Elеctions have consequences. But when it comes to federal agencies, the Administrative Procedure Act shapes the contours of those consequences. This case involves the Department of Homeland Security's decision to delay the implementation of an Obama-era immigration rule, the International Entrepreneur Rule,
The controversy boils down to two competing rules. The first would have allowed certain foreign entrepreneurs to temporarily enter the United States. The second, promulgated six months later, delayed that rule from taking effect. The Court discusses each in turn and then briefly recounts this suit's procedural history.
A. The International Entrepreneur Rule
The Department of Homeland Security promulgated the International Entrepreneur Rule ("IE Final Rule") to "encourage international еntrepreneurs to create and develop start-up entities with high growth potential in the United States."
The executive branch, however, cannot unilaterally create a new visa category, see
In promulgating the IE Final Rule, DHS latched onto the latter criterion. It sought to provide guidance for its line-level adjudicators as to when parole for foreign entrepreneurs would provide a "significant public benefit" to the country. See
To be "considered for a discretionary grant of parole" under the Rule, an entrepreneur "would generally need to demonstrate the following":
1. The applicant must have formed a new start-up entity in the United States within 5 years of the application;
2. The applicant must a) possess at least a 10% ownership interest in the business; and b) "have an active and central role" in its operations and future growth; and
3. The applicant must validate the business's potential "for rapid growth and job creation" by showing a) it has received at least $250,000 from established U.S. investors; or b) it has received at least $100,000 in grants from government entities.
Applicants who met the criteria (along with spouses and minor children) could be considered for discretionary parole of up to 30 months.
The agency solicited and received 763 comments on its proposed rule. See
B. The Delay Rule
Of course, times change and so do administrations. On January 25, 2017, President Trump issued an Executive Order targeting current immigration practice. See Border Security and Immigration Enforcement Improvements, Exec. Order No. 13,767,
For the next six months, the Department stayed silent. Six days before the IE Final Rule would take effect, however, USCIS
C. Procedural Background
Plaintiffs include two foreign nationals (Atma and Anand Krishna), two U.S. businesses (Omni Labs, Inc. and Peak Labs L.L.C., d/b/a Occasion), and the National Venture Capital Association, which is an organization of individuals who "frequently invest in businesses founded by foreign entrepreneurs." Pl. MSJ at 4. All claim that the Delay Rule has seriously injured their businesses or investments.
Two months after its issuance, Plaintiffs brought this suit challenging it as invalid, see Compl., ¶ 11, and moved for a preliminary injunction ten days later. See ECF No. 12. The Court held oral argument on the motion on October 20, 2017. In a conference call shortly thereafter, the parties agreed that there were no factual disputes for the Court to resolve, such that the case could be decided expeditiously on summary judgment. See Minute Order of October 25, 2017. Plaintiffs thus agreed to hold their motion for a preliminary injunction in abeyance in exchange for the Government's submitting its summary-judgment briefing on an expedited basis.
