Individual mandate unlikely to be struck down

In the waning hours before release of the opinion, I am compelled to make my prediction regarding the Supreme Court ruling on Obamacare.

I believe the individual mandate will not be struck down.

Specifically, one or more of the following, on stare decisis grounds or on the grounds that it is a political question, will rule that the government with a rational basis may compel the purchase of a product pursuant to the commerce clause: Scalia, Roberts, or Kennedy.

I believe the states themselves will be considered to not have standing to challenge the individual mandate, and this will likely be a 6-3 or 7-2 decision.

I believe that the states' challenge on Medicaid grounds will be defeated unanimously.

I believe one or more of the following will rule against the challengers to the individual mandate due to either a lack of ripeness, failure to comply with the anti tax injunction act, or complete lack of standing: Ginsburg, Sotomayor, Breyer, Kagan, or Kennedy.

If all of the above happens, then the individual mandate will not be struck down, but will not be deemed constitutional.  The fight will be left for another day.

I hope I am incorrect...

Why Virginia will not be invited to the dance (the Supreme Court battle over the individual mandate)

In 2012 the Supreme Court will decide for the first time if Congress has the power to force the purchase of a good or service under Article I § 8 of the Constitution, and Virginia will be left watching from home.

President Obama signed the PPACA, a sweeping overhaul of America's healthcare system, into law in March 2010.  Litigants, including high profile state attorneys general lined up to challenge the new law, specifically the individual mandate.  A strategic decision to bring suit separately by the Commonwealth of Virginia was a tremendous gamble, and is about to become a losing bet.

On September 8, 2011 the U.S. Court of Appeals for the Fourth Circuit overturned Virginia's challenge to the individual mandate in Commonwealth v. Sebelius.  The fact the 4th Circuit upheld the individual mandate was not surprising given the expectations from the panel selected.  The concerning element of the ruling was the reason for the dismissal, standing.  Standing is the doctrine that one must be the party actually injured before you are allowed to bring a lawsuit, the concept is derived from Article III § 2 Cl. 1 of the Constitution.  Further discussion of standing can be found here.

Decisions from the 6th, 11th, and now 4th Circuit are ready to be appealed to the Supreme Court.  Other courts are not far behind.  Because of the nature of the 4th Circuit ruling in the Virginia case, I predict the Supreme Court will not invite the Commonwealth of Virginia to argue in one of the most important cases of our era.

Did Virginia make a mistake by going it alone?

In a word, no.

A bare minority of states decided before the PPACA was passed to sue to invalidate Obamacare once it was passed.  This became the successful Florida and 11th Circuit cases.  Virginia declined to participate in that lawsuit.  I believe there are three major reasons why Virginia pursued this matter separately.

1. Speed:  Virginia could file in the U.S. District Court for the Eastern District of Virginia also known as the "Rocket Docket."  It is called this because statistically the E.D. Va. is the fastest federal court for adjudicating civil cases in the country.  By suing in the E.D. Va. Virginia could likely get a decision sooner, be in the appeals court sooner, and be the first to appeal to the Supreme Court.  The Fourth Circuit is also known for being fairly swift.

2. Medicaid:  The other states wanted to pursue another argument regarding the unconstitutionality of Obamacare due to additional burdens placed on state Medicaid programs.  When the federal government gives money to the states it can do so with strings attached.  There are some minor limitations to this principle, but they did not apply in this instance.  Despite winning in both the district court and the 11th Circuit on the issue of the individual mandate, the other states lost the Medicaid argument before all of these judges.  This was a bad argument, and watered down an otherwise strong and more important argument invalidating the individual mandate.

3. VHCFA: Virginia passed the Virginia Health Care Freedom Act ("VHCFA") shortly before the passage of Obamacare.  This act says in short: "No resident of this Commonwealth, . . . shall be required to obtain or maintain a policy of individual insurance coverage . . ."  Va. Code § 38.2-3430.1:1.  This law provided Virginia a unique opportunity to challenge a federal law as being in direct contravention of a state law.

These are all good reasons.

Many will speculate as to the additional reasons Virginia filed separately.  The purpose of this article is not to speculate as to those additional reasons.

Did something go awry in the District Court?

No.

Virginia, for the most part won at the District Court level.  The little Virginia lost (conceivably a large loss), allowed Virginia to control the timing of appeal.  Virginia did what it planned and successfully used the speed of the rocket docket to reach the 4th Circuit first.

Should Virginia have merged its case in the 4th Circuit?

Probably not.

