Tag: amicus briefs

IRS Illegally Expands Obamacare

To encourage the purchase of health insurance, the Affordable Care Act added a number of deductions, exemptions, and penalties to the federal tax code. As might be expected from a 2,700-page law, these new tax laws have the potential to interact in unforeseen and counterintuitive ways. As first discovered by Michael Cannon and Jonathan Adler, one of the new tax provisions, when combined with state decisionmaking and Interal Revenue Service rulemaking, has given Obamacare yet another legal problem.

Here’s the deal: The legislation’s §1311 provides a generous tax credit for anyone who buys insurance from an insurance exchange “established by the State.” The provision was supposed to be an incentive for states to create their own exchanges, but only 16 states have opted to do so. In the other states, the federal government established its own exchange, as another section of the ACA specifies. But where §1311 only explicitly authorized a tax credit for people who buy insurance from a state exchange, the IRS issued a rule interpreting §1311 as also applying to purchases from federal exchanges.

This creative interpretation most obviously hurts employers, who are fined for every employee who receives such a tax credit/subsidy to buy an exchange plan when their employer fails to comply with the mandate to provide health insurance. But it also hurts some individuals, such as David Klemencic, a lead plaintiff in one of the lawsuits challenging the IRS’s tax-credit rule. Klemencic lives in a state, West Virginia, that never established an exchange, and for various reasons he doesn’t want to buy any of the insurance options available to him. Because buying insurance would cost him more than 8% of his income, he should be immune from Obamacare’s tax on the decision not to buy insurance. After the IRS expanded §1311 to subsidize people in states with federal exchanges, however, Klemencic could’ve bought health insurance for an amount low enough to again subject him to the tax for not buying insurance.

Klemencic and his fellow plaintiffs argue that they face these costs only because the IRS exceeded the scope of its powers by extending a tax credit not authorized by Congress. The district court rejected that argument, ruling that, under the highly deferential test courts apply to actions by administrative agencies, the IRS only had to show that its interpretation of §1311 was reasonable—which the court was satisfied it had.

Cato and the Pacific Research Institute have now filed an amicus brief supporting the plaintiffs on their appeal to the U.S. Court of Appeals for the D.C. Circuit. While it is manifestly the province of the judiciary to say “what the law is,” where the law’s text leaves no question as to its meaning—as is the case here with the phrase “established by the State”—it is neither right nor proper for a court to replace the laws passed by Congress with those of its own invention or the invention of civil servants. If Congress wants to extend the tax credit beyond the terms of the Affordable Care Act, it can do so by passing new legislation. The only reason for executive-branch officials not to go back to Congress for clarification, and instead legislate by fiat, is to bypass the democratic process, thereby undermining constitutional separation of powers.

This case ultimately isn’t about money, the wisdom of individual health care decisionmaking, or even political opposition to Obamacare. It’s about who gets to create the laws we live by: the democratically elected members of Congress or the bureaucrats charged with no more than executing the laws that Congress passes and the president signs.

Halbig v. Sebelius will be heard by the D.C. Circuit on March 25 (the same day that the Supreme Court hears the Hobby Lobby contraceptive-mandate cases).

Scalia the Unlikely Swing Vote in Big Workers Rights Case

Today the Supreme Court heard oral argument in Harris v. Quinn, the case regarding the forced unionization of home healthcare workers in Illinois (and by extension the 10 other states with similar laws). To me this is a pretty easy case: just because the state is paying these workers through its Medicaid program doesn’t mean it employs them – just like my doctor isn’t employed by my health-insurance company – which means that it can’t force them to pay dues to a union that negotiates Medicaid reimbursement rates. 

Like most of the labor cases in recent years, however, this one is likely to go 5-4. The so-called “liberal” justices were all openly hostile to the workers’ position, so the challengers will have to sweep the rest of the bench of to win. Fortunately, such an outcome is more than possible – though much will depend on the thinking of Justice Scalia, who was hostile to everyone.

The argument began in a frustrating manner, with a focus on the right to petition the government for redress of grievances, and whether a union asking for a pay increase was different from an individual public-sector employee (a policeman, say) asking for the same raise. Justice Scalia correctly pointed out that this wasn’t really the right at issue here, but he further confused the matter in distinguishing the right to petition from the First Amendment (when in fact that right is found in that amendment). He meant to invoke the First Amendment right to the freedoms of speech and association, but also indicated that he was prepared to give the government plenty of leeway when it was acting as an employer.

