Court Opinion

ID: 7801558
Source: CourtListenerOpinion
Date Created: 2022-08-18 00:00:40.866025+00
Date Added: 2024-06-11T16:29:18.511190
License: Public Domain

Case: 20-11179      Document: 00516436126          Page: 1     Date Filed: 08/17/2022

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

                                                                                  FILED
                                                                            August 17, 2022
                                    No. 20-11179                             Lyle W. Cayce
                                                                                  Clerk

   Data Marketing Partnership, LP; LP Management
   Services, LLC,

                                                             Plaintiffs—Appellees,

                                        versus

   United States Department of Labor; Martin Walsh,
   Secretary, U.S. Department of Labor; United States of
   America,

                                                          Defendants—Appellants.

                   Appeal from the United States District Court
                       for the Northern District of Texas
                             USDC No. 4:19-cv-800

   Before Smith, Elrod, and Oldham, Circuit Judges.
   Andrew S. Oldham, Circuit Judge:
          There are three questions presented. The first is whether the
   Department of Labor’s self-labeled “advisory opinion” is reviewable “final
   agency action” under the Administrative Procedure Act. It is. The second is
   whether the Department’s action is arbitrary, capricious, or otherwise
   contrary to law. Again, it is. The third is whether the district court issued the
   appropriate relief. Here, we affirm the district court’s vacatur of the agency
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   action. But we vacate and remand the district court’s injunction for further
   consideration in light of this opinion.
                                             I.
          We first (A) detail the relevant statutory and regulatory background.
   Then we (B) describe the factual and procedural background.
                                             A.
          First, some legal background. This appeal involves the Employee
   Retirement Income Security Act of 1974 (“ERISA”). ERISA was “[e]nacted
   to protect the interests of participants in employee benefit plans and their
   beneficiaries.” Raymond B. Yates, M.D., P.C. Profit Sharing Plan v. Hendon,
   541 U.S. 1, 6 (2004) (quotation omitted). It “pre-empts ‘any and all State
   laws insofar as they may now or hereafter relate to any employee benefit plan’
   covered by ERISA.” Rutledge v. Pharm. Care Mgmt. Ass’n, 141 S. Ct. 474, 479
   (2020) (quoting 29 U.S.C. § 1144(a)). If ERISA doesn’t regulate the plan,
   then state law does.
          One relevant plan regulated by ERISA is an “employee welfare benefit
   plan,” which can be used by employers to provide health insurance to
   “participants.” 29 U.S.C. § 1002(1). ERISA defines a “participant” as “any
   employee or former employee of an employer, . . . who is or may become
   eligible to receive a benefit of any type from an employee benefit plan which
   covers employees of such employer . . . , or whose beneficiaries may be
   eligible to receive any such benefit.” Id. § 1002(7). It in turn defines an
   “[e]mployee” as “any individual employed by an employer” and an
   “employer” as “any person acting directly as an employer, or indirectly in
   the interest of an employer, in relation to an employee benefit plan.” Id.
   § 1002(5), (6). As relevant here, a “working owner” or a “bona fide partner”
   may be an “employee.” See Yates, 541 U.S. at 6 (working owner); 29 C.F.R.
   § 2590.732(d)(2) (bona fide partner).

