Monthly Archives: November 2011

Judge Kavanaugh Shows the Supreme Court How to Duck the Individual Mandate

Judge Silberman’s majority opinion upholding the Affordable Care Act’s individual mandate was largely unexpected. But Judge Brett M. Kavanaugh‘s dissent on jurisdictional grounds should have come as no surprise. Continue reading

Judge Silberman Reluctantly Upholds “an Intrusive Exercise of Legislative Power”

In today’s opinion by Senior Judge Laurence H. Silberman, the D.C. Circuit upholds the Affordable Care Act’s individual mandate over Judge Brett M. Kavanaugh‘s jurisdictional dissent. Although some have expressed puzzlement at the conservative Judge Silberman’s decision, his opinion reads like a reluctant one, compelled by the Supreme Court’s broad interpretation of Congress’s commerce power and conscious of that Court’s unique authority to change course.

In several places, Judge Silberman practically invites the originalists on the Supreme Court to reverse him and unravel decades of the Court’s Commerce Clause jurisprudence, unlikely though that scenario may be:

The Framers, in using the term “commerce among the states,” obviously intended to make a distinction between interstate and local commerce, but Supreme Court jurisprudence over the last century has largely eroded that distinction. Today, the only recognized limitations are that (1) Congress may not regulate non-economic behavior based solely on an attenuated link to interstate commerce, and (2) Congress may not regulate intrastate economic behavior if its aggregate impact on interstate commerce is negligible.

Judge Silberman might also be read to call for Supreme Court intervention in his observation that the individual mandate’s “novelty is not irrelevant” and in his expression of “discomfort with the Government’s failure to advance any clear doctrinal principles limiting congressional mandates that any American purchase any product or service in interstate commerce.”

There is more than a twinge of regret in the conclusion that “if Congress can regulate even instances of purely local conduct that were never intended for, or entered, an interstate market, we think Congress can also regulate instances of ostensible inactivity inside a state.”

And again:

That a direct requirement for most Americans to purchase any product or service seems an intrusive exercise of legislative power surely explains why Congress has not used this authority before–but that seems to us a political judgment rather than a recognition of constitutional limitations. It certainly is an encroachment on individual liberty, but it is no more so than a command that restaurants or hotels are obliged to serve all customers regardless of race, that gravely ill individuals cannot use a substance their doctors described as the only effective palliative for excruciating pain, or that a farmer cannot grow enough wheat to support his own family.

Even if the Supreme Court strikes down the individual mandate, the Court is unlikely to go so far as to upset Wickard v. Filburn, the 1942 decision that Judge Silberman identifies as “the closest Supreme Court precedent to our case.” But Judge Silberman’s opinion suggests he would shed no tears if the Court decided to reverse decades of Commerce Clause doctrine.

Senior Judge Harry T. Edwards joined Judge Silberman’s majority opinion in full and tacked on a one-paragraph concurrence. Perhaps to moderate the dour tone of the majority opinion, Judge Edwards noted that the commerce power is “not without limits”: It is constrained by the Necessary and Proper Clause “if nothing else.”

Judge Kavanaugh dissented on the ground that the Anti-Injunction Act bars challenges to the individual mandate until after it goes into effect. According to Judge Kavanaugh, a taxpayer may challenge the individual mandate only after paying the penalty for failing to purchase health insurance.

Seven-Sky v. Holder, No. 11-5047 (Nov. 8, 2011) (Silberman, S.J., with concurrence by Edwards, S.J., and dissent by Kavanaugh, J.)

From the Majority Opinion:

No Supreme Court case has ever held or implied that Congress’s Commerce Clause authority is limited to individuals who are presently engaging in an activity involving, or substantially affecting, interstate commerce.

At the time the Constitution was fashioned, to “regulate” [as used in the Commerce Clause] meant, as it does now, “[t]o adjust by rule or method,” as well as “[t]o direct.” To “direct,” in turn, included “[t]o prescribe certain measure[s]; to mark out a certain course,” and “[t]o order; to command.” In other words, to “regulate” can mean to require action, and nothing in the definition appears to limit that power only to those already active in relation to an interstate market. Nor was the term “commerce” limited to only existing commerce.

See also:

Cf.:

  • Noah Kristula-Green, Who is Judge Silberman?, Frum Forum (Nov. 8, 2011) (“It would be particularly ironic if liberals used the new court ruling to rehabilitate their image of Silberman. Suffice to say, they have not always had a high opinion of him. He was appointed by George W. Bush to the Iraq Intelligence Commission in 2004 and was the target of a lot of liberal criticism.”).
  • Judge Silberman’s Strange Opinion, Wall St. J. (Nov. 8, 2011) (“Judge Silberman’s reasoning . . . is, well, peculiar for so distinguished a jurist.”).

But see:

Circuits Split on First-to-File Rule for Whistleblower Suits

Two whistleblowers discover that their employer is defrauding the Government and race to the courthouse, each trying to be the first to file a qui tam suit on behalf of the Government. The first whistleblower’s hopes are dashed when the district court determines his complaint fails to “state with particularity the circumstances constituting fraud or mistake” as required by Federal Rule of Civil Procedure 9(b). May the second whistleblower, whose complaint satisfies Rule 9(b), proceed as though his complaint were first in line, or is he barred by the first-to-file rule?

