The first argument on the Affordable Care Act that the Supreme Court will hear this week will be:
Whether the Anti-Injunction Act, 26 U.S.C. § 7421(a), bars the suit brought by Respondents to challenge the minimum coverage provision of the Patient Protection and Affordable Care Act, 26 U.S.C. § 5000A.The Court will hear 90 minutes of argument on the issue this morning. The question comes before the Court not on the urging of any party, but rather sua sponte, or on the Court's own initiative (as the issue is jurisdictional, thus determining whether the Court can even hear the issue, it can be properly raised by the Court on its own initiative.) More accurately, the issue was prominently raised in the dissenting opinion issued by DC Circuit Judge Brett Kavanaugh in Susan Seven-Sky v. Holder, et al (PDF). The majority opinion in Holder, written by stalwart conservative judge Lawrence Silberman rejected the applicability of the Anti-Injunction Act to the individual mandate and its penalty provisions. (Worth noting is that in Liberty Univ. v. Geithner et al (PDF), the Fourth Circuit also ruled that the Anti Injunction Act applied to the challenges to ACA ("Because this suit constitutes a pre-enforcement action seeking to restrain the assessment of a tax, the Anti-Injunction Act strips us of jurisdiction. Accordingly, we must vacate the judgment of the district court and remand the case with instructions to dismiss for lack of jurisdiction.") But the Court did not grant cert in that case, so the issue was not before the Supreme Court.) In a lengthy dissent on the Anti Injunction Act issue (Judge Kavanaugh did not opine on the merits of the claims against ACA), Judge Kavanaugh disagreed:
To determine whether the Anti-Injunction Act bars this suit at this time, we start with the text of the Act:Judge Kavanaugh then proceeds with an exhaustive analysis of the exception provisions and presents a persuasive case. That said, as in all cases where the Court decides whether it will decide a case, the Court's freedom of action is wide. (see abstention, constitutional avoidance, etc.) The Court can decide to the case the case or to not decide the case, whatever they want to do.
Except as provided in sections 6015(e), 6212(a) and (c), 6213(a), 6225(b), 6246(b), 6330(e)(1), 6331(i), 6672(c), 6694(c), and 7426(a) and (b)(1), 7429(b), and 7436, no suit for the purpose of restraining the assessment or collection of any tax shall be maintained in any court by any person, whether or not such person is the personThe Supreme Court has repeatedly held that the Act bars pre-enforcement challenges to tax laws. The Court has interpreted “the principal purpose of this language to be the protection of the Government’s need to assess and collect taxes as expeditiously as possible with a minimum of pre-enforcement judicial interference, and to require that the legal right to the disputed sums be determined in a suit for refund.” Bob Jones Univ. v. Simon, 416 U.S. 725, 736 (1974) By preventing pre-enforcement suits, the Act assures the United States of “prompt collection of its lawful revenue.” Enochs v. Williams Packing & Navigation Co., 370 U.S. 1, 7 (1962). A “collateral objective” of the Act, the Court has said, is “protection of the collector from litigation pending a suit for refund.” Bob Jones, 416 U.S. at 737 (citation and internal quotation marks omitted).10
against whom such tax was assessed. 26 U.S.C. § 7421(a) (emphasis added).
Of course, the exaction in this particular case is statutorily labeled as a Tax Code “penalty,” not a “tax.” Does the Anti-Injunction Act still apply? Yes, as we learn from a
straightforward reading of the cross-references in the relevant statutory provisions. [...]
In any event, the Court ordered briefing on the issue, including from a Court appointed attorney to argue the applicability of the Anti-Injunction Act, Robert Long of the prestigious Washington DC firm Covington & Burling. Long and his team filed this brief (PDF). The parties have also filed briefs. We'll discuss the legal arguments on the other side.
