4th Circuit Upholds Rule of Law in Healthcare Case

In a badly-needed boost to the rule of law and the nation's much-abused new health reform, a three-judge panel on the Fourth Circuit today rejected two attacks on "Obamacare." In one case, Virginia v. Sebelius, the appeals court found that the Commonwealth of Virginia lacked standing to challenge the individual mandate provision and in the other, Liberty University v. Geithner, it ruled that a challenge to the plan's financial penalty for not purchasing individual health insurance coverage was not ready to be heard since the penalty constitutes a tax and taxes may not be challenged until after they have gone into effect and been paid. Both decisions by Circuit Judge Diana Gribbon Motz are a breath of fresh air in a legal and political environment now polluted by partisan and ideological attacks on the health plan.

The decision in the Virginia case, brought by the state's Attorney General Ken Cuccinelli, was an emphatic victory for basic rules of federalism and judicial restraint. Judge Motz found that the court could not hear the case because Virginia lacked standing under long-established jurisdictional principles. As a state, Virginia suffered no "injury in fact" because of the individual insurance mandate it was challenging; the state itself is not "burdened" by it, state officials are not "commandeered" by it, and state sovereignty is not impaired in any way by it. Virginia asserted that it had standing because of a conflict between the new law and a state statute, the "Virginia Health Care Freedom Act," a statute which was transparently cooked up by the legislature for the sole purpose of creating a conflict with the federal health reform law. This state law simply declared that no resident of Virginia "shall be required to obtain or maintain a policy of individual insurance coverage." It had no enforcement mechanism and existed solely for purposes of organizing litigation against the national government. Judge Motz correctly found that, if this kind of metaphysical declaration were enough to create standing, a state could concoct jurisdiction to challenge any federal law just by writing a "not-X" statute. I recall that opponents of the health reform introduced the same meaningless legislation in Maryland and I took great pleasure in pointing out that it had no content. At any rate, Judge Andre Davis dissented from the decision, arguing that the standing problem was no big deal; he would have simply ruled that the individual mandate provision did not exceed Congressional power under the Constitution—and, on this point, he is clearly right.

The other decision, in the Liberty University case, was based on the significant new ruling that the individual insurance mandate is actually a form of federal taxation and the federal Anti-Injunction Act prevents the court from entertaining challenges to taxes until they actually go into effect and have been paid by the litigants. "A taxpayer can always pay an assessment, seek a refund directly from the IRS, and then bring a refund action in federal court," Judge Motz wrote, but the Anti-Injunction Act bars pre-enforcement actions. It is definitely of note that Judge Motz found that, under the Act, financial penalties and exactions are to be treated like a "tax." Both supporters and critics of the decision are noting that this may mark an effort to define and defend the individual insurance mandate as a legitimate exercise of the congressional Taxing power, but this may be over-reading into the court's interpretation of the Anti-Injunction Act, which does have its own body of rules and precedents.

It's not clear yet whether the disappointed litigants will try to take the case en banc to the full right-leaning Fourth Circuit or petition for appeal directly to the Supreme Court. All roads lead to the Supremes in this case since there is currently a split between the Sixth Circuit, which upheld the constitutionality of the individual mandate, and the Eleventh Circuit, which struck it down. In addition, the DC Circuit will be hearing oral arguments in a healthcare challenge in two weeks, so it, too, may add its voice to the discussion by the end of the year. At some point next year, the justices will have to grab the bull by the horns and decide whether they want to fully revive the class-driven judicial activism of the Lochner period by knocking down laws promoting public health and welfare.

PFAW