Fifth Circuit Review-Reviewed: Circuit-Split Edition, by Shane Pennington

by Guest Blogger — Friday, July 12, 2019

Welcome to another installment of Fifth Circuit Review-Reviewed! As you are no-doubt aware, the Fifth Circuit heard oral argument in Texas v. United States earlier this week, a case challenging the constitutionality of the Affordable Care Act. That case is already getting plenty of attention from many capable commentators, so this post will focus on other admin-law news from the Fifth Circuit. I’ll discuss a few important June cases as well as several earlier decisions I’ve been meaning to discuss. Subjects covered include the Fifth Circuit’s approach to Brand X, the Court’s position on six circuit splits, a Chenery puzzle, Lord of the Rings, and more. We have a lot of ground to cover, so let’s get to it.

 

Six Circuit Splits

Since I started blogging on the Fifth Circuit’s admin-law decisions, I’ve come across several cases where the Court weighs in on an issue that is currently dividing the courts of appeals. To keep track of them, I’ve that I’ve started my own dedicated list. The rest of this section discusses each of the six I’ve found so far. If you know of others, please let me know so I can add them to my list!

In In re Benjamin, 924 F.3d 180 (5th Cir. May 10, 2019), the Court interprets 42 U.S.C. § 405(h), which provides that

The findings and decision of the Commissioner of Social Security after a hearing shall be binding upon all individuals who were parties to such hearing. No findings of fact or decision of the Commissioner of Social Security shall be reviewed by any person, tribunal, or governmental agency except as herein provided. No action against the United States, the Commissioner of Social Security, or any officer or employee thereof shall be brought under section 1331 or 1346 of Title 28 to recover on any claim arising under this subchapter.

The Court has already reversed and remanded two other district court decisions in light of In re Benjamin. See D&G Holdings, L.L.C. v. Azar, No. 18-30925 (5th Cir. July 2, 2019); Becker v. Berryhill, No. 18-50837 (5th Cir. June 28, 2019). In D&G Holdings, the Court described the “gist of the [In re Benjamin] decision” this way:

The third sentence [of § 405(h)] strips federal jurisdiction under only the listed statutory provisions—§§ 1331 and 1346—not under unlisted ones, such as bankruptcy jurisdiction under 28 U.S.C. § 1334. 924 F.3d at 184-88. The second sentence, in turn, channels certain claims under Title II into § 405(g) as the exclusive path for obtaining judicial review. But that is true only for claims falling within its scope. The only claims that fall within its scope are claims challenging a disability determination by the Commissioner of Social Security for which § 405(b)(1) provides a hearing. Id. at 188-89. For claims falling outside of the second sentence’s scope, a litigant may altogether avoid § 405(g)’s channeling and exhaustion requirements. At the same time, however, a litigant who takes himself outside of § 405(g) then needs an independent basis of jurisdiction. That is, § 405(g) jurisdiction is unavailable for such claims. Id.

In so holding, the Fifth Circuit joined the Ninth Circuit on the less-popular side of a growing circuit split regarding the scope of § 405(h). The Third, Seventh, Eighth, and Eleventh Circuits have held that the provision bars review of not only of claims brought under §§ 1331 and 1346 but also § 1334 (and others). The Supreme Court recently denied certiorari in a case from the 11th Circuit raising this issue. Perhaps there will be more interest in a future petition now that the Fifth Circuit has thrown its hat in the ring on the minority side of the split.

D&G Holdings, L.L.C. also features a pretty ferocious bench slap:

[T]he Secretary’s counsel at oral argument conceded that she was unaware of any documentation or explanation regarding the $1.8 million check Novitas sent to D&G. As best we can tell, it appears that Novitas picked the number out of thin air. What is worse, its affiant (Shaena Parker) admits the amount was wrong. All this makes one thing inescapably clear: Neither the Secretary nor Novitas seem to have any idea what they are doing or what is going on. It is inexcusable that the Secretary would allow Novitas to wield the sovereign authority of the United States to seize money from a private company but then be utterly unable to give an accounting for the amount pillaged.

