March 14, 2012

First things first: Obamacare and standing

By First things first: Obamacare and standing

One of the most important issues in any federal lawsuit is “standing”—that is, whether a plaintiff is allowed to bring the case in a federal court in the first place. Article III of the Constitution only allows the Court to hear “cases and controversies,” and one of the earliest decisions that the Supreme Court ever reached was that the justices cannot issue “advisory” opinions: they can only hear actual disputes over legal rights by people who have the legal standing to assert those rights. This issue of standing is so important that even if everyone involved in a lawsuit shakes hands and agrees that the case can go forward, courts must still bring up the issue and consider it.

Keep in mind that standing is not the same thing as jurisdiction—standing is a constitutional matter, and Congress can’t normally fiddle with it. Jurisdiction, on the other hand, is determined by Congress, which can add or take away from the court’s jurisdiction as long as it doesn’t do so in a way that violates the Constitution. Marbury v. Madison, the most famous Supreme Court decision ever, involved an effort by Congress to expand the Court’s jurisdiction in a way that exceed Article III, and Chief Justice Marshall said that couldn’t be done.

Now, standing might seem a simple matter, but it is often complicated. In the Obamacare cases there are a couple interesting complications.

First, can states file lawsuits against the federal government to challenge the constitutionality of the Individual Mandate? There are two ways they might do so: first, they can argue that the Individual Mandate hurts them in some direct way. This is a little hard to do, because states aren’t subject to the Mandate: individual people are. Still, the states argue that they are harmed by the Mandate, and we’ll get to that in a moment. The second way a state can try suing is by bringing a “parens patriae” case in which the state acts on behalf of its people. The problem with this is that although the states have been allowed to bring parens patriae lawsuits in some circumstances (most notably in Massachusetts v. EPA), the Supreme Court declared the 1923 case of Massachusetts v. Mellon that they cannot do this where they are arguing that a federal law exceeds Congress’ powers. In the Virginia Obamacare case, PLF has asked the Supreme Court to reconsider the Mellon decision and clarify it, and so have the plaintiffs in this case. But doing so could mark a major shift in constitutional law.

With parens patriae off limits, the states must show that they are themselves harmed in some way by the Individual Mandate. Their argument is that the Mandate will force more people to sign up for Medicaid, and this will require the states to spend more money: “The States’ injury is essentially no different from the injury suffered by a company with an agreement with the federal government to provide a product at a subsidized rate to all individuals who request it,” they write. “If the federal government passed a law making the purchase of that product mandatory, not voluntary, the company would suffer an immediate and enormous financial hit and would clearly have standing to sue.”

The Obama Administration counters this by arguing that the states choose to provide Medicaid coverage to people, so the Administration can’t be blamed if people choose to comply with the Mandate by signing up for this program. But the states have a good answer for that: “the States did not agree to participate in Medicaid under the condition that federal law would require every eligible individual to enroll.” Thus the Mandate has the effect of radically changing the nature of the Medicaid “contract” between states and the federal government. Still, the Administration sees this as something more like the Mellon case, because the state is essentially trying to get a remedy for an injury to someone else—i.e., the state’s citizens.

Keep in mind that this only applies to whether the states can challenge the Individual Mandate. The states are also challenging the constitutionality of other provisions—notably the Medicaid expansion requirements—where the states are much more directly affected, and nobody doubts that they have standing on those matters. But the states argue that because that Medicaid expansion is so closely connected to the Individual Mandate, that they can also challenge the Mandate itself as an essential part of a whole scheme that harms them. Finally, the states also argue that they have standing to challenge the Mandate because it “is a direct assault on the ‘residuary and inviolable sovereignty’ that the Constitution ‘reserved explicitly to the states’…. To the extent that the Court’s decision in Mellon is to the contrary, more recent cases cast doubt on its reasoning.” This echoes the argument that PLF made throughout the Virginia case: the Tenth Amendment reserves powers to the state and the state has the right to defend that authority against federal interference. “To the extent that Mellon forecloses States from challenging federal incursions into their sovereignty…[it] is inconsistent with the Court’s more recent precedents and should be overruled.”

In addition, there is some dispute about whether the NFIB has standing to challenge the Individual Mandate. Organizations like NFIB can sue if (1) their members could sue, and (2) the case involves something that’s relevant to the organization’s purpose. But back in the trial court, the Administration argued that NFIB itself had no standing because its members aren’t required to obey the Mandate until 2014, and because the Mandate isn’t related to NFIB’s mission: “NFIB argues that the [Mandate], though applicable only to individuals, could ‘diver[t]…resources from [members’] businesses,” but this argument couldn’t work because it would be “hard to imagine any organization that would NOT have standing: the American Philaletic Society could argue that the [PPACA] diverts members’ resources from buying stamps….” The Administration has reasserted this argument in the Supreme Court, but it seems unlikely to persuade the justices, particularly since the Court of Appeals spent little time on the question and the Administration didn’t even raise it in the petition for certiorari. Certainly the argument that the Mandate doesn’t apply till 2014 is unconvincing, since courts can rule on cases where an injury is certain to occur in the future. And the effect of the Mandate on NFIB’s members is clear—take for instance our own client, Matt Sissel, whose small business has clearly been affected by the Mandate’s burden. So while it’s not impossible that the Court could find that NFIB lacks standing, it’s unlikely.

I mentioned above that standing isn’t the same thing as jurisdiction. There’s a big statutory jurisdiction question in this case, too, involving a law called the Anti-Tax Injunction Act (or the Tax Anti-Injunction Act, or the AIA; lawyers have to have three names for everything). On the first day of oral argument, the justices will spend two hours considering whether that Act bars the courts from considering this case at all. We’ll take a look at that in our next post.

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