The Ninth Circuit has determined that USCIS may rely on the denial of a petition to find that the petition was not approvable when filed so long as the denial was on the merits, and not based on a procedural finding or based on circumstances that changed after the petition was filed.  Though USCIS is permitted to reevaluate the merits of a denied petition at the time an applicant is applying for adjustment of status, it is not required to do so.  

The full text of Hsiao v. Hazuda can be found here: