U.S. 4th Circuit Court of Appeals Dismisses Two Lawsuits Challenging Affordable Care Act

Fourth Circuit Dismisses Cuccinnelli lawsuit challenging health care lawOn Thursday, September 8, 2011, the U.S. Fourth Circuit Court of Appeals in Richmond, Virginia, dismissed two lawsuits challenging the constitutionality of the Patient Protection and Affordable Care Act (the “Affordable Care Act”), the signature health reform law passed by Congress and signed into law by President Obama in 2010. Both cases were dismissed by the Court on jurisdictional grounds.

One of the suits, brought by the State of Virginia by its Attorney General Ken Cuccinelli, was dismissed by the Appeals Court on grounds that Virginia lacked standing to challenge the health care law, and therefore the federal courts lacked subject matter jurisdiction to entertain the suit. The case was remanded to the Federal District Court, which had upheld the health care law, with instructions to dismiss the case.

The other suit, brought by Rev. Jerry Falwell’s Liberty University and two individual plaintiffs, was dismissed for lack of jurisdiction, finding that the federal courts lack subject matter jurisdiction to hear and decide this lawsuit pursuant to the federal tax Anti-Injunction Act (AIA), I.R.C. § 7421(a), which prohibits a federal court from entertaining any lawsuit brought by any person for the purpose of “restraining the assessment or collection of any tax.”

The plaintiffs in that suit sought to enjoin in advance the collection of the penalties that will be imposed by the Affordable Care Act starting in 2014 upon citizens who fail to maintain the minimal amount of required health insurance (the individual insurance mandate) under the Act, and also sought to enjoin the employer penalties that would be assessed starting in 2014 against large employers (such as Liberty University) that fail to offer the minimally required insurance coverage to their employees.

The Appeals Court remanded the suit to the federal District Court in Virginia, with instructions that the suit be dismissed, and in so doing vacated that lower court’s ruling, which had found the health care law unconstitutional.

These decisions by the Fourth Circuit follow previous split decisions by two other U.S. Circuit Courts of Appeals.

The Sixth Circuit Court of Appeals in Cincinnati, on June 29, 2011, upheld the Affordable Care Act against constitutional challenge, holding that Congress did not exceed its constitutional authority under the Commerce Clause in enacting the health care law.

The Eleventh Circuit Court of Appeals in Atlanta, on August 12, 2011, struck down the individual insurance mandate as beyond Congress’ constitutional authority to enact under the Commerce Clause of the U.S. Constitution, but specifically upheld all the other provisions of the Affordable Care Act in a lengthy opinion detailing all the separate statutory benefits enacted as part of the Affordable Care Act.

The challenges to the Health Care Law considered by these courts are ultimately expected to be decided by the U.S. Supreme Court. A plaintiff in the Sixth Circuit case on July 27, 2011 petitioned the U.S. Supreme Court to hear the case.

Ken Cuccinelli’s State of Virginia Lawsuit

Procedural History. Virginia Attorney General Ken Cuccinelli, on behalf of the State of Virginia, filed a lawsuit challenging the Affordable Care Act on the day it was signed into law by President Obama. Mr. Cuccinnelli challenged the constitutionality of the individual insurance mandate in the federal health care law, and argued that the State of Virginia had standing to bring this lawsuit because the federal individual insurance mandate allegedly conflicts with a new Virginia state law that was signed into law on the day after Mr. Cucinnelli brought his lawsuit.

This new Virginia law, called “the Virginia Health Care Freedom Act (VHCFA),” simply declared, ““[n]o resident of this Commonwealth . . . shall be required to obtain or maintain a policy of individual insurance coverage.”

The lower Federal District Court accepted Mr. Cuccinnelli’s argument, and declared the individual insurance mandate in the Affordable Care Act unconstitutional as beyond the authority of Congress under the Commerce Clause of the U.S. Constitution. That decision was appealed to the Fourth Circuit Court of Appeals by the U.S. government.

The Appeals Court’s Decision. In a unanimous decision, on Thursday, September 8, 2011, The Fourth Circuit Court of Appeals panel accepted the government’s argument that the suit should be dismissed for lack of standing of Virginia as the plaintiff to bring this suit, and thus lack of subject-matter jurisdiction, because “Virginia had not and could not allege any cognizable injury and so was without standing to bring this action.”

In its opinion, written by Judge Diana Gribbon Motz, the Appeals Court stated, “the sole provision challenged here — the individual mandate –- imposes no obligations on the sole plaintiff, Virginia.” Instead, the Court pointed out, the individual insurance mandate will apply only to individual U.S. citizens, not to states.

