The Battle Over Healthcare: Part III

It is all over.  The Patient Protection and Affordable Care Act (ACA) was ruled constitutional by a 5-4 vote on Thursday.   Finally, the constitutional question has been answered in the affirmative and hopefully the majority opinion will assuage any of the fears that naysayers had about the constitutionality of the act.  First things first, I'd like to take a moment to say that I mostly called it.  Although I predicted that Chief Justice Roberts would write the opinion for a 6-3 court, it seems Kennedy was unwilling to join Roberts and ultimately joined the dissent with Scalia, Alito and Thomas.  I also noted that the tax argument, although not the star of the oral argument, did make some sense and seemed a much broader and more legitimate power to use when enforcing the "mandate".   Mandate is in quotes because, as we will discuss later, as far as legal reasoning is concerned, it is not much of a mandate.    I'm going to generally explain what the ruling of the opinion says in this post, and my next post will explain the ramifications of the ruling.

The first part of the opinion ponders the question of whether or not the Supreme Court can hear the merits of the case.   In Section II Justice Roberts essentially lays out his framework for how he sees the case from a matter of statutory interpretation and constitutional interpretation.   These two types of interpretation are not the same and as a result can lead to seemingly different results even though both forms of interpretation revolve around the term "tax".   Prior to oral argument the federal government had made the argument that because the mandate was a tax the Anti-Injunction Act (AIA) applied meaning that the suit was not properly before the court until the tax provisions become effective on January 1, 2014.  Later the federal government backed away from this argument and said that the mandate, for the purposes of the AIA, is not a tax and therefore the jurisdictional issue could be resolved and the merits of the case could be heard by the Supreme Court.   At oral argument, Solicitor General Verrilli argued that the AIA did not apply because, statutorily, the mandate was not a tax.  However, for the purposes of the Constitution the mandate should be considered a tax.  In Section II, Justice Roberts argued that Congress can define terms however it sees fit and that clearly the term penalty (which is how the "mandate" is termed in the ACA) is not the same as a tax for the purposes of the AIA and the ACA which both used the term tax as a separate entity from a mandate.   A common tool of statutory interpretation is that where a definition for a word is found, and Congress deviates from using that word, the deviation ought to carry meaning that cannot be ascribed to the defined word.  According to Chief Justice Roberts, because the mandate is defined as a penalty and not as a tax, which is already defined, Congress must have acted intentionally in terming the mandate as a penalty and therefore the mandate should not be considered a tax under the AIA.  

When Justice Roberts turned to the merits of the case he dealt with the primary question on everyone's mind and ruled that the mandate was an unconstitutional exercise of the Commerce Clause.   Roberts noted that there is a vast distinction between compelling individuals who are already active in a market to doing further economic behaviors, like when compelling farmers to grow limited amounts of a crop to make sure that crop prices remain stable, as opposed to compelling individuals who are inactive in a market to become active in that market.  Justice Roberts found the federal government's argument unpersuasive that everyone was already participating in the healthcare market, or that they eventually would.   Roberts also noted that the Commerce Clause is a potent tool for the federal government.  When the federal government uses its authority pursuant to the Commerce Clause, Congress can force states and individuals to comply with laws like civil rights legislation. (Katzenbach v. McClung).  Although the sweep of the Commerce Clause is necessarily broad, there are limits to this power.   Most importantly the limit applies to cases which do not inherently deal with commercial activity.   Lopez v. U.S.; Morrison v. U.S.  Although Roberts found that a novel application of the Commerce Clause does not spell doom for the new application, it does speak to the potential change in power, as would have been the case here.  Ultimately, Roberts found there is a significant distinction between those regulations which properly target those already in a market and those regulations which incorrectly force others to enter a market against their will.  For this reason, the Commerce Clause cannot be used to enforce the individual mandate.  

Justice Roberts also spent some time discussing the nature of the Necessary and Proper Clause because some filed briefs argued that, pursuant to that clause, the mandate could be upheld.   Roberts held that the Necessary and Proper Clause is not an individual font of power separate from the other traditional congressional powers.  Instead, it is properly invoked to justify a congressional action only after the action has been deemed a valid exercise of power under the Commerce Clause, the taxation power, the spending power, or the 14th Amendment powers.  

At this point some news analysts stopped reading and assumed that the individual mandate was ruled unconstitutional.   However, a more full reading of Roberts' opinion reveals that Roberts holds fast to a very important doctrine, called the Ashwander Doctrine, which is a set of informal Supreme Court rules that dictate when the Supreme Court will rule on the constitutionality of a law.   Crafted by Justice Brandeis, the rule essentially was designed as a way of internally limiting the Supreme Court's ability to invalidate congressional laws.  Seeing Congress as a co-equal branch of government, the Justice Brandeis noted that the proper balance between the separate branches of government is to use judicial review sparingly against Congress.   Justice Roberts invoked one of the last principles in the Ashwander Doctrine to justify his further ruling: if there are serious doubts as to the constitutionality of a law, the Court must first ascertain if there is a alternate construction of the law that might avoid invalidating the law.  

