Petition for Writ of Certiorari — AARP v. Equal Employment Opportunity Commission (No. 07-662)
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Supreme Gourt, U.S.
FIL ele
(1) 07-662N0V19 20007
OFFICE OF THE CLERK
as
IN THE
SUPREME COURT OF THE UNITED STATES
AARP; JACK W. MACMILLAN; FRANK H. SMITH, JR.,
FRANK A. WHEELER; FRED DOCHAT;
GERALD FOWLER; M. ELAINE CLAY,
Petitioners,
Vv.
EQUAL OPPORTUNITY EMPLOYMENT COMMISSION
Respondent.
On Writ of Certiorari To The
United States Court of Appeals
For the Third Circuit
PETITION FOR WRIT OF CERTIORARI
ERWIN CHEMERINSKY CHRISTOPHER G. MACKARONIS*
DUKE UNIVERSITY BRICKFIELD, BURCHETTE, RITTS, STONE
SCHOOL OF LAW 1025 Thomas Jefferson St., NW
Box 90360 8th Fl., West Tower
Durham, NC 27708 Washington, DC 20007
(919) 613-7173 (202) 342-0800
LAURIE A. MCCANN
AARP FOUNDATION LITIGATION
601 E Street, NW
Washington, DC 20049
(202) 434-2060
Counsel for Petitioners
*Counsel of Record
SE ARR A AIS ARE RI TO LETT TES ET LEI EERE POLE SI
a i ~ ove 7 ~2 ~S ee ~ ey ”
QUESTION PRESENTED
This Petition concerns a regulation promulgated
by the Equal Employment Opportunity Commission
(EEOC) that allows employers to terminate the health
care benefits of some ten million retired workers at age
65 and older. However, as acknowledged by the
EEOC, Congress expressly prohibited this very
practice in the substantive prohibitions of the Age
Discrimination in Employment Act (ADEA) while
creating a narrow exception for age-based differences
in benefits when justified by cost considerations. The
question presented in this Petition is therefore:
Whether the Equal Employment Opportunity
Commission’s rulemaking authority under the Age
Discrimination in Employment Act (ADEA) empowers
it to overrule unambiguously expressed congressional
intent, contrary to the application of Chevron U.S.A.
Inc. v. Nat'l Res. Def. Council, Inc., 467 U.S. 837 (1984)
in every other circuit, and legalize a form of arbitrary
age discrimination that Congress directly addressed
and plainly prohibited in the substance of the ADEA?
ii
LIST OF PARTIES
Petitioners are AARP; Jack W. MacMillan;
Frank H. Smith, Jr.; Frank A. Wheeler; Fred Dochat;
Gerald Fowler ; and M. Elaine Clay. Respondent is the
Equal Employment Opportunity Commission (EEOC).
iii
TABLE OF CONTENTS
Page
QUESTION PRESENTED .................... i
Fog gg eer ii
TABLE OF CONTENTS .................05. ill
TABLE OF AUTHORITIES ................-- Vv
CORPORATE DISCLOSURE STATEMENT .... 1
Fe PO PIT over nenevavccncoveceeves 1
STATEMENT OF JURISDICITON ............ 1
RELEVANT CONSTITUTIONAL
PPE 556 eso eb ae aun eee veheens 1
RELEVANT STATUTORY PROVISIONS ....... 1
STATEMENT OF THE CASE ................ 2
REASONS FOR GRANTING THE WRIT ...... 10
I. THE COURT SHOULD GRANT REVIEW
TO RESOLVE THE SPLIT AMONG
THE CIRCUITS REGARDING THE
PRINCIPLES GOVERNING REVIEW OF
AGENCY RULEMAKING SET FORTH IN
THIS COURT'S DECISION IN CHEVRON,
U.S.A., INC. V. NATURAL RESOURCES
DEFENSE COUNCIL AND THE REVIEW
STANDARDS OF SECTION 706 OF
pe, Peer rer rrr rrr ree 11
iV
A. The Third Circuit’s Decision Conflicts
with This Court’s ChevronJurisprudence
And The Proper Application of Chevron
In Every Other Circuit .......... 11
B. The Approach By The Third Circuit
To The “Not in Accordance With
Law” Standard of Section 706(2)(A)
of the Administrative Procedure
Act Presents A Conflict Among
I icerpereckrewdic esses 21
Il. THE COURT SHOULD GRANT REVIEW
BECAUSE PERMITTING EEOC
REGULATIONS TO OVERRULE THE ADEA’S
PLAIN STATUTORY LANGUAGE VIOLATES
THE CONSTITUTIONAL SEPARATION
OF POWERS DOCTRINE .............. 24
RNIN nea 5 ars bie $6 ad a we Ww eee 30
APPENDIX
Third Circuit Opinion ................. 1-A
District Court Opinion .............+-. 17-A
District Court Initial Opinion ......... 61-A
Third Circuit Opinion Denying
Rehearing En Banc.................-- 76-A
i tana nebo enw 78-A
v
TABLE OF AUTHORITIES
CASES
AARP vy. Equal Employment
Opportunity Commission,
383 F. Supp.2d 705
UBD. Pa. FOOG) occ cece: 1,5,6,7,8, 16,25
AARP v. Equal Employment
Opportunity Commission,
390 F. Supp. 2d 437 (E.D.Pa.2005) .. 1,7,8,16
AARP v. Equal Employment Opportunity
Commission, 489 F.3d 558
doy lesa ci kaecis passim
Baptist Health v. Thompson,
458 F.3d 768 (8th Cir. 2006) ............ 15
Castro v. Chicago House Auth.,
360 F.3d 721 (7th Cir. 2004) ............ 15
Chevron U.S.A., Inc. v. Nat’ I Res. Det,
Council Inc., 467 U.S. 837 (1984) .... passim
Clinton v. City of New York,
OO Ws OPTI bp ck eee do vacsences. 26
Diersen v. Chicago Car Exch.,
110 F.3d 481 (7th Cir. 1997) .... 18,19,20,29
Dominion Energy Brayton, LLC v. Johnson,
443 F.3d 12 (1st Cir. 2006) .............. 15
EEOC v. Seafarers Int’7 Union,
394 F.3d 197 (4th Cir. 2005) ............ 15
Engine Mfrs. Ass'n v. EPA,
88 F.3d 1075 D.C. Cir. 1996) ........... 20
vi
Erie County Retirees Ass'n v. County of Erie,
220 F.3d 193 (3d Cir. 2000) ....... 5,6,7,8,25
Fed. Election Comm'n v. Democratic
Senatorial Campaign Comm'n,
a | AS 28
Field v. Clark, 143 U.S. 649 (1892) ............ 27
Gerber v. Norton, 294 F.3d 173(D.C. Cir. 2002) .. 23
Global Crossing Telecomms., Inc.
v. Metrophones Telecomms.,
TE Wr Ge NT boinc cc ccnescnvves 12
Hackworth v. Progressive Cas. Ins. Co.,
468 F.3d 722 (10th Cir. 2006) ........... 16
Harris v. Olszewsky,
442 F.3d 456 (6th Cir. 2006) ............ ‘5
Indus. Union Dept., AFL-CIO v.
American Petroleum Inst.,
oo arr 27
INS v. Chadha, 462 U.S. 919 (1983) ........... 26
Long Island Care at Home, Ltd. v. Coke
bye Bs BT ee 14
Mercy Catholic Med. Ctr. v. Thompson,
380 F.3d 142 (3d ‘Cir. 2004) ............. 24
Mizrahi v. Gonzales, 492 F.3d 156
ee ala a oad 15
Mohasco Corp. v. Silver, 447 U.S. 807 (1980) .... 21
Nat’ Ass'n of Home Builders v. Defenders of
Wildlife, 127 S. Ct. 2518 (2007) .......... 13
vii
Nat Cable and Telecomm. Ass'n v.
Brand X Internet Servs.,
gic © 3. | re 7,8,12,13,14
Natural Res. Def. Council v. EPA,
489 F.3d 1364 (D.C. Cir. 2007) .......... 14
New Edge Network, Inc. v. FCC,
461 F.3d 1105 (9th Cir. 2006) ........... 15
Orca Bay Seafoods v. Nw. Truck Sales, Inc.,
32 F.3d 433 (9th Cir. 1994) ... 18,19,20,29,30
Public Employees Ret. Sys. of Ohio v. Betts,
Se | eee 21
Santa Fe Snyder Corp. v. Norton,
385 F.3d 884 (5th Cir. 2004) ............ 15
Schiller v. Tower Semiconductor Ltd.,
449 F.3d 286 (2d Cir. 2006) .......... 16,17
Se. Alaska Conservation Council v.
U.S. Army Corps of Eng'rs,
486 F.3d 638 (9th Cir. 2007) ......... 22,23
State of New York v. EPA, 443 F.3d 880
RR CA. UD 5 once re weneecccues 19,20,29
Turtle Island Restoration v. Nat'l] Marine
Fisheries Serv.,
340 F.3d 969 (9th Cir. 2003) ............ 23
United States v. Geyler,
949 F.2d 280 (9th Cir. 1991) ............ 19
United States v. Jin Fuey Moy,
ek eer errr rr 27
United States v. Mead Corp.,
OO US. RIB GOO oie ccc ccceees 13
Vill
Whitman v. Am. Trucking Ass'n,
OA AE, ee CD no os ot kc ccccecewsess 27
Wilderness Watch v. Mainella,
375 F.3d 1085 (11th Cir. 2004) .......... 16
STATUTES
Administrative Procedure Act (APA),
Oars es OE 5 6c ct nese cenpaneens 5
Sis coe. ear 11,21,22,23,24,27
5 U.S.C. § 706(2)(A) ....... 9,10,21,22,23,24
6 UBS BT cvs scccacvdevseunbs 23
Age Dies) mination Employment Act of 1967 (ADEA),
9U.S.C. soos NS ea ke Re 2
Bik Sade Do re 2
38 U.S.C. § 623(£)(2)(B)i) ... 2... 2,3,17,25
29 U.S.C. § 4 apa neds oe 17
SO ee I nic cc ccevvecinrevans 3
29 U.S.C. § 603( SE ws xs eu eee 17
git) are. passim
OU Sree ee kv cw heh oes aeuessees 2,3
Medicare Prescription Drug, Improvement
and Modernization Act of 2003,
Pub. L. No. 108-173,
117 Stat. 2066 (2003) ................6- 30
Older Workers Benefit Protection Act
of 1990 (OWBPA),
Pub. L. No. 101-433,
104 Stat. 978 (1990) .......... 2,17,21,26,28
Pub. L. No. 101-239, Title VI, § 6202(b)(2)(C)(1),
103 Stat. 2233 (1989) ................00- 3
96 USE Ss vee ke eee 1
Se, SO, EB ns vo > 6 a cee 26
U2. Ck. A eS cok sie eee 1,25
GMT Sich eetaceeeveveees 26
REGULATIONS
RS eee 3,25
29 C.F.R. : Ey on ek bbe pe ode a
29 C.F.R. § 1625.10((1)Gii) «www ee ee 3
29 C.F.R. : 1625.10(P(I)Gic) .. 2. ee eee eee 4
ak! rr 28
53 Fed. Reg. 5971 (Feb. 29,1988) .............. 3
68 Fed. Reg. 41542 (July 14, 2003) ......... 4,6,29
MISCELLANEOUS
EEOC Final Rule on ADEA Exemption for
Retiree Health Benefits,
Daily Lab. Rep. (BNA) No. 78
(Ameil 25, 2004)... ccc ccc cece 45
http://www.eric.org/forms/uploadFiles/
2D5600000002.filename.Erie_Conferee_letter
_Grassley_Thomas_Sept03.pdf .......... 30
Medicare Drug Deal Would Exclude
U.S. General Accounting Office, “Retiree Health
Benefits: Employer-Sponsored Benefits
May Be Vulnerable To Further Erosion,”
GAO Doc. No. GOA-01-347 (May 2001)..... 5
I
CORPORATE DISCLOSURE STATEMENT
Petitioner AARP is a nonprofit, nonpartisan
membership organization of individuals age 50 and
older. AARP is not a publicly traded corporation, and
has no parent or subsidiary corporations which are
publicly traded. Petitioners MacMillan, Smith,
Wheeler, Dochat, Fowler and Clay are retired
— over age 65, who are also members of
OPINIONS BELOW
The opinion of the United States Court Of
Appeals for the Third Circuit (Pet. App. 1-A - 16-A), is
ublished at 489 F.3d 558. The opinion of the United
tates District Court for the Eastern District of
Pennsylvania (Pet. App. 17-A - 60-A) is published at
390 F. Supp. 2d 437. A prior decision of the district
court (Pet. App. 61-A -75-A) is published at 383 F.
Supp. 2d 705.
STATEMENT OF JURISDICTION
The judgment of the court of appeals was
entered on June 4, 2007. Pet. App. 1-A. The court
denied a timely petition for rehearing en banc on
August 21, 2007. Pet. App. 76-A - 77-A. This Court
has jurisdiction pursuant to 28 U.S.C. § 1254(1).
RELEVANT CONSTITUTIONAL PROVISION
“All legislative Powers herein granted shall be
vested in a Congress of the United States, which shall
consist of a Senate and House of Representatives.”
U.S. Const. Art., Sec. 1.
RELEVANT STATUTORY PROVISIONS
The relevant provisions of the Age
Discrimination in Employment Act, 29 U.S.C.
2
§§ 623(a)(1), 623(6(2)(B)G), 628 and 630() are
reproduced in the appendix to this petition. Pet. App.
78-A-79-A. The text of 29 C.F.R. § 1625.10(e) is also
reproduced in the appendix. Pet. App. 79-A.
STATEMENT OF THE CASE
This case asks whether an executive agency may
issue an administrative rule that undisputedly
overrules clear statutory provisions enacted by
Congress. The specific issue before the Court is the
legality of a regulation adopted by the Equal
Employment Opportunity Commission (EEOC). that
permits employers covered by the federal Age
Discrimination in Employment Act (ADEA), 29 U.S.C.
§ 621 et seq, to discriminate based on age by reducing,
or eliminating altogether, health care benefits for
retirees age 65 or older while providing these benefits
to younger retirees.
At all times throughout the litigation, the
parties have agreed that Congress’ prohibition of
arbitrary age discrimination in employee benefits was
clearly and plainly expressed in the provisions of the
Older Workers Benefit Protection Act (OWBPA), Pub.
L. No. 101-433, 104 Stat. 978 (1990). Congress’
articulated purpose behind the passage of the OWBPA
was “to restore the original congressional intent in
passing and amending the Age Discrimination in
Employment Act of 1967 (29 U.S.C. § 621 et seq.)
which was to prohibit discrimination against older
workers in all employee benefits except when age-
based reductions in employee benefit plans are
justified by significant cost considerations.” Pub. L.
101-438 , Title I, § 101 (Oct. 16, 1990; 104 Stat. 978).
Congress amended the prohibitions of section
110) of the ADEA, 29 U.S.C. 6300), to make it
unmistakably clear that “[t]he term ‘compensation,
terms, conditions, or privileges of employment’
encompasses all employee benefits, including such
3
benefits provided pursuant to a bona fide employee
benefit plan.” 29 U.S.C. § 6300). And, critically
relevant to the issues here, Congress expressly
amended the existing exception for employee benefit
plans, and replaced it with the plain language of the
“equal benefit or equal cost” rule that had been set
forth in administrative regulations since 1969. The
statutory incorporation of the “equal benefit or equal
cost” rule created an exception to the prohibition on
age discrimination by allowing employers to comply
with the ADEA either by providing equal benefits, or
by incurring equal costs for benefits, on behalf of both
younger and older employees. In making its intent
crystal clear, Congress went so far as to literally
incorporate into the ADEA the extensive
administrative regulations that, for more than a
decade, governed the application of the “equal benefit
or equal cost” exception. See 29 U.S.C. §623(f)(2)(B)G)
(statutory exception allowing employers to observe the
“equal benefit or equal cost” rule “as permissible under
section 1625.10, title 29, Code of Federal Regulations
(as in effect on June 22, 1989);....” In determining
_ whether “equal benefits” were being provided, the
regulation allowed employers credit for those benefits
provided by Medicare. 29 C.F.R. § 1625.10(e)(1989).
Consequently, employers could satisfy their ADEA
obligations by purchasing either “carve out” or
“supplemental” plans, both of which are considerably
less expensive than the cost of full health care coverage
for younger individuals. Jd. at 29 C.F.R.
§1625.10(f)(1)Gi)(1987).” Precisely because health care
benefits for individuals age 65 and older were less
“The EEOC removed this provision from its regulations because
it was inconsistent with Section 4(g) of the ADEA, 29 U.S.C.
§ 623(g)(passed in 1984), which required employers to provide the
same health care benefits to Medicare-eligible employees as are
provided to younger individuals. 53 Fed. Reg. 5971 (Feb. 29,
1988). Section 4(g), however, was repealed in 1989. Pub. L. No.
101-239, Title VI,§ 6202(b)(2)(C)(i), 103 Stat. 2233 (1989).
4
expensive than benefits for their younger counterparts,
the regulation ensured that employers would not be
ciscourapet from hirme or retaining older =
because of the cost of their health care. 29 C.F.R.
§ 1625.10(f)(1)Gi)(c)(1987) (“As a result of the savings
to employers when benefits are available through
Medicare, reductions in total health care benefits for
employees age 65 to 70 will generally not be justified”).
On July 14, 2003, the EEOC published a Notice
of Proposed Rulemaking in the Federal Register
announcing the agency’s intention to issue an
“exemption” under section 9 of the ADEA, 29 U.S.C.
§ 628. That exemption would allow “employee benefit
plans to lawfully provide health benefits for retired
participants that are altered, reduced or eliminated
when the participant is eligible for Medicare health
benefits” or state-sponsored retiree health benefits.
68 Fed. Reg. 41542, 41547 (July 14, 2003). The EEOC’s
proposal would nullify the limited statutory exception
enacted by Congress — the ADEA’s “equal benefit or
equal cost rule” - and would permit employers to cease
altogether — without any cost justification — health
care benefits for retirees age 65 and older, directly
contrary to the prohibitions on discrimination set forth
in the substance of the ADEA.
Despite vigorous objections by AARP and tens of
thousands of affected individuals, the EEOC voted on
April 22, 2004, to issue its proposed exemption in final
form. The EEOC’s rationale for the “exemption” rested
on the premise that rather than comply with the
“equal benefit or equal cost” exception crafted by
Congress, “many employers would reduce the overall
level of health benefits they offer to retirees or cease
providing such benefits altogether, leaving many
retirees without access to affordable health care
coverage.” HEOC Final Rule on ADEA Exemption for
Retiree Health Benefits, Daily Lab. Rep. (BNA) No. 78,
at E-1 (April 23, 2004). The rulemaking record reveals
that the health care benefits of approximately ten
5
million individuals could be affected. Jd. at n. 12
(citing to U.S. General Accounting Office, “Retiree
Health Benefits: Employer-Sponsorea Benefits May Be
Vulnerable To Further Erosion,” GAO Doc. No. GOA-
01-347, at 1 (May 2001)).
