State v. Yellen

• Decision Date: 12 May 2021
• Docket Number: Case No. 1:21-cv-181
• Parties: STATE of Ohio, Plaintiff, v. Janet YELLEN, Secretary of the Treasury et al., Defendants.
• Court: U.S. District Court — Southern District of Ohio

539 F.Supp.3d 802

STATE of Ohio, Plaintiff,

v.Janet YELLEN, Secretary of the Treasury et al.,¹ Defendants.

Case No. 1:21-cv-181

United States District Court, S.D. Ohio, Western Division.

Signed May 12, 2021

Benjamin Michael Flowers, Ohio Attorney General's Office, Columbus, OH, Sylvia May Davis, Pro Hac Vice, Ohio Attorney General, Cleveland, OH, for Plaintiff.

Stephen Ehrlich, DOJ-Civ, Charles E.T. Roberts, Brian David Netter, DOJ-Civ, Civil Division, Federal Programs Branch, Washington, DC, for Defendants.

OPINION AND ORDER

DOUGLAS R. COLE, UNITED STATES DISTRICT JUDGE

Our Constitution enacts a system of dual sovereigns—federal and state—allocating certain powers to each. Questions about that distribution of powers, though, are "perpetually arising, and will probably continue to arise, as long as our system shall exist." McCulloch v. Maryland , 17 U.S. (4 Wheat.) 316, 405, 4 L.Ed. 579 (1819). Answering such questions can be a daunting task. That is particularly true about constitutional limitations arising under the Spending Clause, an area in which case law is both sparse and murky. And, much as in NFIB , "resolving the controversy this case presents "requires [this Court] to examine both the limits of the Government's power, and [the] limited role [that Article III courts play] in policing those boundaries." Nat'l Fed'n of Indep. Bus. v. Sebelius , 567 U.S. 519, 534, 132 S.Ct. 2566, 183 L.Ed.2d 450 (2012) (" NFIB ").

Here, Ohio challenges one provision in the American Rescue Plan Act of 2021 ("ARPA"). Among a host of other provisions, the ARPA makes block grants available to the States for specified purposes. But, before a State can receive those funds, it must certify to the Secretary of the Treasury (the "Secretary") that the State will comply with multiple conditions that the law imposes. Ohio claims that one of those conditions—which Ohio labels the "Tax Mandate"—exceeds Congress's power under the Spending Clause and the Tenth Amendment. (Compl., Doc. 1, #10–11). Thus, Ohio filed this action seeking a declaratory judgement and permanent injunction preventing enforcement of the allegedly unconstitutional provision. (Id. at #11).

The matter is currently before the Court on Ohio's Motion for a Preliminary Injunction (Doc. 3) seeking to enjoin the Secretary from enforcing the Tax Mandate against Ohio (and only Ohio, as the State made clear at oral argument) while this suit is pending. This Court can grant that relief only if the Court finds both that it has jurisdiction over this action, and that such relief is appropriate on the substance of Ohio's claim as presented in Ohio's Complaint. Both issues present close questions. Interestingly, that is not because the merits are particularly close—the conceded ambiguity in the Tax Mandate, as written,² establishes that Ohio has a substantial likelihood of showing that the ARPA violates the Spending Clause. Rather, what makes this a close case are issues relating to timing, which impact the analysis of both justiciability generally, and the appropriateness of preliminary relief now. Ultimately, the Court determines that, although the matter is justiciable, the preliminary relief that Ohio seeks is not warranted. Accordingly, the Court DENIES Ohio's request for a preliminary injunction.

BACKGROUND

A. The COVID-19 Pandemic.

The COVID-19 pandemic has imposed far-reaching, unprecedented consequences on nearly every aspect of life, not only in the United States, but around the world. The pandemic has sickened, and killed, people across the globe, as well as straining (or, in some countries, nearly crippling) healthcare systems. What is more, businesses have suffered financially, and many people have found themselves in financial straits, be it from losing employment or incurring other pandemic-related expenses. And as a result of the pandemic-related disruptions and economic dislocations, the need for, and use of, governmental services and assistance has ballooned. Not surprisingly then, in addition to inflicting human costs, the pandemic has wreaked havoc on state budgets. Ohio is no exception.

B. The America Rescue Plan Act.

On March 11, 2021, President Biden signed the ARPA into law. The ARPA is Congress's latest effort to address the harms, including economic harms, that COVID-19 has caused. It is a wide-ranging law that commits the federal government to spending up to roughly $1.9 trillion on a host of goods, services, and forms of government assistance. Included in the ARPA is a provision meant to provide aid directly to the States to assist with their budget woes. In particular, the ARPA provides some $195.3 billion in aid to the States and the District of Columbia. See 42 U.S.C. § 802(b)(3)(A).³ Ohio's share of the pot, should it elect to take it, is $5.5 billion. According to Ohio's Motion, that amounts to roughly 7.4% of the State's total spending last year. (Mot. for Prelim. Inj., Doc. 3, #33).