By determining that the taxing power provided a sufficient valid justification for the individual mandate, Justice Roberts held that the mandate was constitutional pursuant to the taxing power.  In this section, which ultimately saved the ACA, Roberts deemed that the mandate functioned like most taxes.   The mandate essentially offers individuals a choice, they can buy healthcare or they can pay the tax.   If they fail to pay the tax there is no criminal enforcement.   Combining these findings together, Roberts ruled that the tax did not force individuals into one position or the other but, like so many other taxes, provided a valid choice for an individual.  Justice Roberts  held that the tax here carried no penalty and similar taxes have been upheld by the Court and the same should be true in this case.  N.Y. v. U.S.

Furthermore, Justice Roberts described the boundaries of the tax power.   Previously, tax lawyers and judges have determined that Congress is generally free to tax whatever behavior they want because the 16th Amendment gave Congress that power.   I know this because my tax law professor, who is also a tax judge, said so in class, much to most of the students' bewilderment.  Justice Roberts backed away from that principle and noted that there are limits to the taxing power, namely that direct taxes are expressly forbidden by the Constitution.  Direct taxes, according to Roberts' history of the direct tax restriction, are those that deal with a capitation tax (such as an equal dollar figure assessed per individual) or a land tax by the federal government.   Roberts felt that those two forms of direct taxation could not be applied to the mandate.   Further restricting the tax power, Justice Roberts fond that taxes cannot be punitive.  Despite these restrictions Roberts found that where a tax truly does offer a choice to an individual the tax will be valid.  Thus, the mandate, under the taxing power, was constitutional.

Finally, Justice Roberts dealt with the Spending Clause.   The Spending Clause generally affords Congress a free hand when drafting spending agreements between the federal government and the states.   The typical arrangement for the spending clause is that states will receive federal dollars to implement a program if the states are willing to give up some of their sovereignty on the matter and allow the federal government to do its proposed action.  Many of our laws are done this way such as interstate highways, civil rights litigation laws, and education laws.  Because these laws necessarily involve the state's consent, the state allows the federal government to intervene where the 10th Amendment would normally bar federal action.  Because of the broad nature of the spending clause there are restrictions that the Court has previously found. 1) The negotiation must be generally fair between the state and federal government.   The Federal government is allowed to provide large inducements to convince the states to allow entrance to federal conduct but  in doing so, the proposed law must truly allow the states to reject the federal governments offer. 2) The proposed spending must be topically related to the action being committed by Congress.  Therefore, if a highway spending project is proposed, the federal dollars attached to the bill must be topically related to highways and road use or else the spending could be unconstitutionally coercive.  3) As espoused by Roberts in his opinion, Congress is free to deny the states federal dollars for proposed legislation, but it is not free to deny previously allocated federal dollars for a program that is functionally different from the proposed legislation.   The ACA allowed the Secretary of Health and Human Services to deny all Medicaid spending to a state if the state failed to expand Medicaid under the ACA.  Roberts felt that this action put a figurative gun to a state's head.  The ACA represented a significant shift in mission between the original purpose of Medicaid, which covers four types of individuals, and the ACA's expansion of Medicaid which would cover anyone who is below 133% of the federal poverty  level.  As a result, Roberts determined that the federal government cannot make past Medicaid funding contingent on the Medicaid expansion in the ACA.   Thus, the Medicaid expansion is constitutional in so far as future expansion dollars can be denied if the state chooses not to expand Medicaid.  But the federal government cannot impermissibly deny a state past Medicaid dollars for failure to expand Medicaid.  

Citizens United is not Going Away Anytime Soon

Last week and today were very important for unions and campaign finance gurus across the nation.  Several cases were in the Supreme Court that could have broad reaching effects on campaign finance and our political system as a whole. 

The first major case was American Tradition Partnership, Inc. v. Bullock.   In this case, an anti-corporate spending statute in Montana was challenged by American Tradition Partnership with the assistance of Jim Bopp and his law firm.  The statute prevented corporations from spending from their general treasury and required that corporations spend money on politics through a separate segregated fund with harsh limits on how that money could ultimately be spent.  Believing that Montana's state statute was unconstitutional because of the recent Citizens United decision, ATP challenged the law in state court.   The Montana Supreme Court determined that Montana's anti-corporate spending law was constitutional under the First Amendment because Montana had experienced actual corruption at the expense of rich "copper baron" corporations in the early 20th century. 