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          The Department of Labor set up a procedure to formally provide
   guidance to entities. See Advisory Opinion Procedure, 41 Fed. Reg. 36,281
   (Aug. 27, 1976). It provides two options: (1) “advisory opinions” and
   (2) “information letters.” An “advisory opinion” is “a written statement
   issued to an individual or organization, or to the authorized representative
   . . . , that interprets and applies the Act to a specific factual situation.” Id. at
   36,282. In certain circumstances, the requester “may rely on the opinion.”
   Id. at 36,283. By contrast, an “information letter” is “a written statement . . .
   that does no more than call attention to a well-established interpretation or
   principles . . . without applying it to a specific factual situation.” Id. at 36,282.
                                            B.
          Next, the factual and procedural background. LP Management
   Services, LLC (“Management Services”) serves as the general partner of
   several limited partnerships, including Data Marketing Partnership (“Data
   Marketing”).
          In November 2018, Management Services requested an advisory
   opinion from the Department to confirm that a proposed health insurance
   plan for its limited partnerships would qualify as an employee welfare benefit
   plan under ERISA. In the request, it described Data Marketing’s business
   model. Its business is “the capture, segregation, aggregation, and sale to
   third-party marketing firms of electronic data generated by [limited partners]
   who share such data with” Data Marketing. The limited partners share that
   data by “install[ing] specific software [that] tracks the capture of such data
   by other companies . . . and provides access of such data to” Data Marketing.
   Data Marketing then processes, aggregates, and sells that data to marketers.
          The request also described the limited partners’ relationship with
   Data Marketing. Individuals become limited partners by executing a joinder
   agreement subject to the approval of Management Services. They then

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   receive a “Limited Partnership Interest” that permits them to “participate
   in global management issues through periodic votes of all Partners.” That
   partnership interest also lets them receive income distributions from Data
   Marketing that “will be reported as guaranteed payments and subject to
   employment taxes.”
          By October 2019, the Department still had not issued an advisory
   opinion. So plaintiffs sued, sought a declaration that their plan was covered
   by ERISA, and moved for an injunction ordering the Department not to
   release a contrary advisory opinion.
          A few months later, the Department issued a six-page advisory
   opinion. Based on the facts in the request and the complaint, the Department
   concluded that plaintiffs’ plan was not covered by ERISA. According to the
   Department, the limited partners were neither working owners nor bona fide
   partners because their work lacked hallmarks of a traditional employment
   relationship and their financial stake and participation in the management of
   the business was not serious enough. The Department also emphasized that
   plaintiffs’ structure was a sham, intended only to sell insurance to consumers
   under ERISA rather than state law.
          Plaintiffs then amended their complaint to challenge the lawfulness of
   the advisory opinion. Thereafter, plaintiffs and the Department cross-moved
   for summary judgment. The district court granted plaintiffs’ motion, denied
   the Department’s cross-motion, vacated the agency action, and permanently
   enjoined the Department “from refusing to acknowledge the ERISA-status
   of the Plan or refusing to recognize the Limited Partners as working owners
   of” Data Marketing.
          The district court reached two relevant conclusions. First, the district
   court concluded that the advisory opinion was final agency action. That’s
   because no further agency review was available and because the opinion

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   denied plaintiffs the safe harbor of federal preemption, which exposed them
   to state insurance regulation. Second, the district court concluded that the
   advisory opinion was arbitrary, capricious, and contrary to law. The court
   determined that the limited partners were “working owners” under a
   definition that the Department had previously used in another advisory
   opinion. In the alternative, the district court determined that the limited
   partners were “bona fide partners” because they had a “more-than-
   pretextual relationship” with Data Marketing and because the “bona fide
   partner” standard was easier to meet than the “working owner” standard.
          The Department timely appealed. We have appellate jurisdiction
   under 28 U.S.C. § 1291. We review the grant of summary judgment de novo.
   Playa Vista Conroe v. Ins. Co. of the W., 989 F.3d 411, 414 (5th Cir. 2021). And
   we review the district court’s permanent injunction and vacatur of the agency
   action for abuse of discretion. Whole Woman’s Health v. Paxton, 10 F.4th 430,
   438 (5th Cir. 2021) (en banc); Standing Rock Sioux Tribe v. U.S. Army Corps
   of Eng’rs, 985 F.3d 1032, 1051 (D.C. Cir. 2021).
          We (II) determine whether the advisory opinion is final agency action.
   We next (III) address whether the advisory opinion is (A) arbitrary and
   capricious and (B) contrary to law because it unreasonably interpreted the
   applicable statutory and regulatory provisions. Finally, we (IV) tackle the
   proper remedy.
                                         II.
          Start with finality. The Administrative Procedure Act (“APA”)
   provides judicial review of “final agency action for which there is no other
   adequate remedy in a court.” 5 U.S.C. § 704. Our circuit considers finality
   “a jurisdictional prerequisite of judicial review.” Louisiana v. U.S. Army
   Corps of Eng’rs, 834 F.3d 574, 584 (5th Cir. 2016). There are two
   requirements: (A) “the action must mark the consummation of the agency’s

