Below is a copy of an email from Virginia Attorney General Ken Cuccinelli.

Where Liberty Stands – In Virginia and Across the Country

Tuesday, October 26, 2010

Dear Fellow Virginians,

Last Monday, as most of you know, Virginia went to court to argue its motion for summary judgment (the merits of the case), in which we argued that the individual mandate contained in the federal healthcare bill is unconstitutional. At the close of the hearing, the judge indicated that he expected to rule on the constitutionality of the federal health care law by the end of the year.

In addition to the constitutionality of the individual mandate under the commerce clause, we also had to address two other subjects: first, whether the “penalty” associated with not purchasing the government-mandated (I call it “Nancy-approved”) health insurance is a tax under congress’ taxing power, and second, if the individual mandate is unconstitutional, what remedy should the court impose? I’ll get to each of these in turn.

Virginia’s is the first state case to reach the summary judgment stage, and as such we’re likely to have the first decision. The Florida case with 20 other states represented has its summary judgment hearing scheduled for December 16th, right around the time we’ll be looking for a decision in our case.

Last week I promised you a rundown of the case – where we are, and what’s coming up – so today I’m not only going to discuss our case, but the two recent rulings by judges in other healthcare cases as well.

Virginia’s Case

As many of you who have been reading this newsletter since we filed suit back on March 23rd know, this case is not about healthcare. We argued again last Monday that this case is about protecting our liberty, and that the precedent the federal government is trying to establish, namely, that they can order you to purchase a product of their choosing, would massively expand federal power beyond anything the founders intended or envisioned. The result of course would be a loss of liberty by all of the citizens and a reduction of the unique role of states to that of a functionary of the federal government.

In this case, Virginia is exercising the check to federal power that the founding fathers expected states to exercise when the federal government oversteps its proper legal and constitutional authority. This part of the system of checks and balances is what is called “federalism.” The more commonly known part of the system of checks and balances is the division of power between the legislative, executive and judicial branches within the federal government.

If we lose this case, one major consequence will be the death of federalism. I doubt the founders ever conceived that we would be in a situation where all that stood between us and the end of federalism was a single court case. Sadly, that is where we find ourselves as a nation.

Fortunately, as the judge in our case noted in his denial of the motion to dismiss – congress is extending the commerce clause further in the healthcare bill than it has ever done in the past. In an amicus brief (“friend of the court” brief) filed by three former US Attorneys General, Ed Meese, Dick Thornburgh, and William Barr, in support of Virginia’s suit, they said that in all their years of defending the laws of the federal government, they have not seen such strained reasoning to arrive at the conclusion that the government has the power to order people to buy a product and to impose penalties if they don’t. The former AGs called that reasoning “nonsense” – there are some things former US AGs can do and say to the court that I can’t… like call the feds’ central argument “nonsense!”
As we saw in earlier stages of this case – the federal government now feels compelled to argue that the penalty for failing to buy the Nancy-approved health insurance is a “tax,” despite the fact that key figures – including the President – involved in the passage of the bill argued repeatedly that it was “absolutely not a tax”… to use the President’s own phrase.

Interestingly, the judge asked the federal government’s lawyer point blank why they are arguing it was a tax, even though the president said it was not a tax. It was awkward to say the least to see the government’s lawyer try and dance around the question! The lawyer denied that the President had ever said it was NOT a tax… however, if you watch this interview with the President, you will see that that is not true. Whoops.

We asked that if the court rules that the individual mandate is unconstitutional, to issue an injunction to keep the government from implementing the federal health care act. This is the question of what remedy the court should impose if Virginia prevails.

For those who may not recall, the federal healthcare law does NOT have what is called a “severability clause.” What’s that? It’s a provision in most contracts and many pieces of larger legislation that says that if any part of the law is held unconstitutional, all the other parts of the law remain in effect. I.e., the bad provision is “severed” from the bill.

What happens when there is no severability clause? Well, the easiest way to start explaining the answer is to tell you what would happen if there WAS a severability clause. With a severability clause, the feds would get the benefit of a presumption that whatever else could remain in the bill and still function, would in fact be left in effect.
Without a severability clause, the whole bill does NOT automatically fall, though that is what Virginia is requesting of the court. Instead, the court has to ask the question: ‘would the legislation have passed without the offending provision?’ That’s a pretty awkward position for a judge, but it’s the ‘rule’ the Supreme Court has established.
In our case, the federal government has already conceded that if the individual mandate is unconstitutional, then all of the insurance provisions of the bill would have to fall, as they are dependent on the individual mandate for proper functioning.

