# Petition for Writ of Certiorari — AARP v. Equal Employment Opportunity Commission (No. 07-662) > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386009_1702%3A1 ## Record - **Collection:** Supreme Court brief - **Document type:** Petition for Writ of Certiorari - **Published:** January 1, 2007 ## Text on _ ss ~~ ~ ou -~ Sa — oe) ss = ae ) —- ae i a . 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 13-A 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)). 14-A 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)). 15-A 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. 16-A 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. 17-A 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 18-A 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. 19-A 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.) 20-A 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 21-A 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 22-A 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). 23-A 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 24-A 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. 25-A 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 27-A 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: 29-A 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. 30-A 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: 31-A 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 32-A 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 [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386009_1702%3A1. Public record. Not legal advice.