Texas v. United States

352 F.Supp.3d 665

TEXAS, et al., Plaintiffs,

v.UNITED STATES of America, et al., Defendants,California, et al., Intervenors-Defendants.

Civil Action No. 4:18-cv-00167-O

United States District Court, N.D. Texas, Fort Worth Division.

Signed December 30, 2018

Darren L. McCarty, Austin Nimocks, David Jonathan Hacker, Office of the Attorney General of Texas, Robert Earl Henneke, Jonathan F. Mitchell, Austin, TX, Kevin Michael LeRoy, Pro Hac Vice, Misha Tseytlin, Pro Hac Vice, Wisconsin Department of Justice, Madison, WI, for Plaintiffs.

Brett Shumate, Daniel Duane Mauler, Eric Beckenhauer, Joel McElvain, U.S. Department of Justice, Rebecca Kopplin, Washington, DC, for Defendants.

Kathleen M. Boergers, Pro Hac Vice, Office of the Attorney General of California, Oakland, CA, Neli Nima Palma, Pro Hac Vice, Attorney General of California, Sacramento, CA, Nimrod Pitsker Elias, Pro Hac Vice, Attorney General of California, San Francisco, CA, Joseph Rubin, Pro Hac Vice, Connecticut Office of the Attorney General, Hartford, CT, Valerie M. Nannery, Pro Hac Vice, Robyn Renee Bender, Pro Hac Vice, Office of the Attorney General for the District of Columbia, Washington, DC, Jessica Willey, Pro Hac Vice, David J. Lyons, Pro Hac Vice, Delaware Department of Justice, Wilmington, DE, Andrea Suzuki, Pro Hac Vice, Heidi Marguerita Rian, Pro Hac Vice, State of Hawaii Department of the Attorney General, Honolulu, HI, David F. Buysse, Pro Hac Vice, Attorney General of Illinois, Chicago, IL, Taylor Allen Payne, Pro Hac Vice, Office of the Attorney General, Frankfort, KY, Stephen B. Vogel, Pro Hac Vice, Office of the Massachusetts Attorney General, Boston, MA, Jeremy Feigenbaum, Pro Hac Vice, Office of the New Jersey Attorney General, Trenton, NJ, Elizabeth R. Chesler, Pro Hac Vice, New York State Office of the Attorney General, New York, NY, Scott Kaplan, Pro Hac Vice Henry Kantor, Pro Hac Vice, Oregon Department of Justice, Portland, OR, Maria Lenz, Pro Hac Vice, Rhode Island Department of Attorney General, Providence, RI, Benjamin Battles, Pro Hac Vice, Vermont Attorney General's Office, Montpelier, VT, Matthew Robert McGuire, Pro Hac Vice, Office of the Attorney General, Richmond, VA, Jeffrey T. Sprung, Pro Hac Vice, Hagens Berman Sobol Shapiro LLP, Seattle, WA, Scott Ikeda, Pro Hac Vice, Minnesota Attorney General's Office, St. Paul, MN, for Intervenors-Defendants.

ORDER GRANTING STAY AND PARTIAL FINAL JUDGMENT

Reed O'Connor, UNITED STATES DISTRICT JUDGEOn December 14, 2018, the Court entered its Order granting partial summary judgment on Count I of the Plaintiffs' Amended Complaint. See ECF No. 211. On December 16, 2018, the Court ordered the Parties to meet and confer and, by January 4, 2019, to jointly propose a schedule for resolving the Plaintiffs' remaining claims. See ECF No. 212. On December 17, 2018, the Intervenor Defendants moved the Court to clarify that the December 14, 2018 Order is not binding or to enter a stay if the Order is binding and to enter final judgment or certify the Order for immediate appeal. See ECF No. 213.

I. BACKGROUND

Plaintiffs are the States of Alabama, Arizona, Arkansas, Florida, Georgia, Indiana, Kansas, Louisiana, Mississippi, Missouri, Nebraska, North Dakota, South Carolina, South Dakota, Tennessee, Texas, Utah, West Virginia, Wisconsin, Governor Paul LePage of Maine (the "State Plaintiffs"), and individuals Neill Hurley and John Nantz (the "Individual Plaintiffs" and, collectively with the State Plaintiffs, "Plaintiffs").

Defendants are the United States of America, the United States Department of Health and Human Services ("HHS"), Alex Azar, in his official capacity as Secretary of HHS, the United States Internal Revenue Service (the "IRS"), and David J. Kautter, in his official capacity as Acting Commissioner of Internal Revenue (collectively, the "Federal Defendants").

Finally, the States of California, Connecticut, Delaware, Hawaii, Illinois, Kentucky, Massachusetts, Minnesota, New Jersey, New York, North Carolina, Oregon, Rhode Island, Vermont, Virginia, and Washington, and the District of Columbia intervened as defendants (collectively, the "Intervenor Defendants").