The petitioners filed suit on February 4, 2005, in
the U.S. District Court for the Eastern District of
Pennsylvania seeking to enjoin the regulation which
was to become effective upon publication. The
petitioners’ complaint alleged that the regulation was
contrary to the ADEA, violated the Administrative
Procedure Act (APA), 0 U.S.C. § 551 et seg. and
violated the constitutional doctrine of separation of
powers, as it had the effect of repealing a clear
stautory provision of the ADEA.
On March 30, 2005, the district court issued a
memorandum opinion and order granting summary
judgment to the petitioners. AARP v. Equal
Employment Opportunity Commission, 383 F. Supp.2d
705 (E.D. Pa. 2005). The district court premised its
decision on the application of Chevron U.S.A., Inc. v.
Nat] Res. Def, Council, Inc., 467 U.S. 837 (1984).
Applying Chevron's “two-step approach to judicial
review of agency interpretations of acts of Congress,”
the lower court appropriately held that first it “must
determine whether Congress expressed a clear and
unambiguous intent in the statute concerning the
precise question at issue.” AARP v. EEOC, 383
F .Supp.2d at 708. As the court correctly observed, it
should proceed to the second step of the Chevron
analysis only “if the statute is silent or ambiguous
with respect to the specific issues.” /d quoting
Chevron, 467 U.S. at 843
In addressing the issue of congressional intent
at step one of the Chevron analysis, the lower court
deferred to the Third Circuit’s holding in Erie County
Retirees Ass'n v. County of Erie, 220 F.3d 193 (3d Cir.
2000). As the district court explained, “[blased upon a
6
detailed statutory analysis of the Act, the Third Circuit
held that zt was clear from the face of the Act that
Congress intended for the ADEA’s prohibitions against
age discrimination to apply to the practice of reducing
retiree health benefits when retirees become eligible
for Medicare.” 383 F.Supp. 2d at 707 (emphasis
added). Throughout its opinion, the lower court
emphasized that “the Third Circuit has already
determined that Congress expressed a clear and
unambiguous intent with regard to the precise
uestion at issue.” Jd. at 709; See also id. at 710 (“the
hird Circuit held in Erie County that Congress
intended the ADEA to apply to the exact same
behavior that the EEOC would exempt”); id. at
711(“the Third Circuit held that Congress did not allow
for ambiguity with regard to the applicability of the
ADEA to retiree health benefits.”).
The EEOC has repeatedly acknowledged that
the ADEA plainly prohibits discrimination in health
care benefits on the basis of age.” See e.g., 1d. at 710
(“[t]he EEOC does not dispute the holding of Erie
County, that the plain language of the ADEA
prohibits the practice of coordinating retiree benefits
with Medicare eligibility.”). Accordingly, after noting
that “[a]n administrative agency, including the EEOC,
may not issue regulations, rules or exemptions that go
against the intent of Congress,” :d., the district court
concluded that the challenged regulation “is contrary
to law and violates the clear intent of Congress in
passing and amending the ADEA ....” /d. at 712.
The EEOC timely filed a notice of appeal.
7 The EEOC submitted an amicus curiae brief in Erie County,
asserting, “based on the plain language of the ADEA, that (1)
retirees are covered by the ADEA and (2) employer reliance on
Medicare eligibility in making distinctions in employee benefits
violated the ADEA, unless the employer satisfied one of the Act’s
specified defenses or exemptions.” 68 Fed. Reg. at 41545 (July 14,
2003).
7
While the EEOC’s appeal was pending, this
Court decided Nat? Cable and Telecomm. Ass’n v.
Brand X Internet Servs. 545 U.S. 967 (2005) (“Brand
X’). Believing that Brand X impacted its prior
decision, the district court invited further briefing from
both parties. AARP v. Equal Employment Opportunit
Commission, 390 F. Supp. 2d 437, 442 (E.D.Pa.2005).
In the ensuing briefing, the EEOC continued to
concede that Congress unambiguously expressed its
intent to prohibit reducing or terminating retiree
health benefits based on eligibility for Medicare. /d. at
451 (“.. . the EEOC has represented throughout the
litigation that Erie County was correctly decided, and
that the ADEA does prohibit Medicare coordination of
retiree healthcare benefits. .. Nevertheless, the EEOC
has argued throughout that it has the power to exempt
this practice from the prohibitions of the statute under
section 9 of the ADEA... .”) (emphasis in original).
Instead, the EEOC relied on Brand X to
resurrect the argument — wisely rejected by the district
court -- that as part of the first step of the Chevron
analysis, “the court should focus on the language in
section 9 [the EEOC’s rulemaking authority] rather
than on the substantive provisions [§ 4] of the ADEA.”
AARP v. EEOC, 383 F. Supp. 2d at 710. As the district
court explained, “Because it has conceded that the
ADEA prohibits coordinating retiree benefits with
Medicare eligibility, the EEOC argues that the ‘precise
question’ for Chevron step one purposes is ‘whether
Section 9 authorizes the EEOC to issue exemptions . .
.. 390 F. Supp. 2d at 451.
The district court rejected the EEOC’s
“formulation of the ‘precise question” because it was
“required by neither Chevron nor Brand X and would
give the EEOC unfettered discretion to issue
regulations that contravene the intent of Congress . .
.. Id. Nevertheless, the district court granted the
EEOC’s motion for relief from judgment pursuant to
Fed. R. Civ. P. 60(b), vacated its earlier opinion, and
8
granted summary judgment to the EEOC. Although
the parties agreed “that the plain language of the
ADEA prohibits the practice of coordinating retiree
benefits with Medicare eligibility,” 383 F. Supp. 2d at
710, and although the lower court had previously
characterized the Third Circuit’s ruling in Erie County
as holding that “Congress expressed a clear and
unambiguous intent with regard to the precise
question at issue,” id. at 709 Gonaieeaie added), the
lower court predicated its reversal on its conclusion
that “Congress did not express a clear and
unambiguous intentto prohibit Medicare coordination
of retiree health benefits in the ADEA.” 390 F. Supp.
2d at 453 (emphasis added). In explaining this about-
face, the lower court stated that it could disregard the
“plain language” holding in Erie County because,
under Brand X, the Third Circuit “did not state only
one permissible interpretation of the statute, rather
than merely the best interpretation.” Jd. at 455. The
petitioners timely appealed.
The court of appeals affirmed the grant of
summary judgment tc the EEOC, but on entirely
different grounds than those set forth in either of the
district court’s summary judgment opinions. AAFP v.
EEOC, 489 F.3d 558 (3d Cir. 2007). The Third Circuit
acknowledged the fundamental rule of Chevron: “If
the intent of Congress is clearly expressed in the
statute, ‘that is the end of the matter; for the court, as
well as the agency,’ and such intent must be given
effect.” AARP v. EEOC, 489 F.3d at 562-63 quoting
Chevron, 467 U.S. at 842-43. But in a novel twist, the
court of appeals accepted the EEOC’s argument that
the focus of its assessment of congressional intent
should be on the rulemaking provision of the ADEA,
not on the ADEA’s_ substantive provisions.
Consequently, the court of appeals held as follows:
Section 9 unambiguously grants
reasonable exemption authority to the
EEOC, and plainly states that such
9
authority applies to any and all parts of
the statute. Because section 9 clearly
grants such authority to the EEOC, the
fact that the proposed regulation would
allow certain practices not otherwise
permitted under section 4 does not render
the regulation invalid.
Id. at 563-64 (emphasis added). Although the Third
Circuit agreed with the petitioners that under
Chevron “no administrative agency is permitted to
effectively repeal any portion of a statute by
regulation,” its singular reliance on the ADEA’s
rulemaking provision apparently allowed it to conclude
that “the proposed regulation at issue is narrowly
focused and not contrary to the terms and purpose of
the ADEA... .” 489 F.3d at 563 n.5; see id. at 565
“Under Chevron step one, Congress’ express intent to
permit such exemptions under section 9 of the ADEA
”
must be given effect . . . .”).
The court of appeals also rejected the
petitioners’ challenge that the EEOC “exemption” was
unlawful under section 706(2)(A) of the Administrative
Procedure Act (APA), which requires courts to set
aside agency rules that are “arbitrary, capricious, an
abuse of discretion, or otherwise not in accordance
with law.” 5 U.S.C. § 706(2)(A). While the court of
appeals concluded that the rule was not “arbitrary or
capricious,” 489 F.3d at 566-67, it failed to address the
petitioners’ claim that the “not in accordance with law”
standard of section 706(2)(A) of the APA mirrors the
required analysis at Chevron step one, and that any
agency rule that is contrary to plain congressional
intent is, by definition, “not in accordance with law”
under the APA.
Finally, the petitioners argued that interpreting
section 9 of the ADEA as authorizing the agency to
overturn clear statutory prohibitions, as the EEOC
argued, led to a constitutional conflict under the
10
separation of powers doctrine, as “no administrative
agency is permitted to effectively repeal any portion of
a statute by regulation.” 489 F.3d at 563 n.5. The
court of appeals addressed this claim, however, only in
the context of the “delegation doctrine.” See 489 F.3d
at 564 n. 6. Consequently, the Third Circuit found no
constitutional impediment to the proposed exemption
on the ground that “the EEOC’s exercise of its
exemption authority through the proposed regulation
is narrowly focused to permit a discrete practice
pursuant to the purposes of the ADEA.” Jd.
Petitioners timely filed for rehearing en banc,
and their motion was denied on August 21, 2007. This
petition for certiorari has been filed within ninety (90)
days as required by Rule 13 of the Rules of this Court.
REASONS FOR GRANTING THE WRIT
The Third Circuit’s decision to focus entirely on
the grant of rulemaking authority to the EEOC, and
its total disregard for the fact that Congress had
directly spoken to “the precise question at issue” in the
substance of the ADEA, undermines more than two
decades of settled jurisprudence under Chevron. The
decision below creates a direct conflict over the proper
application of Chevronwith every other circuit court of
appeals, and also conflicts with decisions in the Ninth
and District of Columbia Circuits over the proper
application of section 706(2)(A) of the APA. Beyond
that, the Third Circuit’s approach has created a
constitutional dilemma without precedent. By ignoring
the substance of the ADEA at the first step of the
Chevron analysis, the Third Circuit rendered
irrelevant the very factor that Chevron deemed pivotal
— congressional intent on “the precise question at
issue.” Had the Third Circuit focused on the substance
of the ADEA, it would have acknowledged what the
parties do not dispute, that Congress prohibited
discrimination in all employee benefits and
meticulously crafted an “equal benefit or equal cost”
1}
exception that included health care benefits. This
unambiguous statutory expression of congressional
intent should have been “the end of the matter,”
Chevron, 467 U.S. at 842, as the ADEA’s clarity on
“the precise question at issue” left no regulatory gap
for the EEOC.
As a consequence of the Third Circuit’s focus on
the rulemaking delegation — not on the ADEA’s
substance — the court of appeals affirmed an
“exemption” that is admittedly in direct conflict with
the plain terms of the statute. This unprecedented
result cannot be reconciled with (a) this Court’s
Chevron jurisprudence, (b) the “not in accordance with
law” standard of the APA, or (c) the separation of
powers doctrine in the Constitution. The Third
Circuit's decision threatens to undermine the
constitutional balance between congressional
legislation and executive agency rulemaking. Under
the guise of “exemption” authority, the decision of the
court of appeals would permit any executive agency to
overrule an explicit statutory command. In this case,
the court of appeals’ misguided approach threatens the
health care benefits of approximately ten million older
Americans. Further review is warranted to resolve the
circuit conflicts created by the Third Circuit’s decision
and to correct this consequential error.
I. THE COURT SHOULD GRANT REVIEW TO
RESOLVE THE SPLIT AMONG THE
CIRCUITS REGARDING THE PRINCIPLES
GOVERNING REVIEW OF AGENCY
RULEMAKING SET FORTH IN THIS
COURT’S DECISION IN CHEVRON, U.S.A.,
INC. V. NATURAL RESOURCES DEFENSE
COUNCIL AND THE REVIEW STANDARDS
OF SECTION 706 OF THE APA.
A. The Third Circuit’s Decision Conflicts
with This Court’s ChevronJurisprudence
And The Proper Application of Chevron
12
In Every Other Circuit.
For more than twenty-three years, the Court’s
decision in Chevron U.S.A. Inc. v. Nat] Res. Det.
Council, Inc., 467 U.S. 837 (1984), has set forth the
legal framework for evaluating challenges to agency
rules. The Court held that “if the intent of Congress is
clear, that is the end of the matter; for the court, as
well as the agency, must give effect to the
unambiguously expressed intent of Congress.” 467
U.S. at 842-43. This is the “Chevron step one” review.
If Congress “has not directly addressed the precise
question at issue, and the agency has acted pursuant
to an express or implicit fs reo of authority, the
agency's interpretation of the statute is entitled to
deference so long asit is ‘reasonable’ and not otherwise
‘arbitrary, capricious, or manifestly contrary to the
statute.” See id, 467 U.S. at 843-44. This is the
“Chevron step two” review.
The purpose of ascertaining congressional intent
at Chevron step one is to determine whether Congress
has delegated to the agency the latitude to promulgate
rules. “\Ajmbiguities in statutes within an agency’s
jurisdiction to administer are delegations of authority
to the agency to fill the statutory gap in reasonable
fashion.” Nat? Cable & Telecomms. Ass’n v. Brand X
Internet Services, 545 U.S. 967, 980 (2005). “If a
statute is ambiguous, andifthe implementing agency’s
construction is reasonable,” Chevron obligates the
federal court to accept the agency rule, even if it differs
from what the court believes is the best construction of
the statute. Jd. Conversely, if the statute is clear,
then both the agency and the courts must honor
congressional intent. Chevron deference only operates
if there is ambiguity or silence in the statute. See also
Global Crossing Telecomms., Inc. v. Metrophones
Telecomms., 1278S. Ct. 1513, 1522-23 (2007) (given the
“absence of any relevant congressional prohibition” the
FCC's interpretation of the term “unreasonable” in
section 201(b) of the Communications Act was lawful
13
and citing U.S. v. Mead Corp., 533 U.S. 218, 229 (2001)
for the premise that “where ‘Congress would expect the
agency to be able to speak with the force of law when
it addresses ambiguity in the statute or fills a space in
the enacted law,’ a court ‘is obliged to accept the
agency's position if Congress has not previously spoken
to the point at issue and the agency's interpretation’
(or the manner in which it fills ‘the gap’ is
‘reasonable.’).” (emphasis added); Nat? Ass’n of Home
Builders v. Defenders of Wildlife, 127 S. Ct. 2518, 2534
(2007) (an agency's reasonable interpretation of a
statutory scheme is owed deference “only ‘where
Congress has not directly addressed the precise
question at issue’ through the statutory text.” quoting
Chevron at 843).
Until the decision by the Third Circuit in this
case, every circuit court of appeals applying Chevron
looked, as the Court did in Chevron, to the substantive
provisions of the statute in question to ascertain
congressional intent at “step one.” As the Court
recently confirmed, “[a]t the first step, we ask whether
the statute’s plain terms ‘directly addres|s] the precise
question at issue.” Brand X, 545 U.S. at 986 quoting
Chevron, 467 U.S. at 843 (emphasis added). And, of
course, “the precise question at issue” is whether the
substantive terms of the statute reflect congressional
intent on the issue contemplated by the agency rule.
In Chevron, for example, the issue was whether
Congress had expressed intent in the Clean Air Act
Amendments of 1977 regarding the phrase “stationary
source” that would foreclose an agency rule that
permitted the adoption of a “plantwide” definition of
that term. Having found that Congress did not
express intent on that precise issue, the Court found
that the EPA’s definition was “a _ permissible
construction of the statute which seeks to
accommodate progress in reducing air pollution with
economic growth.” 467 U.S. at 866.
14
Similarly, in Brand X, the task of the Court at
the first step of the Chevron analysis was to determine
whether Congress intended the phrase
“telecommunications servicle]” in the Communications
Act to include broadband Internet service. The court
of appeals had declined to apply Chevron because “it
thought the Commission’s interpretation of the
Communications Act foreclosed by the conflicting
construction of the Act [the Ninth Circuit] had adopted
.... 545 U.S. at 982. But the Court disagreed,
holding that “[a] court’s prior judicial construction of a
statute trumps an agency construction otherwise
entitled to Chevron deference only if the prior court
decision holds that its construction follows from the
unambiguous terms of the statute and leaves no room
for agency discretion.” Jd. Concluding that the terms
of the Communications Act “admit of two or more
reasonable ordinary usages,” 545 U.S. at 989, the
Court found that the agency’s “construction was ‘a
reasonable policy choice for the [Commission] to make’
at Chevron’s second step.” 545 U.S., at 997 quoting
Chevron, 467 U.S., at 845.”
Consistent with Chevron, and _ without
exception, all the other circuits focus on the substance
of the statute in question — not the rulemaking
delegation — to determine congressional intent at
Chevron step one. See, e.g., Nat? Res. Def. Council v.
EPA, 489 F.3d 1364, 1372 (D.C. Cir. 2007) (EPA’s
interpretation of § 112(c)(9) of the Clean Water Act
was contrary to the plain language of the statute;
“That EPA may have broad .. . authority, however,
W See also Long Island Care at Home, Ltd. v. Coke, 127 S. Ct.
2339, 2345 (2007) (citing Chevron in referencing the “power of an
administrative agency...to fill any gap left, implicitly or explicitly
by Congress,” and explaining that “[wlhen an agency fills such a
‘gap’ reasonably, and in accordance with other applicable (e.g.
procedural) requirements, the courts accept the result as legally
binding.”).
15
does not authorize EPA to sidestep what Congress has
plainly prohibited.”); Dominion Ener, a, Omg LLC
v. Johnson, 443 F.3d 12, 17-18 (ist Cir. 2006)
oy, tnd intent behind the term “public hearing” in
the Clean Water Act was ambiguous allowing the EPA
to interpret the term as not mandating evidentiary
hearings); Mizrahi v. Gonzales, 492 F.3d 156, 160 (2d
Cir. 2007) (Board of Immigration Appeals reasonably
resolved ambiguity in the Immigration and Nationality
Act by determining that drug solicitation qualifies as
“a violation of... any law... relating to a controlled
substance”); EEOC v. Seafarers Int'l Union, 394 F.3d
197, 202-03 (4th Cir. 2005) (the text of ADEA
§§ 623(a), (b), (c) and (f) “evinces no prohibition” of the
EEOC’s regulation subjecting apprenticeship programs
to the Act); Santa Fe Sn der Corp. v. Norton, 385 F.3d
884, 890-92 (5th Cir. 2004) (§ 304 of the Deep Water
Royalty Relief Act unambiguously granted royalty
suspensions for new leases invalidating the
Department of the Interior’s regulation apy a
suspension only if lease was determined to be in a fiel
that had not produced prior to enactment of Act);
Harris v. Olszewsky, 442 F.3d 456, 466 (6th Cir. 2006)
(Health and Human Services’ interpretation of term
“medical devices” in Medicaid Act as including
incontinence products is valid because Congress had
not addressed the issue); Castro v. Chicago Hous.
