Posted by MataHarley on 16 December, 2010 at 7:14 pm. 12 comments already!

I originally began this post to reconcile what’s going on in the various courts INRE O’healthcare. Indeed, I will do just that, as it is all interrelated. But I first want to lead with the most surprising revelation I’ve read in the opinions and various rulings thus far on the major lawsuits that have hit the news… and that is the inadvertent confession of the lead counsel for Obama’s HHS in oral arguments during the Commonwealth of Virginia vs Sebelius process.

Because the oral argument transcripts are not found online, and need to be ordered from the US District Court for eastern Virginia, I’m going to quote the source of this revelation directly. Do I trust that source? You betcha. It is none other than Judge Roger Vinson in the US District Court for the northern Florida/Pensacola division, using specific citations and quotes for verification.

Vinson shook the lib/prog world back in mid October when he denied the Obama admin’s motion to dismiss. That ruling shares much in common with the latest final ruling that the health care mandate was unConstitutional by Judge Henry Hudson in the Commonwealth of Virginia vs Sebelius case, mentioned above. But what Vinson’s preliminary decision to proceed revealed back in October was more extraordinary…. and unreported.

The decision to call the fee for noncompliance a penalty instead of a tax was a last minute deliberate swap by Congress. It had been specifically called a tax in the previous incarnations. So why the 11th hour change in terms?

In Obama’s counsel’s own words, it was so that Congressional Dems could avoid scrutiny and accountability for raising taxes.


From pg 26 of Vinson’s October ruling:

In Virginia v. Sebelius, 3:10cv188, one of the twenty or so other lawsuits challenging the Act, the federal government’s lead counsel (who is lead defense counsel in this litigation, as well) urged during oral argument in that case that the penalty is proper and sustainable under the taxing power. Although that power is broad and does not easily lend itself to judicial review, counsel stated, “there is a check. It’s called Congress. And taxes are scrutinized. And the reason we don’t have all sorts of crazy taxes is because taxes are among the most scrutinized things we have. And the elected representatives in Congress are held accountable for taxes that they impose.” See Transcript of Oral Argument (Virginia case), at 45 (emphasis added).

This foregoing statement highlights one of the more troubling aspects of the defendants’ “newfound” tax argument. As noted at the outset of this order, and as anyone who paid attention to the healthcare reform debate already knew, the Act was very controversial at the time of passage. Irrespective of the merits of the arguments for or against it, the legislation required lawmakers in favor of the bill to cast politically difficult and tough votes. As it turned out, the voting was extremely close. Because by far the most publicized and controversial part of the Act was the individual mandate and penalty, it would no doubt have been even more difficult to pass the penalty as a tax. Not only are taxes always unpopular, but to do so at that time would have arguably violated pledges by politicians (including the President) to not raise taxes, which could have made it that much more difficult to secure the necessary votes for passage. One could reasonably infer that Congress proceeded as it did specifically because it did not want the penalty to be “scrutinized” as a $4 billion annual tax increase, and it did not want at that time to be “held accountable for taxes that they imposed.” In other words, to the extent that the defendants are correct and the penalty was intended to be a tax, it seems likely that the members of Congress merely called it a penalty and did not describe it as revenue-generating to try and insulate themselves from the potential electoral ramifications of their votes.

Regardless of whether the members of Congress had this specific motivation and intent (which, once again, is not my place to say), it is obvious that Congress did not pass the penalty, in the version of the legislation that is now “the Act,” as a tax under its taxing authority, but rather as a penalty pursuant to its Commerce Clause power. Those two exactions, as previously noted, are not interchangeable. And, now that it has passed into law on that basis, government attorneys have come into this court and argued that it was a tax after all.

This rather significant shift in position, if permitted, could have the consequence of allowing Congress to avoid the very same accountability that was identified by the government’s counsel in the Virginia case as a check on Congress’s broad taxing power in the first place. In other words, the members of Congress would have reaped a political advantage by calling and treating it as a penalty while the Act was being debated, see Virginia v. Sebelius, 702 F. Supp. 2d 598, 612 (E.D. Va. 2010) (referring to “preenactment representations by the Executive and Legislative branches” that the penalty was not “a product of the government’s power to tax for the general welfare”), and then reap a legal advantage by calling it a tax in court once it passed into law. See Def. Mem. at 33-34, 49 (arguing that the Anti-Injunction Act bars any challenge to the penalty which, in any event, falls under Congress’s “very extensive” authority to tax for the general welfare).

This should not be allowed, and I am not aware of any reported case where it ever has been.

In a twist of irony, this attempt for the Dems’ to have their cake, as well as eat it, in order to avoid political repercussions lies at the heart of the admin’s troubles in the courts today. Whether the fees for not having insurance are considered a “penalty” or a “tax” relates to the specific Congressional authority to impose that fee at all. A tax under the general welfare authority generally has a very limited judicial review. However as a “penalty”, it can only be within Congressional power to levy such a regulatory penalty if linked to an enumerated power other than the General Welfare authority.

Enter the Commerce Clause… the power cited in O’healthcare as their specific authority for both the mandate, and the “penalty.

I highly recommend reading Vinson’s penalty vs tax sections in particular, but he sums up Congressional intent with this:

To summarize the foregoing, it “clearly appears” from the statute itself, see Helwig, supra, 188 U.S. 613, that Congress did not intend to impose a tax when it
imposed the penalty. To hold otherwise would require me to look beyond the plain words of the statute. I would have to ignore that Congress:

(i) specifically changed the term in previous incarnations of the statute from “tax” to “penalty;”

(ii) used the term “tax” in describing the several other exactions provided for in the Act;

(iii) specifically relied on and identified its Commerce Clause power and not its taxing power;

(iv) eliminated traditional IRS enforcement methods for the failure to pay the “tax;” and

(v) failed to identify in the legislation any revenue that would be raised from it, notwithstanding that at least seventeen other revenue-generating provisions were specifically so identified.

