Full Opinion (html_with_citations)

Case: 23-11097     Document: 262-1        Page: 1   Date Filed: 07/18/2024




       United States Court of Appeals
            for the Fifth Circuit
                                                                 United States Court of Appeals
                                                                          Fifth Circuit


                           ____________                                 FILED
                                                                    July 18, 2024
                             No. 23-11097                          Lyle W. Cayce
                           ____________                                 Clerk

State of Utah; State of Texas; Commonwealth of
Virginia; State of Louisiana; State of Alabama; State
of Alaska; State of Arkansas; State of Florida; State
of Georgia; State of Indiana; State of Idaho; State of
Iowa; State of Kansas; Commonwealth of Kentucky;
State of Mississippi; State of Missouri; State of
Montana; State of Nebraska; State of New Hampshire;
State of North Dakota; State of Ohio; State of South
Carolina; State of Tennessee; State of West Virginia;
State of Wyoming; Liberty Energy, Incorporated;
Liberty Oilfield Services, L.L.C.; Western Energy
Alliance; James R. Copland; Alex L. Fairly; State of
Oklahoma,

                                                     Plaintiffs—Appellants,

                                 versus

Julie A. Su, Acting Secretary, U.S. Department of Labor; United
States Department of Labor,

                                       Defendants—Appellees.
              ______________________________

              Appeal from the United States District Court
                  for the Northern District of Texas
                        USDC No. 2:23-CV-16
              ______________________________
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Before Haynes, * Willett, and Oldham, Circuit Judges.
Don R. Willett, Circuit Judge:
       Presidents exiting and entering the White House are prone to issuing
whipsawing pronouncements. This case pits an outgoing president’s
“midnight regulation” against an incoming president’s “day one executive
order” and poses a weighty question: Does ERISA allow retirement plan
managers to consider factors that are not material to financial performance
when making investment decisions affecting workers’ retirement savings?
       We do not venture an answer—at least not yet. This case, while
featuring two administrations’ ping-ponging directives, turns fundamentally
on the words that Congress chose: What investment duties does ERISA
prescribe and proscribe for plan fiduciaries? In upholding the Department of
Labor’s reading, the district court relied upon the decades-old Chevron
deference doctrine. But eleven days before we heard oral argument in this
appeal, the Supreme Court decided two landmark cases—Loper Bright
Enterprises v. Raimondo and Relentless, Inc. v. Department of Commerce 1—that
discarded Chevron and pared back agencies’ leeway to interpret their own
statutory authority. 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.
                                     *      *      *
       On Inauguration Day 2021, President Biden signed a flurry of
executive orders, including one meant to neutralize a Department of Labor



       _____________________
       *
           Judge Haynes concurs in the judgment only.
       1
144 S. Ct. 2244
 (2024).
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                                            No. 23-11097


rule that had taken effect eight days earlier. 2 That Trump-era rule—
“Financial Factors in Selecting Plan Investments”—forbade ERISA
fiduciaries from considering “non-pecuniary” factors when making
investment decisions. 3 The Biden order—“Protecting Public Health and the
Environment and Restoring Science to Tackle the Climate Crisis”—
counteracted the Trump rule by, among other things, directing the
Department of Labor to reexamine the Financial Factors Rule that had
eschewed so-called “political investing” and directed ERISA retirement
fund managers to consider solely economic factors that materially affect
financial risk or return. 4
        Ten months after President Biden’s day-one executive order, the
Department of Labor released a final rule that attempts to guide ERISA
fiduciaries on when they may consider “collateral benefits” when making
investment decisions on behalf of the pension plans they manage. 5 According
to the rule, an ERISA fiduciary may 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.” 6 Simply put: the Department’s rule permits ERISA

        _____________________
        2
            See Executive Order 13990 of January 20, 2021,
86 Fed. Reg. 7,037
 (Jan. 25, 2021).
        3
85 Fed. Reg. 72846
 (Nov. 13, 2020).
        4
           See supra, note 2, at § 2 (directing agency heads to consider “suspending,
revising, or rescinding” any agency actions taken during the Trump Administration “that
are or may be inconsistent with . . . the policy set forth in section 1 of this order”); see also
White House, Fact Sheet: List of Agency Actions for Review (Jan. 20, 2021),
https://www.whitehouse.gov/briefing-room/statements-releases/2021/01/20/fact-
sheet-list-of-agency-actions-for-review/ (listing, under the Department of Labor,
“Financial Factors in Selecting Plan Investments,
85 Fed. Reg. 72846
 (Nov. 13, 2020)).
        5
29 C.F.R. § 2550
.404a-1(c)(2).
        6
            Id.;
id.
 § 2550.404a-1(b)(4).