Auth., 360 F.3d 721, 727-29 (7th Cir. 2004) (upholding
the Department of Labor’s decision to include quasi-
public entities as covered “employers” under the
Worker Adjustment and Retraining Notification Act
(WARN) because Congress had not defined “business
enterprise”); Baptist Health v. Thompson, 458 F.3d
768, 774 (8th Cir. 2006) (“Under step one of the
Chevron analysis, we determine whether the statute
makes clear the intent of Congress as to the meaning
of the term ‘approved educational activities.”); New
Edge Network, Inc. v. FCC, 461 F.3d 1105, 1111-12
(9th Cir. 2006) (since the phrase “upon the same terms
and conditions as those provided in the agreement” in
§ 252(i) of the Telecommunications Act of 1996 was
16
ambiguous, the FCC’s interpretation of the statute was
reasonable); Hackworth v. Progressive Cas. Ins. Co.,
468 F.3d 722, 727-29 (10th Cir. 2006) (because
Congress had left an “implicit statutory gap” in the
Family Medical Leave Act, the Secretary of Labor’s
regulation prescribing a method for measuring “within
75 miles” was reasonable); Wilderness Watch v.
Mainella, 375 F.3d 1085, 1092 (11th Cir. 2004) (the
“plain language” of the Wilderness Act contradicts the
National Park Service’s interpretation allowing for
motorized public access to historical structures across
designated wilderness areas).
In the more than twenty years since Chevron
was decided, there is not one case to support the Third
Circuit’s unprecedented deviation from the Chevron
protocols. Neither the Third Circuit nor the EEOC has
cited to a single case in which a court has held that a
rulemaking delegation trumps congressional intent
clearly expressed in the substance of the statute. See
AARP vy. EEOC, 383 F. Supp. 2d at 712 (lower court
finding that “[tlhe EEOC cited no relevant cases
supporting its analysis of this case.”); AARP v. EEOC,
390 F. Supp. 2d at 453 (“neither the parties nor this
Court has found any case that sanctions congressional
delegation to an agency of the authority to undo what
Congress has done through clear and unambiguous
statutory language.”).
The Third Circuit stated that its holding was
“analogous to the Second Circuit’s approach in ScAi//er
v. Tower Semiconductor Ltd., 449 F.3d 286 (2d Cir.
2006).” AARP v. EEOC, 489 F.3d at 565 n. 10. But
the facts of Schiller are far different than those
resented here. The issue in Schiller was whether the
ecurities and Exchange Commission had properly
“exempted” certain foreign issuers of securities from
the proxy statement requirements of the Securities
Exchange Act of 1934. As the Second Circuit noted,
the substantive provision of the Act “[bly its own
terms, does not apply to ‘exempted securitlies].” 449
17
F.3d at 291. And the Act’s definition of “exempted
securities” includes any that the SEC may “exempt
from the operation of any one or more provisions of
this chapter which do not apply to an ‘exempted
security’ or to ‘exempted securities.” Jd By
embedding the SEC’s exemption authority in a
substantive provision of the statute, Congress made
clear its intent that specific substantive provisions
would not apply to “exempted securities.” The
administrative rule challenged in the litigation
exempted “(securities registered by a foreign private
issuer,” a classification not expressly addressed by the
proxy rules or by the statute’s own definition of
‘exempted securities.”
Although Schiller did not mention Chevron, it
appears clear that the challenged rule regarding
securities issued by a “foreign private issuer”
addressed an ambiguity in the statute, as Chevron
would allow. Moreover, the substantive provisions of
the statute in question expressly contemplated
“exemptions,” which is far from the case here. Indeed,
when Congress passed the OWBPA in 1990, it
expressly incorporated specific exceptions for certain
benefit practices, none of which involve the type of
overt discrimination in health care benefits permitted
by the challenged rule. See, e.g., 29 U.S.C. § 623
(f)(2)(B)G) (the “equal benefit or equal cost” exception);
id. at § 623(f(2)(B)Gi)exce tion for “voluntary earl
retirement incentive plan|s}”); id. at § 623()(1)(B
(permitting subsidized early retirement benefits, social
security supplements, and a severance offset for the
value of retiree health care benefits). Unlike Schiller,
there is no hint of ambiguity in the ADEA’s
substantive provision “on the precise issue in
question,” nor is there any evidence that Congress
intended (or contemplated) statutory exceptions
beyond those that it handcrafted.
Indeed, the Third Circuit’s mistaken disregard
of the ADEA’s substance at Chevron step one —
18
contrary to all the other circuits — has created an
additional circuit conflict that warrants resolution by
this Court. The Third Circuit’s holding that an
executive agency rule can “exempt” conduct that
Congress clearly intended to prohibit is in direct
conflict with holdings to the contrary in the Seventh,
Ninth and District of Columbia Circuits. The issue in
both Diersen v. Chicago Car Exch., 110 F.3d 481 (7th
Cir. 1997) and Orca Bay Seafoods v. Nw. Truck Sales,
Inc., 32 F.3d 433 (9th Cir. 1994) was whether the
National Highway Traffic Safety Administration had
the authority to exempt certain classes of vehicles from
the Vehicle Information and Cost Saving Act which
required all persons transferring a motor vehicle to
provide an accurate, written odometer reading to the
recipient of the vehicle. Under challenge in Diersen
was a regulation that exempted from the odometer
requirements all vehicles that are at least ten years
old. Diersen, 110 F.3d at 483. In Orca Bay, the
plaintiff challenged a virtually identical regulation
that purported to exempt from the odometer
requirements “transfers of trucks with gross vehicle
weight ratings of more than 16,000 pounds.” Orca
Bay, 32 F.3d at 434. Both courts of appeals found the
challenged rules contrary to plain statutory language
and, therefore, unlawful. The Court in Diersen
summarized the bedrock of both holdings:
Thle] principle is that “legislative power
rests in Congress and .. . the will of
Congress as unambiguously expressed in
a properly enacted statute cannot be
amended or altered by regulation... .
[A] regulation to the extent it is in direct
variance with an unambiguous statutory
provision is void.”
Diersen, 110 F.3d at 486 (citations omitted).
In language directly applicable to the dispute
here, the Seventh Circuit noted that “[tlhere may be
19
good policy reasons for exempting older vehicles from
the requirements of the Act, but that determination is
legislative in nature and is properly made by Congress,
and not by regulatory fiat.” Jd. at 487 (footnote
omitted); accord Orca Bay, 32 F.3d at 437 (“In the
statute at issue, Congress left no gap, no silence, no
ambiguity, so ‘we must give effect to the plain
language that Congress chose.”) quoting United States
v. Geyler, 949 F.2d 280, 283 (9th Cir. 1991). Both the
analysis and the holdings in Diersen and Orca Bay are
directly at odds with the decision of the Third Circuit
in this case.
Similarly, the District of Columbia Circuit relied
on Chevron to reject an Environmental Protection
Agency (EPA) regulation that “exempted” certain
equipment replacement activity from the provisions of
the Clean Air Act. State of New York v. EPA, 443 F.3d
880 (D.C. Cir. 2006). Under the Clean Air Act, sources
of emissions “that undergo ‘any physical change’ that
increases emissions are required to undergo the NSR
[New Source Review] permitting process.” 443 F.3d at
883. A regulatory “exclusion has historically provided
that routine maintenance, repair, and replacement do
not constitute changes triggering NSR.” Jd. The
EPA’s challenged regulation, however, “both defined
and expanded that exclusion,” to allow sources to
replace up to 20 percent of the replacement value of
the process unit and still remain within the exclusion.
Id. As the D.C. Circuit observed, the exemption rule
“would allow sources to avoid NSR when replacing
equipment under the twenty-percent cap
notwithstanding a resulting increase In emissions.”
Id. (emphasis added).
Like here, the plain effect of the challenged rule
in State of New York was to create a regulatory
exemption that would have removed entirely and
without further scrutiny a broad range of actions that
were explicitly barred by the substantive provisions of
the Clean Air Act. The D.C. Circuit was not distracted
20
by the EPA’s rulemaking provision, and instead
a the time-honored test of Chevron, holding that
“lijf a court, employing traditional tools of statutory
construction, ascertains that Congress had an
intention on the precise question at issue, that
intention is the law and must be given effect.” Jd. at
884 quoting Chevron, 467 U.S. at 843 n. 9. Under
Chevron step one, the court found that the challenged
exemption was “contrary to the plain language of
section 111(a)(4) of the Act,” zd. at 883, which evinced
Congress’ clear intent to apply the Clean Air Act to
any physical modifications of a source that increased
emissions.
Equally important, the D.C. Circuit observed
how the exemption would wholly frustrate the
fundamental purpose of the Clean Air Act by
producing “a ‘strange,’ if not an ‘indeterminate,’ result:
a law intended to limit increases in air pollution would
allow sources operating below applicable emission
limits to increase significantly the pollution they emit
without government review.” /d. at 886. So too here,
a law intended to prohibit age discrimination that
expressly permits employers to adjust benefits when
they are more expensive to provide to older workers
would allow employers to arbitrarily eliminate health
care coverage for millions of Americans at age 65.
Moreover, the proposed exemption would sanction this
result even when the older individuals’ benefits are
admittedly much Jessexpensive than those provided to
younger individuals. Like the Seventh Circuit in
Diersen, and the Ninth Circuit in Orca Bay, the D.C.
Circuit made clear that an agency cannot make policy
determinations that conflict with choices made by
Congress. “EPA may not ‘avoid the Congressional
intent clearly expressed in the text simply by asserting
that its preferred approach would be better policy.”
Id. at 889 quoting Engine Mfrs. Ass'n v. EPA, 88 F.3d
1075, 1089 (D.C. Cir. 1996).
21
Finally, the Third Circuit’s holding that the
EEOC may issue an “exemption” which the parties
agree is contrary to the plain language of the ADEA
also runs afoul of the Court’s holding in Public
Employees Ret. Sys. of Ohio v. Betts, 492 U.S. 158
(1989). In rejecting the validity of the original “equal
benefit or equal cost” regulation (prior to its
codification by Congress in the OWBPA), the Court
held that “no deference is due to agency
interpretations at odds with the plain language of the
statute itself.” 492 U.S. at 171; see also Mohasco Corp.
v. Silver, 447 U.S. 807, 825 (1980) (holding that an
EEOC “interpretation’ of the statute cannot supersede
the language chosen by Congress.”).
B. The Approach By The Third Circuit To
The “Not in Accordance With Law”
Standard of Section 706(2)(A) of the
Administrative Procedure Act Presents
A Conflict Among the Circuits.
The Third Circuit compounded its error in the
misapplication of Chevron by committing an almost
identical mistake in the application of § 706 of the
APA. The APA review provisions are expressly
incorporated into the ADEA’s grant of rulemaking
authority, which states that, the EEOC:
In accordance with the provisions of
subchapter II of chapter 5 of Title 5 [the
AP. . May issue such rules and
regulations as it may consider necessary
or appropriate for carrying out this
chapter, and may establish such
reasonable exemptions to and from any
or all provisions of this chapter as it may
find necessary and proper in the public
interest.
29 U.S.C. § 628 (emphasis added). As the Third
Circuit acknowledged, § 706(2)(A) of the APA requires
22
courts to “hold unlawful and set aside agency action”
that is “arbitrary, capricious, an abuse of discretion, or
otherwise not In accordance with law.” 489 F.3d at
565-66 citing 5 U.S.C. § 706(2)(A) (emphasis added).
The Third Circuit’s erroneous application of the
limitations of § 706 was based once again on its
improper focus on the rulemaking provision to the
disregard of the ADEA’s statutory commands. /d. at
566 (“The EEOC has shown the regulation to be
reasonable, necessary, and proper according to the
terms and purposes of the statute.”). Both the Ninth
and the D.C. Circuits (as well as an earlier decision by
the Third Circuit) have applied the analysis of
Chevron step one to determine whether agency action
is “not in accordance with law” under § 706(2)(A) of the
APA. Unlike the Third Circuit here, which incorrectly
focused on the rulemaking delegation, the Ninth and
D.C. Circuits addressing § 706 of the APA have focused
their analysis on the substance of the statute as the
universal application of Chevron requires.
For example, in Se. Alaska Conservation
Council v. U.S. Army Corps of Engrs, 486 F.3d 638
(9th Cir. 2007), the issue was whether a permit issued
by the Corps of Engineers violated the Clean Water
Act. The Ninth Circuit’s review was governed by
§ 706(2)(A) of the APA. Jd, 486 F.3d at 643. In
articulating the “not in accordance with law’
requirement of § 706(2)(A), the Ninth Circuit applied
verbatim the standard set by the Court at Chevron
step one:
We begin, as we must, with the text of
the Clean Water Act itself to determine
“whether Congress has directly spoken to
the precise question at issue. If the
intent of Congress is clear, that is the
end of the matter; for the court, as well
as the agency, must give effect to the
23
unambiguously expressed intent of
Congress.”
Id. at 644 quoting Chevron, supra, 467 U.S. at 842-43.
Applying Chevron, the Ninth Circuit relied cn the
“plain language” of the Clean Air Act to conclude that
the statute was “unambiguous” on the issue in dispute.
Id. Consequently, the court reversed the entry of
summary judgment and remanded the matter to the
district court to vacate the permit at issue.
The Ninth Circuit had earlier applied the
Chevron step one analysis to an APA challenge
involving the High Seas Fishing Compliance Act.
Turtle Island Restoration v. Nat’ Marine Fisheries
Serv., 340 F.3d 969 (9th Cir. 2003). In setting aside
the agency action challenged in Turtle Island, the
Ninth Circuit focused on the substance of the
Compliance Act and concluded that the agency was
“not entitled to Chevron deference because it [the
challenged action] is contrary to the unambiguous
language of the statute.” Jd. at 975.
The Third Circuit’s disregard for the substantive
provisions of the ADEA in its analysis under § 706 of
the APA also conflicts with the § 706 analysis by the
Court of Appeals for the D.C. Circuit. In Gerber v.
Norton, 294 F.3d 173 (D.C. Cir. 2002), the plaintiffs
brought an APA challenge to a “decision by the Fish
and Wildlife Service to issue a permit authorizing the
otherwise unlawful ‘taking’ of the endangered
Delmarva fox squirrel in connection with a proposed
residential development.” Jd. at 175. The plaintiffs
alleged that the agency failed to follow certain
required procedures in violation of APA § 706(2)(D),
and that the decision itself was in violation of the
standards set forth in § 706(2)(A). Jd. at 178. Looking
to the substance of the Endangered Species Act, the
court found that the issuance of the permit violated
the statute because the agency “failed to find that the
developer would minimize the impacts of the taking,”
24
as required by 16 U.S.C. § 1539(a)(2)(B). Jd. at 184.
Consequently, the court concluded that the agency
“acted ‘otherwise not in accordance with law,” under
§ 706(2)(A) of the APA. Jd. at 186.
Here, had the Third Circuit adopted the
analytical framework applied by the Ninth and D.C.
Circuits to challenges under § 706(2)(A) of the APA,
and focused instead on the substance of the statute, it
would have found (as the parties agree) that Congress’
prohibition on discrimination in health care benefits
was clear and unambiguous, and that “would have
been the end of the matter.” Chevron, 467 U.S. at 842.
Ironically, the Third Circuit’s analysis in this case
deviated from prior circuit precedent under the APA.
In Mercy Catholic Med. Ctr. v. Thompson, 380 F.3d
142, 152 (3d Cir. 2004), the Third Circuit reviewed a
decision of the Secretary of Health and Human
Services denying reimbursement to a hospital for
graduate medical training expenses. At issue in the
case was “a special graduate medical education cost
documentation rule for reaudits” issued by the
Secretary which had been relied upon to disallow
Medicare reimbursement to the hospital. Jd. at 152.
The court applied the standard of review of APA § 706,
id. at 151, and rejected the agency’s rule stating “[wle
owe no deference to an agency interpretation plainly
inconsistent with the relevant statute.” Jd. at 152.
II. THE COURT SHOULD GRANT REVIEW
BECAUSE PERMITTING EEOC
REGULATIONS TO OVERRULE THE ADEA’S
PLAIN STATUTORY LANGUAGE VIOLATES
THE CONSTITUTIONAL SEPARATION OF
POWERS DOCTRINE.
The Third Circuit’s missteps have resulted in a
constitutional morass without precedent. Although it
is undisputed that the ADEA expressly prohibits age
25
discrimination in health care benefits,” the EEOC rule
repeals those portions of the ADEA that mandate non-
discriminatory health care benefits. See Erie County
Retirees Ass’n v. County of Erie, 220 F.3d 193, 215 (3d
Cir. 2000) (“the plain Janguage of section 623(£)(2)(B)(G)
— through its express reference to 29 C.F.R. § 1625.10
~ indicates that Congress intended section
623(f)(2)(B)G) to apply when an employer reduces
health benefits based on Medicare eligibility.”)
(emphasis added).
If, as according to the Third Circuit, section 9 of
the ADEA authorizes the EEOC to overturn plain
congressional intent, then section 9 is most certainly
unconstitutional as applied. The EEOC has no more
authority to permit overt discrimination in employee
benefits — contrary to congressional intent -- than it
does to impose mandatory retirement, also a practice
long ago outlawed by Congress. The Constitution does
not permit the executive branch to overturn legislation
enacted by Congress.
Article I, Section 1 of the U.S. Constitution
states that “all legislative Powers herein granted shall
be vested in a Congress of the United States.” This
explicit separation of power from the Executive Branch
is clear. Simply put, “[t]here is no provision in the
“ Indeed, the EEOC has repeatedly explained that were it not for
the plain language of the ADEA, its “exemption” would be wholly
unnecessary. For example, in the EEOC’s Opposition to Plaintiffs’
Motion for Preliminary Injunction, the agency chastised the
petitioners for “devotling] an inordinate amount of time in their
brief stating the obvious, namely that the proposed regulation
exempts conduct that is prohibited by the ADEA .. . Clearly if
that conduct were not proscribed by the ADEA there would be no
need for an exemption.”); see also AARP v. EEOC, 383 F. Supp. 2d
at 710 (“The EEOC does not dispute the holding of Erie County,
that the plain language of the ADEA prohibits the practice of
coordinating retiree benefits with Medicare eligibility.”).
26
Constitution that authorizes the President to enact, to
amend, or to repeal statutes.” Clinton v. City of New
York, 524 U.S. 417, 438 (1998); see also INS v.
Chadha, 462 U.S. 919, 954 (1983) (‘Amendment and
repeal of statues, no less than enactment, must
conform with Artlicle] I.”); id., n. 18 (“There is no
provision allowing Congress to repeal or amend laws
by other than legislative means pursuant to Art. I.”).
The Third Circuit acknowledged the
constitutional dilemma. 489 F.3d at 563 n.5(“...