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   decisionmaking process—it must not be of a merely tentative or interlocutory
   nature.” U.S. Army Corps of Eng’rs v. Hawkes Co., 578 U.S. 590, 597 (2016)
   (quotation omitted). And (B) “the action must be one by which rights or
   obligations have been determined, or from which legal consequences will
   flow.” Ibid. (quotation omitted). This is generally a “pragmatic” inquiry. Id.
   at 599 (quotation omitted); but see Biden v. Texas, 142 S. Ct. 2528, 2559 n.7
   (2022) (Alito, J., dissenting) (explaining that the Court sometimes uses an
   “expansive, formalist approach to the second Bennett factor . . . at odds with
   the usual pragmatic approach” (quotation omitted)). We consider each
   requirement in turn and find both satisfied.
                                         A.
          The     advisory    opinion     consummated         the   Department’s
   decisionmaking process. That’s because it is “not subject to further Agency
   review.” Sackett v. EPA, 566 U.S. 120, 127 (2012). The Department
   effectively concedes that the advisory opinion is not subject to additional
   agency review.
          Instead, the Department recycles an argument that the Supreme
   Court has repeatedly rejected: The action isn’t final because the agency can
   change its position or its reasons for the decision after more factfinding. This
   argument is squarely foreclosed by numerous Supreme Court decisions. See,
   e.g., ibid. (“The mere possibility that an agency might reconsider in light of
   ‘informal discussion’ and invited contentions of inaccuracy does not suffice
   to make an otherwise final agency action nonfinal.”); Hawkes, 578 U.S. at 598
   (“The Corps may revise an [action] within the five-year period based on new
   information. That possibility, however, is a common characteristic of agency
   action, and does not make an otherwise definitive decision nonfinal.”
   (quotation omitted)). An action is either final or not, and the mere fact that
   the agency could—or actually does—reverse course in the future does not

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   change that fact. See Biden v. Texas, 142 S. Ct. at 2545 (“[B]oth the June 1
   Memorandum and the October 29 Memoranda, when they were issued, marked
   the consummation of the agency’s decisionmaking process and resulted in
   rights and obligations being determined.” (emphasis added) (quotation
   omitted)). Were it otherwise, no agency action would be final because an
   agency could always revisit it. And that can’t be right. 1
           Prong one is thus satisfied.
                                                B.
           The advisory opinion also determined rights, produced obligations, or
   caused legal consequences. That’s for three reasons.
           First, it’s well-established that “where agency action withdraws an
   entity’s previously held discretion, that action alters the legal regime, binds
   the entity, and thus qualifies as final agency action.” Texas v. EEOC, 933 F.3d
   433, 442 (5th Cir. 2019) (quotation omitted). The advisory opinion did that
   here. The applicable regulation provides requestors the right to “rely” in
   certain circumstances on the opinion. 41 Fed. Reg. at 36,283. So the advisory
   opinion bound the Department to some degree and withdrew its previously
   held discretion. That’s textbook final agency action.
           Contrary to the Department’s suggestion, it doesn’t matter that there
   are preconditions to the requestor’s reliance. See 41 Fed. Reg. at 36,283
   (allowing reliance where the request is accurate). Nor does it matter that a
   future event must occur to satisfy those preconditions. See Biden v. Texas, 142

           1
              The Department also points to Taylor-Callahan-Coleman Counties District Adult
   Probation Department v. Dole, 948 F.2d 953 (5th Cir. 1991), for the idea that actions that are
   “subject to change” are not final. See id. at 957. This opinion was contradicted by the
   Supreme Court’s subsequent decisions in Sackett and Hawkes, so we aren’t bound by it.
   See, e.g., Gahagan v. USCIS, 911 F.3d 298, 302 (5th Cir. 2018).

