In His Official Capacity As Attorney Gen. Of Va. v. Sebelius, Civil Action No. 3:10CV188-HEH.

• Decision Date: 02 August 2010
• Docket Number: Civil Action No. 3:10CV188-HEH.
• Citation: 702 F.Supp.2d 598
• Parties: Commonwealth of VIRGINIA ex rel. Kenneth T. CUCCINELLI, II, in his official capacity as Attorney General of Virginia, Plaintiff, v. Kathleen SEBELIUS, Secretary of the Department of Health and Human Services, in her official capacity, Defendant.
• Court: U.S. District Court — Eastern District of Virginia

702 F.Supp.2d 598

Commonwealth of VIRGINIA ex rel. Kenneth T. CUCCINELLI, II, in his official capacity as Attorney General of Virginia, Plaintiff,

v.Kathleen SEBELIUS, Secretary of the Department of Health and Human Services, in her official capacity, Defendant.

Civil Action No. 3:10CV188-HEH.

United States District Court,E.D. Virginia,

Richmond Division.

Aug. 2, 2010.

COPYRIGHT MATERIAL OMITTED.

Earle Duncan Getchell, Jr., Charles E. James, Jr., Stephen R. McCullough, Wesley Glenn Russell, Jr., Office of the Attorney General, Richmond, VA, for Plaintiff.

Jonathan Holland Hambrick, Office of the U.S. Attorney, Richmond, VA, Erika Myers, Ian Gershengorn, Joel McElvain, Sheila M. Lieber, Department of Justice, Federal Programs Branch, Washington, DC, for Defendant.

MEMORANDUM OPINION

(Defendant's Motion to Dismiss)

HUDSON, District Judge.

This is a narrowly-tailored facial challenge to the constitutionality of Section 1501 of the Patient Protection and Affordable Care Act, Pub.L. No. 111-148, 124 Stat. 119 (2010). This provision, in essence, requires individuals to either obtain a minimum level of health insurance coverage or pay a penalty for failing to do so. According to the Complaint, which seeks declaratory and injunctive relief, the enactment of Section 1501 not only exceeds the power of Congress under the Commerce Clause and General Welfare Clause of the United States Constitution, but is also directly at tension with Virginia Code Section 38.2-3430.1:1 (2010), commonly referred to as the Virginia Health Care Freedom Act.

The case is presently before the Court on Defendant's Motion to Dismiss, filed pursuant to Federal Rules of Civil Procedure 12(b)(1) and (b)(6). Both sides have filed extensive and thoroughly researched memoranda supporting their respective positions. The Court heard oral argument on July 1, 2010. Although this case is laden with public policy implications and has a distinctive political undercurrent, at this stage the sole issues before the Court are subject matter jurisdiction and the legal sufficiency of the Complaint.

I.

In the Complaint, the Commonwealth of Virginia (the “Commonwealth”) assails Section 1501 (or “Minimum Essential Coverage Provision”) on a number of fronts. First, the Commonwealth contends that requiring an otherwise unwilling individual to purchase a good or service from a private vendor is beyond the outer limits of the Commerce Clause. In the Commonwealth's view, the failure-or refusal-of its citizens to elect to purchase health insurance is not “economic activity” and therefore not subject to federal regulation under the Commerce Clause. Succinctly put, the Commonwealth defies the Secretary to point to any Commerce Clause jurisprudence extending its tentacles to an individual's decision not to engage in economic activity. Furthermore, they argue that since Section 1501 exceeds this enumerated power, Congress cannot invoke either the Necessary and Proper Clause or its taxation powers to regulate such passive economic inactivity.

Alternatively, the Commonwealth maintains that Section 1501 is in direct conflict with the Virginia Health Care Freedom Act. The Commonwealth argues that the enactment of Section 1501 therefore encroaches on the sovereignty of the Commonwealth and offends the Tenth Amendment to the Constitution.

The Defendant in this case is Kathleen Sebelius, in her official capacity as Secretary of the Department of Health and Human Services (the “Secretary”). The Secretary's Motion to Dismiss, filed under both Fed.R.Civ.P. 12(b)(1) and (b)(6), has several distinct strands. The Secretary argues initially that the Attorney General of Virginia, in his official capacity, lacks standing to challenge Section 1501, thereby depriving this Court of subject matter jurisdiction. Because the mandatory insurance provision is not effective until 2014, the Secretary also maintains that the issues are not ripe for immediate resolution.

With respect to the merits, the Secretary contends that the Complaint lacks legal vitality and therefore fails to state a cause of action. She asserts that the Minimum Essential Coverage Provision is amply supported by time-honored applications of Congress's Commerce Clause powers and associated regulatory authority under the Necessary and Proper Clause. The theoretical foundation for the Secretary's position is predicated on factual findings by Congress that Section 1501 is the central ingredient of a complex health care regulatory scheme. Its core underpinning is the notion that every individual will need medical services at some point. Everyone, voluntarily or otherwise, is therefore either a current or future participant in the health care market.