AARP correctly notes that no administrative agency is
permitted to effectively repeal any portion of a statute
by regulation. . . Gf But the court of appeals
sidestepped the issue, remarkably, by holding that the
rule “is narrowly focused and not contrary to the terms
and purpose of the ADEA... .” Jd. The Third
Circuit’s holding that the rule was not contrary to the
terms and purpose of the ADEA is in direct conflict,
however, with (a) the language of the ADEA and
congressional intent behind the enactment of the
OWBPA, (b) the positions of the parties throughout the
litigation, and @ the Third Circuit’s own reasoning
(“the fact that the proposed regulation would allow
certain practices not otherwise permitted under
section 4 does not render the regulation invalid.”). 489
F.3d at 564. As this Court confirmed in C/inton, 524
U.S. at 438, “[Rlepea! of statutes, no less than
enactment, must conform with Art. I.”2
The Third Circuit’s discussion of the “delegation
doctrine” does not avoid the unconstitutional result
reached here. 489 F.3d at 564 n. 6. The problem is not
that the section 9 delegation is inherently
unconstitutional, but rather it is the Third Circuit’s
* If section 9 authorizes the EEOC to overturn statutory
provisions, as the Third Circuit’s decision implies, it also violates
the Presentment Clause. U.S. Const., art. 1, § 7; see Clinton, 524
U.S. at 442-47.
27
sweeping interpretation that rendered that result.
Indeed, the APA limitations expressly incorporated
into section 9 (arbitrary, capricious and not in
accordance with law), when buttressed by section 9’s
self-imposed limitations that exemptions must be
“reasonable” and “necessary and proper in the public
interest,” provide an “intelligible principle” by which to
regulate. See Whitman v. Am. Trucking Ass‘’n, 531
U.S. 457, 472 (2001). Simply put, a rule that flies in
the face of clear congressional intent is “not in
accordance with law,” could never be “reasonable,” and
is contrary to, not “necessary and proper in the public
interest.” Had the Third Circuit given practical
meaning to the limitations on the section 9 delegation,
it would not have reached the unconstitutional result
it has fashioned. “That Congress cannot delegate
legislative power to the President is a principle
universally recognized as vital to the integrity and
maintenance of the system of government ordained by
the Constitution.” Jndus. Union Dept., AFL-CIO v.
American Petroleum Inst., 448 U.S. 607, 673 (1980)
(Rehnquist, J. concurring) quoting Field v. Clark, 143
U.S. 649, 692 (1892).
At virtually every turn (Chevron, § 706 of the
APA, and the limitations contained in section 9), the
Third Circuit was presented with opportunities to hold
the EEOC’s proposed rule unlawful. The Third
Circuit's failure to seize any of those opportunities,
ironically, runs afoul of the time-honored principle
even the circuit court acknowledged: “A statute must
be construed, if fairly possible, so as to avoid not only
the conclusion that it is unconstitutional, but also
grave doubts upon that score.” 489 F.3d at 564 n. 6,
quoting United States v. Jin Fuey Moy, 241 U.S. 394,
401 (1916).
Finally, the constitutional conflict is apparent
from the EEOC’s claim that the challenged regulation
is “in the public interest.” According to the EEOC, it
is in the “public interest” to permit employers to
28
discriminate on the basis of age against individuals
age 65 and older, all in the “hope” that employers
permitted to cut those expenses will beneficently
maintain health care coverage for younger retirees.
But what the EEOC believes is in the “public interest”
clashes head on with what Congress concluded when
it passed the OWBPA in 1990. This direct
confrontation is apparent from the EEOC’s own
regulations governing the issuance of exemptions
under the ADEA.
The EEOC’s own regulations indicate that:
“(tlhe authority conferred on the
Commission by section 9 ...will be
exercised with caution and due regard for
the remedial |, ae of the statute to
—— employment of older persons
ased on their ability rather than age
and to prohibit arbitrary age
discrimination in employment.
Administrative action consistent with
this statutory purpose may be taken...
when found necessary and proper in the
public interest in accordance with the
statutory standards.”
29 C.F.R. § 1627.15(b) (emphasis added).
The challenged rule does not serve either of
these two statutory purposes, either logically or
factually. First, the exemption plainly undermines the
statutory purpose of prohibiting arbitrary age
“ This Court has ruled that courts “must reject administrative
constructions of the statute, whether reached by adjudication or
by rulemaking, that are inconsistent with the statutory mandate
or that frustrate the policy that Congress sought to implement.”
Fed. Election Comm'n vv. Democratic Senatorial Campaign
Freee 466U.S: 87, 88GOOR::socrcr oo cei
29
discrimination by allowing employers to specifically
target individuals for the elimination of health care
benefits based so/ely on their age. Rather than
prohibit arbitrary age discrimination, the challenged
rule sanctions it. Second, the EEOC rule cannot
rationally “promote employment of older persons”
because, by its terms, it only applies to retired
employees.
Faced with the obvious contradiction between
the rule and congressional intent behind the ADEA,
there are only two sentences in the entire rulemaking
record regarding the observance of these statutory
purposes. Included in the EEOC’s Federal Register
announcement of the proposed exemption is the
agency's ipse dixit that “(t]he proposed exemption
shows due regard for the Act’s prohibition against
arbitrary age discrimination in employment -—a central
concern of Congress when it enacted the ADEA. The
exemption is also consistent with the Act’s purpose of
promoting the employment of older persons. . . .” 68
Fed. Reg. at 41547 (July 14, 2003). These conclusory
statements are bereft of any explanation as to how
those critical statutory purposes are advanced by a
rule that permits wholesale age discrimination against
approximately ten million individuals. The Third
Circuit sidestepped altogether the two remedial
purposes of the ADEA, however, and ruled in similar
conclusory fashion that “[t]he EEOC has shown the
regulation to be reasonable, necessary, and proper
according to the terms of the statute.” 489 F.3d at 566.
Ultimately, the Third Circuit’s decision
unconstitutionally allows an executive agency to
substitute its judgment for that of Congress. That
precise result was emphatically rejected by the courts
in Diersen, Orca Bay and State of New York.
If we were to defer to the Secretary's
judgment about the wisdom of exempting
_ large trucks, despite Congress’s. ......... .....
i
|
|
SS a 2
30
determination not to exempt them, we
would in effect allow lobbyists to appeal
from the legislative to the executive
branch after a bill has become law.
..- he executive branch is not a tribunal
to which affected interests can appeal
adverse legislative judgments. For all we
know, the same trucking interests
mentioned by the Secretary in his
explanation made the same arguments to
Congress, lost, and then asked the
Secretary to undo what they saw as a
legislative misjudgment.
Orca Bay, 32 F.3d at 437.7
CONCLUSION
For the foregoing reasons, the petition for a writ
of certiorari should be granted.
Sl ...
“Tn fact, that is precisely what occurred here. Language virtually
identical to the EEOC's proposed exemption was proposed but
excluded from the Medicare Prescription Drug, Improvement and
Modernization Act of 2003, Pub. L. No. 108-173, 117 Stat. 2066
(2003). Almost all of the amici that support the EEOC rule (see
489 F.3d at 564 n.9) were unsuccessful in their efforts to convince
Congress to amend the ADEA to allow employers to reduce or
terminate retiree health benefits at age 65. Medicare Drug Deal
Would Exclude Employers’ Subsidies From Taxes, Daily Lab. Rep.
(BNA) No. 222, at A-7 (Nov. 18, 2003). See also :
.. http://www.eric org/forms/uploadFiles/2D5600000002.filename...............
' Erie_Conferee_letter_Grassley_Thomas_Sept03.pdf. (
31
Respectfully submitted
Christopher G. Mackaronis
Brickfield, Burchette, Ritts
and Stone
1025 Thomas Jefferson Street, NW
8th Fl., West Tower
Washington, DC 20007
(202) 342-0800
Laurie A. McCann
AARP Foundation Litigation
601 E Street, NW
Washington, DC 20049
(202) 434-2060
Erwin Chemerinsky
Duke University School of Law
Box 90360
Durham, NC 27708
(919) 613-7173
APPENDIX
1-A
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
Argued: February 27, 2007
Filed: June 4, 2007
Docket No. 05-4594
AMERICAN ASSOCIATION OF RETIRED
PERSONS; Jack W. MacMillan; Frank H. Smith, Jr.;
Frank A. Wheeler; Fred Dochat: Gerald Fowler; M.
Elaine Clay,
Appellants,
v.
EQUAL EMPLOYMENT OPPORTUNITY
COMMISSION.
Christopher G. Mackaronis (Argued),
Brickfield, Burchette, Ritts and Stone,
Laurie A. McCann, AARP Foundation,
Washington, DC, Stephen G. Console,
Philadelphia, PA, Counsel for Appellants.
Anthony A. Yang (Argued), Untied States
Department of Justice, Appellate Section,
Marleigh D. Dover, United States
Department of Justice, Washington, DC,
Counsel for Appellees.
Barbara B. Brown, Neal D. Mollen, Paul,
Hastings, Janofsky & Walker,
Washington, DC, for Counsel for Amicus-
Appellee Chamber of Commerce of the
United States.
Douglas L. Greenfield, Bredhoff & Kaiser,
2-A
Washington, DC, Counsel for Amicus-
Appellees National Education
Association; American Federation of
Teachers; International Union, United
Automobile, Aerospace and Agricultural
Implement Workers ‘of America;
American
Federation State, County and Municipal
Employees; Untied Steel, Paper and
Forestry, Rubber, Manufacturing,
Energy,
Allied Industrial and Service Workers j
International Union; and International
Association of Fire Fighters. Ann E.
Reesman, McGuiness, Norris & Williams,
Washington, DC, Counsel for Amicus-
Appellees Equal Employment Advisory
Council; HR Policy Association; America’s
Health Insurance Plans; American
Benefits Council; ERISA Industry
Committee; National Rural Electric
Cooperative Association; Society for
Human Resource Management: American
Council on Education: College and
University Professional Association for
Human Resources; and WorldatWork.
Before: MCKEE and ALDISERT, Circuit
Judges, and RESTANI*, Judge.
OPINION OF THE COURT
RESTANI, Judge.
Appellants American Association of Retired
Persons, et al. (“AARP”), appeal a judgment of the
United States District Court for the Eastern District of
Pennsylvania. The District Court vacated, on the
basis of a significant change in law, a previous grant of
summary judgment in favor of AARP, and instead
granted summary judgment in favor of the Equal
Employment Opportunity Commission (“EEOC”). At
3-A
issue is a regulation that would exempt from the Age
Discrimination in Employment Act ADEA
employer coordination of retirement benefits with,
inter alia, Medicare benefits. AARP challenges the
regulation as contrary to the terms of the AD and
seeks to reinstate the District Court’s permanent
injunction against implementation of the regulation.
We will affirm the District Court’s order granting
summary judgment in favor of the EEOC on grounds
other than those relied on by the District Court.
BACKGROUND
On July 14, 2003, the EEOC published a notice
of proposed rulemaking to exempt from the
prohibitions of the ADEA “the practice of altering,
reducing or eliminating employer-sponsored retiree
health benefits when retirees become eligible for
Medicare or a State-sponsored retiree health benefits
program.” Age Discrimination in Employment Act;
Retiree Health Benefits, 68 Fed. Reg. 41,542, 41-542
(EEOC July 14, 2003) (notice of proposed
rulemaking)“ AARP brought suit in the Eastern
#99 U.S.C. §§ 621-34, as amended by the Older Workers Benefit
Protection Act, Pub.L. No. 101-433, 104 Stat. 978 (1990).
” The final rule would read as follows:
(b) Exemption. Some employee benefit plans
provide health benefits for retired participants
that are altered, reduced or eliminated when the
participant is eligible for Medicare health benefits
or for health benefits under a comparable State
health benefit plan. Pursuant to the authority
contained in section 9 of the [ADEA], and in
accordance with the procedures provided therein
... it is hereby found necessary and proper in the
public interest to exempt from all prohibitions of
the Act such coordination of retiree health
4-A
District of Pennsylvania on February 4, 2005,
challenging the proposed regulation under the
Administrative Procedure Act, 5 U.S.C. §§ 551, et seq.
(“APA”), and the ADEA. AARP v. Equal Employment
Opportunity Comm'n, 383 F. Supp.2d 705, 708
(E.D.Pa. 2005) “AARP S).
Initially, the District Court granted summary
judgment in favor of AARP, holding that the
challenged regulation was contrary to law under this
court’s decision in Erie County Retirees Ass'n Vv.
County of Erie, 220 F.3d 193 (3d Cir. 2000). In Erie
County, consistent with the position of the EEOC in
that action, we held that, as Medicare eligibility is age
dependent, the ADEA did not permit reduction or
termination of retiree health benefits upon Medicare
eligibility unless the employer met the “equal benefit
or equal cost” defense set forth in section 4 of the
ADEA.” Jd. at 217. Accordingly, here the District
Court stated that “[blecause the Third Circuit held in
Erie County that Congress intended the ADEA to
apply to the exact same behavior that the EEOC would
exempt, the EEOC’s challenged exemption is contrary
to Congressional intent and the plain language of the
benefits with Medicare or a comparable State
health benefit plan. 68 Fed. Reg. at 41,548-49.
'©' The relevant portion of 29 U.S.C. § 623 reads as follows:
It shall not be unlawful for an employer,
employment agency, or labor organization .. . to
take any action otherwise prohibited .. . to
observe the terms of a bona fide employee benefit
plan . . . where, for each benefit or benefit
package, the actual amount of payment made or
cost incurred on behalf of an older worker is no
less than that made or incurred on behalf of a
younger worker.
29 U.S.C. § 623(0(2)(B)W.
5-A
ADEA.” AARP J, 383 F. Supp. 2d at 710. The District
Court permanently enjoined the EEOC from
“publishing or otherwise implementing the regulation
at issue.” Jd. at°712. The EEOC appealed that
judgment.
On June 27, 2005, while the first appeal was
pending, the Supreme Court decided National Cable
and Telecommunications Ass’n v. Brand X Internet
Services, 545 U.S. 967, 125 S.Ct. 2688, 162 L.Ed 2d
820 (2005). Brand X held that prior judicial
interpretation of a statute bars subsequent agency
interpretations only where the precedent
“unambiguously forecloses the agency’s interpretation,
and therefore contains no gap for the agency to fill.”
Brand X, 545 U.S. at 983, 125 S.Ct. 2688. The EEOC
moved for relief from judgment in the District Court,
citing Brand X as an intervening change of law with
respect to the court’s application of Erie County and
arguing that its proposed regulation was consistent
with the statute. AARP v. Equal Employment
Opportunity Comm’n 390 F. Supp. 2d 437, 441-42
(E.D.Pa. 2005) (“AARP JP). The District Court
granted the motion, vacating its decision in AARP J
and ory summary judgment in favor of the
EEOC. /dat 462. The District Court stayed its order
lifting the permanent injunction pending any appeal.
Id. at 463. AARP appeals.
JURISDICTION AND STANDARD OF REVIEW
The District Court had jurisdiction under 28
U.S.C. § 1331. We have jurisdiction under 28 U.S.C.
§ 1291. We review the District Court’s grant of
summary judgment de novo. Concerned Citizens
—_- Inc., v. Slater, 176 F.3d 686, 693 (3d Cir.
1999).
6-A
DISCUSSION
At issue is whether the proposed regulation is
within the EEOC’s authority under the ADEA, and
whether the regulation is valid under the APA.
I. The Proposed Regulation is Within the EEOC’s
—- Authority Under Section 9 of the
There is a well-trodden two-step approach to
judicial review of an agency regulation. Chevron,
U.S.A., Inc. v. Natural Res. Def. Council, 467 U.S. 837,
842-43, 104 S.Ct. 2778, 81 L. Ed. 2d 694 (1984). Step
one asks “whether Congress has directly spoken to the
precise question at issue.” Jd. at 842, 104 S.Ct. 2778.
If the intent of Congress is clearly expressed in the
statute, “that is the end of the matter; for the court, as
well as the agency,” and such intent must be given
effect. Jd. at 842-43, 104 S.Ct. 2778. “[I]f the statute
is silent or ambiguous with respect to the specific
issue,” then the court proceeds to a_ step-two
determination of whether the agency interpretation is
based on a “permissible construction” of the statute.
Id. at 843, 104 S.Ct. 2778.
The precise question in this case is whether the
EEOC has the power to issue a regulation exempting
from the prohibitions of the ADEA employer-sponsored
benefits plans that coordinate retiree health benefits
with eligibility for Medicare or state-sponsored health
benefits programs. Section 9 of the ADEA authorizes
the EEOC to “establish such reasonable exemptions to
and from any or all provisions of [the Act] as it may
find necessary and proper in the public interest.” 29
U.S.C. § 628. The EEOC acknowledges this source of
authority in its notice of the proposed rulemaking,
stating that “[a]fter an in-depth study, the Commission
believes that the practice of [coordinating retiree
health benefits with Medicare eligibility] presents a
circumstance that warrants Commission exercise of its
T-A
ADEA exempting authority . . . [Plursuant to its
authority under Section 9 of the Act, the EEOC
proposes ... this notice of proposed rulemaking.” 68
Fed. Reg. at 41,542.
Section 9 clearly and unambiguously grants to
the EEOC the authority to provide, at least, narrow
exemptions from the prohibitions of the ADEA. By
definition, the power to grant “exemptions” provides
an agency with authority to permit certain actions at
variance with the express provisions of the statute in
question. By stating that “any or a// provisions” may
be subject to exemptions,” Congress made plain its
intent to allow limited practices not otherwise
permitted under the statute, so long as they are
“reasonable” and “necessary and proper in the public
interest.” 29 U.S.C. § 628 (emphasis added). Because
the language of section 9 expressly grants to the EEOC
the power to implement such exemption shown by the
agency to be reasonable, necessary, and proper falls
within the agency’s authority under the statute.
AARP argues that the proposed exemption
exceeds the EEOC’s authority under section 9 because
it would allow certain employer practices otherwise
\V “The term ‘exemption’ is ordinarily used to denote relief from
a duty or service.” Am. Paper Inst., Inc. v. Am. Elec. Power Serv.
Corp., 461 U.S. 402, 421, 103 S.Ct. 1921, 76 L.Ed. 2d 22 (1983).
See also id. (“(T\o ‘exempt’ is ‘to relieve, excuse or set free from a
duty or service imposed upon the general class to which the
individual exempted belongs.”)(quoting Black’s Law Dictionary
513 (5th ed. 1979)).
ad Although AARP correctly notes that no administrative agency
is permitted to effectively repeal any portion of a statute by
regulation, see, e.g., United States v. Shumway, 199 F.3d 1093,
1107 (9th Cir. 1999), the proposed regulation at issue is narrowly
focused and not contrary to the terms and purpose of the ADEA,
and therefore does not present such a challenge.
8-A
prohibited by the ADEA. (See Appellants’ Br. 35-36.)