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   S. Ct. at 2545 n.7 (“The fact that the agency could not cease implementing
   MPP, as directed by the October 29 Memoranda, until it obtained vacatur of
   the District Court’s injunction, did not make the October 29 Memoranda any
   less the agency’s final determination of its employees’ obligation to do so
   once such judicial authorization had been obtained.”). All that matters is
   that, when those preconditions are met, the Department loses discretion.
          The Department insists that it hasn’t lost any discretion because
   plaintiffs can’t prevent state regulation with the particular advisory opinion
   they received. In other words, the Department focuses on how plaintiffs
   would use the current advisory opinion rather than the advisory opinion
   plaintiffs wanted. That focus is wrong. “The fact that the advisory opinion
   procedure is complete and deprives the plaintiff of a legal right . . . [that] it
   would enjoy if it had obtained a favorable resolution in the advisory opinion
   process . . . denies a right with consequences sufficient to warrant review.”
   Unity08 v. FEC, 596 F.3d 861, 865 (D.C. Cir. 2010) (quotation omitted); see
   also Env’t Def. Fund, Inc. v. Ruckelshaus, 439 F.2d 584, 589 n.8 (D.C. Cir.
   1971). The Department can’t escape finality just by ruling against the
   requester.
          Second, the applicable regulation contemplates that the “failure to
   obtain an advisory opinion” can cause “unusual hardship.” 41 Fed. Reg. at
   36,282. This further confirms that an advisory opinion is “binding as a
   practical matter” and thus final. Texas v. EEOC, 933 F.3d at 442 (quotation
   omitted). After all, how can an advisory opinion alleviate “unusual hardship”
   without determining any rights, producing any obligations, or causing any
   legal consequences?
          Third, comparing the Department’s advisory opinions to its
   information letters reinforces that its advisory opinions are final agency
   action. Information letters are “informational only” and are “not binding on

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   the Department with respect to any particular factual situation.” 41 Fed. Reg.
   at 36,282. Advisory opinions, by contrast, are the “opinion of the
   Department as to the application[s] of” ERISA and may be relied on in
   certain circumstances. Id. at 36,283. The Department thus had the choice to
   provide final agency action (advisory opinion) instead of non-final agency
   action (information letter). See id. at 36,282 (“[T]he Department may, when
   it is deemed appropriate and in the best interest of sound administration of
   the Act, issue information letters calling attention to established principles
   under the Act, even though the request that was submitted was for an
   advisory opinion.”). It chose final agency action. And that choice has
   consequences.
          Prong two is thus satisfied. The agency’s action is final.
                                         III.
          Next, the action’s lawfulness. We (A) conclude that the advisory
   opinion is arbitrary and capricious. We then (B) frame the relevant
   interpretive questions for the district court’s consideration on remand.
                                         A.
          The APA directs courts to “hold unlawful and set aside agency
   action[s]” that are “arbitrary, capricious, an abuse of discretion, or otherwise
   not in accordance with law.” 5 U.S.C. § 706(2). “The APA’s arbitrary-and-
   capricious standard requires that agency action be reasonable and reasonably
   explained.” FCC v. Prometheus Radio Project, 141 S. Ct. 1150, 1158 (2021). We
   must not “substitute” our “own policy judgment for that of the agency.”
   Ibid. Still, we must ensure that “the agency has acted within a zone of
   reasonableness and, in particular, has reasonably considered the relevant
   issues and reasonably explained the decision.” Ibid.; see also Motor Vehicle
   Mfrs. Ass’n of U.S., Inc. v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43
   (1983). “Put simply, we must set aside any action premised on reasoning that