Oh my.

In Louisiana Real Estate Appraisers Board v. FTC, 917 F.3d 389 (5th Cir. Feb. 28, 2019), the Court holds that while the collateral-order doctrine might permit immediate review of certain administrative decisions, it doesn’t apply to an FTC order denying state-action immunity to a state agency alleged to have violated federal antitrust laws. In reaching that conclusion, the Fifth Circuit expressly rejects the First Circuit’s holding that the doctrine is “generally applicable” to administrative decisions. As the panel puts it, “[t]he collateral-order doctrine may apply to judicial review of some administrative decisions,” but that does not mean that “courts of appeals may intervene in administrative proceedings as a general matter.”

Unlike most per curiam opinions from the Fifth Circuit, this one is published–and therefore precedential.

W.M.V.C. v. Barr, 926 F.3d 202 (5th Cir. June 7, 2019), is an interesting immigration case in which a divided panel holds that while the petitioners were prevailing parties, they are not entitled to attorney’s fees under the Equal Access to Justice Act because the government’s position as a whole was “substantially justified.” Judge Willett joined Judge Smith’s majority opinion. Judge King dissented. The majority claims to “join the vast majority of our sister circuits in evaluating the government’s position under the totality of the circumstances,” though it acknowledges that the D.C. Circuit has rejected that view.

Judge King acknowledges that the Seventh Circuit has accepted the majority’s reading of the statute, but she disputes the majority’s view of its opinion “as falling on the heavier-trafficked side of a circuit split.” As she sees it, “the majority stands alone with the Seventh Circuit,” whereas she “would join the Sixth, Tenth, and D.C. Circuits.” I’ve posted a more detailed summary of this case on my blog, if you’re interested.

In Shah v. Azar, 920 F.3d 987 (5th Cir. Apr. 12, 2019), the Fifth Circuit joined four other circuits in holding that physicians do not have a protected property interest in continued participation in Medicare. See Parrino v. Price, 869 F.3d 392, 397-98 (6th Cir.  2017); Erickson v. U.S. ex rel. Dep’t of Health & Human Servs., 67 F.3d 858, 862 (9th Cir. 1995); Koerpel v. Heckler, 797 F.2d 858, 863-65 (10th Cir. 1986); Cervoni v. Sec’y of Health, Ed. & Welfare, 581 F.2d 1010, 1018-19 (1st Cir. 1978). The Fourth Circuit has held otherwise. Ram v. Heckler, 792 F.2d 444, 447 (4th Cir. 1986).

In Melendez v. McAleenan, No. 18-20341 (5th Cir. June 27, 2019), the Court held that that an alien is deemed to have “maintain[ed] lawful status” under 8 U.S.C. § 1254a(f)(4) only during the “period in which [he] is granted temporary protected status.” The Court acknowledged that its interpretation of the statute contradicted that of the U.S. District Court for the Eastern District of Pennsylvania in Medina v. Beers, 65 F. Supp. 3d 419 (E.D. Pa. 2014).

Next up is Texas Tech Physicians Associates v. HHS, 917 F.3d 837 (5th Cir. 2019). To promote innovation, Medicare authorizes experiments and demonstration projects deviating from the normal reimbursement rules. 42 U.S.C. § 1395b-1. This case arises from such a project: Under a “demonstration agreement” between HHS and Texas Tech Physicians Associates, Texas Tech could keep the additional fees it received for implementing the project only if its care management model achieved cost savings. HHS alleged that Texas Tech hadn’t lived up to its side of the bargain and demanded return of roughly $8 million in fees. Texas Tech resisted, and when HHS’s Departmental Appeals Board rejected its challenges to HHS’s demand, Texas Tech filed an APA action in district court. The district court granted HHS’s motion for summary judgment, and Texas Tech appealed.