AARP points to section 4 of the ADEA, which states
that “tlt shall be unlawful for an employer . . . [to]
discriminate against any individual with respect to his
compensation, terms, conditions, or privileges of
ome oyment, because of such individual’s age.” 29
U.S.C. § 623(a)(1). As discussed previously, however,
it is clear that Congress intended to permit limited
exemptions from the ADEA, including the
antidiscrimination provision of section 4. Section 9
unambiguously grants reasonable exemption authority
to the EEOC, and plainly states that such authority
applies to any and all parts of the statute. Because
section 9 clearly grants such authority to the EEOC,
the fact that the proposed regulation would allow
certain practices not otherwise permitted under
section 4 does not render the regulation invalid.
This is not to say that the EEOC’s exemption
authority is unlimited. As indicated, section 9 limits
permissible exemptions to those that are shown to be
“reasonable” and “necessary and ag in the public
interest.” 29 U.S.C. § 628. Here, the EEOC issued
- According to the “delegation doctrine,” under the Constitution
Congress is required to limit delegations of legislative authority
by setting forth in the relevant st:.cute “an intelligible principle
to which the [agency] authorized to [act] is directed to conform.”
Touby v. United States, 500 U.S. 160, 165, 111 S.Ct. 1752, 114
L.Ed. 2d 219 (1991) (quoting /.W. Hampton, Jr. & Co. v. United
States, 276 U.S. 394, 409, 48 S.Ct. 348, 72 L.Ed. 624 (1928)). We
must narrowly interpret section 9 of the ADEA, if possible, to
avoid any potential delegation problem. Jndus. Union Dep't, AFL-
CIO v. Am. Petroleum Inst., 448 U.S. 607, 646, 100 S.Ct. 2844, 65
L.Ed. 2d 1010 (1980) (“A construction of the statute that avoids
{an} open-ended grant [of legislative authority} should certainly be
favored.”); see also United Sates v. Jin Fuey Moy, 241 U.S. 394,
401, 36 S.Ct. 658, 60 L.Ed. 1061 (1916) (“A statute must be
construed, if fairly possible, so as to avoid not only the conclusion
that it is unconstitutional, but also grave doubts upon that
9-A
the proposed regulation in response to its finding that
employer-sponsored retiree health benefits were
decreasing. 68 Fed. Reg. at 41,543-44. Rather than
maintaining retiree benefits at pre-Medicare eligibility
levels for all retirees in order to avoid discrimination
under the ADEA, some employers chose to reduce all
retiree health benefits to a lower level. Jd. at 41,546.
Further, in addition to rising health care costs and
increased demand for retiree benefits, the EEOC
correctly noted that employers are not required to
provide any retiree health benefits, or to maintain
such plans once they have been established. Jd. at
41,542-43. Retiree benefits often face elimination
under these constraints, and the EEOC issued the
proposed exemption to “permit{ ] employers to offer
score.”). In section 9, Congress establishes clear limitations on the
EEOC’s exemption authority by requiring that the exemptions be
“reasonable” and “necessary and proper in the public interest.” 29
U.S.C.§ 628. We interpret this to require narrow exemptions
tailored to the overall purpose of the ADEA, an intelligible
principle. Here, the EEOC’s exercise of its exemption authority
through the proposed regulation is narrowly focused to permit a
discrete practice pursuant to the purposes of the ADEA. As
discussed, the proposed regulation adheres to the limitations set
forth in section 9. Therefore, the exemptions at issue does not run
afoul of the requirements of the delegation doctrine.
\! See Curtiss-Wright Corp. v. Schoonejongen, 514 U.S. 73, 77,
115 S.Ct. 1223, 131 L.Ed. 2d 94 (1995) (stating that emp ‘oyers
“are generally free under [the Employee Retirement Security Act,
29 U.S.C. § 1001, et seq.) for any reason at any time to adopt,
modify, or terminate welfare plans”).
'’ There are exceptions to this general rule. The federal
government, for example, is required to offer health benefits to
some retirees. See 5 U.S.C. §§ 8901(3), 8905(b).
10-A
[retiree] benefits to the greatest extent possible.”*” Jd.
at41,543. We recognize with some dismay that the
proposed exemption may allow employers to reduce
health benefits to retirees over the age of sixty-five
while maintaining greater benefits for younger
retirees. Under the circumstances, however, the
EEOC has shown that this narrow exemption from the
ADEA is a reasonable, necessary and proper exercise
of its section 9 authority, as over time it will likely
benefit all retirees.”
16’ as noted by the District Court, the proposed exemption has the
support of various amici curiae, including labor and industrial
organizations. See AARP IJ, 390 F. Supp. 2d at 441°42 n.3; see
also Br, of Amicus Curiae Chamber of Commerce of the United
States; Br. of Amici Curiae National Education Association,
American Federation of Teachers, International Union, United
Automobile, Aerospace and Agricultural Implement Workers of
America, American Federation of State, County and Municipal
Employees, United Steel, Paper and Forestry, Rubber,
Manufacturing, Energy, Allied Industrial and Service Workers
International Union, and International Association of Fire
Fighters; Br. of Amici Curiae Equal Employment Advisory
Council, HR Policy Association, America’s Health Insurance
Plans, American Benefits Council, ERISA Industry Committee,
National Rural Electric Cooperative Association, Society for
Human Resource Management, American Council on Education,
College and University Professional Association for Human
Resources, and WorldatWork.
'! This is analogous to the Second Circuit's approach in Schi//er
v. Tower Semiconductor Ltd., 449 F.3d 286 (2d Cir. 2006), which
upheld the Security and Exchange Commission's statutory
authority to issue exemptions, so long as the exemptions are
shown to be in the public interest and maintain sufficient
protections for the class protected by the statute. See Schiller,
449 F.3d at 296-97 (“The practical effect of an exemption ... . is,
everything else being equal, a decrease in the net level of investor
protection. Therefore, the prohibition of any decrease in the level
of investor protection would at the very least substantially curtail,
11-A
It is clear that the proposed regulation is
expressly authorized by the terms of section 9 of the
EA. The proposed exemption permits the narrow
ractice of coordinating employer-sponsored retiree
ealth benefits with eligibility for Medicare and state-
sponsored health programs for the necessary and
proper purpose of encouraging employers to provide
the greatest possible health benefits for all retirees.
The regulation is consistent with the purposes and
intent of the ADEA, and is a reasonable exercise by the
EEOC of authority delegated to it by Congress.
. Under Chevron step one, Congress’ express
intent Fann such exemptions under section 9 of
the ADEA must be given effect; it is unnecessary to
proceed to step two. We note, however, that the
reasonableness inquiry made here under Chevron step
one as to the statutory limitations on exemptions is
similar to the usual reasonableness inquiry under
Chevron step two. Nonetheless, we do not decide the
extent to which our decision in Erie County permits of
more than one reasonable interpretation of the statute.
The District Court, applying Brand X, held that Erie
County set forth “only the best of several alternatives
[and] is not the ‘only permissible’ interpretation” of the
ADEA, AARP IT, 390 F. Supp. 2d at 448. We do not
reach this issue because we do not find, as did the
District Court, that ambiguity must be present in the
ADEA in order for the EEOC to exercise its authority
under section 9. Rather, the proposed regulation
presents a narrow exemption expressly authorized by
the statute. Therefore, even if Erie County sets forth
if not completely eviscerate, the Commission's exemptive
authority. Such an effect is clearly at odds with congressional
intent to grant the Commission flexibility in adopting exemptions.
We therefore conclude... that the Commission can promulgate an
exemption once it has determined that the exemption serves the
public interest while at the same time leaving in place adequate
investor protections.” (footnote omitted)).
12-A
the only acceptable view of section 4 of the ADEA, the
exemption is nonetheless permitted under section 9.
Il. The Proposed Regulation is Valid According to
the Requirements of the APA
AARP also challenges the EEOC’s proposed
regulation under the APA. According to the APA, we
must “hold unlawful and set aside agency action,
findings, and conclusions” that are “arbitrary,
capricious, an abuse of discretion, or otherwise not in
accordance with law.” 5 U.S.C. § 706(2)(a); NJ. Coal.
for Fair Broad. v. F.C.C., 574 F.2d 1119, 1125 (3d Cir.
1978) . This test asks us to “focus| ] on the agency's
decision making process, not on the decision itself.”
NVE Inc. v. Dep't of Health & Human Servs., 436 F.3d
182, 190 (3d Cir. 2006) (emphasis omitted).
AARP first asserts that the EEOC acted
arbitrarily by disregarding its own regulation, 29
C.F.R. § 1627.15(b), which states that its exemption
authority under the ADEA “will be exercised with
caution and due regard for the remedial purpose of the
statute.” Jd Because we have found that the proposed
regulation, being narrowly drawn to meet the goals of
the ADEA and being in the public interest, is expressly
authorized by the ADEA, this argument is unavailing.
The EEOC has shown the regulation to be reasonable,
necessary, and proper according to the terms and
purposes of the statute. Therefore, there is no question
that the EEOC has exercised due regard for the
urposes of the ADEA according to the requirements
of 29 C.F.R. § 1627.15(b). For the same reasons,
AARP’s argument that the proposed regulation
exceeds the EEOC’s authority because it addresses
health care policy is equally without merit.
AARP’s argument that the proposed regulation
is arbitrary and capricious because it represents a
change in agency policy is unsupported by existing
law. Although it is “well-established that an agency
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may not depart from ‘established precedent without
announcing a principled reason for such a reversal,”
Fertilizer Institute v. Browner, 163 F.3d 774, 778 (3d
Cir. 1998) (quoting Donovan v. Adams Steel Erection,
Inc., 766 F. 2d 804, 807 (8d Cir, 1985)), a change in
agency policy supported by “a reasoned analysis for the
change” is not arbitrary and capricious, Motor Vehicle
Mfrs. Ass'n of U.S., Inc. v. State Farm Mut. Auto. Inc.
Co., 463 U.S. 29, 40°42, 108 S.Ct, 2856, 77 L. Ed 2d
443 (1983). In the notice of proposed rulemaking, the
EEOC set forth its reasons for adopting the new
exemption, and indicated that the regulation is
intended to respond to the unintended negative effects
of its prior approach: namely, that employers have
chosen to terminate retiree benefits rather than
adhere to a standard that has proven too on to
sustain. 68 Fed. Reg. at 41,542°43. The EEOC’s
review of available material and careful explanation of
its reasoning on this point demonstrates that its
change in policy is neither arbitrary nor capricious.
In addition, AARP claims that the EEOC acted
arbitrarily by failing to consider all relevant factors
and possible alternatives in proposing the exemption.
AARP claims that the EEOC did not fully consider
that a number of employers offer full health benefits to
all retirees. In the notice of proposed regulation,
however, the EEOC indicated a number of relevant
studies and applicable statistics to support its
reasoning on this point.“ Relying substantially on
‘“ The EEOC cited, for example, an outside report that estimated
“a 15 percent decline in the number of large employers providing
preage 65 retiree health coverage between 1991 and 2000 and an
18 percent decrease in the number of large employers providing
health benefits to retirees age 65 or older during the same period.”
68 Fed. Reg. at 41,544 (citing Hewitt Associates LLC, Trends in
Retiree Health Plans (2001)).
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these reports, the EEOC concluded that the proposed
exemption is necessary to counteract the effects of
rising health care costs and to encourage employers to
provide retiree health benefits to the greatest possible
extent. Jd. at 41,542, 41,544. Similarly, AARP’s
assertion that the EEOC failed to consider the
potential effect on all workers, particularly retirees
over the age of sixty-five, is contradicted by the
EEOC’s explanations accompanying the proposed
regulation. The EEOC recognized that “many retirees
in this age group rely on employer-sponsored benefits,”
and that such programs are “valuable benefit[s] for
older persons [and] should be protected and
preserved.” Jd. at 41,544. The EEOC determined that
the proposed exemption would be in the interests of all
retirees, “permit{ting] employers to provide a valuable
benefit to early retirees who otherwise might not be
able to afford health insurance coverage and allowling]
employers to provide valuable ve emental health
benefits to retirees who are eligible for Medicare.” Jd.
at 41,547. AARP’s claim that the EEOC failed to
consider possible alternatives, specifically the “equal
cost equal benefit” provision in section 4 of the ADEA,
also fails. The EEOC considered, at length, whether
the “equal cost equal benefit” provision would be
sufficient to address the problem of declining retiree
health benefits, and concluded as a policy matter that
relying solely on this approach would be impractical or
impossible. Jd. at 41,544-46. Therefore, it is clear that
the EEOC’s proposed regulation was supported by the
agency’s full consideration of the relevant factors,
'! While the EEOC never initiated its own, independent survey
of healthcare providers, the “failure to conduct [an] independent
study [is] not violative of [the] APA because notice and comment
procedures ‘permit parties to bring relevant information quickly
to the agency’s attention.” Chamber of Commerce of U.S. v. Sec.
& Exch. Comm'n, 412 F.3d 133, 142 (D.C. Cur. 2005) (quoting Nat?
Ass'n of Regulatory Util. Comm'rs v. F.C.C., 737 F.2d 1095, 1124
(D.C. Cir. 1984)).
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potential effects, and possible alternatives to such a
policy, and was not arbitrary or capricious.
Finally, AARP challenges the regulation based
on the notice and comment requirements of the APA,
asserting that the proposed regulation was based on
comments and rad in te that were not publicly
available during the notice and comment period. The
plain language of section 553 of the APA fails to
support this claim. For notice and comment
rulemaking, as here, the APA requires only “[g]eneral
notice of proposed rule making . . . in the Federal
Register,” including “either the terms or substance of
the proposed rule,” and “an opportunity to participate
in the rule making through submission of written data,
views, or arguments.” 5 U.S.C. § 553(b)-(c). Here, the
EEOC provided general notice of the proposed
rulemaking, including the terms of the rule and a
lengthy explanation of its rationale, and provided an
a for interested parties to participate in the
rulemaking through the submission of comments. 68
Fed. Reg. at 41,542, 41,548-49. Therefore, the EEOC
fulfilled the requirements of section 553.
In addition, an agency is not required to disclose
all informal contacts related to the issue addressed in
a notice and comment rulemaking, “so long as [the
contacts} do not frustrate judicial review or raise
serious questions of fairness.” Home Box Office, Inc.
v. F.C.C.,, 567 F.2d 9, 57 (D.C. Cir. 1977). The EEOC
has acknowledged the informal communications being
challenged by AARP for the purposes of judicial
review, and noted that the communications took place
well before official notice of the rulemaking. These
contacts therefore do not frustrate judicial review or
raise questions of fairness. Because the EEOC
adhered to the notice and comment requirements of
the APA and did not engage in improper
communications with respect to the rulemaking, the
proposed regulation is valid under the APA.
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For the foregoing reasons, the proposed
regulation is within the EEOC’s authority under the
ADEA and valid according to the requirements of the
APA.
CONCLUSION
For the reasons stated above, we will AFFIRM
the District Court’s order dated September 27, 2005,
granting the EEOC’s Motion for Relief from Judgment,
vacating the District Court’s prior order dated March
30, 2005, and lifting the injunction of the
implementation of the proposed regulation.
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UNITED STATES DISTRICT COURT
AARP, et al.,
E.D. PENNSYLVANIA.
Sept. 27, 2005
No. 05-CV-509
Plaintiffs,
QUAL EMPLOYMENT OPPORTUNITY
COMMISSION,
Defendant.
Christopher G. Mackaronis, Brickfield,
Burchette Ritts & Stone, P.C., Laurie A.
McCann, AARP Foundation Litigation,
Michael J. Schrier, Bell Boyd & Lloyd,
PLLC, Washington, DC, Stephen G.
Console, Console Law Office LLC,
Philadelphia, PA, for Plaintiffs.
Gillian Flory, Henry A. Azar, Jr.,
Jacqueline Eloine Coleman, Jennifer R.
Rivera, U.S. Department of Justice,
Douglas L. Greenfield, Bredhoff & Kaiser
PLLC, Ann Elizabeth Reesman, Daniel
Yager, McGuiness Norris & Wilhams
LLP, Washington, DC, Joan K. Garner,
U.S. Attorney’s Office, Daniel P. O’Meara,
Montgomery McCracken Walker &
Rhoads, LLP, Philadelphia, PA, for
Defendant.
MEMORANDUM AND ORDER
ANITA B. BRODY, District Judge
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I. INTRODUCTION
In this suit under the Administrative Procedure
Act, 5 U.S.C. § 551 et seg. (the “APA”), the AARP
challenges a regulation proposed by the Equal
Employment Opportunity Commission tthe “EEOC”).
The proposed regulation would exempt certain
employer practices from the Age Discrimination in
Employment Act, 29 U.S.C. § 621 et seg. (the “ADEA”),
as amended by the Older Workers Benefit Protection
Act, Pub. L. No. 101-433 (1990) (the “OWBPA”).
Before me is the EEOC’s motion to vacate this Court’s
Order of March 30, 2005, granting summary judgment
to plaintiffs AARP, et al. (collectively referred to as
“the AARP”). AARP v. EEOC, 383 F. Supp. 2d 705,
2005 WL 723991 (E.D. Pa. Mar. 30, 2005)(“AARP I’).
EEOC moves for relief from judgment pursuant to
Federal Rule of Civil Procedure 60(b), citing an
intervening change in law as a result of the Supreme
Court’s recent decision in National Cable and
Telecommunications Association v. Brand X Internet
Services, — U.S. — , 125 S.Ct. 2688, 162 L. Ed. 2d 820
(2005). For the reasons set forth below, I will grant
Defendant’s motion.
Il. BACKGROUND
On March 30, 2005, I permanently enjoined the
EEOC from publishing or otherwise implementing a
“Proposed Rulemaking”™’ that would exempt from the
prohibitions of the ADEA “the practice of altering,
reducing, or eliminating employer-sponsored retiree
2” The EEOC is the agency charged with implementing the
ADEA. See 29 U.S.C. § 628.
2” Asin my earlier opinion, I note that the parties have used the
words “rule,” “regulation,” and “exemption” interchangeably to
refer to the regulation at issue, and I do the same. See AARP J,
2005 WL 723991, at *1 n.1.
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health benefits when retirees become eligible for
Medicare or a State-sponsored retiree health benefits
program.” 68 Fed. Reg. 41542, 41542 (July 14, 2003);
AARP I, 2005 WL 723991, at *6. Applying the test of
Chevron, U.S.A., Inc. v. Natural Resources Defense
Council, 467 U.S. 837, 104 S.Ct. 2778, 81 L. Ed 2d 694
(1984), I held that the challenged regulation was
contrary to law and Congressional intent under the
ADEA and its amendments. AARP J, 2005 WL
723991, at *6. In so holding, I expressly noted that I
was bound by the Third Circuit’s decision in £rie
County Retirees Association v. County of Erie, 220 F.
3d 193 (3d Cir. 2000), and that Erie County required
my conclusion that the regulation failed the first step
of the Chevron test.
The EEOC filed a notice of appeal on May 31,
2005. On June 27, 2005, while the appeal was still
pending, the U.S. Supreme Court decided National
Cable and Telecommunications Association v. Brand X
Internet Services, — U.S. — , 125 S.Ct. 2688, 162 L.
