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Posts Tagged ‘jurisdiction’

I recently posted to SSRN a draft version of the paper that arose out of my participation in the “Everything But the Merits” symposium on the healthcare litigation held at the University of Richmond School of Law last November (11/11/11). The papers from the symposium will be published in the March 2012 issue of the University of Richmond Law Review.

The title of my paper is The Anti-Injunction Act, Congressional Inactivity, and Pre-Enforcement Challenges to Section 5000A of the Tax Code.

Abstract below.

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Earlier this week, a split Fourth Circuit panel result two knotty jurisdictional questions. The first relates to appellate jurisdiction  in a case that has been transferred from a district court in one circuit to a district court in another circuit. The second relates to the commercial activities exception of the Foreign Sovereign Immunities Act. Judge Duncan wrote the majority opinion in Wye Oak Technology, Inc. v.  Republic of Iraq, in which Judge Osteen (M.D.N.C.) joined. Judge Shedd dissented.

Wye Oak sued the Republic of Iraq for breach of contract in the United States District Court for the Eastern District of Virginia. The underlying contract was between Wye Oak and Iraq’s Ministry of Defense. Iraq moved to dismiss for  lack of jurisdiction (both subject-matter jurisdiction and personal jurisdiction) and for improper venue. The subject-matter jurisdiction argument was based on the Foreign Sovereign Immunities Act. Wye Oak  invoked the commercial activities exception. Iraq then argued that the commercial activities exception did not apply to the claim against Iraq, because the contract was entered into by Iraq’s Ministry of Defense–a separate legal person–rather than Iraq itself. The District Court held that the commercial activities exception did apply after determining that Iraq and Iraq’s Ministry of Defense should be “treated as one and the same” for purposes of the FSIA. The District Court also held, however,  that venue was improper, and immediately transferred the case to the United States District Court for the District of Columbia. The transferee court stayed the case while the parties appealed the denial of the motion to dismiss to the Fourth Circuit.

The Fourth Circuit affirmed, holding that it possessed appellate jurisdiction notwithstanding the transfer, and that Iraq and Iraq’s Ministry of Defense were not separate legal purpose persons for purposes of the FSIA’s commercial activities exception.

Judge Shedd dissented from the holding regarding appellate jurisdiction over the now-transferred case.

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In answering the Republican claim that jurisdiction over the murder committed by Thomas Nash (aka Jonathan Robbins) against a foreign citizen on a British ship was established by arraignments in a federal court in Trenton, Congressman John Marshall argued:

It has also been contended that the question of jurisdiction was decided at Trenton, by receiving indictments against persons there arraigned for the same offence, and by retaining them for trial after the return of the habeas corpus.

Every person in the slightest degree acquainted with judicial proceedings, knows that an indictment is no evidence of jurisdiction; and that, in criminal cases, the question of jurisdiction will seldom be made but by arrest of judgment after conviction.

The proceedings, after the return of the habeas corpus, only prove that the case was not such a case as to induce the Judge immediately to decide against his jurisdiction. The question was not free from doubt, and, therefore, might very properly be postponed until its decision should become necessary.

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Earlier this week, the Fourth Circuit released an unpublished per curiam opinion in Zeno v. United States that affirms the dismissal of claims under the FTCA and state law. The Fourth Circuit held that the FTCA claims were filed late and that the state claims were barred by collateral estoppel. The panel that issued the per curiam opinion consisted of Judges Duncan and Agee, and Senior Judge Keith (of the Sixth Circuit).

One part of the ruling that may have benefited from additional elaboration was the discussion of the dismissal of the FTCA claims. The district court dismissed the FTCA claims for lack of subject-matter jurisdiction upon concluding that the plaintiffs alleged only intentional torts. The Fourth Circuit did not address this basis of the district court’s opinion, but instead affirmed on the alternative ground that the claims were filed too late. The panel treated this late filing as a defect in subject-matter jurisdiction. By doing so, the panel avoided the need to address whether the federal government’s motion to dismiss for untimeliness, filed just one week before oral argument, was itself untimely.

The Fourth Circuit relied on circuit precedent, Gould v. United States, 905 F.2d 738 (4th Cir. 1990) (en banc), that treats filing outside of the FTCA statute of limitations as a jurisdictional defect. The Gould decision, however, predates a series of cases in the past several years in which the Supreme Court has reconsidered the “jurisdictionality” of various rules.

I have not undertaken extensive independent research, but this analysis by Adam Bain (Senior Counsel, Environmental Torts Section, Torts Branch, Civil Division, United States Department of Justice) indicates that, as of November 2010, the circuits were split on the jurisdictionality of the FTCA statute of limitations. The closest on-point Supreme Court precedent appears to be John R. Sand & Gravel Co. v. United States, 552 U.S. 130 (2008). In John R. Sand, the Supreme Court held that the statute of limitations for bringing claims against the United States in the United States Court of Federal Claims was jurisdictional.