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   fails to account for ‘relevant factors’ or evinces ‘a clear error of judgment.’”
   Univ. of Tex. M.D. Anderson Cancer Ctr. v. HHS, 985 F.3d 472, 475 (5th Cir.
   2021) (quoting Marsh v. Or. Nat. Res. Council, 490 U.S. 360, 378 (1989)).
           In reviewing an agency’s action, we may consider only the reasoning
   “articulated by the agency itself”; we cannot consider post hoc
   rationalizations. State Farm, 463 U.S. at 50; see also DHS v. Regents of the
   Univ. of Cal., 140 S. Ct. 1891, 1909 (2020) (“An agency must defend its
   actions based on the reasons it gave when it acted.”). At the same time, the
   fact that an agency provided a post hoc rationalization is relevant evidence that
   the action is arbitrary and capricious. See, e.g., Wages & White Lion Invs., LLC
   v. FDA, 16 F.4th 1130, 1140 (5th Cir. 2021) (“The very fact that the FDA
   perceived the need to rehabilitate its Order with new and different arguments
   before our court underscores that the Order itself omitted a reasoned
   justification for the agency’s action.”); Texas v. Biden, 20 F.4th 928, 993 (5th
   Cir. 2021). 2
           Our review is “not toothless.” Sw. Elec. Power Co. v. EPA, 920 F.3d
   999, 1013 (5th Cir. 2019). In fact, it’s well-established that “after Regents, it

           2
             The Supreme Court recently reversed our judgment in Texas v. Biden. See Biden
   v. Texas, 142 S. Ct. at 2548 (reversing the court of appeals). It’s thus important to
   determine the extent to which the panel’s opinion is still binding under this circuit’s rule
   of orderliness. Our rule of orderliness requires us to follow the panel opinion except for the
   portions of it on statutory interpretation and final agency action. See Cent. Pines Land Co.
   v. United States, 274 F.3d 881, 893 n.57 (5th Cir. 2001) (concluding that circuit opinions in
   which the judgment was reversed on some but not all grounds are still precedential with
   respect to the portions not reversed); United States v. Kirk, 528 F.2d 1057, 1063–64 (5th
   Cir. 1976); see also Texas v. United States, 40 F.4th 205, 222 n.9 (5th Cir. 2022) (per curiam)
   (understanding Texas v. Biden, 20 F.4th 928 (5th Cir. 2021), to be binding on all grounds
   not reversed). So the panel’s understanding of arbitrary-and-capricious review,
   reviewability under Heckler v. Chaney, 470 U.S. 821 (1985), Article III standing, mootness,
   &c. remains binding. Cf. Stokes v. Sw. Airlines, 887 F.3d 199, 205 (5th Cir. 2018) (“[T]he
   determination whether a given precedent has been abrogated is itself a determination
   subject to the rule of orderliness.”).

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   has serious bite.” See, e.g., Wages, 16 F.4th at 1136; Texas v. United States, 40
   F.4th 205, 226 (5th Cir. 2022) (per curiam).
             The Department failed to “reasonably consider[] the relevant issues
   and reasonably explain[]” the advisory opinion. Prometheus, 141 S. Ct. at
   1158; see also Michigan v. EPA, 576 U.S. 743, 750, 752 (2015) (“[A]gency
   action is lawful only if it rests on a consideration of the relevant factors” and
   “important aspect[s] of the problem.” (quotation omitted)). The key factors
   the Department ignored were its prior advisory opinions discussing the term
   “working owner” and its regulation adopting a definition of the term in a
   related context. See Dep’t of Labor, Advisory Op. No. 99-04A, 1999 WL
   64920, at *2 n.3 (Feb. 4, 1999) [hereinafter 1999 opinion]; Dep’t of Labor,
   Advisory Op. No. 2006-04A, 2006 WL 1401678, at *3 (Apr. 27, 2006)
   [hereinafter 2006 opinion]; Definition of “Employer” Under Section 3(5) of
   ERISA—Association Health Plans, 83 Fed. Reg. 28,912, 28,931 (June 21,
   2018); 29 C.F.R. § 2510.3-5(e). These omissions doom the Department’s
   action.
             Start with the omitted advisory opinions. In 1999, the Department
   issued an advisory opinion that characterized the term “working owner”:
             By the term “working owner,” [the requester] apparently
             mean[s] any individual who has an equity ownership right of
             any nature in a business enterprise and who is actively engaged
             in providing services to that business, as distinguished from a
             “passive” owner, who may own shares in a corporation, for
             example, but is not otherwise involved in the activities in which
             the business engages for profit.
   1999 opinion, supra, at *2 n.3. In 2006, the Department issued another
   advisory opinion reiterating this prior characterization. See 2006 opinion,
   supra, at *3. Yet the Department never even mentioned this prior
   characterization in the advisory opinion at issue here.