(Continued on the other side)
Long's brief persuasively argues that the Anti-Injunction Act acts as a pre-enforcement bar to challenges to the individual mandate and its penalty provisions. Long argues that the penalty of the ACA is an"assessable penalty" and thus is not a covered exception to the Anti-Injunction Act's prohibitions. More interestingly, Long persuasively argues that an end run attempt around the Anti-Injunction Act -- that the challenge is of the individual mandate itself as opposed to the penalty-- is not availing:
In holding that the Anti-Injunction Act did not bar the litigation in Seven-Sky, the D.C. Circuit deemed it “critical” that plaintiffs’ suit was “center[ed]” on challenging the constitutionality of the minimum coverage requirement. See 661 F.3d at 9. The court concluded that the Anti-Injunction Act was inapplicable because the plaintiffs “brought suit for the purpose of enjoining a regulatory command, the individual mandate, that requires them to purchase health insurance from private companies, produces no revenues for the Government, and imposes obligations independent of the shared responsibility payment.” Id. at 8. This argument does not justify a decision that the Anti-Injunction Act is inapplicable to this case.Regarding the Seven-Sky court's reasoning, the Long brief argues:
First, Respondents have challenged the penalty imposed by Section 5000A as well as the minimum coverage requirement. Counts One and Two of the Amended Complaint challenge the allegedly “Unconstitutional Mandate That All Individuals Have Healthcare Insurance Coverage Or Pay A Penalty.” J.A. 122, 125 (emphasis added). The Amended Complaint also seeks an injunction against “enforcement” of the Act. Id. at 124, 126. “[T]he ‘enforcement’ contemplated by the statute is the assessment and collection of the tax penalties by the IRS.” Seven-Sky, 661 F.3d at 41 n.29 (Kavanaugh, J., dissenting). The allegations in the Amended Complaint “leave little doubt that a primary purpose of this lawsuit is to prevent the Service from assessing and collecting” the Section 5000A penalty. Bob Jones, 416 U.S. at 738.
Second, even if Respondents had attempted to challenge only the minimum coverage requirement and not the penalty, the Anti-Injunction Act would bar their suit. Arguments that the Anti-Injunction Act can be avoided in this way are “circular” and “unpersuasive.” Alexander v. “Americans United” Inc., 416 U.S. 752, 760-61 (1974). See also Bob Jones, 416 U.S. at 731-32.
The D.C. Circuit attempted to distinguish Americans United and Bob Jones on the ground that the minimum coverage requirement and the Section 5000A penalty are not “inextricably linked.” Seven-Sky, 661 F.3d at 10. According to the court of appeals, the provisions impose distinct legal obligations, as evidenced by the fact that some “applicable individuals” subject to the minimum coverage requirement are exempt from the penalty provision. Id. at 9-10.In reply, the private challengers argue that the Anti-Injunction Act does not apply to their challenge (PDF). First, the private challengers argue that the AIA is not jurisdictional. The argument is weak. The argument is significant in the sense that, technically, if the argument is not jurisdictional, it can not be raised by the Court itself.The federal government has waived the application of the AIA bar. Practically speaking, I think it does not matter in this sense - if the Court wants to apply the AIA bar, it will deem the issue jurisdictional. If it doesn't, it can deem it not jurisdictional OR find an exception on other grounds. The other grounds arguments are more interesting. The private challengers argue they are not challenging the penalty:
This attempt to distinguish Americans United and Bob Jones fails. This Court did not characterize the regulations and taxes at issue in those cases as “inextricably linked,” much less rely on such a characterization in holding that the Anti-Injunction Act applied. To the contrary, the Court has “abandoned” any “distinctions between regulatory and revenue-raising taxes.” Bob Jones, 416 U.S. at 741 n.12. Indeed, the Court has applied the Anti-Injunction Act even to regulatory provisions that are beyond the taxing power of Congress. See Bailey v. George, 259 U.S. 16.16
Private Respondents’ “purpose” as law-abiding citizens is to eliminate their legal duty to buy costly insurance, rather than to avoid a non-compliance penalty that they have no intention of incurring, see id. 10-15, 19-22; (2) it is immaterial that success inResponding to the federal government's arguments (curiously not much of the brief is addressed to the arguments made by the Court appointed attorney Long), the private respondents argue:
this suit will have the inevitable effect of invalidating the alleged tax penalty for other
individuals who would have failed to comply, see id. 16-19; and (3) requiring the use of post-enforcement refund actions for challenges to substantive legal duties enforced through the Tax Code would force plaintiffs to become law-breakers, see id. 22-25.
