Walker v. Azar

• Court: U.S. District Court — Eastern District of New York
• Writing for the Court: BLOCK, Senior District Judge
• Citation: Walker v. Azar, 480 F.Supp.3d 417 (E.D. N.Y. 2020)
• Decision Date: 17 August 2020
• Docket Number: Case No. 20-CV-2834 (FB) (SMG)
• Parties: Tanya Asapansa-Johnson WALKER and Cecilia Gentili, Plaintiffs, v. Alex M. AZAR II, in his official capacity as the Secretary of the United States Department of Health and Human Services, and United States Department of Health and Human Services, Defendants.

480 F.Supp.3d 417

Tanya Asapansa-Johnson WALKER and Cecilia Gentili, Plaintiffs,

v.Alex M. AZAR II, in his official capacity as the Secretary of the United States Department of Health and Human Services, and United States Department of Health and Human Services, Defendants.

Case No. 20-CV-2834 (FB) (SMG)

United States District Court, E.D. New York.

Signed August 17, 2020

For the Plaintiffs: EDWARD J. JACOBS, KATHRYN M. ZUNNO-FREANEY, MICHAEL A. SABELLA, Baker & Hostetler LLP, 45 Rockefeller Plaza, New York, New York 10110-0100, JOSHUA D. ROVENGER, Baker & Hostetler LLP, 127 Public Square, Suite 2000, Cleveland, Ohio 44114-1214, KATRINA M. QUICKER, RYAN E. HARBIN, Baker & Hostetler LLP, 1170 Peachtree Street, NE, Suite 2400, Atlanta, Georgia 30309-7676.

For the Defendants: WILLIAM K. LANE III, JORDAN L. VON BOKERN, U.S. Department of Justice, Civil Division, 950 Pennsylvania Avenue, NW, Washington, DC 20530.

For Amicus Curiae: DOUGLAS N. LETTER, Office of General Counsel, U.S. House of Representatives, 219 Cannon House Office Building, Washington, DC 20515.

MEMORANDUM AND ORDER

BLOCK, Senior District Judge:

Some two months ago, the Supreme Court held that discrimination based on sex encompassed discrimination based on both sexual orientation and gender identity. See Bostock v. Clayton Cnty., Ga. , ––– U.S. ––––, 140 S. Ct. 1731, 207 L.Ed.2d 218 (2020). It concluded that such discrimination "has always been prohibited by Title VII's plain terms," and that "that should be the end of the analysis." Id. at 1743.

In this case, the Court is tasked with having to decide if a proposed set of rules by the Department of Health and Human Services ("HHS") is contrary to the Supreme Court's pronouncement in Bostock or if the agency acted arbitrarily or capriciously in enacting the rules.

For the reasons that follow, the Court concludes that the proposed rules are, indeed, contrary to Bostock and, in addition, that HHS did act arbitrarily and capriciously in enacting them. Therefore, it grants plaintiffs’ application for a stay and preliminary injunction to preclude the rules from becoming operative.

I

In 2010 President Barack Obama signed into law the Patient Protection and Affordable Care Act, Pub. L. No. 111-148, 124 Stat. 119, commonly known as the Affordable Care Act ("ACA") or Obamacare. Section 1557 of the ACA (codified at 42 U.S.C. § 18116 ) prohibits various forms of discrimination in "any health program or activity" that either receives federal financial assistance or is administered by a federal agency. 42 U.S.C. § 18116(a). Rather than list the prohibited grounds, § 1557 incorporates forms of discrimination prohibited by other statutes, including Title IX of the Education Amendments of 1972, which makes it unlawful to discriminate "on the basis of sex." 20 U.S.C. § 1681(a). In addition, § 1557 incorporates the "enforcement mechanisms provided for and available under" Title IX (and other statutes). 42 U.S.C. § 18116(a). Finally, § 1557 states that the Secretary of Health and Human Services ("HHS") "may promulgate regulations to implement this section." Id. § 18116(c).

Acting on that authority, HHS proposed a series of rules ("the 2016 Rules") in September 2015. See Nondiscrimination in Health Programs and Activities, 80 Fed. Reg. 54,172 (Sept. 8, 2015). One proposed rule restated, in simpler language, the statutory nondiscrimination provision: "[A]n individual shall not, on the basis of race, color, national origin, sex, age, or disability, be excluded from participation in, be denied the benefits of, or otherwise be subjected to discrimination under any health program or activity to which this part applies." 80 Fed. Reg. at 54,218 (to be codified at 45 C.F.R. § 92.101(a) ). Another defined discrimination "on the basis of sex" to include discrimination "on the basis of pregnancy, false pregnancy, termination of pregnancy, or recovery therefrom, childbirth or related medical conditions, sex stereotyping, or gender identity." Id. at 54,216 (codified at 45 C.F.R. § 92.4 ). It then defined "sex stereotypes" as "stereotypical notions of gender, including expectations of how an individual represents or communicates gender to others, such as behavior, clothing, hairstyles, activities, voice, mannerisms, or body characteristics," id. at 54,216 -17, and "gender identity" as "an individual's internal sense of gender, which may be different from that individual's sex assigned at birth," id. at 54,216. The proposed rules were finalized in May 2016 and took effect on July 18, 2016. See Nondiscrimination in Health Programs and Activities, 81 Fed. Reg. 31,375, 31,376 (May 18, 2016).