In an opinion by Chief Judge David B. Sentelle, the D.C. Circuit’s answer to this question of first impression created a circuit split. The Court held on Friday that the second whistleblower is out of luck, at least where the first, deficient complaint was sufficient to put the Government on notice of the facts underlying the second suit. The Court based its decision on the plain meaning of the first-to-file rule, which provides that “[w]hen a person brings [a qui tam] action . . . , no person other than the Government may intervene or bring a related action based on the facts underlying the pending action.” 31 U.S.C. § 3730(b)(5). Thus, the Court held, “as long as a first-filed complaint remains pending, no related complaint may be filed.” United States ex rel. Batiste v. SLM Corp., No. 10-7140 (D.C. Cir. Nov. 4, 2011).

The Court noted that its decision contradicts the Sixth Circuit’s holding that “[o]nly a complaint that complies with Rule 9(b) can have preemptive effect under § 3730(b)(5).” Walburn v. Lockheed Martin Corp., 431 F.3d 966, 971 (6th Cir. 2005). The Sixth Circuit reasoned that a strict interpretation of the first-to-file rule would encourage deficient lawsuits designed to preempt sufficiently particular claims. The D.C. Circuit wrote that the Sixth Circuit’s reasoning “does not make sense.” A whistleblower’s fear of dismissal under Rule 9(b) should encourage him to state his fraud claims with sufficient particularity.

The D.C. Circuit’s decision does not say whether the second whistleblower could have proceeded as the first-to-file if the original, deficient complaint were dismissed before the second whistleblower filed suit. In that event, there would be no related, pending action. As long as the second whistleblower is an original source of the information underlying his suit (or the first, deficient complaint and any related information remains under seal), see 31 U.S.C. § 3730(e)(4), (b)(2), it would seem that the second whistleblower may proceed as though the first, inadequate complaint had never existed. A savvy relator may therefore delay filing if he has reason to believe a prior, related complaint will be dismissed on pleading grounds. Or he may move to voluntarily dismiss his own claim without prejudice and refile it after the first complaint has been dismissed. Indeed, the untimely relator in Friday’s case argued that his complaint should have been dismissed without prejudice, but the D.C. Circuit held he waived this argument by failing to raise it in the district court.

The relator, a former senior loan associate at a Sallie Mae subsidiary, alleged that Sallie Mae unlawfully granted forbearances on federally subsidized student loans and then fraudulently certified its compliance with federal law when it submitted claims to the Government. A similar suit was filed earlier, and dismissed for failure to satisfied the heightened pleading standard for fraud, in United States ex rel. Zahara v. SLM Corp., No. 2:05-cv-8020 (C.D. Cal. Nov. 9, 2005).

From the Opinion:

[A] complaint may provide the government sufficient information to launch an investigation of a fraudulent scheme even if the complaint does not meet the particularity standards of Rule 9(b).

Nothing in the language of Section 3730(b)(5) incorporates the particularity requirement of Rule 9(b), which militates against reading such a requirement into the statute.

Imposing the heightened pleading standard [in the first-to-file rule], moreover, would create a strange judicial dynamic, potentially requiring one district court to determine the sufficiency of a complaint filed in another district court, and possibly creating a situation in which the two district courts disagree on a complaint’s sufficiency.

[I]mposing such a requirement would not minimize duplicative claims, would encourage opportunistic behavior, and would have a negligible impact on desirable whistle-blowing. We therefore reject Batiste’s argument that first-filed qui tam complaints must meet a heightened pleading standard under Rule 9(b) in order to bar later-filed complaints. (quotation marks omitted).

Opinions:

See also:

Update:

Ben Vernia at False Claims Counsel sees the same loophole I pointed out above:

The Court of Appeals’ final point, however, raises a possible solution for later relators caught in this situation (at least where the first case has been dismissed): move to amend their complaint after the dismissal of the first one, then argue that the first case was not pending at the time of the amended filing. See, for example, U.S. ex rel. Campbell v. Redding Medical Center, 421 F.3d 817 (9th Cir. 2005).

But as I read Campbell, the Ninth Circuit is closer to the Sixth Circuit’s Walburn decision than it is to the D.C. Circuit’s Batiste decision. Where there has been a public disclosure, Campbell holds that a relator who is an original source of the information underlying his complaint is not barred by the first-to-file rule when his complaint is preceded by a relator who is not an original source and whose complaint is therefore jurisdictionally defective. Campbell does not require the original source to re-file after dismissal of the prior, jurisdictionally defective complaint.

Prevailing Dissenters in Massachusetts v. EPA to Decide New Greenhouse Gas Challenge

The D.C. Circuit announced Wednesday that the challenge to the EPA’s new greenhouse gas rules will be heard by Chief Judge David B. Sentelle and Circuit Judges Judith W. Rogers and David S. Tatel in February. Continue reading

Supreme Court Could Decide Whether Retroactive Rulemaking Requires Express Statutory Authorization

[Update: The Supreme Court denied cert on Monday, November 7, 2011.]

At its conference tomorrow, the Supreme Court will consider whether to grant cert in a D.C. Circuit case only an admin lawyer could love: National Petrochemical & Refiners Ass’n v. EPA, No. 11-102 (S. Ct.). Continue reading