Did the challengers in King really ignore federalism? Their response

[In this guest post, attorneys C. Boyden Gray, Adam White and Adam Gustafson respond to the claim made in the Politico by Yale law professor Abbe Gluck, and on Balkinization by my Georgetown colleague Marty Lederman, that the challengers to the IRS regulation in King v Burwell have entirely ignored the federalism implications of their challenge:]

Liberals would rather pretend that conservative arguments don't exist-at least it feels that way, sometimes. But on the eve of King v. Burwell, that is exactly what's happening. Recognizing the significance that constitutional federalism could come to bear in interpreting the Affordable Care Act's provisions for health insurance exchanges, some of the Administration's defenders have begun to argue that their opponents have not even attempted to make a federalism argument in support of their challenge. Which comes as quite a surprise to us, because federalism was a central point in our own brief (on behalf of State Legislators and the Galen Institute), as well as the brief filed by Oklahoma and several other States.

As the petitioners and others have noted, King v. Burwell presents a straightforward issue of statutory interpretation: when Congress empowered the Administration to subsidize health insurance purchased "through an Exchange established by the State," it meant what it said, and it did not empower the Administration to also subsidize insurance purchased on exchanges established by federal bureaucrats in lieu of States. The statutory text is straightforward; the arguments offered by the Administration and its defenders are less about statutory construction than they are about statutory correction.

But as our brief and the States' brief further stressed, the statute's plain meaning is reinforced by fundamental canons of statutory construction-especially, for present purposes, the federalism canon embodied by Gregory v. Ashcroft's clear statement rule.

We made this argument in the lower courts, and we made it again before the Supreme Court. The Affordable Care Act provision at issue in King gave each State a straightforward choice: establish your own health insurance exchange, or leave it to the federal government. A State establishing its own exchange would trigger subsidies for its people, true-but at great cost. The State's acceptance of subsidies causes the individual mandate to bind more people, and triggers the employer mandate within that State. It also forces the State to shoulder the significant costs of establishing the exchange-quite a burden, as many States learned (or are learning) the hard way. In Obamacare, as in life, there are no free lunches.

When Congress limited those Obamacare burdens and subsidies to "Exchange[s] established by the State," it spoke in clear, unmistakable terms-and with good reason. If Congress wants to substantially alter a longstanding allocation of power between the States and federal government, then the Supreme Court requires Congress to "make its intention to do so 'unmistakably clear in the language of the statute.'" A self-contradictory, ambiguous provision, by contrast, cannot justify federal regulatory encroachment upon "areas traditionally regulated by the States."

This "clear statement rule," found in cases such as Gregory v. Ashcroft, ensures that laws are interpreted so as to vindicate our Constitution's system of federalism-the "double security," in James Madison's words (quoted by the Court in Gregory), that protects "the rights of the people" by ensuring that the federal and state governments "will control each other."

Health insurance is an area of such traditional state concern. According to the Court, "the controls of all types of insurance companies and contracts has been primarily a state function since the States came into being," and Congress has codified this federal-State arrangement since at least 1945. Congress left health insurance regulation to the States because, the Court explains, the States "were in close proximity to the people affected by the insurance business and, therefore, were in a better position to regulate that business than the Federal Government."

Accordingly, Congress could freely modify that arrangement, but only if it did so with "clear, unmistakable" statutory terms. In the Affordable Care Act, Congress offered such a clear legislative statement only with respect to States with an "Exchange established by the State." By establishing their own exchanges, those States invited vast new federal involvement-HHS's penalties and subsidies-in their insurance markets. But Congress did not offer the same clear statement for States that declined to establish their own exchanges.

This is a straightforward argument – which is why were surprised to find the Administration's defenders less interested in responding to the argument than in denying its existence altogether. Yale's Abbe Gluck, writing in Politico last week, invoked Gregory v. Ashcroftin support of the Administration's position (more on that in a bit), and further added that "[i]t is thus remarkable that the King challengers-formerly staunch federalists-have suddenly adopted an interpretation of the law diametrically at odds with these protections. They do not mention these flagship cases in their briefs[.]" Similarly, Georgetown's Marty Lederman asserted on the Balkinization blog yesterday that "the challengers entirely ignore" the federalism argument.

Gluck's refusal to acknowledge the federalism briefs is particularly ironic, since her own essay accuses the King petitioners of "hyper-simplification and obfuscation."

We're not afraid to acknowledge Gluck's own federalism argument; we just think it's wrong on the merits. In an amicus brief co-signed by Nicholas Bagley, Thomas Merrill, and Gillian Metzger, she offers the following version of a Gregory federalism argument:

1. Congress intended to subsidize all health insurance exchanges.
2. If Congress had further intended to take subsidies away from States that did not establish their own exchanges, then it needed to state this intent with clearly stated terms.
3. Because Congress did not state in sufficiently clear terms any intent to remove subsidies from those States, the statute should be construed not to take the subsidies away from them.

The problem with this argument, however, is that it presumes the very issue before the Court: whether Congress intended to grant those subsidies to all States in the first place. Gluck and her colleagues are not answering the question presented-they're begging it.

We would add that as misguided as their argument is in its details, it is even stranger in its broader sense: by their telling, the true defender of federalism (or, as Gluck calls it, "states' rights") is the federal executive branch, administering a federal statute impacting the States-while the enemies of federalism (sorry, "states' rights") are the States opposing the federal government's intervention within those States.

Indeed, their argument flips Madison's "double security"-the principle animating Gregory-on its head. Rather than relying on federalism to restrain (or as Madison put it, "control") federal regulators, they are relying on it to remove restraints on federal regulators.

For the last six years, a major theme of constitutional law has been the Administration's various efforts to replace federalism with nationalism-part and parcel of the Administration's persistent disregard for the Constitution's separation of powers. The Administration's excessive unilateralism has met significant pushback by the Supreme Court, which rejected its efforts to unilaterally "tailor" the Clean Air Act in greenhouse gas regulations, rejected its violation of religious liberty in the Hobby Lobby case, and rejected unanimously the Administration's phony "recess" appointments in Noel Canning. By one count, offered by Sen. Cruz, the Court has unanimously rejected the Administration's legal positions twenty times.

For that reason, we understand the urgency with which the Administration's proponents are defending this latest overreach. But a zealous defense should not come at the cost of actual federalism, or of the truth.