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United States House of Representatives v. Burwell

United States District Court, D. Columbia.

September 9, 2015

UNITED STATES HOUSE OF REPRESENTATIVES, Plaintiff,
v.
SYLVIA MATTHEWS BURWELL in her official capacity as Secretary of the United States Department of Health and Human Services, et al., Defendants

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[Copyrighted Material Omitted]

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[Copyrighted Material Omitted]

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          For UNITED STATES HOUSE OF REPRESENTATIVES, Plaintiff: Eleni Maria Roumel, Isaac Benjamin Rosenberg, Kerry William Kircher, Kimberly Ann Hamm, Todd Barry Tatelman, William Bullock Pittard, IV, U.S. HOUSE OF REPRESENTATIVES, Office of the General Counsel, Washington, DC; Jonathan Robert Turley, GEORGE WASHINGTON UNIVERSITY LAW SCHOOL, Washington, DC.

         For SYLVIA M. BURWELL, in her official capacity as Secretary of the United States Department of Health and Human Services, UNITED STATES DEPARTMENT OF HEALTH AND HUMAN SERVICES, JACOB J. LEW, in his official capacity as Secretary of the United States Department of the Treasury, UNITED STATES DEPARTMENT OF THE TREASURY, Defendants: Joel L. McElvain, LEAD ATTORNEY, U.S. DEPARTMENT OF JUSTICE, Civil Division, Washington, DC.

         For STATE OF WEST VIRGINIA, Movant: Elbert Lin, LEAD ATTORNEY, OFFICE OF THE WEST VIRGINIA ATTORNEY GENERAL, Charleston, WV.

         For STATE OF OKLAHOMA, Movant: Patrick R. Wyrick, LEAD ATTORNEY, ATTORNEY GENERAL OF OKLAHOMA, Oklahoma City, OK.

         For STATE OF LOUISIANA, Movant: James D. Caldwell, LEAD ATTORNEY, LOUISIANA ATTORNEY GENERAL, Baton Rouge, LA.

         For STATE OF SOUTH CAROLINA, Movant: Alan McCrory Wilson, LEAD ATTORNEY, OFFICE OF THE ATTORNEY GENERAL, STATE OF SOUTH CAROLINA, Columbia, SC.

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         MEMORANDUM OPINION

         ROSEMARY M. COLLYER, United States District Judge.

         Article I of the United States Constitution established the Congress, which comprises a House of Representatives and a Senate. U.S. Const. art. I, § 1. Only these two bodies, acting together, can pass laws--including the laws necessary to spend public money. In this respect, Article I is very clear: " No Money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law . . . ." U.S. Const. art. I, § 9, cl. 7.

         Through this lawsuit, the House of Representatives complains that Sylvia Burwell, the Secretary of Health and Human Services, Jacob Lew, the Secretary of the Treasury, and their respective departments (collectively the Secretaries) have spent billions of unappropriated dollars to support the Patient Protection and Affordable Care Act. The House further alleges that Secretary Lew and Treasury have, under the guise of implementing regulations, effectively amended the Affordable Care Act's employer mandate by delaying its effect and narrowing its scope.

         The Secretaries move to dismiss, arguing that the House lacks standing to sue. They argue that only the Executive has authority to implement the laws, and urge this Court to stay out of a quintessentially political fight in which the House is already well armed. The House opposes, adamant that it has been injured in several concrete ways, none of which can be ameliorated through the usual political processes.

         The only issue before the Court is whether the House can sue the Secretaries; the merits of this lawsuit await another day. Although no precedent dictates the outcome, the case implicates the constitutionality of another Branch's actions and thus merits an " especially rigorous" standing analysis. Ariz. State Legislature v. Ariz. Indep. Redistricting Comm'n, 135 S.Ct. 2652, 2665 n.12, 192 L.Ed.2d 704 (2015). The House sues, as an institutional plaintiff, to preserve its power of the purse and to maintain constitutional equilibrium between the Executive

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and the Legislature. If its non-appropriation claims have merit, which the Secretaries deny, the House has been injured in a concrete and particular way that is traceable to the Secretaries and remediable in court. The Court concludes that the House has standing to pursue those constitutional claims.