The stated purpose of the 2016 Rules was to "reflect the current state of nondiscrimination law," id. at 31,388, and HHS concluded that its definition of "on the basis of sex" was consistent with "existing regulation and previous Federal agencies’ and courts’ interpretations that discrimination on the basis of sex includes discrimination on the basis of gender identity and sex stereotyping," id.

But not everyone agreed that HHS's interpretation was legally correct. A month after the 2016 Rules took effect, a coalition of states and healthcare providers filed suit in the Northern District of Texas to enjoin their enforcement. See Franciscan Alliance, Inc. v. Burwell , No. 7:16-CV-00108 (N.D. Tex. filed Aug. 23, 2016). They argued that HHS exceeded its authority under § 1557 by defining discrimination on the basis of sex to include discrimination based on gender identity.

The district court agreed and enjoined enforcement of that portion of the 2016 Rules. See Franciscan Alliance, Inc. v. Burwell , 227 F. Supp. 3d 660 (N.D. Tex. 2016).¹ It held that HHS's regulatory definition was not entitled to deference under Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc. , 467 U.S. 837, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984), because "[t]he text of Section 1557 is neither silent nor ambiguous as to its interpretation of sex discrimination." Franciscan Alliance , 227 F. Supp. 3d at 687. Noting that § 1557 incorporated Title IX, the district court believed that it was "clear from Title IX's text, structure, and purpose that Congress intended to prohibit sex discrimination on the basis of the biological differences between males and females." Id. That conception of sex discrimination, it held, necessarily excluded discrimination based on gender identity. See id. at 689 ("Prior to the passage of the ACA in 2010 and for more than forty years after the passage of Title IX in 1972, no federal court or agency had concluded sex should be defined to include gender identity."). "Accordingly," the district court concluded, "HHS's expanded definition of sex discrimination exceeds the grounds incorporated by Section 1557." Id.

Timing, the saying goes, is everything. The district court issued its injunction on December 31, 2016. Three weeks later, a new Administration took office. As a result, HHS did not appeal the district court's preliminary injunction, which was later converted into an outright vacatur, with remand for "further consideration." See Franciscan Alliance, Inc. v. Azar , 414 F. Supp. 3d 928, 947 (N.D. Tex. 2019).

The district court did not delineate what "further consideration" should entail. But even before the district court's remand, HHS had begun the process of dismantling the 2016 Rules. On June 14, 2019, it gave notice of a proposal "to repeal the novel definition of ‘sex’ in the Section 1557 regulation in order to make the Department's regulations implementing Title IX through the Section 1557 Regulation more consistent with the Title IX regulations of other Federal agencies." Nondiscrimination in Health and Health Education Programs or Activities, 84 Fed. Reg. 27,846, 27,856 (June 14, 2019). In addition, HHS proposed replacing the list of prohibited grounds of nondiscrimination with a reference to the statutes incorporated by § 1557, including Title IX. See 85 Fed. Reg. at 27,861 (to be codified at 45 C.F.R. § 92.2). Despite significant opposition, the agency finalized the proposal ("the 2020 Rules") a year later. See Nondiscrimination in Health and Health Education Programs or Activities, Delegation of Authority, 85 Fed. Reg. 37,160 (June 19, 2020). Among many other things, HHS "finalize[d] its repeal of § 92.4 of the 2016 Rule without change." Id. at 37,167.² Cognizant that Bostock was on the horizon, however, it recognized the obvious: "[T]o the extent that a Supreme Court decision is applicable in interpreting the meaning of a statutory term, the elimination of a regulatory definition of such term would not preclude application of the Court's construction." Id. at 37,168.

HHS's rationale for the 2020 Rules is set forth in what the parties refer to as a "preamble."³ Many parts of the preamble evince an interpretation of § 1557 that is fundamentally at odds with the interpretation embraced by the previous Administration:

• "The Department enforces statutory prohibitions on discrimination on the basis of race, color, national origin, age, disability, and sex discrimination because they are set forth in the text of statutes incorporated into Section 1557, and gender identity is not set forth as a protected category in those statutes." 85 Fed. Reg. at 37,175.

• " ‘Sex’ according to its original and ordinary public meaning refers to the biological binary of male and female that human beings share with other mammals." Id. at 37,178.

• "Title IX, along with its implementing regulations, consistently understands ‘sex’ to refer to the biological binary categories of male and female only." Id. at 37,179.

• "The Department disagrees with commenters who contend that Section 1557 or Title IX encompass gender identity discrimination within their prohibition on sex discrimination." Id. at 37,183.

• "The Department believes that, unlike stereotypes, reasonable distinctions on the basis of sex, as the biological binary of male and female, may, and often must, play a...