The Fourth Circuit Court ruled Thursday that a constitutional challenge to the new federal health care law requiring virtually everyone in the Nation to have health insurance by 2014 was filed prematurely, and thus cannot go forward.  In a second ruling, the Circuit Court ruled that the state of Virginia had no legal right to bring a challenge to that mandate.   The two rulings were a victory for the Obama Administration, but will not keep the insurance mandate issue from Supreme Court review, since other cases are either now at the Court or on the way.  The main Circuit Court decision, a 2-1 ruling, is here; its Virginia opinion is here.

The Circuit Court ruled that the new law’s insurance mandate, enforced with a financial penalty, is a form of federal tax, and a federal law — the Anti-Injunction Act — bars lawsuits seeking to block enforcement of a tax measure before it goes into effect officially.   This marked the first time that a federal appeals court had ordered an end to a constitutional challenge to the mandate based on this legal theory.  In fact, the theory was abandoned by the Obama Administration when it appealed the case to the Fourth Circuit, but the Circuit Court revived it on its own.

The pair of rulings nullified one federal District judge’s ruling upholding the new provisions, and another judge’s decision to strike them down.  No federal court, the Circuit Court panel said, has jurisdiction to hear such a case at this point.   Circuit Judge Diana Gribbon Motz wrote both opinions; she was joined by Circuit Judge James A. Wynn, Jr., in finding the lawsuit barred under the tax injunction law.  Circuit Judge Andre M. Davis dissented, arguing that the jurisdictional bar cited by the majority was not a real one; Judge Davis went on to say that he would have held that the insurance mandate was within Congress’s constitutional powers.  The three judges were unanimous in finding that Virginia lacked “standing” to challenge the mandate in one of the two cases.

The Anti-Injunction Act, a part of the federal tax code, says that no lawsuit seeking to block the enforcement of “any tax” can be pursued in federal court.  Only after paying a tax may a taxpayer challenge its validity.  “The AIA,” Judge Motz wrote, “forbids only pre-enforcement actions” filed before a tax has actually been assessed or collected.  Later, a taxpayer can sue for a refund.

When the challenges were before lower courts, the Obama Administration had contended that they were barred by the injunction act.  In one of the two cases decided Thursday, a federal judge had rejected that argument.   The Administration did not pursue it in its appeal, and, in fact, argued to the Circuit Court that the injunction law simply did not bar the lawsuit.  It did argue, though, that Congress, in enacting the new mandate and its financial penalty, had relied in part upon its power to tax.

Judge Motz wrote that, under the injunction law, a financial penalty imposed by the federal government is to be treated as a tax any time the method of its collection is the one used to enforce federal taxes.  “The Supreme Court has steadfastly adhered to this broad construction” of the law, the opinion said.

That ruling came in the case of Liberty University v. Geithner (Circuit docket 10-2347), which was a challenge to two provisions of the new health law that Congress adopted in order to enforce the broad requirement that Americans obtain health insurance within the next three years.   Liberty University and two of its employees argued that the penalties at issue were not a tax, but rather a financial enforcement mechanism for the insurance-purchase mandate.   Their lawsuit contested both a financial penalty to be levied on individuals who do not obtain insurance by 2014 and a separate financial penalty imposed on some employers whose workers got a federal subsidy in order to obtain insurance.

Neither of those challenges, the panel majority ruled, can go forward in the face of the anti-injunction law.  In a 49-page opinion broadly discussing why the federal courts had no authority to hear the challenges, Judge Motz cautioned that creating an exception so that the courts could rule on the merits of the insurance mandate could jeopardize the federal government’s entire effort to require Americans to pay a variety of taxes.  Collection efforts could be seriously disrupted, Motz wrote.

Circuit Judge Wynn, while supporting Motz’s opinion on the tax injunction issue, offered his own opinion on the merits of the insurance-purchase mandate.  He said he would uphold its constitutionality as a valid use of Congress’s power to tax.  Since he regarded the penalty enforcing the mandate to be a tax, Judge Wynn explained, that leads back to the conclusion that the anti-injunction law bars the challenge.

Circuit Judge Davis, in a 73-page dissenting opinion, argued that the federal courts do have jurisdiction to rule on the challenges to the insurance-mandate and its enforcement penalty, and concluded that the mandate and penalty were a valid exercise of Congress’s authority to pass laws regulating interstate commerce.  Davis dismissed the majority’s view that the courts lacked jurisdiction as a “rather strained construction” of the anti-injunction law.

The second case thrown out by the Circuit Court Thursday was Virginia v. Sebelius (Circuit dockets 11-1057 and 11-1058), a challenge by the state of Virginia and its attorney general.  That lawsuit, noting that Virginia’s legislature had passed a law to protect state residents from being forced to obtain health insurance, argued that this set up a challenge to the new federal insurance mandate, thus giving the state the legal right to file its challenge.

Judge Motz said that this case was different from all of the other lawsuits around the nation challenging the mandate, since that mandate imposes no burden whatsoever on the only challenger in this case: the state of Virginia.  The law, the panel said, imposes that requirement only on individuals, not states.  It accepted the Obama Administration’s argument that the state will suffer no harm from the new mandate.

The Circuit Court suggested that Virginia might have had a right to sue if it could have shown that it was doing so to protect its own sovereign powers to pass legislation to protect its citizens.  The newly enacted state law that Virginia adopted to insulate its citizens from a federal insurance-buying mandate, the Court said, has no enforcement mechanism and thus the state would not be frustrated in carrying out that law simply because of the existence of the federal mandate.

Virginia, Judge Motz wrote, has no sovereign power to nullify federal law.   The federal government, when it adopts laws that apply to citizens, is exercising its sovereign authority to do so, and states may not challenge that, the panel said.  “The Constitution itself,” the opinion remarked, “withholds from Virginia the power to enforce [its law] against the federal government.  Quoting a Supreme Court precedent, the opinion said that “it is no part of a state’s duty to enforce its citizens’ rights in respect of their relations with the federal government.”

If the Court were to adopt Virginia’s claim that, by passing a law of its own, it had a legal right to challenge a federal law as conflicting with that law, the result, the panel said, would make each state “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.”

The panel stressed that it was not dismissing the Virginia lawsuit — as it did the Liberty University case — under the federal tax injunction law.  Rather, its ruling as to Virginia’s challenge was based solely on a lack of “standing” to sue, the panel made clear.

Virginia’s attorney general, Kenneth Cuccinelli, announced that he would appeal the decision, but did not say whether that meant he would seek en banc review on the Circuit Court, or review by the Supreme Court.

 

Posted in Featured, Health Care

Recommended Citation: Lyle Denniston, Health care challenge rejected, SCOTUSblog (Sep. 8, 2011, 11:28 AM), http://www.scotusblog.com/2011/09/health-care-challenge-rejected/