The Limits on Post-Chevron Challenges to Regulations

At a Glance

• At least one court has rejected a Loper Bright challenge to a Department of Labor (DOL) regulation promulgated more than six years ago in a challenge under ERISA to a denial of benefits, highlighting potential hurdles for litigants seeking to invalidate federal regulations, even post-Loper Bright.
• Even after Corner Post, only certain plaintiffs will have standing to assert facial challenges to regulations promulgated more than six years ago — in all likelihood, newer entities that only recently have been adversely affected by the regulation.
• Regulations promulgated under an authorizing statute that provides a broad grant of authority are less susceptible to challenges to their validity under Loper Bright.
• In this case, a plan administrator challenged the DOL’s ERISA claims-procedure regulation, which defines procedures a plan administrator must comply with in administering benefit claims, arguing that the regulation conflicted with ERISA.
• The federal district court upheld the regulation, finding:
  • The plan administrator had not appropriately raised a facial challenge to the regulation because it failed to sue under the Administrative Procedure Act and instead argued the invalidity of the regulation only in responding to the participant’s ERISA claim.
  • The six-year statute of limitations on a facial challenge to the regulation began to run whenever the plan administrator allegedly was first injured by the sub-provision of regulation it was asserting was invalid ― i.e., no later than when the first plan participant relied on that provision to challenge a plan administrator’s decision.
  • The regulation was supported by a broad authority Congress granted the DOL in 29 U.S.C. §§ 1133 and 1135 and thus also failed on the merits, even post-Loper Bright.
• The plan administrator’s appeal of the district court’s decision is pending before the Fourth Circuit.

As a wave of litigation tests the enforceability of various federal regulations following the Supreme Court’s June 28, 2024, Loper Bright Enterprises v. Raimondo decision, which overturned Chevron deference, one federal court has rejected a bid to overturn part of the U.S. Department of Labor’s (DOL) Employee Retirement Income Security Act of 1974 (ERISA) claims-procedure regulation. In Cogdell v. Reliance Standard Life Insurance Company, No. 1:23-cv-01343 (E.D. Va. Sept. 11, 2024), the district court applied Loper Bright and the Supreme Court’s follow-on ruling, Corner Post, Inc., v. Board of Governors of the Federal Reserve System, to reject a defendant’s attempt to sidestep a regulation by arguing its invalidity.

Cogdell concerns a challenge by a participant in an ERISA-governed benefit plan to the plan administrator’s denial of her claim for benefits. The participant asserted that the plan administrator failed to follow the administrative requirements the DOL has promulgated in its claims-procedure regulation, 29 C.F.R. § 2560.503-1(l)(2)(i), because the administrator did not decide her appeal of the plan’s initial decision denying her benefit claim within 45 days, as the regulation requires. The participant thus argued that, under the regulation, her claim was deemed denied without the plan’s having exercised any discretion, and the court should review the denial de novo — i.e., anew — and give no deference to the plan’s initial decision. In response, the plan administrator argued that the DOL exceeded its statutory authority in deeming appeals of certain benefit claims administratively exhausted without the plan’s having exercised discretion, because ERISA does not give the DOL authority to determine the standard of review courts will apply to claims challenging benefit denials.

The Cogdell v. Reliance Standard Life Court’s Reasoning

After considering briefing from the DOL, as well, the court found the plan administrator’s argument procedurally and substantively flawed. It concluded that the plan administrator was, in essence, asserting a facial challenge to the regulation, which must be made under the Administrative Procedure Act (APA) rather than in response to a benefit dispute. The court then applied Corner Post to hold that the six-year statute of limitations on a facial challenge to the regulation would have accrued whenever the plan administrator was first adversely affected by the regulation, which the court deduced was at least as early as when the plan administrator faced its first challenge under the regulation. In so doing, the court highlighted the other side of the coin of the Corner Post ruling: an established entity that has previously been adversely affected by a regulation cannot bring a facial challenge beyond the six-year statute of limitations. The court also reasoned that, even post-Loper Bright, the statute itself refuted the plan administrator’s argument because ERISA, specifically sections 29 U.S.C. §§ 1133 and 1135, grants the DOL broad authority to implement its directives. Moreover, the court rejected the notion that the regulation mandates the standard of review courts apply, finding that the courts not the DOL have made rules about the appropriate standards of review where the plan has failed to exercise discretion. The court thus applied the regulation as written and ultimately ruled in the participant’s favor. The plan administrator’s appeal is pending in the Fourth Circuit (Case No. 24-1940).

