2 July 2012
The Supreme Court's "taxing power" rationale for upholding the individual mandate of the Affordable Case Act June 28 surprised many – but not Mayer Brown partner Andrew Pincus. He had been making the case for that reasoning since last year, when he began filing briefs on the issue on behalf of several law professors.
Most of the debate over the law raged over the Commerce Clause justification for the law, but early on Pincus and his clients saw the broadly interpreted power of Congress to "lay and collect taxes" as a potential winner. Quietly, the Obama administration started to view it as a possible way to prevail, even though officials had treated the word "tax" like a hot potato.
The full behind-the-scenes story of how the justices decided the cases is only just beginning to emerge. But at some point, even as he rejected the Commerce Clause rationale, Chief Justice John Roberts Jr. latched on to the tax argument, stating in his historic opinion that "the federal government does have the power to impose a tax on those without health insurance." The Court's liberal wing joined him and the rest is history.
Pincus' brief exclusively on the taxing power
was one of only two on the subject filed with the Supreme Court in the cases decided last week. (The other was submitted by the Service Employees International Union.)
Pincus spoke Monday with Tony Mauro of the Supreme Court Insider
about how the brief evolved, as well as other observations about the final day of the Court's term. Question:
How did the brief on the taxing power come about, and how did you get to write it? Pincus:
My clients and co-authors, Gillian Metzger and Trevor Morrison — both professors at Columbia Law School — had the idea for the brief (together with Jack Balkin of Yale Law School) and were looking for an appellate practitioner to partner with. They reached out, and it seemed to me an interesting issue that wasn't getting much attention at all in the initial debates about the law's constitutionality. We filed our amicus brief in just about all of the cases in the lower courts as well as in the Supreme Court. Question:
Why did you think this issue might be a winner? Pincus:
The long line of Supreme Court precedents regarding the scope of Congress's tax power was (and is) very clear. They establish the breadth of the taxing authority (extending to matters outside Congress's other enumerated powers); the irrelevance of a regulatory purpose (as long as the measure will raise some revenue, it qualifies as a tax); the dividing line between taxes and penalties for constitutional purposes (penalties being characterized by a large financial burden relative to the activity in question, and other indicia of punishment such as a scienter requirement and collection through criminal processes); and the Court's obligation to consider whether the tax power supports a law even if Congress has not expressly invoked that authority. The Court's precedents squarely addressed and rejected every objection being raised by the challengers to the healthcare law.
The only remaining question related to this particular statute: whether the "mandate" imposes a free-standing legal obligation to purchase insurance, or whether it provides a choice — requiring either the purchase of insurance or payment of the "shared responsibility" fee. And the Court's decision in New York v. United States
(the radioactive waste disposal statute case) answered that question, construing a statute with a virtually identical structure to provide a choice, and therefore to fall within the tax power. Question:
Were you surprised that the tax argument trumped the Commerce Clause argument? Pincus:
Not really. As the Commerce Clause issue became the subject of greater and greater controversy, it seemed likely that a majority of the Court would recognize the clear tax power precedent as a way to avoid that contentious question. I was surprised that the Court reached the merits of the Commerce Clause argument, given the alternative basis for upholding the statute. I had thought the Court would uphold the statute on tax power grounds and decline to address the Commerce Clause issue. But it would have been very difficult for the Court to reject the tax power argument without deviating quite significantly from its precedents in that area. Question:
Overall, what did you make of the decision and the role that Chief Justice Roberts played in stitching it together? Pincus:
Obviously I am happy that my clients and the government prevailed. And I think the decision is legally the right one. Moreover, because I value and admire the Court as an institution, I am especially pleased that the ruling protects the Court against the growing perception that it is just as political as the other branches. A contrary outcome would have ignited a controversy that, I believe, would have inflicted much more long-term damage on the Court than the one that followed Bush v. Gore
The dissenters' position is not just completely inconsistent with the Court's tax power precedents, but also — by invalidating the entire statute — goes far beyond the Court's severability precedents, which in recent decades have virtually always severed unconstitutional provisions and left the remainder of a law intact (including in the New York case relevant to the tax power argument). If the entire healthcare law had been held unconstitutional, the charge that the Court had "reached out" to invalidate the whole law, and that the decision was motivated by something other than adherence to precedent and the Constitution, would have been difficult to avoid.
The contrast with the dissenters' approach to statutory interpretation would have been especially stark. That is because the Court's increasingly rigid adherence to textualism in the statutory interpretation context rests on its view that it is not the Court's role to assess whether the consequences of its interpretation of a statute are what Congress intended — rather, Congress can repair through subsequent legislation any adverse consequences of the Court's construction of a statute. The dissenters declined to apply that same rationale in the context of their severability analysis — even though it was a key justification in the long line of decisions endorsing severance over invalidation of an entire enactment.
The majority's ruling, on the other hand, is judicially modest in what seems to me the most important sense — it upholds an action by the elected branches because there is a reasonable basis in the Constitution for doing so. And it recognizes that it is not the Court's role to impose political accountability. Rather, the people can, and if they wish to, will, either reward or penalize their representatives for the decisions embodied in the statute. Question:
In a much less-noticed action on Thursday, the Supreme Court dismissed a case you were watching: First American v. Edwards
. What did you make of that action and why was the case important? Pincus: First American
seemed at first blush a routine case involving private liability under a particular federal statute. As the issues evolved, and particularly as they were fleshed out during oral argument, it became clear that the case presented a much more fundamental question: whether Congress may confer a statutory right to sue for damages on a party who has not otherwise suffered an actual injury sufficient to invoke the federal courts' jurisdiction under Article III.
The question arose here in the context of a claim alleging an illegal kickback in violation of the Real Estate Settlement Procedures Act: because state law effectively set the fees paid by the plaintiff, the defendant argued the plaintiff suffered no injury from any alleged kickback. But there are many other federal laws that create causes of action with claims for statutory damages that do not depend on the plaintiff's ability to establish an actual injury — notably, a number of federal privacy laws that today are the basis for numerous consumer class actions.
We don't know why the Court dismissed the case seven months after the oral argument — a delay that is very unusual. Perhaps it found some factual defect that precluded consideration of the question presented; perhaps it just ran out of time, given the other important cases on the docket. But it seems likely that defendants will be raising this constitutional issue in future cases, and that the question will be back before the Court.
Reprinted with permission from the July 2, 2012 edition of National Law Journal
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