Bob Jones and ‘Americans United’ do not support the proposition that the AIA applies if a suit will have the “inevitable effect” of precluding the collection of taxes, even where the suit’s “purpose” is unrelated to anyone’s taxes.This is pretty weak stuff. In fact, this appears to mischaracterize the Government's arguments and it fails to address the arguments made by the Court appointed attorney Long. Remember the Government has argued that it can waive the AIA bar and that it has done so. It does not want the Anti-Injunction Act to bar the suit. Backseat driving by me, but it seems to me that the better advocacy here would be to emphasize where the private respondents agree with the Government - to wit that the AIA bar can be waived. The Government is not seeking to stop a merits decision for the private respondents, why argue against issues that are not central to how this issue can be resolved in your favor?
Rather, those cases stand only for the correct proposition that where a plaintiff’s clear “purpose” is to “restrain the … collection of a tax,” 26 U.S.C. § 7421(a), it is irrelevant that the “tax” is imposed on a third party and that the plaintiff’s injury flows from that third-party taxation.
Indeed, the Government itself virtually concedes that its portrayal of Bob Jones and ‘Americans United’ is untenably overbroad. The Government never disputes that those cases involved suits lacking any non-“tax”-related “purpose.” Nor does the Government expressly contend that those cases should be extended to suits that, while brought for a
non-“tax”-related “purpose,” would nevertheless have a “necessary effect” on “taxes.” Rather, the Government’s sole rejoinder is that this is not the latter type of suit, because Private Respondents’ “purpose” supposedly is “inextricably linked” to the alleged tax penalty. See Govt. AIA Br. 39-40. In particular, the Government claims that the mandate
does not actually impose a “discrete regulatory requirement” to buy insurance, but merely affords individuals a lawful economic choice whether to do so or pay the penalty, such that the only reason for challenging the mandate would be to avoid paying the penalty. See id. 39-41. Notably, however, the Government does not argue that the AIA bars this
suit if, instead, the mandate does impose a freestanding duty to purchase insurance.
By contrast, the federal government IS arguing for blocking the States' challenge, arguing that they lack standing. While on the AIA issue, the federal government's waiver applies to the States as well, the federal government is forcefully arguing that the States have no business in this suit at all.
With regard to the argument that States themselves are exempted from coverage under the Anti-Injunction Act, there is some support for such an argument in the case law, specifically in South Carolina v. Regan. However, the Long brief argues:
The Anti-Injunction Act applies to the State Respondents as well as the Private Respondents. The definitional provisions of the Code state that a “person” includes certain specified entities, and that the term “includes” “shall not be deemed to exclude other things otherwise within the meaning of the term defined.” 26 U.S.C. §§ 7701(a)(1), (c).Only a federalism argument would avail for a different treatment of the States. On the question of the mandate, such an argument should be unavailing. The case that relied on federalism concerns to find an exception to the Anti-Tax Injunction Act, South Carolina v. Regan, relied upon the direct effect on how States finance their operations (specifically through the issuance of bonds.) In a concurrence, Justice O'Connor articulated the "federalism" view on the Anti-Injunction Act:
This Court and other courts have interpreted the term “person” in the Code to include States. See, e.g., Sims v. United States, 359 U.S. 108 (1959); Ohio v. Helvering, 292 U.S. 360 (1934). Congress added the term “person” to the Anti-Injunction Act in 1966 to reaffirm the broad scope of the statute, and to prevent suits by third parties whose property rights compete with federal tax liens. Consequently, there is no basis for concluding that the addition of the “any person” language exempted States from coverage.