Citing a long line of established judicial precedent that prohibits federal courts from entertaining cases where there is no direct conflict or “case or controversy” before the court between the actual parties to that case, in that the plaintiff in the case is not the one directly suffering the alleged harm that the plaintiff seeks to redress (i.e. lacks “standing to sue”), the Court explained:

“Article III of the Constitution confers on federal courts the power to resolve only “cases” and “controversies.” A federal court may not pronounce on “questions of law arising outside” of such “cases and controversies.” To do so “would be inimical to the Constitution’s democratic character” and would weaken “the public’s confidence in an unelected but restrained Federal Judiciary.” Id. The standing doctrine prevents federal courts from transgressing this constitutional limit.”

Explaining the three elements that Virginia had the burden of proving to establish “standing” to bring this lawsuit, the Court said:

“Thus, to ensure that there exists the requisite “case” or “controversy,” a plaintiff must satisfy the three requirements that combine to form the “irreducible constitutional minimum of standing.” Id. at 560. Specifically, a plaintiff must demonstrate that: (1) it has “suffered an injury in fact”; (2) there exists a “causal connection between the injury and the conduct complained of”; and (3) a favorable judicial ruling will “likely” redress that injury. Id. (internal quotations omitted). The burden rests with the party invoking federal jurisdiction, here Virginia, to “establish[] these elements.” Id. at 561. Only if Virginia meets the burden of establishing standing does the Constitution permit a federal court to address the merits of the arguments presented.”

The Court found that Virginia had not satisfied this burden of proof to establish “standing” to bring this suit challenging the individual mandate, in that “the individual mandate [which applies only to individual citizens, not to states] does not directly burden Virginia.” The Court stated:

“[T]he lack of factual context here impedes analysis of the underlying constitutional disputes. For example, both parties premise their Commerce Clause arguments on their competing characterizations of what the individual mandate regulates. A number of factors might affect the validity of these characterizations, including a taxpayer’s current possession of health insurance, current or planned future consumption of health care, or other related voluntary action. The case at hand lacks the concrete factual context critical to a proper analysis of these issues.”

The Court rejected Virginia’s argument that the State had standing to sue because of an alleged conflict between the individual insurance mandate in the federal health care law and the new state law that Virginia adopted the day after bringing its lawsuit, which Cuccinnelli argued gave Virginia an interest in protecting its “sovereignty.”

The Court cited a long line of cases holding that a state may not sue the United States government on behalf of or asserting claims of their citizens. “This prohibition rests on the recognition that a state possesses no legitimate interest in protecting its citizens from the government of the United States,” the Court said. “When a state brings a suit seeking to protect individuals from a federal statute, it usurps this sovereign prerogative of the federal government and threatens the “general supremacy of federal law.” “A state has no interest in the rights of its individual citizens sufficient to justify such an invasion of federal sovereignty.”

The Court then found, based on a review of Virginia’s new law (the VHCFA) and in part on statements accompanying the new law, that the clear intent of the Virginia legislature and Governor in enacting this new law was not rightfully to exercise Virginia’s sovereignty to establish a regulatory regime for Virginia citizens, which the federal individual mandate would interfere with, but rather simply to codify a declaratory statement that the federal law’s individual mandate would not be legal in Virginia, for the main purpose of giving the State’s Attorney General standing to challenge the federal law.

The Court wrote, “the VHCFA regulates nothing and provides for the administration of no state program. Instead, it simply purports to immunize Virginia citizens from federal law. In doing so, the VHCFA reflects no exercise of “sovereign power,” for Virginia lacks the sovereign authority to nullify federal law.”

“[T]he only apparent function of the VHCFA is to declare Virginia’s opposition to a federal insurance mandate. And, in fact, the timing of the VHCFA, along with the statements accompanying its passage, make clear that Virginia officials enacted the statute for precisely this declaratory purpose,” the Court found.

“But a state may not litigate in federal court to protect its residents “from the operation of [a] federal statute[],” [citing legal authority of a U.S. Supreme Court case], nor can it escape this bar merely by codifying its objection to the federal statute in question,” the Court held.

“After all, the action of a state legislature cannot render an improper state parens patriae lawsuit less invasive of federal sovereignty. [citing additional authority of U.S. Supreme Court case law] Nor does a state acquire some special stake in the relationship between its citizens and the federal government merely by memorializing its litigation position in a statute,” the Court stated. “The Constitution does not permit a federal court to answer such questions,” it held.

The Court further reasoned:

“To permit a state to litigate whenever it enacts a statute declaring its opposition to federal law, as Virginia has in the VHCFA, would convert the federal judiciary into a “forum” for the vindication of a state’s “generalized grievances about the conduct of government.” Flast v. Cohen, 392 U.S. 88, 106 (1968). 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.”

