Circuits Reckon With Appeals ‘Caught in the Middle’ Post-Chevron

The Fifth Circuit’s decision to send a US Labor Department rule challenge back to district court raises thorny questions about what appeals panels are to do with cases pending on their dockets that cited the recently axed Chevron doctrine.

The US Supreme Court’s June 28 ruling in Loper Bright Enterprises v. Raimondo did away with Chevron, under which courts had to defer to reasonable agency interpretations of ambiguous statutes.

The US Court of Appeals for the Fifth Circuit opted July 18 to task a lower court with untangling the interpretive issues of a post-Loper Bright reality in a challenge to the DOL’s 401(k) sustainable investing rule.

The lower court had leaned on Chevron to uphold the rule in a challenge brought by conservative attorneys general who believe the agency overstepped statutory bounds in promulgating the regulation.

Now, appellate panels elsewhere that are reviewing pre-Loper Bright cases that cited Chevron are weighing whether to follow the Fifth Circuit’s lead.

Some will see the district courts as having better capacity to handle a high volume of cases after the doctrine’s demise, prompting remand. But others may be empowered by the Supreme Court decision to rule definitively on their own, regulatory law professors and lawyers say.

“There’s nothing to keep appeals courts from kicking the can back to the district courts,” said Cary Coglianese, director of the University of Pennsylvania Carey Law School’s program on regulation. “The law has changed, so the appeals courts don’t have to do what the Fifth Circuit did.”

Many courts are starting the discussion by requesting supplemental briefing from parties on how Loper Bright could alter pending appeals midstream.

The limited remand chosen by the Fifth Circuit sent the sustainable investing rule challenge back to Judge Matthew Kacsmaryk, whom the judges only asked to reconsider how Loper Bright may impact his prior decision, rather than re-evaluating the entire case.

“Sometimes there are cases courts just aren’t excited about deciding,” said Danielle Desaulniers Stempel, a senior associate at Hogan Lovells LLP. “They’re messy, they’re politically sensitive, and sending it back means buying yourself more time, getting another court to give a firsthand opinion that you can work off of, which can be advantageous.”

Anticipating another appeal after the remand to the US District Court for the Northern District of Texas, the same Fifth Circuit panel said it would hear the case if it returns there. Both courts have a track record of overturning Biden administration regulations.

Remand or Not

The recent choice to remand the DOL challenge to Texas district court leaned on Fifth Circuit norms that may not apply universally to other federal courts of appeals.

Courts could choose separate paths based on political or logistical factors, as well as potentially differing views of the Supreme Court precedent, according to regulatory law professors.

The Fifth Circuit in its order remanding the 401(k) rule case described the move as its “normal (though not absolute) practice” when a change in Supreme Court precedent impacts a case on appeal.

“The federal reporter teems with such dispositions, both from our circuit and others,” Judge Don R. Willett said in the order, citing examples across the Fifth, Second, and Fourth circuits when an intervening high court ruling prompted remands.

But the order highlighted that remand does have its perils, creating a tension between an appeals court’s desire for “efficiency” by ruling on its own and the need to obtain “reasoned judgment” at the district court level. Willett said a limited remand “strikes the right balance.”

The Fifth Circuit also pointed out a Seventh Circuit case involving the Consumer Financial Protection Bureau that went the other way—choosing instead to rule on the merits of the case. That order noted that while Chevron had been vacated since the lower court ruling, deference wasn’t warranted because the statute wasn’t ambiguous.

The Fifth Circuit again may have to confront the same question of whether or not to remand in a pending challenge to a Trump-era overtime rule. A fast-food operator is appealing the lower court’s decision that cited Chevron, arguing the DOL didn’t have the authority to consider workers’ earnings when determining who is exempt from overtime pay.

The court asked the parties to submit briefs explaining how Loper Bright would impact the legal challenge, which they provided July 15.

Different Approaches

It’s difficult to say how the arguments in the supplemental briefings will influence the outcome.

The Sixth Circuit quickly requested extra briefing in a case challenging net neutrality regulations from the Federal Communications Commission, which were set to go into effect July 22 before the court paused them.

Both parties have since submitted briefs detailing how Loper Bright affects the appeal. That case was appealed directly from an FCC declaratory ruling, which means a remand would send the proceedings back to the agency itself, a development that some appeals courts could seek to avoid.

“If there’s a provision in the rules that make you go straight to the circuit courts, remanding would just give the agency an opportunity to further augment its explanation,” Stempel said. “But the whole point of Loper Bright is that the court is the one to decide what the best interpretation of the law is, so sending it back to the agency doesn’t get you very much.”

The Sixth Circuit is also hearing a case brought by the state of Tennessee that seeks to get back family planning grant money that the US Department of Health and Human Services rescinded because of compliance issues with an abortion-related condition of the award.

At oral arguments, Judge Raymond M. Kethledge suggested that the appeals court can decide whether the agency had authority to impose that funding condition post-Chevron.

The Sixth Circuit no longer has to defer to the HHS interpretation of the statute, a development that fundamentally changed the case while Tennessee’s appeal was pending on the denial of its motion to compel the agency to return the funds before trial, he said.

“I think panels will have to grapple with Loper Bright,” said Andrew Kim, a partner at Goodwin Procter LLP. “By the time that the Utah v. Su case plays itself out, we will have a decent picture from the courts of appeals as to how they’re going to deal with Loper Bright for those other cases caught in the middle.”

‘Appellate Lawyer Catnip’

As circuit courts apply their own unique strategies, there’s a possibility that circuit splits will emerge where courts take different approaches on whether to accept agencies’ actions based on the same laws.

The absence of the agency deference doctrine also raises concerns about a high volume of litigation targeting the federal government’s legal interpretations, seeking the “best meaning” of statutes described in the Loper Bright decision, Kim said.

“Now we have the opportunity for two or more ‘best meanings,’ and I think there are going to be a lot of agency rules that get gummed up that way, because we have different challenges in different circuits,” he said. “This is appellate lawyer catnip.”

Those potential conflicts could land back on the Supreme Court’s docket, which the high court should have expected when it struck down a doctrine used to find straightforward solutions to complex statutory questions, Coglianese said.

“When you start overturning 40- and 50-year-old precedents, you can’t necessarily expect that there won’t be all sorts of questions and ramifications,” he said.