Notice & Comment

Chevron’s New Step Zero?: Measuring the Impact of Justice Gorsuch’s “Pecuniary Interest” Query, by Damonta D. Morgan

Last November, the Supreme Court heard argument in Becerra v. Empire Health Foundation and American Hospital Association, et. al. v. Becerra. Both cases involved challenges to the Department of Health and Human Services’ (HHS) reimbursement rules under the Medicare Act, 42 U.S.C. § 1395 et seq. In Empire Health, the Plaintiff challenged its 2008 reimbursement under an HHS rule that governs how certain hospitals that serve low-income patients are to be reimbursed; in American Hospital Association, the Plaintiff challenged HHS’ statutory authority to reduce drug reimbursement rates for certain hospitals which were able to obtain the drugs at a below-market rate. While the facts varied between the cases, the principal issue overhanging both arguments was one that has been percolating in conservative legal circles for the better part of the last decade: should the Court overrule Chevron, and, if not, should Chevron be limited?[1]

During the Empire Health oral argument, Justice Gorsuch previewed one potential limitation on the doctrine when he asked the Government’s counsel whether Chevron should apply when the government’s interpretation “tends to favor the government’s own pecuniary interests?” It was not immediately clear from the argument what role Justice Gorsuch saw such interests playing in the ultimate Chevron analysis, but the question can be interpreted in a number of ways. In one sense, Gorsuch’s question could be read as an addition (a “Step Three,” if you will) to Chevron, under which a court would consider the government’s pecuniary interests only after having affirmatively found the statute at issue ambiguous (Step One) and the agency’s interpretation reasonable (Step Two). This understanding envisions the “pecuniary interest” inquiry as a quasi-burden-shifting mechanism, requiring the challenger to an agency rule to demonstrate that the agency has (or lacks) a pecuniary interest in the effect of its rule, after undergoing the traditional Chevron analysis.

Another reading treats the “pecuniary interest” inquiry as a new Step Zero, requiring courts to consider those interests before engaging in any Chevron analysis. Of course, this reading has the effect of operating as a categorical bar on Chevron deference where it applies: if the government is found to possess a pecuniary interest in the effect of the rule or regulation at issue, courts would not engage in a Chevron analysis, but would instead scrutinize the rule themselves (perhaps something more akin to Skidmore deference). 

Regardless of whether one views the suggestion as a threshold or tertiary step in the Chevron analysis, a more fundamental question remains: What constitutes a sufficient “pecuniary interest”? Justice Gorsuch gave no hints as to the answer during the oral arguments. In my view, however, the term can have either a narrow or a broad reading, both of which would have serious implications for the long-term viability of the Chevron doctrine. Read narrowly, a “pecuniary interest” would be understood to stem from rules similar to those at issue in Empire Health and American Hospital Association—where an agency creates and manages a reimbursement process, or otherwise withholds or collects funds from a third party as part of the agency’s interpretation or implementation of a statute. Under this narrow understanding of the phrase, Chevron lives to fight another day, but the normative question about whether it should would continue to stalk future cases.

Under a broader reading, “pecuniary interest” could entail any regulation or interpretation that affects the government’s finances. The problem then becomes identical to that identified by Justice Gorsuch vis-à-vis how to identify “ambiguity” in Step One of the existing Chevron formulation: “how much…is enough.” Notwithstanding the inherent vagueness and indefiniteness concerns, this broader reading has the benefit (for conservatives) of effectively supplanting Chevron without having to explicitly overrule the doctrine, because, at bottom, nearly every agency rule, regulation, or interpretation that affects businesses and corporations can be said to affect the government’s finances—either on the front end (by withholding disbursements or reimbursements) or on the back end (by assessing fines and fees associated with compliance or the lack of compliance, etc.).

In many ways, the pecuniary interest concern that Justice Gorsuch articulated is simply a reformulation of the prevailing conservative critique of Chevron, which argues that the doctrine impermissibly sanctions conflicts of interests. Because versions of this critique have found purchase with other members of the Court, it could play a factor in the Court’s resolution of the HHS cases, if the Court is not prepared to explicitly overrule Chevron. It is valuable, therefore, to understand the role that a pecuniary interest inquiry might have on the ability of lower courts to apply Chevron to various fact scenarios.

To that end, I have reviewed all Chevron deference decisions issued by the Courts of Appeals in the one-year period between November 30, 2020, and November 30, 2021 (the day the Court heard American Hospital Association v. Becerra). During that period, the Courts of Appeals heard 113 cases concerning the applicability of Chevron deference.[2] In seven of those cases, courts explicitly opted not to apply the doctrine either because it was not invoked by the parties or because the court found it irrelevant to decide the case. Those cases were removed from the analysis. Additionally, in two cases, multiple agency rules/interpretations were at issue, so the court undertook more than one Chevron analysis. Each analysis was counted separately, and new denominators were calculated based on the total number of unique Chevron analyses applied (108). There were other cases, often in the immigration context, where a court chose not to apply Chevron because its precedents foreclosed the possibility of doing so; those cases, along with cases in which the court merely asserted that the statute was “unambiguous” under its own reading, remain part of the new denominator.

