On January 3, 2019, the intervenor states in Texas litigation challenging the Affordable Care Act's (ACA's) individual mandate appealed to the US Court of Appeals for the Fifth Circuit a district court ruling that the individual mandate is unconstitutional and the ACA itself is invalid. The states' appeal followed a federal district court order entering partial final judgment on its ACA ruling from December 14, 2018 (Texas v. Azar, (N.D. Tex. Dec. 14, 2018)). The district court also stayed its ACA ruling, and the remaining claims in the litigation, pending appeal.
Democratic state attorneys general (the "intervenor states") have appealed to the Fifth Circuit Court of Appeals a district court order that the ACA's individual mandate is unconstitutional and the ACA itself is invalid (Texas v. Azar, (N.D. Tex. Dec. 14, 2018)). The appeal will allow the Fifth Circuit to review an order, issued by Judge Reed O'Connor of the Northern District of Texas, that:
The ACA's individual mandate is unconstitutional (26 U.S.C. § 5000A).
The remainder of the ACA is not severable from the individual mandate and is therefore invalid.
Following the district court's December 14, 2018 order, the intervenor states requested clarification regarding whether the order was immediately binding. In response, on December 30, 2018, the district court:
The court also issued an order staying the remaining claims in the litigation. (As an example of the remaining claims, Count II of the plaintiffs' complaint challenges the individual mandate on a Due Process Clause theory.)
The intervenor states later joined the litigation to defend the ACA. The federal defendants, which include the US, HHS, and the IRS, did not defend the individual mandate's constitutionality, but argued that the mandate was severable from other ACA provisions.
The district court's December 14 order granted summary judgment on Count I of the plaintiffs' amended complaint. The district court's December 30, 2018 orders allowed the intervenor states to appeal the Count I ruling on the individual mandate claim to the Fifth Circuit, which they did on January 3, 2019.
Entry of Partial Final Judgment Is Warranted
The district court concluded that entering final judgment on the plaintiffs' Count I individual mandate claim was warranted under a federal procedure rule permitting the court to enter final judgment on fewer than all claims in a dispute if there is no just reason for delay (Federal Rule of Civil Procedure (FRCP) 54(b); see Practice Note, Fifth Circuit Civil Appeals: Initiating an Appeal: Orders or Judgments Appealable as of Right). Because the district court's December 14 order did not address all counts in the plaintiffs' amended complaint, it was not immediately appealable. However, the court's December 30 orders entered final judgment on the Count I claim and severed it from the plaintiffs' remaining claims – allowing an appeal to the Fifth Circuit on the Count I claim.
In issuing the December 30 orders, the district court rejected the federal defendants' argument that:
Other counts in the litigation merely restated the Count I individual mandate claim.
Partial final judgment under FRCP 54(b) was therefore inappropriate.
In the district court's view, the plaintiffs' claims were "related but distinct."
December 14 Order Is Stayed Pending Appeal
The district court also concluded that staying its December 14 order pending appeal was warranted. According to the district court, the equities favored a stay, even if – in the district court's view – the intervenor states are unlikely to succeed on the merits.
Intervenor States Are Unlikely to Succeed on the Merits
The district court predicted that the Fifth Circuit is likely to agree with its findings that:
The ACA's individual mandate cannot be upheld under the tax-based saving construction applied in NFIB in the absence of a payment for violating the mandate.
The individual mandate cannot be upheld under the Commerce Clause.
The text of the ACA unambiguously shows Congress's intent that the individual mandate is inseverable from the rest of the ACA.
Equities Favor a Stay
In finding that the equities favored granting a stay, the district court acknowledged the impact that immediate implementation of the December 14 order would have on individuals, health providers, insurers, and governments. The district court also recognized that the December 14 order would not immediately address the individual plaintiffs' argument that the individual mandate forced them to buy ACA-compliant coverage that they would not otherwise buy. This is because the individuals had already made coverage decisions for 2019.
Practical Impact
Attention now turns to the Fifth Circuit, which will be tasked with reviewing Judge O'Connor's order on the individual mandate and the ACA's constitutionality. Although the litigation raises renewed concerns regarding the ACA's future, for now the ACA remains good law.
In related developments, the U.S. House of Representatives, under Democratic control as of January 3, submitted a motion to intervene in the litigation – as to the plaintiffs' claims other than Count I. In an accompanying filing, the House set out its bases for intervening and defending the ACA's validity. Regarding Count I, the House indicated that it would also seek to intervene in the Fifth Circuit appeal and would file a motion to intervene in that appeal as soon as possible. On January 4, the federal government requested a stay on briefing concerning its opposition to the House's motion to intervene – owing to a of lack of funding to work on the litigation due to the federal government shutdown.
In response, Judge O'Connor:
Stayed the House's motion to intervene (noting that Counts II through V are presently stayed, administratively closed, and therefore dormant).
Denied the federal government's motion to stay briefing as moot.
In addition, citing a "lapse of appropriations" related to the government shutdown, the Fifth Circuit on January 11 stayed proceedings in the appeal of Judge O'Connor's ruling on Count I.