Biden Priorities Quickly Tripped Up in Courts by Chevron Demise

Biden administration rules prohibiting transgender discrimination in health care and public schools were among the first to run afoul of less deferential judges after a landmark US Supreme Court administrative law ruling.

On July 3, federal district courts in Mississippi, Florida, and Texas all barred the Department of Health and Human Services from enforcing a rule that prohibits health-care discrimination against people based on their sexual orientation or gender identity under the Affordable Care Act. The rule was set to take effect July 5.

All three judges referenced the justices’ opinion in Loper Bright Enters. v. Raimondo. The conservative majority voided a 40-year-old precedent under which courts deferred to reasonable agency interpretations of unclear laws. The lower court decisions are among the early examples of how the end of the Chevron doctrine has emboldened judges to override federal agencies.

“What we’re dealing with here is decades and decades of judicial precedent reviewing and looking at agency action under a deferential prism that has largely been stripped away,” said Morgan Lewis partner David Broderdorf. “And courts will be empowered to take a more aggressive and extensive review of agency action and interpretation of statutory provisions.”

The impact of the Loper Bright ruling has already spread across the US court system, including in rulings blocking an Education Department rule that bars discrimination against children based on their gender identity in federally funded schools and a decision against a Labor Department overtime rule in Texas.

Regulatory foes have seized on the decision to support challenges of regulations covering Medicare reimbursements to health providers, employment authorization for spouses of H1-B visas, the Labor Department’s independent contractor rule, and others.

“When we think about the tens of thousands of lower court decisions that have relied upon or cited Chevron in some way,” said Morgan Lewis partner Jocelyn Cuttino, “in terms of how widespread use of their reliance on the doctrine has been, the impact, I think is bigger than maybe the average person who may not know what this means would otherwise think.”

Also Read: US Business Regulations Upended With Back-to-Back Rulings

Health Rulings

All three July 3 orders referenced the end of Chevron deference in their justification for blocking the HHS rule, which turned on the agency’s interpretation of the word “sex” under the Affordable Care Act and Title IX of the Education Amendments of 1972, which blocks sex discrimination.

Judge Louis Guirola Jr. of the US District Court for the Southern District of Mississippi referenced Loper Bright‘s holding that a statute must have a “single, best meaning” before explaining why he concluded a coalition of Republican state attorneys general were likely to succeed in challenging the HHS regulation.

“Interpreting the word ‘sex to include gender identity would create contradictions and ambiguity within Title IX and its regulations,” Guirola wrote in his order blocking enforcement of the rule nationwide.

In a separate ruling, Judge William F. Jung of the Middle District of Florida noted that federal agencies’ interpretation of the word under Title IX has fluctuated.

“HHS’s attempt to alter prospectively the meaning of Title IX shows the wisdom of Loper’s statement that ‘agencies have no special competence in resolving statutory ambiguities. Courts do,’” he wrote in halting enforcement of the regulation in Florida.

A third July 3 ruling by Judge Jeremy D. Kernodle of the Eastern District of Texas stopped enforcement in Texas and Montana.

Quick Turnaround

The three injunction orders, as well as other court decisions, included the end of Chevron in legal arguments.

Hours after Loper Bright came down, Judge Sean D. Jordan of the US District Court for the Eastern District of Texas granted a request to block enforcement of a Labor Department overtime rule in Texas. Jordan said his analysis of the case “carefully follows” the guidance offered by the Supreme Court, as well as the Administrative Procedure Act, the statute that governs the agency rulemaking process.

An Education Department rule that expanded Title IX protections against discrimination and harassment to include sexual orientation and gender identity, which was frozen in 10 states last month, was blocked in four states on July 2 by Judge John W. Broomes of the US District Court for the District of Kansas.

The ruling, which also focused on the meaning of the word “sex” under various statutes, references Loper Bright along with several other Supreme Court rulings that have limited the authority of regulatory agencies. While Broomes concluded that the term “sex” under Title IX is clear, he noted that even if it wasn’t, the Education Department wouldn’t get the benefit of the doubt.

US District Judge Ada Brown in Dallas July 3 delayed a near-total Federal Trade Commission ban on non-compete agreements in a ruling that referred to Loper Bright without relying on it.

New Filings

Opponents of several regulations moved quickly to capitalize on the high court ruling.

Three New Jersey hospitals referenced it in a June 28 lawsuit over what they described as an “irrational and unlawful” interpretation of the laws that govern Medicare reimbursement.

The Fifth Circuit jointly heard from Utah and energy groups who argued Loper Bright only bolstered their existing case against a Labor Department rule on environmental, social, and corporate governance considerations in retirement investments.

“This Court now must determine whether the 2022 Rule’s tiebreaker provision is lawful under the best reading of that statute,” the ESG rule opponents wrote in their letter. “It is not.”

Courts across the US have received filings citing Loper Bright in support of challenges to decisions made by various agencies, including the Education Department, Small Business Administration, and Department of Homeland Security. It isn’t just regulatory opponents: anti-tobacco groups pointed to the ruling to back their lawsuit over the Food and Drug Administration’s delay in banning menthol cigarettes.

The Fifth Circuit ESG case, set to be argued July 9, offers a preview of the Justice Department’s strategy in the post-Chevron world. The government’s attorneys argued in a filing that their previous briefs hadn’t invoked Chevron deference.

Government lawyers described the Labor Department’s interpretation of the Employee Retirement Income Security Act as having been consistent across decades of presidential administrations.

“Plaintiffs offer the Court no reason to disagree with the long-settled view of the agency charged with interpreting ERISA,” they wrote.

Also Read: Businesses Quick to Deploy Chevron’s End to Attack Labor Rules

Lower Courts Mull Impact

The federal government will have plenty of additional chances to argue why agency decisions should withstand legal challenges.

Appellate courts have asked for supplemental briefing on how the end of Chevron deference impacts various cases, including litigation over a Trump-era overtime rule and shipping and logistics giant FedEx Corp.‘s attempt to get a $84.6 million refund for foreign tax credits.

The Supreme Court July 2 also kicked nine cases back to the lower courts to reconsider their rulings in light of the Loper Bright decision.

The remanded rulings include a closely-watched D.C. Circuit fight involving a Federal Energy Regulatory Commission order that required a utility to buy solar power and an Eighth Circuit case over the Natural Resources Conservation Service’s designation of a South Dakota farmer’s land qualifies as a wetland.

“This is a recalibration of the system,” said Craig Green, an administrative law scholar at Temple University, about the flurry of court activity. “That’s what it means to overturn a landmark precedent.”