Texas Tech’s merits arguments were all based on contract law. The Board argued that contract law doctrines don’t control in disputes involving federal grants. The Court concluded that it was unnecessary to resolve that issue. Even if contract law doctrines did apply, the panel explained, the Board had made valid findings justifying rejection of each of Texas Tech’s contract theories anyway. In a footnote, the Court acknowledged that

Typically, when an agency reaches a decision based on erroneous reasoning, the Chenery doctrine prohibits a reviewing court from upholding that decision for an alternative reason. Motor Vehicle Mfrs. Assoc. v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 50 (1983); SEC v. Chenery Corp., 332 U.S. 194, 196 (1947). But when an agency gives multiple reasons, we may uphold its decision based on any one of those reasons. Salt River Project Agr. Imp. & Power Dist. v. United States, 762 F.2d 1053, 1060 n.8 (D.C. Cir. 1985).

The Court also explained that while the Board hadn’t offered any response to two contract-based defenses that Texas Tech had raised, it had made valid findings that doomed them both. Accordingly, the Court held, any error was harmless.

Citing Nicholas Bagley’s article, Remedial Restraint in Administrative Law, 117 Colum. L. Rev. 253, 302-07 (2017), the Court acknowledged that “[t]he administrative harmless error rule can sit uneasily alongside the Chenery doctrine, which typically confines judicial review to the agency’s reasoning.” Ultimately, however, it concluded that applying the harmless error rule wasn’t problematic, explaining:

 [T]hat tension arises when a reviewing court makes findings the agency should have made in the first instance. See id. at 305 (observing “controversial[ ]” cases upholding agency decisions when “the evidence in the record so strongly supports the result that the court is confident the agency would reach the same decision on remand”). Chenery cautions against intruding onto an agency’s turf, not against giving an agency’s own findings their obvious effect. See Henry J. Friendly, Chenery Revisited: Reflections on Reversal and Remand of Administrative Orders, 1969 Duke L.J. 199, 211 (explaining that remand to an agency is “necessary only when the reviewing court concludes that there is a significant chance that but for the error the agency might have reached a different result” because “in the absence of such a possibility, affirmance entails neither an improper judicial invasion of the administrative province nor a dispensation of the agency from its normal responsibility”).

The panel opinion raises two other interesting questions. First, it reaffirms the Fifth Circuit’s rule that “when an agency . . . interpret[s] [a] contractual agreement . . . our review is effectively de novo.” (quoting Inst. for Tech. Dev. v. Brown, 63 F.3d 445, 450 (5th Cir. 1995)). I did some quick research, however, and it appears that the circuits are split on this issue as well. Compare, e.g., Burgin v. Office of Pers. Mgmt., 120 F.3d 494, 497-98 (4th Cir. 1997) (de novo review) and Bos. Edison, Co. v. FERC, 233 F.3d 60, 66 (1st Cir. 2000) (“FERC is entitled to some deference in construing contracts where the sales are subject to FERC regulation.”); Amoco Prod. Co. v. FERC, 765 F.2d 686, 690 (7th Cir. 1985); City of Kaukauna v. FERC, 214 F.3d 888, 894-95 (7th Cir. 2000); Wash. Urban League v. FERC, 886 F.2d 1381, 1386 (3d Cir. 1989) (“We generally defer to an agency’s interpretation of agreements within the scope of the agency’s expertise, and the case for deference is particularly strong when the agency has interpreted regulatory terms regarding which it must often apply its expertise.” (citation omitted)); Muratore v. U.S. Office of Pers. Mgmt., 222 F.3d 918, 923 (11th Cir. 2000) (extending Chevron to an Office of Personnel Management’s interpretation of a federal employee’s health insurance contract; factors included delegation, expertise, and uniformity); Braintree Elec. Light Dep’t v. FERC, 667 F.3d 1284, 1288 (D.C. Cir. 2012) (applying Chevron deference to FERC interpretation of settlement agreement involving electric reliability).

