Late last month a three-judge panel of the U.S. Court of Appeals for the Second Circuit handed down an important and complex ruling situated at the intersection of separation of powers and federalism principles in the context of so-called “sanctuary” jurisdictions, that is, state and local governments that refuse to assist the federal government in immigration enforcement efforts. Although the Second Circuit may have gotten to the right legal result (given the constraints under which lower courts operate), there is one aspect of its reasoning that I believe reflects a common and dangerous misunderstanding (an overreading, actually) of the highly contested Obamacare ruling, National Federation of Independent Business v. Sebelius. (Sebelius). In the space below, I try to identify the way Sebelius is being overread, and offer a more careful and lawyerly way of understanding the case, and one that would not lead to as many problematic results.
First, some complicated background: the Second Circuit case involves the federal government’s administration of a program of the U.S. Department of Justice (DOJ) known as Edward Byrne Memorial Justice Assistance grants. Byrne grants from the federal government support state and local law enforcement with money for equipment, training, and personnel. Shortly after taking office, President Trump issued an Executive Order —entitled “Enhancing Public Safety in the Interior of the United States”—that directs relevant cabinet officers to deprive sanctuary jurisdictions of federal funding. Consistent with this Executive Order, the DOJ has made clear that it would require entities who seek Byrne-grant funding to, among other things, certify compliance with 8 U.S.C. § 1373, a law that, in turn, says in pertinent part that “a . . . State, or local government entity or official may not prohibit, or in any way restrict, any government entity or official from [maintaining,] sending to, or receiving from, [federal immigration authorities] information regarding the citizenship or immigration status, lawful or unlawful, of any individual.” Thus, the statute prevents a state or local government from having a policy or practice that forbids maintaining or giving to the feds information on the immigration status of individuals.
Various public entities, including the States of New York and Virginia, sued the federal government, arguing that it is illegal for the DOJ to require them to comply with § 1373 (and other, related immigration-assistance conditions) in order to be eligible for Byrne-grant funding. The plaintiffs (herein referred to collectively as “the States”) made many arguments, but two important constitutional claims merit discussion here. First, although the States acknowledged that the federal government can condition federal monies on compliance with obligations that the federal government otherwise could not impose on state and local entities (and the States have consistently, and I think rightly, maintained that Congress could not simply mandate states to comply with § 1373 if funding were not in the picture), such obligations and conditions attached to federal grants need to be laid out to the states clearly, and they need to be authorized by Congress rather than simply fashioned by the Executive Branch. On this question, the Second Circuit said that the statute authorizing Byrne grants conferred authority upon DOJ to require compliance with § 1373 insofar as the statute Congress passed requires grant applicants to certify they will comply with “all other applicable laws.” Because, said the Second Circuit panel, the DOJ reasonably concluded that § 1373 falls within the universe of these “other applicable laws” Congress had in mind, it does not violate separation of powers for DOJ to use the grants to gain cooperation from states. As to the requirement that funding conditions need to be laid out unambiguously for the states so that they are fully aware of any bargain they are striking, the Second Circuit found that because DOJ told Byrne applicants of the requirements explicitly at the time of grant application, states were put on adequate notice of their obligations prior to the making of any promises in exchange for money, and thus could not complain that they were being misled or duped into any bargain.
The Second Circuit’s reasoning here is plausible, but the judges brushed aside what could be an important countervailing consideration—the fact that Congress itself was not clear and unambiguous in its enactment about precisely which statutes and conditions recipient states must heed. The Second Circuit conceded that the notice given to states in the present instance “was provided by DOJ rather than Congress,” but thought that so long as states received clear notice before they accepted the funding, the anti-deception reason for a clear-notice requirement was fully satisfied.
Perhaps this reasoning works (which is why I think, under existing law, the Second Circuit may have been justified in this regard), but perhaps instead federalism principles do require Congress—rather than the Executive branch—to decide on the conditions to be imposed. In an analogous arena, many commentators have argued that executive agencies should not be given broad license to construe federal statutes so as to preempt state laws, because decisions about mandatory preemption should be made by Congress. It might be that because conditional funding (and conditional preemption) involves “deals” between the feds and the states—unlike ordinary preemption, in which states are given no choice in the matter—vagueness by Congress should be curable by the executive branch. In other (e.g., due process or First Amendment) vagueness contexts, judicial interpretations—especially by state courts, which are not encumbered by Article III limits on advisory opinions and the like—of a statute can put individuals on notice as to the meaning of a law and thus avoid the problem of vagueness in future disputes. But query whether in the federalism context, where other plain-statement rules such as that announced in 1991 in Gregory v Ashcroft (which requires Congress to clearly say in the text of a regulatory statute that the statute applies to state and local government entities before states can be required to obey) seem designed to make sure Congress has carefully considered state interests, Congress itself has to be the one to fix any vagueness problems in the terms of conditional funding deals. The Court hasn’t had occasion to discuss this in any depth in the conditional spending doctrine or (what should be treated identically) the conditional preemption arena. For that reason, the Second Circuit, even if it thought there were merit in requiring Congress to be the one to reflect on and lay down precise conditions, might not have felt it had sufficient running room from the Court to fashion new doctrine.
