Utah v. Julie A. Su, a new opinion from Fifth Circuit, concerns an appeal of the “weighty question”—post Chevron—of whether, as phrased by the Court, “ERISA allow[s] retirement plan managers to consider factors that are not material to financial performance when making investment decisions affecting workers’ retirement savings.” Can ERISA fiduciaries “consider ‘collateral benefits’ when making investment decisions on behalf of the pension plans they manage”? In 2021, the Department of Labor adopted a new rule that interpreted ERISA to allow retirement plan managers to consider “‘the economic effects of climate change and other environmental, social, or governance factors’ in the event that competing investment options ‘equally serve the financial interests of the plan.’” That rule had effectively reversed a “midnight regulation” adopted by the prior Administration that “forbade ERISA fiduciaries from considering ‘non-pecuniary’ factors when making investment decisions.” The new rule was immediately challenged by a group of states, companies and trade associations, claiming that the new rule was inconsistent with ERISA and arbitrary and capricious under the Administrative Procedure Act. The district court, following the mandate of Chevron, deferred to the interpretation of the current DOL and rejected the challenge. Plaintiffs appealed. And then…… SCOTUS overruled Chevron. In a new decision, a three-judge panel of the Fifth Circuit has elected not to answer that weighty question on appeal—not now at least: “Given the upended legal landscape, and our status as a court of review, not first view, we vacate and remand so that the district court can reassess the merits.” Are we about to see a slew of these types of decisions revisiting agency regulations after the demise of Chevron? Time will tell.
The Court observed that even before SCOTUS decided Loper Bright, the DOL had “presciently disclaimed reliance on Chevron in its briefing, arguing instead that the district court’s judgment could and should be affirmed even without any deference.” As a result, the Court said, each party argued that theirs was the best reading of the statute, and “the decision had little effect on the parties’ arguments.” Apparently, neither party had suggested a remand in light of Loper Bright.
According to the Court, however, “the normal (though not absolute) practice when intervening Supreme Court precedent affects a case pending before us on direct appeal” is to “vacate the judgment below and remand for reconsideration in light of the new decision.” The Court viewed this practice as “a basic feature of our judicial hierarchy, and it reflects at least two premises implicit in our legal system: first, that changes in precedent generally apply to cases pending on appeal; and second, that appellate courts generally sit as courts ‘of review, not first view.’… While premise one is largely guided by principles of law, premise two is largely guided by principles of prudence, and its applicability is discretionarily applied on a case-by-case basis.” While an appellate court could take the first crack at answering legal questions, they “seldom do so, opting to break out of our appellate mold only when, for example, a failure to address the issue would ‘lead to an incorrect result or a miscarriage of justice.’” While there are some drawbacks to vacating and remanding—the loss of judicial economy and efficiency, as well as the impression of kicking the can down the road—preserving the “‘independence of the district judge, as well as the special role that individual plays in our judicial system’…is especially salient in this case, in which the district court deferred to the Department’s interpretation of ERISA rather than discharge its ‘solemn duty’ of ‘interpreting the laws’ without ‘influence from the political branches’—the stuff of Article III.” The best course, the Court determined, was to have the benefit of the district court’s “independent judgment” (referencing Loper Bright) by remanding “for the limited purpose of reconsidering Plaintiffs’ challenge in light of the Supreme Court’s decision in Loper Bright (retaining the current appellate panel).
