Siskind Summary – National Venture Capital Association v. Duke (filed 9/19/2017)
By Greg Siskind (email@example.com)
There are six plaintiffs – the National Venture Capital Association, two individual company founders and two startup companies. The defendants are Elaine Duke, acting Secretary of the Department of Homeland Security and DHS itself as well a James McCament, acting Director of USCIS and USCIS itself.
The plaintiffs are suing over the “unlawful delay” of the start date of the International Entrepreneur Rule which will allow entrepreneurs to stay in the US to grow their new companies. The complaint’s introduction explains the benefits of the new rule and the reasoning behind its creation.
The final rule issued on January 17, 2017 was set to take effect on July 17, 2017. Beginning on that date, applicants were supposed to be able to apply for “parole” which would allow work and travel if they could demonstrate a substantial role and ownership stake in a company founded in the US in the last five years and that the company received a substantial amount of funding from investors or present other comparable “evidence of substantial and demonstrated potential for rapid business growth and job creation.”
On July 11th, the Trump Administration announced the effective date of the rule would be delayed until March 14, 2018 and that it intended to reconsider the rule in light of the President’s executive order directing DHS to “ensure that parole authority … is exercised only on a case-by-case basis.” The Defendants admit the “delay” is a de factor repeal.
Defendants did not provide any notice or opportunity for advance comment to the public. Instead, Defendants offered a “post-promulgation public comment” on their decision to delay the rule.
Justification offered for a lack of notice and comment was the Administration Procedure Act’s “good cause exception to public participation” which allows agencies to skill notice and comment in extraordinary circumstances. It would waste limited agency resources implementing a rule that will almost certainly be rescinded.
The delay is unlawful under the APA. Courts make notice and comment the default and the good cause exception is to be narrowly construed and invoked in extraordinary circumstances. DHS could have offered a comment period during the six months after the executive order was released up until the rule’s effective date.
Plaintiffs are requesting the court declare the delay of the rule invalid and enjoin Defendants to begin accepting and adjudicating parole applications from qualified entrepreneurs.
National Venture Capital Association – the largest organization of venture capitalists in the US. NVCA notes that if the effective date of the rule continues to be postponed, its members will be harmed because many have invested in companies with foreign founders and the suspension of the rule has made it more difficult for NVCA members to make new investments in companies founded by foreign entrepreneurs.
Atma and Anand Krishna – two brothers who are citizens of the United Kingdom and are founders of LotusPay a digital payment platform. Received funding from the prestigious startup accelerator Y Combinator. Anand is on a soon to expire B-1 business visitor visa. Atma has already left the country.
Omni Labs, Inc. – provides companies with a platform for data visualization and analytics to ain in their marketing operations. Two of the founders are Indian citizens – Nishant Srivastava and Vikram Tiwari. Prior H-1B and L-1 applications have failed. They got Canadian permits and reside there today. Company maintains a Vancouver office because of an inability to get a US visa.
Peak Labs LLC (doing business as Occasion) – a platform that service provides can use to book appointments and receive payments. The company already has six US workers and plans to hire more as it expands. Customer base of over 3,500 businesses and 500,000 people have used the booking software. The company has already received $1.5 million in investment from angel funds. Founder Pelle ten Cates is a Netherlands citizen who failed to get an H-1B visa in the lottery.
Defendants – Description of the government officials and agencies named.
Jurisdiction and Venue
28 USC Section 1331 – there exists between the parties an actual and justiciable controversy
Defendants’ delay of the rule constitutes a “final agency action” reviewable under the APA (“an order delaying a rule’s effective date is tantamount to amending or revoking a rule” and constitutes reviewable final agency action).
Filed in DC District Court because defendants reside there.
Immigrant Entrepreneurs Benefit the United States
Plaintiffs discuss the various economic and other benefits immigrant entrepreneurs provide the US. Also explains why other visa options are frequently unavailable and why the lack of such paths disadvantages the US in the global economy.
The International Entrepreneur Rule
Explains the history of the rule and the criteria for applying for entrepreneur parole. Notes that even if applicants meet the rule criteria, an adjudicator must “conclude, based on the totality of the circumstances, that both: 1) The applicant’s parole would provide a significant public benefit, and 2) the applicant merits a grant of parole as a matter of discretion.”
“As DHS noted, the Rule falls well within the Secretary of Homeland Security’s authority under current law to ‘parole individuals into the United States, on a case-by-case basis for urgent humanitarian reasons or significant public benefit.’” Examiners maintain discretion and rule is designed to provide general criteria.
DHS stated in final rule that it would “increase and enhance entrepreneurship, innovation and job creation in the United States.” It also rejected the idea that it would harm the US labor market.
DHS gave the rule an effective date of six months from promulgation in order to ensure it had time to properly roll out.
The Unlawful Delay of the Rule
DHS waited until the last minute and then delayed effective date almost a year. DHS provided no advance notice of the delay nor did it give the public any opportunity to comment on the decision in advance.
DHS actions are largely a charade. It has made clear it intends to rescind rule and post-delay comments are meaningless “nothing more than theater.”
The Harm Caused to Plaintiffs by the Delay
Outlines in more detail the harms faced by each plaintiff (expands on what has been summarized above).
First Cause of Action
The Delay of the International Entrepreneur Rule Violates the Notice-and-Comment Requirement of the Administrative Procedure Act, 5 USC Section 553
Notes requirement to provide notice and an opportunity to comment when issuing rules and gives a good cause exception when that process is impracticable, unnecessary or contrary to the public interest. Defendants didn’t provide advance notice-and-comment before delaying the effective date of the rule and Defendants failed to include an adequate statement of the reasons for their finding of good cause.
Good cause is plainly lacking. The section is to be rarely used and generally used for emergency situations. DHS’ two justifications – wasting resources and causing confusion – are adequate. DHS could have offered notice and comment in plenty of time. Claiming in the last week the need to expend additional resources is implausible. “DHS cannot seriously contend that it intended to develop a system for adjudicating applications, yet took no steps to do so, until the final week before the Rule was to take effect. Either DHS always intended to delay the Rule, and could have easily offered an opportunity for notice and comment to the public, or DHS has already expended significant resources in developing such a system, and any additional resources DHS would expend are minimal. Indeed, DHS already promulgated several of the documents needed to apply for parole when it promulgated the final Rule.”
DHS didn’t provide any details or factual findings corroborating claim of expending significant resources.
DHS claim that the public would rely on the rule to their detriment in the absence of a delay, Mobil Oil v. DOE case says that’s not enough for good cause. Courts have also rejected argument that “an alleged pressing need to avoid industry compliance with regulations that were to be eliminated” constitutes good cause for bypassing notice and comment. Environmental Defense Fund v. EPA.
Potential applicants had already taken steps to qualify for the rule such as hiring counsel, preparing paperwork and rearranging ownership stakes. Thus, any harm to the public has already occurred as a result of DHS’s last-minute decision to delay the rule.
And potential reliance interests were created by Defendants’ own procrastination.
DHS’s solicitation of “post-promulgation” comments does not make up for its failure to offer advance notice and comment. APA is designed to give affected parties an opportunity to participate in agency decision-making early in the process.
Request for Relief
Declare the delay a violation of APA’s notice and comment requirement, enjoin Defendants from delaying effective date and begin accepting and adjudicating applications, award plaintiffs their costs and aware other relief the court deems proper
Signed by American Immigration Council and Mayer Brown LLP