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Halbig v. Burwell: Plain Language Trumps ‘Purpose’ and ‘Intent’



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The D.C. Circuit’s carefully reasoned decision striking down the IRS’s unlawful tax subsidies in Halbig v. Burwell undermines the administration’s interpretation of the Affordable Care Act (ACA). As I noted before, a three-judge panel of the Court of Appeals for the D.C. Circuit held 2–1 that the IRS had exceeded its authority in issuing a tax regulation that mandated tax subsidies through federal Obamacare exchanges that were not “established by the State.” Judge Griffith wrote the majority opinion, joined by Judge Randolph (who also wrote a separate concurring opinion). Carter appointee Judge Harry Edwards dissented.  (The Fourth Circuit issued a contrary opinion today, too. More on that later.). 

This case was all about text: What role does the actual language of a statute play when Congress has passed it as part of a complex legislative scheme that, quite frankly, includes bad policy decisions? How much latitude does the government have to re-interpret statutory text in trying to change the policy? And where do courts draw the line between interpretation and distortion? This post will examine how Judge Griffith and Judge Edwards answer those questions.

Judge Griffith took what one might call a “textualist” approach, reasoning from the text and its meaning and rebutting the alternative interpretations. Judge Randolph’s concurring opinion agreed and made the sharper point that an exchange established by the federal government cannot possibly be an exchange established by the state, and that “to hold otherwise would be to engage in distortion, not interpretation.” Judge Edwards, as predicted, took the broadest interpretation of the ACA, relying on a broad understanding of the ACA’s purpose and policy, which he then used to trigger Chevron deference. (Somewhat oddly, Judge Edwards directs most of his fire at the appellants, not the majority opinion.)

Judge Griffith’s majority opinion recognized the relationship between the Constitution and the court’s duty to focus on the statutory text, noting that the Constitution “assigns the legislative power to Congress, and Congress alone, see U.S. Const. art. I, § 1, and legislating often entails compromises that courts must respect.” The only legal instrument that triggers the executive’s responsibility to execute it — a bill that passes both houses of Congress and is signed or acceded to by the president — is the statutory text. Because legally binding compromises can result in the passage of statutory text, the statutory text is the proper focal point for the courts.

Nevertheless, Judge Griffith pointed out what he called a “fork” in the D.C. Circuit’s precedent regarding legislative history. One of those forks includes the traditional rule that if the statutory text is unambiguous, there is no need to resort to legislative history. The other fork, from a case called Sierra Club v. EPA (D.C. Cir. 2008), commended legislative history “to shed new light on congressional intent, notwithstanding statutory language that appears superficially clear.” (As a side note, a quick review of the precedent cited for Sierra Club’s search for “new light” in legislative history finds little support in Supreme Court precedent. It appears to be an artifact of in-circuit debate.)

Judge Griffith also noted the limitations on the use of legislative history under Sierra Club. First, the clear language of a statute doesn’t receive a different meaning simply because legislative history doesn’t repeat the statutory terms. As Judge Griffith put it, “its purpose is not to confirm already clear text; clear text speaks for itself and requires no ‘amen’ in the historical record.”

Second, if the statute’s plain language might lead to an “odd result” (and there’s lots of wiggle room in defining what counts as “odd”), the court asks whether the legislative history is “demonstrably at odds with the intentions” of the drafters.  This means that there has to be some significant discrepancy between the text and intent that is provable from the legislative record, not based on post hoc rationalizations. Because the legislative history was silent on these issues, the majority concluded that the government had no way to demonstrate, rather than presuppose, what the drafters were intending to accomplish with particular provisions.

Judge Edwards, by contrast, sought to discern a single, unifying purpose behind the ACA’s matrix of interlocking provisions. The first part of his analysis attacked the argument that Congress could have intended to create perverse incentives by allowing exchanges to fail in states without exchanges. The rest of his opinion repeatedly invoked the whole-act canon. Based on these principles, Judge Edwards argued that the meaning of “Exchange” in “Exchange established by the State” comes from a different provision defining “Exchange” to include federally-created exchanges, and that in total, the result is ambiguous.