Second, and finally, before oral argument, the panel ordered the parties to file supplemental briefs addressing the following issue:

The panel then addressed the parties’ supplemental filings in a footnote:

Other circuits have held that contract claims seeking equitable or declaratory relief are “impliedly forbid[den]” under the APA. 5 U.S.C. § 702; see, e.g., Transohio Sav. Bank v. Dir., Office of Thrift Supervision, 967 F.2d 598, 609 (D.C. Cir. 1992). But when we asked for supplemental briefing, both parties agreed that the APA permits review of disputes about grant agreements. So we will consider this grant dispute under the APA, as we have before. See Delta Found., Inc. v. United States, 303 F.3d 551, 563 (5th Cir. 2002); Inst. for Tech. Dev. v. Brown, 63 F.3d 445, 449-50 (5th Cir. 1995).

I’m sure someone out there knows all about this issue, but I certainly don’t. I’m simply flagging it and adding it to my ever-expanding list of stuff to study.

 

Brand X Fifth-Circuit Style

In Acosta v. Hensel Phelps Construction Company, 909 F.3d 723 (5th Cir. 2018), the Fifth Circuit applied Brand X to overturn its own nearly forty-year-old precedent, Melerine v. Avondale Shipyards, Inc., 659 F.2d 706, 711 (5th Cir. Unit A 1981), which had held that “OSHA regulations protect only an employer’s own employees.”  As far as I know, this marked the first and only time the Fifth Circuit applied Brand X to invalidate its pre-Chevron construction of a statute.

Along the way, the Court also reaffirms that the Fifth Circuit applies Brand X to the Court’s pre-Chevron interpretations of federal regulation. That surprised me. Chevron doesn’t govern judicial constructions of regulations at all. So why it makes any difference whether the Court interpreted a regulation before or after Chevron was decided is beyond me.

The Fifth Circuit applied Brand X again more recently in Texas v. Alabama-Coushatta Tribe of Texas, 918 F.3d 440 (5th Cir. 2019). The Alabama-Coushatta Tribe argued that the district court abused its discretion by refusing to grant Chevron deference to the National Indian Gaming Commission’s interpretation of the Indian Gaming Regulatory Act, 25 U.S.C. §§ 2701-2721. The NIGC, which administers the IGRA, concluded that the IGRA governs the Tribe’s gaming activity, thus bringing the Tribe within the NIGC’s jurisdiction. The problem? That interpretation contradicted a 1994 Fifth Circuit decision holding that (1) the IGRA conflicted with another Indian gaming statute—the Ysleta del Pueblo and Alabama-Coushatta Indian Tribes of Texas Restoration Act (which, curiously, is uncodified but still in effect, see Pub. L. No. 100-89, 201-07, 101 Stat. 666 (Aug. 18, 1987))—and (2) the Restoration Act controls the Tribe’s gaming activities. See Ysleta del sur Pueblo v. Texas (“Ysleta I”), 36 F.3d 1325, 1335 (5th Cir. 1994).

The Tribe argued that deference was appropriate anyway under Brand X. The district court rejected that argument, and the Fifth Circuit affirmed. Brand X, the panel explained, only permits an agency’s statutory interpretation to trump a prior judicial construction of the same provision when the prior court decision found the statutory text ambiguous. In Ysleta I, however, the Court did not find “ambiguity in the [statutory] text at issue.”

I’ve posted more detailed summaries of Alabama-Coushatta Tribe of Texas and Hensel Phelps Construction Company on my blog.

Other Recent Adlaw Decisions

Forrest General Hospital v. Azar, 926 F.3d 221 (5th Cir. June 10, 2019), involves two hospitals’ claims that HHS miscalculated their “disproportionate share hospital” (DSH) payments under the Medicare statute. In rejecting the hospitals’ claims, the district court granted “substantial deference” to HHS’s interpretation of 42 U.S.C. § 1395ww(d)(5)(F)(vi)(II) to exclude so-called “uncompensated care pool” (UCCP) patient days from the numerator of the Medicaid fraction the agency uses to calculate hospitals’ DSH payments.

