Reagan Appointee Dismisses Suit To Gut Obamacare Exchanges

Although barely noted by the media, immediately upon returning from the three-day President’s Day weekend, bitter-end opponents of the Affordable Care Act suffered a major defeat, at the hands of Judge James R. Spencer, a Reagan appointee to the United States District Court for the Eastern District of Virginia.  Tuesday afternoon, February 18, Judge Spencer dismissed a complaint filed in September of last year by eminent conservative Supreme Court advocate Michael Carvin, on behalf of the Competitive Enterprise Institute, that sought to bar “premium assistance” tax credits and subsidies to needy individuals purchasing health insurance policies on ACA exchanges in states that have opted to not set up an exchange of their own, but to pass that buck to the Federal government. 

Carvin’s lawsuit advances a counter-intuitive interpretation of the ACA that would, as Obamacare opponents have repeatedly gloated, “sink” the ACA, “drive a stake through its heart,” and “threat[en]” its “survival.”[1]  Carvin argued that the plain text of one ACA provision, which references “exchanges established by the state,” excludes federally facilitated exchanges from participating in the premium assistance regime altogether.  Judge Spencer disagreed.  Noting archly that “Courts have a duty to construe statutes as a whole,” he ruled that, when the ACA’s “statutory context is taken into account, Plaintiffs’ position is revealed as implausible” and “not a viable theory.”

After losing their bid to cancel the ACA in their constitutional challenge to the law’s individual mandate and expansion of Medicaid, NFIB v. Sebelius, ACA opponents pivoted quickly to the line of attack rejected by Tuesday’s decision.  In July 2012, CATO Institute economist Michael Cannon and Case Western Reserve law professor Jonathan Adler published a law review article elaborating the statutory interpretation on which this lawsuit – along with three other similar suits – is based.  Right-wing forces have invested heavily in the Cannon-Adler theory.  Cannon stressed the likelihood of scoring a court victory that would effectively nullify the exchanges, in a relentless campaign to persuade Republican state legislators and officials nationwide, to resist local and federal pressures to embrace the local exchange option.  House Republican Darrell Issa’s Government Reform and Oversight Committee conducted a high decibel investigation and hearing targeting a Treasury Department ruling that the premium assistance program covered federal as well as state exchanges; in February 2014, Issa issued a report purporting to document that “ the [IRS and Treasury Department] promulgated a final rule that appears to contradict the plain meaning of the statute.”  Sympathetic pundits, recently and notably, George F. Will, on January 29,  trumpeted the party line that this case “that no one had ever heard of” could “blow Obamacare to smithereens.” 

By the time Will chimed in, this below-the-media-radar legal guerrilla strategy had already hit a wall.  Though Will did not mention it in his column, on January 15, Judge Paul Friedman of the District Court for the District of Columbia dismissed a second suit filed by Carvin, identical to the Eastern District of Virginia complaint.  Judge Friedman’s rationale substantially anticipated Judge Spencer’s.  Indeed, Judge Spencer’s opinion generally followed, and repeatedly quoted, Friedman’s prior analysis. 

These matching results mark an ironic denouement to a sequence of impatient maneuvers by uber-litigator Carvin, apparently aimed at finding the right judge, presumably a Right-leaning judge who could see the case as a chance to vent ideological hostility to Obamacare and its namesake.  His initial complaint, filed in May 2013, drew D.C. District Judge Richard W. Roberts, a former career federal prosecutor appointed by President Clinton.  When the judge failed to move the case swiftly enough for Carvin’s liking, Carvin successfully moved to have the matter reassigned, on the ground that Roberts was overburdened by his recent elevation to Chief Judge of the District.  After Judge Friedman, another Clinton appointee, was given responsibility for the case, on September 13, 2013, Carvin responded swiftly.  On September 16, he filed a second iteration of the same claim, in a district 100 miles to the South which had, three years earlier, upheld Virginia’s then-Attorney General Kenneth Cuccinelli’s challenge to the ACA individual mandate.  What this forum-shopping has netted for Carvin is a lesson: even in a politically charged matter such as this back-door effort to maim Obamacare, conscientious judges appointed by presidents from widely divergent political persuasions will follow the law, to similar, and similarly non-political conclusions. 

Not coincidentally, both these district judges have strong reputations for professionalism, thoroughness, and even-handedness, When Judge Spencer became Chief Judge of Virginia’s Eastern District in 2004, the Washington Post reported that “lawyers of all stripes say [he] puts the law ahead of politics and dispenses justice in an evenhanded, occasionally blunt manner.”  He has presided over a court nationally famed for its no-nonsense modus operandi as “the rocket docket,” and as Chief Judge materially accelerated the pace at which he and the three other judges in the district disposed of the matters before them.  That blunt efficiency was on full display in the comprehensive but concise 24 page argument with which Judge Spencer, a former prosecutor and cum laude Harvard Law graduate, fairly described, then curtly dispatched the Cannon-Adler-Carvin gutting interpretation of the ACA.  For his part, Judge Friedman, a 1994 Clinton appointee, enjoys a similar reputation for professionalism and fairness, also on display in his handling of the challenge to the ACA exchange provisions.  Prior to his January 15 decision to grant the Justice Department’s motion for summary judgment on the merits of Carvin’s case, Judge Friedman rejected DOJ’s motion to dismiss the case on procedural grounds (principally, standing-related issues).  That decision that prompted the reliably anti-ACA Washington Times to editorialize that “Judge Paul L. Friedman deserves credit for doing the right thing” allowing the lawsuit to proceed to the merits. 

To be sure, these two district court decisions are not the last word on this last-ditch gambit to ambush the ACA in the courts.  Both were instantly appealed. The D.C. Circuit Court of Appeals effectively granted the challengers’ Motion to Expedite, and no fewer than 16 amicus curiae briefs have been filed – seven of them by advocacy groups and political leaders opposed to the ACA and supporting the complaint.  (Last Saturday, February 15, CAC filed an amicus brief supporting the Department of Justice, on behalf of Democratic leaders Reid and Pelosi, and the five committee chairs responsible for drafting the ACA, as well as 125 state legislators.)   But these two, credibly argued and authored, district court decisions will make reversal a legal challenge for Carvin and his allies, and a heavy political lift for any judges inclined to vent animus toward the ACA and the Obama Administration.

[1] See, e.g., Michael Cannon, “No Obamacare Exchanges,” National Review Online (April 12, 2012),; Dan Diamond, “Could Halbig et al. v. Sebelius Sink Obamacare, The Health Care Blog, (June 11, 2013) (quoting Michael Greve: “This is for all the marbles.”),