II. Legal Standard
The parties have cross-moved for summary judgment on the administrative record. The summary-judgment standard set forth in Federal Rule of Civil Procedure 56(c), therefore, "does not apply because of the limited role of a court in reviewing the administrative record." Sierra Club v. Mainella,
The Administrative Procedure Act "sets forth the full extent of judicial authority to review executive agency action for procedural correctness." FCC v. Fox Television Stations, Inc.,
III. Analysis
Plaintiffs allege that the Delay Rule is invalid, as the agency promulgated it without adhering to the APA's notice-and-comment playbook. See
A. Standing
Article III of the Constitution limits the jurisdiction of federal courts to actual "Cases" and "Controversies." U.S. Const., art. III, § 2. But not just any dispute will do. See Lujan v. Defs. of Wildlife,
The Krishnas are two foreign entrepreneurs who claim that they would have applied and qualified for parole under the International Entrepreneur Rule. See PI Mot., Declaration of Atma Krishna, ¶¶ 7, 9. In May 2017, the two British nationals founded LotusPay, a U.S.-based start-up designed to help companies collect digital payments. Id., ¶¶ 1-2, 5. Both play integral roles in the business-Atma is the CEO, while Anand is the Head of Marketing-and each owns more than a 10% stake in the company. Id., ¶¶ 2, 9. They also allege (and the Government does not dispute) that they could demonstrate a "potential for rapid growth," as their business has already received $120,000 from qualified U.S. investors and was recognized by the renowned start-up incubator Y Combinator. Id., ¶¶ 3-4. The Krishnas contend that the Delay Rule has injured them insofar as they have "lost the opportunity to apply for parole under the [IE Final] Rule." Without parole, they say, they will be unable "to remain in the United States on a long-term basis." Id., ¶ 10. Plaintiffs then attribute a litany of adverse consequences to thаt lost opportunity-namely, that they will struggle to hire U.S.-based employees, obtain additional investment from U.S.-based investors, and launch their platform in the United States. Id.
For their part, Defendants argue first that "aliens outside the United States generally lack standing to challenge the Government's immigration decisions." Def. Opp. at 14. Their cited cases, however, relate either to justiciability (rather than standing) hurdles or decisions on individual immigration petitions or visas. See Def. Opp. at 14-17 (citing Harisiades v. Shaughnessy,
Defendants relatedly maintain that "parole is an immigration action granted at the sole discretion of DHS, and aliens have no legally protected interest in a discretionary immigration determination." Opp. at 20. They believe that Plaintiffs' inability to apply for parole thus cannot constitute an injury in fact. Id. at 20-21. Defendants also question whether Plaintiffs can establish redressability, as "even with the benefit of the IE Final Rule, Plaintiffs still need ... a favorable exercise of DHS discretion," as well as a favorable inspection at a U.S. port of entry, to receive parole. Id. at 18.
The Government, however, once again fails to engage with Plaintiffs' actual asserted injury: the lost opportunity to obtain parole status. While Plaintiffs concede that they have no right to receive parole, they still maintain that being denied the opportunity to seek it constitutes a cognizable injury. The D.C. Circuit has indeed held that "a plaintiff suffers a constitutionally cognizable injury by the loss of an opportunity to pursue a benefit ... even though the plaintiff may not be able to show that it was certain to receive that benefit hаd it been accorded the lost opportunity." CC Distributors, Inc. v. United States,
Although the D.C. Circuit has not considered whether a "lost opportunity" qualifies as a cognizable injury in the immigration context, other courts of appeals have unanimously concluded that it does. Take, for instance, a plaintiff's standing to challenge the denial of an immigration petition. "[A]pproval of a visa petition vests no rights in the beneficiary" of that petition, see In re Ho,
In those cases, as here, there was no guarantee that the petitioners would successfully obtain admission into the country. Although USCIS has the authority to approve immigration petitions, the State Department retains the final authority to issue visas, and it does so with total-and unreviewable-discretion. See Bruno,
In this case, too, DHS may ultimately deny parole, which this Court could not review, and it can only "prognosticat[e]" about how the agency would treat the Krishnas' applications. See Shalom,
Plaintiffs are not home yet, however, as there are two wrinkles still to be ironed out. First, the Government has not permanently deprived them of the opportunity tо seek parole-at least not so far. As its name implies, the Delay Rule only delays their ability to seek parole. By contrast, when USCIS denies an immigration petition, it derails the application permanently. Even so, the difference gives the Court little pause in this case. The D.C. Circuit has suggested that an "order delaying the rule's effective date ... [is] tantamount to amending or revoking a rule." Clean Air Council v. Pruitt,
Second, even were rescission to occur, Plaintiffs might still technically have an opportunity to apply for parole. As outlined above, the agency has long held the authority to issue parole "for urgent humanitarian reasons or significant public benefit."
