Elgin Nursing & Rehabilitation Center v. United States Department of Health & Human Services , 718 F.3d 488 ( 2013 )

Case: 12-60086 Document: 00512245877 Page: 1 Date Filed: 05/17/2013
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit
FILED
May 17, 2013
No. 12-60086
Lyle W. Cayce
Clerk
ELGIN NURSING AND REHABILITATION CENTER,
Petitioner,
versus
UNITED STATES DEPARTMENT OF HEALTH AND HUMAN SERVICES,
Respondent.
Petition for Review of a Decision of
the Department of Health and Human Services
Before STEWART, Chief Judge, SMITH and WIENER, Circuit Judges.
JERRY E. SMITH, Circuit Judge:
Elgin Nursing and Rehabilitation Center (“Elgin”) seeks review of a final
decision of the Department of Health and Human Services (“DHHS”) upholding
a ruling of an administrative law judge (“ALJ”) affirming a determination by the
Center for Medicare and Medicaid Services (“CMS”) that Elgin had violated cer-
tain safety requirements by serving “undercooked” eggs to its elderly residents.
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We grant the petition for review and set aside the decision.
I.
Between February 9 and 12, 2010, Elgin was investigated by the Texas
Department of Aging and Disability (“TDAD”), which observed two breakfast
plates with egg yolk “smeared around the plate.” The surveyors interviewed
residents and the kitchen manager, who confirmed that five of Elgin’s residents
had requested that the unpasteurized eggs that Elgin had purchased be served
“soft cooked.” TDAD, having concluded that “nonpasteurized shell eggs when
served ‘soft-cooked’ . . . could lead to” serious illness and even death, found Elgin
to be in noncompliance with 42 C.F.R. § 483.35(i), which requires facilities such
as Elgin to serve food in a “sanitary” manner. TDAD found that Elgin’s soft-
cooked eggs placed its residents in “immediate jeopardy.”
On March 2, 2010, CMS adopted TDAD’s findings and imposed a number
of penalties: a civil monetary fine of $5,000, termination of Elgin’s provider-of-
care agreement, a denial of payment for new admissions, and withdrawal of
Elgin’s approval to conduct nurse training. CMS later rescinded most of the pen-
alties, but Elgin was still required to pay $5,000.
Elgin requested an ALJ hearing to contest the finding of a safety defici-
ency and the fine. It presented significant evidence in support of the safety of
its culinary operations, including the affidavit of Mary Abshire, Elgin’s dietary
consultant, noting that she had conducted temperature checks on eggs cooked
during TDAD’s survey and found them to be above the required 145EF. in all
instances. Elgin also presented the affidavit of Gary Jefferson, the cook who had
prepared the offending meals. He described his method of cooking eggs in a half-
inch of boiling oil for several minutes so that the white was congealed but the
yolk was “a little soft in the middle.” He added that no TDAD surveyor observed
him cooking eggs, spoke with him, or took temperatures during the survey.
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Pamela Sue Brummit, a registered dietician and food-safety instructor,
provided an affidavit wherein she explained replicating Johnson’s method. She
noted that the eggs she cooked had temperatures ranging from 153 to 156EF.
and that despite that, the yolks were still soft or slightly runny. Elgin attached
a video of Brummit performing her experiment. CMS presented TDAD’s state-
ment of deficiencies and copies of a CMS letter and a Department of Agriculture
report discussing the safe preparation of eggs. The parties agreed to all of the
facts and presented no live testimony.
The ALJ found that the yolks were too soft, the whites uncongealed, and
the final product not safely edible. CMS had made a prima facie case of noncom-
pliance with safety regulations, and Elgin had not produced sufficient rebuttal
evidence. The ALJ upheld CMS’s finding of deficiency and concluded that the
amount of the monetary penalty was reasonable.
On appeal to the DHHS Departmental Appeals Board, Elgin maintained
again that the evidence of smeared yolk alone was not enough to make a prima
facie case of noncompliance. The Appeals Board rejected that contention and
concluded that CMS had met its burden, that substantial evidence supported the
ALJ’s decision, and that the fine of $5,000 was not unreasonable.
II.