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                                       No. 23-11097


fiduciaries to consider ESG objectives when there is a purported “tie”
between two or more investment options. 7
        A group of plaintiffs consisting of various states, corporations, trade
associations, and individuals quickly challenged the rule, arguing that it was
not only inconsistent with the plain text of ERISA but also arbitrary and
capricious under the Administrative Procedure Act. Plaintiffs sought vacatur
under
5 U.S.C. § 706
(2). The district court, however, rejected their
challenge, opting to defer to the Department’s interpretation of ERISA
under Chevron, U.S.A., Inc. v. Natural Resources Defense Council, Inc. 8
“[A]fter affording [the Department] the deference it is presently due under
Chevron,” the district court reasoned, “the Court cannot conclude that the
Rule is ‘manifestly contrary to the statute.’”
        Plaintiffs timely appealed. While the appeal was pending before this
court, the Supreme Court decided two consolidated cases—Loper Bright
Enterprises v. Raimondo and Relentless, Inc. v. Department of Commerce 9—in
which the Court overruled Chevron, holding that the deference it prescribed
could not be reconciled with either the APA or the independent role of the
federal courts in our system of separated powers.
        Notably, even before the Supreme Court issued Loper Bright, the
Department 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. Thus, perhaps unsurprisingly, the

        _____________________
        7
         Congress overturned the Department’s rule by statute, see H.R.J. Res. 30, 118th
Cong. (2023), but President Biden vetoed the bill, the first veto of his presidency, see Veto
Message on H.J. Res. 30 (Mar. 21, 2023).
        8
467 U.S. 837
 (1984).
        9
144 S. Ct. 2244
 (2024).




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                                        No. 23-11097


decision had little effect on the parties’ arguments before us. Each
maintained that they had the best reading of ERISA, both in their briefing
and in their Rule 28(j) letters, and each continued to press their respective
positions during oral argument.
        Neither party, however, suggested that we ought to adhere to our
normal (though not absolute) practice when intervening Supreme Court
precedent affects a case pending before us on direct appeal: that is, vacate the
judgment below and remand for reconsideration in light of the new decision.
The federal reporter teems with such dispositions, both from our circuit and
others. 10

        _____________________
        10
           E.g., Vicknair v. Formosa Plastics Corps.,
98 F.3d 837, 839
 (5th Cir. 1996) (“We
conclude that the Louisiana Supreme Court’s recent announcement of a major change in
the law that governs the principal issue here on appeal makes prudent a vacatur of the
district court’s summary judgment and remand for reconsideration in light of that law
change.”); Harrison v. Dyson,
492 F.2d 1162, 1163
 (5th Cir. 1974) (vacating and remanding
because the district court had “dismissed on the authority of” a case that the Supreme
Court overruled); Rent-A-Center Inc. v. Barker, 306 Fed. App’x 853, 854 (5th Cir. 2009)
(vacating and remanding in light of a new Supreme Court decision); Broussard v. S. Pac.
Transp. Co.,
665 F.2d 1387, 1390
 (5th Cir. 1982) (vacating and remanding for the district
court to consider new authority from the Texas Supreme Court in a diversity case); Satcher
v. Honda Motor Co.,
993 F.2d 56
, 57–58 (5th Cir. 1993) (vacating and remanding for
reconsideration in light of new statutory changes); see also, e.g., Jackson v. Crosby,
437 F.3d 1290, 1294
 (11th Cir. 2006) (“Normally, when reviewing on direct appeal a ruling relying
substantially upon precedent later overruled by the Supreme Court, we . . . simply remand
the case to the district court for reconsideration in light of the intervening Supreme Court
decision.”); Henderson v. Henderson,
535 F.2d 1399, 1399
 (2d Cir. 1976) (vacating and
remanding to the district court in light of a new Supreme Court decision); Younger v.
Glamorgan Pipe & Foundry Co.,
561 F.2d 563, 565
 (4th Cir. 1977) (same); United States v.
Porter,
347 F.2d 940, 941
 (6th Cir. 1965) (same); Strategic Diversity, Inc. v. Alchemix Corp.,
666 F.3d 1197, 1206
 (9th Cir. 2012) (same).
        Relatedly, we are aware of at least one case in which one of our sister circuits
addressed the merits of a dispute despite noting that Chevron had been overruled while the
case was pending on direct appeal. See CFPB v. Townstone Fin., Inc., __ F.4th __,
2024 WL 3370023
, at *5 n.15 (7th Cir. July 11, 2024). The Seventh Circuit was free to do so, of
course, but unlike this case, the district court there had concluded that deference was