Nor are the State Respondents “aggrieved parties” for purposes of the implied exception recognized in South Carolina v. Regan, 465 U.S. at 378. The States are not liable for the penalty, and they are not authorized to sue as parens patriae to protect citizens of the United States from the operation of federal statutes. See Massachusetts v. Mellon, 262 .S. 447, 485 (1923). The States also cannot qualify as “aggrieved parties” by arguing that the minimum coverage provision will induce individuals who were previously eligible for Medicaid to enroll in the program. This claim is both speculative and premature, and in any event a State is not injured when eligible individuals enroll in a state-sponsored program intended for their benefit.
[T]he State qua State has demonstrated that it has no adequate alternative forum in which to raise its unique Tenth and Sixteenth Amendment claims. See Maryland v. Louisiana, supra, at 743, and n. 19. If the State issues bearer bonds and urges its purchasers to contest the legality of 103(j)(1), it will suffer irremedial injury. The purchasers will inevitably demand higher interest rates as compensation for bearing the risk of future potential federal taxes. Conversely, if the State forsakes bearer bonds in favor of registered ones, it will bear the increased expense that issuers of registered bonds incur, and it will be unable ever to contest the constitutionality of 103(j)(1). In short, the State will suffer irremedial injury if the Court does not assume original jurisdiction.There seems no logical way for this reasoning to be applied to the individual mandate issue, but there it is. A willing Court would not doubt seize on such an argument, especially Justice Kennedy. In their response, the challenging States argue (PDF):
Therefore, although great deference is due the longstanding congressional policy against premature judicial interference with federal taxes, I believe it is proper to exercise the Court's original jurisdiction under these unique circumstances. I emphasize both the unique circumstances of this case and the congressional policy against premature judicial interference because original litigants should not be misled into believing that this Court will become a haven for suits that cannot be entertained in lower courts with concurrent jurisdiction. The original jurisdiction is not a forum for litigating everyday tax concerns. Rather, it must be "sparingly" invoked. United States v. Nevada, 412 U.S. 534, 538 (1973). Moreover, the legislative policy against premature judicial interference embodied in the Act must be paid the highest deference by this Court. Thus, where the original party does not present a clear and convincing case that the tax at issue will impair its ability to structure integral operations of its government and that irremedial injury is likely to occur absent review in the original jurisdiction, I would defer to the legislative directive against premature judicial interference. 18 But since South Carolina's claims meet these stringent requirements, its motion for leave to file should be granted.
The States are injured by the mandate for multiple reasons, most obviously because it will force millions of individuals to enroll in Medicaid, thereby substantially increasing States’ financial obligations under the program. The States are injured just as obviously as if Congress had amended Medicaid directly to require the States to enroll a higher percentage of eligible individuals. But because neither the mandate nor its penalty provision applies directly to the States, to hold the AIA applicable to the States’ challenge would deprive the States of any remedy for that injury. This Court has already rejected the argument that the AIA applies in such circumstances, and Amicus does not argue otherwise. Beyond that, the AIA does not even apply to States in the first place, as it uses the generic term “person” and contains no clear indicia to overcome the “longstanding interpretive presumption that ‘person’ does not include the sovereign.” Vt. Agency of Natural Res. v. United States ex. rel. Stevens, 529 U.S. 765, 780 (2000).The States also repeat the arguments made by the individual challengers.
The federal government has argued against an exemption from the AIA for States (PDF). The federal government argues that the States lack standing to challenge the individual mandate as they suffer no direct injury. The federal government rejects the contention that the mandate's indirect encouragement of enrollment in Medicaid programs could possibly constitute a direct injury to a State. They further rebut the repeated arguments regarding whether the challenges are solely to the mandate, not to the penalty provisions and that States are not covered by the AIA as they are not "persons" as defined by the statute.
The merits of these arguments? I think they fall strongly with the argument that the Anti-Injunction Act bars these challenges to the individual mandate. But the Court is likely to decide whatever forwards the result it wishes. There is enough room for any result to be plausible.
That makes the oral argument today especially interesting. We may know after today's argument whether the Court wishes to reach the merits of this dispute. If they, especially Justice Kennedy, are favorably disposed to the Anti-Injunction Act argument, we can reasonably assume that the Court will not reach the merits of the individual mandate arguments this Term.