The Administrative Procedure Act allows you to challenge a federal agency’s decision as either unsupported by the factual record or not allowed by the agency’s governing statutes. If the agency’s governing statute is ambiguous, then the court must defer to an agency’s interpretation of that statute—a rule known as Chevron deference. But if you can convince a court that the statute is not ambiguous, then the agency gets no deference. The Sixth Circuit has recently ruled on an APA case highlighting the change this can make.

Sunrise Cooperative is an agricultural cooperative with members in Ohio, Michigan, and Indiana. Sunrise also owns a crop-insurance company. When Sunrise’s members buy crop insurance from that company, Sunrise gives those members agricultural-insurance rebates.

This kind of rebate was only briefly lawful, from 2000 until 2008. But when Congress banned the system again in 2008, it added a grandfather clause allowing rebates if the “entity” giving them had been allowed to give them under the old law. After the ban was put back in place, Sunrise merged with another cooperative; the U.S. Department of Agriculture held that Sunrise could no longer pay rebates, reasoning that after the merger Sunrise was no longer the same “entity.”

Sunrise sued under the APA, arguing that the Department’s ruling was against the statutory text. The district court found the term “entity” ambiguous and deferred to the agency under Chevron. But the Sixth Circuit disagreed, holding that “entity” is an unambiguous term—and that Sunrise was indeed the same “entity” after its merger as it was before the merger.

The Sixth Circuit began with the text, noting that “[w]hile Congress did not define ‘entity,’ the term is not ambiguous. . . .  In everyday speech, an ‘entity’ is ‘an organization (such as a business or governmental unit) that has an identity separate from its members.” The agency relied on a “‘functional’ reading of ‘entity,’ [that] considers, ‘in a practical sense,’ an increase in membership ‘and the attendant increase in premium-rebating that comes with the expanded membership’ . . . .” Because the text was unambiguous, the Sixth Circuit refused to follow the agency’s reading.

The Sixth Circuit also rejected the Department’s argument that “the statute defines the term ‘legal entity,’ but it does not define ‘entity’ standing alone.” The agency urged the court to follow the definition for “legal entity,” which would not have allowed Sunrise to provide rebates. But the Sixth Circuit noted that the same terms have the same meaning “only when the term at issue is the same. ‘Entity’ (undefined) and ‘legal entity’ (defined) are not.”

Read the Sixth Circuit’s decision here.