         In contrast, the House's claims that Secretary Lew improperly amended the Affordable Care Act concern only the implementation of a statute, not adherence to any specific constitutional requirement. The House does not have standing to pursue those claims. The Secretaries' motion to dismiss will be denied as to the former and granted as to the latter.

         I. FACTS

         Some background is necessary on the appropriations process under our Constitution, the workings of the statute at issue, and how this case came about. The facts alleged in the House's complaint must be taken as true in this procedural posture. Baird v. Gotbaum, 792 F.3d 166, 169 n.2 (D.C. Cir. 2015).

         A. Constitutional Overview

         Congress passes all federal laws in this country. U.S. Const. art. I, § 1 (" All legislative Powers herein granted shall be vested in a Congress of the United States[.]" ). That includes both laws that authorize the expenditure of public monies and laws that ultimately appropriate those monies. Authorization and appropriation by Congress are nonnegotiable prerequisites to government spending: " No Money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law . . . ." U.S. Const. art. I, § 9, cl. 7; see also United States v. MacCollom, 426 U.S. 317, 321, 96 S.Ct. 2086, 48 L.Ed.2d 666 (1976) (" The established rule is that the expenditure of public funds is proper only when authorized by Congress, not that public funds may be expended unless prohibited by Congress." ). The distinction between authorizing legislation and appropriating legislation is relevant here and bears some discussion.

         Authorizing legislation establishes or continues the operation of a federal program or agency, either indefinitely or for a specific period. GAO Glossary at 15.[1] Such an authorization may be part of an agency or program's organic legislation, or it may be entirely separate. Id. No money can be appropriated until an agency or program is authorized, although authorization may sometimes be inferred from an appropriation itself. Id.

         Appropriation legislation " provides legal authority for federal agencies to incur obligations and to make payments out of the Treasury for specified purposes." Id. at 13. Appropriations legislation has " the limited and specific purpose of providing funds for authorized programs." Andrus v. Sierra Club, 442 U.S. 347, 361, 99 S.Ct. 2335, 60 L.Ed.2d 943 (1979)

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(quoting Tennessee Valley Auth. v. Hill, 437 U.S. 153, 190, 98 S.Ct. 2279, 57 L.Ed.2d 117 (1978)). An appropriation must be expressly stated; it cannot be inferred or implied. 31 U.S.C. § 1301(d). It is well understood that the " a direction to pay without a designation of the source of funds is not an appropriation." U.S. Government Accounting Office, GAO-04-261SP, Principles of Federal Appropriations Law (Vol. I) 2-17 (3d ed. 2004) (GAO Principles ). The inverse is also true: the designation of a source, without a specific direction to pay, is not an appropriation. Id. Both are required. See Nevada, 400 F.3d at 13-14. An appropriation act, " like any other statute, [must be] passed by both Houses of Congress and either signed by the President or enacted over a presidential veto." GAO Principles at 2-45 (citing Friends of the Earth v. Armstrong, 485 F.2d 1, 9 (10th Cir. 1973); Envirocare of Utah Inc. v. United States, 44 Fed.Cl. 474, 482 (1999)).

         Appropriations come in many forms. A " permanent" or " continuing" appropriation, once enacted, makes funds available indefinitely for their specified purpose; no further action is needed from Congress. Nevada, 400 F.3d at 13; GAO Principles at 2-14.[2] A " current appropriation," by contrast, allows an agency to obligate funds only in the year or years for which they are appropriated. GAO Principles at 2-14. Current appropriations often give a particular agency, program or function its spending cap and thus constrain what that agency, program, or function may do in the relevant year(s). Most current appropriations are adopted on an annual basis and must be re-authorized in each fiscal year. Such appropriations are an integral part of our constitutional checks and balances, insofar as they tie the Executive Branch to the Legislative Branch via purse string.