Interestingly however, during the motion to dismiss phase of the case, they referred to the healthcare bill as regulating how healthcare was financed. The ‘financing’ tie-in seemed to disappear from their discussion in the summary judgment phase of the case. Why? So they could argue that the Medicaid/Medicare changes wrought by the bill could survive. If this is primarily a financing scheme, then surely the other financing pieces should fall with the individual mandate, i.e., the changes to Medicaid and Medicare.

Note that it is the changes to Medicaid and Medicare that threaten Virginia with over $1 billion of unfunded mandates by fiscal year 2022… and of course that conservative cost estimate assumes that federal estimates of the costs associated with the bill are – for the first time in history – accurate.

So, I think if the individual mandate is held unconstitutional, and the penalty is deemed – shockingly – a penalty and not a tax, then there are three most probable remedies the judge might impose: 1) enjoin the whole bill; 2) enjoin just the insurance elements of the legislation; and 3) enjoin the insurance, Medicaid and Medicare elements of the legislation.

The judge could carve the law up even more, but that strikes me as unlikely if for no other reason than keeping it simple makes sense when he knows that whichever side loses is going to appeal.
A lot to think about…

Meanwhile, Up in Michigan

Several weeks ago, in a far less publicized case than either Virginia’s or the multi-state case being tried in Florida, a federal judge ruled that the individual mandate is constitutional. While we would love to see our allies win every single case around the country, such an outcome was never going to happen. And in the Michigan case, reading the ruling demonstrates the incredible leaps of logic and language the judge had to explicitly engage in to reach his desired conclusion. In fact, such weaknesses are so obvious on reading the ruling, that I am hopeful that it will actually be helpful to us.

How, you might ask? Well, I think that the obvious lengths to which the Michigan judge had to go to rule that the individual mandate was constitutional may ultimately deter other judges from going down that same route.

However, despite the judge’s ruling regarding the individual mandate, he also noted in his ruling that “The provisions of the Health Care Reform Act at issue here, for the most part, have nothing to do with the assessment or collection of taxes.” Now, if you remember from our case, the federal government painstakingly argued that the healthcare law can be maintained under congress’ taxing power. It is unclear why the judge made this statement, as he did not elaborate on his reasoning, but it begins to suggest that we may see consistent rulings against the feds’ tax argument, perhaps even across the country.

And In Sunny Florida...

In the Florida case, where our 20 sister states are litigating together, Judge Vinson recently denied the federal government’s motion to dismiss like Judge Hudson did in our case in August.

Remember that a typical constitutional law case has two rounds: first, the motion to dismiss and then summary judgment. The motion to dismiss in Virginia’s case was decided on August 2nd, while the motion to dismiss in the Florida case was decided on October 14th.

Similar to the Michigan case, Judge Vinson repeatedly called the fine for those that don’t purchase the Nancy-approved health insurance a penalty. In fact, he spent 22 pages explaining why the “penalty” is not a tax. He noted that the fines were not intended to raise revenue, but rather act as a deterrent against people choosing not to purchase the mandated healthcare.

In a particularly stinging passage, the judge cited “Alice in Wonderland” to note the absurdity of professing to the public (while the bill was under consideration in congress) that the penalty for failure to comply with the mandate is NOT a tax, and shortly thereafter walking into court and arguing that, in fact, it IS a tax.
As the Washington Times noted regarding Judge Vinson’s opinion as it related to the tax argument, “His 22-page analysis is an exposition of the logic that if something is called a duck, acts like a duck and quacks like a duck, it’s a duck – and the same goes for a penalty.”

You might ask how the judge was ruling on the tax question at the motion to dismiss stage. The short answer is that he said that he did not need to take up the issues related to standing regarding the tax question, because the penalty in question is not a tax. So, he addressed the tax issue in his ruling on the motion to dismiss in order to set aside certain arguments being made in the motion to dismiss by the federal government.

Note that there are now two substantive rulings on the tax question, one by a judge (in Michigan) who looked like he really wanted to rule the individual mandate constitutional, and in both instances the feds’ position that the penalty is really a tax has been rejected.

Here’s hoping for #3 on that point in December!

And to Conclude…

In Virginia’s case – the judge noted at the end of the hearing that both sides were better prepared for this case than any he had seen in a long, long while. It was clear during the hearing that he had carefully read the briefs submitted by both sides, and he asked pointed – and very knowledgeable – questions about the positions of both Virginia and the United States.

His very detailed preparation for the trial date, and the statements he made about taking his time to carefully parse out all the arguments before coming to a decision means that he is taking this case – as we are in the AG’s office – as one of the most important cases of our time.

I have not changed my expectations on the case from the outset. I am still cautiously optimistic that Virginia will prevail, but whenever you’re in truly uncharted legal territory in the courts… anything can happen!

Stay tuned for more, as this is not just developing here in Virginia, but all over the country.


Ken Cuccinelli, II
Attorney General of Virginia

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