Bench Memos

Law & the Courts

Third Circuit Rejects Premise of Supreme Court’s Little Sisters Ruling

Three years ago, in Zubik v. Burwell, the Supreme Court issued a brief unanimous ruling in the challenges brought by the Little Sisters of the Poor and various other religious nonprofits against the Obama administration’s so-called “accommodation” to its HHS contraceptive mandate. Noting “the gravity of the dispute and the substantial clarification and refinement [following oral argument] in the positions of the parties, the Court sent the challenges back to the lower courts. In so doing, it declared that “the parties [the challenger petitioners and HHS] on remand should be afforded an opportunity to arrive at an approach going forward that accommodates petitioners’ religious exercise while at the same time ensuring that women covered by petitioners’ health plans receive full and equal health coverage, including contraceptive coverage.” (Internal quote omitted.) The Court expressed its hope that the lower courts would “allow the parties sufficient time to resolve any outstanding issues between them.”

The Court’s disposition in Zubik was clearly premised on the proposition that HHS had ample regulatory authority to adjust its own mandate and to craft a satisfactory resolution. That proposition did not surprise anyone: it was one area of common ground from the outset between the Obama administration and those challenging the HHS contraceptive mandate, and it underlay the Court’s 2014 holding in Burwell v. Hobby Lobby Stores that HHS had available means of serving its interest in contraceptive coverage that were less restrictive of religious liberty. (The dissenters in Hobby Lobby disagreed that the HHS contraceptive mandate did not satisfy the Religious Freedom Restoration Act, but they did not contest, and indeed embraced, the breadth of HHS’s regulatory authority.)

Accepting the Court’s invitation in Zubik to try to resolve the ongoing litigation, the Trump administration’s HHS issued two interim final rules in October 2017 that altered the Obama administration’s accommodation. A year later, after notice-and-comment rulemaking, HHS issued final rules to the same effect. (HHS’s regulatory steps here—interim rule followed by notice-and-comment rulemaking, followed by final rule—were the same steps that the Obama administration had used to adopt the contraceptive mandate in the first place and to develop its religious exemption and accommodation.) The final rules leave most employers subject to the contraceptive mandate, but they allow religious and moral objectors to exclude objectionable coverage from their plans. At the same time, a parallel HHS rulemaking allowed women who were not able to obtain coverage from objecting employers to seek government-funded contraceptives instead.

That everyone understood HHS to have broad regulatory authority to revise its contraceptive mandate does not, of course, mean that that understanding was legally sound. But it does mean that you’d expect a court that rejects that understanding both to acknowledge that it is repudiating the premise of Zubik and to provide a persuasive account why it is doing so.

Unfortunately, the Third Circuit’s perplexing panel decision last Friday in Commonwealth of Pennsylvania v. President United States of America (yes, that’s the odd case caption) fails on these and other measures. Let’s take a look at the decision, authored by Judge Patty Schwartz and joined by Judges Theodore McKee and Julio Fuentes (all appointees of Democratic presidents):

1. The panel takes a remarkably crabbed view of HHS’s authority under the Affordable Care Act (aka Obamacare), and it makes no effort to reconcile that crabbed view with the Supreme Court’s understanding of HHS’s regulatory authority in Zubik and Hobby Lobby or with the Obama administration’s own understanding (much less with the Obama administration’s freewheeling resort to waivers and other makeshift maneuvers in implementing the ACA). The panel argues that the ACA requires that all group health plans provide the preventive care services that HHS determines. In its view, HHS’s authority to issue “comprehensive guidelines” concerning preventive care for women “concerns the type of services that are to be provided and does not provide authority to undermine Congress’s directive concerning who must provide coverage for these services.” (Slip op. at 42-43.)

Under the panel’s reasoning, the Obama administration would have lacked statutory authority both for its initial exemption for some religious entities and for its later accommodation. The panel weakly addresses this objection in a footnote (note 26, pp. 43-44). It asserts that “Supreme Court precedent dictates a narrow form of exemption for houses of worship.” But that was not the ground on which the Obama administration created the exemption, and, contrary to the precedent the panel cites, the exemption is not limited to “ministerial” employees. The panel’s explanation of how the accommodation would survive its analysis is also feeble: it says that the accommodation merely “provides a process through which a statutorily identified actor ‘shall provide’ the mandate coverage.” The panel ends this footnote with a whimper: “In any event, the Agencies’ authority to issue the Church Exemption and Accommodation is not before us.”

(The panel makes another argument that hinges on the omission in one provision of the word “the.” The fact that the supposedly critical omission is in fact inconsequential is illustrated by the panel’s inadvertent insertion of that word when it misquotes the provision: “Congress addressed the women’s preventive care guidelines that were yet to be promulgated by stating ‘as provided for in the comprehensive guidelines.’” Slip op. at 44 (emphasis added). It’s interesting that all the judges and their clerks somehow missed this.) [Update (7/18): The panel has now fixed this error.]

2. The panel’s conclusion that the Religious Freedom Restoration Act does not authorize HHS’s final rules (slip op. at 46-51) is also unpersuasive.

The panel argues that RFRA “does not require” the religious exemption in the final rules. At the same time, it concludes that the Little Sisters of the Poor “lack appellate standing” in the case because they, like every other religious organization that has fully litigated a RFRA challenge to the Obama administration’s accommodation, already have obtained injunctive relief. (See note 6, pp. 17-18.) In concluding that the new rule is unnecessary because the accommodation “did not infringe on the religious exercise of covered employers,” the panel relies on the reasoning in a circuit precedent that the Zubik Court vacated. That reasoning is highly dubious and in conflict with the many courts that have granted relief to challengers. The panel also made no attempt to address the “substantial clarification and refinement in the positions of the parties” that the Zubik Court said warranted remand.

Further, the panel assumes without explanation that RFRA authorizes agencies to do no more than grant relief from rules that would otherwise violate RFRA. But why isn’t it more sensible to read RFRA as allowing an agency to afford ample breathing room to the exercise of religious liberty? That is clearly how the Supreme Court read RFRA in Hobby Lobby (“RFRA surely allows” the government leeway to modify existing programs) and in Zubik (which expected the parties to reach resolution without a RFRA ruling).

3. The panel’s holding that Pennsylvania and New Jersey have standing to challenge HHS’s new final rules is also dubious. That holding rests on the supposed showing that women in those states will lose their employer-provided contraceptive coverage under the new rules and will “seek out state-sponsored programs providing contraceptive services” or “forego contraceptive use, causing the States to shoulder the costs of unintended pregnancies.”

But the panel acknowledges that the states have been unable to identify a single woman who would be affected by the new rules. Further, there is ample reason to believe that any religious employer who challenged the pre-existing accommodation would be able to receive the same injunctive relief that the Little Sisters of the Poor and other challengers have received. So it is not at all clear that the new rules would impose any costs on the states.

Let’s hope that the Third Circuit revisits this ruling en banc. If not, it will soon be time for Round Three in the Supreme Court.

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