, 242 P.2d 617 (1952); State v. Oakland, 129 Mont. 347, 287 P.2d 39 (1955). However, each of these cases involved “resident aliens” permanently residing in the U.S., not foreign individuals that have a temporary right to reside in the country.

An update to this article will be published as this lawsuit moves forward.

To read the plaintiffs’ complaint, click here.

To read SB 264, click here.

For compilation of state laws governing foreign ownership of agricultural land, click here.

To learn more about foreign ownership of agricultural land, click here.

Subscribe to NALC’s bi-weekly newsletter The Feed for recent legal developments affecting agriculture, including foreign ownership of agricultural land here.

For previous issues of The Feed, click here.