United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Filed: August 16, 2011
No. 09-5448
FORSYTH MEMORIAL HOSPITAL, INC., ET AL.,
APPELLANTS
v.
KATHLEEN SEBELIUS, SECRETARY OF HEALTH AND HUMAN
SERVICES,
APPELLEE
Appeal from the United States District Court
for the District of Columbia
(No. 1:07-cv-01828)
On Petition for Rehearing En Banc
Before: SENTELLE, Chief Judge, and GINSBURG,
HENDERSON, ROGERS, TATEL, GARLAND, BROWN*, GRIFFITH,
and KAVANAUGH, Circuit Judges.
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ORDER
Appellants’ petition for rehearing en banc and the
response thereto were circulated to the full court, and a vote
was requested. Thereafter, a majority of the judges eligible to
participate did not vote in favor of the petition. Upon
consideration of the foregoing, it is
ORDERED that the petition be denied.
FOR THE COURT:
Mark J. Langer, Clerk
BY: /s/
Jennifer M. Clark
Deputy Clerk
* A statement by Circuit Judge Brown, dissenting from the
denial of the petition for rehearing en banc, is attached.
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BROWN, Circuit Judge, dissenting from the denial of
rehearing en banc: “An agency may not promulgate retroactive
rules absent express congressional authority.” Nat’l Mining
Ass’n v. Dep’t of Labor, 292 F.3d 849, 859 (D.C. Cir. 2002)
(citing Bowen v. Georgetown Univ. Hosp., 488 U.S. 204, 208
(1988)). Though we pay lip service to this principle, it is on the
verge of becoming an empty form of words. Petitioners
challenge one recent blow to the doctrine: our holding that
impermissibly retroactive rules may be rectified by adoption in
post hoc agency adjudication. See St. Luke’s Hosp. v. Sebelius,
611 F.3d 900, 907 (D.C. Cir. 2010), cited in Forsyth Mem’l
Hosp., Inc. v. Sebelius, 639 F.3d 534, 537 (D.C. Cir. 2011).
This holding violates the Supreme Court’s admonition that
“[e]ven where some substantial justification for retroactive
rulemaking is presented, courts should be reluctant to find such
authority absent an express statutory grant.” Georgetown, 488
U.S. at 208–09. Because our new doctrine undermines the
presumption against retroactive rulemaking in every
administrative agency with an adjudicatory function, I would
grant rehearing en banc.
In St. Luke’s, we misapplied a different presumption
designed for agency adjudication, plain and simple, to a hybrid
proceeding in which adjudication served as a Trojan horse for
retroactive rules the agency had already promulgated. In
contrast to the presumption against retroactive rulemaking,
“[w]e start with the presumption of retroactivity for
adjudications.” Qwest Servs. Corp. v. FCC, 509 F.3d 531, 539
(D.C. Cir. 2007). The origin of these dual presumptions lies in
the statutory distinction between rules and orders. See
Georgetown, 488 U.S. at 216 (Scalia, J., concurring). Rules are
defined by their “future effect,” id. (quoting 5 U.S.C.
§ 551(4)), and orders are defined in contradistinction to rules,
id. (citing 5 U.S.C. § 551(6)). Thus, “[a]djudication deals with
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what the law was; rulemaking deals with what the law will be.”
Id. at 221.
As long as rules and orders are confined to their proper
spheres, the presumption in favor of retroactive adjudication
serves a valuable purpose. “Clarifying the law and applying
that clarification to past behavior are routine functions of
adjudication.” Qwest, 509 F.3d at 540. Parties to an
adjudication are protected against unanticipated retroactive
effects by the procedural guarantees of “notice and an
opportunity to offer evidence bearing on the new standard,”
and by the chance to rebut the presumption of retroactivity by
proving they have “detrimentally relied on the established
legal regime.” Burlington N. & Santa Fe Ry. v. STB, 526 F.3d
770, 784 (D.C. Cir. 2008) (quoting Consol. Edison Co. v.
FERC, 315 F.3d 316, 323 (D.C. Cir. 2003)). But parties
affected by an informal agency rulemaking enjoy no such
procedural or substantive protection against retroactivity
—hence, the presumption against retroactive rulemaking.
Because of the inherent tension between these two
presumptions, blurring the distinction between an agency’s
adjudicatory and rulemaking functions inevitably erodes the
presumption against retroactive rulemaking. In St. Luke’s, we
allowed the Department of Health and Human Services to cure
its own impermissibly retroactive rulemaking by enforcing the
offending rule through adjudication. Even though the affected
party had not had an opportunity to present evidence or to
establish detrimental reliance when the agency promulgated its
guidance document, that informal rule was enforced against
the hospital retroactively. We sanctioned this process, holding
“any potential retroactive effect ‘was completely subsumed in
the permissible retroactivity of the agency adjudication.’” St.
Luke’s, 611 F.3d at 907 (quoting Health Ins. Ass’n of Am., Inc.
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v. Shalala, 23 F.3d 412, 424 (D.C. Cir. 1994) (dicta)). This was
a mistake.
It is not difficult to see why the St. Luke’s exception
threatens to swallow the rule against retroactive rulemaking.
Many agencies charged with interpreting statutes by regulation
also have adjudicatory functions, and adjudication can have the
same widespread effect as rulemaking. See Int’l Union, UAW
v. Brock, 783 F.2d 237, 248 (D.C. Cir. 1986). The same
policies an agency can formulate by formal or informal rule are
also generally susceptible of adjudication. See id.; Qwest, 509
F.3d at 536. Thus, after St. Luke’s, nothing prevents an agency
from creating impermissibly retroactive rules in a process
devoid of procedural or substantive safeguards and then
enforcing those rules through the back door of administrative
adjudication.
In combination with an exception for “implicit”
congressional authorization of retroactivity, which I recently
criticized, Nat’l Petrochemical & Refiners Ass’n v. EPA, 643
F.3d 958 (D.C. Cir. 2011) (Brown, J., dissenting from the
denial of rehearing en banc), the court’s novel exception for
rules enforced through adjudication renders the presumption
against retroactive rulemaking a virtual nullity. Because we
invoked St. Luke’s to dismiss appellants’ retroactivity
argument in Forsyth Memorial, this petition presents a vehicle
for correcting our past mistake. If an agency is to do by
adjudication what it cannot do by rulemaking, I would hold the
agency must rely on the independent interpretation of the
adjudicatory body, produced in an adversarial process with an
opportunity for affected parties to demonstrate detrimental
reliance on the old standard. See Burlington N. & Santa Fe Ry.,
526 F.3d at 784. Impermissibly retroactive guidance is an
improper basis for such an adjudicatory order.
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I respectfully dissent from the denial of rehearing en banc.