Judge Preserves Constitutional Challenge to Individual Mandate

JB

Today Judge Hudson in the Eastern District of Virginia refused to dismiss Virginia's constitutional challenge to the individual mandate for failure to state a claim.

The court rejected arguments that the state of Virginia lacked standing to challenge the individual mandate and that it was barred by the federal Tax Anti-Injunction Act, which requires people challenging tax laws to seek a refund rather than pursue an injunction. The court also held that because the legal questions posed by the challenge were novel, and there were no controlling circuit court or Supreme Court precedents, it would proceed to a consideration of the merits.

The most interesting aspect of Judge Hudson's opinion is his treatment of the standing issue and the tax anti-injunction act. He argues that what Virginia really wants is to vindicate its own recently passed Virginia Health Care Freedom Act-- which asserts that no Virgina citizen may be forced to purchase health care insurance; that this law conflicts with the federal Affordable Care Act, and therefore Virginia has standing to challenge the act under the 10th amendment. Judge Hudson also argues that the tax anti-injunction act does not apply because Virginia might not be able to persuade anyone else to challenge the individual mandate, and nobody else might have standing to raise Virginia's Tenth Amendment claims.

Judge Hudson recognizes that the Virginia Health Care Freedom Act is merely declaratory, but he argues that "[d]espite its declaratory nature, it is a lawfully-enacted part of the laws of Virginia. The purported legislative intent underlying its enactment is irrelevant." In essence, Judge Hudson argues that by passing a law that says that Virginia will interpose itself to protect its citizens from the individual mandate, Virginia has succeeded both in giving itself standing and in getting around the federal tax-anti-injunction act.

These arguments are the weakest part of the opinion, and in particular, the arguments about the tax anti-injunction act strike me as particularly weak. The fact that Virginia can get around the tax anti-injunction act simply by passing a statute saying that it thinks the federal law is unconstitutional means that every state in the Union can do so as well. This undermines the purposes of the tax anti-injunction act, which was to keep tax protesters from littering the federal courts with protest litigation; the act requires that challenges to tax laws proceed in an orderly fashion through requesting refunds.

Indeed, the logic of the opinion seems to suggest that if Virginia had objections to any other part of the federal tax laws, it could pass a Virgina Tax Freedom Act related to that provision, claiming that the federal individual mandate invaded the reserved powers of the states under the Tenth Amendment. This new act would give it standing to challenge any other part of the Internal Revenue Code, and it would also get around the tax anti-injunction act. Moreover, under the logic of the opinion, every other state in the Union could also create its own tax freedom act, and each of them would also be entitled to begin a series of tax protest challenges to provisions of the Internal Revenue Code. This cannot be consistent with the purposes of the tax anti-injunction act.

Moreover, it is somewhat disingenuous to say, as Judge Hudson does, that there is a danger that nobody in the state of Virginia will challenge the individual mandate if Virginia does not. Indeed, if the judge had dismissed the state's lawsuit, many members of the Republican party in the state of Virginia would have scrambled over each other to bring suit.

Nor is it clear, as the judge argues, that nobody other than the state of Virginia has standing to raise the claim that the Virginia's Health Care Freedom Act conflicts with the individual mandate. For example, a taxpayer who did not want to purchase insurance could argue that he believes he has a legal right not to do so because of Virginia's Health Care Freedom Act, and that the individual mandate is unconstitutional because it infringes on the reserved powers of the states.

Judge Hudson then proceeds to the merits; he characterizes the issue as "whether or not Congress has the power to regulate-- and tax-- a citizens decision not to participate in interstate commerce." He rehearses the arguments on both sides and concludes that "[g]iven the presence of some authority arguably supporting the theory underlying each side's position, this Court cannot conclude at this stage that the Complaint fails to state a cause of action."

This does not mean that either side will win on the merits. It merely means that Judge Hudson will decide the merits at a later date. Indeed, it is not clear that, in the motion for summary judgment that will inevitably follow, much in the way of new information will be forthcoming. What Judge Hudson has done, in short, is to put off the day when he will have to write a decision on the merits.

Judge Hudson, however, has tipped his hand about the merits in the way he describes the case. He clearly sympathizes with the state of Virginia. First, he characterizes the challenge as a "narrowly-tailored facial challenge" (normally, one says this about as-applied challenges, not about facial challenges, which are generally characterized as broad based). Second he characterizes the issue as one of first impression, which is precisely what opponents of the individual mandate want. Third, he characterizes the issue as whether individuals can be forced to participate in interstate commerce, which also accepts the framing by opponents of the individual mandate. Fourth he massages a quote by a Justice Department attorney to suggest that the government is conceding that Congress would not have the power to enforce a tax penalty if the mandate "is not within the letter and the spirit of the Constitution." This is also the view of the opponents of the individual mandate, who want to merge the taxing power argument with the argument about the commerce power.

Judge Hudson's decision is only the beginning of many years of litigation over the constitutionality of the individual mandate in many different courts around the country. It does not tell us how he will rule on the merits, although, given the efforts he has made to find standing and get around the tax anti-injunction act, he is clearly tilting toward the plaintiffs. It also does not tell us how the circuit court will rule, for whatever Judge Hudson decides will almost certainly be appealed. And it does not tell us what the Supreme Court will do. It is still very likely that the Supreme Court will uphold the individual mandate. However, for the moment, opponents of the individual mandate can take comfort that the door has not been firmly closed on their constitutional claims.
Posted 12:25 PM by JB [link]