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State of West Virginia v. United States Department of Health and Human Services

United States District Court, D. Columbia

October 30, 2015

State of West Virginia, Plaintiff,
v.
United States Department of Health and Human Services, Defendant

          For STATE OF WEST VIRGINIA, ex rel. Patrick Morrisey, Plaintiff: Elbert Lin, LEAD ATTORNEY, OFFICE OF THE WEST VIRGINIA ATTORNEY GENERAL, Solicitor General, Charleston, WV; Julie Marie Blake, OFFICE OF THE WEST VIRGINIA ATTORNEY GENERAL, Charleston, WV; Misha Tseytlin, OFFICE OF THE ATTORNEY GENERAL/WV, Charleston, WV.

         For U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES, Defendant: Daniel Schwei, LEAD ATTORNEY, U.S. DEPARTMENT OF JUSTICE, Civil Division, Washington, DC.

         For PACIFIC LEGAL FOUNDATION, Amicus: Joshua P. Thompson, LEAD ATTORNEY, PACIFIC LEGAL FOUNDATION, Sacramento, CA.

Page 95

         MEMORANDUM OPINION

         Amit P. Mehta, United States District Judge.

         I. INTRODUCTION

         As part of the Patient Protection and Affordable Care Act (" ACA" or " the Act" ), all individual health insurance plans are required to comply with eight federally mandated market requirements, unless a plan qualifies for a " grandfathering" exception. Responsibility for the enforcement of these market requirements is

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shared by the federal government and the States. The ACA does not compel the States to enforce the market requirements, but provides them with the option of doing so if they desire. If a State declines to enforce the Act or does so inadequately, the ACA provides that " the Secretary [of Health and Human Services] shall enforce" the Act's provisions " in such State."

         Initially, all health insurance plans that went into effect or were renewed after January 1, 2014, were required to be compliant with the ACA's eight market requirements. However, after some individuals and small businesses received cancellation notices from their insurance companies, the federal government--through Defendant Department of Health and Human Services (" HHS" )--instituted a change in policy (" the Administrative Fix" [1] or " the Fix" ). On November 14, 2013, HHS announced that, subject to certain conditions, it would refrain from enforcing the eight market requirements through October 1, 2014, thereby allowing consumers to retain coverage under non-compliant policies until that date. HHS further announced that it would encourage States to follow the federal government's lead and refrain from enforcing the eight market requirements. States, however, remained free to enforce the market requirements if they so wished. On March 5, 2014, HHS extended the Administrative Fix until October 1, 2016.

         Plaintiff State of West Virginia brought this action to challenge the Administrative Fix, claiming that the Fix violates the Affordable Care Act and the Administrative Procedure Act; constitutes an unlawful delegation of federal executive and legislative power to the States; and contravenes state sovereignty under the Tenth Amendment. The merits of the State's contentions, however, must take a back seat to the threshold issue advanced by HHS in its Motion to Dismiss: that West Virginia lacks standing to challenge the Administrative Fix.

         West Virginia asserts that it has standing because the Administrative Fix forces it to make an untenable choice: either regulate under the ACA or decline to regulate, in which case non-compliant policies will be sold within West Virginia's borders because of HHS' policy decision not to enforce the ACA's market requirements. These circumstances, West Virginia argues, have caused it to suffer two cognizable injuries. First, West Virginia contends that HHS' policy decision not to enforce the ACA has shifted enforcement responsibility to the State and made it the " exclusive and unfettered" enforcer of the ACA's eight market requirements within its borders. This purported shifting of enforcement responsibility, West Virginia claims, has caused it to suffer an " anti-commandeering" injury under the Tenth Amendment. Second, West Virginia contends that the shift in enforcement responsibility has made the federal government less politically accountable for the non-enforcement of the ACA at the expense of the States. West Virginia alleges that this heightened " political accountability" to its own citizens constitutes a cognizable injury.

         The court rejects these arguments and concludes that West Virginia lacks standing to challenge the Administrative Fix. The State's asserted injuries are not the kind of concrete and particularized injury-in-fact that is actual or imminent--and not conjectural or hypothetical--that is required to establish standing under the

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standards set by Lujan v. Defenders of Wildlife, 504 U.S. 555, 112 S.Ct. 2130, 119 L.Ed.2d 351 (1992). Therefore, because this court lacks subject matter jurisdiction over this matter, the court grants Defendant's Motion to Dismiss.

         II. BACKGROUND

         A. Factual Background

         Congress enacted the Patient Protection and Affordable Care Act (" ACA" or " the Act" ) on March 23, 2010. Def.'s Mem. in Supp. of Mot. to Dismiss, ECF No. 13-1, at 4 [hereinafter Def.'s Mem.]. Among the reforms initiated by the ACA was a requirement that all individual health insurance plans that went into effect or were renewed after January 1, 2014, were to meet eight federally mandated market requirements, unless they fell under a grandfathering exception. Compl., ECF No. 1, ¶ 20.