A second contention the States raised against the DOJ is that the Byrne-grant program, as implemented by the DOJ, amounts to unconstitutional coercion, inasmuch as the States have no real choice to decline the funding (and comply with the conditions) given the States’ economic realities. There is no modern Supreme Court case squarely holding that a deal offered by Congress to states is invalid simply because it is too adhesive. The Second Circuit seemed to read the Medicaid portion of Sebelius to mean that if a particular deal Congress offers in fact places too much pressure on state fiscs, then states needn’t live up to the agreement. And the Court’s own mention of how the Medicaid expansion placed a “gun” to the states’ heads may contribute to that impression. But this reading of Sebelius is unnecessary and dangerous.
It is unnecessary because a careful parsing of Sebelius indicates that a sufficient reason Obamacare was deemed by a majority of the Court to be coercive was that Congress was vitiating the terms of a preexisting deal. (Seeking to unilaterally alter important terms of an agreed-upon deal and impose new terms is inherently coercive regardless of the amount of money at stake.) That is, any federal coercion present was a function of a lack of meaningful notice to, and thus consent by, the states, a problem the Second Circuit already said was not present in the Byrne-grant context.
To appreciate this very important point, we need to dive back into the Sebelius ruling handed down eight years ago. In the portion of its opinion holding that Congress could not discontinue Medicaid funding to states that were unwilling to cover additional classes of persons, the Court had to confront the federal government’s argument that states agreed when they joined Medicaid that Congress would have latitude to make changes to the funding scheme. Such an argument, if successful, would have defeated the states’ challenge. Tellingly, Chief Justice Roberts, writing for the majority, at that point did not say that agreement by states in 1965 could not cure a problem of undue economic pressure in 2011. Instead, he said states were never given notice in 1965 of the kinds of changes involved in Obamacare. This suggests that had there been clear notice that the coverage requirements might expand greatly within the program, states would have had to live with the deal they struck.
In this regard, the Chief effectively characterized Medicaid as one continuing program in which the states had essentially been told they would receive money on an ongoing basis, subject to minor coverage and funding modifications, until the program was formally repealed. He thus identified the problem with Obamacare’s expansion of Medicaid as the federal government’s having “surpris[ed] participating States with post[-]acceptance or ‘retroactive’ conditions. . . . A State could hardly anticipate that Congress’s reservation [in the original Medicaid Act] of the right to ‘alter’ or ‘amend’ the Medicaid program included the power to transform it so dramatically.”
Some analysts (and dissenting Justice Ginsburg) have been inclined to think that while the absence of notice was an ingredient in Chief Justice Roberts’s analysis, it was not sufficient, and that the magnitude of state reliance was also an essential factor in the outcome of the case. But absence of notice alone can (and should be understood to) fully justify Chief Justice Roberts’s bottom line in Sebelius, just as it explains the outcome in other cases, like Pennhurst State School and Hospital v Halderman, where the economic stakes were not very large but the absence of notice nonetheless freed states of having to comply with federally imposed conditions.
My notice-based reading of Sebelius is buttressed significantly by the fact that Chief Justice Roberts apparently conceded (dissenting) Justice Ginsburg’s claim that Congress could lawfully have repealed Medicaid and replaced it with Obamacare. Chief Justice Roberts replied to that assertion not by saying that repeal today would be unconstitutional, but only that it would be politically difficult. Yet repeal/replace would impose the same substantive duress on states—the same “gun” to their heads—as did Obamacare. The only legal difference between the two is that Congress in the original Medicaid act reserved for itself the right to “repeal . . . any provision.” While the kind of “alter[ations]” and “amend[ments]” Congress and the states had in mind in 1965 may be open to debate, a right of “repeal” is more textually straightforward.
None of this is to say that the large “amount-in-controversy” (the size of the “gun,” so to speak) was not germane to Chief Justice Roberts’s analysis. But, in context, his mention of the financial pressure and reliance under which states were operating could (and I think should) be understood simply as a relevant observation to help establish that Obamacare wasn’t the kind of relatively minor “amendment” or “alteration” of the ongoing program as to which states had been put on notice in 1965 that Congress was empowered to make.
Whether in Sebelius the majority’s belief “that states could not [or should not] have anticipated such a fundamental change is [factually] unpersuasive,” and whether [its] understanding of the Medicaid deal is accurate “as a positive matter . . . [or] as a normative matter,” (criticisms made by commentators) that was how Chief Justice Roberts’s majority opinion said it understood the bargain. And any mistake of fact on the Court’s part, while unfortunate, does not upend federalism doctrine in the way a broader reading of Sebelius would, creating daunting slippery-slope problems about how big a hole in a state’s budget is too big for Congress to be able to blow, and haunting institutional-legitimacy problems about why courts are the right institutions to be drawing such inherently political lines.
Thus, while the Second Circuit was correct in declining to embrace the States’ invocation of Sebelius (assuming the court’s finding that there had been adequately clear notice and that such notice didn’t need to come from Congress itself), the Second Circuit could and should have rejected the Sebelius claim at a more basic level, by holding simply that when notice is adequate, funding deals can never amount to coercion, at least under existing precedent (including Sebelius).
