Fourth Circuit Tosses Virginia Challenge To Obamacare

From Forbes

The Fourth Circuit Court of Appeals today rejected two different attacks on the Obama healthcare reform act, delivering a double blow to opponents who hope to use the courts to nullify the law as unconstitutional. The decisions also set up a double conflict among courts that only the U.S. Supreme Court can unravel: Whether the healthcare act is constitutional, and whether states have a right to sue over it in the first place. Courts in Florida and Georgia have upheld state-led challenges to Obamacare, while the Fourth Circuit threw out Virginia’s case against the law.

“The Virginia decision is not helpful” to other state suits, said said Gregory Katsas. a partner at Jones Day who represented the National Federation of Independent Business in the recent 11th Circuit victory for Obamacare foes. But ultimately, he added, “these decisions just underscore the need for the Supreme Court to settle this matter,”

In the most significant decision (thanks, Avik Roy, for uploading to Forbes), a majority on the formerly conservative appeals court in Richmond, Va. threw out a lower-court ruling that found the act’s individual mandate unconstitutional. Virginia simply doesn’t have the right to sue the federal government on behalf of its citizens, the court ruled, since “a state possesses no legitimate interest in protecting its citizens from the government of the United States.”

In the second, the court threw out a challenge by a conservative group as an improper attempt to block a tax from being collected. In so doing, the court rejected the Obama administration’s contentions that the “penalty” associated with failing to buy insurance is not a tax. The court effectively said whatever Congress called it, it’s a tax: Only if there is “something talismanic about the label `penalty,’” the majority held, does the fine collected by the Treasury fail to fall under the broad Anti-Injunction Act prohibiting citizens from using the courts to block a tax.

The decisions weren’t unexpected. Both were penned by Judge Diana Gribbon Motz, a Clinton appointee, and the other two judges randomly assigned to the cases were also Democratic appointees. The decisions are powerful in their simplicity, and might offer the U.S. Supreme Court a convenient way out of the intensely political question of whether to uphold the divisive law. Rather than deciding whether the law exceeds the power of Congress to regulate interstate commerce, the high court could simply rule that neither states nor individual citizens have the right to sue to have it overturned.

The Virginia case is potentially more devastating to Obamacare opponents, since they pinned their hopes on using Republican-leaning states to overturn the law. The 11th Circuit Court of Appeals in Atlanta endorsed this approach last month, striking down the individual mandate as unconstitutional overreaching by Congress. Judges in Florida and Virginia also have ruled in favor of the states.

But in today’s decision, the Virginia appeals court said there was no basis for the suit because the law “imposes no obligations” on the state. A little basic doctrine is necessary here: Federal courts are courts of limited jurisdiction. There must be a “case or controversy” and it must fit within the categories spelled out under the Constitution. Further, decisions over the years have established three tests to determine if a case can be heard. The plaintiff must have suffered an injury, the injury has to be linked to the defendant’s conduct, and the courts must be capable of redressing it somehow.

Virginia’s suit failed the first test, the court ruled, because the main injury the state claimed was Obamacare conflicted with the Virginia Health Care Freedom Act, which prohibited enforcement of the individual mandate. The state claimed it was acting in a parens patriae role to protect its citizens but the Fourt Circuit wasn’t buying that. If anybody is acting in the role of a parent here, the court said, it’s the feds in enacting health care reform. The Virginia law served “merely as a smokescreen” to protect Virginia citizens from the penalties in the healthcare act and that sort of behavior ain’t allowed. So much for the states’ rights argument.

In the second decision the court threw out conservative Liberty University’s challenge to the law on somewhat novel grounds. Neither the government nor the plaintiffs based their cases on Anti-Injunction Act, which sensibly prevents people from using the courts to try and block the government from collecting taxes. The Obama administration refuses to call the penalty in the healthcare act a tax. But no matter; the Fourth Circuit decided the Anti-Injunction Act applies anyway and used that to bat Liberty’s case out of court. Allowing lawsuits like this would impede the Treasury’s ability to collect billions of dollars in revenue, the court ruled. If Congress is persuaded by the administration’s view that the insurance penalty is not a tax, then it can add a clause to the law specifically exempting it from the Anti-Injunction Act.

The effect of the ruling was to throw Liberty out of court as a plaintiff, since it was trying to achieve an impermissible end through the litigation. Justice Andre Davis, an Obama nominee, thought that went too far. He argued the court had jurisdiction over the case. But that doesn’t mean they’d do well there. Davis said he would have rejected arguments Obamacare exceeds Congress’ power to regulate interstate commerce.