It very well could be that a thorough analysis of the continuing viability of Gould in light of intervening Supreme Court jurisdictionality precedent  (or even some quick research identifying a controlling precedent containing such analysis) would reveal that the panel’s decision to treat the FTCA statute of limitations as jurisdictional was correct. But the casual invocation of Gould appears to be too quick.

It is obviously much easier, as an academic observer, to suggest that more analysis would have been helpful, than it is to decide, as a judge, how much analysis to provide. But when a court of appeals affirms on alternate grounds, and particularly when the decision on the alternate ground lets the government off the hook for a late-filed claim of untimeliness, an in-depth analysis would appear to be particularly warranted. Because those more familiar with the case could have had many reasons for concluding otherwise, I flag the jurisdictionality issue more for the purpose of bringing attention to the issue going forward than to second-guess this particular decision looking backward.

An examination of this issue by the Fourth Circuit may be warranted in an appropriate case. A quick search as I was writing this post revealed a thorough discussion of the jurisdictionality of the FTCA statute of limitations in an opinion by Magistrate Judge Auld of the Middle District of North Carolina issued this past Friday in Smith v. United States. The issue in that case is the availability of equitable tolling, not waiver or forfeiture by the government through an untimely raising of the statute of limitations, but the “jurisdictionality” characterization is important to both analyses. Guidance from the Fourth Circuit on this issue could have obviated the need for such an extensive legal analysis.


					

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Some challengers to the individual mandate now assert that the federal tax Anti-Injunction Act is not jurisdictional. Instead, they claim, it is a defense. From this characterization, they argue that the government has forfeited the AIA as a bar to the challenges.

The non-jurisdictional characterization of the federal tax AIA faces a number of difficulties, including the text of the statute and its authoritative construction by the Supreme Court as a jurisdictional bar (e.g., Enoch v. Williams Packing & Nav. Co., 370 U.S. 1, 5 (1962) (“The object of § 7421 (a) is to withdraw jurisdiction from the state and federal courts to entertain suits seeking injunctions prohibiting the collection of federal taxes.”); Bob Jones Univ. v. Simon, 416 U.S. 725 (1974) (affirming dismissal for lack of jurisdiction)) . Given these difficulties, it is not surprising to see inventive arguments about “jurisdictionality” appear in the recent cert filings.

One argument advanced by the NFIB in its response to the federal government’s cert petition in Florida v. HHS is that the Supreme Court has previously accepted the federal government’s “express ‘waiver of a defense under’ the AIA’s predecessor statute.” (NFIB BIO at 17, quoting Helvering v. Davis, 301 U.S. 619, 639-40 (1937).) The NFIB’s response does not elaborate too much on this argument–as perhaps may be expected given the setting in which the argument appears.

Although understandable, the absence of elaboration is unfortunate because a look at Helvering v. Davis suggests that the quotation lifted out of it by the NFIB has been misdeployed. The AIA provides that “no suit for the purpose of restraining the assessment or collection of any tax shall be maintained in any court.” The suit in Helvering v. Davis was not such a suit. It was a shareholder suit against a corporation to prevent the corporation from paying a tax. As described by the Supreme Court:

This suit is brought by a shareholder of the Edison Electric Illuminating Company of Boston, a Massachusetts corporation, to restrain the corporation from making the payments and deductions called for by the act, which is stated to be void under the Constitution of the United States. The bill tells us that the corporation has decided to obey the statute, that it has reached this decision in the face of the complainant’s protests, and that it will make the payments and deductions unless restrained by a decree.

As the foregoing description indicates, the suit was not a suit brought against the federal government for the purpose of preventing the government from assessing or collecting a tax. Rather, the suit was brought against a corporation for the purpose of preventing it from paying a tax. Given the nature of the suit, it is far from obvious what relevance the government’s position as an intervenor defendant in the case has to the AIA’s status as a jurisdictional bar in Florida v. HHS. The plaintiffs in that case seek declaratory and injunctive relief against the federal government to prevent it from enforcing an exaction administered through the machinery of tax enforcement.

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Regardless of what one thinks about the constitutionality of the individual mandate in the Affordable Care Act, there appears to be an emerging bipartisan consensus that (1) its constitutionality should be resolved by the Supreme Court, and (2) the Supreme Court should act sooner rather than later (i.e., by the end of the October 2011 Term rather than in some later term). For example, the news coverage here in Virginia after yesterday’s rulings dismissing Virginia’s challenge and dismissing Liberty University’s challenge included statements urging Supreme Court review by both Republican Governor Bob McDonnell and Democrat Senator Mark Warner (relevant statements quoted below if you don’t want to click through).