A case from the Western District of Virginia also reached the 4th Circuit at about the same time.  This case, Liberty U. v. Geithner, was brought on behalf of a university and a handful of individuals on commerce clause grounds, and religious liberty grounds.  The plaintiffs in Liberty U. lost at an early stage in their case in the district court.  In the 4th Circuit the cases were to be heard on the same day by the same judges, but were to remain separate.  Virginia made no attempt to merge the two cases.

The Liberty U. plaintiffs had problems showing standing, and their religious liberty arguments were fairly weak.  Virginia, as a governmental entity, came into the 4th Circuit in a strong position, and made a good strategic decision not to tie its fate to the Liberty U. plaintiffs.

Virginia lays the groundwork for its loss.

After all the briefing, and preparation, Virginia laid out the basis for its loss at oral argument.  The 4th Circuit panel selection was unfavorable for Virginia.  Virginia made things worse as the panel hammered counsel on the issue of standing, and counsel for Virginia ultimately rested their entire basis for standing on the VHCFA.  Stating in no uncertain terms:

"I'm resting my claim on my statute." - Va. Solicitor General at oral argument on Commonwealth v. Sebelius, Record No. 11-1057, U.S. Court of Appeals for the Fourth Circuit, May 10, 2011.

For a detailed discussion of oral argument see my post here.

Intervening trouble

After the 4th Circuit argument, the 6th and 11th Circuit's hear oral arguments in similar cases.  The 4th Circuit then orders Virginia to perform additional briefing, delaying the potential date for a decision.  The 6th Circuit turns around a decision in approximately one month upholding the individual mandate.  Virginia has now lost the advantage of speed.  The 11th Circuit then rules, striking down the individual mandate and dismissing the Medicaid challenge without fanfare.  Virginia lost its second reason for going it alone.  The 4th Circuit does not rule until September. 

Virginia took just enough rope . . .

Relying on Virginia's steadfast unwavering statement that the VHCFA is the only basis Virginia has for standing, the panel reversed the district court and dismissed Virginia's case for lack of standing.  The panel did not even explore any other possibilities for standing because Virginia chose only one.  Regardless of the panel, this was always a mediocre legal argument, but a good argument in the media.  Yet, the case is not tried in the media.  The last reason to go it alone was gone.

But how did the other states survive this hurdle?

In a little discussed portion of the 11th Circuit opinion, the court examined the nature of the parties in the 11th Circuit case.  By that time, 11th Circuit case involved over 25 states, the NFIB, and a handful of individuals.  The 11th Circuit analysis indicates

"Although the question of the state plaintiffs’ standing to challenge the individual mandate is an interesting and difficult one, in the posture of this case, it is purely academic and one we need not confront today. The law is abundantly clear that so long as at least one plaintiff has standing to raise each claim—as is the case here—we need not address whether the remaining plaintiffs have standing. See, e.g., Watt v. Energy Action Educ. Found., 454 U.S. 151, 160, 102 S. Ct. 205, 212 (1981) . . ."  p. 10.

The 11th Circuit determined that at least one individual plaintiff had standing, and as such all the plaintiffs may proceed.  No such individual plaintiffs were joined with Virginia in its lawsuit, and it would have been difficult to predict this outcome.

If Virginia lost due to lack of standing, do they still get to go to the Supreme Court?

I believe the answer to this question will be no.

Standing is a procedural issue.  A decision on the Constitutionality of the individual mandate is a substantive ruling.  The Supreme Court takes only a small proportion of all cases appealed.  One of the major factors it looks for when deciding to take cases is a circuit split, a disagreement between circuit courts on a major issue.  There is currently a circuit split between the 6th and 11th Circuits on the Constitutionality of the individual mandate.  The 4th Circuit dismissed Virginia's case on procedural grounds, and did so on an issue that is nonexistent in all the other cases.  The Supreme Court will likely take the appeals of the 6th and 11th Circuits and may even join in the Liberty U. case and cases not yet decided in the 3d, 9th, and D.C. Circuits. 

If the Supreme Court allows Virginia to proceed, it will add a substantial additional complicated standing issue for which there is no current circuit split.  For this reason I expect that Virginia will not be invited to the dance and will have to watch the litigation play out with the rest of us.

Where was the mistake made and what can be done?

At some point extremely early in the litigation, during the first motion to dismiss filed by the federal government in the district court, Virginia made the decision to use this argument, and only this argument to create standing.  Judge Hudson agreed with Virginia’s reasoning, and Virginia did not have to face this issue again until the appeal. 

