Instant Analysis of Texas v. U.S. (Obamacare Decision) Part I: Standing of Individual Plaintiffs

"The evidentiary basis for this injury is even stronger than it was in NFIB."

The Fifth Circuit decided Texas v. United States, the challenge to the constitutionality of the ACA. The panel divided 2-1. Judges Elrod and Engelhardt found that (1) the Plaintiffs have standing, (2) the individual mandate was unconstitutional, but (3) remanded for further proceedings on severability. Judge King dissented. This post will consider the first issue: whether the individual plaintiffs have standing. I will consider the merits and severability in later posts.

The majority's standing analysis, which begins on p. 17, is consistent with a post I co-authored with Randy Barnett before oral arguments, as well as a solo post after oral arguments.

First, the majority acknowledged that the individual plaintiffs' argument for standing is similar to the arguments presented by the plaintiffs in NFIB. The panel quotes an important colloquy between Justice Kagan and (now-Judge) Gregory Katsas.

The standing issues presented by the individual plaintiffs are not novel. The Supreme Court faced a similar situation when it decided NFIB in 2012. At oral argument in that case, Justice Kagan asked Gregory Katsas, representing NFIB, whether he thought "a person who is subject to the [individual] mandate but not subject to the [shared responsibility payment] would have standing." Mr. Katsas replied, "Yes, I think that person would, because that person is injured by compliance with the mandate." Id. Mr. Katsas explained, "the injury—when that person is subject to the mandate, that person is required to purchase health insurance. That's a forced acquisition of an unwanted good. It's a classic pocketbook injury."

Second, in NFIB, the injury was never premised on the penalty; it was always premised on the obligation imposed by the mandate. Indeed, the penalty would not be assessed for two years. Such an injury would not be "imminent" for purposes of standing. The court explained:

It was thus certainly imminent that the private plaintiffs would be subject to the individual mandate, which applies to everyone, but not certain that they would be subject to the shared responsibility payment, which exempts certain people. . . . To bring a claim against the individual mandate, therefore, the plaintiffs needed to show injury from the individual mandate—not from the shared responsibility payment.

Third, the District Court record in NFIB reflected this conception of the Article III injury:

Accordingly, the district court in NFIB ruled that the private plaintiffs were injured by the ACA "because of the financial expense [they would] definitively incur under the Act in 2014," and the private plaintiffs' need "to take investigatory steps and make financial arrangements now to ensure compliance then." . . . The record evidence in that case supported this conclusion. Mary Brown, one of the private plaintiffs in that case, for example, had declared that "to comply with the individual insurance mandate, and well in advance of 2014, I must now investigate whether and how to rearrange my personal finance affairs." . . .  At the Eleventh Circuit, all parties agreed that Mary Brown had standing. . . .  Congress could have reasonably contemplated people like Mary Brown. As Mr. Katsas explained at oral argument in the Supreme Court, "Congress reasonably could think that at least some people will follow the law precisely because it is the law."

Fourth, the declarations from the two private plaintiffs (Nantz and Hurley) assert the same injury as that at issue in NFIB:

It is undisputed that Hurley and Nantz are the objects of the individual mandate and that they have purchased insurance in order to comply with that mandate. Record evidence supports these conclusions. In his declaration in the district court, Nantz stated, "I continue to maintain minimum essential health coverage because I am obligated." Similarly, Hurley averred in his declaration that he is "obligated to comply with the ACA's individual mandate." They both explain in their declarations that they "value compliance with [their] legal obligations" and bought insurance because they "believe that following the law is the right thing to do." Accordingly, the district court expressly found that Hurley and Nantz bought health insurance because they are obligated to, and we must defer to that factual finding. The evidentiary basis for this injury is even stronger than it was in NFIB. In the instant case, the individual mandate has already gone into effect, compelling Nantz and Hurley to purchase insurance now as opposed to two years in the future.

The emphasized sentence is important. The argument for standing in 2019 is even stronger than the argument for standing in 2012.

Fifth, the panel cites CBO reports from 2008 and 2017, which predicted that some people would purchase insurance even in the absence of a penalty:

The intervenor-defendant states acknowledge a 2017 report from the Congressional Budget Office indicating that "a small number of people" would continue to buy insurance without a penalty "solely because" of a desire to comply with the law. . . . This report is at least somewhat consistent with a 2008 Congressional Budget Office report, relied on by the state plaintiffs, that "[m]any individuals" subject to the mandate, but not the shared responsibility payment, will obtain coverage to comply with the mandate "because they believe in abiding by the nation's laws." Whether this group of law-abiding citizens includes "many individuals" or "a small number of people," Nantz and Hurley have undisputed evidence showing that they are a part of this group.

Sixth, the court states the precise nature of the injury: time and money.

The threat of a penalty that Hurley and Nantz would face under the pre-2017 version of the statute is one potential form of injury, but it is far from the only one. We have held that the costs of compliance can constitute an injury just as much as the injuries from failing to comply. Thus, in this instance, it is this injury—the time and money spent complying with the statute, not the penalty for failing to do so—that constitutes the plaintiffs' injury.

This analysis largely follows my own reading of the case.

The standing section of Judge King's dissent begins at p. 68.

Update: On my first quick read, I missed footnote five of Judge King's standing analysis, which addresses NFIB. She wrote:

The majority's suggestion that NFIB, 567 U.S. at 552 (opinion of Roberts, C.J.), supports the individual plaintiffs' standing does not warrant above-the-line attention. In short, the NFIB Court did not address standing. See id. at 530-708. At the time NFIB was decided, the coverage requirement was set to take effect with the shared-responsibility payment as an enforcement mechanism. And there is no indication that any of the NFIB plaintiffs were exempt from the shared-responsibility payment. Thus, even if the majority seeks to infer from NFIB some jurisdictional ruling in violation of the Supreme Court's "repeated[]" command "that the existence of unaddressed jurisdictional defects has no precedential effect," Lewis v. Casey, 518 U.S. 343, 352 n.2 (1996), NFIB offers no inferences of value for the majority to draw. Further, counsel's answer to a Justice's hypothetical question does not bind this court.

True enough NFIB did not address standing. But the only basis for an injury was the mandate; the penalty would not be paid for at least two years. NFIB provides far more than "inferences of value." The case could only proceed based on the injury inflicted by the mandate.

Update 2: I made a brief point above about ripeness and the penalty which I need to give some more thought. I took it out for now.