“Standing” In Unfamiliar Territory: Part Two in a Series on the California v. Texas Affordable Care Act Case

Posted in: Constitutional Law

This second installment in our series on the upcoming legal challenge to the Affordable Care Act (ACA) in California v. Texas focuses on “standing.” Both sets of plaintiffs, individuals (hereafter Hurley) and states (hereafter Texas), advance conventional bases for standing to challenge the constitutionality of §5000A, the provision stating that individuals “shall” procure insurance coverage—the so-called “individual mandate.” Hurley alleges that he takes his legal obligations seriously, and continues to purchase health insurance because the mandate obligates him to do so. Texas, by contrast, contends that the mandate imposes a “pocketbook” injury on it by increasing its administrative and recordkeeping costs in connection with individuals, including its own employees, who have obtained insurance on account of the mandate’s obligation. We think these conventional arguments are weak. Even if the mandate is properly interpreted to require Hurley to purchase insurance, he faces no realistic threat of penalty or other harm if he fails to comply; and Texas’s claim that individuals’ compliance with the mandate incidentally imposes various costs on the state is attenuated and unsupported.

However these arguments play out, they are relatively familiar and straightforward, and in any event not our focus here. That’s in part because these arguments at most provide Hurley or Texas standing to challenge the individual mandate. If either of them secures standing on these conventional grounds and persuades the Supreme Court that the mandate is unconstitutional, their injury would be fully remedied by an injunction that focuses on the mandate. This result, while surely welcomed by the plaintiffs, would fall short of their primary litigation objective: to sink the whole ACA from stem to stern.

To support this broadside, the Solicitor General (SG) offers an intriguing alternative basis for standing that would permit a more extensive attack. The SG posits that Hurley has standing to challenge ACA provisions other than the individual mandate so long as these other provisions cause him injury-in-fact, even if the latter are by themselves perfectly legal. And this is so, the SG argues, even if Hurley lacks standing to challenge the mandate itself.

In our view, the SG’s creative argument faces several hurdles that the SG leaves unaddressed. Perhaps Hurley can surmount these hurdles. But embracing the SG’s broad new theory in California would open the door to other, even more aggressive, applications that the Court should first consider. Severability-driven lawsuits aren’t going away anytime soon.

Laying Out the SG’s Inseverability-Based Standing Argument

Standard doctrine says that to establish Article III standing, a plaintiff must show (1) an actual or imminent “injury-in-fact,” (2) a sufficient “causal connection” between the injury and the defendant’s allegedly wrongful conduct, and (3) the injury is “redressable” by the court. The SG fits Hurley’s claim into this formula as follows.

Step one: Hurley alleges that the ACA’s guaranteed-issue, community-rating, and related insurance-reform provisions collectively injure him by limiting and increasing the costs of available insurance coverage packages. In other words, these insurance-reform provisions, and not (for purposes of this argument) the individual mandate, generate his Article III injury-in-fact. For simplicity, we’ll say his injury stems from provisions B, C & D (insurance reforms) and not provision A (mandate).

Step two: Hurley alleges that the ACA contains an implied “inseverability clause,” meaning the Act should be read as manifesting an intent by Congress that, should the mandate be enjoined as unlawful and thus rendered inoperable, the rest of the Act may not be “severed” from it but must sink with the mandate.

Step three: the implied inseverability clause means that the continued enforceability of provisions B, C & D depends on the continued enforceability of provision A. If A goes, B, C & D go with it.

Step four: Because provision A is unconstitutional, provisions B, C & D should be enjoined, thereby redressing Hurley’s injury from B, C & D.

The doctrinal logic underlying the inseverability-based standing theory is superficially sound and perhaps in certain contexts it would be persuasive. But in California, the SG fails to acknowledge, let alone address, three important issues that present challenges for the SG’s approach in general and its support for Hurley’s standing in particular.

First: Conceptualizing Article III Causation

The Court has said that the Article III standing requirement of “causal connection” means that the injury must be “caused by” or “fairly traceable to” the wrongful conduct, but the Court has not precisely defined these terms. Elsewhere in the law, the meaning of “cause” ranges from “sole cause” to “direct cause” to “primary cause” to “significant cause” to “contributing factor” to “but-for cause.”

The SG’s standing theory rests on “but-for” cause (meaning one thing would not exist in the absence of another), which, by itself, represents a pretty thin conception of causation. (This essay would not have been written but for each of our three sets of parents deciding to have children, yet no one should blame them for anything we say.) There is no suggestion by any of the litigants that Congress’s enactment of the mandate provision A “caused” Congress (in a direct, logical or proximate way) to enact the insurance-reform provisions B, C & D. (Indeed, according to the challengers’ theory of inseverability, the ideas behind B, C & D put Congress on the path to creating the mandate.) Put differently, the SG does not (and cannot) maintain that A literally cannot exist without B, C & D. The only asserted connection is that, per congressional wishes, B, C & D would not be desired without A. So A is at most a “but-for” cause of B, C & D—and even then only in the mind of the legislature, not in any physical reality.

