Federal District Court in D.C. Denies Injunctive Relief to Plaintiffs: No Big Deal (So Far)

by Tom Miller

In the second half of Tuesday’s ruling in Halbig vs. Sebelius by federal district court senior judge Paul Friedman, the court denied the plaintiffs’ motion for a preliminary injunction. Such injunctive relief would have temporarily stopped operation of controversial Internal Revenue Service (IRS) regulations that currently facilitate distribution of premium-assistance tax credits through federally run exchanges — at least for any of the six such exchanges available to the various plaintiffs involved in this case. 

Does this mean that the plaintiffs (four individuals and three businesses opposed to Obamacare’s tax subsidies and their role in enforcing the law’s individual and employer coverage mandates) now look much more likely to lose their claims against the Affordable Care Act (ACA) in the final stages of the Halbig lawsuit? Not really.

A preliminary injunction is considered extraordinary relief, and it won’t be provided unless those seeking it already demonstrate, among other things, the likelihood of irreparable injury and prevailing on the ultimate merits. In the Halbig case, the plaintiffs appeared to climb partway up that steep legal hill — after first defeating a motion to dismiss their claims — but they could not reach the top.  

According to Judge Friedman, the plaintiffs’ claims of irreparable harm were weakened by the fact that the individuals involved would be able to wait as late as roughly mid February 2014, before deciding if they have to purchase ACA-approved insurance coverage, or instead pay an individual mandate penalty instead. Moreover, the likely dollar amounts at stake did not look very large for the sole individual plaintiff for whom net premium costs (compliance) versus likely penalty amounts (non-compliance) were presented to the court. Although that may suffice to show an injury for legal standing purposes, it did not seem to the court like an “irreparable” one at this stage of the litigation. Judge Friedman emphasized that because he already was likely to issue a final ruling on the entire case before mid-February, this weakened the potential urgency of imposing a preliminary injunction before even that type of harm would occur.   

Another key test for a preliminary injunction here is whether the plaintiffs are likely to prevail ultimately in trying to overturn the IRS rule as issued contrary to the requirements of the Administrative Procedure Act. However, the court first wants to see further briefing and argument on several outstanding legal issues, in the context of upcoming motion(s) for summary judgment that will provide a final overall decision. Judge Friedman noted that the plaintiffs had not (yet) made a particularly strong showing on the likelihood of prevailing on the merits, even though “they make a very good argument” that some of the words in the ACA statute that would authorize tax credits only for exchanges “established by a state” (in section 1311 of the ACA) should be interpreted “quite literally.”

On the other hand, Judge Friedman indicated that the federal government defendants made a good argument about how viewing the IRS regulations for federal exchange tax credits “in the context of the entire statute” and applying so-called Chevron review standards to their validity could mean “they’re likely to win.”

Before jumping to premature conclusions, observers should note that Judge Friedman concluded that “each argument may ultimately be successful,” upon further briefing. His request for an additional look at the “second” level of Chevron review (i.e., not just considering what the relevant statutory text of the ACA by itself means) might be a warning sign to the plaintiffs. Close calls in APA challenges to federal regulations are more likely to end up in the government’s favor, all other things being equal.

But we will see over the next few months, because now it’s on a final ruling on the merits of the respective legal claims. Judge Friedman emphasized that he intends to decide the remaining issues — including some leftover ones involving the legal standing of other employer plaintiffs in the case — “quickly.” That’s actually what the plaintiffs wanted most of all, with or without preliminary injunctive relief. But by seeking the latter, their attorneys accelerated the pace of a previously stalled lawsuit (originally filed in early May 2013) and should ensure a final decision by early next year, if not sooner. 

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