Trump’s Delay of Foreign Entrepreneur Rule Likely to Face Litigation

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By Michaela Ross

The Trump administration’s July 11 move to delay and repeal a rule that would create a path for foreign entrepreneurs to launch startups in the U.S.—on border security grounds—likely faces litigation, administrative and immigration attorneys told Bloomberg BNA.

The possible setback adds to the simmering tension between the Trump administration and the tech industry, which supports the Obama-era rule and has clashed with the president over his broader crackdown on legal immigration. The Obama administration estimated 3,000 entrepreneurs would be eligible to enter the U.S. each year under the rule.

The International Entrepreneur Rule—set to take effect July 17—would allow foreign-born startup founders to stay in the U.S. for up to 30 months if they meet certain requirements, such as investment targets. The last-minute delay and repeal may be challenged by individual founders, companies, or organizations that were counting on the rule’s implementation, attorneys said.

Immigrants have long fueled Silicon Valley’s tech machine—giants such as Alphabet Inc.'s Google, Tesla Inc., and eBay Inc. all have foreign-born founders—and the rule has strong backing, including from the National Venture Capital Association and FWD.us, an immigration group founded by tech icons like Bill Gates and Mark Zuckerberg.

A legal challenge to the rule’s delay and repeal would come on top of the legal scrutiny the administration has already faced for previous attempts to delay and rollback regulation without following administrative procedures.

“There is a good chance that a court would reject the weak argument that there is good cause to delay implementation without first going through the notice and comment process,” Richard Pierce, a George Washington University Law School professor and the author of over 20 books on administrative law and government regulation, said.

Upcoming Challenges

If all formal rulemaking steps are followed, the move to repeal the rule would likely take about a year, attorneys said. In the meantime, a legal challenge may result in a court ordering the Department of Homeland Security to begin accepting applications under the current system, Greg Siskind, an immigration attorney and founding partner of Siskind Susser PC in Memphis, Tenn., told Bloomberg BNA. Immigration and advocacy groups already are researching a challenge. An American Immigration Lawyers Association spokesperson confirmed to Bloomberg BNA that they are “exploring all options to challenge this action.”

The rule has been delayed until March 14, 2018, according to a Federal Register announcement published July 11 by Homeland Security—except for a provision related to identity verification. In the meantime, no applications are being accepted from founders, and Homeland Security will seek public comment on the rule’s repeal, a U.S. Citizenship and Immigration Services (USCIS) spokesperson told Bloomberg BNA.

Entrepreneurs on Parole

The rule has been frozen so Homeland Security can ensure it complies with President Donald Trump’s Jan. 25 executive order to improve border security, a USCIS spokesperson told Bloomberg BNA.

The order called for an end to what the administration called the “abuse” of parole status—a temporary permission to remain in the U.S. that’s granted by DHS. The status, which is not a visa, is typically granted to refugees or individuals who contribute “significant public benefit.” Under the rule, entrepreneurs are considered to offer such a public benefit. After meeting initial requirements, they would need to prove they have hit targets for U.S. job and revenue creation in order to extend their stays, up to a total of five years.

Final Rules Are Hard to Kill

The administration will likely face litigation on both delaying and attempting to repeal the rule, attorneys told Bloomberg BNA.

“The only reason they are delaying it is because they have a philosophical problem with the program, which is not how the Administrative Procedure Act works,” Siskind said. “I think they might’ve gotten some slack if they would’ve said there are some technical reasons that are delaying us from complying.”

Agencies have pushed back the effective dates of rules for reasonable circumstances, such as delays in paperwork or the technology needed to implement the rule, Siskind said. But in this case, Homeland Security has offered no technical reason for halting applications, he said.

The repeal attempt is also ripe for legal scrutiny, multiple attorneys said, pointing to a recent decision against the administration’s attempt to quickly repeal a U.S. Environmental Protection Agency rule. On July 3, the U.S. Court of Appeals for the District of Columbia Circuit said that the EPA did not have the authority to delay the effective date of a rule limiting methane emissions for oil and gas wells, and landfills. The judges in Clean Air Council v. Pruittruled the agency could not reverse regulations without undertaking a new rulemaking process.

Any changes to the entrepreneur rule must also go through a new rulemaking process, including a lengthy public comment period and review to illustrate how the first rule was incorrect, incomplete or outdated, attorneys said. Then, the administration would likely face litigation to defend its new interpretation of the law and facts against the Obama administration’s interpretation of the rulemaking record just months before, Susan Dudley, director of George Washington University’s Regulatory Studies Center and former administrator of the U.S. Office of Information and Regulatory Affairs, said.

“The final outcome is uncertain, since affected parties unhappy with the change would have solid grounds for litigation because they could point to the Obama record to challenge the Trump rule,” Dudley said.

To contact the reporter on this story: Michaela Ross in Washington at mross@bna.com

To contact the editor responsible for this story: Keith Perine at kperine@bna.com

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