         The ACA established a regime of " cooperative federalism" to enforce these requirements. Under the Act, States are the first line of enforcement and can elect to use their resources to enforce the ACA, consistent with their own state laws. Id. ¶ ¶ 25-26; 42 U.S.C. § 300gg-22(a)(1) (" [E]ach State may require that health insurance issuers . . . meet the requirements of this part with respect to such issuers." ). If a State elects not to enforce the market requirements, the ACA then tasks the Secretary of the Department of Health and Human Services (" HHS" ) with making a " determination" as to whether " a State has failed to substantially enforce a provision (or provisions) in this part with respect to health insurance issuers in the State." 42 U.S.C. § 300gg-22(a)(2). If the Secretary makes such a " determination," the ACA provides that " the Secretary shall enforce such provision (or provisions) . . . in such State." Id. (emphasis added). In other words, if a State decides not to enforce the market requirements, the ACA authorizes the federal government to enforce the market requirements within a State's boundaries.

         In 2013, before the ACA's market requirements went into effect, health insurance companies began sending insurance cancellation letters to customers whose plans were neither covered by the grandfathering exception nor compliant with the ACA-mandated market requirements. Compl. ¶ 35. In response to those cancellations, on November 14, 2013, HHS instituted a policy change--what West Virginia refers to as " the Administrative Fix" --and announced that it would not, subject to two conditions, enforce the eight ACA-mandated market requirements until October 1, 2014. Id. ¶ ¶ 40, 44-45. Health insurers would be permitted to continue selling non-compliant insurance coverage as long as (1) the plans had been in effect on October 1, 2013, and (2) the insurers informed affected customers of their plans' non-compliance and the existence of the ACA's health insurance exchanges. Id. ¶ ¶ 45-46. HHS " encouraged" the States to adopt the same transitional policy and thus to refrain from state-level enforcement of the market reforms. Id. ¶ 49 & Ex. 6 at 3. On March 5, 2014, HHS extended the Administrative Fix until October 1, 2016. Id. ¶ ¶ 51-52.

         " West Virginia believes that its citizens should be able to keep their individual health insurance plans if they like them." E.g., id. ¶ 6. To that end, and in anticipation of the Act going into effect, West Virginia had given insurance carriers " the option to permit early renewal for 2013 policyholders," so that they could extend their current, possibly non-compliant insurance plans through 2014. Compl., Ex. 13, at 2. Due to this prior action, West Virginia Insurance Commissioner Michael D. Riley initially announced that West Virginia would not " accommodate the Administrative

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Fix" because individuals and businesses had " already made extensive changes to comply with the new law." Compl. ¶ ¶ 80-81 (internal citation omitted) (internal quotation marks omitted). After HHS extended the Administrative Fix until 2016, Commissioner Riley announced that West Virginia would refrain from enforcement. Id. ¶ 82-83. The State " committed not to restrict the renewal of certain non-compliant plans for policy years that end by October 2017," and left it " up to the [insurance] carriers as to whether they want[ed] to offer non-compliant plans through that much longer period." Id. (citation omitted) (internal quotation marks omitted).

         B. Procedural Background

         Four months after HHS extended the Administrative Fix, West Virginia filed this lawsuit. Its Complaint specifies the nature of its alleged injury. West Virginia alleges that the Administrative Fix caused it injury " by forc[ing it] to become the sole and exclusive enforcer of federal law within its borders" and by " reduc[ing] the political accountability of the federal government at the expense of the States." Id. ¶ ¶ 68-69.

         Soon after it filed its Complaint, West Virginia filed a Motion for Summary Judgment. ECF No. 7. HHS then moved to stay proceedings on the Motion for Summary Judgment, so that the court first could resolve the question of its subject matter jurisdiction over this suit. ECF No. 10. Judge Walton, who was then presiding over this case, granted HHS' motion, staying further briefing on West Virginia's Summary Judgment Motion. Order, ECF No. 17.

         HHS filed its Motion to Dismiss on October 17, 2014. ECF No. 13. The court heard argument on the Motion on September 3, 2015. ECF No. 32.