Justice Alito was the most skeptical of the union/government position, pointing out that unions don’t necessarily act in all workers’ interest, even when they succeed in negotiating certain “gains.” For example, a productive young worker might prefer merit pay to tenure provisions or a defined-benefit pension plan. Chief Justice Roberts was similarly concerned about administering the line between those union expenses that could be “charged” even to nonmembers (because related to collective bargaining) versus those that can’t because they involve political activity. Justice Kennedy, meanwhile, noted that in this era of growing government, increasing the size and cost of the public workforce is more than simple bargaining over wages and benefits; it’s “a fundamental issue of political belief.” In no other context could a government seek to compel its citizens to subsidize such speech. A worker who disagrees with the union view on these political questions is still made to subsidize it. 

It was also heartening to see that the continuing vitality of Abood v. Detroit Board of Education (1977) was in play. That case established that, in the interest of “labor peace,” a state could mandate its employees’ association with a union, forcing them to subsidize that union’s speech and submit to it as their exclusive representative for negotiating with the government regarding their employment. (Abood simply assumed, without further analysis, that the Supreme Court had recognized labor peace as a compelling interest.)

Justices Breyer and Kagan were particularly concerned that so many employers and unions had relied on the Abood doctrine over the years, so touching it would implicate significant reliance interests. But overruling or severely limiting Abood would only be one more step in the Court’s trend of protecting individual workers from having to support political activities. More workers could thus opt out of supporting a labor union – but if unions truly provide valuable services for their members, few workers would do so.

Of course, the Court could shy away from touching Abood and simply rule that being paid by state funds alone isn’t sufficient to make someone a state employee. Such a position might more easily attract Justice Scalia’s vote – and that of Chief Justice Roberts, who goes out of his way to rule narrowly – even if it leaves unresolved some of the contradictions at the heart of the jurisprudence in this area, such as the duty of courts to police the murky line between “chargeable” and “nonchargeable” union expenses.

For more on the case, see George Will’s recent op-ed and the Wall Street Journal’s editorial.

Connecticut, Drunk on Power, Uses Bottle Bill to Steal Money

For nearly 30 years, Connecticut beverage distributors received the unclaimed refund value of recycled bottles as part of the state’s Bottle Bill, which set up a refund system for used bottles as an attempt to encourage recycling. As in other states, the law requires beverage dealers to pay refunds for every bottle turned in.

Fiscal troubles in 2008 prompted Connecticut to amend the law, however, to require a “deposit account” from which distributors were to pay the refunds. This requirement was intended to aid the state environmental agency to study the rates of deposit payments and returns. The following year, the fiscal situation worsened, and the Bottle Bill was again amended, this time to require the remaining funds in the deposit accounts (after returns were paid out) to be paid to the state—retroactively including any unpaid remainder funds since the accounts went into effect in 2008.

A. Gallo & Co. and other beverage distributors in Connecticut saw this as an uncompensated taking of their property and sued the state. They took their case through the state court system, but even the Connecticut Supreme Court turned a blind eye, holding that beverage distributors never had a property right in the remainder funds in the first place. The distributors have now asked the U.S. Supreme Court to hear their case, and Cato joined the New England Legal Foundation, the Southeastern Legal Foundation, and the National Federation of Independent Business on a brief supporting their petition.

We argue that Connecticut’s budgetary troubles are no excuse for violating a longstanding property right without compensation. Moreover, by twisting its statutory interpretation to satisfy political pressures, the Connecticut Supreme Court has made itself complicit in the uncompensated taking. It’s bad enough when strapped-for-cash legislatures unfairly force public burdens onto the shoulders of private parties to feed their spending addictions, but when all three government branches – including the one entrusted with soberly interpreting the law, especially in times of fiscal emergency – get drunk on power and deny even the existence of a property right, it’s time for a Supreme Court intervention.

The Supreme Court will decide by winter’s end whether to take the case of A. Gallo & Co. v. Esty.

The Constitution Still Applies on College Campuses

Few could imagine a more troubling free speech and due process case than that of Hayden Barnes. Barnes, a student at Valdosta State University in Georgia, peacefully protested the planned construction of a $30 million campus parking garage that was the pet project of university president Ronald Zaccari. A “personally embarrassed” Zaccari didn’t take kindly to that criticism and vowed to retaliate.

Ignoring longstanding legal precedent, the Valdosta State University Student Handbook (a legally binding contract), and the counsel of fellow administrators, Zaccari ordered staff to look into Barnes’s academic records, his medical history, his religion, and his registration with the VSU Access Office. The federal district court found that Barnes’s due process rights had been violated and denied Zaccari qualified immunity from liability for his actions, but also interpreted Barnes’s First Amendment claim narrowly and sharply reduced his award of attorney’s fees.

In the first appeal of this case to the U.S. Court of Appeals for the Eleventh Circuit (decided in 2012), Cato joined a brief filed by the Foundation for Individual Rights in Education on behalf of 15 organizations arguing that qualified immunity was inappropriate given Zaccari’s brazen violation of Barnes’s constitutional rights to free speech and due process. The Eleventh Circuit affirmed the denial of qualified immunity, restating that malicious public officials aren’t entitled to special protections when they clearly violate the rights of another.