To underwrite this health care scheme and guarantee affordable coverage to every individual, the cost of providing these services must be defrayed from some source, particularly as to the individuals who are uninsured. To address the annual deficit caused by uncompensated medical services, which according to the Secretary is approximately $43 billion, Congress included the penalty provision in Section 1501 to coax all individuals to purchase insurance. Because Section 1501, like the Act as a whole, regulates decisions about how to pay for services in the health care market and the insurance industry, the Secretary reasons that it necessarily affects interstate commerce.

Lastly, the Secretary contends that Section 1501 is a valid exercise of Congress's independent authority to use its taxing and spending power under the General Welfare Clause. Therefore, she argues that this action is barred by the Anti-Injunction Act.

II.

Turning first to the standing issue, relying on Massachusetts v. Mellon, 262 U.S. 447, 43 S.Ct. 597, 67 L.Ed. 1078 (1923), the Secretary argues that the Attorney General's prosecution of this case, on behalf of the citizens of the Commonwealth of Virginia, is barred by the long-standing doctrine of “ parens patriae.” Id. at 485, 43 S.Ct. at 600. In Mellon, the U.S. Supreme Court noted that because citizens of an individual state are also citizens of the United States, “[i]t cannot be conceded that a State, as parens patriae, may institute judicial proceedings to protect citizens of the United States from the operation of the statutes thereof.” Id. The Court further stated in Mellon that “it is no part of [a State's] duty or power to enforce [its citizens'] rights in respect of their relations with the federal government.” Id. at 485-86, 43 S.Ct. at 600. Therefore, the Secretary contends that a state does not have standing as parens patriae to bring an action against the federal government. Id.; see Alfred L. Snapp & Son, Inc. v. Puerto Rico ex rel. Barez, 458 U.S. 592, 610 n. 16, 102 S.Ct. 3260, 3270, 73 L.Ed.2d 995 (1982).

The Secretary further maintains that the congressional enactment at issue, Section 1501, imposes no obligation on the Commonwealth as a sovereign. The Secretary marginalizes the conflict between Section 1501 and the Virginia Health Care Freedom Act as a political policy dispute manufactured for the sole purpose of creating standing. The resulting abstract policy dispute causes no imminent injury to the sovereign and is thus insufficient to support standing to challenge a federal enactment. Mellon, 262 U.S. at 484-85, 43 S.Ct. at 600.

On the other hand, the Commonwealth views the task at hand differently. In prosecuting the immediate action, the Commonwealth, through its Attorney General, is not simply representing individual citizens, it is defending the constitutionality and enforceability of its duly enacted laws. The Commonwealth maintains that its standing to defend its legislative enactments is a fossilized principle uniformly recognized by the U.S. Supreme Court, citing Diamond v. Charles, 476 U.S. 54, 106 S.Ct. 1697, 90 L.Ed.2d 48 (1986).

“[T]he power to create and enforce a legal code, both civil and criminal” is one of the quintessential functions of a State. Alfred L. Snapp & Son, Inc. v. Puerto Rico ex rel. Barez, 458 U.S. 592, 601, 102 S.Ct. 3260, 3265-66, 73 L.Ed.2d 995 (1982). Because the State alone is entitled to create a legal code, only the State has the kind of “direct stake” identified in Sierra Club v. Morton, 405 U.S. [727,] 740, 92 S.Ct. [1361,] 1369 [31 L.Ed.2d 636 (1972) ], in defending the standards embodied in that code.

Diamond, 476 U.S. at 65, 106 S.Ct. at 1705.

The Commonwealth draws a clear distinction between this case and those relied upon by the Secretary. The Commonwealth argues that it is not prosecuting this case in a parens patriae, or quasi-sovereign capacity. In the immediate case, the Commonwealth is exercising a core sovereign power because the effect of the federal enactment is to require Virginia to yield under the Supremacy Clause. Unlike Mellon, irrespective of its underlying legislative intent, the Virginia statute is directly in conflict with Section 1501 of the Patient Protection and Affordable Care Act. ¹

A subsidiary element of the Secretary's argument that this Court lacks subject matter jurisdiction is the alleged absence of any imminent injury to sovereign interest. The Commonwealth counters that the conflict between federal and state law is “immediate and complete with respect to the legal principles at issue.” (Pl.'s Mem. Opp'n Mot. Dismiss 4.) By way of further elucidation, the Commonwealth contends that it has already begun taking steps to prepare for the implementation of the Patient Protection and Affordable Care Act. It asserts that “officials are presently having to deviate from their ordinary duties to begin the administrative response to the changes in federal law as they cascade through the Medicaid and insurance regulatory systems.” (Pl.'s Mem. Opp'n Mot. Dismiss 4.)

The next facet of the Secretary's challenge to the Court's subject matter jurisdiction in this case invokes the Anti-Injunction Act, 26 U.S.C. § 7421(a). ² The Anti-Injunction Act provides, in...