some courts not all courts recognize that USCIS looses jurisdiction.Only the second,fourth and ninth circuits does the court agree that USCIS looses jurisdiction once a lawsuit is filed and thus the USCIS cannot deny your application once a lawsuit is filed because they do not have jurisdiction.Check this out;
The statute vests jurisdiction over the suit in the district court.
Section 1447(b) explicitly gives the district court jurisdiction over the action. There is a
question, however, as to whether this jurisdiction is exclusive, or whether the agency
retains concurrent jurisdiction over the application. Frequently, after suit is filed under §
1447(b), USCIS will adjudicate the naturalization application and file a motion to dismiss
the district court proceedings as moot. The agency takes the position that it retains
concurrent jurisdiction with the district court. Moreover, where the application is denied
by USCIS, it takes the position that, after the § 1447(b) case is dismissed, the applicant
must exhaust the administrative appeal required by statute before seeking federal court
review of the denial. See 8 U.S.C. § 1421(c); 8 U.S.C. § 1447; 8 C.F.R. § 336.9(d); cf.
Chavez v. INS, 844 F. Supp. 1224 (N.D. Ill. 1993) (finding no jurisdiction to reinstate §
1447(b) suit where agency denied application following remand; applicant had to exhaust
administrative remedies before seeking judicial review under 8 U.S.C. § 1421(c)).
Three courts of appeals and a number of district courts reject USCIS’ position and instead
hold that a district court has exclusive jurisdiction upon the filing of a § 1447(b) action
and that USCIS is without jurisdiction to decide the naturalization application unless the
district court remands the case. See, e.g., Bustamante v. Napolitano, 582 F.3d 403 (2d
Cir. 2009); Etape v. Chertoff, 497 F.3d 379 (4th Cir. 2007); U.S. v. Hovsepian, 359 F.3d
1144 (9th Cir. 2004); Taalebinezhaad v. Chertoff, 581 F. Supp. 2d 243 (D. Mass. 2008);
Castracani v. Chertoff, 377 F. Supp. 2d 71 (D.D.C. 2005); see also Al Maleki v. Holder,
558 F.3d 1200, 1205 n.2 (10th Cir. 2009) (finding it unnecessary to answer the question
but noting the persuasive reasoning of Hovsepian and Etape). Thus, in the Second,
Fourth and Ninth Circuits, a denial of the application by USCIS after the § 1447(b) action
is filed is without force because the agency had no jurisdiction to make the decision.