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          The Department’s failure is hardly “reasoned decisionmaking.”
   Michigan, 576 U.S. at 750 (quotation omitted). The opinion at issue adopts a
   definition of “working owner” materially different from the definitions in the
   1999 and 2006 opinions. The opinion thus has “an unexplained
   inconsistency”—the hallmark of “an arbitrary and capricious change from
   agency practice.” Encino Motorcars, LLC v. Navarro, 579 U.S. 211, 222
   (2016) (quotation omitted). Plus, if courts must give the Department’s
   advisory opinions Skidmore deference, then the Department itself must
   meaningfully consider relevant advisory opinions as well to issue a
   “reasonable and reasonably explained” action. Prometheus, 141 S. Ct. at 1158.
   “That omission alone renders [the Department’s opinion] arbitrary and
   capricious, but it was not the only defect.” Regents, 140 S. Ct. at 1896.
          The Department justifies ignoring its prior characterization of the
   term “working owner” because the characterization originated in an
   advisory opinion predating the Supreme Court’s 2004 decision in Yates. But
   Yates is no justification. For one thing, the Department referred to the 1999
   opinion’s definition of “working owner” after Yates in the 2006 advisory
   opinion. See 2006 opinion, supra, at *3. For another, the Supreme Court in
   Yates relied on that very same 1999 opinion, though not specifically for
   defining the term “working owner.” See 541 U.S. at 17–18, 20. Still, Yates
   shows that the Department was on notice of the 1999 opinion’s significance
   and potential continued significance. And in all events, Data Marketing cited
   the 1999 opinion in its submission, putting the Department on notice of the
   relevant authority.
          The Department also failed to address a regulation that adopted a
   definition of “working owner.” See 29 C.F.R. § 2510.3-5(e) (definition). The
   Department in promulgating the regulation justified at length its definition of
   “working owner.” See 83 Fed. Reg. at 28,929–33; see also id. at 28,964
   (providing the definition). Yet the Department adopted a contrary definition

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   in the opinion here and never acknowledged the regulation. It did so even
   though Data Marketing cited the regulation in its request. One would think
   that a reasonable agency’s “natural response” to seeing a regulation with a
   definition of the exact same term at issue in the request would be to consider
   the definition—perhaps explaining why the Department is adopting a
   different one. Regents, 140 S. Ct. at 1916. 3
             More fundamentally, the Department spills much ink in its response
   brief either explaining away the prior advisory opinions and the regulation or
   arguing that the definitions they adopted are consistent with the ones
   adopted elsewhere. But all those arguments were not made in the final agency
   action itself and thus aren’t “contemporaneous explanations.” Regents, 140
   S. Ct. at 1909. They are instead “impermissible post hoc rationalizations.”
   Ibid. And these post hoc rationalizations confirm that the action here is
   arbitrary and capricious. See Wages, 16 F.4th at 1140; Texas v. Biden, 20 F.4th
   at 993.
                                                B.
             Next we consider whether the district court interpreted the relevant
   provisions correctly. The court interpreted two relevant terms: (1) “working
   owner” and (2) “bona fide partners.” We remand as to both terms, so that
   the district court may address certain interpretive questions in the first
   instance.