With Plaintiffs' injury properly framed as the "lost opportunity" to seek parole, the redressability inquiry becomes far less thorny. Plaintiffs ask the Court to invalidate the Delay Rule; were it to do so, the Government agrees that the IE Final Rule would immediately take effect, thereby restoring the Krishnas' shot at parole. See Def. Opp. at 34. During oral argument, the Government suggested that even with the IE Final Rule in place, it might still fail to complete any parole requests before rescission. See Tr. 15:6-23; 16:3-10. The Court, however, sees no evidence that the agency would simply run out the clock on applications. Rather, the entire premise of the Delay Rule is that DHS would otherwise implement the IE Final Rule (and expend significant resources doing so). With no indication of bad faith on the Government's part, the Court assumes it would process applications in regular order. Were it to do so, Plaintiffs would have a far more meaningful chance at parole than they would have with the Delay Rule in place. That suffices to establish standing.
B. Notice and Comment
Having cleared the jurisdictional brush, the Court now turns to the merits. Under the APA, an agency must provide "[g]eneral notice of proposed rule making" in the Federal Register, as well as "an opportunity to participate in the rule making through submission of written data, views, or arguments," before promulgating a rule. See
Defendants, as a result, do not dispute that the Delay Rule constitutes a final rule, subject to the APA's notice-and-comment requirements. Nor do they claim compliance with that provision. Rather, they seek a haven in the APA's "good cause" exception, which allows an agency to dispense with notice and comment when it "for good cause finds ... that notice and public рrocedure thereon are impracticable, unnecessary, or contrary to the public interest."
Any agency faces an uphill battle to meet that burden. The D.C. Circuit has repeatedly warned that "the good cause exception 'is to be narrowly construed and only reluctantly countenanced.' " Mack Trucks, Inc. v. EPA,
1. Delay
Before the Court even reaches the Government's justifications, Plaintiffs argue that the agency has forfeited any "good cause" defense through its own delay. In other words, Defendants purportedly promulgated the Delay Rule in response to an Executive Order issued on January 25, 2017. See
That position finds significant traction. It is well established that good cause "cannot arise as a result of the agency's own delay." Washington All. of Tech. Workers v. U.S. Dep't of Homeland Sec.,
The D.C. Circuit's decision in Environmental Defense Fund, Inc. v. EPA,
The D.C. Circuit (and district courts within this circuit) have repeatedly rejected good cause when the agency delays implementing its decision. See, e.g., Air Transp. Ass'n of Am. v. Dep't of Transp.,
To date, Defendants' justification for their delay remains vague. The Government's briefing never explains the time lag, and, when pressed at oral argument, it struggled to explain what the agency did between learning of the Executive Order and issuing the Delay Rule. At most, the agency suggested that it needed time to consider "the applicability of the executive order" in the "context of a leadership change." Tr. 37:18-20. Apparently, DHS needed until July to decide whether it was "highly likely" to rescind the IE Final Rule, and only then did it see the Delay Rule as necessary. While the agency may well be decrying an emergency of its own creation, the Court need not resolve whether it has forfeited any good-cause defense. Even on its own terms, the agency's proffered reasons for bypassing notice and comment easily fall short of good cause. The Court now explains why.
2. Good-Cause Rationales
In a total of three paragraphs in the Federal Register, DHS offered its rationales for invoking the good-cause exception. First and foremost, the agency explained that if it did not "delay the effective date immediately, USCIS would be required to expend limited agency resources to implement the IE Final Rule."
a. Expense
DHS primarily justified the Delay Rule by citing the expense of implementing the new parole system. It worried that doing so "would require USCIS to establish a new business line for the processing of entrepreneur parole applications, hir[e] and train[ ] аdditional adjudicators, modify[ ] intake and case management information technology systems, modify[ ] application and fee intake contracts, develop[ ] guidance for the adjudicators, and communicat[e] with the public."