         B. Statutory Overview

         The 111th Congress enacted the Patient Protection and Affordable Care Act, Pub. L. No. 111-148, 124 Stat. 119 (2010) (ACA), " to increase the number of Americans covered by health insurance and decrease the cost of health care." Nat'l Fed'n of Indep. Bus. v. Sebelius, 132 S.Ct. 2566, 2580, 183 L.Ed.2d 450 (2012); see also King v. Burwell, 135 S.Ct. 2480, 2485, 192 L.Ed.2d 483 (2015) (" The [ACA] adopts a series of interlocking reforms designed to expand coverage in the individual health insurance market." ). No party disputes here whether the ACA was validly adopted by both houses of Congress and signed into law by the President.[3]

         1. Subsidies under Sections 1401 and 1402 of the Affordable Care Act

         The ACA provides monetary subsidies in several forms; two are relevant here. First, in order to assist certain individuals with the cost of insurance on the newly-established exchanges, Congress enacted a " premium tax credit" under the Internal Revenue Code for coverage of statutory beneficiaries with household incomes from 100% to 400% of the federal poverty level. See 26 U.S.C. § 36B; 42 U.S.C. § § 18081, 18082; King, 135 S.Ct. at 2487. These premium tax credits were enacted in Section 1401 of the ACA, and the Court will

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therefore refer to this subsidy as the " Section 1401 Premium Tax Credit."

         Second, Section 1402 of the ACA requires insurers to reduce the cost of insurance to certain, eligible statutory beneficiaries. See 42 U.S.C. § 18071(a)(2). Specifically, these " cost-sharing" provisions require insurance companies that offer qualified health plans through the ACA to reduce the out-of-pocket cost of insurance coverage for policyholders who qualify. See generally id. § 18071.[4] The federal government then offsets the added costs to insurance companies by reimbursing them with funds from the Treasury. See 42 U.S.C. § 18071(c)(3) (" An issuer of a qualified health plan making reductions under this subsection shall notify the Secretary of such reductions and the Secretary shall make periodic and timely payments to the issuer equal to the value of the reductions." ). The Court will refer to this subsidy as the " Section 1402 Cost-Sharing Offset."

         Eligibility determinations for either subsidy can be made in advance, as can payments. See 42 U.S.C. § 18082(a)(1) (requiring the Secretaries of Health and Human Services (HHS) and Treasury to consult and establish a program to make advance determinations " with respect to the income eligibility of individuals . . . for the premium tax credit allowable under section 36B of title 26 and the cost-sharing reductions under section 18071" ). The Section 1401 Premium Tax Credits are paid directly to insurance companies, who then " reduce the premium charged the insured for any period by the amount of the advance payment." Id. § 18082(c)(2)(B)(i). Treasury pays Section 1402 Cost-Sharing Offsets to the insurers " at such time and in such amount as the Secretary [of HHS] specifies." Id. § 18082(c)(3).

         The House alleges that there is a marked, and constitutionally significant, difference in the way these two subsidies are funded. See Compl. ¶ 29 (citing 31 U.S.C. § 1324). Essentially, the House contends that Section 1401 Premium Tax Credits are funded by a permanent appropriation in the Internal Revenue Code, whereas Section 1402 Cost-Sharing Offsets must be funded and re-funded by annual, current appropriations. Id. The House alleges further that " Congress has not, and never has, appropriated any funds (whether through temporary appropriations or permanent appropriations) to make any Section 1402 Offset Program payments to Insurers." Id. ¶ 28.

         2. The Affordable Care Act's Employer Mandate

         Apart from its monetary subsidies, the ACA provides incentives for employers to offer health insurance coverage to their employees. Under the title " Shared Responsibility for Employers Regarding Health Coverage," Section 1513 of the ACA adds a new chapter to the Internal Revenue Code that subjects every non-conforming employer to an " assessable payment," i.e., a tax. See 26 U.S.C. § 4980H(a). Cf. id. § 4980H(c)(7) (" For denial of deduction for the tax imposed by this section . . . ." ) (emphasis added); Independent Business, 132 S.Ct. at 2580, 2601 (concluding that the " [s]hared responsibility payment" in the ACA's individual mandate, 26 U.S.C. § 5000A(b)(1), could

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" reasonably be read as a tax" ). The substance of Section 1513 is only relevant here insofar as it requires any " applicable large employer" to " offer its full-time employees (and their dependents) the opportunity to enroll in minimum essential coverage under an eligible employer-sponsored plan" or else to pay the tax. 26 U.S.C. § 4980H(a)-(b). Section 1513 concludes: " The amendments made by this section shall apply to months beginning after December 31, 2013." Id. § 4980H(d).