Difficulties in Challenging Regulations Post-Loper Bright and Corner Post

The court’s reasoning highlights the difficulties that parties may face in challenging regulations even post-Loper Bright and Corner Post, as well as the new layer of factual disputes courts may have to confront in deciding these challenges. Loper Bright abandoned the deference courts had long given to executive agencies’ interpretations of ambiguous statutes granting those agencies regulatory authority and returned that interpretative role to the courts. And Corner Post further opened the door to challenges to agency regulations. Before Corner Post, the statute of limitations on facial challenges to regulations was thought to begin running when a rule was first promulgated. But in Corner Post, the Supreme Court upended that analysis, holding that a party has six years from the date it is first adversely affected by the regulation to challenge the law. It thus held that the Corner Post plaintiff’s challenge to a decade-old regulation was nonetheless timely, because, as a newly incorporated entity, the plaintiff had only recently been first adversely affected by the regulation. Nonetheless, the Cogdell court rejected the plan administrator’s attempt to take advantage of both of these rulings, finding no facts to support that the plan administrator’s claim was timely or raised through the appropriate procedure, and no merit to the argument the executive agency had exceeded the regulatory authority the governing statute gave it.

Remaining Questions

But questions remain. The facts surrounding the plan administrator’s first instance of being adversely affected by the regulation are not clear; neither the parties nor the court pinpoint when the statute of limitations on the plan administrator’s challenge would have begun to run―a fact-sensitive inquiry. Instead, quoting Corner Post, the court generally concluded that the statute of limitations began to run when the plan administrator “had a ‘complete and present cause of action,’ which would (at minimum) have run from the time it faced its first argument” from a claimant relying on the regulation’s 45-day deemed-exhausted rule. Additionally, although this portion of the regulation was promulgated in 2016, it was not effective until January 1, 2017, and that effective date was later postponed to April 1, 2018. Cogdell filed suit on October 3, 2023, within six years of that regulation’s effective date, so the plan administrator might argue that its challenge is timely both in response to the promulgation and in response to Cogdell’s lawsuit. And it may dispute the court’s having deemed its challenge facial, rather than as-applied to Cogdell’s suit, specifically. But, even if it surmounts these adverse rulings by the district court on appeal, it remains unclear whether the plan administrator will be able to escape the Supreme Court’s recognition in Loper Bright that Congress often enacts statutes that authorize agencies to exercise discretion “to prescribe rules to ‘fill up the details’ of a statutory scheme,” as the district court concluded Congress did for the DOL through ERISA.

What Cogdell Reveals

Cogdell thus illustrates the potential morass ahead ― for parties hoping to rely on, and overturn, agency regulations. As Cogdell shows, Corner Post permits a timely challenge to a regulation, but whether a challenge is timely is fact-sensitive. And newer entities are more likely than longstanding entities to succeed in convincing a court their challenge is timely. Moreover, a challenger must be able to clearly show why the regulation it is challenging exceeds the bounds of the agency’s statutory authority, which will be particularly difficult where Congress has broadly granted the agency regulatory authority. In other words, a successful challenge to a regulation under the APA, even post-Loper Bright and Corner Post, will require the right entity at the right time and against the right regulation. As Cogdell shows, challenges to the DOL’s ERISA claims-procedure regulation face serious hurdles. But because these issues are nuanced, and circumstance-dependent, challenges to agency action are likely to proliferate, at least until courts develop clearer rules for when and how they will apply Loper Bright and Corner Post consistently.