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Combative Bench Grills IRS in Halbig v. Sebelius



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There were fireworks at the D.C. Circuit today as the IRS and HHS squared off against appellants challenging the IRS’s power grab in Halbig v. Sebelius. I attended arguments today and provide the following synopsis. (Carrie Severino has discussed the district court’s opinion here, here, here, and here. Carrie also filed an amicus brief in the case.) 

The central question is: Does the phrase “established by the State” actually mean what it says, or is that just a fancy way of saying “established by either the State or by the federal government?” At issue is a tax subsidy that the IRS currently grants to anyone who buys health insurance on an exchange under Obamacare. The plain language of the statute says that the subsidy only applies to insurance plans in states that have established an exchange, apparently as an incentive for states to start their own exchanges. But the IRS has decided that the tax subsidy should apply to every state, no matter who established the exchange. The problem, as these challengers point out, is that the IRS’s interpretation turns the actual language on its head.

Though news media have largely ignored this case so far, today’s argument should wake them up. We already had indications that today would be interesting. For starters, DOJ (which represents the IRS in arguments) filed a letter with the court only a couple of weeks ago stating essentially that because this wasn’t a class action, the IRS might consider not abiding by an order enjoining enforcement of its regulation. Two judges brought that “improper” filing up at the end of the argument today, admonishing the DOJ lawyer for filing it against court rules. When the poor DOJ lawyer had no ready response (one imagines it wasn’t his idea), the third judge advised him to just conclude his argument and sit down.

There were plenty of fireworks on the merits. Right at the beginning, Judge Edwards (a Carter appointee) began an aggressive line of questioning pressing appellant’s counsel, Michael Carvin, to explain where the legislative history showed that one of the purposes of Obamacare was to incentivize states to start state-based health-care exchanges. Judge Edwards’s point was apparently that “no one” who voted for the Affordable Care Act intended to encourage states to create health-insurance exchanges. (Which is an odd thing to say, since Congress explicitly created a mechanism to do so.) Carvin could barely get his answers out because of repeated interruptions by Judge Edwards, prompting Judge Randolph to suggest specific examples of the legislative history that Judge Edwards was seeking.

The two other judges, Judges Griffith and Randolph, both Republican appointees, seemed genuinely puzzled by the basis for the government’s interpretation of the phrase, and spent most of the government’s argument trying to divine a coherent interpretive methodology underlying the IRS’s position. Judge Griffith was most pointed in his skepticism, at one point asking the DOJ attorney to parse the phrase “established by the State under [Section] 1311,” which he more or less couldn’t accomplish without compromising his litigation position. DOJ counsel also conceded that the exchange in West Virginia (where one of the appellants lives) was “established by” the Secretary of Health and Human Services, not the State of West Virginia, but refused to concede defeat on those grounds.

Today’s argument acutely demonstrated the dangers (and even absurdity) of broadly purposive statutory interpretation, which is readily susceptible to manipulation of the generality of the purpose. At one point, [Update, 4/11/2014] Judge Edwards the DOJ attorney claimed that because the statute was entitled the “Affordable” Care Act, the court should construe it so care would be affordable. This problem was even more evident in Judge Edwards’s repeated arguments that amounted to: “Nobody understood Obamacare to create a preference for state-run exchanges, so there is no reason why we should construe the text this way.” But it’s not surprising that there is relatively little legislative history or publicity devoted to the mechanics of a single technical provision of a hulking statute like Obamacare. Members of Congress and its staff are unlikely to generate legislative history interpreting a statute they haven’t read. As we all remember, Congress had to pass the law to find out what was in it.

The more important point, though, is what an “everybody-knew-it-but-nobody-says-it” canon of construction suggests about the law, the courts, and the Constitution. It implies that the role of the judge is to, as Michael Carvin put it, “psychoanalyze” Congress to find out what they did or didn’t know or think. This is especially true for a long, complicated statute like the Affordable Care Act, which typifies congressional sausage-making. There are so many cross-cutting purposes, gambles, tradeoffs, and compromises that for a court to pick a single, broad “purpose” and use it to construe the statute simply ignores all other possible “purposes” that Congress nevertheless enacted into the text of the law.

As Judges Griffith and Randolph asked the DOJ at the end of the argument, is it really the court’s constitutional role to “fix” a statute if that would mean construing it in a way that upsets the balance that Congress, however unwisely, enacted? At the end of the day, the court’s responsibility is to interpret the legislation based on what Congress has actually passed, not what it hasn’t said or what “everyone” knew or didn’t know.

A 2-1 panel decision seems likely, with Judges Griffith and Randolph firmly in favor of applying the plain meaning, and with Judge Edwards against the plain meaning. If the appellants win and the court declares the regulation ultra vires, the government would likely petition for en banc rehearing to the newly-packed D.C. Circuit to delay or reverse the effect of the panel’s decision. Based on what I saw today, though, this case may very well make its way to the only court that trumps the en banc D.C. Circuit.

[Update, 3/25/2014, 4:52 PM: Audio recording available here.]



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