In short, the lead counsel’s faux pas, and their dual defense argument that it’s a tax instead of a penalty in order to bring it easily under the general welfare powers of taxation, has yielded them a verbal spanking for their political shenigans by a federal district judge, even before the hearings began.

What has become apparent from reading opinions and preliminary rules on motions to dismiss is that the Commerce Clause will end up being center stage, and likely the sole and final battle ground in the individual mandate issue.

At this writing, there have been two judicial rulings which have upheld the health care mandate as a Constitutional Congressional authority, based on the aggregate effects of uninsured, and it’s vital implementation to the rest of the “reform”. These judges say the aggregate effects… even if citizens agree to pay out of pocket… means they are planning on participating in the “commerce” of medical services in the future. To them, the “decision” to participate in the future constitutes willing engagement in “commerce” today.

One of these is Judge George Steeh’s ruling in Michigan’s southern division district court, just one week before Vinson’s denial of the motion to dismiss, in early October. In Thomas More Law Center vs Obama, there were similar arguments in the other three cases – including the status of the fee as a penalty or a tax…. but with one difference. The point became moot when the bench decided that Congress was within their Commerce Clause power, and therefore could indeed impose the “penalty” as part of that power – the status of which remains intrinsically linked with the statutory authority.

The other ruling to uphold the mandate as legitimate power under the Commerce Clause is another Virginia case, with Judge Norman K. Moon hearing the Liberty University vs Geithner, Sebelius. Liberty’s lawsuit included many grounds revolving exemption for religious, but also included… as they all do… the individual mandate.

On the dissenting side is the advent of unprecedented power such an interpretation of the Commerce Clause would bring. As Hudson pointed out in his VA ruling, to allow the unchecked expansion of Congressional power to the limits established by the healthcare mandate “… would invite unbridled exercise of federal police powers.”

At it’s core, this dispute is not simply about regulating the business of insurance – or crafting a scheme of universal health insurance coverage – it’s about an individual’s right to choose to participate.

The current count for these insights into judicial review… whether a final ruling or a ruling denying the admin’s motion to dismiss… is two to two. Three of them are final rulings… the Liberty/Geithner VA lawsuit, which Liberty plans to appeal, the Michigan and the Commonwealth of Virginia lawsuit. Judge Vinson, source for the main subject matter of this post, is currently hearing arguments that started today in the State of FL by/through Bill McCollum vs the HHS. We have yet to hear his ruling, as it’s an ongoing process, but we do have a clue to his reasoning already.

But another lawsuit, USCA vs Sebelius in Ohio’s northern district of Eastern Ohio, may make that count 3-2 as unConstitutional. Judge David Dowd has not only denied the admin’s motion to dismiss, he also stated he found himself in agreement with Judge Vinson’s (FL) reasoning on both the Anti-Injunction Act and Ripeness arguments by the administratio. Additionally, he decided that the issue of authority under the Commerce Clause “…requires additional consideration by the Court in further proceedings.”

Yet these are not the extent of all the challenges to O’healthcare. According to Healthcare Lawsuit dot Org, a one stop quick reference site to (if not all, most) related lawsuits, there are 60 still in the courts in various stages. Again, with what I’ve read thus far, and depending upon legitimate stand of the plaintiffs, I do believe that it will come down to Congressional authority under the Commerce Clause as the sole argument.

The Obama admin does have some hurdles, as they point out the individual mandate is integral to the entire package.

Without it, they say, the whole package collapses, dashing hopes for universal coverage and cost control. Ripping the mandate from the law would have “devastating consequences,” the White House said Tuesday

But this administration is not to be deterred and, according to a Daily Caller article today, suggests that the admin may have a “backdoor” solution by imposing a “lifelong penalty that escalates the longer they wait” to participate. They use as an example the ability to “opt out” of Medicare.

The fly in that ointment is there is no way to opt out of Medicare unless you also opt out of your Social Security benefits, as demonstrated by the Hall vs Sebelius lawsuit. You can find continual updates on that lawsuit at the Fund for Personal Liberty website. One would have to think that forcing anyone to yield their Social Security pay in over their working lives is already a “lifelong penalty”. This means that the Daily Caller writer, and any quoted in his article, must be unaware of the Clinton regulation change and the lawsuit.

On the whole, there’s no hurry with this story… contrary to a few lib/progs residing here, and grumpy FA didn’t come out with a fast news blurb on the latest court ruling. The road to the High Court is a long and winding road, fraught with lots of lions, tigers and bears… oh my. As the New York Times pointed out days ago, this could take a year or two for any of the earlier suits to hit the robed ones.

Ultimately, the Supreme Court will have to resolve the conflict, and many court watchers already expect a characteristically close decision. But what is now clear is that the challenges from dozens of states to the law’s constitutionality can no longer be dismissed as frivolous, as they were earlier this year by some scholars and Democratic partisans.

“All the insiders thought it was a slam dunk,” said Randy E. Barnett, a professor of constitutional law at Georgetown University who supports the health care challenges. “Maybe a slam dunk like weapons of mass destruction were a slam dunk.”

Which may make it just in time for a 2012 October Surprise… if not delivered in the Court’s usual flurry of June opinions.

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