Texas v. California and the Doctrine of Judicial Exhaustion

It has been an eventful two months, to say the very least. In the last segment of our series on the Affordable Care Act (ACA), we took the opportunity to reflect (bemusedly) on political vehemence associated with the ACA.  The ACA engenders strong feelings, not dissimilar from the sweet potato versus pumpkin pie divide or the acceptability of cranberry sauce from the can (#teamyeswecan), albeit just somewhat more consequential.  As discussed in that last article, the vehemence against the ACA is a little disconcerting to us given the deeply conservative and market-oriented roots of the legislation. But we will leave that observation here.  Today we are, in remembrance of Thanksgiving Dinners’ Past, reminded of the wisdom of letting an argument go and turning to less fiery topics. 

Therefore, in this, the fourth segment of our ACA series, we will focus on bringing us all back up to speed following the Supreme Court hearing in Texas v. California last week and will provide our best assessment as to the Supreme Court’s decision in this matter (and when we can expect that decision). 

ORAL ARGUMENTS BEFORE SCOTUS

The ACA has the dubious distinction of being the most challenged statute in modern American history, coming to the Court at least seven times (on one issue or another) over its ten-year history. In Oral Arguments at the Supreme Court last week, several of the Justices (including, notably, Chief Justice Roberts and Justice Kavanaugh) seemed to indicate that they are ready to move on and use this as an opportunity to validate (again) the constitutionality of the law and forestall further challenges.  In years to come, law students may study this case as the first use of the doctrine of Judicial Exhaustion).  

The general consensus of legal scholars, at this point, seems to be that even if the Individual Mandate is deemed to be an unconstitutional exercise of Congressional authority (where it is no longer considered an exercise of Congress’s taxing power), the rest of the Statute is likely to be upheld. 

As a brief recap, the Supreme Court is considering three constitutional questions in the current case:

• First: Whether the plaintiffs, including a series of “red states” joined by two individuals, have standing to challenge the ACA.
• Second: Whether the individual mandate is a constitutional exercise of Congressional authority where there is no financial penalty associated with non-compliance. (This is relevant because in the 2012 case upholding the constitutionality of the ACA, the Court relied upon Congress’s power of taxation.)
• Third: If the mandate is unconstitutional, can it be “severed” from the Statute, or must the entirety of the Statute fail.

In the two hours of arguments, the Justices directed questions on each of these issues.  Considerable time was dedicated to the first question of standing.  Standing is a threshold issue (if you can’t demonstrate standing – you don’t get your day in court on the issues).  Justice Roberts expressed skepticism of the plaintiff’s argument that even if the challengers were unable to identify a concrete injury as it relates to enforcement of the individual mandate, that the plaintiffs had a right to sue as they were injured by other elements of the Act. He observed that such a theory “really expands standing dramatically”: a point that was reinforced by Justice Sotomayor who described the effect of this expansion more emphatically.

On the issue of the Constitutionality of the mandate following the “zeroing out” of the penalty through the Tax Cuts and Jobs Act of 2017, several of the Justices indicated skepticism, with Justice Kavanaugh and Justice Gorsuch noting that in NFIB the Court then expressly relied upon Congress’s taxing power to uphold the mandate. It would be pure conjecture to predict where the majority may fall on the Constitutionality question, although “questions were generally divided into assessing whether the mandate could continue to be read as a…legal command….or whether the provision is simply inoperative or precatory.” To return to the older doctrine of “no harm no foul” and the principle of “please eat your vegetables.”

The final question is whether, assuming that the Plaintiff’s argument that the Mandate is now an unconstitutional exercise of Congressional authority where it is divorced from taxing power (or at least the generation of tax revenues), the remainder of the 2,000 page Act can ‘survive’ on the well-established precedent of (and strong preference for) Severability. 