We have difficulty imagining a more expansive conceptualization of Article III causation. But the SG contends that its theory is nothing new. The SG relies principally on Alaska Airlines v. Brock (1987) in which airlines contended that the employee protection requirements of the Airline Deregulation Act of 1978 were invalid because the implementing regulations issued by the Secretary of Labor were subject to an inseverable legislative veto (unconstitutional under INS v Chadha). The Court held the legislative veto provision was indeed severable from the remainder of the law and so rejected the airlines’ argument. The SG says that Hurley’s claim “mirrors” that of the airlines. In Alaska Airlines, however, the legislative veto was itself intertwined with the regulations and allegedly rendered unlawful the challenged rulemaking authority, not simply in the sense that (according to the airlines) Congress would not have wanted to create one absent the other. And given that the Court’s opinion in Alaska Airlines made absolutely no mention of whether the airlines had standing, the case does not support the more general theory the SG offers. Scholars have identified other cases that do appear to fit the formula, but most are over a century old and long predate the development of modern standing doctrine and none of the more recent cases actually considered and resolved the question of Article III standing. So the historical and precedential pedigree is thin at best.

Second: Demonstrating Article III Causation

Even if the Court were to accept the but-for causal connection the SG asserts, there remains a question whether a plaintiff’s claim that Congress would intend other provisions to disappear were the arguably illegal provision inoperative is sufficiently well-pleaded and then supported at the summary judgment stage. For example, the ACA nowhere expressly states that other provisions depend on the mandate. Instead, the SG argues that a legislative finding contained in the ACA serves as an implied inseverability clause. We’ll evaluate this claim on the merits in depth in a later installment. But even if we accept, for purposes of standing, that the SG’s reading of Congress’s legislative findings is correct, problems remain.

For one, the SG’s logic would apply also in cases where there is no inseverability clause (express or implied) and yet someone injured by provisions E-Z could tell a colorable (non-frivolous?) story as to why a legislature would not have intended one or more of those provisions to survive without provision A. Many severability claims rest on an all-things-considered judgment of statutory purpose, historical context, and how the provisions function on the ground, all of which serve as proxies for Congress’s hypothesized intent. For these reasons, the SG’s standing approach could, in theory, blow off the courthouse doors. For example, the 900-page ACA includes a huge number of different provisions, scattered throughout the U.S. Code. The SG’s theory would permit any person who claims to suffer a concrete and imminent injury (no matter how trivial) from any one of its myriad provisions or sub-provisions to challenge it as inseverable based on an underlying claim that the mandate or another provision or sub-provision is unconstitutional. If the SG were right, a hospital harmed by changed Medicare reimbursement rates, or a patent holder harmed by the ACA’s biosimilars regime, could seek to invalidate those provisions based on the asserted illegality of the mandate or some other provision of the Act.

To cabin this seemingly dramatic result at the standing (rather than merits) stage, the Court would need to put some teeth into the notion that challengers must support their assertion of causation at the pleading and summary judgment stages with something more than a speculative story about Congress’s disinclination to sever the challenged provision. But, unless the Court is willing to substantially modify severability doctrine to find inseverability only where there is overt and clear language to that effect, coming up with a standing test for a “plausible claim of inseverability-based-causation” is a tall order. Putting aside whether any such test might be satisfied in California given the congressional “finding” that supposedly functions as an inseverability clause, we can certainly imagine many other future contexts in which the same theory of standing will beg the Court for a principled stopping point, especially because proponents of inseverability will nearly always point to some statutory text that they argue clearly indicates Congress’s agreement with them.

Third: Overcoming Prudential “Third-Party” Standing Restrictions

In addition to Article III’s already-described standing requirements of injury-in-fact, causation, and redressability, the Court recognizes (albeit somewhat unevenly) additional prudential standing restraints. Especially relevant to the SG’s theory of Hurley’s standing in California is a requirement that a litigant “generally must assert his own legal rights and interests, and cannot rest his claim to relief on the legal rights or interests of third parties.” Exceptions generally include circumstances where the litigant asserting the claim has a “close relationship” with the actual rightholder and the rightholder confronts a barrier to protecting her own legal interest, and perhaps also where enforcement of the challenged restriction against the litigant would indirectly violate the third party’s right.