The Plaintiffs sued the Federal Defendants seeking, among other things, a declaration that the Individual Mandate of the Patient Protection and Affordable Care Act (ACA), Pub. L. 111-148, 124 Stat. 119- 1045 (2010), as amended by the Tax Cuts and Jobs Act of 2017 (TCJA), Pub. L. No. 115-97, 131 Stat. 2054 (2017), is unconstitutional and that the remainder of the ACA is inseverable. Am. Compl. 2, ECF No. 27. Their theory is that, because the TCJA eliminated the shared-responsibility tax, the tax-based saving construction developed by the Supreme Court in National Federation of Independent Business v. Sebelius (NFIB) , 567 U.S. 519, 132 S.Ct. 2566, 183 L.Ed.2d 450 (2012), no longer applies. Am. Compl. 2–3, ECF No. 27. Plaintiffs further argue that, as the four joint dissenters reasoned in NFIB , the Individual Mandate is inseverable from the rest of the ACA. Pls.' Br. Prelim. Inj. 35, ECF No. 40 (citing NFIB , 567 U.S. at 691–703, 132 S.Ct. 2566 (joint dissent) ) [hereinafter "Pls.' Br."].

The Federal Defendants agree the Individual Mandate is unconstitutional and inseverable from the ACA's pre-existing-condition provisions. But they argue all other ACA provisions are severable from the mandate. The Intervenor Defendants argue all of Plaintiffs' claims fail.

The Plaintiffs filed an Application for Preliminary Injunction, (ECF No. 39), on April 26, 2018; the Federal Defendants and the Intervenor Defendants responded, (ECF Nos. 91 and 92), on June 7, 2018; and Plaintiffs replied, (ECF No. 175), on July 5, 2018. Because the Federal Defendants argued a judgment, as opposed to an injunction, was more appropriate, the Court provided notice of its intent to resolve the issues raised by the Application for Preliminary Injunction on summary judgment. See July 16, 2018 Order, ECF No. 176 (citing FED. R. CIV. P. 56(f)(3) ). The parties responded. See ECF Nos. 177–79.

On December 14, 2018, the Court issued its order denying the Plaintiffs' request for a preliminary injunction but granting summary judgment on Count I of the Amended Complaint, finding the Individual Mandate is unconstitutional because it no longer triggers a tax and is inseverable from the remainder of the ACA. See Dec. 14, 2018 Order, ECF No. 211. On December 17, 2018, the Intervenor Defendants moved the Court to (1) clarify whether the December 14, 2018 Order is immediately binding on the parties and (2) stay the order or certify it for appeal, as appropriate. See Intervenor Defs.' Mot. Stay, ECF No. 213. The Court ordered expedited briefing, see ECF No. 215, and the Parties promptly complied, see ECF Nos. 216, 217, and 218.

As an initial matter, the Court recognizes the Parties' diligent work on this delicate and complex matter. Counsel have conducted themselves with grace and professionalism, consistently advocating zealously on behalf of their clients with candor and class. And it is no small feat, the Court acknowledges, to prepare such crisp briefing, with so many moving parts, on an expedited basis during the holiday season. For all this, the Court is grateful.

Having reviewed the briefing and applicable law, the Court finds it is most efficient and appropriate to GRANT the Intervenor Defendants' request for final judgment on the December 14, 2018 Order granting summary judgment on Count I of the Amended Complaint and to GRANT the Intervenor Defendants' request for a stay of that judgment.

II. LEGAL STANDARDS

A. Partial Final Judgment

Federal Rule of Civil Procedure 54(b) provides: "When an action presents more than one claim for relief ... the court may direct entry of a final judgment as to one or more, but fewer than all, claims or parties only if the court expressly determines that there is no just reason for delay." FED. R. CIV. P. 54(b). This Rule "permits district courts to authorize immediate appeal of dispositive rulings on separate claims in a civil action raising multiple claims." Gelboim v. Bank of Am. Corp. , ––– U.S. ––––, 135 S.Ct. 897, 902, 190 L.Ed.2d 789 (2015). "As both the rule's text and the Supreme Court have made clear, a district court deciding whether to certify a judgment under Rule 54(b) must make two determinations." Briargrove Shopping Ctr. Joint Venture v. Pilgrim Enterprises, Inc. , 170 F.3d 536, 539 (5th Cir. 1999) (citation omitted). First, the court must determine that it is entering judgment on "an ultimate disposition of an individual claim entered in the course of a multiple claims action." Id. (citation omitted). Second, the court must determine that no "just reason for delay exists." Id. (citation omitted).

B. Stay of Judgment

"The party requesting a stay bears the burden of showing that the circumstances justify an exercise of [the court's] discretion." Nken v. Holder , 556 U.S. 418, 433–34 (2009). To determine whether to grant a stay pending appeal courts consider four factors: "(1) whether the stay applicant has made a strong showing that he [or she] is likely to succeed on the merits; (2) whether the applicant will be irreparably injured absent a stay; (3) whether issuance of the stay will substantially injure the other parties interested in the proceeding; and (4) where the public interest lies." Campaign for S. Equality v. Bryant , 773 F.3d 55, 57 (5th Cir. 2014) (quoting Veasey v. Perry , 769 F.3d 890, 892 (5th Cir. 2014) ). But when "evaluating these factors, [the Fifth Circuit] has refused to apply them ‘in a rigid ... [or] mechanical fashion.’ " Id. (quoting United States v. Baylor Univ. Med. Ctr. , 711 F.2d 38, 39 (5th Cir. 1983) ).

III. ANALYSIS

A. The Court Will Enter Partial Final Judgment

Given the Parties' inquiries about whether the Court's December 14, 2018 Order is final and binding—and the unanimous agreement that the Order should be immediately appealable¹ —the Court finds it is most efficient to enter a partial final...