Figure 1:

Of the 108 cases identified, courts granted Chevron deference in 51.85% of them. In the remaining 48.15%, courts refused to defer to the agency, either because the statutory provision at issue was unambiguous, the agency’s interpretation was unreasonable, or the agency action being contested was not a regulation or administrative adjudication. Notably, just under a third (30.56%) of the 108 Chevron cases arose in the immigration context, i.e. a noncitizen appealing an immigration judge’s (IJ), Board of Immigration Appeals (BIA), or Attorney General’s removal decision as a misconstruction of some provision of the Immigration and Naturalization Act (INA). Even with those cases removed, however, the rates at which courts defer to the agency’s interpretation remained roughly the same (52% to 48%).

Having performed the descriptive analysis, I next considered the effect of Justice Gorsuch’s pecuniary interest inquiry on the way these cases are decided. Given the indefiniteness concerns associated with reading “pecuniary interests” too broadly, I opted to apply the narrower reading. Thus, the cases where the government had a sufficient pecuniary interest were ones in which the court was reviewing, for example, a Small Business Administration (SBA) rule prohibiting bankrupt debtors from receiving PPP loans, see In re Gateway Radiology Consultants, P.A, 983 F.3d 1239 (11th Cir. 2020), or the Postal Regulatory Commission’s decision to adopt a new ratemaking system under the PAEA, see National Postal Policy Council v. Postal Regulatory Commission, 17 F.4th 1184 (D.C. Cir. 2021), or the FCC’s enforcement of a rule allowing it to seek reimbursement for overpayment from a carrier under the Debt Collection Improvement Act (DCIA), see Blanca Telephone Company v. Federal Communications Commission, 991 F.3d 1097 (10th Cir. 2021). In each of the “pecuniary interest” cases, the financial benefit to the agency was apparent. And because this analysis was primarily concerned with identifying cases in which a pecuniary interest would require the court not to defer to the agency’s interpretation, the relevant universe became those cases in which the court had deferred to the agency under Chevron.

Figure 2:

As depicted in Figure 2, the government agency promulgating the regulation had a discernible pecuniary interest in 18.5% of Chevron deference cases heard by the Courts of Appeals during the identified time frame. Considered as a function of non-immigration cases only (n=75), that number rises to 26.67%. Looking solely at the universe of cases where Chevron deference was granted (n=56), the government had a pecuniary interest in 35.71% of them.

Figure 3:

More to the point, Figure 3 shows that if the cases in which the government had a pecuniary interest were categorized instead as cases where courts denied Chevron deference—the certain effect of the pecuniary interest inquiry—the numbers shift dramatically. There, just over a third of what we currently consider Chevron cases get deference (34.26%, down from 51.85%), while slightly less than two-thirds do not (65.74%, up from 48.15%).  

In sum, importing a pecuniary interest inquiry—even a narrow one—is likely to have qualitatively significant effects on the rates at which courts apply (and grant) Chevron deference. Perhaps unsurprisingly, the addition of such an inquiry would go far in serving the goals of conservative critiques of Chevron.

Damonta D. Morgan is a third-year law student at Columbia Law School.

[1] In argument for American Hospital Association, Justices Thomas and Alito asked the advocate for AHA, former Solicitor General Don Verrilli, straightforwardly if Chevron should be overruled. Transcript of Oral Argument at 5, 30, American Hospital Association, et. al. v. Becerra (20-1114). Oyez. Retrieved at Perhaps more tellingly, within the last decade, at least four sitting justices have expressed concerns or misgivings about the extent of Chevron deference. See, e.g., City of Arlington, Texas v. F.C.C., 569 U.S. 290, 312 (2013) (Roberts, C.J., dissenting) (“A court should not defer to an agency until the court decides, on its own, that the agency is entitled to deference.”); Michigan v. Environmental Protection Agency, 576 U.S. 743, 760 (2015) (Thomas, J., concurring) (“Chevron deference raises serious separation-of-powers questions.”); Gutierrez-Brizuela v. Lynch, 834 F.3d 1142, 1152 (10th Cir. 2016) (Gorsuch, J., concurring) (“Chevron seems no less than a  judge-made doctrine for the abdication of the judicial duty”); and Brett M. Kavanaugh, Fixing Statutory Interpretation, Harv. L. Rev., 129, 2118 (2016) (expressing support for the Supreme Court’s “reining in” Chevron deference).

[2] The cases were located by Westlaw search using the following search terms: “Chevron,” “Chevron deference,” and “agency interpretation.” I cross-referenced the search by shepardizing the Chevron case and filtering based on the identified date range and jurisdiction(s). 

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