Little can be done to add to the existing arguments.  The same argument was brought at both the trial and appellate levels and the petition for writ of certiorari has already been filed.

Making this argument was a huge risk.  If successful, it would provide an avenue for extensive 10th Amendment litigation driven by federalist attorneys general.  This would possibly be an even bigger victory than simply overturning Obamacare.  If unsuccessful, Virginia ran the outside risk that it would be left out of a Supreme Court battle that may decide the scope of Congressional power for decades to come.

If Virginia does not get before the Supreme Court, it is time to bring the next 10th Amendment case, and then the next one.  Still, in Commonwealth v. Sebelius Virginia took the risk, and it looks like it is about to come up on the short side of history. 

My previous analysis of litigation regarding the individual mandate can be found here.

First Federal Court of Appeals declares individual mandate unconstitutional

Early this afternoon the 11th Circuit Court of Appeals declared the individual mandate of the PPACA unconstitutional in a 2-1 decision.

The case, Florida v. U.S. Department of Health and Human Services, is the matter filed on behalf of 26 states, the NFIB, and a handful of individual plaintiffs.  Most notably the lower court decision in this case was one of only two declaring the individual mandate unconstitutional, and the only case declaring the entirety of Obamacare unconstitutional as a result.

My previous analysis from January 2011 of the lower court ruling can be found here. 

What this means for the Supreme Court

The Supreme Court now has two competing appellate decisions from different parts of the country on the same issue: the earlier decision from the 6th Circuit upholding the individual mandate, and now this decision from the 11th Circuit declaring the individual mandate unconstitutional.  This "circuit split" is one of the strong factors considered by the Supreme Court when deciding to take a case.

What this means for the challengers in the 11th Circuit

There was always a danger that the 11th Circuit challengers might win this case, but that the government might seek and obtain en banc review (review by the entire appellate court).  This would have delayed a petition to the Supreme Court for months and months.  Instead the challengers lost on a couple of issues, and may file a petition for Writ of Certiorari as soon as they are ready.

Introduction to the opinion

The opinion is a monstrous 304 pages (including the brief appendix).  Below is an analysis primarily of the majority decision, and what it means for challengers of the individual mandate throughout the country.  Judges Dubina and Hull wrote for the majority, while Judge Marcus wrote the dissent.

Findings and Medicaid - the first 67 pages

Most of the first 67 pages are devoted to stating factual findings, primarily reciting the legislative history of the PPACA, Congressional findings regarding the bill, and actual terms of the bill.

Did you know the suit filed by the states challenged Congressional authority to expand the mandates within Medicaid?  This is the portion of the lawsuit in which Virginia did not also file a similar action.  The states actually lost on this issue in the lower court and the decision was the same here before the 11th Circuit.  The short version of how Medicaid works is that states may opt out of the program, and so any constraint placed on the program by Congress are inherently not coercive, and coercion equals unconstitutionality.

The history of the Commerce Clause and explanation of the necessary and proper clause

The Commerce Clause is one of the enumerated powers under Article 1 § 8 of the U.S. Constitution allowing Congress to write laws "To regulate Commerce with foreign Nations, and among the several States . . ."  The majority goes to great lengths to detail commerce clause jurisprudence in pages 67-92 of the opinion.  A Constitutional law course on the Commerce Clause could be taught from this portion of the brief.

Pages 92-99 are devoted to explaining the Necessary and Proper Clause also of Article 1 § 8 of the U.S. Constitution allowing Congress "to make all Laws which shall be necessary and proper for carrying into Execution the foregoing Powers, and all other Powers vested by this Constitution in the Government of the United States . . ."

The individual mandate exceeds the powers allowed under the Commerce Clause

Given the length of the opinion I will allow the judges to speak for themselves:

In commenting on the court's need to intervene: "When Congress oversteps those outer limits [of the Commerce Clause], the Constitution requires judicial engagement, not judicial abdication." p. 104.

On the issue of activity v. inactivity: "[T]he Supreme Court has always described the commerce power as operating on already existing or ongoing activity."  p. 108.  Nonetheless, "we are not persuaded that the formalistic dichotomy of activity and inactivity provides a workable or persuasive enough answer in this case."  p. 109.  The decision is not made based on the concept that not buying health insurance constitutes activity or inactivity.

What the Court views as the actual legal question: "We perceive the question before us to be whether the federal government can issue a mandate that Americans purchase and maintain health insurance from a private company for the entirety of their lives." p. 112. 