This explanation does not pass muster. As an initial matter, the agency's concern for its (or its components') own bottom line hardly constitutes the sort of emergency necessary to invoke gоod cause. As the D.C. Circuit recently explained, "In the past, [it has] approved an agency's decision to bypass notice and comment where delay would imminently threaten life or physical property." Sorenson,
Even assuming that "fiscal peril" for an agency could constitute good cause, DHS has failed to provide "factual findings supporting the reality of that threat."
At times, Defendants also suggest that the Rule was an "extraordinary change" to the parole system and would thus involve "training adjudicators about a novel and extraordinarily complex exercise of parole authority." Opp. at 29-30. This logic suffers from several flaws. First, the IE Final Rule would not "up-end ... over a century" of discretionary decisionmaking, as Defendants protest. Id. at 32. Rather, it expressly preserves the agency's discretion on a case-by-case basis, while providing "guidance" on how officers might exercise that discretion in a uniquely "complex" area of parole. See
Finally, although Defendants maintain that rescission of the IE Final Rule is imminent-such that any expenditures to implement it would be wasteful-the Court has seen no effort to that effect thus far.
b. Confusion and Reliance
Perhaps recognizing the weakness of its primary justification, Defendants assure the Court that the Delay Rule was not "simply a matter of off-setting costs or training" additional agency employees. See Def. Opp. at 32. Instead, the agency insists that implementing the IE Final Rule "would sow confusion and would likely cause the waste of resources by multiple stakeholders with interests in [the] rulemaking."
Defendants nonetheless pitch the Rule as an "extraordinary change," which would "add regulatory complexity" to the parole system. See Opp. at 29. As explained above, that protestation overstates the novel nature of the Rule. In any event, Defendants fail to show any real "confusion" that required bypassing notice and comment. Most concretely, the agency worries that if the IE Final Rule were left in place, foreign entrepreneurs might misguidedly rely on it, including by "expending significant effort and resources in order to establish eligibility under the criteria promulgated by the IE Final Rule." See
The agency, moreover, gave little thought to those foreign entrepreneurs who may have already relied on the impending IE Final Rule, set to take effect just six days before the agency suspended it. Without notice to the contrary, aliens would have fairly expected the Rule to take place as scheduled and therefore already "expend[ed] significant effort and resources in order to establish eligibility."
In the Federal Register, the Government cited two cases to support its argument that regulatory "confusion" arising from the IE Final Rule constituted good cause: Am. Hosp. Ass'n v. Bowen,
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All told, "[a]gencies obviously have broad discretion to reconsider a regulation at any time," and the Department may well ultimately decide to rescind the International Entrepreneur Rule. See Clean Air Council,
C. Remedy
That leaves the question of remedy. When a court concludes that agency action is unlawful, "the practice of the court is ordinarily to vacate the rule." Ill. Pub. Telecomms. Ass'n v. FCC,
Neither factor favors the Government here. The D.C. Circuit recently made clear that "deficient notice is a 'fundamental flaw' that almost always requires a vacatur." Allina Health,
Nor would vacatur be particularly disruptive. This is not a case in which "the egg has been scrambled and there is no apparent way to restore the status quo ante." Sugar Cane Growers Co-op of Fla. v. Veneman,
Defendants do not question whether vacatur would be appropriate; instead, they suggest that the Court should stay any such order. In so arguing, DHS largely reprises its reasons for dispensing with notice-and-comment in the first place. To wit, they сlaim that a stay is necessary to save expenses and avoid reliance interests as the agency fashions a new Rule. As explained above, none of those consequences justified dispensing with notice-and-comment, and none justifies a stay. See Hudson v. Am. Fed. of Gov't Employees,
IV. Conclusion
For the foregoing reasons, the Court will grant Plaintiffs' Motion for Summary Judgment and deny Defendants'. It will also vacate the Delay Rule. A contemporaneous Order to that effect will issue this day.