Recently, a group of Chinese citizens living in Florida and Multi-Choice Realty, a Florida-based real estate brokerage firm, 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. As previously discussed in two NALC articles (here and here), the plaintiffs claim that 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 asked the court to issue a preliminary injunction to prevent the implementation and enforcement of SB 264 before it went into effect on July 1, 2023. On July 3, 2023, the state filed a response opposing the plaintiffs’ motion.
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” (“exclusion zones”) located within the state.
A “foreign principal” includes governments, business entities, and individuals who are “domiciled” in a “foreign country of concern.” “Foreign countries of concern” include China, Russia, Iran, North Korea, Cuba, Venezuela’s Nicolás Maduro regime, and Syria. Florida’s new foreign ownership law also 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 are 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 Chinese investors 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.
Chinese investors that hold or acquire an interest in Florida real property on or after July 1, 2023, are required to report their interests to the Florida Department of Economic Opportunity or risk a fine of $1,000 each day the disclosure is late. Chinese purchasers in violation of the restriction under SB 264 are subject to forfeiture, meaning the state acquires title and take legal possession of the property. Also, 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.
Plaintiffs’ Motion for Preliminary Injunction
On June 7, 2023, the plaintiffs in Shen filed a motion for preliminary injunction to prevent the Florida state government from implementing and enforcing SB 264. Although the law went into effect on July 1, 2023, the court can still issue a preliminary injunction that prohibits the state from further enforcing the law. Before a case goes to trail, some litigants file a motion to a court asking the judge for a preliminary injunction. Essentially, a preliminary injunction, if granted by the judge, restrains a party from beginning or continuing an action. Preliminary injunctions may be issued by a judge before or during trial, and these injunctions typically remain in effect until the case is fully resolved. Generally, a party asking for a preliminary injunction must satisfy four factors:
- A likelihood they can win the lawsuit based on the facts and evidence of the case;
- They will suffer irreparable injury if the preliminary injunction is denied;
- The threat of their injury outweighs any damage to the opposing party; and
- Granting the preliminary injunction will not harm the public interest.
When a litigant is asking for an injunction under this four-part test, the judge balances factors (1) and (2) against (3) and (4). If the first two outweigh the last two factors, a judge will most likely grant the party’s motion for an injunction. In the Shen plaintiffs’ motion for a preliminary injunction, they claim the judge must grant their motion because factors (1) and (2) outweigh factors (3) and (4).
Under the first factor, the plaintiffs argue they are likely to succeed in their lawsuit against the state at trail because SB 264 is unconstitutional because it violates their rights to equal protection and due process, rights under FHA, and is preempted by federal law. The plaintiffs claim that SB 264 violates their equal protection guarantee under the U.S. Constitution because the law discriminates against them on the basis of alienage, national origin, race, and ethnicity and excludes them from acquiring certain parcels of real property located within the state. According to the plaintiffs, the state law does not advance a compelling state interest—as required by law—because the state will be unable to provide evidence that barring Chinese investments in Florida real property is necessary to protect national security and Florida security.
The plaintiffs claim that SB 264 violates their due process rights because the law does not “adequately define or identify ‘military installations’ and ‘critical infrastructure facilities’…[or] ‘domiciled’, making it impossible for a person of ordinary intelligence” to know which properties and individuals are subject to the restriction prescribed under the law. 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. Because there is no catalog or map identifying exclusion zones and no indication of where individuals are “domiciled” for purposes of SB 264, according to the plaintiffs, the state law fails to provide sufficient notice required under the Due Process Clause.
Further, the plaintiffs claim SB 264 makes certain properties unavailable to some purchasers, particularly Chinese citizens, because of their race and national origin, which is a violation of FHA. Last, the plaintiffs assert SB 264 is unconstitutional because it violates the Supremacy Clause of the Constitution by conflicting with the federal government’s system to regulating land purchases. Specifically, federal law preempts SB 264 because Congress has authorized the federal government to manage foreign affairs, foreign investments, and national security through the Committee on Foreign Investment in the United States (“CFIUS”), and SB 264’s “blanket” approach to restricting real estate acquisitions conflicts with the federal regime, according to the plaintiffs.
The plaintiffs claim they meet the second factor of the balancing test because they suffer irreparable harm if the preliminary injunction is denied by the judge. According to the plaintiffs, the implementation and enforcement of SB 264 will require them to cancel real estate contracts and forfeit their deposits under these contracts, be viewed “with suspicion” from potential buyers of their properties, suffer discrimination from sellers of property, lose significant real estate business, and “will be denied fair opportunities to participate in the housing market on equal footing with other potential buyers.”
Next, the plaintiffs allege that factors (3) and (4) of the balancing test weigh in their favor because granting the preliminary injunction to halt the implementation and enforcement of SB 264 does not injure the Florida state government or the public interest. The third factor, according to the plaintiffs, favors their position because the state will not suffer an injury because the injunction would simply delay the enforcement of SB 264 because the state cannot identify “evidence of any harm sufficient to justify” the restriction prescribed under the law. However, if the court denies the injunction, the plaintiffs claim they will experience a “constitutional injury, unwarranted stigma, and significant financial harms….” Under the fourth factor, the plaintiffs argue it is in the public’s interest to prevent an individual’s constitutional rights from being violated. In their conclusion, the plaintiffs claim the court must issue a preliminary injunction because all four factors of the balancing test weights in their favor.