Ed. 2d 820 (2005) (“Brand xX’), which dramatically
altered the respective roles of courts and agencies
under Chevron. Brand X held that a court's
interpretation of a statute only bars an agency from
interpreting that statute differently from the court if
the court has determined the only permissible
meaning of the statute. See Brand X, 125 S.Ct. at
22/ This exemption had the support of various amici curiae,
representing both industry and labor. (See Br. Amici Curiae of
the Equal Employment Advisory Council, HR Policy Association,
America’s Health Insurance Plans, American Benefits Council,
the Chamber of Commerce of the United States, the ERISA
Industry Committee, National Rural Electric Cooperative
Association, and the Society for Human Resource Management;
see also Br. Amici Curiae of the National Education Association,
the American Federation of Teachers, and the International
Union, United Automobile, Aerospace, and Agricultural
Implement Workers of America.)
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2701. Because the Third Circuit’s Erie County
decision did not determine the only permissible
meaning of the relevant provisions of the ADEA, under
Brand X, 1 am not bound by Erie County in reviewing
the EEOC’s regulation. Brand X also clarified the
degree of deference due to agency interpretations
under Chevron, and made it a that the EEOC’s
exemption satisfies Chevron’s two-step test.
Because of the impact of Brand X on the
continuing validity of my permanent injunction, [ gave
the EEOC leave to file a motion for relief from
judgment pursuant to Rule 60(b). The Third Circuit
stayed the appeal and remanded the case to me for
consideration of this motion. (Order of 7/14/05). Both
parties submitted briefs on whether I should vacate
my March 30, 2005 Order in light of Brand X, and I
now vacate that Order. At this point, there are no
genuine issues of material fact with respect to Count
I of Plaintiffs’ complaint, which alleged that the
regulation was “arbitrary, capricious, and not in
accordance with law.” (Pls.’ Compl. at 22.) Because
Defendant is entitled to judgment as a matter of law,
I will grant summary judgment to Defendant on Count
I. Because my March 30, 2005 Order granted
summary judgment for Plaintiffs on Count I, it was not
necessary to reach Count II, alleging violations of the
APA’s notice-and-comment requirements. (id.)
Because there are no genuine issues of material fact
with respect to this count, and Defendant is entitled to
judgment as a matter of law, I will also grant
summary judgment to Defendant on Count II.
My Order of March 30, 2005 permanently
enjoined the EEOC from “publishing or otherwise
implementing the regulation at issue in this case,”
AARP I, 2005 WL 723991, at *6, and I now dissolve
that injunction. However, because the parties have
already indicated their intention to appeal, I will stay
the portion of this Order vacating the permanent
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injunction, so that the injunction will remain in effect
pending appeal.
UI. LEGAL STANDARD
Federal Rule of Civil Procedure 60(b) provides:
On motion and upon such terms as are
just, the court may relieve a party...
from a final judgment, order, or
roceeding for the following reasons: .. .
5) it is no longer equitable that the
judgment should have _ prospective
application; or (6) any other reason
justifying relief from the operation of the
judgment.
Fed. R. Civ. P. 60(b). It is appropriate to grant a Rule
60(b)(5) motion “when the party seeking relief from an
injunction or consent decree can show ‘a significant
change either in factual conditions or in law.”
Agostini v. Felton, 521 U.S. 203, 215, 117 S.Ct. 1997,
138 L. Ed. 2d 391 (1997) (quoting Rufo v. Inmates of
Suffolk County Jail, 502 U.S. 367, 384, 112 S.Ct. 748,
116 L. Ed. 2d 867 (1992)). A change in law can also
qualify as one of the “other reasons” justifying relief
under Rule 60(b)(6). While “lilntervening
developments in the law by themselves rarely
constitute the extraordinary circumstances required
for relief under Rule 60(b)(6),” Agostini, 521 U.S. at
239, 117 S.Ct. 1997, “a supervening change in
governing law that calls into question the correctness
of the court’s judgment may .. . constitute such an
extraordinary circumstance justifying the granting of
a Rule 60(b) motion.” United States v. Enigwe, 320 F.
Supp. 2d 301, 308 (E.D. Pa. 2004) (internal citations
omitted).
2“ The EEOC moved for relief from judgment under “Rule 60(b).”
(Def.’s Mot. Rel. J. at 1.) While the EEOC only addressed Rule
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Thus, I must determine whether the change in
governing law occasioned by the Supreme Court’s
Brand X decision has “cali fed] into question the
correctness” of my earlier injunction, jd. or made it “no
longer equitable that the judgment should have
prcepastere application,” Fed. R. Civ. P. 60(b)(5). I will
egin by summarizing my earlier opinion and the
Supreme Court’s decision in Brand X, and then
analyze the effect of Brand X on the legal basis for my
AARP I decision.
IV. DISCUSSION
A. Earlier Opinion
The AARP brought suit to enjoin the EEOC
from implementing a rule that would permit
employers who provide healthcare benefits to retired
employees to decrease those benefits when employees
become eligible for Medicare. AARP J, 2005 WL
723991, at *1. The AARP argued that the regulation
violated section 4(a)(1) of the ADEA,™ and was thus
“arbitrary, capricious, an abuse of discretion, or
60(b)(6) in its accompanying memorandum of law, (Def.’s Mem.
Supp Mot. Rel. J. at 5), because my earlier ruling had “prospective
application” within the meaning of 60(b)(5), I considered that
subsection as well. See In re Four Seasons Sec. Laws Litig., 502
F.2d 834, 841 (10th Cir. 1974) (noting that where motion is timely
filed under any of the 60(b) clauses, court is not bound by strict
categorization of particular claims). In any event, because Brand
X is a “supervening change in governing law that calls into
question the correctness” of my earlier judgment, Enigwe, 320 F.
Supp. 2d at 308, the EEOC has also presented “extraordinary
circumstances” justifying relief under 60(b}(6). Jd.
24 Section 4(a)(1) forbids, inter alia, “discriminatlion] against any
individual with respect to his compensation, terms, conditions, or
privileges of employment, because of such individual’s age.” 29
U.S.C. § 623(a)(1).
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otherwise not in accordance with law” under the APA,
5 U.S.C. § 706(2). (Pls.’ Compl. at 22.) The AARP
claimed that the regulation was foreclosed by the
Third Circuit’s interpretation of section 4(a)(1) in Erie
County Retirees Association v. County of Erie, 220
F.3d 193 (3d Cir. 2000). In Erie County, the Third
Circuit held that the ADEA’s prohibitions applied to
the practice of coordinating retiree healthcare benefits
with Medicare eligibility, and that an employer could
not reduce benefits to Medicare-eligible retirees unless
it could meet the conditions of the “equal benefit or
equal cost” safe harbor of the ADEA, 29 U.S.C. §
623(f)(2)(B)G).2” In AARP J, while not disputing the
holding of Erie County, the EEOC claimed that the
*S! Section 623(f)(2)(B)(i) provides: “It shall not be unlawful for an
employer, employment agency, or labor organization . . . to take
any action otherwise prohibited under subsection (a), (b), (c), or (e)
of this section . . . to observe the terms of a bona fide employee
benefit plan .. . where, for each benefit or benefit package, the
actual amount of payment made or cost incurred on behalf of an
older worker is no less than that made or incurred on behalf of a
younger worker, as permissible under section 1625.10, title 29,
Code of Federal Regulations (as in effect on June 22, 1989).”
**’ The EEOC filed an amicus brief in Erie County advocating the
position the Third Circuit eventually adopted, i.e., that employers
should be required to meet the “equal cost or equal benefit” test
when reducing retiree health care benefits in response to
Medicare eligibility. (Def.’s Mem. Supp. Mot. Rel. J. at 3; Pls.’
Opp. Def.’s Mot. Rel. J. at 3 n. 2). However, the EEOC
subsequently sought notice and comment on the effects of the Eze
County decision, through which it learned that many employers
were deciding not to cover retirees at all in light of Erie County,
which was within their rights under the ADEA. See AARP J, 2005
WL 723991, at *2. It was in response to these “unintended
consequences” of its policy that the EEOC promulgated the
exemption at issue here. (Def.’s Reply Supp. Mot. Rel. J. at 3.) If
the EEOC has changed its position since Erie County, it should
not detain us long, since “[a]n initial agency interpretation is not
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regulation at issue fell within its authority under
section 9 of the ADEA, which gives the EEOC power
“to issue such rules and regulations as it may consider
necessary or appropriate for carrying out this chapter”
and “to establish... reasonable exemptions to and
from any or all provisions of this chapter as it may find
con and proper in the public interest.” 29 U.S.C.
Because I was asked to review an
administrative agency rule for its consistency with
congressional intent, I applied the familiar two-part
Chevron test to the challenged regulation. See
Chevron, 467 U.S. at 843, 104 S.Ct. 2778; Marincas v.
Lewis, 92 F.3d 195, 200 (3d Cir. 1996). The first step
of the Chevron test asks “whether there is a clear and
unambiguous congressional intent concerning the
precise question in issue.” Marincas, 92 F.3d at 200;
see Chevron, 467 U.S. at 843, 104 S.Ct. 2778. In
answering this question, I noted that I did not write on
a clean slate, but rather was bound by the Third
Circuit’s decision in Erie County that the ADEA
prohibited the employer practice at issue. AARP /,
2005 WL 723991, at *3.
In Erie County, the Third Circuit analyzed
whether Medicare coordination of retiree health
benefits constituted “discriminatlion] against any
individual with respect to his compensation, terms,
conditions, or privileges of employment, because of
such individual’s age.” 29 U.S.C. § 623(a)(1); Erie
County, 220 F. 3d at 208-13. The court looked first to
the phrase “terms, conditions, or privileges of
employment,” which had been defined in the OWBPA
to include “all employee benefits.” 29 U.S.C. § 630(1);
Erie County, 220 F. 3d at 209. The court concluded
instantly carved in stone. On the contrary, the agency . .. must
consider varying interpretations and the wisdom of its policy on
a continuing basis.” Chevron, 467 U.S. at 863-64, 104 S.Ct. 2778.
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that “the ordinary meaning of the term ‘employee
benefit’ should be understood to encompass health
coverage and other benefits which a retired person
received from his or her former employer.” Erie
County, 220 F. 3d at 209. Next, the court considered
whether Medicare eligibility was an “age-based
criterion,” and concluded that it was. Jd. at 210-12.
The court next held that the use of the term “older
worker” rather than “older employee” in the language
of the “equal benefit or equal cost” safe harbor, 29
U.S.C. § 623(0(2)(B)i), was not meant to exclude
retirees. Jd. at 215-16. The court thus rejected the
argument that Congress had used the term “older
worker’ to indicate that employers could reduce retiree
benefits without meeting “equal benefit or equal cost.”
Id. Finally, the court concluded that none of the
ADEA’s other safe harbors were applicable. Jd. at 213-
16. Thus, the Third Circuit held that unless an
employer could satisfy the “equal benefit or equal cost”
test, the ADEA prohibited the practice of reducing
retiree health care benefits in response to Medicare
eligibility.
Accordingly, when applying step one of the
Chevrontest to the EEOC’s proposed exemption of this
practice, I concluded that “the Third Circuit has
already determined that Congress expressed a clear
and unambiguous intent with regard to the precise
question at issue.” AARP J, 2005 WL 723991, at *3. I
went on to reject the EEOC’s argument that section 9
of the ADEA gave it the authority to promulgate the
regulation notwithstanding the Third Circuits’s
decision that Congress intended the ADEA to prohibit
the conduct in question. AARP J, 2005 LW 723991, at
*5-6. Because I found that the EEOC’s proposed
regulation failed step one, I did not reach step two of
the Chevron test — whether the regulation is “based
on a permissible construction of the statute” such that
it is “a reasonable policy choice for the agency to
make.” Chevron, 467 U.S. at 843, 845, 104 S.Ct. 2778. |
Because I found the regulation at issue to be contrary
26-A
to law, I granted summary judgment to Plaintiffs on
Count I of their complaint and did not need to reach
the other count. AARP J 2005 WL 723991, at *6.
B. The Brand X Decision
The EEOC appealed, and while the case was
pending before the Third Circuit, the Supreme Court
decided Brand X, which cast grave doubts upon the
basis for my ruling in AARP TL Like this case, Brand
X involved the question of when a court’s prior
interpretation of a statute foreclosed a later, contrary
construction by an administrative agency. The Brand
X decision clarified the respective roles of courts and
agencies in two key ways that altered the
underpinnings of my AARP Jdecision. First, Brand X
concluded that “[o}nly a judicial precedent holding that
the statute unambiguously forecloses the agency's
interpretation, and therefore contains no gap for the
agency to fill, displaces a conflicting agency
construction.” Brand X, 125 S.Ct. at 2700 ie. wed
added). Put differently, Brand X states that the only
court decision that forecloses a later, contrary
interpretation of a statute by an agency is a decision
that determines the only permissible reading of the
statute, not merely the best of several alternatives.
See id at 2701.
In addition, Brand X clarified the Chevron
standard itself. In applying Chevron’s first step to the
regulation at issue in Brand X, the Supreme Court did
not ask merely whether Congress had “spoken to the
precise question at issue,” Chevron, 467 U.S. at 843,
104 S.Ct. 2778, but rather “whether the statute’s plain
terms‘directly addres(s] the precise question at issue.”
Brand X, 125 S.Ct. at 2702 (quoting Chevron, 467 U.S.
at 843, 104 S.Ct. 2778) (emphasis added). Thus,
Brand X makes it clear that Chevron step one focuses
on the plain text of the relevant statute to determine
whether Congress has spoken. As discussed further
below, Brand X has established that the relevant
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inquiry at Chevron step one is the same as for
determining whether a court decision will foreclose
contrary agency interpretation — whether the
statutory text compels only one _ permissible
interpretation.
In Brand X, the Supreme Court considered Title
II of the Communications Act of 1934, as amended by
the Telecommunications Act of 1996, 47 U.S.C. § 151
et seq., which defines “telecommunications service” as
“the offering of telecommunications for a fee directly to
the public.” 47 U.S.C. § 153(46); Brand X, 125 S.Ct. at
2697. Brand Xinvolved a Declaratory Ruling™ by the
Federal Communications Commission (the “FCC”) that
cable companies providing cable modem Internet
service were not providing “telecommunications
service,” but rather “information service,” and were
thus exempt from certain common-carrier regulations.
Id. at 2697-98. Numerous parties challenged the
FCC’s ruling, arguing that “telecommunications
service” as used in the Pusmacndestions Act includes
cable modem service. /d. at 2698.
The Ninth Circuit vacated the FCC regulation
insofar as it concluded that cable modem service was
not telecommunications service. Brand X Internet
Serv. v. FCC, 345 F.3d 1120, 1132 (9th Cir. 2003)
(“Brand X v. FCC’). In vacating the FCC regulation,
the Ninth Circuit relied on its earlier decisionin AT&T
v. City of Portland, 216 F.3d 871 (2000), a case that did
not involve the application of Chevron deference. See
Portland, 216 F.3d at 876. In Portland, the Ninth
Circuit had determined that the Communications Act
included cable modem service in the definition of
“telecommunications service.” /d. at 878. Because the
Ninth Circuit considered itself bound by stare decisis
7 Section 554(e) of the APA provides that an agency, “in its
sound discretion, may issue a declaratory order to terminate a
controversy or remove uncertainty.” 5 U.S.C. § 554(e).
28-A
to follow Portland’s construction of the
Communications Act, it did not even apply Chevron to
the FCC regulation at issue in Brand X, but instead
vacated it solely on the authority of Portland. See
Brand X v. FCC, 345 F.3d at 1132. In so holding, the
Ninth Circuit relied heavily on language from the
Supreme Court’s decision in Neal v. United States, 516
U.S. 284, 116 S.Ct. 763, 133 L.Ed. 2d 709 (1996):
Once [a court] has determined a statute’s
meaning, the court must adhere to that
prior ruling under the doctrine of stare
decisis and assess an agency's later
interpretation of the statute against that
settled law.
Brand X v. FCC, 345 F.3d at 1132-33 (quoting Nea/,
516 U.S. at 294, 116 S.Ct. 763).
On certiorari, the Supreme Court reversed the
Ninth Circuit and upheld the challenged FCC
regulation. The Court held that the Ninth Circuit had
erred in following its ruling in Portland rather than
affording the pte Senate regulation Chevrondeference,
because “[a] court’s prior judicial construction of a
statute trumps an agency construction otherwise
entitled to r, tne deference only if the prior court
decision holds that its construction follows from the
unambiguous terms of the statute and thus leaves no
room for agency discretion.” Brand X, 125 S.Ct. at
2700. The Court derived this principle from Chevron
itself and its underlying premise that “it is for
agencies, not courts, to fill statutory gaps.” /d. (citing
‘hevron, 843-44 and n.11, 104 S.Ct. 2778). Turning to
the Ninth Circuit's Portland decision, the Court
concluded that “[nlothing in Port/and held that the
Communications Act unambiguousl; required treating
cable Internet providers as telecommunications
carriers.” Jd. To the contrary, the Court concluded:
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Portland held only that the best reading
of [the Act] was that cable modem service
was a ‘telecommunications service,’ not
that it was the only permissible reading
of the statute.
Id. (emphasis in original). Because Portland did not
hold that its particular interpretation of the statute
was the “only permissible” construction, rather than
merely “the best,” the Court determined that Portland
could not control the Ninth Circuit’s review of the FCC
regulation. Rather, the Court concluded, the Ninth
Circuit should have afforded the regulation Chevron
deference.
Finally, the Supreme Court itself applied the
Chevron test to the challenged FCC regulation. Under
the first step, it considered “whether the
[Communications Act’s] plain terms ‘directly addresls]
the precise question at issue.” Brand X, 125 S.Ct. at
2702 (quoting Chevron, 467 U.S. at 845, 104 S.Ct.
2778). The Court considered the “precise question” to
be “whether cable companies providing cable modem
service are providing a ‘telecommunications service’ .
... Id. at 2702-03. The Court concluded that because
the word “offering” as used in the Communications Act
did not unambiguously dictate one particular
interpretation of the statute, the FCC regulation
2 Tn so holding, the Supreme Court limited its prior decision in
Neal v. United States, a case on which I expressly relied in my
AARP I opinion. The Court stated that the Ninth Circuit’s
reliance on Nea/ was misplaced, and that Nea/does not stand for
the proposition that a “prior judicial construction of a statute
categorically controls an agency’s contrary construction.” Brand
X, 125 S.Ct. at 2701. The Court distinguished Nea/ by
characterizing Chapman v. United States, 500 US. 453, 111 S.Ct.
1919, 114 L.Ed. 2d 524 (1991), the case on which it had relied in
Neal, as holding that the relevant statute was in fact
unambiguous. /d.
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passed Chevron’s first step. Jd. at 2704. Finally, the
Court found that the FCC’s rule was a “reasonable
policy choice for the agency to make,” thus satisfying
Chevron’ second step. Jd. at 2708 (quoting Chevron,
467 U.S. at 845, 104 S.Ct. 2778). Accordingly, the
Court reversed the Ninth Circuit and upheld the
challenged regulation. Jd. at 2712.
