Foreign Ownership of U.S. Real Property: Developments in Shen v. Simpson

Foreign Ownership of U.S. Real Property: Developments in Shen v. Simpson

Legal Sidebari

Foreign Ownership of U.S. Real Property:
Developments in Shen v. Simpson
March 4, 2024
As described in this CRS Legal Sidebar, lawmakers have considered and promoted various legislative
options to restrict ownership of land by certain foreign entities. One such law, Florida’s SB 264,
establishes certain land ownership restrictions pertaining to foreign entities associated with certain
countries of concern. This country list includes the People’s Republic of China (PRC), the Russian
Federation, and the Islamic Republic of Iran, among others. SB 264 creates further restrictions
specifically for the PRC and associated entities.
In February 2024, the U.S. Court of Appeals for the Eleventh Circuit (Eleventh Circuit) granted, in part, a
motion for an injunction pending appeal filed by a group of PRC citizens and a Florida corporation
challenging SB 264 on various grounds. The scope of the ruling is limited, with the court restricting SB
264 from being enforced against two of the plaintiffs while the court reviews a lower court decision
against such an enforcement limitation against all of the plaintiffs while their case proceeds in court. In
reaching this decision, however, the court concluded that the plaintiffs would likely prevail in their
argument that SB 264 is preempted by federal law. This Legal Sidebar summarizes the status of this
action and potential related considerations for Congress.
Enforcement of SB 264 Against Two Plaintiffs
Preliminarily Enjoined Pending Appeal
Following Florida’s passage of SB 264, several plaintiffs, including PRC citizens with interests in Florida
property, challenged the state law on various grounds, including violations of equal protection under the
U.S. Constitution and preemption under “federal regimes governing foreign affairs, foreign investment,
and national security.” After the federal district court denied a preliminary injunction motion to ban
enforcement of SB 264 against the plaintiffs during the pendency of their legal challenge, the plaintiffs
appealed to the Eleventh Circuit. The Eleventh Circuit’s February 2024 order granting, in part, the
plaintiffs’ motion for an injunction pending appeal grounds the court’s reasoning in the belief that
plaintiffs showed “a substantial likelihood of success” as to the claim that portions of SB 264 are
preempted by 50 U.S.C. § 4565, including the Foreign Investment Risk Review Modernization Act of
2018 (FIRRMA). These laws authorize the activities of the Committee on Foreign Investment in the
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United States (CFIUS), an interagency executive branch committee charged with reviewing certain
transactions, such as mergers and acquisitions, for national security risk where there is a foreign acquirer
of a U.S. entity. The court also concluded that the plaintiffs satisfied other injunction factors but expressed
that this type of “extraordinary equitable relief” is appropriate only where the filing party would
experience a harm that cannot be fixed. Here, the court determined that two of the plaintiffs qualified for
such relief because they have recent and pending real estate transactions.
The circuit court’s four-page order concluded that the plaintiffs would likely succeed in their preemption
challenge, but it did not detail the basis for this determination. Although the court did not explain the
reasons for its conclusion, it approvingly cited Supreme Court and Eleventh Circuit decisions finding
state laws unenforceable when they undermined the discretion federal law afforded the President in the
realm of foreign affairs. The plaintiffs cited these cases when arguing that CFIUS preempts portions of
SB 264. The lower court was not persuaded by these arguments when it denied plaintiffs’ preliminary
injunction request, reasoning that the CFIUS regime meaningfully differs from the federal laws at issue in
those earlier cases, and further deciding that states’ long-standing regulation of land acquisition by foreign
nationals counseled against construing CFIUS to preempt laws like SB 264.
The order did not address the plaintiffs’ equal protection challenge to the statute, but one circuit judge
wrote a concurrence arguing that relief also should have been granted based on those claims. The
concurrence emphasized that the Fourteenth Amendment to the Constitution “protects citizens and non-
citizens alike.” The U.S. Department of Justice supported the plaintiffs’ equal protection arguments in this
case.
Along with the Eleventh Circuit’s decision to grant an injunction pending appeal prohibiting enforcement
of SB 264 against two individual plaintiffs until the circuit court’s review of the lower court’s decision,
the Eleventh Circuit also agreed to review the lower court decision on an expedited basis, with oral
arguments scheduled for April. As the case proceeds, the reviewing panel “will be better positioned to
determine the issues presented on appeal.”
Considerations for Congress
Congress has considered various types of legislative action to address foreign ownership of U.S. land. The
plaintiffs in Shen v. Simpson argue that portions of SB 264 are preempted by laws establishing CFIUS
authorities. Application of CFIUS authorities turns on the establishment of jurisdiction (covered real
estate), after which CFIUS may review the transaction in question for national security purposes. Some
lawmakers may feel that CFIUS’s jurisdiction does not reach all land purchases in which lawmakers have
an interest, such as land that lacks proximity to a military installation or critical infrastructure but may
have some other value. Others may feel that a narrow scope of CFIUS review is appropriate for a legal
framework that can restrict purchase and ownership of real property.
Real estate is not the only market in which states have sought to limit participation by certain foreign
entities. Recent challenges to Montana’s TikTok ban illustrate how state legislation foreclosing foreign
participation in varied state markets may prompt litigation. The ultimate results of these suits may provide
additional insight into the degree of federal exclusivity in these realms.

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Author Information

Sanchitha Jayaram

Assistant Director/ALD

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