The Fifth Circuit reversed. As Judge Willett’s opinion for the Court put it: “By excluding instead of including, HHS committed a fraction infraction—and flouted the law’s plain language.” Because “HHS’s position [wa]s foreclosed by the text and structure of the relevant provisions,” the Court explained, it was not entitled to deference under Chevron or Auer.

This opinion is worth reading in full. I’ve posted a more detailed summary on my blog, but here are just a few other notes:

  1. Look out for the Lord of the Rings reference.
  2. Alluding to the Supreme Court’s then-pending decision in Kisor, the panel quips that “Auer’s hours seem numbered.”
  3. Justice Gorsuch’s Kisor dissent cites tthis case as an example of lower court judges “question[ing] Auer’s validity and pleading with [the Supreme Court] to reconsider it.”
  4. The panel relies heavily on the opinion of Judge Ketanji Brown Jackson of the U.S. District Court for the District of Columbia in Health Alliance Inc. v. Azar, 346 F. Supp. 3d 43 (D.D.C. 2018). That decision, which the panel describes as “excellent” and “extremely persuasive,” is currently pending on appeal in the D.C. Circuit.

SEC v. Arcturus Corp., No. 17-10503 (5th Cir. June 27, 2019), concerns an SEC enforcement action against several defendants who sold interests in oil and gas drilling projects to investors but never registered the interests as securities. The SEC alleged that the defendants’ failure to register violated securities laws. The district court granted the SEC’s motion for summary judgment, holding that oil and gas interests qualify as securities. Concluding that the defendants had raised significant material issues of fact, the Fifth Circuit reversed and remanded for trial. For those interested, the opinion includes a thorough discussion of the law governing the question of whether a given investment constitutes a “security.”

Neville v. Lipnic, No. 18-50438 (5th Cir. June 28, 2019) (per curiam), involves Tina Neville’s petition for a writ of mandamus ordering a military agency to comply with EEOC orders finding that the agency had discriminated against her. The district court denied her petition, and the Fifth Circuit affirmed. The panel opinion contains an extensive discussion of some of the questions that arise when applying the Feres doctrine in the Title VII context. If that’s your thing, it’s certainly worth a read. I’ve posted a more thorough summary of this case on my blog as well.

In Bank of Louisiana v. FDIC, 919 F.3d 916 (5th Cir. 2019), the Court held that the judicial review scheme in 12 U.S.C. § 1818 foreclosed district court review of the Bank’s constitutional challenges to two FDIC enforcement actions that resulted in penalties being assessed against the bank for alleged violations of federal banking laws.  The opinion contains an interesting and thorough discussion of the standards that apply when determining whether Congress has explicitly or implicitly precluded district court jurisdiction, including how to apply the so-called “Thunder Basin factors”: (1) whether precluding district court jurisdiction could foreclose all meaningful judicial review; (2) whether the Bank’s suit is wholly collateral to a statute’s review provisions; and (3) whether its claims are outside the agency’s expertise. See Thunder Basin Coal Co. v. Reich, 510 U.S. 200 (1994). I’ve posted a more detailed summary of this case on my blog as well.

 

About Shane Pennington

In addition to practicing appellate law at Yetter Coleman LLP in Houston, Texas, Shane reports on the administrative-law decisions of the U.S. Court of Appeals for the Fifth Circuit at his blog: admin.law. He has also served as a law clerk to then-Chief Judge David B. Sentelle of the U.S. Court of Appeals for the D.C. Circuit, Judge Jennifer Walker Elrod of the U.S. Court of Appeals for the Fifth Circuit, and then-Chief Judge Royce C. Lamberth of the D.C. District Court. All views are the author’s alone. Follow him on Twitter @admindotlaw.

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