On the unprecedented nature of behavioral mandates (economic or otherwise): "Given the attractiveness of the power to compel behavior in order to solve important problems, we find it illuminating that Americans have, historically, been subject only to a limited set of personal mandates: serving on juries, registering for the draft, filing tax returns, and responding to the census." p. 119.  "[T]he individual mandate is a sharp departure from all prior exercises of federal power." p. 120.

Why looking at the decision to not purchase health insurance by everyone (i.e. in the aggregate) is not a justification for the individual mandate:  "Applying aggregation principles to an individual’s decision not to purchase a product would expand the substantial effects doctrine to one of unlimited scope." p. 124.  "Although any decision not to purchase a good or service entails commercial consequences, this does not warrant the facile conclusion that Congress may therefore regulate these decisions pursuant to the Commerce Clause."  p. 125. 

On what is actually being regulated: "But the individual mandate does not regulate behavior at the point of consumption . . . Instead, the language of the individual mandate in fact regulates a related, but different, subject matter: when health insurance is purchased."  p. 130 (internal quotations omitted). 

Why the federal government's analysis of Commerce Clause Jurisdiction is incorrect

On the nefarious reason why the federal government chooses to argue that the individual mandate is Constitutional under the Commerce Clause because it regulates the consumption of healthcare (as opposed to health insurance):  "Because an individual’s decision to forego purchasing a product is so incongruent with the “activities” previously reached by Congress’s commerce power, the government attempts to limit the individual mandate’s far-reaching implications.  Accordingly, the government adroitly and narrowly redefines the regulated activity as the uninsured’s health care consumption and attendant cost-shifting, or the timing and method of payment for such consumption."  pp. 135-136.

On the issue of the uniqueness of the healthcare system as the government's argument for allowing this one infringement of the bounds of the Commerce Clause:  "The government’s five factual elements of “uniqueness,” proposed as constitutional limiting principles, are nowhere to be found in Supreme Court precedent. Rather, they are ad hoc, devoid of constitutional substance, incapable of judicial administration—and, consequently, illusory."  p. 168.  Translated this means the government's argument that healthcare is a special area of the economy and has different Constitutional limitations has absolutely no basis in law.

The other concerns of the Court and the thrilling conclusion

The Court acknowledged that insurance is traditionally an area of state concern and this increases the Constitutional concerns.  The Court also indicates that striking the individual mandate will not hinder the ability of Congress to regulate insurance companies. 

And most importantly the sweeping conclusion!  "The federal government’s assertion of power, under the Commerce Clause, to issue an economic mandate for Americans to purchase insurance from a private company for the entire duration of their lives is unprecedented, lacks cognizable limits, and imperils our federalist structure." p. 171. 

The individual mandate is not a tax

If the penalty from the individual mandate is a tax it is much easier for the government to show that it is Constitutional.  The Court noted that no Court has upheld the individual mandate penalty because it is considered a tax.  "It is not surprising to us that all of the federal courts, which have otherwise reached sharply divergent conclusions on the constitutionality of the individual mandate, have spoken on this issue with clarion uniformity." p. 173.  And later the Court concludes, "The plain language of the statute and well-settled principles of statutory construction overwhelmingly establish that the individual mandate is not a tax, but rather a penalty." p. 174.

And the challengers suffer a major loss

The individual mandate was found to be severable from the remainder of Obamacare.  Essentially courts are required to leave a statute intact, and simply remove the unconstitutional portions if at all possible.  The lower court found that the individual mandate was not severable from the remainder of the Act and therefore struck down the whole of Obamacare.  The 11th Circuit has reversed that decision, and merely determined the individual mandate itself was unconstitutional.

Judge Marcus's dissent

Judge Marcus wrote an over 80 page dissent determining that the individual mandate is Constitutional under the Commerce Clause.  I may go back later and pull quotes from this section to show differences in thought form other judges that upheld the individual mandate.

Conclusion

This was a great day for challengers of the individual mandate.  A victory was obtained in a federal appellate court accompanied by sound reasoning.  This nearly assures that the Constitutionality of the individual mandate will be decided by the Supreme Court.

I may, over the next week, explain the standing ruling in the 11th Circuit and why it does not bode well for the Commonwealth of Virginia.

My previous analysis of litigation regarding the individual mandate can be found here.