In light of yesterday’s rulings, however, there is a real possibility that the Supreme Court could conclude that it lacks jurisdiction to rule on any of the challenges to the individual mandate. Challenges by the states have been dogged by questions about jurisdiction from the outset. The Fourth Circuit’s answer to some of those questions knocked out Virginia’s case. The 26-state mandate challenge in Florida v. HHS has so far dodged jurisdictional bullets because of the presence in that case of private parties, whose standing to challenge the mandate has generally been accepted by the federal courts. But yesterday’s Fourth Circuit ruling in Liberty University v. Geithner has breathed new life into a private-plaintiff jurisdictional problem that the parties to the mandate challenges had left for dead. Specifically, the Fourth Circuit held that the Tax Anti-Injunction Act prohibited individuals subject to the mandate from bringing a pre-enforcement challenge because such a suit was one to restrain the assessment or collection of a tax.

If there is a jurisdictional problem preventing both the private plaintiffs (who are subject to the individual mandate) and the State plaintiffs (who are not subject to the individual mandate) from having a federal court hear their constitutional challenges, then the Supreme Court cannot get to the merits of the mandate challenges any time soon.

One response may be to hope that the Supreme Court reads the Tax Anti-Injunction Act differently from the Fourth Circuit. That response may rest on wishful thinking. I need to study the relevant precedents more closely than I have previously, but Judge Motz’s opinion strikes me as persuasive. (See also the amicus brief filed by two former Commissioners of the IRS, Mortimer Caplin and Sheldon Cohen.)

In any event, there is no need to take a chance and rest the possibility of a mandate-challenge merits decision on speculation about how the Supreme Court will resolve the legal uncertainty about application of the Tax Anti-Injunction Act. The Act sets forth a statutory limitation that Congress can and should change to allow a pre-enforcement challenge to the individual mandate. Importantly, it appears that Congress can make this change effective immediately and can make clear that the change preserves jurisdiction over private-party challenges to the individual mandate that have already been filed. See Hamdan v. Rumsfeld, 548 U.S. 557, 576 (2006) (“We have in the past ‘applied intervening statutes conferring or ousting jurisdiction, whether or not jurisdiction lay when the underlying conduct occurred or when the suit was filed.'”), quoting Landgraf v. USI Film Products, 511 U.S. 244, 274 (1994); see also Landgraf v. USI Film Products, 511 U.S. 244, 274 (1994) (“[I]n Andrus v. Charlestone Stone Products Co.436 U.S. 604, 607-608, n. 6 (1978), we held that, because a statute passed while the case was pending on appeal had eliminated the amount in controversy requirement for federal question cases, the fact that respondent had failed to allege $10,000 in controversy at the commencement of the action was ‘now of no moment.'”). (My assessment of the legal soundness of a “retroactive” jurisdictional cure is based on just a little bit of digging around thus far, and I have not yet vetted the assessment with others, but the foregoing authorities appear to support it. Critical commentary is, of course, welcome on this or any other aspect of the post.)

In sum: The constitutional merits of the challenges to the individual mandate have divided largely (though not cleanly) along party lines, but there appears to be bipartisan agreement that the merits should be decided soon. A legislative fix to the Tax Anti-Injunction Act can eliminate a jurisdictional barrier that presents a serious possibility of causing extensive delay. Congress can and should get rid of that barrier and clear the way to prompt Supreme Court resolution of the constitutional challenges to the individual mandate.

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Statement by Gov. McDonnell (R-VA) on the need for prompt Supreme Court review of the constitutionality of the individual mandate:

“As federal courts across the country continue to come to differing conclusions on the merits of cases arguing the unconstitutionality of the federal health care law, today’s decision further exemplifies why these cases should be expedited to the nation’s highest court.  It is the Supreme Court that will ultimately determine whether the federal mandate on every citizen to purchase health insurance violates the U.S. Constitution.  States and businesses continue to expend time and money and languish in uncertainty as they try to come into compliance with a law that may ultimately be ruled unconstitutional. It is exasperating that the President and the Justice Department oppose a prompt resolution of this case through an expedited appeal.  America needs finality in this case.”

Statement by Sen. Mark Warner (D-VA) on the desirability of prompt Supreme Court review of the constitutionality of the individual mandate:

“This is going to end up getting decided by the Supreme Court and candidly, I hope, the sooner the better. I do believe there are a lot of parts of the health care reform law that make sense. I think there are some parts that need to be corrected.”

[Note: The Warner quotation comes directly from the linked video. The accompanying text misquotes Sen. Warner.]

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A short introduction to my Stanford Law Review piece on jurisdiction over Virginia’s challenge to the individual mandate: Health Care: Why Jurisdiction Matters | University of Richmond School of Law Alumni Magazine: Summer 2011.

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