C. The Effect of Brand X on My Holding in
AARP I
As already stated, Brand X has cast grave
doubts on the legal basis for my ruling in AARPJ. The
Ninth Circuit’s Brand X decision, which the Supreme
Court ultimately reversed, was in many ways parallel
to my own decision in AARP I Just as the Ninth
Circuit relied on the stare decisis effect of Portland in
striking down the regulation at issue, I relied on the
precedential value of the Third Circuit’s Erie County
decision. Moreover, to justify my reliance on Erie
County, I quoted the very same language from Nea/
that the Ninth Circuit cited in Brand X, see AARP IJ,
2005 WL 723991, at *3; Brand X v. FCC, 345 F.3d at
1132-33, and which the Supreme Court concluded the
Ninth Circuit had relied on erroneously. See Brand X,
125 S.Ct. at 2701. Although, unlike the Ninth Circuit,
I did apply the Chevron test to the agency regulation
at issue, Brand X did not merely command the lower
courts to apply Chevronrather than their own circuit’s
precedents. Rather, Brand X stands for the broader
proposition that a prior court interpretation of a
statute cannot trump a subsequent agency
interpretation unless the court holds that its
interpretation is the on/y permissible, not merely the
best, construction of the statute. See Brand X, 125
S.Ct. at 2701.
In AARP £ I concluded that I was bound by the
Third Circuit’s decision in Erie Countyto hold that the
EEOC’s proposed rule violated the ADEA:
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In this case I will not reach the second
step of Chevron because the Third
Circuit has already determined that
Congress has expressed a clear and
unambiguous intent with regard to the
precise question at issue. AARP J at *3.
However, Brand X has established a
considerably more stringent standard for when a
construction can be said to “follolw] from the
unambiguous terms of the statute.” Brand X, 125
S.Ct. at 2700. Crucially, Brand X makes it clear that
where a court’s holding states merely the “best”
interpretation of a statute, not the “only permissible”
interpretation, the court decision does not foreclose a
later, differing agency interpretation. Jd. at 2701.
Because the Third Circuit’s opinion in Erie County did
not hold that it was the only permissible interpreta ‘ion
of the ADEA, it cannot foreclose a contrary
interpretation by the EEOC.
D. The Holding of Erie County
Brand X requires a closer reading of the Erie
County decision than was necessary in AARP J, and
this close reading demonstrates that Erie County's
interpretation of section 4(a)(1) is only the best of
several alternatives: it is not the “only permissible”
interpretation within the meaning of Brand X. First of
all, Erie County does not explicitly state that its
holding is the “only permissible reading of the statute.”
Indeed, in its discussion of whether defendants could
satisfy the “reasonable factors other than age” safe
harbor, the Erie County court seems to acknowledge
that its decision is not the only possible interpretation:
“While it is possible that Congress intended Medicare
eligibility to be a ‘reasonable ved other than age,’ we
believe i¢ is more likely that Congress would have
drafted a specific provision addressing the issue...”
Erie unty, 220 F.3d at 214 (emphasis added). It is
a
ble that the Third Circuit would not have
understan
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stated that its interpretation was the only one
permitted by the statute’s plain language, because
prior to Brand X there was no reason to do so.
However, where the court did make a plain-language
determination of an issue, it stated so explicitly: “[T]he
plain language of section 623(f)(2)(B)G) [the ‘equal
benefit or equal cost’ safe harbor]. . .indicates that
Congress intended [it] to apply when an employer
reduces health benefits based on Medicare eligibility.”
Id. at 215 (emphasis added). Thus, it is relevant that
Erie County does not state that its ultimate conclusion
is inescapably dictated by the ADEA’s plain language.
Because the Erie County opinion does not expressly
state whether it determined the only permissible
reading of the statute, rather than merely the best
reading, it is appropriate to analyze the opinion’s
reasoning.
At the outset of its analysis, the Third Circuit
states that it is “left with a rather difficult task of
statutory interpretation in this case.” Erie County,
220 F.3d at 208. The court’s own characterization of
its interpretive task as “difficult” would seem to
undermine the notion that the statutory text compels
a single interpretation. Moreover, the Erie County
opinion points to inherent ambiguities in the statutory
text. It is true that the court states at one point that
“the ordinary meaning of the term ‘employee benefit’
should be understood to encompass health coverage
and other benefits which a retired person receives from
his or her former employer.” Jd. at 209. However, in
the next paragraph, the court indicates ambiguities in
the word “employee.” After noting that the ADEA’s
definition of the term “employee” is the same as that of
Title VII of the Civil Rights Act of 1964, the Third
Circuit draws an analogy to the Supreme Court’s
interpretation of the Title VII definition of “employee”
in Robinson v. Shell Oil Co., 519 U.S. 337, 117 S.Ct.
843, 136 L.Ed. 2d 808 (1997). There, as the Third
Circuit notes, the Supreme Court “found the term
‘employees’ to be ‘ambiguous as to whether it excludes
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former employees’... then construed this ambiguityin
favor of Title VII’s broad remedial purposes.” rie
County, 220 F.3d at 209 (quoting Robinson, 519 U.S. at
341, 345-46, 117 S.Ct. 843) (emphasis added). The
Erte Countycourt’s reliance on Robinson, a case which
expressly found the term “employee” to be ambiguous
in an analogous context, seems to indicate that the
term “employee” as used in the ADEA is open to more
than one possible interpretation.
The Erie County court also recognized
ambiguity in the use of the term “older worker” rather
than “older employee” in the ADEA’s “equal benefit or
equal cost” safe harbor. That provision states that it
only applies if “the actual amount of payment made or
cost incurred on behalf of an older worker is no less
than thac made or incurred on behalf of a younger
worker ..... ” 29 U.S.C. § 623(£)(2)(B)G@). The Third
Circuit noted that “our analysis is complicated by the
presence of the term ‘older worker . . . [I]t is unclear
why Congress made this change or what significance
it was supposed to have.” EHrre County, 220 F.3d at
215. While the court ultimately concluded that
Congress did not intend the phrase “older worker” to
exclude retirees, this additional layer of ambiguity in
the statute further demonstrates that the Erie County
decision did not determine the only _ possible
interpretation of the ADEA.
Another indication that Erie County did not
focus solely on the unambiguous terms of the statute
is the court’s extended discussion of contradictory
legislative history. The Erie County court notes that
“while the legislative history may provide assistance in
resolving ambiguity, the language of the statute must
guide us in the first instance,” thereby invoking the
canon of statutory interpretation that where a
statute’s meaning is plain on its face, legislative
history cannot be introduced to contradict it. Erie
County, 220 F.3d at 209 (citing Jn re Unisys Sav. Plan
Litig., 74 F.3d 420, 444 (3d Cir. 1996)); see United
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States v. Gonzales, 520 U.S. 1, 6, 117 S.Ct. 1032, 137
L. Ed. 2d 132 (1997) (where statutory command is
straightforward, there is no reason to resort to
legislative history); Scafar Contracting, Inc. v. Sec’y of
Labor, 325 F.3d 422, 425-26 (3d Cir. 2003) (court looks
to legislative history only if statutory text is
ambiguous). Under this canon, the court could only
consider legislative history if there were some
ambiguity in the statutory text. Thus, the fact that
the Erie County court examined legislative history in
some depth indicates that the statutory text does not
dictate only one permissible reading.
Not only did the Third Circuit discuss at length
the legislative history of the amendments made to the
ADEA by the OWBPA, see 220 F.3d at 203-08, the
court recognized that even the legislative history itself
was ambiguous on the relevant question:
We recognize that there are statements
in the legislative history of the OWBPA
which indicate that certain members of
Congress viewed the ADEA as
inapplicable to retirees except when a
retiree’s benefits are ‘discriminatorily
structured prior to retirement.’
Id. at 210. The Court went on to conclude that this
legislative history was not reflected int he text of the
ADEA. Erie County, 220 F.3d at 210, 214. However,
while in this instance, the court rejected an argument
from legislative history by pointing to the statute’s
text, elsewhere the court supports its rejection of an
admittedly plausible reading of the statute by
reference to legislative History:
In reaching this conclusion [that the
“reasonable factors other than age” safe
harbor does not apply to Medicare
eligibility], we point out that the
legislative history we have cited
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demonstrates that when Congress passed
the OWBPA it expressly considered the
issue of availability of Medicare coverage.
Id. at 214-15. While the court’s interpretation seems
to be anchored in the statutory text, it is by no means
limited to the text, as can be seen from these appeals
to legislative history.
This combination of legislative history and
statutory text was more than enough for the Erie
County court to conclude that the “best” interpretation
of section 4(a)(1) of the ADEA prohibited the employer
practice at issue. However, I cannot conclude that the
court, on the basis of admittedly ambiguous statutory
language, admittedly contradictory legislative history,
and an admittedly “difficult he of statuto
interpretation,” could have reached the only possible
interpretation of the statute. Because that is what
Brand X demands of Erie County’ holding in order for
it to foreclose a later, conflicting interpretation of
section 4(a)(1) by the EEOC, in light of Brand X, Erie
County no longer forecloses a contrary EEOC
interpretation. Thus, as I proceed to the next and final
step in my analysis, the application of Chevron to the
regulation at issue, I write as though on a clean slate.
2” The Erie County court also made several references to the
policies underlying the ADEA. See 220 F.3d at 216 (noting that
“jt makes good sense and furthers Congress’ intent to apply the
equal benefit or equal cost principle in this case”); id. (noting that
its interpretation “strikes a fair middle ground between the
interest of the employer and the interests of older retirees.”) Like
its arguments from legislative history, the court’s appeals to
general congressional intent and the balancing of competing policy
considerations would seem unnecessary if its decision were the
only permissible construction of the statute.
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E. aa lication of Chevron To The
OC Regulation
As in AARP JI, I must now apply the two-step
test of Chevronto the challenged regulation. However,
whereas in my earlier opinion I was bound by the
Third Circuit’s holding in Erie County to find that the
regulation failed the first step, now the Supreme
Court’s decision in Brand X has made it clear that I
am not bound by Erie County’ interpretation of the
ADEA in reviewing the EEOC’s construction.
Chevron directs a court reviewing an agency
regulation to first address congressional intent
concerning the precise question in issue. Chevron, 467
U.S. at 843, 104 S.Ct. 2778; Marincas, 92 F.3d at 200.
In addition to clarifying the relationship between
Chevron deference and reliance on prior court
precedent, Brand X also impacted the Chevron step
one standard itself. In applying Chevron to the
regulation at issue in Brand ad ha Dasevine Court did
not ask only whether Congress had “spoken to the
precise question at issue,” Chevron, 467 U.S. at 843,
104 S.Ct. 2778, but rather “whether the statute’s plain
terms‘directly addres|s) the precise question at issue.”
Brand X, 125 S.Ct. at 2702 (quoting Chevron, 467 U.S.
at 843, 104 S.Ct. 2778) (emphasis added). Thus,
Brand X makes it clear that Chevron step one focuses
on the plain text of the relevant statute to determine
whether Congress has spoken. Brand X also makes it
clear that the analysis under Chevron§ first step is
identical to the analysis of whether a prior judicial
precedent controls the later regulation:
The better rule is to hold judicial
interpretations contained in precedents
to the same demanding Chevron step one
standard that applies if the court is
reviewing the agency’s construction on a
blank slate.
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Brand X, 125S.Ct. at 2700 (emphasis added). Thus, in
both analyses, a court must look to whether the plain
text of the statute compels only one permissible
interpretation. If the court concludes that there is
only one permissible meaning of the statute, then “that
is the end of the matter; for the Court, as well as the
agency, must give effect to the unambiguously
expressed intent of Congress.” Chevron, 467 U.S. at
842-43, 104 S.Ct. 2778.
1. Chevron Step One
In order to determine whether Congress has
spoken unambiguously to the question, I must first
ascertain what the applicable “question” is. In AARP
J, my analysis of Chevron step one concluded that
“Congress intended for the ADEA to prohibit the
practice of coordinating employer-provided retiree
health benefits with Medicare eligibility unless the
employer could meet the equal cost or equal benefit
analysis.” AARP J, 2005 WL 723991, at *4. Thus,
J implicitly framed the “precise question” as
“whether the ADEA prohibits the practice of
coordinating retiree benefits with Medicare eligibility.”
i the same formulation of the relevant question
ere.
The EEOC argues in its Rule 60(b) motion, as it
did in AARP J, that this is not the correct question to
ask. This is because the EEOC has represented
throughout the litigation that Erie County was
correctly decided, and that the ADEA does prohibit
Medicare coordination of retiree healthcare benefits.
AARP I, 2005 WL 723991, at *5. Nevertheless, the
EEOC has argued throughout that it has the power to
exempt this practice from the prohibitions of the
statute under section 9 of the ADEA, 29 U.S.C. § 628,
which provides:
In accordance with the provisions of the
subchapter II of chapter 5 of Title 5, the
bam 6:
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Equal Employment Opportunity
Commission may issue such rules and
regulations as it may consider necessary
or appropriate for carrying out this
chapter, and may establish such
reasonable exemptions to and from any
or all provisions of this chapter as it may
find necessary and proper in the public
interest.
29 U.S.C. Bona Because it has conceded that the
ADEA prohibits coordinating retiree benefits with
Medicare eligibility, the EEOC argues that the “precise
—. for Chevron step one purposes is “whether
ection 9 authorizes the EEOC to issue exemptions,
and, if so, whether the EEOC properly determined
here that exempting the practice of coordinating
retiree health benefits with Medicare eligibility is
‘necessary and proper in the public interest.” (Def.’s
Mem. Supp. Mot. Rel. J. at 8.) Because this
formulation of the “precise question” is required by
neither Chevron nor Brand X and would give the
EEOC unfettered discretion to issue regulations that
contravene the intent of Congress, I decline to adopt it.
(i) The EEOC’s formulation of the
“precise question”
In AARP J, I gave several reasons for rejecting
the EEOC’s argument that section 9 of the ADEA
authorized the EEOC to allow the employer practice at
issue, despite the fact that Erie County had found the
practice to violate the ADEA. AARP J 2005 WL
723991, at *5-6. Because the only change since my
earlier opinion is the Supreme Court’s decision in
Brand X, and Brand Xhas done nothing to compel the
EEOC’s view of how Chevron should be applied, I
merely expand upon these reasons in rejecting the
argument again here.
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One key reason that I rejected the EEOC’s
argument in AARP J] was that it would allow the
EEOC to pass exemptions that contravene express
congressional intent. See AARP I, 2005 WL 723991,
3 Tn AARP I, 1 also noted that “examining solely the statutory
provision that delegates rulemaking authority rather than the
ADEA as a whole, the approach the EEOC is advocating, would
render meaningless the first step of Chevron.” AARP J, 2005 WL
723991, at *5. The Supreme Court has never decided whether an
agency’s interpretation of the scope of its own statutory authority
is entitled to Chevron deference. Compare Mississippi Power &
Light Co., v. Mississippi ex rel. Moore, 487 U.S. 354, 387, 108
S.Ct. 2428, 101 L. Ed. 2d 322 (1988) (Brennan, J., dissenting)
(“(T}his Court has never deferred to an agency’s interpretation of
a statute designed to confine the scope of its jurisdiction.”) with id.
at 381, 108 S.Ct. 2428 (Scalia, J., concurring in the judgment)
(“[I)t is settled law that the rule of deference applies even to an
agency's interpretation of its own statutory authority or
jurisdiction.”); see also Bus. Roundtable v. SEC, 905 F.2d 406, 408
(D.C. Cir. 1990) (“The Supreme Court cannot be said to have
resolved the issue definitively.”). Likewise, the most recent Third
Circuit case to face this question expressly declined to reach it.
See Lancashire Coal Co. v. Sec’y of Labor, Mine Safety & Health
Admin., 968 F.2d 388, 393 n.4 (3d Cir. 1992) (“We thus avoid the
need to reach the question as to when an agency is entitled to
deference on issues regarding its own jurisdiction.”)
I recognize that statements in two earlier Third Circuit cases,
neither of which was cited to me by the parties, seem to indicate
that agency interpretations of their own statutory authority may
in fact be entitled to deference in some circumstances. See Air
Courier Conference of Am./Int’] Comm. v. U.S. Postal Serv., 959
F.2d 1213, 1223 (3d Cir. 1992); Puerto Rico Maritime Shipping
Auth., v. Valley Freight Systems, Inc., 856 F.2d 546, 552 (3d Cir.
1988). However, no case that I have reviewed commands
deference to an agency interpretation that contravenes
unambiguous congressional intent. See Air Courier Conference,
959 F.2d at 1224 (“Of course, we recognize that judicial deference
to an agency's construction of a statute in conflict with the
40-A
at *6. The essence of the EEOC’s argument is that
section 9 would give it the power to exempt the
challenged conduct even if the plain language of the
ADEA ted clearly and unambiguously indicated a
congressional intent to forbid it. Yet as I noted in
AARP J, “aln administrative agency, including the
EEOC, may not issue regulations, rules or exemptions
that go against the intent of Congress.” AARP /, 2005
WL 723991, at *5. No federal statute or case that I
have reviewed authorizes an agency to pass
exemptions that contradict unambiguously expressed
congressional intent. See Chevron, 467 Us. at 843
n.9, 104 S.Ct. 2778 (“The judiciary is the final
authority on issues of statutory construction and must
reject administrative constructions which are contrary
to clear congressional intent.”); see also Mohasco Corp.
v. Silver, 447 U.S. 807, 825, 100 S.Ct. 2486, 65 L. Ed.
2d 532 (1980) (“We must also reject any suggestion
that the EEOC may adopt regulations that are
inconsistent with the statutory mandate. As we have
held on prior occasions, its ‘interpretation’ of the
statute cannot supersede the language chosen by
Congress.”).
Thus, the EEOC presents the novel*and
paradoxical question of whether Congress “intended”
section 9 to authorize the EEOC to pass exemptions
that override unambiguously expressed congressional
intent. Such a sweeping interpretation of the EEOC’s
power would seem to ay in effect, a congressional
delegation to the EEOC of the power to partially repeal
statute’s plain meaning would be inappropriate.”)
3” Prior to this case, the EEOC has passed only one “exemption”
under section 9—allowing non- EEOC supervised waivers of claims
under the ADEA—and because that exemption did not lead to any
litigation, the question of the EEOC’s authority to issue
exemptions under section 9 has never been squarely presented to
a court. (Tr. 3/18/05 at 12-13).
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portions of the ADEA—a delegation that might very
well violate the separation of powers doctrine. Article
I, section 1 of the Constitution vests “[alll legislative
Powers herein granted... in a Congress of the United
States” and “permits no delegation of those powers.”
