Andrew Pincus, of Mayer Brown, speaking during an event held at the U.S. Chamber of Commerce titled “CFPB’s Anti-Arbitration Rule: Analysis & Implications,” on July 19, 2017.
Photo: diego M. Radzinschi/ALM

The Trump administration is unlawfully delaying a rule that would allow foreign entrepreneurs to travel or remain in the United States for at least two years to work on business development, according to a new lawsuit that startups and venture capital advocates filed Tuesday in Washington federal district court.

The plaintiffs include the National Venture Capital Association, the San Francisco-based data visualization company Omni Labs Inc., the online appointment-booking platform Occasion, based in Chicago and the founders of the digital payment collection company LotusPay.

The suit comes as the Trump administration stalls dozens of rules from the Obama era, an approach that has aroused complaints that the delay tactics are really intended to kill regulations—everything from environmental protection to workplace safety. An analysis published in July by the Center for Progressive Reform, a left-leaning think tank, found that 42 regulations have been delayed by the Trump administration and another 13 have been placed under review.

The suit filed Tuesday puts a spotlight on rules that allow foreign entrepreneurs to enter the United States for the purpose of growing new companies—”companies that hire U.S. workers, contribute to the U.S. economy, and benefit the United States as a whole,” according to the complaint. The regulations would have provided a temporary immigration status, not a formal admission into the U.S. A qualified applicant would need to show a “substantial role and ownership stake in a company founded in the United States in the last five years,” according to the lawsuit.

Those rules were set to go into effect this summer. In July, the Trump administration pushed the effective date of the rule to March 2018, a move described in the suit as a “de facto repeal of the rule.”

A team from Mayer Brown, including Washington partners Andrew Pincus and Paul Hughes, and the American Immigration Council represents the challengers.

“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 lawyers for the challengers wrote in the complaint, which notes that immigrant entrepreneurs founded major U.S. companies that include Tesla, Nordstrom, Google.

Melissa Crow, litigation director of the American Immigration Council, said in a press statement that the foreign entrepreneur rule is essential to ensuring that America remains at the forefront of emerging enterprise. Our lawsuit is intended to get this important initiative back on track.”

The challengers argue that the U.S. Department of Homeland Security violated the Administrative Procedure Act by not taking comments before delaying the rule. The agency took action immediately, saying that any comment period was against the public interest.

“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 agency said in a public notice.

DHS said it’s “highly likely” the rule will be outright rescinded.

In Tuesday’s complaint, the plaintiffs said the Homeland Security department’s rationale for refusing to open a comment period before the delay “only further reveals that defendants have no intention whatsoever of considering the public’s views.” The complaint declared the agency’s delay as “unlawful.”

“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.”