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                                         No. 23-11097


        This modest and relatively uncontroversial 11 practice is 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 12; and second, that appellate courts generally sit as courts “of
review, not first view.” 13 The first premise, while easily stated, has not been
easily applied, 14 and exploring its complexities is not a worthwhile investment
for purposes of this case.
        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. Nothing in Article III or
elsewhere affirmatively prohibits us, as a court of appeals, from answering
legal questions in the first instance. But we seldom do so, opting to break out
of our appellate mold only when, for example, a failure to address the issue


        _____________________
unwarranted because the statute was unambiguous under Chevron step one. See CFPB v.
Townstone Fin., Inc.,
2023 WL 1766484
, at *5 (E.D. Ill. Feb. 3, 2023).
        11
          But see Aaron-Andrew P. Bruhl, The Supreme Court’s Controversial GVRs—and
an Alternative,
107 Mich. L. Rev. 711
, 735–36 (2009).
        12
            See Richard Fallon, et al., Hart & Wechsler’s The Federal
Courts and the Federal System 1292 (7th ed. 2015) (“Traditionally, judicial
decisions, no matter how novel, apply retroactively to the parties in the litigation and to
other litigants in all pending cases that have not yet become ‘final’ on direct review.”).
        13
             Braidwood Mgmt., Inc. v. Becerra,
104 F.4th 930, 957
 (5th Cir. 2024) (quotations
omitted).
        14
            Compare Plaut v. Spendthrift Farm, Inc.,
514 U.S. 211, 240
 (1995) (holding that a
statute which reopened a federal court’s final judgment that had been entered before the
statute’s enactment was unconstitutional on separation-of-powers grounds), with Miller v.
French,
530 U.S. 327
, 344–45 (2000) (holding that “[p]rospective relief under a continuing,
executory decree remains subject to alteration due to changes in the underlying law”). And
there is also, of course, the intractably complicated issue of whether changes in the law
apply retroactively to, for example, pending cases posing collateral attacks on convictions.
See, e.g., Ramos v. Louisiana,
590 U.S. 83, 110
 (2020).




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                                         No. 23-11097


would “lead to an incorrect result or a miscarriage of justice.” 15 Exploring
ground not yet trodden by the district court thus remains the narrow
exception, and for good reason. Without the benefit of the considered
judgment of our esteemed colleagues on the district courts, we would
arguably be no better positioned to answer the questions presented by the
parties’ dispute, 16 and the law-declaration function that is necessarily
incident to our appellate review would naturally deteriorate as a result.
        Judicial humility thus entails not only the occasional recognition of a
wrong decision, as the Supreme Court’s opinion in Loper Bright readily
illustrates, 17 but also when to make that decision in the first place. 18 Merely
because we have a mandatory appellate docket does not ineluctably require




        _____________________
        15
             Murray v. Anthony J. Bertucci Constr. Co.,
958 F.2d 127, 128
 (5th Cir. 1992).
        16
            Cf. Maslenjak v. United States,
582 U.S. 335, 354
 (2017) (Gorsuch, J.,
concurring in part and concurring in the judgment) (“[T]he crucible of adversarial testing
on which we usually depend, along with the experience of our thoughtful colleagues on the
district and circuit benches, could yield insights (or reveal pitfalls) we cannot muster guided
only by our own lights.”).
        17
            See Loper Bright, 144 S. Ct. at 2272 (“And part of judicial humility . . . is
admitting and in certain cases correcting our own mistakes . . . .”); see also Doe v. Mckesson,
945 F.3d 818, 835
 (5th Cir. 2019) (Willett, J., concurring in part, dissenting in part)
(“Admittedly, judges aren’t naturals at backtracking or about-facing. But I do so
forthrightly. Consistency is a cardinal judicial virtue, but not the only virtue. In my
judgment, earnest rethinking should underscore, rather than undermine, faith in the
judicial process.”).
        18
           See, e.g., Hensley v. State Comm’n of Jud. Conduct, __ S.W.3d __,
2024 WL 3210043
, at *17 (Tex. 2024) (Young, J., concurring) (“[W]hile I agree that this Court
has the discretion to reach the merits now, there is a virtue in allowing the process to unfold,
with this Court being the last rather than the first to address important legal questions.
What may seem prudent from the vantage point of one single case might be less so when
viewed from the perspective of the system as a whole.” (internal citation omitted)).