Now again before the Eleventh Circuit on the question of damages, Barnes is appealing the district court’s narrow interpretation of his First Amendment claim and the way it handled attorney’s fees. Cato has again joined with FIRE and numerous other groups on a brief supporting the full vindication of Barnes’s freedom of speech.

In this latest brief, we argue that the district court’s ruling threatens to encourage further First Amendment violations by inexplicably letting the defendants off on lesser claims (which weren’t even pled)—even though Barnes’s complaint clearly set forth detailed allegations of First Amendment-violating retaliation. We also argue that the district court erroneously applied a severe across-the-board reduction of its attorney’s fees award, even though that amount was supposed to address costs already deducted from the total. The court even granted reverse attorney’s fees for some of the defendants who were held not liable, going so far as calling those claims frivolous solely because they were unsuccessful.

The Eleventh Circuit should rework the attorney’s fees award, especially given the incalculable public benefit derived from such suits. Students who stand up for their constitutional rights are rare, and imposing unfavorable fee awards will only make it more difficult for them to secure strong representation. (Barnes’s counsel is the renowned First Amendment lawyer, and friend of Cato, Robert Corn-Revere.) While the district court did acknowledge that Hayden Barnes’s First Amendment rights were violated, its remedy consisted of half-hearted half-measures  We hope that the Eleventh Circuit corrects that mistake, sending university officials the loud, clear message that constitutional protections don’t stop at the edge of campus.

Antidiscrimination Law Can’t Trump the Freedom of Speech

While Cato supports marriage equality, a commitment to equality under the law can’t justify the restriction of constitutionally protected fundamental rights like freedom of speech or association. Yet increasingly, legislation and judicial rulings sacrifice individual liberties at the altar of antidiscrimination law. Perhaps the most prominent current example of that trend is the case of the New Mexico wedding photographer.

Elane Photography, a Christian-identified business in Albuquerque, declined to photograph Vanessa Willock’s same-sex commitment ceremony based on the business owners’ personal opposition to gay marriage. New Mexico law prohibits any refusal to render business services because of sexual orientation, however, so Willock filed a claim with the New Mexico Human Rights Commission. She argued that Elane Photography is a “public accommodation,” akin to a hotel or restaurant, that is subject to the state’s anti-discrimination law. The commission found against Elane and ordered it to pay $6,600 in attorney fees. The state trial and appellate courts affirmed that order.

The case then went before the New Mexico Supreme Court, where Cato, along with same-sex-marriage-supporting law professors Eugene Volokh and Dale Carpenter, filed an amicus brief urging the court to reverse the court of appeals. Our brief explained that photography, unlike many other wedding-related businesses (e.g., caterers, hotels, limousine drivers), is an art form protected by the First Amendment—even if it’s not political and even if the photos are taken for commercial purposes. 

The U.S. Supreme Court ruled in Wooley v. Maynard—the 1977 “Live Free or Die” license plate case out of New Hampshire—that forcing people to speak is just as unconstitutional as preventing or censoring speech. The First Amendment “includes both the right to speak freely and the right to refrain from speaking at all.” Moreover, unlike true cases of public accommodation, there are abundant opportunities to choose other photographers in the same area.

Alas, the New Mexico Supreme Court also ruled against Elane Photography, holding that the First Amendment only prohibits compelling an individual to speak the government’s message, and that even if the state law did infringe on Elane Photography’s speech rights, those rights could not be vindicated because they conflicted with Willock’s right to equal access to public accommodations. Cato, again joined by professors Volokh and Carpenter, has again filed a brief, this time urging the U.S. Supreme Court to hear the case, because the New Mexico court’s reasoning is incorrect and incompatible with Wooley. 

The Supreme Court has never held that the compelled speech doctrine is only applicable when an individual is forced to serve as a courier for the message of another. Instead, the Court has said repeatedly that what the First Amendment protects is a “freedom of the individual mind,” which the government violates whenever it tells a person what she must or must not say. Forcing a photographer to create a unique piece of art violates that freedom of the mind.

Our brief also argues that the New Mexico Supreme Court was wrong to hold that the First Amendment can be abridged if a state law creates a “new right” that the constitutionally protected expression allegedly violates. The U.S. Supreme Court has never allowed such operation of state law, and allowing the New Mexico court’s reasoning to stand would send a dangerous message to state legislators and courts that the Bill of Rights is merely a suggestion, not a rule.

Vanessa Willock has until February 11 to file her opposing brief, and soon thereafter the Court will decide whether to take the case. If it does, Elane Photography v. Willock would likely be argued at the beginning of next term, in October, with an ultimate decision by June 2015.