We have jurisdiction to review the decision of the Appeals Board under 42
U.S.C. § 1320a-7a(e), which provides that, upon appeal of a decision, this court
may enter an order “affirming, modifying, remanding for further consideration,
or setting aside, in whole or in part, the determination of the Secretary and
enforcing the same.” “[F]indings of the Secretary with respect to questions of
fact, if supported by substantial evidence on the record considered as a whole,
shall be conclusive.” Id. Appellate review of an agency’s finding is “limited to
determining whether the decision is supported by substantial evidence in the
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record and whether the proper legal standards were used in evaluating the evi-
dence.” Villa v. Sullivan, 895 F.2d 1019, 1021 (5th Cir. 1990). We grant defer-
ence “to the Secretary’s interpretation [of the agency’s regulation] unless an
alternative reading is compelled by the regulation’s plain language or by other
indications of the Secretary’s intent at the time of the regulation’s promulga-
tion.” Thomas Jefferson Univ. v. Shalala, 512 U.S. 504, 512 (1994) (internal quo-
tations omitted).
III.
We must first determine what level of deference to give DHHS’s legal
interpretations. There are three levels of interpretation nested within one
another. The first level is 42 C.F.R. § 483.35(i)(2), which requires that long-term
care facilities “[s]tore, prepare, distribute, and serve food under sanitary condi-
tions.” That is DHHS’s interpretation and implementation of 42 U.S.C.
§ 1320a-7j, which requires the agency to regulate nursing facilities.
That requirement in the Code of Federal Regulations (“CFR”), however,
is somewhat vague—“sanitary conditions” requires further specification. Thus
DHHS, through CMS, fashioned guidelines interpreting and clarifying the regu-
lation. The second level of interpretation is CMS’s interpretive manual, specifi-
cally Appendix PP of CMS’s State Operations Manual (“SOM”),1 which provides:
Final Cooking Temperatures
Cooking is a critical control point in preventing foodborne illness.
Cooking to heat all parts of food to the temperature and for the time
specified below will either kill dangerous organisms or inactivate
them sufficiently so that there is little risk to the resident if the food
is eaten promptly after cooking. Monitoring the food’s internal tem-
1
Available online at http://www.cms.gov/Regulations-and-Guidance/Guidance/-
Manuals/downloads/som107ap_pp_guidelines_ltcf.pdf, at 476.
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perature for 15 seconds determines when microorganisms can no
longer survive and food is safe for consumption. Foods should reach
the following internal temperatures:
...
Unpasteurized eggs when cooked to order in response to resident
request and to be eaten promptly after cooking;- 145 degrees F for
15 seconds; until the white is completely set and the yolk is
congealed.[2]
The third level of interpretation is CMS’s interpretation, in this case, of
the SOM Appendix’s requirement. The SOM has its own ambiguity—there are
potentially dueling requirements regarding temperature and consistency of the
egg. Based on its presentations to the ALJ, the Appeals Board, and here, CMS
appears to interpret the SOM as imposing a conjunctive requirement; that is, the
egg must be cooked at 145EF., and the white must be completely congealed and
the yolk firm.
CMS posits, unsurprisingly, that its interpretations at all three levels
should be accorded “great deference.” It contends that Bowles v. Seminole Rock
& Sand Co., 325 U.S. 410, 414 (1945), which mandates deference to an agency’s
interpretation of its own regulations, controls. Courts must, CMS asserts, defer
to an agency’s interpretation unless an “alternative” interpretation is “com-
pelled” by the regulation’s plain language. Thomas Jefferson Univ., 512 U.S. at
512. CMS improperly mixes the last two levels of interpretationSSthe SOM and
the SOM’s later interpretation as applied to this caseSSinto a single “interpreta-
tion” and requests Seminole Rock deference for the final product.
Elgin, on the other hand, urges that we may interpret the CFR regulation,
2
The ALJ and Appeals Board made reference to other guidance, including Food and
Drug Administration (“FDA”) regulations on egg-carton labeling and a letter from CMS dis-
cussing salmonella. CMS, however, in its finding of deficiency, as well as the ALJ and Appeals
Board, relied exclusively on the SOM’s interpretation of the published rule.
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the SOM’s interpretation of the CFR, and CMS’s interpretation of the SOM with-
out reference to CMS’s interpretations. Elgin points to the statement in Kansas
City Southern Industries, Inc. v. Interstate Commerce Commission, 902 F.2d 423,
430 (5th Cir. 1990), that, “[i]n reviewing agency actions, [the court] shall decide
all relevant questions of law, and interpret statutory provisions.” (internal quo-
tation omitted). That is, however, only half the standard and inapplicable here;
Kansas City Southern reviewed agency interpretation of an originating statute,
citing Chevron, U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S.
