Various states, corporations, trade associations, and individuals sued the US Department of Labor (DOL), asserting that DOL’s rules allowing retirement plan managers to consider “factors that are not material to financial performance” violate federal law.

District Court employed Chevron Deference
The district (trial level) court determined that DOL was within its discretion to allow plan managers to consider “environmental, social, or governance” (ESG) factors when deciding between two investments that “equally serve the financial interests of the plan.” In upholding DOL’s rules, the district court held that DOL’s interpretation of the relevant federal statute was entitled to Chevron deference.

Intervening End of Chevron Deference
Those challenging DOL’s rules appealed. While the appeal was pending, the US Supreme Court ended Chevron deference; the 5th Circuit did not make a substantive ruling but sent the case back to the district court with instructions that it reconsider without applying Chevron deference.

Judicial Humility
The 5th Circuit could have decided the case; as the opinion noted, the parties seemed to have expected the death of Chevron. DOL “presciently disclaimed reliance on Chevron in its briefing,” and both sides argued that the statute supported their position without any notion of deference.

“Judicial humility” and “the appellate process” encourage the 5th Circuit to send most cases back to the district court to consider intervening Supreme Court decisions; it did so in this case.

To see the opinion 23-11097-CV0.pdf (uscourts.gov)