WASHINGTON (CN) — The largest organization of venture capitalists in the United States sued the Department of Homeland Security Tuesday over another delay of an Obama-era rule that would foster foreign entrepreneurship in new businesses here.
On a case-by-case basis, the International Entrepreneur Rule was intended to allow foreigners with an ownership stake in a new business in the U.S. to stay in the country for up to 30 months on a temporary non-visa immigration status called parole.
Proposed last year, the rule was reserved for “only the most qualified and talented entrepreneurs,” according to the National Venture Capital Association’s federal lawsuit. It intended to help circumvent obstacles with visa options.
But six days before the rule’s July 17 implementation date, the co-defendant U.S. Citizenship and Immigration Services announced the rule would be delayed until March 14 to get public comments about a proposal to kill it outright under President Trump’s Jan. 25 executive order on border security and immigration enforcement.
According to the National Venture Capital Association, which supported the Obama-era rule, the new administration lacks good cause to delay it under the Administrative Procedure Act’s exception to advance notice and comment on rulemaking.
“Defendants asserted that ‘[u]ndertaking notice and comment rulemaking … is contrary to the public interest’ because it would require them to expend ‘limited agency resources’ implementing a rule that will almost certainly be rescinded, and would encourage the public to rely on the rule in the interim,” the 32-page complaint states.
Courthouse News has reached out to both defendant agencies for comment.
According to the lawsuit, the good cause exception must be narrowly tailored and used “only in extraordinary circumstances,” and “(n)one of the rationales proffered by defendants constitute good cause.”
The association says immigrant entrepreneurs play an important role in the U.S. economy: 25 percent of U.S. entrepreneurs are immigrants, and their share of entrepreneurship has dramatically increasing since the mid-1990s.
“Today, ‘35%-40% of new firms have at least one immigrant entrepreneur connected to the firm’s creation,’” the lawsuit states, adding that about 40 percent of Fortune 500 companies have at least one immigrant founder.
And they are powerful job creators, the association says. From 2006 to 2012, “immigrants started 33 percent of U.S. venture-backed companies that became publicly traded,” it says.
Joining as plaintiffs are would-be immigrants Atma and Anand Krishna, two brothers from the U.K. who founded LotusPay, which provides a platform for companies to digitally collect recurring payments.
Faced with the inability to continue staying in the country lawfully, the Krishna brothers planned to apply for parole status under the International Entrepreneur Rule.
In its comments supporting the rule, the National Venture Capital Association said it would allow talented founders of startups “that will revolutionize industries,” such as LotusPay, to expand their successful business in the United States rather than overseas.
“The U.S. market is very attractive to LotusPay, and LotusPay’s platform for digitally processing payments would be a boon to U.S.-based companies and the economy as a whole,” the complaint states.
But without the ability to apply for parole, the brothers say they will have a tougher time launching their platform in the United States and hiring U.S. employees.
“And it likewise makes it difficult to obtain additional investment from U.S.-based investors, who would understandably prefer to invest in companies with founders based in the United States,” the lawsuit says.
Two other starts ups — a Omni Labs Inc. and Peak Labs LLC — also as plaintiffs.
The venture capitalists say that delaying the rule would harm its members.
“If the effective date of the rule continues to be postponed, NVCA’s members will be harmed. Many of NVCA’s members invest in companies founded by foreign entrepreneurs,” the complaint states.
“The suspension of the rule — and the inability of entrepreneurs to apply for parole — would impact the ability of NVCA’s members to invest in companies with foreign entrepreneurs.”
The plaintiffs ask the court to declare that delay of the rule is unlawful and order Homeland Security and Citizenship and Immigration Services not to delay it.
The Department of Homeland Security does not comment on pending legislation.