Other federal lawsuits challenging the individual mandate are catching up while we await rulings in the claims made by states

There have been two true victories for opponents of the individual mandate, one in Virginia, and the second in Florida.  These matters have been appealed by the federal government.  At the same time, Plaintiffs have filed another dozen substantive claims in various courts throughout the country.  Of those that have been ruled upon at the trial level, challengers to Obamacare have lost in every other District Court.  See coverage of the other cases Liberty University v. Geithner, here, and Seven-Sky v. Holder, here.

Only one Federal Court of Appeals has ruled, and it found the individual mandate Constitutional by a vote of 2-1 (the ruling is far more complicated than the mere 2-1 vote suggests, and I explained the details here).

Where are we headed?

If you read the articles of any major news organization, it is presumed this litigation will ultimately be decided in the Supreme Court.  But, there simply is no guarantee the Supreme Court will weigh in on this issue.  Before the Supreme Court takes a case, they usually must see an egregious miscarriage of justice, or a conflict amongst appellate courts, or both.  Right now we have one appellate opinion.  For the challenges to the individual mandate to have a reasonable chance of being adjudicated in the Supreme Court there will likely need to be at least one victory for opponents of Obamacare before the Supreme Court is willing to take the case.

The most likely victories

The most likely victories will come from the Fourth or the Eleventh Circuits.  These are the two Circuits in which the lawsuits filed by Virginia and the other 26 states respectively are being adjudicated.  These are also the Circuits adjudicating the only victories so far.  Unfortunately it looks like the Fourth Circuit is likely to uphold the individual mandate, as explained here.  The Eleventh Circuit though appears to have a mixed panel, and there is a better chance of success.

Both the Fourth and Eleventh Circuits have completed briefing and oral argument and have been pending written decisions for over a month.

The rise of other opportunities

Because of the passage of time, two lesser known appeals have caught up.  In the Third Circuit, New Jersey Physicians v. Obama is now pending a decision.  In the Ninth Circuit, the matter of Baldwin v. Sebelius is pending a decision.

Both cases were dismissed due to a lack of standing for the Plaintiffs.  Although originally standing was thought to be a large hindrance to these types of cases, the courts have been fairly responsive to the need to find standing and proceed to the merits in other jurisdictions.  In fact, the Sixth Circuit Court of Appeals ruling upholding the individual mandate still goes to great lengths to explain why plaintiffs have standing in these types of cases.  The victory opponents of the individual mandate are looking for may be coming any day, but it may surprisingly be coming from the Third or the Ninth Circuits. 

Keep an eye on the Courts, any day now we will see our next ruling, and be one more step closer to convincing the Supreme Court to take on this major Constitutional issue.

For previous posts regarding the individual mandate please click here.

Ken Cuccinelli's take on the 6th Circuit upholding the Constitutionality of the individual mandate

Wherein Virginia Attorney General Ken Cuccinelli agrees with most of my analysis regarding the effect of the 6th Circuit opinion upholding the Constitutionality of the individual mandate:

From the Cuccinelli Compass July 12, 2011

July 12, 2011 Dear Friends and Fellow Virginians,    I wanted to update you on the 6th Circuit's appellate ruling in the healthcare case.  There are a lot of nuances to the ruling, so let's start at the beginning and go through them one at a time. Before I begin, I need to offer a disclaimer.  The way this case was decided, it ended up being very complex - so please bear with me.   Process Remember that in an ordinary appeal (not to the Supreme Court), three judges sit together to decide the appellate case. There are four appellate courts that have heard appeals in the healthcare cases: the 4th circuit (including Virginia); the 6th circuit; the 3rd circuit; and the 11th circuit (where our 26 sister states argued their case).  Only the 6th circuit has ruled so far.  We are awaiting rulings from the other three circuits. Because three judges sit on each of these cases, an important procedural rule to be aware of is that the narrowest opinion in the majority is deemed the governing opinion of the court.  The rationale for this rule is that the narrowest opinion is the one that everyone in the majority agreed upon, and then other opinions 'added' to that 'base' opinion.  This is a simplification of course, but that is the governing rule of interpretation. This rule of interpretation is important in the 6th circuit's case because all three judges wrote separate opinions in the case. Guts of the Ruling: Individual Mandate The three judge panel split 2-1, with two judges concluding that the individual mandate is constitutional, at least in this case.  One of those judges concluded that the mandate is constitutional, period.  However, Judge Sutton, who wrote the narrowest prevailing opinion, said only that it was constitutional in this case, but could be unconstitutional on a case by case basis in other cases - a very unusual ruling indeed. Because of the unique approach taken by Judge Sutton, it seems unlikely that other judges (or Justices) will follow his approach. More on Judge Sutton's opinion in a moment... Other Guts: Taxing Power While upholding the constitutionality of the individual mandate, the court voted 2-0 to reject the federal government's argument that the individual mandate and accompanying penalty could be sustained under Congress' taxing power.  You may ask, 'where was the third judge?'  The answer is that Judge Martin did not address the subject. Judge Martin reasoned that he had already upheld the individual mandate under the commerce clause, so there was no need to address the taxing power argument.  However, both Judges Sutton and Graham did address the subject - and both rejected the feds' claim that the penalty was a 'tax' and thus fell under Congress' constitutional taxing power. As a reminder, what the feds are arguing is that the penalty you must pay if you fail to buy the government-mandated health insurance is in fact a tax, not a penalty.  Furthermore, they say, that Congress has broad authority to levy taxes under Article I, section 8 of the constitution (this is certainly true).  Therefore, this reasoning goes, Congress was simply exercising its constitutional taxing power by imposing the penalty on those who fail to obey the government diktat to buy approved health insurance. Put simply, the feds are saying that they can order you to do just about anything, then assess a financial penalty against you if you fail to act, and because they deem that penalty a tax, the whole thing is constitutional.  This is the most radical claim in the whole case - by far. Those of you that have heard me speak on this matter have heard me say that I am loathe to make any specific predictions on how this case will go, but that I will predict that no judge or justice in America will agree with the federal government's radical taxing power argument. So far, so good on that prediction! The Scorecard So here is how the judges lined up in this case: Judge Martin: individual mandate IS constitutional; did not vote on taxing power. Judge Sutton: individual mandate IS constitutional (in this case); penalty is NOT a tax. Judge Graham: individual mandate is NOT constitutional; penalty is NOT a tax. Judge Martin didn't vote on both issues because he knew that the feds only needed to win on one to sustain the statute, so he didn't vote on the tax issue. Judge Sutton concluded only that the individual mandate was constitutional in this case, so because he presumably foresaw circumstances in which the individual mandate would not be constitutional, he proceeded to also rule on the tax question. My Opinion of the Opinions Two of the judges (Sutton and Graham) agreed that the exercise of power by the federal government in mandating individuals to buy government-approved health insurance is "unprecedented."  This is consistent with my view that for the federal government to win this case, the Supreme Court will have to go farther than it has ever gone before in expanding the commerce power of Congress.  However, for the states to prevail, the Court need not go beyond or overturn any prior commerce clause case. Judges Sutton and Graham thus agreed that it is the feds that are seeking a change in the status of the law related to the commerce clause, and despite saying that such a change is only for the Supreme Court to undertake, Judge Sutton implicitly accepted the change anyway by ruling the mandate constitutional. Judge Sutton unusually challenged the Supreme Court to take definite action.  Most strikingly he said that the Supreme Court "either should stop saying that a meaningful limit on Congress' commerce powers exists or prove that it is so."  Amen brother! Additionally, both Judges Sutton and Graham spoke predictively about the 'direction' of Supreme Court cases related to the commerce clause and federalism - a decidedly unusual feature of a lower court opinion. I am unfamiliar with any case ever that saw such brazen expectations of Supreme Court involvement explicitly written into the opinion.  It seems that virtually all of the trial and appellate judges who have touched this case are confident that it's going on to the Supreme Court.  Again, very unusual, but I do agree. The two greatest weaknesses of the controlling opinion - in my humble opinion - are the failure to effectively digest and respond to the arguments about the distinction between regulating "activity" vs. "inactivity," and the mistake of not treating the case as a facial challenge to the statute. That's all for now!  As always, we'll update you on the rulings as they come in.    Sincerely,    Ken Cuccinelli, II Attorney General of Virginia

_________________________________________

My analysis on the opinion from June 29, 2011:

http://northernvirginialawyer.blogspot.com/2011/06/sixth-circuit-sortof-upholds.html

There is an apparent dissimilarity between the two analyses, I may explain it when I have more time.

Sixth Circuit (sortof) upholds Constitutionality of the individual mandate (and clearly states the penalty is not a tax)

Today the Sixth Circuit Court of Appeals upheld the individual mandate in the PPACA.  Below is a synopsis of the findings of the court and the likely procedural effects on all litigation regarding the individual mandate.  Contrary to the headlines, this is far from a loss for believers in the Constitution.  We just need to dig through the details.

The decision can be found here.

