Standing is unlikely to derail the plaintiffs’s case. In the weeks leading up to the argument, there were several press reports raising questions about some of the plaintiffs’s continued standing. Yet only one plaintiff need have standing for the court to have jurisdiction, which is why cases like this are filed with multiple plaintiffs. The issue was raised by Justice Ginsburg at the outset of the argument, but it did not appear to gain any traction, particularly after the Solicitor General effectively conceded that he had no basis for questioning whether there was standing to challenge the IRS rule.
Justice Kennedy is not buying the government’s textual arguments. Justice Kennedy may have said some things which were encouraging to the government (see below), but he expressed tremendous skepticism of the SG’s efforts to make textual arguments in defense of the IRS rule. When the SG noted that Section 1401 does not merely reference exchanges “established by the State,” but instead says “established by the State under 1311,” Justice Kennedy cut him off noting that the SG’s argument was heading in the “wrong direction.”
The SG flubbed the drafting history of Section 1401. When the SG turned to explaining the origins of the phrase “established by the state” as it appears in Section 1401 of the Act, he got his facts wrong. The SG claimed that the language came from the Senate Finance Committee, and was not added at the last minute: “The language here in 36B was not the product 5 of some last-minute deal, it wasn’t the product of scrambling at the end.” What the SG failed to acknowledge, however, is that Section 14o1 refers to exchanges “established by the State” in two separate places, and one of those references was “added at the last minute,” as Michael Cannon and I discussed in our amicus brief. This matters because if all Congress sought to do was reference exchanges established under Section 1311, there would have been no reason to add this additional language, and the SG was able to offer no credible explanation for why this language is there.
Justice Kennedy is unlikely to defer to the IRS interpretation. Late in the argument, Justice Kennedy asked the SG whether a potential conflict among statutory provisions is sufficient to create an ambiguity worthy of Chevron deference. The SG certainly thought it was, though it’s worth noting that this question splintered the court in a case last term. At this point, however, Justice Kennedy threw cold water on the idea that the IRS should receive deference:
If it’s ambiguous, then we think about Chevron. But it seems to me a drastic step for us to say that the Department of Internal Revenue and its director can make this call one way or the other when there are, what, billions of dollars of subsidies involved here?
Justice Breyer is “not a literalist.” Oral argument confirmed something that we already knew; Justice Breyer is more concerned with the overall operation of a law than its actual text. Early in the plantiffs’ argument, Justice Breyer tried to make an argument based on the statutory text. Specifically, he claimed that looking at the “definitions” in the statute was sufficient to make the government’s case. Yet in making this argument, Justice Breyer made the mistake of characterizing a requirement in Section 1311 as a definition. This same mistake was made in the academic amicus brief I critiqued here. Interestingly enough, this was not a mistake made by the SG, who refrained from trying to characterize this portion of 1311 as a “definition.” After this exchange, Justice Breyer admitted that he is “not a literalist,” which is his way of saying he’s not a textualist when it comes to statutory interpretation. (Cf. his dissent in UARG v. EPA)
(Some on) the court have thought about remedy. In discussing whether states had received adequate notice of the conditions placed on tax credits, Justice Alito asked the SG whether the court could stay its mandate, should it invalidate the IRS rule, so as to provide states and the federal government time to respond to the ruling and ameliorate any potentially disruptive consequences. In response, the SG acknowledged the court could take such a step, and that a stay could help. Said the SG “if that’s where the court is going and that’s what the court thinks the proper disposition is, that would reduce the disruption.”
Federalism is the federal government’s best hope, and that makes the federal government uncomfortable. Justice Kennedy may not have shown much sympathy for the federal government’s textual arguments, but he did seem open to the idea that interpreting the statute as urged by the plaintiffs could raise federalism concerns. In particular, he suggested it may be impermissibly coercive to condition tax credits — and whatever protection such subsidies provide against adverse selection in the individual health insurance market — on state cooperation with federal policy.
Justice Kennedy’s questions suggested he might be a fifth vote to uphold the IRS tax credit rule on the grounds of “constitutional avoidance.” That is, by upholding the rule, the court could avoid a result that is constitutionally problematic. Randy noted some of the problems with adopting that approach to this case below. I would also add that such a decision would implicitly call into question existing court precedents. In New York v. United States, for example, the court upheld conditional regulations that threatened to impose highly disruptive conditions on private industry in non-cooperating states — specifically those firms that produce low-level radioactive waste, including hospitals and medical research centers. This, unlike the LLRWPAA’s “take title” provision raised no constitutional problems, the court held in New York, which would seem to cover the sorts of federalism concerns raised here.
Although the SG openly encouraged the court to consider whether constitutional avoidance concerns would support the government’s textual analysis, he also stopped short of embracing the underlying federalism concerns. Indeed, the SG said that the government could defend the constitutionality of conditioning tax credits on state cooperation under current law, and cited New York. The SG’s reticence about the federalism arguments is totally understandable because the SG’s office is well aware of the threat such arguments could pose to other federal programs. Just last month Maine filed a cert petition in Mayhew v. Burwell challenging conditions placed upon the continued receipt of Medicaid funding as unconstitutionally coercive under NFIB. A federalism holding in King would strengthen Maine’s arguments, and bolster the arguments of litigants in pending cases, such as Ohio’s recent ACA challenge and litigation against the EPA’s interpretation of Section 111 of the Clean Air Act.
That’s all for now. For more, see the podcast I recorded on the oral argument linked below.