The Severability Doctrine is that, where one part of a statute is defective, the Courts will generally “cut out” that part of the statute, and leave the rest in operation. Chief Justice Roberts explained the principle of severability in Selia Law v. Consumer Protection Bureau, a decision published earlier this year:

“[W]e try to limit the solution to the problem, severing any problematic portions while leaving the remainder intact. … We will presume that Congress did not intend the validity of the statute in question to depend on the validity of the constitutionally offensive provision … unless there is strong evidence that Congress intended otherwise.”

In this instance, the Plaintiffs rely upon arguments made by the Obama Administration in the 2012 Supreme Court case that the Individual Mandate (as a part of the oft-referenced “three-legged stool”) was inextricably intertwined with every component of the statute.  In short, without the Mandate, no other portion of the Statute could operate as intended.  There are flaws to this reasoning (not least the example of the invalidation of the mandatory expansion of Medicaid which was arguably an even more integral component of the ACA framework, and the fact that the Mandate was been inoperable for the past two years while the ACA has continued to operate), but it does make for some awkward questioning by the Justices. Chief Justice Roberts zeroed in on this point:

“[E]ight years ago, those defending the mandate emphasized that it was the key to the whole act. Everything turned on getting the money from the people forced to buy insurance to cover all the other shortfalls in the expansion of health care. And the briefs here on the other side go over all that. But now the representation is that, oh no, everything’s fine without it. Why the bait and switch?”

Mr. Verrilli, the lead attorney for the U.S. House of Representatives (and former U.S. Solicitor General under the Obama Administration), fielded the question deftly, although, in the end, it boiled down to (and I’m (definitely) paraphrasing here): We’ve grown since then and learned some things.  In short, breaking up may be hard to do, but our experiences have shown us that if the Individual Mandate were to pack its bags tomorrow we would all carry on, a little sadder and wiser for the experience. 

DELPHIC ORACLES AND OTHER IMPERFECT PROGNOSTICATIONS

It’s generally agreed that one shouldn’t count one’s chickens before they are hatched (or Supreme Court Justice’s votes until the final decision is issued). But it does seem likely that the ACA (if not the individual mandate) will be upheld. The commentary and questions of several of the conservative Justices on the point of Severability lend credence to this analysis.  At one point Justice Kavanaugh observed that “it’s a very straightforward case for severability.” Chief Justice Roberts was even more direct saying:

“I think it’s hard for you to argue that Congress intended the entire Act to fall if the mandate were struck down, when the same Congress that lowered the penalty to zero did not even try to repeal the rest of the act. I think, frankly, that they wanted the court to do that, but that’s not our job.” [emphasis added]

The Chief Justice’s comments and those of other conservative members, like Justice Kavanaugh, seem to indicate that they are not here for a game of “pass the political question” to the judicial branch.

While several Justices express wariness (potentially bordering on alarm) at the prospect of accepting a broadened theory of standing as presented by the plaintiffs, legal scholars predict that it is unlikely that the Court will conclude that the Plaintiffs lack standing. As Beth Brinkmann, a partner at Covington and Burlington, LLP stated during a panel discussion hosted by the American Association of Medical Colleges this week:

“If the court tossed the case on the grounds of standing, they would probably find themselves facing the same case brought by people or entities with a stronger argument that they’ve been harmed by the law.”

On the issue of standing at least, it may therefore come down to a question of which is the perceived greater evil: the fear of having to hear this case again, or of numerous other cases that would now be justiciable under an expanded standing doctrine. 

In my estimation, I expect that the Court will confirm the Plaintiff’s standing, but draw unequivocal limitations to the standing doctrine to limit the damage done to this threshold criteria. The Individual Mandate is likely to be struck down and severed from the statute (although Justices Kagan and Sotomayor articulated persuasive defenses for how taxing power can be held in abeyance).  But as I said before, this is just an exercise in crystal ball gazing or oracle bone divination – and just as reliable.  In any event, as I write this, I am “knocking on wood” and will continue to do so until the Court’s final decision is published, likely in Spring 2021.