Another Battle Against Silly Tour-Guide Regulations

For the second time this fall, Cato has filed a brief supporting a lawsuit challenging the power of cities to stifle and regulate speech by licensing tour guides—effectively restricting who may lawfully speak to an audience about the city’s history. 

In September, we filed a brief supporting “Segs in the City,” a segway touring company challenging a D.C. law which made it illegal to give tours in Washington, D.C., without completing a licensing process that involves a thorough history exam. Now we’ve filed a brief in the U.S. Court of Appeals for the Fifth Circuit, again joined by First Amendment expert Eugene Volokh, in support of a group of tour guides challenging New Orleans’ licensing scheme. (Both the D.C. and New Orleans guides are represented by our friends at the Institute for Justice.)

Like D.C., New Orleans only licenses guides who can pass a history test. In addition to that blatantly unconstitutional speech restriction, the Big Easy also requires licensees to submit to periodic drug tests. All that just so they can talk about the history and culture of New Orleans without spending five months in prison!

We argue that the licensing regime is a content-based restraint on speech and therefore must pass the strictest judicial scrutiny, so the government needs a compelling reason for it and has no other way of accomplishing the same goal. The law is a content-based speech regulation in that it is (a) triggered by the content of speech, and (b) justified on the basis of the content that it regulates. The Supreme Court has repeatedly held that a law regulating the content of speech—as opposed to its location, timing, or manner—is subject to strict scrutiny. The justifications offered for the licensing law refer to the “sufficient knowledge” of the guides and the accuracy of their speech. That is as much a content-based justification as saying that people need to be protected from hearing “erroneous” political opinions or “controversial” historical theories.

Finally, we argue that tour guides are not members of a “profession,” such as lawyers, doctors, and accountants, which could merit less First Amendment protection in order to protect the public from harm. Unlike those professions, tour guides don’t have intimate relations with clients. Instead, like most businesses, they simply have customers. The government can’t possibly require authors, public lecturers, or documentary filmmakers to get licensed in order to protect the public from “misinformation,” and it has no more basis for licensing tour guides.

The Fifth Circuit will hear argument in Kagan v. City of New Orleans early in the new year.

Against Forced Unionization

The Supreme Court has long applied exacting scrutiny to limitations placed on the freedoms of speech and association. Unfortunately, the Court has not extended such protection to those forcibly unionized.

In Abood v. Detroit Board of Education (1977), the Court accepted that promoting “labor peace”—limiting the number of competing workplace interests that bargain over the conditions of employment—was an interest so compelling that a state may mandate its employees’ association with a labor union, forcing them to subsidize that union’s speech and submit to it as their exclusive representative for negotiating with the government regarding their employment. Since that time, more than a dozen states have forcibly unionized independent contractors who are paid through Medicaid.

In 2003, Illinois forced its home healthcare workers to join and pay dues to the Service Employees International Union as their sole representative before the state. Workers subject to this coerced association have challenged the law as a violation of their First Amendment rights and the case is now before the Supreme Court. Cato, joined by the National Federation of Independent Business, has filed an amicus brief in support. We argue that Abood was wrong when it was decided and should now be overturned. Abood simply assumed without analysis that the Supreme Court had already recognized “labor peace” as a “compelling interest.”

But the cases Abood relied on only regarded “labor peace” as justifying Congress’s exercise of its Commerce Clause authority to regulate labor relations, not as a basis to override workers’ First Amendment rights—and a Commerce Clause analysis is logically irrelevant to the First Amendment. Furthermore, Abood turns the logic of the First Amendment on its head: Unions are designated as the exclusive representatives of those employees that are compelled to support them for the sole purpose of suppressing the speech of dissenting employees, but under Abood it is exactly this suppression of speech that validates coerced association under the First Amendment. Such logic can’t be reconciled with the Court’s strict scrutiny of laws in other First Amendment contexts.

Even if the Court chooses to maintain Abood, it should reject the coercive programs at issue here because they’re unsupported by Abood’s rationale and serve no other compelling state interest. The homecare workers subject to the law aren’t employed by the state. Although they’re paid through a Medicaid disbursal, every crucial aspect of the employment relationship, including workplace conditions, hiring, and firing, is determined by the individual cared-for by the worker. The union is thus limited to petitioning the state for greater pay and benefits. Given this limited scope, there can be no serious claim that SEIU’s exclusive representation of some workers has freed Illinois from any great burden due to “conflicting demands” from other workers. Whatever Abood’s long-term vitality, that flawed case doesn’t support the compelled unionization of workers who are in no way managed by the state.

The Supreme Court will hear Harris v. Quinn on January 21.

This blogpost was co-authored by Cato legal associate Lauren Barlow.