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Texas v. United States - 945 F.3d 355 (5th Cir. 2019)

Rule:

Now that the Patient Protection and Affordable Care Act's shared responsibility payment amount is set at zero, 26 U.S.C.S. § 5000A(c)(2)(B)(iii) and (c)(3)(A), the provision's saving construction is no longer available. The four central attributes that once saved the statute because it could be read as a tax no longer exist. Most fundamentally, the provision no longer yields the essential feature of any tax because it does not produce at least some revenue for the government. Because the provision no longer produces revenue, it necessarily lacks the three other characteristics that once rendered the provision a tax. The shared-responsibility payment is no longer paid into the Treasury by taxpayers when they file their tax returns because the payment is no longer paid by anyone. The payment amount is no longer determined by such familiar factors as taxable income, number of dependents, and joint filing status. The amount is zero for everyone, without regard to any of these factors. The I.R.S. no longer collects the payment in the same manner as taxes because the I.R.S. cannot collect it at all.

Facts:

On March 23, 2010, President Barack Obama signed the Patient Protection and Affordable Care Act (ACA) into law. The ACAought to "increase the number of Americans covered by health insurance and decrease the cost of health care" through several key reforms. 

 Two months after the shared responsibility payment was set at zero dollars, the plaintiffs here—two private citizens and 18 states—filed this lawsuit against several federal defendants. Inter alia, plaintiffs argued that, because the individual mandate was essential to and inseverable from the rest of the ACA, the entire ACA must be enjoined. On this theory, plaintiffs sought declaratory relief that the individual mandate is unconstitutional and the rest of the ACA is inseverable. Plaintiffs also sought an injunction prohibiting the federal defendants from enforcing any provision of the ACA or its regulations.

The federal defendants agreed with plaintiffs that once the shared responsibility payment was reduced to zero dollars, the individual mandate was no longer constitutional. They also agreed that the individual mandate could not be severed from the ACA's guaranteed-issue and community-rating requirements. Unlike plaintiffs, however, the federal defendants contended in the district court that those three provisions could be severed from the rest of the ACA. Driven by the federal defendants' decision not to fully defend against the lawsuit, 16 additional states and the District of Columbia intervened to defend the ACA.

The district court agreed with plaintiffs' arguments on the merits. Specifically, the court held that: (1) the individual plaintiffs had standing because the individual mandate compelled them to purchase insurance; (2) setting the shared responsibility payment to zero rendered the individual mandate unconstitutional; and (3) the unconstitutional provision could not be severed from any other part of the ACA. The district court granted plaintiffs' claim for declaratory relief, specifically, the declaring the "Individual Mandate, 26 U.S.C. § 5000A(a), UNCONSTITUTIONAL," and further declaring that "the remaining provisions of the ACA, Pub L. 111-148, are INSEVERABLE and therefore INVALID." The district court, however, denied plaintiffs' application for a preliminary injunction. The district court entered partial final judgment as to the grant of summary judgment for declaratory relief, but stayed judgment pending appeal. This appeal to the Court of Appeals for the Fifth Circuit followed.

On appeal, the U.S. House of Representatives intervened to join the intervenor-defendant states in defending the ACA. Also on appeal, the federal defendants changed their litigation position. After contending in the district court that only a few provisions of the ACA were inseverable from the individual mandate, the federal defendants contend in their opening brief for the first time that all of the ACA is inseverable. Moreover, the federal defendants contend for the first time on appeal that—even though the entire ACA is inseverable—the appellate court should not enjoin the enforcement of the entire ACA. The federal defendants now argue that the district court's judgment should be affirmed "except insofar as it purports to extend relief to ACA provisions that are unnecessary to remedy plaintiffs' injuries." They also argue that the district court's judgment "cannot be understood as extending beyond the plaintiff states to invalidate the ACA in the intervenor states." Simply put, the federal defendants have shifted their position on appeal more than once.

Issue:

Is the individual mandate of the ACA a constitutional exercise of congressional power?

Answer:

No

Conclusion:

There was a live case or controversy even though the federal defendants had conceded many aspects of the dispute because the intervenor-defendant States had standing to appeal and, even if they did not, there remained a live case or controversy between plaintiffs and the federal defendants. Plaintiffs had U.S. Const. art. III, § 2, cl. 1, standing to bring a challenge to the ACA because the individual mandate injured both the individual plaintiffs, by requiring them to buy insurance that they did not want, and the state plaintiffs, by increasing their costs of complying with the reporting requirements that accompanied the individual mandate. The individual mandate was unconstitutional because it could no longer be read as a tax, and there was no other constitutional provision that justified that exercise of congressional power.

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