Today the supreme court summarily reversed the Montana Supreme Court.  This means that, without hearing oral argument or having any kind of briefing, the Supreme Court disagreed completely with the Montana Supreme Court.  In a 5-4 vote, with the same justices in the majority and dissent as in Citizens United, the Court, citing to Citizens United, held that the Montana Supreme Court was in error and remanded the case back to Montana.

The second case, decided last week, was Knox v. SEIU.   This case involves a political fight in California against then governor Schwarzenegger.  The California governor attempted to limit the power of public employee unions in California which, not too surprisingly, resulted in an intense political fight between the governor and several allied unions.   California is a state that requires individuals to pay dues even if they do not wish to be a part of a union.   California instituted this system to ensure that nonmembers did not free ride on the success of union negotiations, like in right to work states.  In prior cases, such as Hudson, the Supreme Court has noted that unions can demand payment for those union dues that go to non political activities.   However Hudson demanded that employees be given notices letting the employees know how much money the union anticipates on spending for chargeable expenses (offices, rents, negotiators, and other fees associated with union bargaining) and non-chargeable expenses (political activities).  Employees that are not associated with the union were then allowed to opt-out of paying the non-chargeable expenses but still must pay the chargeable expenses. The fight in California resulted in unions charging an extra amount on top of regular union dues, however, the public sector unions did not give employees any notice about the additional fee.  Knox, as well as 20,000 other employees who opted out of the non-chargeable portion of their dues filed a class action resulting in this case.

The Supreme Court held that failure to provide a Hudson notice about the additional fee was an unconstitutional abridgment of the First Amendment.  The Court held that by failing to provide notice to the public sector employees who were not a part of the union, the state was requiring these individuals to subsidize the speech of the union and forcing the employees to associate with the unions despite the fact that they opted out of the union's non-chargeable expenses.

What do these two cases portend for the future of campaign finance law?   First, it is unmistakably clear that as long as the current composition of the Court remains unchanged, Citizens United will not be revisited.   Summary reversal is a very drastic move by the Supreme Court, and it does not occur frequently.  The Supreme Court made it clear, by summarily reversing the Montana Supreme Court, that state laws that force entities to speak through separate segregated funds, or PACs, are unconstitutional.   A couple weeks ago I was in Idaho Falls speaking to the Idaho AFL-CIO and I predicted that the Court was going to reverse the Montana Supreme Court.  Although it is good to see that I can sometimes correctly predict the outcomes of Supreme Court cases, the Supreme Court has guaranteed that Citizens United is the law of the land for the time being.  The only silver lining is that unions can use Citizens United at the state level to their advantage as well.  As I mentioned in an earlier post, unions must take advantage of the Bullock and Citizens United decisions by challenging state laws that force unions to spend through PACs or else state level unions will be unable to compete with the money that corporations pump into state elections.   

Secondly, the Court mentioned that laws that force non-union members to pay union dues can quickly cross the line from permissible fees to an unconstitutional violation of the First Amendment, depending on the state law.  Unions would be well advised to provide notice to their members and non-members whenever they are increasing their fees and unions would do well to be very cautious when it comes to fundraising practices.   In Justice Alito's opinion, he noted that mandatory payments for union activity is an anomalous situation for the First Amendment and it seemed he was apprehensive about the entire union franchise wherein nonmembers are forced to pay for services despite an employee's lack of membership in the union.  Alito made clear that nonunion members must opt in before their funds are used for any political activity.   This will obviously hurt public employee union funds across the board.  Worse, it is not hard to see that the next step in Alito's logic is to say that unions cannot force nonmembers to pay for any union activity chargeable or not. In Knox, unions were lucky that the question before the Supreme Court was not the constitutionality of California's anti-free rider law. However, I would not be surprised if the next Supreme Court challenge brings this issue directly before the Court.  If and when such a case arrives at the Supreme Court, I anticipate a grave ruling for unions in that matter.

Finally, the Supreme Court will likely determine the constitutionality of the Affordable Care Act this week.  If it is going to happen this week it will likely occur on Thursday.   I'll be blogging my thoughts about the opinion as soon as I can digest the Court's opinion.

Some Thoughts About the Wisconsin Recall

It has been a while since I have posted a new article and I apologize for that.   Since my absence a lot of things have happened in the political and legal realms that are ripe for comment.   For example, Common Cause and various congressional members have sued the Senate claiming that the filibuster is unconstitutional, the Supreme Court is set to release its opinion on the Affordable Care Act any day, the Ninth Circuit recently decided to pass on en banc review of a district court's decision determining proposition 8 unconstitutional on federal grounds(along with the First Circuit's decision on the Defense of Marriage Act), and most recently Governor Scott Walker's win last night in a tense political battle between him and the labor movement.  Because the Wisconsin recall election falls squarely within my practice area I wanted to use this opportunity to explain what can be learned politically and legally from the recall election.