Whitman v. American Trucking Ass’n, 531 U.S. 457,
472, 121 S.Ct. 903 149 L. Ed. 2d 1 (2001). Moreover,
“repeal of statutes, no less than enactment, must
comport with Article I.” Clinton v. City of New York,
524 U.S. 417, 438, 118 S.Ct. 2091, 141 L. Ed. 2d 393
(1998) (quoting INS v. Chadha, 462 U.S. 919, 954, 103
S.Ct. 2764, 77 L.Ed.2d 317 (1983)). Although the
Supreme Court has not invalidated a Congressional
grant of authority to an agency under the
“nondelegation” doctrine since A.L.A. Schechter
Poultry Corp. v. United States, 295 U.S. 495, 55 S.Ct.
837, 79 L.Ed. 1570 (1935), the interpretation of section
9 advocated by the EEOC veers close to the
constitutional limit.”
It is true that Congress need only give an
agency an “intelligible principle” upon which to
regulate in order to satisfy the nondelegation doctrine.
tman, 531 U.S. at 472, 121 S.Ct. 903. It is also
true that many statutes authorizing regulation “in the
public interest” have been upheld as laying down a
sufficiently “intelligible principle.” See e.g., Nat7-
Broad, Co., Inc. v. United States, 319 U.S. 190, 225-26,
63 S.Ct. 997, 87 L.Ed. 1344 (1943) (upholding
delegation to FCC of authority to regulate airwaves “as
public convenience, interest, or necessity requires”).
5% Absent a clear statement from Congress, courts are reluctant
to follow agency interpretations of statutes that would push the
constitutional limits of congressional authority. “Where an
administrative interpretation of a statute invokes the outer limits
of Congress’ power, we expect a clear indication that Congress
intended that result.” Solid Waste Agency of Northern Cook
Coumly v US. Army Corps of Engineers, 531 U.S. 159, 172-73,
121 S.Ct. 675, 148 L.Ed.2d 576 (2001).
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However, neither the parties nor this Court has found
any case that sanctions congressional delegation to an
agency of the authority to undo what Congress has
done through clear and unambiguous statuto
language. Whi le the nondelegation cases establis
that Congress may leave wide statutory gaps to be
filled by agencies, an agency has no authority to
regulate where a statutory provision “unambiguously
forecloses the agency’s interpretation, and therefore
contains no gap for the agency to fill...” Brand X, 125
S.Ct. at 2700.
However, this case does not present the difficult
question of whether the EEOC can promulgate an
exemption under section 9 of the ADEA that
contradicts the unambiguously expressed intent of
Congress. This is because, as set forth fully below,
Congress did not express a clear and unambiguous
intent to prohibit Medicare coordination of retiree
health benefits in the ADEA. Indeed, under Brand X,
there is a gap in the ADEA with respect to whether it
applies to retiree benefits at all, because Erie County’
conclusion that it does is not the “only permissible”
construction of the statute. As I noted in my earlier
opinion, “[t]he EEOC has the power to issue rules,
regulations and exemptions within these explicit, or
’¥ Nor could the EEOC avoid this nondelegation problem through
its self-imposed requirement that exemptions under section 9 be
exercised “with caution and due regard for the remedial purpose
of the statute” and only upon a “a strong and affirmative showing”
that the exemption is necessarv and proper in the public interest.
29 C.F.R. § 1627.15. As the Supreme Court has said, “[t}he very
idea that an agency can cure an unconstitutionally standardless
delegation of power by declining to exercise some of that power
seems to us internally contradictory.” Whitman, 531 U.S. at 473,
121 S.Ct. 903.
43-A
implicit, gaps that Congress left in the ADEA.”
AARP I, 2005 WL 723991, at *6. Thus, because there
is a gap in the statute, the EEOC could promulgate a
rule that interpreted the ADEA not to apply to any
retiree benefits, although it has clearly stated that it
has not intention to do so. Since retiree healthcare
benefits are merely a subset of a class of benefits that
the EEOC could theoretically exclude from the
rotections of the ADEA, the EEOC’s exemption of
edicare coordination of healthcare benefits is both a
“permissible construction of the statute” and a
“reasonable policy choice for the agency to make.”
Chevron, 467 U.S. at 843, 845, 104 S.Ct. 2778.
This interpretation of the EEOC’s authority to
exempt under section 9 of the ADEA has at least two
strengths. First, it avoids the potential constitutional
problems with the EEOC’s interpretation, consistent
with the doctrine of constitutional avoidance. See
Clark v. Martinez, — U.S. —, 125 S.Ct. 716, 724, 160
L.Ed.2d 734 (2005)(“[W]hen deciding which of two
plausible statutory constructions to adopt, a court
must consider the necessary consequences of its choice.
If one of them would raise a multitude of constitutional
problems, the other should prevail .. . ”); United
States v. Navarro, 145 F.3d 580, 589 (3d Cir. 1998)
(courts generally avoid statutory constructions that
raise doubtful constitutional questions). Indeed, the
Supreme Court has often avoided nondelegation
questions by interpreting statutes narrowly. See, e.g.
Nat] Cable Television Ass’n, Inc. v. United States, 415
U.S. 336, 340-41, 94 S.Ct. 1146, 39 L.Ed.2d 370 (1974)
(construing FCC assessment as a “fee” rather than a
“tax” to avoid question of whether Congress
unconstitutionally delegated taxing power to agency);
Plaintiffs themselves admit that “Lilf there is a ‘gap’ in the
statute, the agency can regulate so long as the regulation is not
arbitrary, capricious, or otherwise contrary to law.” (Pls.’ Reply
Supp. Mot. Prelim In). at 4.)
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Kent v. Dulles, 357 U.S. 116, 129-30, 78 S.Ct. 1113, 2
L.Ed. 2d 1204 (1958) (construing delegation to
Secretary of State of power to issue passports to
exclude power to deny on basis of political beliefs).
Restricting the EEOC’s section 9 exemption power to
circumstances in which Congress has left a gap in the
ADEA provides a limiting principle that avoids a
nondelegation problem. An additional strength of this
reading of section 9 is that it addresses the EEOC’s
argument that an adequate interpretation of the
provision must not render the exemption clause
superfluous. See AARP J, 2005 WL 723991, at *5.
Under the interpretation adopted here, the EEOC is
free to issue exemptions in the “gaps” where Congress
has not unambiguously foreclosed agency
interpretation — so long as those exemptions are
“necessary and proper in the public interest,” 29
U.S.C. § 628, and satisfy the second step of Chevron.
(ii) The AARP’s argument that the EEOC
has conceded Chevron step one
As a last step before evaluating the regulation
at issue under the Chevron test, I will address the
AARP’s argument, that the EEOC has conceded that
its exemption fails Chevron step one. The AARP
argues that since the relevant question for Chevron’s
first step is “whether the ADEA prohibits the
challenged employer practice,” and the EEOC does not
interpret the ADEA to allow the practice, this Court’s
Chevron inquiry is at an end. (Pls.’ Opp. Def.’s Mot.
Rel. J. at 3 n. 2) However, Brand X established that
the relevant question under Chevron step one is
whether the statute’s plain terms compel only one
permissible interpretation. Crucially, the EEOC has
never conceded that Erie County held that the only
permissible interpretation of section 4(a)(1) forbids the
conduct at issue. It is true that in AARP J I stated
that “(t]he EEOC does not dispute the holding of Erie
County, that the plain language of the ADEA prohibits
the practice of coordinating retiree benefits with
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Medicare eligibility.” AARP J, 2005 WL 723991, at *5.
However, this characterization of the EEOC’s position
was made before Brand X changed the definition of a
“plain-language” holding in the context of the Chevron
framework. As discussed at length above, Erie County
did not hold that the ADEA’s “plain language” forbid
the practice at issue because, under Brand X, it did not
state only one permissible interpretation of the
statute, rather than merely the best interpretation.
Subsequent to the Brand X decision, far from
conceding that Hrie Countys holding followed from the
unambiguous terms of the ADEA, the EEOC has
argued that Erie County “was not a plain language
decision on the central issue of whether an employer
violated the ADEA by [coordinating health benefits
with Medicare eligibility].” (Def.’s Mem. Supp. Mot.
Rel. J. at 8). Nowhere has the EEOC admitted that
there is only one permissible reading of section 4(a)(1)
that unambiguously forbids the conduct at issue.
Under Brand X and Chevron, if there is more than one
permissible reading of the statute, then there is a
statutory gap that an agency is entitled to fill with any
“permissible construction.” Chevron, 467 U.S. at 843.
Because there is more than one _ permissible
interpretation of section 4(a)(1), it leaves such a gap,
and the EEOC is entitled to fill it with any reasonable
regulation.
(ii) The regulation passes Chevron step one
Having determined the relevant “precise
uestion” for Chevron step one, I rust now apply the
irst step of Chevron to the EEOC’s proposed
regulation. In determining whether Erie Count
foreclosed a contrary interpretation of section a(a(1)
of the ADEA by the EEOC, Brand X required me to
ask whether Erie County’ interpretation of the
statute “follow[ed] from the unambiguous terms of the
statute” such that it was the on/y permissible reading
of section 4(a)(1). Brand X, 125 S.Ct. at 2700-01.
hg
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Since, as discussed above, Brand X establishes that
exactly the same standard should apply in Chevron
step one, see id. at 2701, I must now make an
independent determination of whether a construction
of section 4(a)(1) that contradicts the EEOC’s
interpretation is the only permissible reading of the
statute.
However, having already concluded that Erie
County did not hold that the plain text of section
4(a)(1) compels only one permissible interpretation, I
do not now go where the Third Circuit did not venture.
Given the inherent ambiguities in the statutory
language, the conflicting legislative history, and the
various opposing policy arguments underlying section
4(a)(1), the plain language of the provision cannot be
said to unambiguously foreclose the EEOC’s
exemption. Thus, because Congress had not “spoken
to the precise question at issue” in the plain terms of
the ADEA, the EEOC’s proposed exemption satisfies
Chevron step one. Chevron, 467 U.S. at 843, 104 S.Ct.
2778; Prand X, 125 S.Ct. at 2702.
2. Chevron Step Two
I come now to step two of the Chevron test,
which asks whether the regulation is “based on a
permissible construction of the statute” such that it is
a “reasonable policy choice for the agency to make.”
Chevron, 467 U.S. at 843, 845, 104 S.Ct. 2778. This
test has been described as one of “reasonableness,”
Chen v. Ashcroft, 381 F.3d 221, 224 (3d Cir. 2004)
(citing Chevron, 467 U.S. at 845, 865, 866, 104 S.Ct.
2778), under which “the agency’s regulation is ‘given
controlling weight unless [it is} arbitrary, capricious,
or manifestly contrary to the statute.” Household
Credit Serv., Inc. v. Pfenning, 541 U.S. 232, 239, 124
S.Ct. 1741, 158 L.Ed. 2d 450 (2004) (quoting Chevron,
467 U.S. at 844, 104 S.Ct. 2778).
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The earlier part of this opinion detailed how
neither the Erie County decision nor the plain text of
section 4(a)(1) clearly and unambiguously established
that the ADEA applies to retiree benefits at all or that
it prohibits Medicare coordination of retiree health
benefits. Though the Third Circuit’s interpretation in
Erie County may indeed be the best reading of the
statute, it is not the only permissible reading within
the meaning of Brand X. Thus, even if the EEOC had
proposed a regulation that interpreted the ADEA’s
protections not to apply to retiree benefits at all, I
would be poole to find it “a permissible
construction of the statute.” Chevron, 467 U.S. at 843,
104 §.Ct. 2778. However, the EEOC’s has chosen
instead to maintain that the ADEA does apply to
retiree benefits generally, while specifically exempting
the practice of Medicare coordination of health
benefits. See 68 Fed. Reg. at 41547 (“No other aspects
of ADEA coverage or benefits other than retiree health
benefits are affected by this exemption.”). Thus, the
question becomes whether this is a reasonable way for
the EEOC to fill the gap that Congress has left in the
ADEA. I conclude that it is.
Erie County’ reading of section 4(a)(1) of the
ADEA—that it applies to retiree benefits generally and
— Medicare coordination of retiree healthcare
enefits—is not the “only permissible” construction of
the ADEA. Thus, the EEOC has the flexibility to
decide whether retiree benefits are covered by the Act
at all. Section 9 of the ADEA, which allows the EEOC
to “establish such reasonable exemptions to and from
any or all provisions of this chapter as it may find
necessary and proper in the public interest,” 29 U.S.C.
§ 628, gives the EEOC power to “deregulate,” or
forbear from exercising its regulatory authority, when
the public interest requires. Compare 47 U.S.C. §
160(a) (providing that the FCC “shall forbear from
applying any regulation or any provision of this
chapter to a telecommunications carrier or
telecommunications service” where enforcement is not
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necessary and forbearance is in the public interest).
Taken together, section 4(a)(1) and section 9 allow the
EEOC to interpret the ADEA to cover retiree benefits
generally while exempting the practice of Medicare
coordination of health benefits. In limiting its
exemption to healthcare benefits, the EEOC is merely
interpreting section 4(a)(1) of the ADEA to apply to
retiree benefits (which is within its authority to do),
while at the same time forbearing from exercising its
regulatory authority with respect to a subset of retiree
benefits (which section 9 allows it to do).
Two well-recognized canons of statutory
interpretation guide this reading of the interaction
between section 4(a)(1) and section 9 of the ADEA: the
canon that statutes are to be interpreted so as not to
render any provision superfluous and the canon of
constitutional avoidance. The interpretation set forth
here gives content to the exemption clause of section 9,
by reading it to allow the EEOC to exempt any
employer conduct within its sphere of regulatory
authority, i.e., where there is a gap in the statute. At
the same time, this reading forbids the EEOC from
stepping outside this permissible regulatory sphere in
its exercise of section 9 exemption power, and thus
avoids a thorny nondelegation issue. Another
consideration that guides this interpretation is the
Supreme Court’s recent admonition in Brand X that
“Chevron’s premise is that it is for agencies, not courts,
to fill statutory gaps.” Brand X, 125 S.Ct. at 2700.
3 The EEOC’s regulation can also be understood as filling
several distinct gaps in the ADEA in different ways. Erie County
addressed at least two potential ambiguities in the statute: (1)
whether the ADEA applies to retiree benefits at all, see 220 F.3d
at 208-09, and (2) whether Congress nonetheless intended to allow
employers to coordinate retiree health benefits with Medicare
without meeting the “equal benefit or equal cost” safe harbor, see
id. at 213-14. The EEOC’s exemption has the effect of answering
“yes” to both questions.
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Chevron commands a reviewing court to inquire
whether there is a gap in the statute: if so, then the
agency is entitled to regulate in any reasonable
manner within that gap. See Chen, 381 F.3d at 224
(characterizing Chevronstep two as test of regulation’s
“reasonableness”). Here, there is a gap in section
4(a)(1), which the EEOC has chosen to fill by
interpreting the section to apply to retiree benefits
oer while carving out an exception for health
nefits under its section 9 authority. Because this
combination of sections 4 and 9 is a reasonable way for
the EEOC to fill the statutory gap, it passes the second
step of the Chevron test.
F. Whether the Regulation is “Arbitrary
and Capricious
Having concluded that the EEOC’s regulation
passes the two-part test of Chevron, | am bound to
uphold it unless it is otherwise “arbitrary and
capricious” under section 706(2) of the APA. See
Pfenning, 541 U.S. at 239, 124 S.Ct. 1741; Chen, 381
F.3d at 224; see also Brand X, 125 S.Ct. at 2710-12
(rejecting argument that regulation was arbitrary and
capricious after finding that it satisfied two-step
Chevron test). The traditional “arbitrary and
capricious” standard under the APA asks “whether
[the agency] considered the relevant factors and
articulated a rational connection between the facts
found and the choice made.” Southwestern Pa. Growth
Alliance v. Browner, 121 F.3d 106, 111 (3d Cir. 1997).
The scope of review is “narrow, and a court is not to
substitute its judgment for that of the agency.”
Prometheus Radio Project v. FCC, 373 F.3d 372, 389
(3d Cir. 2004) (quoting Motor Vehicle Mfrs. Ass’n of
5®' | also find that the regulation at issue falls within the EEOC’s
discretion to make exemptions to the ADEA as “necessary and
proper in the public interest” within the meaning of 29 U.S.C.
§ 628.
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U.S., Inc. v. State Farm Mut. Auto. Ins. Co., 463 U.S.
29, 43, 103 S.Ct. 2856, 77 L.Ed.2d 443 (1983)). The
AARP has put forth several arguments as to why the
——— cannot meet this admittedly “highly
deferential standard,” Conoco, Inc. v. Skinner, 970
F.2d 1206, 1216 (3d Cir. 1992), all of which I find
insufficient as a matter or law.
The AARP first claims that the EEOC failed to
“considel[r] the relevant factors” in promulgating the
exemption at issue, Growth Alliance, 121 F.3d at 111,
but this allegation is without support in the record. It
is clear that the EEOC consulted numerous sources
and assembled a copious amount of data before
promulgating the regulation at issue. Before
ublishing its Notice of Proposed Rulemaking
“NPRM”) in the Federal Register, the EEOC gathered
information on retiree health benefits from unions,
private employers, employee groups, actuaries,
benefits consultants, human resources consultants,
and state and local government representatives. 68
Fed. Reg. at 41542. The EEOC also examined a study
by the General Accounting Office (“GAO”), reviewed
survey data and scholarly publications on retiree
heaith benefits, ard held meetings with various
stakeholders.” Jd.
3” The administrative record include several hundred pages of
studies and articles that were consulted by the EEOC and cited in
its NPRM, (ADR08120-ADR08125, ADR0O8174-ADR08362,
ADR08372-ADR08527, ADR08561-ADR08565, and ADR09746-
09749), and still more that were reviewed but not cited (ADR0863-
ADR08371, ADRO8538-ADR08561, ADR08566-ADR0$031,
ADR09034-ADR09042, and ADR09741-ADR09745).
3@ These stakeholders consisted of, inter alia, labor unions,
industry groups, and advocacy groups, and included the AARP.
(See ADRO8022 (list of stakeholder meetings); ADR0O8008-
AD08013 (sign-in sheets)).
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The data indicated to the EEOC that a declining
number of employers were providing health benefits to
retirees, 7d. at 41544, and that “concern about the
potential application of the ADEA to employer-
sponsored retiree benefits [was] adversely affecting the
continued provision of this important benefit.” Jd. at
41542. The GAO report, which was submitted to the
Senate Committee on Health, Education, Labor and
Pensions in May 2001, expressed concern that the
EEOC’s enforcement of Erie County“could potentially
accelerate the decline of retiree health benefits.” U.S.
General Accounting Office, Retiree Health Benefits:
Employer-Sponsored Benefits May Be Vulnerable to
Further Erosion (GAO Doc. No. GAO-01-374), at 16
(2001) (ADRO7746). The report indicated that
employers might seek to comply with the ADEA by
eliminating or “reducing benefits to the lowest common
level for all retirees.” Jd. at 17 (ADRO7747). Another
study agreed that in response to EEOC enforcement of
Erie County, employers might eliminate many retiree
medical programs altogether.” Anna M. Rappaport,
“FAS 106 and Strategies for Managing Retiree Health
Benefits,” 72 Compensation and Benefits Managem
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