Thursday, September 15, 2011

Obamacare may yet Fail in Virginia

Obamacare may yet fail in Virginia: What do the recent 4th Circuit rulings in Commonwealth of Virginia v. Kathleen Sebelius and Liberty University v. Timothy Geithner mean?

            On September 8, 2011, the 4th Circuit Court of Appeals in Richmond issued two critical rulings in cases concerning President Obama’s signature health care legislation passed by Congress and signed into law on March 23, 2010, the Patient Protection and Affordable Care Act, sometimes referred to as “Obamacare.”  Procedurally, two United States District Court judges in Virginia the 4th Circuit had previously ruled against the United States federal government, holding in both cases that the entirety of the Obamacare law was unconstitutional. The federal government appealed both rulings to the 4th Circuit Court of Appeals, and the parties argued the issues in briefs and orally before a panel of the appellate court.  The Court of Appeals issued two separate rulings, one in each case, overturning the lower court decisions.

            The legal reasoning in each, however, was far from the popular perception that the Court of Appeals had somehow declared that Obamacare is “constitutional.”  Both focused on a very narrow conclusion which leaves the question of the “constitutionality” of Obamacare open to further challenge.

            In Virginia v. Sebelius, the Commonwealth of Virginia filed suit against the federal government to declare Obamacare unconstitutional, on the grounds that it conflicted with a recently-enacted Virginia statute (the Virginia Health Care Freedom Act) declaring that no Virginia resident “shall be required to obtain or maintain a policy of individual insurance coverage.”  The U.S. government argued that Virginia, as a state, lacked standing to bring the suit n the first place, primarily because Virginia, as a state, suffered no injury as a result of Obamacare’s provision, and because the Virginia state statute lacked any enforcement mechanism and was otherwise ineffective since it merely declared that Virginians were exempt from federal law.  The 4th Circuit ruled in favor of the federal government, found that Virginia lacked standing to sue, and remanded the case to the district court with instructions that the district court dismiss it. 

            In Liberty University v. Geithner, two individuals filed suit seeking an injunction to stop enforcement of the Obamacare legislation, and in particular, the provision requiring individuals to obtain and maintain health insurance.  Their argument was that the individual mandate unconstitutionally required them to purchase a product they had chosen not to purchase, and mandated that they do so from another private party.  Liberty University, also a plaintiff, sued to enjoin enforcement of the law due to its application of certain onerous requirements on “large employers.”  The federal government argued that existing federal law prohibits any plaintiff from obtaining an injunction against the IRS on the stated grounds to prevent it from collecting taxes.  The lower district court found that the penalties and enforcement mechanism in the Obamacare legislation were not taxes, and therefore were not authorized by the Constitution’s taxing power.  Consequently, the federal law preventing injunctions against tax enforcement therefore did not apply.  Interestingly, on appeal to the 4th Circuit, while both sides agreed with the lower court that the specific federal anti-injunction law did not apply, the Court of Appeals disagreed.  The appellate court determined that the Obamacare legislation created a tax and an enforcement mechanism, and therefore the federal anti-injunction law applied, leaving the district court without jurisdiction to award an injunction prior to an actual instance of the tax being collected (the Obamacare penalty for noncompliance goes into effect in 2014).

The 4th Circuit never reached the question of constitutionality in either of the two cases, and therefore, in the 4th Circuit, that is still an open question.  These two opinions, however, should be read and studied by every practicing lawyer and law student as incredibly interesting examples of what happens when you (a) name the wrong party plaintiff, and (b) request relief that cannot be granted. 

Law students in particular should be conscious of the series of seemingly inane (but quite important) hurdles to overcome in every case they plead or file.  Have I named the correct Plaintiff and/or Defendant?  Has my plaintiff actually suffered some form of injury or is he or she granted standing to sue by some other statute or case law?  Can the Court grant me the relief I’m requesting?

Perhaps most importantly, do I have the ability to explain, believably and convincingly, to a Court what logical process I followed to make each decision as I put together my case?

Other jurisdictions have already taken up the substantive constitutional issues implicated in Virginia v. Sebelius and Liberty University v. Geithner.  Most recently, the 11th Circuit Court of Appeals issued a lengthy (304 pages), but fascinating, opinion in State of Florida ex rel. Atty. Gen. v. U.S. Dept. of Health & Human Services, 11-11021 (11th Cir. Aug. 12, 2011).  The 11th Circuit struck down the so-called individual mandate provision of the Obamacare legislation because, the Court said, it exceeds Congress’ constitutional authority to regulate interstate commerce under the Commerce Clause.  Congress does not have the authority, the Court said, to require by law an individual to purchase a product or service from another private party.  The 11th Circuit affirmed the remainder of the law, which stretches to more than 900 pages, as constitutional.  The opinion is an excellent primer on the historical development of Commerce Clause jurisprudence, and is also recommended reading for all lawyers and law students with even a passing interest in constitutional law.

Each of these cases is likely to be appealed to the United States Supreme Court, and the repeal of Obamacare is likely to be a hot-button issue in the 2012 Presidential election.

                                                                        -           Tom Ashton, September 8, 2011

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