             3
             It’s true that a district court in March 2019 held the regulation’s definition
   unreasonable because it included working owners without employees. See New York v.
   DOL, 363 F. Supp. 3d 109, 136–39 (D.D.C. 2019). But this makes the Department’s failure
   to discuss the regulation all the more perplexing. The Department appealed the decision to
   defend the definition. If the definition is worth defending in court, it’s worth meaningfully
   addressing in an advisory opinion when the request cites the regulation.

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                                         1.
          First, “working owner.” In Yates, the Supreme Court concluded that
   a “working owner” may qualify as an “employee” and a “participant” under
   ERISA. 541 U.S. at 6. In reaching this conclusion, the Court did not “resort
   to common law.” Id. at 12. Instead, the Court determined that “ERISA’s
   text contains multiple indications that Congress intended working owners to
   qualify as plan participants” and that “these indications combine to provide
   specific guidance.” Ibid. (quotation omitted). The Court, however, did not
   “clearly define who exactly makes up this class of ‘working owners.’” Id. at
   25 n.* (Thomas, J., concurring in the judgment). All it said was that “a
   working owner may have dual status, i.e., he can be an employee entitled to
   participate in a plan and, at the same time, the employer (or owner or member
   of the employer) who established the plan.” Id. at 16 (majority op.); see also
   ibid. (stating that “a working owner can wear two hats, as an employer and
   employee”). Lower courts were thus left to determine the scope of the term.
          Yates nevertheless provided courts a framework for assessing
   working-owner questions. Yates requires courts to determine whether
   ERISA’s text provides “specific guidance” on the precise question before
   the court, such that resort to the common law is unnecessary. To determine
   whether ERISA provides “adequate[] informati[on],” courts must consider,
   among other things, all four titles of ERISA and the Internal Revenue Code.
   Ibid.; see also id. at 12–13 (“Congress enacted ERISA against a backdrop of
   IRC provisions that permitted corporate shareholders, partners, and sole
   proprietors to participate in tax-qualified pension plans. . . . Congress’
   objective was to harmonize ERISA with longstanding tax provisions.”).
          The district court did not perform this analysis. It appears to have
   understood Yates to say that ERISA always provides specific guidance for all
   working-owner questions. In our estimation, however, Yates only concluded

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   there was sufficient guidance for the particular threshold question before the
   Court—i.e., whether working owners may qualify as participants at all. That,
   however, does not mean the same guidance is relevant, let alone specific
   enough, to resolve all working-owner questions. Rather, the question on
   remand is whether all of the Yates factors, including the various provisions of
   ERISA and the IRC, combine to make these particular working owners
   qualify as plan participants.
                                            2.
          Now, bona fide partners. The applicable regulation says:
          Employment relationship. In the case of a group health plan, the
          term employer also includes the partnership in relation to any
          bona fide partner. In addition, the term employee also includes
          any bona fide partner. Whether or not an individual is a bona
          fide partner is determined based on all the relevant facts and
          circumstances, including whether the individual performs
          services on behalf of the partnership.
   29 C.F.R. § 2590.732(d)(2). The regulation requires the determination to be
   “based on all the relevant facts and circumstances” and then provides one
   example consideration (“whether the individual performs services on behalf
   of the partnership”). In essence, the regulation commands a totality-of-the-
   circumstances analysis.
          The district court did not appear to apply a totality-of-the-
   circumstances inquiry. It instead understood the regulatory definition to
   “simply require[] a more-than-pretextual relationship between the employer
   and employee.” And it determined that the limited partners were bona fide
   partners because the “standard is a lower threshold” than for working
   owners. Insofar as these standards differ from a totality-of-the-circumstances
   inquiry, the district court erred.

