Startups Sue Trump Administration Over Delay of International Entrepreneur Rule

Several Startup Companies Are Suing The Trump Administration Over Its Decision To Delay The Obama-era International Entrepreneur Rule

The National Venture Capital Association, along with several startup companies, is suing the Trump Administration over its decision to delay the Obama-era International Entrepreneur Rule. The immigration regulation, which would allow immigrant start-up founders to enter the country for up to five years under certain conditions, was slated to take effect in July. While the Department of Homeland Security (DHS) delayed the rule until March 14, 2018, the plaintiffs allege that its ultimate goal is to rescind the rule.

International Entrepreneur Rule

The International Entrepreneur Rule is based on the Immigration and Nationality Act (INA), which grants the Secretary of Homeland Security discretionary authority to grant individuals temporary permission to be in the United States (also known as “parole”) on a case-by-case basis, for urgent humanitarian reasons or significant public benefit. The rule would have established general criteria for the use of parole with respect to entrepreneurs of start-up businesses whose entry into the United States would provide a significant public benefit through “the substantial and demonstrated the potential for rapid growth and job creation.”

Under the proposed “International Entrepreneur Rule,” DHS may parole, on a case-by-case basis, eligible entrepreneurs of start-up enterprises:

• Who have a significant ownership interest in the startup (at least 15 percent) and have an active and central role to its operations;
• Whose startup was formed in the United States within the past three years; and
• Whose startup has substantial and demonstrated the potential for rapid business growth and job creation, as evidenced by:
  1. Receiving significant investment of capital (at least $345,000) from certain qualified U.S. investors with established records of successful investments;
  2. Receiving significant awards or grants (at least $100,000) from certain federal, state or local government entities; or
  3. Partially satisfying one or both of the above criteria in addition to other reliable and compelling evidence of the startup entity’s substantial potential for rapid growth and job creation.

Under the proposed rule, foreign entrepreneurs would be granted an initial stay of up to two years to oversee and grow their startup entity. An extension of up to three additional years would be available if the entrepreneur and the startup entity continue to provide a significant public benefit as evidenced by substantial increases in capital investment, revenue, or job creation.

In support of the International Entrepreneur Rule, the plaintiffs highlight that the U.S. economy has long thrived on the contributions of immigrant entrepreneurs. In 2016, 44 of the 87 start-ups in the United States valued at $1 billion or more were created by immigrants, according to a National Foundation for American Policy study.

“It is impossible to overstate the benefits that immigrant entrepreneurs and companies have provided to the American economy and the nation as a whole, and the concomitant importance of ensuring that immigrant entrepreneurs can come to the United States to continue to grow their businesses,” the complaint states.

Plaintiffs Allege Immigration Rule Delay Is “Unlawful”

The plaintiffs maintain that the Department of Homeland’s decision to delay the rule violated the Administrative Procedures Act because the agency failed to gather public comments prior to doing so. In its public notice, DHS stated: “Given that DHS will be proposing to rescind the [international entrepreneur] final rule, and may ultimately eliminate the program, the expenditure of these resources is unlikely to ever be recouped from filing fees under the new program.”

The plaintiffs argue that the refusal to accept public comments was not in the public interest and functioned as a “de facto repeal” of the immigration rule. “In light of the manifest importance of public participation in agency decision-making, courts have repeatedly explained that advance notice-and-comment is the default; the ‘good cause’ exception to notice-and-comment rulemaking must be narrowly construed and invoked only in extraordinary circumstances,” according to the complaint. “None of the rationales proffered by defendants constitute good cause.”

We will be closely tracking the lawsuit, as well as the DHS’s planned efforts to rescind the International Entrepreneur Rule. Please check back for updates.

Do you have any questions? Would you like to discuss the matter further? If so, please contact me, Jeffrey Cassin, at 201-806-3364.