Defendants’ Response to Plaintiffs’ Motion
On July 3, 2023, the state of Florida filed a response challenging the plaintiffs’ request for preliminary injunction. Unlike the plaintiffs’ motion, the defendants’ memorandum claims the judge must deny the motion for preliminary injunction because factors (1) and (2) do not outweigh factors (3) and (4). The first factor, according to the defendants, favors their position because it is unlikely the plaintiffs can win a lawsuit. Specifically, the state claims that the plaintiffs are unlikely to succeed in their challenge to SB 264 because they lack standing, the law does not violate their constitutional rights, they are unable to prove discrimination under FHA, and the restriction is not preempted by federal law.
When bringing a lawsuit, plaintiffs must demonstrate they have standing. “Standing” is the legal right for a particular person to bring a claim in court, and plaintiffs that lack standing will have their case dismissed or remanded to a proper court. In general, plaintiffs establish standing by demonstrating an injury, a direct connection to the defendant, and a decision in the plaintiff’s favor will likely provide an adequate remedy for the injuries. According to the state, the Shen plaintiffs lack standing because they are unable to demonstrate they have suffered an injury under SB 264 because the law restricts those who are “domiciled” in China. The state claims the term “domiciled” is “well-defined” under Florida common law, which defines the term as the place someone is “physically present and intends to remain permanently or indefinitely.” See Keveloh v. Carter, 699 So. 2d 285, 288 (Fla. 5th DCA 1997). The state argues that the plaintiffs are “domiciled” in the U.S. because they are physically present in the U.S. because they live in Florida and intend to stay indefinitely or permanently. Therefore, the plaintiffs are not subject to the restrictions prescribed under SB 264.
The state also asserts that SB 264 does not violate the plaintiffs’ due process rights. According to the state, the terms “domicile”, “critical infrastructure facility”, “military installation”, and the distance calculations from these facilities and installations are not unconstitutional vague. Specifically, the state argues the terms “critical infrastructure facility” and military installation” are defined “in detail” under the statute, and the term “domiciled” is defined under state common law. Additionally, the state claims the distance calculations are not unconstitutionally vague because in Florida, “absent contrary indications in the statute, measurements are taken from the boundary of a property, extending outward in a straight line.” See State ex rel. Fronton Exhibition Co. v. Stein, 198 So. 82, 85–858 (Fla. 1940). “That easily administered distance calculation is not vague,” according to the state.
Further, the state argues that SB 264 does not violate the equal protection rights of the plaintiffs for a few reasons. First, the state points out that the U.S. Supreme Court has previously ruled that state law restrictions like SB 264 do not violate the Equal Protection Clause. See Terrace v. Thompson, 263 U.S. 197 (1923). Second, SB 264 does not discriminate against a purchaser based on their national origin or alienage, but restricts purchasers based on where they are domiciled. As a result, investors potentially subject to SB 264’s restrictions “encompass a wide range of ethnicities and national origins,” and are limited to investors domiciled in “foreign countries of concern.” Third, the restrictions under SB 264 are rational because “[t]hey are consistent with the long tradition in this country of restricting alien land ownership, rooted in concerns for public safety and state security,” according to the state.
Next, the state claims the plaintiffs will most likely fail in their claim that SB 264 violates the FHA. According to the state, the plaintiffs cannot prove SB 264 discriminates against them based on race and national origin because the FHA “does not prohibit discrimination on alienage” and SB 264’s restrictions are based on where an investor is domiciled, not race or national origin.
Last, the state argues that the plaintiffs’ claim that federal law preempts SB 264 is not likely to succeed. The state claims that the plaintiffs have no right to challenge CFIUS’s preemptive authority because federal law does not expressly permit citizens to challenge in court a state law as preempted by the CFIUS regime. Nevertheless, the CFIUS regime does not preempt SB 264 because regulating real estate transactions is a “historic and traditional state power,” and SB 264 “supplements CFIUS’s limited capacity to review and investigate real-estate transactions that pose national-security risks,” according to the state. Thus, the state asserts that the first factor of the balancing test favors their position because the plaintiffs are unlikely to win the lawsuit based on the facts and evidence of the case.
The state claims that factors (2), (3), and (4) of the balancing test weigh in their favor because the plaintiffs “alleged harms” are “premised on the mistaken views” that the restriction applies to them, and none of these “alleged harms outweigh the harm that the State and its citizens will suffer” if the court grants the preliminary. In their conclusion, the state requests the court to deny the plaintiffs’ motion for preliminary injunction. Furthermore, the state also asks the court to grant injunctive relief only to the plaintiffs in the lawsuit if it decides to grant the plaintiffs’ motion. In other words, the state is asking the court to only prohibit them from enforcing SB 264 against the Shen plaintiffs if the court grants the motion, meaning the state is permitted to continuing enforcing the restrictions prescribed under the law against other investors of Florida real estate.
Conclusion
Although Florida’s SB 264 went into effect on July 1, 2023, the court can still grant a motion for preliminary injunction. If the judge issues a preliminary injunction, it is unlikely the state will be able to enforce the restrictions prescribed under SB 264 against the Shen plaintiffs or all real estate investors that are subject to the restrictions under the law. If the court does not issue a preliminary injunction, the state may enforce the restriction against certain foreign investments in real property located within the state.
An update to this article will be published as this lawsuit moves forward.
To read the plaintiffs’ motion for preliminary injunction, click here.
To read the state’s response to this motion, click here.
To read SB 264, click here.
To read two NALC articles discussing the plaintiffs’ claims challenging SB 264, click here and here.
To learn more about foreign ownership of agricultural land, click here.
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