The determination of the Court by a 2-1 decision is as follows:

The individual mandate is not facially unconstitutional. 

This does not mean that the individual mandate is Constitutional in all instances.  It does mean that the challengers to the individual mandate lost, today.

Who came to this decision?

Federal Circuit Court cases are decided (in almost all instances) by a panel of three judges.  In this instance two Circuit Court Judges, Martin and Sutton, and a District Court Judge, Graham, sitting by designation.  Each Judge issued a separate opinion agreeing on a handful of issues and explaining their disagreements on the remainder.

Judge Boyce F. Martin, Jr. determined the individual mandate is Constitutionally permissible under the Commerce Clause

Judge Martin determines that "Virtually everyone participates in the market for health care delivery, and they finance these services by either purchasing an insurance policy or by self-insuring."  p. 17.  His argument essentially runs downhill from there.  As soon as he accepted intellectually that not buying insurance constitutes an affirmative economic action of "self insurance" it is virtually guaranteed he will determine the individual mandate to be Constitutional.

Judge Jeffrey S. Sutton determined that The individual mandate is not facially unconstitutional

In a well thought out and explained opinion Judge Sutton determined first that the Plaintiffs were only bringing a facial challenge, which bears a very high burden.  This burden requires a showing that a law is unconstitutional in all applications.  Even, for example, in a state that already has an individual mandate like (Mitt Romney's) Massachusetts.  This is a very high standard to meet.  The Plaintiffs were unable to show that the individual mandate is unconstitutional in all applications, and therefore their appeal is denied.

Judge Sutton, despite dismissing the challenge, invited future litigants back to the Court to decide this issue in more particularized cases, stating:

"While future challenges to the law have hills to climb, nothing about this view of the case precludes individuals from bringing as-applied challenges to the mandate . . . Just as courts should refrain from needlessly pre-judging the invalidity of a law’s many applications, they should refrain from doing the same with respect to their validity."  pp. 52-53.

The combination of Judge Martin's and Judge Sutton's opinions means the challengers to the individual mandate lost 2-1.  But in such instances as when a majority requires the inclusion of different reasoning, the narrowest reading constitutes the holding of the court.  In this instance Judge Sutton's narrower procedural ruling that the Plaintiffs had not met their burden of proof for a facial challenge constitutes the holding.  The Sixth Circuit has only determined that The individual mandate is not facially unconstitutional.

Judge James L. Graham determined the individual mandate is an unconstitutional regulation of inactivity

I could quote most of Judge Graham's dissenting opinion, but will simply state that I agree with it.

Instead please consider Judge Graham's admonishment that Judges should not fear using the Constitution to overturn political decisions by the legislature stating:

"We must not lose sight of the fact however that the Constitution we interpret and apply itself embodies a resolution of powerful competing political ideologies, including the extent of the power of the federal government – a resolution that the States and the people accepted in the ratification process." p. 63.

Do not overlook some major important victories where all three Judges agreed

1. The Plaintiffs have standing.

2. The case is ripe.

3. The Anti-Injunction Act does not apply.

4. The penalty for not complying with the individual mandate is not a tax.

What does this mean in the Sixth Circuit

The Plaintiffs may seek en banc review where all the judges in the Circuit may hear the case, or there will be a direct appeal to the Supreme Court.  The decision is the hands of the challengers to the individual mandate.

What does this mean for the other challenges to the individual mandate

This outcome is generally good news for the other challenges.  The diverse opinions of the three Judges begs for intervention by the Supreme Court.  The Fourth and Eleventh Circuits where other matters are awaiting a ruling can not rely on the Sixth Circuit opinion to say there is a clear outcome with which they agree.  These cases will likely result in divergent opinions necessitating a ruling from the Supreme Court.  Challengers to the individual mandate should remember that without differing opinions between the Circuit Courts we are far from guaranteed an audience in the Supreme Court.

For my previous posts regarding challenges to the individual mandate click here.

Is the individual mandate penalty a tax? Analysis of the 4th Circuit briefs regarding the Anti Injunction Act

In originally proposing the individual mandate as part of the PPACA, Congress and the President took great pains to ensure that no portion of the bill be referred to (or enacted as) a tax.  Of course once threatened litigation hit the Federal Courts lawyers for the Federal government argued that the penalty for not obtaining insurance pursuant to the individual mandate is a tax.  This is because the penalty pursuant to the individual mandate is more likely to be considered Constitutional if it is a tax, than if it is a mere regulatory penalty promulgated pursuant to the commerce clause in Article I § 8 of the Constitution.