         C. Budgetary Requests and Appropriation Acts

         The House alleges that the " Administration repeatedly has acknowledged that it requires temporary appropriations to fund Section 1402," namely through the budget request process since the ACA's enactment. Compl. ¶ 31. After the May 28, 2015 hearing on the pending motion, the Court ordered supplemental briefing on these budget requests. See 6/1/2015 Minute Order. The parties filed a joint stipulation of facts in response, see Dkt. 30 (Stipulation).[5] The stipulated facts are clear, even if the parties dispute their relevance. See Stipulation at 1-2.[6]

         On April 10, 2013, the Office of Management and Budget submitted its Fiscal Year 2014 Budget of the U.S. Government. Budget [Dkt. 30-1]. The Appendix to that budget contained " more detailed financial information on individual programs and appropriation accounts than any of the other budget documents." App. to Budget [Dkt. 30-2] at 3. The Appendix included, among other things, " explanations of the work to be performed and the funds needed." Id. In the April 2013 Appendix, the Administration requested the following:

For carrying out, except as otherwise provided, sections 1402 [Reduced Cost-Sharing] and 1412 of the Patient Protection and Affordable Care Act (Public Law 111-148), such sums as necessary. For carrying out, except as otherwise provided, such sections in the first quarter of fiscal year 2015 (including upward adjustments to prior year payments), $1,420,000,000.

Id. at 453.

         On the same day, HHS separately submitted to the relevant appropriations committees a Justification of Estimates for Appropriations Committees. Justification [Dkt. 30-3]. In that document, HHS explained:

The FY 2014 request for Reduced Cost Sharing for Individuals Enrolled in Qualified Health Plans is $4.0 billion in the first year of operations for Health Insurance Marketplaces, also known as Exchanges. CMS also requests a $1.4 billion advance appropriation for the first quarter of FY 2015 in this budget to permit CMS to reimburse issuers who provided reduced cost-sharing [under Section 1402] in excess of the monthly advanced payments received in FY 2014 through the cost-sharing reduction reconciliation process.

Id. at 14. In its conclusion, HHS referred to the " Cost-Sharing Reductions" as one

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of " five annually-appropriated accounts." Id. In a later graphic entitled " Reduced Cost Sharing," HHS listed " --" under " Budget Authority" for " FY 2013 Current Law," id. at 193. That fact indicates that no prior appropriation applied to Section 1402. HHS compared the Section 1402 program to " other appropriated entitlements such as Medicaid." Id.

         On May 17, 2013, the Administration submitted a number of amendments to its budget request. Amendments [Dkt. 30-4]. The House contends that these amendments are relevant because as they " did not withdraw or otherwise alter in any respect the Administration's FY 2014 request for an annual appropriation for the Section 1402 Offset Program," Pl. Supp. Mem. at 7 n.6.[7]

         On May 20, 2013, OMB issued its Sequestration Preview Report for Fiscal Year 2014, which listed " Reduced Cost Sharing" as subject to sequestration in the amount of $286 million, or 7.2% of the requested appropriation. Report [Dkt. 30-18] at 4. The House believes that because " payments properly made under [Section 1401 of the ACA] are exempt from sequestration," OMB's inclusion of Section 1402 Cost-Sharing Offsets on a list of sequestration-required programs was " an acknowledgement that the permanent appropriation codified at 31 U.S.C. § 1324 cannot be the funding source for such payments." Stipulation at 7 n.2.

         On July 13, 2013, the Senate Appropriations Committee adopted S. 1284, a bill appropriating monies to HHS and other agencies. An accompanying report stated that " [t]he Committee recommendation does not include a mandatory appropriation, requested by the administration, for reduced cost sharing assistance . . . as provided for in sections 1402 and 1412 of the ACA." S. Rep. No. 113-71, 113th Cong., at 123 (2013). No subsequent consideration of funding for Section 1402 appears in the record.

         On October 17, 2013, the President signed into law the first of two continuing resolutions to keep the government running pending a consolidated appropriations act. See Continuing Appropriations Act for 2014, Pub. L. 113-46, 127 Stat. 558 (2013); Joint Resolution, Pub. L. 113-73, 128 Stat. 3 (2014). Neither resolution included an appropriation for the Section 1402 Cost-Sharing Offset program.