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                                          No. 23-11097


us to be the first mover on a disputed issue, especially one of national
significance. 19
        This is not to suggest that vacating and remanding in light of
intervening precedent is without its drawbacks. Repeatedly reciting “the
‘court of review’ mantra” can understandably give parties the impression
that we are just “kicking the can down the road.” 20 There is also something
to be said of the judicial economy and efficiency lost by not forging ahead and
providing the parties the swift resolution they seek.
        Yet efficiency and economy—valuable, no doubt—have never been
pursued at all costs, at least in our legal system. The Constitution’s promises
of due process and a jury trial, for example, are not exactly tools of expedition,
but they foster thoughtful deliberation and help us ensure that we reach the
right answers when we need them most. 21
        Orderly observation of the appellate process advances a similar
purpose. The rule that parties may only appeal final judgments, 22 for
instance, preserves the “independence of the district judge, as well as the
special role that individual plays in our judicial system.” 23 We think that
sentiment is especially salient in this case, in which the district court deferred
        _____________________
        19
           Cf. Braidwood Mgmt.,
104 F.4th at 957
 (“[W]e are disinclined to decide questions
without sufficient briefing, particularly ones of high stakes and of constitutional import. So
rather than decide these heady questions ourselves without the benefit of any considered
judgment below . . . we think it prudent for the district court to consider these arguments
in the first instance.”); Ohio v. Wyandotte Chem. Corp.,
401 U.S. 493, 498
 (1971) (“This
Court is . . . structured to perform as an appellate tribunal . . . .”).
        20
         Stephen I. Vladeck, A Court of First View, 138 Harv. L. Rev. (forthcoming
2024) (manuscript at 1), https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4726492.
        21
             See SEC v. Jarkesy,
144 S. Ct. 2117
, 2139 (2024).
        22
28 U.S.C. § 1291
.
        23
             Firestone Tire & Rubber Co. v. Risjord,
449 U.S. 368, 374
 (1981).




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                                           No. 23-11097


to the Department’s interpretation of ERISA rather than discharge its
“solemn duty” of “interpreting the laws” without “influence from the
political branches” 24—the stuff of Article III.
       Whatever efficiency or economy is gained by taking up the parties’
invitation to decide their dispute in light of the intervening changes, both we
and the circuit at large would be better served by the slight delay occasioned
by remanding to the district court for its reasoned judgment.
                                       *        *         *
       The parties can rest assured, however, that in leaving the district court
to address the important statutory issues in the first instance, we have not
completely thrown the values of efficiency and economy to the wind. Their
arguments have thus far significantly aided the appellate decision-making
process, and there is no reason to start afresh with a new panel. We therefore
think a limited remand is appropriate under the circumstances. Just as the
panel can have the benefit of the district court’s “independent judgment” 25
as to whether the Department’s new rule can be squared with either ERISA
or the APA, the parties can have the benefit of a panel already acquainted
with the briefs and argument of counsel. This disposition, we believe, strikes
the right balance between the competing demands on the parties’ time and
the court’s interest in the correct pronouncement of law. 26




       _____________________
       24
            Loper Bright, 144 S. Ct. at 2257.
       25
            Id. at 2258.
       26
          Cf. United States v. Rodriguez-Pena,
957 F.3d 514, 519
 (Oldham, J.,
concurring) (discussing the costs saved by a limited remand in the sentencing context).




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                                No. 23-11097


      We accordingly VACATE the district court’s judgment and
REMAND for the limited purpose of reconsidering Plaintiffs’ challenge in
light of the Supreme Court’s decision in Loper Bright.




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