As is sometimes the case with federal dollars, the money comes with certain strings attached. In particular, to qualify for the funding, a State must "provide the Secretary [of the Treasury] with a certification, signed by an authorized officer of such State ... that such State ... requires the payment ... to carry out the activities specified in subsection (c) ... and will use any payment under this section ... in compliance with subsection (c)." 42 U.S.C. § 802(d)(1). The Secretary is to "make the payment required for the State ... not later than 60 days after the date on which th[at] certification ... is provided to the Secretary." Id. § 802(b)(6)(A)(i).

As the above language suggests, the conditions themselves are set forth in subsection (c). That subsection provides that a State shall only use the funds to cover costs incurred by the State:

(A) to respond to the public health emergency with respect to [COVID-19] or its negative economic impacts ...

(B) to respond to workers performing essential work during the COVID-19 public health emergency ...

(C) for the provision of government services to the extent of the reduction in revenue of such State ... relative to revenues collected in the most recent full fiscal year of the State ... prior to the [pandemic] ... or

(D) to make necessary investments in water, sewer, or broadband infrastructure.

Id. § 802(c)(1)(A)–(D). And the State must use the funds by December 31, 2024. Id. § 802(c)(1). Ohio does not dispute the validity of any of those conditions. But the ARPA also imposes one more term. In particular, in a section labeled "Further Restriction On Use Of Funds," the ARPA provides that:

"(A) IN GENERAL.—A State or territory shall not use the funds provided under this section ... to either directly or indirectly offset a reduction in the net tax revenue of such State or territory resulting from a change in law, regulation, or administrative interpretation during the covered period that reduces any tax (by providing for a reduction in a rate, a rebate, a deduction, a credit, or otherwise) or delays the imposition of any tax or tax increase.

Id. § 802(c)(2)(A). Ohio refers to this provision as the Tax Mandate, and that provision forms the gist of the dispute here.

C. Ohio's Lawsuit And The Pending Motion.

In its lawsuit, Ohio claims that the Tax Mandate is unconstitutional. This is so, Ohio says, for two reasons. First, the Tax Mandate allegedly violates the Spending Clause in two ways—it is both unconstitutionally coercive, and unconstitutionally ambiguous. (Compl., Doc. 1, #9–10). And second, Ohio claims that the Tax Mandate violates the Tenth Amendment in that it unconstitutionally commandeers state taxing authority. (Id. at #11).

On the same day Ohio filed its Complaint, March 17, 2021, the State filed a Motion for a Preliminary Injunction and Memorandum in Support (Doc. 3). In that Motion, the State requested the Court to "enjoin the Tax Mandate." The Court established a briefing schedule for the Motion, and several amici filed briefs supporting Ohio.

The Secretary opposed Ohio's requested relief. More specifically, the Secretary first claimed that the Court does not have jurisdiction, as (1) Ohio lacks standing, and (2) Ohio's claims are not ripe. (Resp. in Opp'n, Doc. 29, #237). Second, the Secretary asserted that Ohio has failed to show that a preliminary injunction is warranted. (Id. at #238). Finally, the Secretary argued that any injunctive relief should be limited solely to Ohio. (Id. at #263).

The parties completed briefing on April 22, 2021, and the Court heard oral argument on April 30, 2021. At the argument, Ohio clarified that the relief it is seeking through its Motion is an Order enjoining the Secretary from enforcing the Tax Mandate only as against the State of Ohio.

Two additional factual developments have occurred since argument. First, two days ago, the Secretary provided this Court a Notice of Interim Final Rule (Doc. 33), attaching the interim rule (Doc. 33–1). In the Notice, the Secretary explained that the rule "has been submitted to the Office of the Federal Register (OFR) for publication in the Federal Register." (Notice of Interim Final Rule, Doc. 33, #356). Second, yesterday Ohio filed a combined Motion for Leave to File Response to Notice and the corresponding Response to Notice.⁴ (Doc. 34). With the impact of those additional filings in mind, Ohio's Motion is now pending.

LAW AND ANALYSIS

Resolving the pending motion requires consideration of both jurisdictional and merits issues. Typically, when a jurisdictional challenge is raised, the Court would start its analysis there. Here, though, the two issues are inextricably intertwined. That is because the questions of (1) whether Ohio has suffered an injury in fact, and (2) whether its suit is ripe both turn to a large extent on how the injury is characterized. That in turn requires the Court to analyze the nature of the rights that the Spending Clause confers to the States when offered conditional funding. But that issue is also closely related to the...