         Finally on January 17, 2014, the President signed the Consolidated Appropriations Act for 2014, Pub. L. 113-76, 128 Stat. 5 (2014). That law similarly did not appropriate monies for the Section 1402 Cost-Sharing Offset program.[8] Indeed, the Secretaries have conceded that " [t]here was no 2014 statute appropriating new

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money" for the Section 1402 Cost-Sharing Offset program. 5/28/15 Tr. at 27.

         D. Background of this Case

         The House alleges that the Secretaries, despite Congress's refusal to fund the Section 1402 Cost-Sharing Offsets through a current appropriation, nonetheless drew and spent public monies on that program beginning in January 2014. Compl. ¶ 35. The House also alleges that Secretary Lew has effectively " legislate[d] changes" to Section 1513, both by delaying the employer mandate beyond December 31, 2013 and by altering the percentage of employees that must be offered coverage. Id. ¶ ¶ 45, 46. These changes to the mandate are said by the House to have " usurp[ed] its Article I legislative authority." Id. ¶ 50.

         To right these perceived wrongs, the House took legal action. On July 30, 2014, it adopted House Resolution 676, which authorized the Speaker of the House to file suit in federal court against the head of an Executive department or agency for " failure . . . to act in a manner consistent with that official's duties under the Constitution and laws of the United States with respect to implementation of any provision of the Patient Protection and Affordable Care Act." H.R. Res. 676, 113th Cong. (2014). Section 3(a) of the same Resolution authorized the House's Office of General Counsel, assisted by outside counsel, to represent the House in court. Id. After this suit commenced, the 113th Congress ended and the 114th Congress began. The new House adopted House Resolution 5 on January 6, 2015, which provided in part that the 114th House of Representatives could succeed the 113th House of Representatives as plaintiff in this lawsuit. H.R. Res. 5, § 3(f)(2)(A), 114th Cong. (2015).

         The Secretaries moved to dismiss the case on January 26, 2015. See Mot. to Dismiss [Dkt. 20] (Mot.); Mem. in Support [Dkt. 20-1] (Mem.). The House opposes. Mem. in Opp'n [Dkt. 22] (Opp'n). The Secretaries have filed a reply. Reply to Opp'n to Mot. [Dkt. 26] (Reply). Oral argument was held on May 28, 2015. The motion is thus ripe for resolution.[9]

         II. LEGAL STANDARDS

         The Court will analyze the pending motion under the following legal standards.

         A. Motion to Dismiss

         The Secretaries move to dismiss the complaint under the Federal Rule of Civil Procedure 12(b)(1) for lack of subject matter jurisdiction and under Rule 12(b)(6) for failure to state a claim upon which relief can be granted.

         1. Rule 12(b)(1)

         Pursuant to Rule 12(b)(1), a defendant can move to dismiss a complaint, or any portion thereof, for lack of subject matter jurisdiction in federal court. Fed.R.Civ.P. 12(b)(1). No action by the parties can confer subject matter jurisdiction on a federal court, because subject matter jurisdiction is both a statutory requirement and an Article III requirement. Akinseye v. District of Columbia, 339 F.3d 970, 971, 358 U.S. App.D.C. 56 (D.C. Cir. 2003). The party claiming subject matter jurisdiction bears the burden of demonstrating that such jurisdiction exists. Khadr v. United States, 529 F.3d 1112, 1115, 381 U.S. App.D.C. 408 (D.C. Cir. 2008); see Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377, 114 S.Ct. 1673, 128 L.Ed.2d 391 (1994) (noting that federal courts have limited jurisdiction and that " [i]t is to be presumed that a cause lies

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outside this limited jurisdiction, and the burden of establishing the contrary rests upon the party asserting jurisdiction" ) (internal citations omitted). When reviewing a motion to dismiss for lack of jurisdiction under Rule 12(b)(1), a court must construe the complaint liberally, giving the plaintiff the benefit of all inferences that can be derived from the facts alleged. Barr v. Clinton, 370 F.3d 1196, 1199, 361 U.S. App.D.C. 472 (D.C. Cir. 2004). Nevertheless, " the court need not accept factual inferences drawn by plaintiffs if those inferences are not supported by facts alleged in the ...


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