Opinions – 9/26/11: U.S. 4th Circuit Court of Appeals

Civil Procedure

Standing

BOTTOM LINE: Judgment of the district court vacated because Virginia could not challenge the “individual mandate” provision in the Affordable Care Act for lack of Article III standing.

CASE: Commonwealth of Virgina v. Sebelius, Nos. 11-1057, 11-1058 (decided Sept. 8, 2011) (Judges MOTZ, Davis & Wynn). RecordFax No. 11-0908-60, 52 pages.

FACTS: Virginia filed this action on March 23, 2010, the same day that the President signed the Affordable Care Act into law. The Governor of Virginia did not sign the Virginia Healthcare Freedom Act (VHFCA) into law until the next day. The VHCFA declares, with exceptions not relevant here, that “[n]o resident of this Commonwealth … shall be required to obtain or maintain a policy of individual insurance coverage.” Va.Code Ann. § 38.2-3430.1:1. It contains no enforcement mechanism.

Because the individual mandate applies only to individual persons, not states, Kathleen Sebelius, the Secretary of the Department of Health and Human Services, moved to dismiss the suit for that Virginia had not and could not allege any cognizable injury and so was without standing to bring this action. Virginia insisted that it acquired standing from the asserted “collision” between its new statute, the VHCFA, and the individual mandate. Although the district court recognized that the VHCFA was only “declaratory [in] nature,” it held that the VHCFA provided Virginia standing. The court then declared the individual mandate unconstitutional, awarding summary judgment to Virginia.

The Secretary appealed, maintaining that Virginia lacks standing to challenge the individual mandate and that, in any event, the mandate withstands constitutional attack. The 4th Circuit, holding that Virginia lacked standing, vacated the judgment of the district court and remanded with instructions to dismiss the case for lack of subject-matter jurisdiction.

LAW: Virginia lacks standing to challenge the individual mandate because the mandate threatens no interest in the “enforceability” of the VHCFA. Maine v. Taylor, 477 U.S. 131, 137, 106 S.Ct. 2440, 91 L.Ed.2d 110 (1986). The mere existence of a state law like the VHCFA does not license a state to mount a judicial challenge to any federal statute with which the state law assertedly conflicts. Rather, only when a federal law interferes with a state’s exercise of its sovereign “power to create and enforce a legal code” does it inflict on the state the requisite injury-in-fact.” Alfred L. Snapp & Son, Inc. v. Puerto Rico, 458 U.S. 592, 601 (1982).

Thus, in each case relied on by Virginia, in which a state was found to possess sovereign standing, the state statute at issue regulated behavior or provided for the administration of a state program. See e.g., Maine v. Taylor, 477 U.S. 131, 132-33 (1986) (regulating importation of baitfish); Texas Office of Pub. Util. Counsel v. FCC, 183 F.3d 393, 409 (5th Cir.1999) (establishing telecommunications aid programs for schools and libraries); Alaska v. U.S. Dep’t of Transp., 868 F.2d 441, 442-43 (D.C.Cir.1989) (regulating airline price advertising); Ohio v. U.S. Dep’t of Transp., 766 F.2d 228, 230 (6th Cir.1985) (regulating shipment of hazardous nuclear materials). The state statutes in each of these cases reflect the “exercise of [a state’s] sovereign power over individuals and entities within the relevant jurisdiction.” Snapp, 458 U.S. at 601.

By contrast, the VHCFA regulates nothing and provides for the administration of no state program. Instead, it simply purports to immunize Virginia citizens from federal law. In doing so, the VHCFA reflects no exercise of “sovereign power,” for Virginia lacks the sovereign authority to nullify federal law. See Mayo v. United States, 319 U.S. 441, 445 (1943) (stating the “corollary” of the Supremacy Clause that “the activities of the Federal Government are free from regulation by any state”); Johnson v. Maryland, 254 U.S. 51, 55-56 (1920) (noting the “entire absence of power on the part of the States to touch … the instrumentalities of the United States”).

Moreover, the individual mandate does not affect Virginia’s ability to enforce the VHCFA. Rather, the Constitution itself withholds from Virginia the power to enforce the VHCFA against the federal government. See Ohio v. Thomas, 173 U.S. 276, 283 (1899) (stating that “federal officers who are discharging their duties in a state … are not subject to the jurisdiction of the state”).

Given this fact, the VHCFA merely declares, without legal effect, that the federal government cannot apply insurance mandates to Virginia’s citizens. This non-binding declaration does not create any genuine conflict with the individual mandate, and thus creates no sovereign interest capable of producing injury-in-fact.

In concluding that Virginia lacks standing to challenge the individual mandate, the Court recognized that the question of that provision’s constitutionality involves issues of unusual legal, economic, and political significance. The Constitution, however, requires that courts resolve disputes “not in the rarified atmosphere of a debating society, but in a concrete factual context conducive to a realistic appreciation of the consequences of judicial action.” Valley Forge Christian College v. Americans United for Separation of Church and State, Inc., 454 U.S. 464, 472 (1982). Virginia provided no such “concrete factual context” here, because it challenged a statutory provision that applies not to states, but exclusively to individuals.

Accordingly, the judgment of the district court was vacated.