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                                      No. 20-11179

          As with the working-owner inquiry, we believe it best to remand for
   the district court to apply the totality-of-the-circumstances inquiry in the first
   instance. On remand, the district court should also consider whether the
   Department’s interpretation of the regulation warrants Auer deference or
   whether the Department forfeited the argument for such deference. See Ortiz
   v. McDonough, 6 F.4th 1267, 1275–76 (Fed. Cir. 2021) (Auer deference
   forfeitable); cf. HollyFrontier Cheyenne Refin., LLC v. Renewable Fuels Ass’n,
   141 S. Ct. 2172, 2180 (2021) (“[T]he government is not invoking Chevron.
   We therefore decline to consider whether any deference might be due its
   regulation.” (quotation omitted)); Texas v. Biden, 20 F.4th at 961 (“The
   Government thus forfeited the Chevron issue by failing to mention it in its
   brief.”).
                                          IV.
          Next, the proper remedy. The APA gives courts the power to “hold
   unlawful and set aside agency action[s].” 5 U.S.C. § 706(2). Under prevailing
   precedent, § 706 “extends beyond the mere non-enforcement remedies
   available to courts that review the constitutionality of legislation, as it
   empowers courts to ‘set aside’—i.e., formally nullify and revoke—an
   unlawful agency action.” Jonathan F. Mitchell, The Writ-of-Erasure Fallacy,
   104 Va. L. Rev. 933, 950 (2018); see also id. at 1012–16; Texas v. Biden, 20
   F.4th at 957 (“That statutory empowerment means that, unlike a court’s
   decision to hold a statute unconstitutional, the district court’s vacatur
   rendered the June 1 Termination Decision void.” (emphasis added));
   Driftless Area Land Conservancy v. Valcq, 16 F.4th 508, 522 (7th Cir. 2021)
   (“Vacatur [of an agency action] retroactively undoes or expunges a past
   [agency] action. . . . Unlike an injunction, which merely blocks enforcement,
   vacatur unwinds the challenged agency action.”); Monsanto Co. v. Geertson
   Seed Farms, 561 U.S. 139, 165 (2010) (describing vacatur as “a less drastic
   remedy” than an injunction); but see John Harrison, Section 706 of the

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                                       No. 20-11179

   Administrative Procedure Act Does Not Call for Universal Injunctions or Other
   Universal Remedies, 37 Yale J. on Reg. Bull. 37 (2020). The default rule
   is that vacatur is the appropriate remedy. See, e.g., Texas v. Biden, 20 F.4th at
   1000 (“[B]y default, remand with vacatur is the appropriate remedy.”);
   United Steel v. Mine Safety & Health Admin., 925 F.3d 1279, 1287 (D.C. Cir.
   2019) (“The ordinary practice is to vacate unlawful agency action.”). The
   Department makes no developed argument that the district court abused its
   discretion in following the default rule, so the Department forfeited the
   argument. See, e.g., DeVoss v. Sw. Airlines Co., 903 F.3d 487, 489 n.1 (5th Cir.
   2018) (concluding that an argument was “forfeited” because it wasn’t
   “structured”); United States v. Maes, 961 F.3d 366, 377 (5th Cir. 2020);
   United States v. Avants, 367 F.3d 433, 442 (5th Cir. 2004); Trevino v. Johnson,
   168 F.3d 173, 181 n.3 (5th Cir. 1999). We therefore uphold the court’s
   vacatur.
          The district court also permanently “enjoined” the Department
   “from refusing to acknowledge the ERISA-status of the Plan or refusing to
   recognize the Limited Partners as working owners of” Data Marketing. This
   injunction, however, turned on the interpretative questions that the district
   court must further address on remand. So we vacate this injunction without
   opining on whether such relief might be appropriate.
                                   *        *         *
          The Supreme Court has made clear that when it comes to arbitrary-
   and-capricious review, “the Government should turn square corners in
   dealing with the people.” Regents, 140 S. Ct. at 1909 (quotation omitted). The
   Department failed to do that. For the foregoing reasons, the district court’s
   judgment is AFFIRMED                in part, VACATED             in part, and
   REMANDED.

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