To best illustrate the concern, imagine that the challenger here was healthcare insurance company Aetna rather than Hurley. Aetna is itself not subject to the individual mandate and thus cannot claim the mandate injures the company directly or violates its own rights. But Aetna may plausibly claim to be harmed by the insurance-reform provisions because they restrict the insurance packages it can sell to consumers (for example, it can’t charge less for minimalist packages and can’t charge more for preexisting conditions). Under the SG’s standing approach, Aetna may sue to enjoin the reform provisions, arguing they are inseverable from the individual mandate threatening consumers’ rights. While Aetna has Article III standing (putting aside the causation questions raised above), Aetna would very likely falter on prudential standing grounds because it lacks a sufficiently close relationship to consumers subject to the mandate, and the latter face no barriers to asserting their own interests. And of course one can easily imagine even more dubious cases, say, where the mandate is challenged by a chain restaurant required by the ACA to post nutritional info. Or beyond the ACA, where a couple is challenging an increase in their income taxes because elsewhere the massive omnibus tax bill imposes an unconstitutional tax penalty on social media companies that fail to screen out hate messages. In sum, the SG’s inseverability-based standing approach entirely ignores an important third-party standing barrier.

We’ll linger here momentarily to address one commentator’s proposal that third-party concerns don’t apply in cases such as California because such concerns have been overridden by Congress’s implied intentions. Brian Lea argues that when Congress evidences its intent that provision B is inseverable from A, Congress essentially grants anyone injured by B a statutory right of action to enjoin B via challenging the legality of A. If so, then the litigant is actually vindicating her own first-party statutorily granted right, and in any event Congress may legislatively override prudential standing concerns. We find this characterization unpersuasive. Especially given how hesitant the Court is these days to find implicit statutory rights of action, it seems tendentious to assume that merely by declaring an inter-statutory relationship of inseverability, Congress necessarily (or even ever) intends to authorize lawsuits on this basis. Even more so (as Lea recognizes) when the asserted inseverability intent arises not from actual text but merely from statutory purposes, functional claims, and/or legislative history. We’ll offer in a later installment what we view as a more persuasive way of conceptualizing the cause of action underlying an inseverability claim. But we don’t think this framing dissolves the third-party standing hurdle.

Turning our attention back to the actual plaintiffs in California, we need to ask: is Hurley a better candidate for standing under the SG’s theory than Aetna would be? In one respect Hurley is formally in the same position as Aetna; he is (under the SG’s argument) directly challenging the insurance-reform provisions B, C & D and only indirectly challenging the mandate A along the way as an embedded legal argument. But unlike Aetna, Hurley could be viewed as a good representative of the folks actually and directly burdened by the mandate because Hurley is just the kind of person whom the mandate (assertedly) legally wrongs ― indeed he is that person! (Put different, Hurley qua B, C & D-challenger has an exceedingly close relationship to Hurley qua mandate-challenger.) And yet, because this entire standing theory of the SG presupposes that Hurley lacks standing to challenge the mandate directly (indeed, that is why the SG needs a more ambitious theory), by definition Hurley has not been wronged in any actionable way by the mandate. So it’s an obvious bootstrap to let Hurley qualify for third-party standing to challenge the very provision against which he failed as a first-party challenger, despite his being the theoretical rightholder.

And here’s another, related bootstrap. Hurley’s inseverability argument is that provisions B, C & D may not be enforced against him (ending their harmful effects) after provision A “drops out” of the statute. Typically, a statutory provision drops out because it is enjoined after being judicially declared unlawful. But we know that Hurley has already proven unworthy of any such injunction against A because it (by hypothesis) doesn’t threaten him with imminent injury. So, while the Court seemingly may opine that the mandate is unconstitutional as part of the SG’s inseverability claim formula, there is a question whether the Court could actually enjoin the mandate ― even the SG believes that parties need to demonstrate standing for each claim of relief they assert, and the SG’s theory gives Hurley standing to enjoin only the B, C & D provisions that injure him. But if, under the SG’s own understandings, the Court may comment on but not enjoin the mandate, does it ever become “inoperable” for purposes of triggering the severability question in the first place?

The big point here is that the third-party prudential standing constraint raises an important hurdle that neither the SG’s nor others’ briefs address. We think this constraint offers a middle-ground response to the parties’ all-or-nothing approach. The SG asserts that its severability-based standing formula always works, and the defendants say it never works. Our (provisional) right answer: if the SG’s approach is permitted at all by Article III causation principles, its applicability in a given case turns on the relationship between the litigant challenging provision B, C & D, and the person whose rights are put at stake by provision A.

Does and Should the Court Really Care?

One might ask why none of the Justices who in NFIB found some constitutional defect (concerning the individual mandate, the arguably-coercive-of-states Medicare expansion, or both) engaged in this standing analysis before considering the severability questions presented there. The Justices’ failure to do so might be problematic—and at a minimum it requires more explanation than was offered by the four dissenters who found inseverability—but at least in NFIB the challengers asserted an injury-in-fact from the very provision(s) that legally wronged them, and so the question of “what next” was somewhat different. If the SG’s argument is taken head on in the California case, the Justices should bear in mind and address the thorny issues we describe above (even if the parties didn’t engage them).

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