Judge Edwards also reasoned that the plain meaning of “established by the State” is implausible because allowing tax subsidies only to states that establish exchanges “would destroy the fundamental policy structure and goals of the ACA that are apparent when the statute is read as a whole,” that is, from a birds-eye view. Having constructed an ambiguity, then, Judge Edwards concluded that the IRS’s interpretation should receive Chevron deference.

But Judge Griffith’s counterargument on this point is devastating. I can’t do better than to simply quote (sans citations and footnotes):

The government, together with the dissent, also leans heavily on a more abstract form of legislative history—Congress’s broad purpose in passing the ACA—urging the court to view section 36B through the lens of the ACA’s economic theory and ultimate aims. They emphasize that to achieve the goals of “near universal coverage” and  “lower[ing] health insurance premiums,” the ACA relies on three interrelated policies: insurance market reforms prohibiting insurers from denying coverage or charging higher premiums based on an individual’s health status, the individual mandate, and subsidies to individuals purchasing insurance in the individual market. These policies, the government and dissent explain, are like the legs of a threelegged stool; remove any one, and the ACA will collapse. . . . Given this structure, the government and dissent argue that it is “inconceivable” to think Congress would have risked the ACA’s stability by making subsidies conditional on states establishing Exchanges.

Yet the supposedly unthinkable scenario the government and dissent describe—one in which insurers in states with federal Exchanges remain subject to the community rating and guaranteed issue requirements but lack a broad base of healthy customers to stabilize prices and avoid adverse selection—is exactly what the ACA enacts in such federal territories as the Northern Mariana Islands, where the Act imposes guaranteed issue and community rating requirements without an individual mandate. This combination, predictably, has thrown individual insurance markets in the territories into turmoil. . . .

The CLASS Act and the provisions applicable to the territories attest that Congress twice did exactly what the government and the dissent insist it never would: introduce significant adverse selection risk to insurance markets. This is not to say that as Congress did in the CLASS Act and territories, so too must it have done in section 36B; perhaps Congress was willing to tolerate risks in those corners of the insurance market that it never would tolerate at its core. But perhaps not. The point is that we don’t know, and in asking us to ignore the best evidence of Congress’s intent—the text of section 36B—in favor of assumptions about the risks that Congress would or would not tolerate—assumptions doubtlessly influenced by hindsight—the government and dissent in effect urge us to substitute our judgment for Congress’s. We refuse. As the Supreme Court explained just this term, “an agency may not rewrite clear statutory terms to suit its own sense of how the statute should operate.” And neither may we. “The role of th[e] [c]ourt is to apply the statute as it is written—even if we think some other approach might ‘accor[d] with good policy.’”

Judge Griffith’s opinion is a model of careful statutory interpretation. Judge Edwards’s opinion is also worth reading as an example of how to smuggle policy into textual interpretation. These two opinions clearly demarcate the legal battle lines for these cases (such as the Fourth Circuit’s King v. Burwell and two cases still working their way through the district courts).

Now that the panel has ruled in favor of the plaintiffs, the government is expected to seek review of this decision by the en banc D.C. Circuit, which the administration has worked very hard to pack with friendly judges. But to me, it’s no longer clear that the en banc Circuit would actually want to rehear this case. To reverse Judge Griffith’s opinion, which carefully lays out decades of D.C. Circuit statutory interpretation precedent, the en banc court would be effectively unsettling its own precedent on a vast scale. Furthermore, endorsing Judge Edwards’s use of policy considerations to create statutory ambiguity effectively leaves Chevron shorn of its first step (the finding of ambiguity) in the vast majority of cases where Congress compromises a single-minded policy goal for the purpose of passing legislation. There may be other downsides to reversing this opinion, so right now, I’m not entirely sure the en banc D.C. Circuit will want to open up that can of worms. But we’ll see.



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