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

Background

Treez, Inc. and its employee, Ameya Vinayak Pethe, challenged under the Administrative Procedure Act the denial of an amended H-1B visa petition. The defendants were the Department of Homeland Security, United States Citizenship and Immigration Services, and two USCIS directors sued in their official capacities. The amended petition sought to permit Pethe, an Indian national, to work in the United States.

The parties filed cross-motions for summary judgment. The court explained that, in an Administrative Procedure Act case, summary judgment is the mechanism for deciding whether the agency’s action is legally supported by the administrative record and complies with the applicable review standard. The court therefore reviewed the denial on the merits rather than deciding whether factual disputes required a trial.

Issues and analysis

The plaintiffs raised three challenges. First, they argued that the defendants lacked statutory authority to evaluate whether the employer’s business or the employee’s job involved illegal conduct. Second, they argued that the defendants had effectively adopted a new substantive rule without providing the notice and opportunity for public comment required for rulemaking. Third, they argued that the denial was arbitrary and capricious because the defendants departed from earlier decisions without adequate explanation, applied an incorrect standard for aiding and abetting, and failed to give sufficient weight to evidence that the plaintiffs did not aid violations of the Controlled Substances Act.

On statutory authority, the court held that the plaintiffs had not shown that the denial necessarily exceeded the defendants’ authority. The court reasoned that an agency need not facilitate illegal conduct merely because its authorizing statute does not expressly direct it to consider the legality of the conduct. The court emphasized that the issue arose from the face of this application, the nature of Treez’s business, and the difference between state and federal cannabis laws.

On notice and comment, the court concluded that the defendants’ consideration of the legal issues connected to proposed employment in H-1B applications was not subject to notice-and-comment requirements. Although the defendants had approved similar applications in the past, the court characterized the change as applying existing authority to circumstances in which it had not previously been applied, rather than adopting a new rule.

On the arbitrary-and-capricious claim, the court agreed that the ultimate denial was inadequately supported. The court applied the principle that aiding and abetting requires an affirmative act in furtherance of a specific offense, together with intent to facilitate that offense. It found that Pethe’s software-engineering duties were too remote from third parties’ conduct violating the Controlled Substances Act to establish criminal aiding and abetting. General knowledge or services supporting an illicit actor were not enough.

Disposition

Judge Richard Seeborg granted the plaintiffs’ motion for summary judgment and denied the defendants’ cross-motion. The court held that the denial of the amended H-1B petition was arbitrary and capricious because the defendants failed to adequately support their conclusion that Pethe’s job duties amounted to aiding and abetting a specific violation of the Controlled Substances Act. The court stated that a separate judgment would issue.