837 (1984), which is not at issue in this case.
Neither CMS nor Elgin states the proper type of deference. Nor does
either analyze the correct “level” of interpretation. The first levelSSDHHS’s
interpretation and implementation of the statute promulgated in the CFRSSis
given Chevron deference.3 The secondSSCMS’s interpretation of the CFR as
embodied in the SOMSSreceives Seminole Rock deference.4 The question, how-
ever, is what amount of deference, if any, is accorded to CMS’s interpretation of
the SOM.5
An agency’s interpretation of its own regulation “becomes of controlling
weight unless it is plainly erroneous or inconsistent with the regulation.” Sem-
3
“If a statute is ambiguous, and if the implementing agency’s construction is reasona-
ble, Chevron requires a federal court to accept the agency’s construction of the statute, even
if the agency’s reading differs from what the court believes is the best statutory interpreta-
tion.” Nat’l Cable & Telecomms. Ass’n v. Brand X Internet Servs., 545 U.S. 967, 980 (2005).
4
See Thomas Jefferson Univ., 512 U.S. at 512.
5
In its brief, Elgin maintains that the SOM is an unreasonable interpretation of the
CFR’s requirement that food be prepared and served under “sanitary” conditions. Elgin bases
its argument on the Texas Food Establishment Rules and the FDA Food Code, both of which
focus on time-and-temperature cooking instructions and do not mention the congealment of
whites or yolks. Elgin contends that, based on those, the SOM is an unreasonable interpreta-
tion of the CFR. That theory is problematic: Requiring food to be cooked with more specificity
is not “inconsistent with” a regulation requiring it to be served in a sanitary way. See Semin-
ole Rock, 325 U.S. at 414. The Texas and FDA rules are irrelevant.
6
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inole Rock, 325 U.S. at 414. The Court reaffirmed that position in Auer v. Rob-
bins, 519 U.S. 452, 461 (1997), holding that an agency’s interpretation of its own
regulation, published in the CFR, receives deference unless it is inconsistent
with the regulation. This court “and others have held that opinion letters, hand-
books and other published declarations of an agency’s views, including amicus
briefs, are authoritative sources of the agency’s interpretation of its own regula-
tions.” Castellanos-Contreras v. Decatur Hotels, LLC, 622 F.3d 393, 407–08 (5th
Cir. 2010). Agencies receive even greater deference under Seminole Rock and
Auer than they would under Chevron:
The most important reason for extending greater deference to an
amicus brief that purports to interpret an agency’s own ambiguous
regulation (under Auer), than a brief that interprets the organic
statute directly (under Chevron), is the greater expertise and famili-
arity of the agency with respect to the history and content of its own
enacted rules.
Belt v. EmCare, Inc., 444 F.3d 403, 416 n.35 (5th Cir. 2006).
All of our decisions applying Seminole Rock and Auer, however, have
addressed only an agency’s direct interpretation of its published regulations.
DHHS, it seems, asks us to go a step further and defer to its interpretation of the
SOM; essentially, it seeks “Seminole Rock squared” deference—deferring to its
interpretation of its manual interpreting its interpretive regulation. We have
never granted such extraordinary deference to an agency, and we decline to do
so now.
Accepting DHHS’s request for such deference would lead to problematic
outcomes. In the first place, it would make it possible for agencies not only to
issue ambiguous regulations, but also to write and enforce ambiguous interpre-
tations of them. It would also require courts to interpret not only interpreta-
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tions, but also interpretations of interpretations.6
Second, granting deference to CMS’s interpretation of the SOM would
leave no role for the courts—taken to its logical conclusion, it could effectively
insulate agency action from judicial review. It is not within the province of the
Executive Branch to determine the final meaning of a vague document interpret-
ing a regulation any more than it would be to interpret the final meaning of a
contract entered into by the Executive Branch.
Third, extending Seminole Rock and Auer to apply to agency interpreta-
tions of agency interpretations of agency regulations would allow agencies to
punish “wrongdoers” without first giving fair notice of the wrong to be avoided.