On May 23, 2011, nearly two weeks after oral argument in the two Virginia cases (Commonwealth v. Sebelius and Liberty U. v. Geithner ), the Fourth Circuit ordered additional briefing on the application of the Anti Injunction Act [AIA], and if the penalty for meeting the terms of the individual mandate constitutes a tax under the AIA.  This was a strong signal that the Fourth Circuit panel that heard oral argument not only believes the penalty is a tax, but that the parties are not allowed to come to court to challenge that tax until after the tax is assessed and collected in another couple years.

Virginia, and the Liberty U. Plaintiffs submitted substantially different briefs due to the procedural effects on each party of the AIA.  The Federal government submitted a nearly identical brief in both cases, and argued something quite surprising.

Below is an analysis of the briefs submitted on May 31, 2011, and the potential effect they will have on each case.

Virginia’s brief correctly lays out the inapplicability of the AIA

The AIA does not apply to Virginia in this type of situation.  As I laid out here on May 24, 2011, and here on May 26, 2011, The AIA, for the most part, does not apply to states.  In short, the AIA does not apply to Virginia, as there is no alternative remedy given by the AIA.  Further, the AIA generally does not apply to the states under traditional statutory construction principles.  On pages 2-4 of the brief Virginia applies a version of my analysis from May 24, 2011, and on pages 4-6 Virginia applies a version of my May 26, 2011 analysis.  Both are accurate and controlling, and the Fourth Circuit panel will likely find the AIA simply does not apply to Virginia.  Unfortunately, as I indicated on May 10, 2011 I believe Virginia is likely to lose at the Fourth Circuit due to standing.

Liberty U.’s brief impressively lays out not only a major exception to the AIA, but also how the penalty truly is not a tax

In a simple summary the brief starts, in part, with the following:

“The AIA deprives a court of jurisdiction only if the suit seeks to restrain the assessment or collection of a tax. Even then, the AIA does not apply if (1) it is clear that under no circumstances could the Government ultimately prevail, and (2) equity jurisdiction exists otherwise.”

Equity jurisdiction in this instance is injunctive relief based on a court ordered declaration that the PPACA is unconstitutional.  The first part of the test is self explanatory.  Nonetheless, I presume the Fourth Circuit panel still feels the penalty is Constitutional.   

And the Federal government capitulates?

Far and away the most surprising arguments came from the Federal government.  On page 2 of each brief they state:

“In the district courts, the government argued for dismissal of these actions under the AIA. On further reflection, and on consideration of the decisions rendered thus far in the ACA litigation, the United States has concluded that the AIA does not foreclose the exercise of jurisdiction in these cases.”

The Federal Government expressly attempts to waive the argument of the applicability of the AIA.  They go to great lengths to reemphasize that the penalty is Constitutional as it is a tax.  Later on page seven they argue:

“. . .Congress delayed the effective date of the minimum coverage provision, thus dramatically mitigating the risk of disruption to ongoing administration of the tax code that the AIA is intended to prevent. The AIA’s purpose is to prevent anyone from interfering with the federal government’s administration of the Tax Code, from forcing it by judicial fiat to treat a particular taxpayer or group of taxpayers differently than others, and from compelling it to stop or alter the ongoing business of tax enforcement. This broad challenge to the constitutionality of the minimum coverage provision, which was brought nearly four years before the minimum coverage provision is to be implemented, five years before any tax is to be paid and the IRS begins assessing and collecting those taxes, and well before the IRS has even set up the systems to administer the provision, poses no realistic threat of such disruption -- in contrast to the threat of disruption to the administration of the ACA that postponing review would raise.”

In short, they want this issue resolved well in advance to avoid disruption of the PPACA years down the road.

But isn’t this a change of heart?  In my opinion, yes.  The Federal government has changed its strategy, but not because of fear of disruption in 2015.  I believe the strategy, up until now has been to delay as long as possible, even if that means procedural dismissals (such as a dismissal based on standing or ripeness) in order for the PPACA be too far along for courts to want to disrupt implementation.  But, given the makeup of this Fourth Circuit panel, the Federal government wants a substantive (rather than procedural) victory to carry to the 6th and 11th Circuits to support their other cases.

The result

The Fourth Circuit could ignore all the briefs and rule as it deems fit.  Unfortunately, given the not so subtle signals from the Federal Government I fear we are headed towards a dismissal of Virginia’s claim based on standing, and a loss for the Liberty U. Plaintiffs on the substance of the PPACA.