No Red Herring: Fisheries’ Legal Arguments About Chevron Deference Could Scramble Federal Healthcare Regulation

What do herring fishers have to do with drug approvals and Medicare payment policies? If they win their cases in the Supreme Court, the herring fisheries could eliminate or reduce the courts’ reliance on the Chevron deference, ushering in more lawsuits against federal agencies on healthcare issues.

The Chevron deference was introduced in 1984, when the Supreme Court decided the Chevron v. Natural Resources Defense Council case. The result set a legal precedent for courts to defer to the judgment of federal agencies on how to interpret and implement statutes and regulations. Numerous cases have come before the Supreme Court in recent years that could have threatened the Chevron deference, as it has come to be called, but these two cases, Loper Bright Enterprises v. Raimondo and Relentless, Inc. v. Department of Commerce, have been consolidated and are thought to be the ones that could topple it. Loper Bright Enterprises is a New Jersey-based, family-owned herring fishing company operating in the waters of New England. Relentless Inc. is also a herring fishing company. The plaintiffs are asking the court to interpret the rules at the heart of their cases while also overturning the Chevron deference. The Supreme Court heard oral arguments in January.

Agency power

Ken Nahigian, J.D.

“This is the biggest thing that can happen to the federal government as far as a policy change. It affects everybody,” says Ken Nahigian, J.D., a public affairs consultant and former staffer for the Senate Committee on Commerce, Science, and Transportation. The courts give agencies deference if Congress has not been specific about an issue and the agency actions are considered reasonable. That creates a chilling effect on litigation, as companies may not even bring cases because they’re already starting behind the eight ball, he says.

Politics have gotten more divisive in recent years, so it’s harder to pass legislation with regularity, leaving many decisions up to the agencies, says Nahigian. “It also creates this kind of unaccountable power to the agencies to do what they like, as long as they can argue that it was a reasonable action,” he says. This leads to more court challenges against the agencies.

While people used to protest in front of the Capitol, Nahigian said, they’re now protesting in front of the Supreme Court, given the power shift.

Lower courts affected

Stuart Gerson, J.D.

Not everyone agrees that overturning the Chevron deference would be so momentous. “At least as the Supreme Court is concerned, Chevron hasn’t mattered much in the decision of any of these [recent healthcare] cases,” says Stuart Gerson, J.D., a healthcare, cybersecurity and fraud litigation attorney at Epstein Becker Green and a former assistant attorney general in the George H.W. Bush administration. The healthcare cases include Becerra v. Empire Health Foundation and the American Hospital Association v. Becerra, both decided by the Supreme Court in 2022 without citing or relying on the Chevron deference.

Gerson also referred to two COVID-19 vaccine mandate cases, one where the Supreme Court blocked an Occupational Safety and Health Administration (OSHA) rule for large businesses to require employee COVID-19 vaccination or weekly testing while allowing the CMS to require vaccination of healthcare workers at federally funded facilities.

“The OSHA mandate was overturned as overbroad and not delegated to the agency. And in the HHS mandate, the hospital mandate, it was upheld because it was clearly within the confines of what the Department of Health and Human Services is charged to do,” Gerson says.

So why is the Chevron deference still relevant? “It’s not because it’s a problem in the Supreme Court. It’s because there are hundreds of cases in lower courts where Chevron is applied,” Gerson says. That means understanding how lower court judges should defer to agency determinations on ambiguous statutes or regulations.

In the Empire Health Foundation and American Hospital Association cases, the courts did not address Chevron in reaching their decisions, notes Robert Wanerman, J.D., M.P.H., a healthcare regulatory, reimbursement and compliance attorney at Epstein Becker Green. In the Supreme Court’s oral arguments in the fishing cases, “you’ll see that a number of justices on both sides of the aisle really struggle with exactly what are we asking lower court judges to do. Are they really equipped to delve into the minutia of things like herring fishing? You can say the same thing about Medicare outpatient reimbursement and Medicare cost reporting,” he says. Eliminating the Chevron deference can turn judges into super-legislators or super-regulators, he says.

More challenges

Stephanie Webster, J.D.

If the Chevron deference is overturned, “I anticipate there could be additional challenges to agency actions that might not have been brought otherwise,” says Stephanie Webster, J.D., a partner with Ropes & Gray who primarily litigates against the government for healthcare clients.

Although many factors help determine whether to bring a lawsuit, “I think on balance it will make it easier to prevail against the government,” Webster says. “It would make my job easier if I didn’t have to contend with Chevron.”

Nahigian compares the potential overturning of Chevron to the 2022 Dobbs v. Jackson Women’s Health Organization decision overturning Roe v. Wade when “nobody seemed to really think through what’s next, because they’re just looking for the outcome.” He anticipates a flood of litigation if Chevron is overturned.A variety of healthcare organizations and interest groups, including the American Cancer Society, the American Academy of Pediatrics, the Leukemia & Lymphoma Society and the American Lung Association filed amicus briefs, asking the court to maintain the stability provided by the Chevron deference. Industries with regulatory environments rely on that regulatory certainty. “Anything creating uncertainty will be seen as unwelcome” to them, says Nahigian. He anticipates that overturning Chevron could also reopen past regulator decisions to determine whether agencies exceeded their authority.

No matter how these herring fishery cases are decided, there will be many reimbursement and FDA approval cases brought through the courts, says Gerson.

“Many of them will look like administrative law cases that are really surrogates for political hot-button issues like reproductive rights, which is what we’re seeing in the mifepristone [abortion pill] case,” Gerson says. “There’s no area of healthcare that isn’t a target because there are people or political entities that complain about
almost everything.”

The court will likely hand down a decision that could decide the fate of the Chevron deference in May or June. “If it’s overruled or it’s extremely pared back, what you would expect to happen in most agencies is that they will really have to do their homework when they come up with a new policy or change in policy,” adding more detail, Wanerman says. “If you think the Federal Register is a dense document, guess what’s coming down the pike.” That is because certain agencies know that their regulations will be challenged by large entities and
trade associations.