That final concern is particularly troubling considering the monetary penalties
at stake and the potential repercussions of a finding of deficiency, including, in
this case, losing all access to Medicare and Medicaid reimbursement.7
Although there are valid reasons for allowing deference to agencies, doing
so “creates a risk that agencies will promulgate vague and open-ended regula-
tions that they can later interpret as they see fit.” Christopher v. SmithKline
Beecham Corp., 132 S. Ct. 2156, 2168 (2012). In Christopher, the Court refused
to defer to an agency that had changed a long-held position in an enforcement
action. Of particular concern was the lack of notice:
6
Several Justices have expressed concern regarding agencies’ strategically drafting
vague regulations to maximize agency power and beat the “cumbersome rulemaking process.”
See Thomas Jefferson Univ., 512 U.S. at 525 (Thomas, J., dissenting, joined by Stevens, O’Con-
nor, and Ginsburg, JJ.). Where courts defer completely to agency interpretations of their own
regulations, “the incentive is to speak vaguely and broadly, so as to retain a ‘flexibility’ that
will enable ‘clarification’ with retroactive effect.” Decker v. Nw. Envtl. Def. Ctr., 133 S. Ct.
1326, 1341 (2013) (Scalia, J., concurring in part and dissenting in part); id. at 1338 (Roberts,
C.J., joined by Alito, J., concurring) (expressing agreement).
7
See Diamond Roofing Co. v. Occupational Safety & Health Review Comm’n, 528 F.2d
645, 649 (5th Cir. 1976) (“[S]tatutes and regulations which allow monetary penalties against
those who violate them . . . must give an employer fair warning of the conduct [they] prohibit[]
or require[].”).
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It is one thing to expect regulated parties to conform their conduct
to an agency’s interpretations once the agency announces them; it
is quite another to require regulated parties to divine the agency’s
interpretations in advance or else be held liable when the agency
announces its interpretations for the first time in an enforcement
proceeding and demands deference.
Id. Allowing an agency to apply its own interpretation to an otherwise vague
regulation in the context of an enforcement proceeding would unfairly surprise
the sanctioned party and “seriously undermine the principle that agencies
should provide regulated parties ‘fair warning of the conduct [a regulation] pro-
hibits or requires.’” Id. at 2167 (quoting Gates & Fox Co. v. Occupational Safety
& Health Review Comm’n, 790 F.2d 154, 156 (D.C. Cir. 1986) (alteration in orig-
inal).
Affording deference to agency interpretations of ever more ambiguous reg-
ulations would allow the agency to function not only as judge, jury, and execu-
tioner but to do so while crafting new rules. “[W]hen an agency promulgates an
imprecise rule, it leaves to itself the implementation of that rule, and thus the
initial determination of the rule’s meaning.” Talk Am., Inc. v. Mich. Bell Tel.
Co., 131 S. Ct. 2254, 2266 (2011) (Scalia, J., concurring). Affording deference to
an agency’s interpretations of its own rules “encourages the agency to enact
vague rules which give it the power, in future adjudications, to do what it
pleases. This frustrates the notice and predictability purposes of rulemaking,
and promotes arbitrary government.” Id. For this and the other reasons we
have now explained, we do not defer to DHHS’s interpretation of the SOM.
IV.
Unfettered by DHHS’s interpretation of the SOM, we apply traditional
tools of textual interpretation to determine its fair meaning regarding safe egg
preparation. See U.S. Nat’l Bank of Or. v. Indep. Ins. Agents of Am., Inc., 508
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U.S. 439, 454–55 (1993) (explaining proper statutory interpretation). We con-
sider the text holistically, accounting for the “full text, language as well as punc-
tuation, structure, and subject matter.” Id. at 455.
The SOM’s directive is inherently ambiguous. It states that “[f]oods
should reach the following internal temperature,” but its description of eggs
includes “145 degrees F for 15 seconds; until the white is completely set and the
yolk is congealed.” There are thus two possible requisites: (1) time and tempera-
ture and (2) degree or extent of congealing. CMS’s proposed interpretation
treats that phrase as conjunctive—absence of either is a violation. Elgin pro-
poses that the phrase is disjunctive—meeting either is sufficient.
The language and context of the SOM show that a disjunctive reading is
the better. The punctuation between the clausesSSa semicolonSStends to suggest
related but separate ideas and stands for “or,” not “and.” Clauses separated by
a semicolon “are presumed to be independent clauses.” In re Owsley, 384 B.R.
