Lawsuit Against ICE And Its Fake College Can Continue, Says Fifth Circuit

Legal Issues

from the can't-defraud-people-while-hunting-fraudsters dept

During the Trump administration, ICE came up with the highly questionable scheme of setting up a completely fake college solely for the reason of setting up immigrants on H-1B visas for failure. The DHS and ICE created a faux university in Michigan (the “University of Farmington”), complete with a (fake) social media presence. Then it “opened” its doors to students on H-1B visas, which allowed foreign students to remain in the United States as long as they continued their education.

The sting operation worked well enough to result in 161 arrests, but only eight criminal charges. More than 600 prospective students paid the $100 application fee. An untold number also paid tuition for classes they’d never be able to take.

The DHS didn’t offer any refunds, even to students cleared of wrongdoing. That has resulted in a least two class action lawsuits against the government for doing the exact thing it claimed it was trying to stop: defrauding foreign residents. ICE claimed the sting was meant to catch huckster middlemen who defrauded honest students. But it invalidated several visas just because students fell for its trickery. Then it had the temerity to suggest the students duped by the hoax school should have known it was a hoax.

You can’t run a successful sting operation if everyone knows it’s a sting operation. And yet, that was the argument made by the government in one lawsuit. That one was revived in 2019 by the Third Circuit Appeals Court, which said this group of plaintiffs could continue suing the government for cancelling their visas after they fell victim to ICE’s sting operation.

This lawsuit, which has been revived by the Fifth Circuit Appeals Court, makes a different claim: that students who paid application fees and tuition were defrauded by the government when it failed to deliver the education it promised in exchange for the money it took from H-1B visa holders. (h/t C.J. Ciaramella/Reason)

The decision [PDF] opens with a very brief recounting of the ICE sting operation.

Starting in March 2018, Ravi Teja Tiyagurra paid thousands of dollars to the “University of Farmington” to enroll as a student, expecting to take classes. At the time of his enrollment, Mr. Ravi was unaware that the University was not a university at all but had been formed and advertised to offer educational services for money—though not actually provide them—as an undercover operation of the United States Department of Homeland Security (DHS) to target fraud involving student visas. The government’s operation eventually came to light, but the government neither provided the paid-for education nor gave Mr. Ravi his money back.

A whole lot of procedural history dealing with government contracts, sting operations, and changes in precedent over the past fifty years is covered by the court before it starts spelling things out for the laypeople.

Of course, the government can engage in sting operations. And, of course, the government needs to go through all the motions necessary to make the faux operation seem as real as possible. In this case, that meant accepting application fees and tuition payments. But that doesn’t mean the government can renege on its end of its contract just because it never had any intention of offering classes to victims of its sting operation.

In so ruling, we do not doubt, of course, that the government entered into the contract at issue in order to carry out a sovereign function of discovering criminal activity it might then prosecute. But that is not the right focus of the inquiry. The same would be true of a lease the government entered into to set up an office to use in carrying out its undercover operation. The focus of the Kania exception, in our precedent, has been on the particular agreement and its subject, not the overall activity of which the agreement is a part.

In other words, the government can rent office space to conduct a sting operation. But it still has to pay the lease, even if it’s not really running a business out of that space. In this case, the government was obliged to either refund the money it took in its fake college sting or provide the paid-for services. What it can’t do is keep the money it accepted as part of an agreement with prospective students just because it never intended to provide educational services.

The government’s argument is so far off base and unsupported by any precedent, including the cherry-picked selections the government presented in its counterarguments. The Fifth Circuit says these arguments aren’t going to work here and, one assumes, won’t fare much better when this case returns to the lower court.

[T]he government relies on the notion that, because it was only pretending to operate a university, there could not have been intent to contract on its part, even though it took (and has kept) the money Mr. Ravi paid for the offered education, and it makes that assertion even accepting the assumption, required at the present stage of the case, that Mr. Ravi intended to obtain the education for which he was paying. The argument is that even when there is an objectively clear offer and acceptance, with acceptance in the form of paying money to the offeror, there is no contract enforceable against the offeror, for want of mutuality of intent, as long as the offeror had its fingers crossed behind its back when making the offer and accepting the money.

If nothing else, it looks like Mr. Ravi might finally get his tuition refunded. And if he does, anyone else who paid in and got nothing out of it should be expecting a refund as well. Perhaps the government will learn from this and run cleaner sting operations in the future. Then again, it never should have permitted this particular operation to take place, since it’s clear most of the people “caught” in the sting were just people honestly seeking to continue their education.

Filed Under: 5th circuit, dhs, ice, lawsuit, sting, sting operation, visas