By Chaya Rosenbaum
On June 28, 2024, the U.S. Supreme Court decisions in Loper Bright Enterprises v. Raimondo, and a companion case, Relentless, Inc. v. Department of Commerce, had the collective effect of upending a legal framework relating to federal regulation that has been in place since 1984. While these decisions relate to the fishing industry, the impacts of these rulings and several other related ones will be felt across all regulated industries, including the healthcare industry.
Loper Bright: Limitations on Agency Regulations
Federal agencies are bodies within the government’s executive branch tasked with overseeing and administering specific areas of federal law. These agencies establish rules and regulations based on federal statutes to carry out and put policies into effect. In the context of the healthcare field, examples include the Food and Drug Administration (FDA), which oversees drugs, medical devices, food products, and cosmetics, and the Centers for Disease Control and Prevention (CDC), which manages the prevention of disease and preparedness for new health threats. Other commonly known healthcare agencies include the Centers for Medicare and Medicaid Services (CMS), the Health and Human Services Department (HHS), and the Drug Enforcement Agency (DEA). These agencies establish rules and regulations based on federal statutes, in order to carry out and put policies into effect.
Prior to Loper Bright, if a plaintiff brought an action under a federal law before a court, the court was often required to rely on the relevant federal agency for the interpretation of the law. This judicial process, known as Chevron deference (based on a landmark 1984 decision of the same name), required that if Congress had not directly addressed the question in dispute, then the agency rules were upheld, so long as they were reasonable and were made properly pursuant to the rulemaking process. This deference worked to limit the judges’ authority over administrative matters governed by industry experts.
However, in Loper Bright, the Supreme Court ruled that legal questions arising from certain federal laws may now be decided by the courts, without allowing the federal agencies that promulgate regulations related to the laws to settle these ambiguities. Thus, unless otherwise limited by Congress, the courts now have the ability to apply their own judgment to the validity of federal regulations and to handle technical statutory questions without giving deference to agency interpretation.
The effects of this new judicial standard mean that in highly regulated industries such as the healthcare field, onerous federal regulations may be more easily challenged by interested plaintiffs, with a greater chance that the courts may find such regulations unenforceable. While established decisions and existing federal regulations set forth under the previous framework continue to remain in effect, future litigation may lead to a repealing of many healthcare regulations. Specifically, it is possible that complex CMS rules such as those that relate to referrals and billing may be limited in the future, as entities begin to utilize increased options to have a court decide whether such rules exceed what was contemplated by federal law.
Corner Post: Increased Time to Challenge Agency Regulations
Relatedly, after the July 1, 2024 Supreme Court decision in Corner Post, Inc. v. Board of Governors of the Federal Reserve System, parties who aim to advance these types of claims now have more time to challenge agency actions. Under Corner Post, the six-year statute of limitations for a case against a federal agency that harmed a party does not accrue at the time of agency action but can now accrue at the time that a party was harmed. This means that unless Congress decides otherwise, parties may now bring suits against the federal government even if such claims were previously prohibited. Therefore, a new business entering the healthcare space may now challenge decades-old healthcare regulations.
Jarkesy: The Right to a Trial for Agency Penalties
Additionally, it is expected that agency powers will be further limited with regard to the penalties that agencies may charge defendants in enforcing federal laws. In the June 27, 2024 Supreme Court decision SEC v. Jarkesy, the Court ruled that the SEC cannot use internal administrative courts to adjudicate securities fraud claims, and that the defendants have a constitutional right to a trial by jury in a claim for civil penalties. While this decision applies directly to the SEC, it raises constitutional challenges relating to the power of agencies to charge civil penalties without a jury trial. These questions will be relevant to similar actions by HHS to impose civil monetary penalties for False Claims Act, Anti-Kickback Statute, and Medicare exclusion violations, among many others. A defendant facing healthcare agency investigation now has increased basis to challenge these decisions.
Effect of These Decisions on the Non-Compete Ban
Together, these three rulings have significant impact on the authority of federal agencies and the breadth of challenges that industry parties may use against agency rules. In particular, the recent rule by the FTC, a federal agency, to prohibit non-compete clauses in private employment contracts, which has seen a strong amount of pushback across jurisdictions, now stands on more shaky ground. While the recent Supreme Court decisions do not repeal the rule, they collectively work to bolster litigation efforts and to strip the FTC of its deference by the courts. Currently, the rule is still set to be effective on September 4, when, with certain exceptions, employers must give written notice to employees about the voiding of their restrictive covenants. However, the rule is actively in litigation in the Fifth and Third U.S. Circuits. The recent Supreme Court decisions will have direct impact on the review process of these courts, and the courts’ decisions may apply to several states within their jurisdiction, or may even apply nationally.
We continually follow these decisions and other litigation in the healthcare industry. Should you need the assistance of experienced counsel to assist you in evaluating your compliance with healthcare regulations or defending an allegation of a healthcare violation, do not hesitate to contact Chaya Rosenbaum at (516) 294-5414 or [email protected].
Weiss Zarett Brofman Sonnenklar & Levy, P.C. is a Long Island law firm providing a wide array of legal services to the members of the health care industry, including corporate and transactional matters, civil and administrative litigation, healthcare regulatory issues, bankruptcy and creditors’ rights, and commercial real estate transactions.
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