739, 748 (Bankr. N.D. Tex. 2008); see also McLeod v. Nagle, 48 F.2d 189, 191
(9th Cir. 1931). That does not establish whether the clauses are conjunctive or
disjunctive, however. Moreover, punctuation alone is not “a reliable guide for
discovery of a statute’s meaning.” U.S. Nat’l Bank of Or., 508 U.S. at 455.
The canon of construction that all clauses be given effect strongly recom-
mends a disjunctive reading. See Duncan v. Walker, 533 U.S. 167, 174 (2001).
If the two phrases are read conjunctively, one will be rendered effectively mean-
ingless. As was demonstrated by Brummit’s video and affidavit, an egg may be
cooked for 15 seconds at 145EF. but still have a runny yolk. If the regulation
were read conjunctivelySSrequiring both the stated cooking time and the
prescribed level of consistencySSthe former requirement would be nullified; the
egg would always have to be cooked until the yolk hardened, and the time
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requirement would never matter.8
Considering the specific instructions regarding eggs in the context of the
SOM Appendix as a whole also points to a disjunctive reading. The title of the
relevant SOM Appendix subsection is “Final Cooking Temperatures,” which
suggests that the times and temperatures are the primary focus. The egg-
preparation instructions are part of a list of other food-preparation instructions;
for example, “Fish and other meatsSS145 degrees F for 15 seconds.” Every other
food-preparation direction includes only a temperature and time.
The fact that a consistency-and-appearance requirement is attached to
eggs alone suggests that there is something different about them, and indeed
there is. It is possible to take the internal temperature of meat while it is cook-
ing and verify that it remains at that temperature for a certain period of time.
An egg’s temperature may also be taken if it is cooked in certain ways. It is
impossible, however, to take an egg’s internal temperature while it is being
boiled—thus some other metric is required to ensure safe cooking.
Consistency and appearance together serve as such a proxy. Thus, an egg
must be either cooked at 145EF. for 15 seconds or cooked until the white is set
and the yolk congealed; either alternative is sufficient. Such a reading fits best
within the context of the regulation and gives full meaning to all its parts.
V.
Having determined the proper meaning of the SOM, we turn to Elgin’s
8
At oral argument, counsel for DHHS demonstrated the unworkability of its own defi-
nition: He maintained that the requirements are conjunctive, because, if an egg were left out
on a counter, it would eventually congeal, meeting the second requirement. Such an egg would
obviously be unsafe, so both clauses must be required. But that theory is invalid. The rele-
vant section is titled “Final Cooking Temperatures,” and the clauses complete the phrase
“Foods should reach the following internal temperature.” Cooking is an obvious threshold
matter—the relevant question is whether the cooking must be for a certain time at a certain
temperature or must lead to a congealed white and yolk.
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contention that there was not substantial evidence to find that it violated the
SOM. “Substantial evidence is more than a scintilla, less than a preponderance,
and is such relevant evidence as a reasonable mind might accept as adequate to
support a conclusion.” Hames v. Heckler, 707 F.2d 162, 164 (5th Cir. 1983).
Based on DHHS’s interpretation of the SOM as containing a conjunctive
requirement that eggs be both cooked to 145EF. for 15 seconds and have con-
gealed whites and hard yolks, the ALJ and Appeals Board concluded that there
was substantial evidence to support CMS’s finding of a lack of substantial com-
pliance.9 There was evidence of yolks smeared on plates; only unhardened yolks
could be so smeared.
Because the SOM is disjunctive, however, CMS was required to adduce
evidence that eggs were not cooked at the correct temperature for the proper
amount of time; absent such evidence, it could not establish that Elgin had failed
to satisfy that requirement. CMS presented no evidence regarding temperature,
cooking time, or cooking method of the eggs in question. No temperatures were
taken during TDAD’s survey, and TDAD did not observe the cooking process or
communicate with the chef. CMS therefore did not present sufficient evidence
to establish even a prima facie case of noncompliance with the time-and-
temperature requirements.
DHHS may not issue ambiguous interpretive documents and then inter-
pret those in enforcement actions—we will not defer to that level of agency inter-
pretation. The petition for review is GRANTED, and the finding of deficiency
and resultant penalties are SET ASIDE.
9
DHHS defines substantial compliance as “a level of compliance with the requirements
of participation such that any identified deficiencies pose no greater risk to resident health or
safety than the potential for causing minimal harm.” 42 C.F.R. § 488.301.
12