Franciscan Alliance, Inc. v. Burwell, 227 F. Supp. 3d 660

Background

Plaintiffs (eight states + three private healthcare/religious organizations) challenge HHS’s 2016 Rule implementing ACA §1557, which defines discrimination “on the basis of sex” to include "gender identity" and "termination of pregnancy." The Rule took partial effect July 18, 2016; insurance provisions effective Jan. 1, 2017.
Private Plaintiffs (Franciscan, Specialty Physicians, CMDA members) object on religious grounds to performing, referring for, or covering transition-related procedures and elective abortions; State Plaintiffs maintain categorical insurance exclusions for such services.
The Rule forbids categorical insurance exclusions and contemplates broad transition-related coverage (hormones, psychotherapy, surgery), and requires individualized assessments rather than blanket exclusions; enforcement includes loss of federal funds and private suits.
Plaintiffs moved for a preliminary injunction to prevent enforcement of the Rule’s provisions on gender identity and termination of pregnancy; the court held expedited briefing and a hearing.
The district court concluded it had jurisdiction, found the Rule likely violated the APA (contrary to Title IX as incorporated by §1557 and by omitting Title IX’s religious/abortion exemptions) and likely violated RFRA as applied to Private Plaintiffs, and granted a nationwide preliminary injunction against enforcement of the two challenged provisions.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether court has jurisdiction (standing, ripeness, reviewability)	Plaintiffs: covered entities face imminent enforcement, funding loss and costs; claims ripe and reviewable under APA	Defendants: injuries speculative; administrative scheme requires exhaustion; protections in Rule reduce harm	Court: Plaintiffs have Article III standing, claims ripe, APA review not precluded; jurisdiction proper
Whether HHS’s interpretation of Title IX (sex → includes gender identity & termination of pregnancy) is entitled to Chevron deference	Plaintiffs: §1557 incorporated Title IX’s ordinary, binary "sex" meaning; HHS exceeded authority by expanding scope	Defendants: §1557 ambiguous re: application to healthcare; Rule fills gap and merits deference	Court: Chevron deference not warranted; Congress already spoke by incorporating Title IX’s structure; HHS exceeded authority
Whether the Rule is lawful under the APA (contrary to law/arbitrary and capricious)	Plaintiffs: Rule conflicts with Title IX’s text, structure and exemptions (religious & abortion); HHS unlawfully expanded incorporated statute	Defendants: Rule implements nondiscrimination and relies on other statutory protections; interpretation reasonable	Court: Rule is contrary to law—HHS unlawfully expanded Title IX and failed to incorporate Title IX’s religious/abortion exemptions; vacatur (prelim injunction) appropriate
Whether Rule violates RFRA as applied to Private Plaintiffs	Plaintiffs: Rule substantially burdens sincere religious exercise (perform/cover/ refer); government cannot show least restrictive means	Defendants: RFRA protections and other conscience statutes available; further facts needed	Court: Private Plaintiffs likely to succeed on RFRA claim; Rule imposes substantial burden and government failed to show least restrictive means

Key Cases Cited

Norton v. S. Utah Wilderness All. 542 U.S. 55 (jurisdictional scope of APA review)
Bennett v. Spear 520 U.S. 154 (final agency action test)
Chevron U.S.A., Inc. v. Natural Res. Def. Council, Inc. 467 U.S. 837 (agency deference framework)
FDA v. Brown & Williamson Tobacco Corp. 529 U.S. 120 (limits on agency authority esp. for major policy decisions)
City of Arlington v. FCC 569 U.S. 290 (agency jurisdiction and Chevron analysis principles)
Burwell v. Hobby Lobby Stores, Inc. 573 U.S. 682 (RFRA framework; substantial burden and least-restrictive-means)
Lujan v. Defenders of Wildlife 504 U.S. 555 (standing requirements)
Winter v. Natural Resources Defense Council, Inc. 555 U.S. 7 (preliminary injunction — irreparable harm requirement)