FOURTH CIRCUIT VACATES HEALTH-CARE RULINGS

 

[Posted September 8, 2011] The Fourth Circuit today vacates two conflicting district-court rulings involving the Patient Protection and Affordable Care Act. Both rulings are on jurisdictional grounds; the court does not reach the merits of the plaintiffs’ arguments that the Act is unconstitutional. I’m in the process of reading the two opinions (well over 100 pages) and will post more analysis here later this afternoon. For now, here are hyperlinks to the opinions (both in memorandum format) in Liberty University v. Geithner and Virginia v. Sebelius.
 

Virginia v. Sebelius

This one is going to have the tea partiers in an uproar, starting with this quote from page 22: “This prohibition rests on the recognition that a state possesses no legitimate interest in protecting its citizens from the government of the United States

 

This is the suit filed by Attorney General Cuccinelli on the day in March 2010 when President Obama signed the Act (“Obamacare”) into law. The legislature swiftly passed the Virginia Health Care Freedom Act, and the Governor signed that bill into law the day after suit was filed. The premise of the suit is that the Virginia act, which states that no Virginian can be required to maintain health insurance, conflicts with federal law, so the federal courts should decide whether the federal part of the equation is constitutional.

 

Today’s opinion, written by Judge Motz on behalf of Judges Davis and Wynn, is in my view an unassailable explanation of why states can’t litigate against the federal government in this way. Strictly speaking, the decision is one of standing. The fundamental holding here is that Virginia isn’t directly affected by the federal law, and by well-established precedent, states can’t sue on behalf of their citizens to redress the citizens’ private grievances. This is not to say that the citizens themselves can’t sue; they probably can, the opinion notes. But the idea of a state taking over private litigation, conceivably taking it in a direction that the real party in interest wouldn’t want, makes sense to me.

 

Over the course of the opinion, there are plenty of barbs directed at the Commonwealth. The undercurrent of each of them is the Supremacy Clause, the result of which is that states can’t sue to enforce state law that conflicts with federal law. Here are some of the bon motz (my apologies to her honor for this dreadful pun on her name; but I mean no harm) in the opinion:

  • “By contrast, the VHCFA regulates nothing and provides for the administration of no state program. Instead, it simply purports to immunize Virginia citizens from federal law.”
  • “ Virginia lacks the sovereign authority to nullify federal law.” (Just ask John C. Calhoun.)
  • “Rather, the only apparent function of the VHCFA is to declare Virginia‘s opposition to a federal insurance mandate.” (This assertion is amply buttressed by quotations from the Governor and Lieutenant Governor at the bill-signing ceremony, both declaring that the bill is expressly for the purpose of nullifying Obamacare. Of course, no one in the Executive Branch can declare what the legislature’s intent was, so these quotes, juicy as they are, are probably misplaced as authority.)
  • “[T]he VHCFA, because it is not even hypothetically enforceable against the federal government, raises only ‘abstract questions of political power, of sovereignty, of government.’”
  • “Under Virginia’s standing theory, a state could acquire standing to challenge any federal law merely by enacting a statute — even an utterly unenforceable one — purporting to prohibit the application of the federal law. For example, Virginia could enact a statute declaring that ‘no Virginia resident shall be required to pay Social Security taxes’ and proceed to file a lawsuit challenging the Social Security Act.” (It’s kind of hard to argue with this one.)
  • “Thus, if we were to adopt Virginia’s standing theory, each state could become a roving constitutional watchdog of sorts; no issue, no matter how generalized or quintessentially political, would fall beyond a state’s power to litigate in federal court.”
I’m not going to take a position on Obamacare or the VHFCA in this essay – as I’ve noted before, we don’t do politics here at VANA – but this is an issue of pure legal standing, and it’s abundantly clear that Virginia doesn’t have that in this case. Doubtless many opponents of the Health Care Act will claim that this ruling is a fix, or a blatant over-reach by an unrestrained judiciary. Those criticisms can be met by a simple approach: Read the opinion; preferably with an open mind, as I just did. It’s relatively short at 33 pages, but fully half of that is a listing of the various parties, amici curiae, and counsel of record, so you can skip that part. The next one goes into much more detail and is accordingly significantly longer (140 pages).
 

Liberty Univ. v. Geithner

This decision comprises three separate opinions – a majority, written by Judge Motz, followed by a concurrence by Judge Wynn and a dissent filed by Judge Davis. The primary issue here is whether the penalty imposed for failure to comply with the individual or employer’s mandate is a tax or not. If it is, then this action is barred by the Anti-Injunction Act. That act prohibits suits to enjoin the collection of a tax (you have to pay the tax and then sue for a refund). Obviously, no penalties have yet been paid under the Act, since the mandates don’t kick in until 2013. That makes this a jurisdictional issue, too, but this time, the judges don’t agree.

 

Judge Motz rules that the penalties are taxes, so the AIA bars the litigation; she declines to reach the merits of the underlying legal issue (the constitutionality of the Health Care Act). Judge Davis thinks the courts can reach the merits, and he would rule that the Act is constitutional under Congress’s taxing powers. Judge Wynn agrees with Judge Motz that the AIA prohibits this action, but he goes on to express his agreement on the merits with Judge Davis. Accordingly, we have an interesting division of views that all essentially lead to the same conclusion – more or less. Two judges feel that the Act is constitutional, and two judges believe the courts can’t get to that legal question.

 

One interesting aspect of this decision is that before reaching the merits, the district court ruled that the AIA didn’t bar its consideration of the litigation. On appeal, neither side took issue with that ruling. The plaintiffs obviously didn’t, because they didn’t want to get thrown out of court on their collective ear. And the Secretary of the Treasury didn’t gripe, presumably because he wanted a ruling affirming that the Act was constitutional. You can’t get such a ruling if the courts decide that they can’t consider the case.

 

Accordingly, on appeal neither party briefed the AIA issue until the appellate panel directed them to do so. Unsurprisingly, both sides argued in those supplemental briefs that the AIA did not bar the litigation. Despite this veneer of accord between the parties, the appellate court reaches the opposite conclusion, reflecting the fact that parties cannot make binding admissions or stipulations on matters of law.

So, who won today? In a sense, both sides did, although the Secretary would have liked that solid affirmance of the Act. The university and the citizens at least live to fight another day (although probably not in this litigation); today’s ruling leaves open the question of whether a citizen, or even an employer like the school, may pay the penalty in 2013 and then file suit to recover the payment. The AIA only prohibits injunctions against the assessment or collection of a tax; it doesn’t bar suits to recover taxes already paid.

 

Of course, there’s always the possibility of an appeal on to Washington, something Attorney General Cuccinelli has been aching for since he first drafted his lawsuit. But as I noted above, the caselaw barring actions by states on behalf of individual citizens is formidable; if he elects to pursue such an appeal, I think he’ll have a tough swim against a tide of precedent. The citizens and the school? Now, that’s another matter.