“We cannot accept a theory of standing that so contravenes settled jurisdictional constraints,” the Court held.

Holding that Virginia lacked standing to bring this lawsuit, the Court wrote, “The Constitution … requires that courts resolve disputes “not in the rarified atmosphere of a debating society, but in a concrete factual context conducive to a realistic appreciation of the consequences of judicial action.” [citing U.S. Supreme Court authority] Given this fact, Virginia lacks the “personal stake” in this case essential to “assure that concrete adverseness which sharpens the presentation of issues.”

Having found that the case must be dismissed for lack of standing of the plaintiff, the State of Virginia, to bring the case, the Court did not address or decide the underlying issue of the constitutionality of the individual insurance mandate in the Affordable Care Act.

A full copy of the Fourth Circuit Court of Appeal’s opinion in this case is available on the Court’s website.

The Liberty University Case

Procedural History. In the other case decided by the Fourth Circuit on Thursday, September 8, 2011, Rev. Jerry Falwell’s Liberty University and two individual plaintiffs had challenged the individual insurance mandate and sought to enjoin enforcement of the penalty that Congress imposed, via an amendment to the Internal Revenue Code, to enforce the individual mandate starting in 2014. Liberty University also sought to enjoin the employer penalty that the Affordable Care Act would impose, also via the Tax Code, starting in 2014 on any large employer that does not offer at least the minimal required health insurance coverage to its employees.

The lower Federal District Court rejected the government’s challenges to its jurisdiction to entertain the suit based upon the federal tax Anti-Injunction Act (AIA), I.R.C. § 7421(a), which prohibits a federal court from entertaining any lawsuit brought by any person for the purpose of “restraining the assessment or collection of any tax.” That lower court then accepted the plaintiffs’ arguments and declared the health care law unconstitutional.

The Appeals Court’s Decision. Overturning the lower court, the Fourth Circuit, in an opinion again written by Judge Motz, held that the federal tax Anti-Injunction Act (AIA) does in fact apply to prohibit the court from entertaining a case seeking in advance to enjoin enforcement of the referenced penalty provisions that will take effect in 2014 under the Affordable Care Act.

The Court rejected the plaintiffs’ arguments that (i) the AIA applies only to prohibit suits to enjoin “taxes” and not to suits seeking to enjoin “penalties” and (ii) the AIA does not apply because Congress used the term “penalty” rather than “tax” in naming the assessments to be imposed under the Affordable Care Act. Citing previous case law, the Court found that the AIA applies to prohibit both actions seeking to enjoin enforcement of taxes and those seeking to enjoin enforcement of penalties.

The Court therefore found that, pursuant to the AIA, federal courts do not have subject matter jurisdiction to hear this lawsuit, and vacated the lower court’s decision, remanding the case with instructions that it be dismissed.

In so deciding, the Court again did not reach the merits of the constitutional challenge to the individual mandate in this case. However, two other judges on the panel, in concurring and dissenting opinions both expressed the opinion that the individual mandate and the health care law is constitutional. In a concurring opinion, Judge James A. Wynn Jr. wrote that he would have upheld the act based on Congress’s authority under its taxing powers. Judge Andre M. Davis, dissented from the conclusion that the federal courts did not have jurisdiction, but wrote that he would have upheld the mandate under Congress’s power to regulate interstate commerce.

A copy of the Fourth Circuit’s opinion in this case, along with the concurring and dissenting opinions, is found on the Fourth Circuit’s website.

More Information

See previous HelpingYouCare™ reports on the litigation challenging the Affordable Care Act:

11th Circuit Appeals Panel Strikes Insurance Mandate, Upholds Rest of Health Care Law

U.S. Sixth Circuit Court of Appeals Upholds Affordable Care Act

Lawsuits Challenging Health Care Law to Be Argued on Appeal May 10;

Florida Federal Judge Stays His Previous Decision Against Health Care Reform Law;

D.C. Federal Judge Dismisses Lawsuit Challenging Health Care Law — Courts now 3-2 in Favor of Law;

Florida Federal Judge Declares Health-Care Law ‘Void’ in its Entirety – Conflicting Judicial Decisions Now Pending Appeal; and

Central Provision of Health Care Law Is Ruled Unconstitutional.

And, see generally, the HelpingYouCare™ resource pages on:

Latest News on Health Care Reform

Health Reform Legislation – Pending & Recently Adopted

Editorials on Health Care Reform

Advocacy – Proposals for Reform; and

International Health Care Compare

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Copyright © 2011 Care-Help LLC, publisher of HelpingYouCare™.

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