"No duty to mitigate damages," says North Carolina Supreme Court

The North Carolina Supreme Court has handed down an important decision that makes two important rulings for I-864 beneficiaries. Zhu v. Deng, No. COA16-53 (N.C. Dec. 6, 2016) was a case brought by a Chinese national against her U.S. citizen husband and his parents. Before immigrating, the couple had a pair of marriage ceremonies in China, and had received $150,000 in gift money. That money came to be controlled by the husband’s parents, who refused to relinquish it to the wife. Litigation followed, in which the wife made claims to the gift money and to support under the Form I-864, Affidavit of Support. The litigation was against both the husband – who had been her K-1 fiancée visa petitioner – and also against his parents. The parents had signed a Form I-864A as members of the husband’s household.

On appeal, the North Carolina Supreme Court made two rulings that will be very useful to future I-864 plaintiffs.

Most importantly, the Court held that the I-864 beneficiary-plaintiff had no duty to mitigate damages. The lower court had reached the opposition conclusion. The duty to mitigate essentially means that a court will impute income to an I-864 plaintiff if the court believes the individual is voluntarily unemployed. But in holding that the duty to mitigate does not apply, the Zhu case means that damages calculations are simply a matter whether the plaintiff has actually be earning income. Under Zhu, a court will not speculate about whether a plaintiff could be earning income, only if she actually is.

The holding in Zhu follows a seminal Seventh Circuit opinion authored by Judge Posner, Liu v. Mund, 686 F.3d 418, 422 (7th Cir. 2012). It is now accurate to say that the prevailing view in the United States is that the duty to mitigate does not apply in I-864 enforcement cases. This approach is consistent with the congressional purpose behind the Affidavit of Support, which is to ensure that the sponsored immigrant has a safety net.

Second, Zhu holds that an I-864 plaintiff’s assets are irrelevant to whether she is entitled the calculation of damages. The parent-defendants in Zhu argued that their support obligation should be offset by the plaintiff-beneficiary’s gift money. But the Supreme Court disagreed. The Court stated:

Assets do not amount to income, and a judgment, even a monetary one, is not necessarily an asset for purposes of income. [. . .] Notably, plaintiff-husband listed $150, 000.00 under a heading titled "Assets of the principal sponsored immigrant" on his Form I-864A. This fact had no bearing or impact on the government's requirement that contracts of support were necessary for [the plaintiff-beneficiary] to become a permanent resident, and nor should a judgment against defendant-parents in the amount of $67, 620.

This is another important ruling for I-864 plaintiffs.

The basic formula for calculating damages in I-864 cases is simple: 125% of the Federal Poverty Guidelines for the I-864 beneficiary’s household size, minus any “income” that she has earned. But courts have struggled to define “income” for this purpose. Some courts have taken the approach of turning to the definition contained in the IRS guidelines for federal income tax. See, e.g., Toure-Davis v. Davis, No. WGC-13-916 (D. Md. March 4, 2014) (memo. op.).

But other courts have applied inconsistent standards. This led one federal court in Dahhane v. Stanton to hold that $3,000 brought to the U.S. by an I-864 beneficiary counted as “income” for purposes of offsetting the sponsor’s liability. No. 15-CV-1229 (PJS/BRT) (D. Minn., Aug. 12, 2016) (Order on plaintiff’s objection to magistrate’s report and recommendations). That incorrect conclusion is directly at odds with the holding reached by the North Carolina Supreme Court in Zhu.

The Zhu opinion joins the line of cases that clearly distinguish between income, which offsets a sponsor’s liability, and assets, which do not.

The plaintiff-beneficiary was represented by attorney Nicholas J. Dombalis, II and we applaud his advocacy on this matter.