         III. LEGAL STANDARD

         On a motion to dismiss brought, as here, under Federal Rule of Civil Procedure 12(b)(1), a federal court must presume that it " lack[s] jurisdiction unless the contrary appears affirmatively from the record." DaimlerChrysler Corp. v. Cuno, 547 U.S. 332, 342 n.3, 126 S.Ct. 1854, 164 L.Ed.2d 589 (2006) (citation omitted) (internal quotation marks omitted). The burden of demonstrating the contrary, including establishing the elements of standing, " rests upon the party asserting jurisdiction." Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377, 114 S.Ct. 1673, 128 L.Ed.2d 391 (1994); Lujan v. Defenders of Wildlife, 504 U.S. 555, 561, 112 S.Ct. 2130, 119 L.Ed.2d 351 (1992). Standing must be demonstrated " for each claim" and " for each form of relief sought," DaimlerChrysler, 547 U.S. at 352 (citation omitted) (internal quotation marks omitted), " with the manner and degree of evidence required at the successive stages of litigation," Lujan, 504 U.S. at 561.

         Further, on a motion to dismiss, the court must accept " well-pleaded factual allegations as true and draw all reasonable inferences from those allegations in the plaintiff's favor." Arpaio v. Obama, 797 F.3d 11, 19 (D.C. Cir. 2015). The court need not, however, assume the truth of legal conclusions, see Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009), nor " accept inferences that are unsupported by the facts set out in the complaint," Islamic Am. Relief Agency v. Gonzales, 477 F.3d 728, 732, 375 U.S.App.D.C. 93 (D.C. Cir. 2007). " Threadbare recitals of the elements of [standing], supported by mere conclusory statements, do not suffice." Iqbal, 556 U.S. at 678. If a complaint does not contain sufficient factual matter " to state a claim [of standing] that is plausible on its face," it must be dismissed.

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Id. (quoting Bell A. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007)); see generally Arpaio, 797 F.3d at 19-20 (setting forth the standard of review for a motion to dismiss that asserts a lack of standing under Rule 12(b)(1)). In evaluating a Rule 12(b)(1) motion, a court has broad discretion to consider relevant and competent evidence--including materials outside the pleadings. Finca Santa Elena, Inc. v. U.S. Army Corps of Eng'rs, 873 F.Supp.2d 363, 368 (D.D.C. 2012) (citing 5B Charles Wright & Arthur Miller, Federal Practice & Procedure § 1350 (3d ed. 2004)).

         IV. DISCUSSION

         Under Article III of the U.S. Constitution, the jurisdiction of the federal courts is limited to " Cases" and " Controversies." Art. III, § 1. The Constitution does not define either of those terms, and so federal courts have developed the doctrine of standing to identify exactly which cases and controversies fall within the scope of federal jurisdiction. Lujan, 504 U.S. at 560. At a minimum, in order to establish that it has standing, a plaintiff must allege: (1) injury-in-fact suffered by the plaintiff; (2) a causal connection between the injury and the complained-of conduct; and (3) a likelihood that the injury will be " redressed by a favorable decision" from the court. Id. at 560-61 (citation omitted) (internal quotation marks omitted). Although HHS contends that West Virginia cannot meet any of the three elements, Def.'s Mem. at 11-13, the court only focuses on the first--injury-in-fact.

         A. West Virginia's Alleged Injuries

         Even a cursory reading of West Virginia's Complaint reveals that the injuries it asserts are not among the traditional kinds of injuries that the Supreme Court has recognized as sufficient to confer standing on a State that is challenging federal action. West Virginia does not claim that the Administrative Fix has caused it to suffer any financial injury. See, e.g., Nat'l Fed'n of Indep. Small Bus. v. Sebelius, 132 S.Ct. 2566, 2604-05, 183 L.Ed.2d 450 (2012); Tr. of Oral Arg., ECF No. 32, at 19 [hereinafter Tr.] (conceding that West Virginia has not expended any state funds as a result of the Administrative Fix). Nor does it allege that it has been compelled by the federal government to take a specific action. See, e.g., New York v. United States, 505 U.S. 144, 160, 112 S.Ct. 2408, 120 L.Ed.2d 120 (1992); Pl.'s Opp'n to Mot. to Dismiss, ECF No. 20, at 30-31 [hereinafter Pl.'s Opp'n] (" The State has not claimed harm from having to take any particular action." ). Nor does it contend that it brings this action in its capacity as parens patriae to protect its citizens' interests. See, e.g., Alfred L. Snapp & Son, Inc. v. Puerto Rico, 458 U.S. 592, 597-610, 102 S.Ct. 3260, 73 L.Ed.2d 995 (1982); Compl. ¶ ¶ 67-79 (describing the alleged injury to West Virginia without any mention of harm to its citizens); Pl.'s Opp'n at 16-30 (same).

         Instead, West Virginia alleges that it has suffered two, less traditional types of injury: (1) harm from " being forced to become the sole and exclusive enforcer of federal law within its borders," Compl. ¶ 68, and (2) harm from " the Administrative Fix reduc[ing] the political accountability of the federal government at the expense of the States," id. ΒΆ 69. Though West Virginia presents these as distinct harms, the court agrees with HHS that, upon closer scrutiny, they actually collapse into one injury: the enhanced " political ...


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