The facts of the recall are simple.   Governor Walker was hailed by anti-labor groups when he spear-headed legislation that undercut public employee collective bargaining in early 2011.   Walker argued that to get an estimated $300million in savings, public employees would have to manage cuts to their pensions, healthcare benefits, wages, and collective bargaining rights.  In a show of force, union groups staged large protests against governor Walker, negotiations between unions and Walker broke down, some of Wisconsin's senators fled the state to prevent Walker's legislation from passing. Ultimately, the situation was resolved with Governor Walker enacting dramatic cuts to union rights.

The unions and other like minded individuals got together and sought signatures to recall the governor for legislative overreach.  After gathering enough signatures the recall was a necessarily muddy process.  Although Democrats knew they wanted Walker out of office, settling on who would replace Walker if he was successfully recalled was a much harder question.   After a primary fight where the perceived union candidate lost, the Democrats put forward Tom Barrett to run against Governor Walker.  All of this culminated in last night's election where early exit polls indicated that union turnout was higher than anticipated, but ultimately was not enough to recall Walker; resulting in a 53%-46% win for Walker.

From a campaign side, the amount of spending in this recall election was tremendous.  Both sides raised large sums of money, although Walker raised considerably more than Barrett.   According to Mother Jones and Bill Moyers, Gov. Walker raised $30.5 million just to fight off the recall election and Barrett raised $3.9 million.  Of that, approximately 66% of Walker's funds came from outside sources whereas only 26% of funds raised by Barrett were from external donors.  Wisconsin's Government Accountability Board estimates that independent expenditures, the kinds made by super PAC's, contributed approximately $22 million dollars to the race with $16.3 million being in favor of Walker.  This means that 74.1% of super PAC funds were spent by Walker favoring groups.

The most immediate thought that comes to my mind is that anti-labor legislators are likely to feel emboldened by Walker's success last night.   Legislatures that disfavor union activity, like those in Utah, Idaho, and Indiana will feel emboldened to eliminate automatic wage deductions and to enact a raft of legislation designed to further limit union activity.   Unions need to be ready to proactively shut down attempts to legislatively limit their power.  Citizens United and its progeny in the D.C. Circuit Court is a powerful tool to shore up funding for both sides in an election and considering the gravity of last night's recall election, unions should prepare themselves to fight a new round of legislative attacks.

The second, jarring, thought that comes to my mind is that the recall rules allow Walker to raise unlimited funds from individuals, whereas Barrett could only maximally accept $10,000 contributions from any one individual.  According to Wisconsin's accountability board, the state's contribution limits are not applicable when the contributions go to a candidate who is defending against the recall.  Wis. Stats. 11.26(13m)(b). This means Walker had a statutory incumbency advantage.   This strikes me as odd considering the Supreme Court's harsh language in F.E.C. v. Davis, where the Court disapproved of contribution schemes that apply stilted limits on the candidates, particularly in a way that favors an incumbent.  In Davis, the Court struck down laws designed to increase the contribution limits for a candidate when the opposing candidate spent large amounts of money from his/her personal funds.  Justice Alito, for the Court, determined that the statutory regime in Davis  was a drag on the First Amendment because it forced a candidate to refrain from expending personal wealth on her/his own campaign out of fear of triggering the laws that would increase the opposition's contribution limit.  Wisconsin's law seems one step worse than the law in Davis.  At the outset, a candidate is discouraged from participating in a recall because the challenger can only maximally raise $10,000 from each individual whereas the incumbent can raise unlimited amounts to defend against the recall.  Candidates may be disinclined to even challenge a candidate through the recall process because of the fund raising disadvantages statutorily imposed on the candidate.  Furthermore, it seems likely that Walker's vast fundraising advantage over Barrett is in some part due to the fact that Walker can raise unlimited funds from individuals.  It seems to me that Wisconsin's recall contribution limits are an unconstitutional regime designed to protect incumbents.

Finally, I finish with this thought: the effects of Citizens United have not been fully explored by both sides of the political spectrum.  It seems the right has been far more willing to test the boundaries of the logic in that opinion, and so far, it has resulted in a massive influx of money into our election system.  As long as these are the rules that we are to play by, both of our political parties should feel equally able to use Citizens United to advance their electoral goals.  The disparity of funds spent on behalf of Barrett and on a pro-union message, to me, signals that pro-union groups and candidates are unfamiliar with utilizing super PAC funds.   If the left does not spend the kind of money that right leaning super PAC's have, then the left will be faced with an arms race that it will likely lose come November.