Like all who follow admin law or the D.C. Circuit to any degree, my colleagues here at D.C. Circuit Review have been keeping track of decisions illustrating the Circuit’s emerging approach to Loper Bright. Last week offers two more examples to consider, which were also the only two admin law decisions from the week, and in both cases the agency’s statutory interpretations were held invalid.

The case where Loper Bright perhaps had the most impact was Lake Reg. Healthcare Corp. v. Becerra, No. 22-5318 (Katsas, J., writing, joined by Judges Henderson and Randolph). I say this because the district court upheld the agency’s decision, deferring  under Chevron, as had the Eighth Circuit in a similar case. Post-Chevron, the D.C. Circuit set aside the agency’s decision. The case involved a Medicare statute providing that certain hospitals are entitled to additional payments to “fully compensate” their “fixed costs.” The Court called the issue a “difficult question,” but it wasn’t really a difficult statutory question—everyone agreed that the statute called for determining the amount of a hospital’s unreimbursed fixed costs. Doing so was more of a practical problem, given that “baseline payments for treating Medicare patients do not disaggregate between fixed costs… and variable costs.” This seems like the type of case where an agency might be able to re-frame the case away from statutory interpretation in the future; Chevron-era development of the case might have landed the agency in a framing that wasn’t so helpful once Loper Bright emerged. But viewing the question as a statutory interpretation one, the Court held that the agency did not comply with the statutory mandate to fully compensate fixed costs. The agency’s approach overstated a hospital’s reimbursement for fixed costs (by attributing total baseline reimbursements entirely to fixed costs, even though some unknown portion covers variable costs) and thereby wrongly understated a hospital’s unreimbursed fixed costs.

The second case was U.S. Sugar Corp. v. EPA, No. 22-1271 (per curiam; Judges Wilkins, Katsas, and Walker). Reading the opening to this case, you could be forgiven for thinking this is a case where the agency’s rule would have flunked Chevron step one:

But of course, the details are more complex than that, and the Court found itself faced with two “semantically plausible” interpretations of the key statutory phrase, which defines a “new” pollution source as one constructed “after the Administrator first proposes regulations … establishing an emission standard applicable to such source.” It could refer to “the first time the agency proposes any standards for the source category … or the first time the Agency proposes a particular standard.” Consulting statutory structure and context, the Court concluded that the latter reading—the one favored by industry petitioners in this case—was the right one. Perhaps deference would have tipped the scale in the agency’s favor in the Chevron era. It’s hard to say. Structure and context could have been applied to rule out the agency’s interpretation at step one, too, and EPA’s apparent inconsistency about what “new source” means didn’t make it the best case for deference. So this could be a case where Loper Bright was applied but didn’t really make a difference to the outcome. (In a second part of the opinion, the Court rejected a petition from environmental groups raising a statutory/arbitrariness issue about EPA’s use of outdated emissions data.)

In other news, arguments started back up again at the D.C. Circuit last week, so there will soon be more examples to scrutinize for Loper Bright’s impact.