The U.S. Court of Appeals for the Eleventh Circuit recently issued a decision in Shen v. Simpson, a case challenging Florida’s foreign ownership law, which has significant implications for real estate investments and constitutional law. The lawsuit, originating in May 2023, was filed by a group of Chinese citizens living in Florida who alleged that the state’s newly enacted foreign ownership law violates the United States Constitution. The Eleventh Circuit’s decision follows more than two years of litigation, including a federal district court’s denial of a preliminary injunction and the Eleventh Circuit’s grant of an injunction in early 2024 that prevented the state from enforcing its foreign ownership law against two individual Shen plaintiffs.
In a 2-1 decision, the Eleventh Circuit ruled that the Shen plaintiffs lack standing and are unlikely to succeed on their constitutional and federal preemption claims. The court addressed three preliminary issues—standing, the scope of review, and the provisions actually at issue—before turning to the plaintiffs’ constitutional and statutory claims. The court found that the plaintiffs lack standing to challenge SB 264’s restriction on real estate investments because they are domiciled in Florida, not China, and thus fall outside the scope of the restriction. However, the court did determine that one of the plaintiffs, Xinxi Wang, has standing to challenge the registration requirement under SB 264, and another plaintiff, Yongxin Liu, has standing to challenge the affidavit requirement.
The plaintiffs argued that SB 264 discriminates against them on the basis of their race, ethnicity, color, alienage, and national origin, which is known as a “suspect classification.” The Eleventh Circuit rejected the plaintiffs’ argument that the registration and affidavit requirements classify on the basis of national origin. The court found that the law does not discriminate based on national origin but rather on the basis of the country of domicile, which is a non-suspect classification. As a result, the court applied rational basis review, which is a lower level of scrutiny than strict scrutiny. The court found that the law is rationally related to a legitimate state purpose, which is to protect Florida’s real estate market from foreign adversaries.
The implications of this decision are significant for real estate investors and constitutional law. The decision upholds Florida’s foreign ownership law, which restricts certain foreign investments in real property located within the state. The law is designed to protect Florida’s real estate market from foreign adversaries, particularly those from China, Cuba, Iran, North Korea, Russia, and Venezuela. The decision also clarifies the scope of standing in constitutional challenges to state laws, which is an important issue in constitutional law.
The decision is also significant for real estate investors, particularly those from China. The law restricts Chinese investors from acquiring additional real property within the state and requires them to register their interests in real property to the Florida Department of Economic Opportunity. The law also requires all buyers of Florida real property to provide an affidavit signed under penalty of perjury attesting that they are not a prohibited buyer. The decision upholds these requirements, which will have a significant impact on real estate investments in Florida.
The decision is also significant for constitutional law. The court’s rejection of the plaintiffs’ argument that the law discriminates based on national origin is an important clarification of the scope of the Equal Protection Clause. The court’s application of rational basis review to the law is also significant, as it clarifies the level of scrutiny that applies to laws that discriminate based on non-suspect classifications. The decision is also significant for the doctrine of standing, as it clarifies the scope of standing in constitutional challenges to state laws.
In conclusion, the Eleventh Circuit’s decision in Shen v. Simpson is a significant development in the law of real estate investments and constitutional law. The decision upholds Florida’s foreign ownership law, which restricts certain foreign investments in real property located within the state. The decision also clarifies the scope of standing in constitutional challenges to state laws and the level of scrutiny that applies to laws that discriminate based on non-suspect classifications. The decision will have a significant impact on real estate investments in Florida and will be an important precedent in constitutional law.