Treez, Inc. v. United States Department of Homeland Security

Background

Treez, Inc. and Ameya Pethe brought an Administrative Procedure Act case challenging the denial of an amended H-1B petition. The plaintiffs alleged that the denial was arbitrary, capricious, an abuse of discretion, or otherwise unlawful, including because the government allegedly applied a new standard concerning employment connected to the state-legal cannabis industry.

In June 2023, the court ordered the defendants to supplement the administrative record. The order required searches for internal deliberative documents concerning the petitions and the alleged rule change, as well as materials concerning past adjudications of similarly situated H-1B petitions and departures from prior decisions or policy. The plaintiffs later moved to enforce that order and requested attorneys’ fees as sanctions.

Enforcement of the Record-Supplementation Order

The court found that the defendants’ searches were inadequate. It identified shortcomings involving the databases and systems searched, the lack of a stated search time period, the failure to use certain available search terms, and the exclusion of petitions based on whether cannabis-related employment was considered a factor in the agency’s decision.

The court ordered the defendants to add “hemp,” “CBD,” and “cannabinoids” to the search terms used in databases that permit keyword searches. It also ordered the defendants to search for and produce materials concerning past adjudications of H-1B petitions in the cannabis or marijuana industry regardless of whether the agency considered cannabis-related employment a factor in the adjudication.

The court further ordered the defendants to search for and produce internal deliberative documents concerning the alleged rule change and departures from past adjudications or policy, regardless of which petition was connected to those documents. If the defendants considered a responsive document privileged, they could provide a detailed privilege log identifying the withheld material. The court found the plaintiffs’ challenge to the defendants’ deliberative-process privilege claims moot because the defendants stated they were no longer withholding documents under that doctrine.

The court held that hemp-related H-1B petitions were similarly situated to the plaintiffs’ petition and ordered that the defendants could not exclude them. It also ordered the defendants to include H-1B petitions submitted by companies in the state-legal cannabis industry that were approved or otherwise found not to violate the alleged illegality rule. The court rejected the plaintiffs’ request for records concerning non-H-1B visa petitions and found reasonable the defendants’ decision not to search for petitions from software companies whose businesses or clients were not cannabis-related.

The court ordered production of materials concerning the past adjudications for all H-1B petitions produced. Those materials included, among other things, responses to requests for evidence, supporting letters, executive summaries, and withdrawal letters. The defendants could redact sensitive or proprietary information and serve a redaction log. The court noted that copies of passports, personal financial documents, and personal educational documents did not need to be included in the administrative record.

Sanctions and Contempt

The court denied the plaintiffs’ request for monetary sanctions. It concluded that sanctions under Federal Rule of Civil Procedure 37 were not available because the prior administrative-record order was not treated as a discovery order, and the plaintiffs did not identify another statutory, constitutional, or procedural basis for monetary sanctions.

The court also denied the plaintiffs’ request for adverse inferences because they first raised that request in their reply rather than in their motion, which did not give the defendants adequate notice.

The court found that the defendants had not taken all reasonable steps within their power to comply with the June 2023 order and that their conduct did not appear to have been in good faith or based on a reasonable interpretation of the order. Because Magistrate Judge Hixson could certify facts concerning possible civil contempt but could not enter the contempt order without the required process, he certified the facts to District Judge Richard Seeborg. The defendants were ordered to appear before Judge Seeborg on November 13, 2024, at 1:30 p.m. and show cause why they should not be adjudged in contempt.

Disposition

The court granted in part and denied in part the plaintiffs’ motion. It ordered the defendants to supplement the administrative record within 21 days of the order. The order did not itself adjudge the defendants in contempt.