Why the challenge to federal exchanges moved ahead in D.C. court today

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It took nearly two hours for D.C. Federal District Court senior judge Paul Friedman to read aloud his thorough and clear “oral” opinion this morning in Halbig et al. v. Sebelius et al. The bottom line is that the group of plaintiffs — four individuals and three employers – all get to come back again for the next round in the case (a motion for summary judgment and some final rulings on the merits). Judge Friedman denied the federal government’s motion to dismiss on standing, ripeness, and other jurisdictional grounds.

The court did deny the plaintiffs’ motion for a preliminary injunction to halt enforcement of the IRS regulation that authorizes federal tax credits to reduce the costs of coverage offered in federal-run health exchanges, which means implementation of the law will go ahead for now.

Judge Friedman also signaled which legal issues he found open to further argument at the next stage of the case, but most important of all, he seemed firmly resolved to reach a relatively quick final decision in the case (certainly well before a projected last-train-out-of-the-station date of February 15 for any individuals needing to decide whether or not individual mandate penalties might apply to them next year). Expect both sides to agree soon to an accelerated schedule for further legal briefing in the case.

Here a few interpretive observations made reading between the lines while attending this morning’s session:

 The plaintiffs almost ran the table on standing arguments involving individuals in the case, even though the actual dollar amount of likely harm was not that large. Those economic cost numbers actually might be higher for three relatively older individual plaintiffs in a related case in another federal court (in the eastern district of Virginia). An October 31 hearing in Richmond already is scheduled for that case.

 The three employer plaintiffs in the D.C. case might run into some standing problems during the next stage of proceedings. Judge Friedman seemed surprisingly receptive to the government’s arguments that they were trying to “leverage” the injuries of other parties — the employers’ employees – who were not before the court. Their future injuries (such as if they later sought tax credits for exchange coverage) might not be able to be fully redressed in any decision in this case that invalidated the IRS regulation and the tax subsidies it facilitates. The court also seemed at least a little bit open to further arguments about whether the Anti-Injunction Act might bar any (indirect) challenge to the employer mandate because the harms haven’t occurred yet, despite recent rulings otherwise in the Fourth and Tenth Circuit Courts of Appeals. Note that another case recently filed in Indiana federal district court to challenge the IRS regulations relies primarily on the injuries to local-government school corporations in their role as employers. Plaintiffs’ attorneys in the D.C. and Indiana lawsuits may have heavier legal lifting ahead.

 Ripeness is no problem for the plaintiffs for Judge Friedman, who appears to see the lawsuit as a standard challenge of a final federal regulation under the Administrative Procedure Act.  Lawfulness of this regulation “is a purely legal question,” said Judge Friedman, and the rule is “beginning to affect people now.”

(Look for a few more tea-leaves readings in this space later on the ruling on the motion for preliminary injunction, and what that tells us about the future decision on the merits.)

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Thomas P.
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