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IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF FLORIDA

PENSACOLA DIVISION

STATE OF FLORIDA, by and through

Bill McCollum, et al.;

Plaintiffs,

v. Case No.: 3:10-cv-91-RV/EMT

UNITED STATES DEPARTMENT OF

HEALTH AND HUMAN SERVICES, et al.,

Defendants.

____________________________________/

ORDER AND MEMORANDUM OPINION

Now pending is the defendants’ motion to dismiss (doc. 55). This motion

seeks dismissal of Counts One, Two, Three, and Six of the plaintiffs’ amended

complaint for lack of subject matter jurisdiction (pursuant to Rule 12(b)(1), Fed. R.

Civ. P.), and dismissal of all counts in the amended complaint for failure to state a

claim upon which relief can be granted (pursuant to Rule 12(b)(6), Fed. R. Civ. P.).

The plaintiffs have filed a response in opposition, and the defendants have filed a

reply to that response. A hearing was held in this matter on September 14, 2010.

I. INTRODUCTION

This litigation --- one of many filed throughout the country --- raises a facial

Constitutional challenge to the federal healthcare reform law, Patient Protection and

Affordable Care Act, Pub. L. No. 111-148, 124 Stat. 119 (2010), amended by

Health Care and Education Reconciliation Act of 2010, Pub. L. No. 111-152, 124

Stat. 1029 (2010) (the “Act”). It has been filed by sixteen state Attorneys General

and four state Governors (the “state plaintiffs”);1

 two private citizens, Mary Brown

1

 The state plaintiffs represent: Alabama, Alaska, Arizona, Colorado, Florida,

Georgia, Idaho, Indiana, Louisiana, Michigan, Mississippi, Nebraska, Nevada, North

and South Dakota, Pennsylvania, South Carolina, Texas, Utah, and Washington.

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and Kaj Ahlburg (the “individual plaintiffs”); and the National Federation of

Independent Business (“NFIB”) (together, the “plaintiffs”). The defendants are the

United States Department of Health and Human Services, Department of Treasury,

Department of Labor, and their respective secretaries (together, the “defendants”).

Before addressing the plaintiffs’ allegations, and the arguments in support of

the defendants’ motion to dismiss, I will take a moment to emphasize preliminarily

what this case is, and is not, about. 

The Act is a controversial and polarizing law about which reasonable and

intelligent people can disagree in good faith. There are some who believe it will

expand access to medical treatment, reduce costs, lead to improved care, have a

positive effect on the national economy, and reduce the annual federal budgetary

deficit, while others expect that it will do exactly the opposite. Some say it was

the product of an open and honest process between lawmakers sufficiently

acquainted with its myriad provisions, while others contend that it was drafted

behind closed doors and pushed through Congress by parliamentary tricks, late

night weekend votes, and last minute deals among members of Congress who did

not read or otherwise know what was in it. There are some who believe the Act is

designed to strengthen the private insurance market and build upon free market

principles, and others who believe it will greatly expand the size and reach of the

federal government and is intended to create a socialized government healthcare

system.

While these competing arguments would make for an interesting debate and

discussion, it is not my task or duty to wade into the thicket of conflicting opinion

on any of these points of disagreement. For purposes of this case, it matters not

whether the Act is wise or unwise, or whether it will positively or negatively impact

healthcare and the economy. Nor (except to the limited extent noted in Part III.A(7)

infra) am I concerned with the manner in which it was passed into law. My review

of the statute is not to question or second guess the wisdom, motives, or methods

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of Congress. I am only charged with deciding if the Act is Constitutional. If it is,

the legislation must be upheld --- even if it is a bad law. United States v. Butler,

297 U.S. 1, 79, 56 S. Ct. 312, 80 L. Ed. 477 (1936) (“For the removal of unwise

laws from the statute books appeal lies, not to the courts, but to the ballot and to

the processes of democratic government”) (Stone, J., dissenting). Conversely, if it

is unconstitutional, the legislation must be struck down --- even if it is a good law.

Bailey v. Drexel Furniture Co. (Child Labor Tax Case), 259 U.S. 20, 37, 42 S. Ct.

449, 66 L. Ed. 817 (1922) (reviewing court must strike down unconstitutional law

even though that law is “designed to promote the highest good. The good sought

in unconstitutional legislation is an insidious feature, because it leads citizens and

legislators of good purpose to promote it, without thought of the serious breach it

will make in the ark of our covenant, or the harm which will come from breaking

down recognized standards.”).

At this stage in the case, however, my job is much simpler and more narrow

than that. In ruling on the defendants’ motion to dismiss, I must only decide if this

court has jurisdiction to consider some of the plaintiffs’ claims, and whether each

of the counts of the amended complaint states a plausible claim for relief.

II. BACKGROUND

As Congress has recognized: “By most measures, we have the best medical

care system in the world.” H.R. Rep. No. 111-443, pt. 1. However, at the same

time, no one can deny that there are significant and serious problems. Costs are

high and millions do not have insurance. Lack of health insurance can preclude the

uninsured from accessing preventative care. If and when the uninsured are injured

or become ill, they receive treatment, as the defendants acknowledge, because in

this country medical care is generally not denied due to lack of insurance coverage

or inability to pay. However, the costs that are incurred to treat the uninsured are

sometimes left unpaid --- to the tune of $43 billion in 2008 (which is less than 2%

of all national healthcare expenditures for that year). The costs of uncompensated

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care are passed along to market participants in the form of higher costs and raised

premiums, which, in turn, can help perpetuate the cycle (or the “premium spiral,”

as the defendants call it) and add to the number of uninsured. It was against this

backdrop that Congress passed the Act.

A. The Legislative Scheme

At nearly 2,700 pages, the Act is very lengthy and includes many provisions,

only a few of which are specifically at issue in this litigation. Chief among them is

Section 1501, which, beginning in 2014, will require that all citizens (with stated

exceptions) obtain federally-approved health insurance, or pay a monetary penalty

(the “individual mandate”). This provision is necessary, according to Congress and

the defendants, to lower premiums (by spreading risks across a much larger pool)

and to meet “a core objective of the Act,” which is to expand insurance coverage

to the uninsured by precluding the insurance companies from refusing to cover (or

charging exorbitant rates to) people with pre-existing medical conditions. Without

the individual mandate and penalty in place, the argument goes, people would

simply “game the system” by waiting until they get sick or injured and only then

purchase health insurance (that insurers must by law now provide), which would

result in increased costs for the insurance companies. This is known as “the moral

hazard.” The increased costs would ultimately be passed along to consumers in the

form of raised premiums, thereby creating market pressures that would (arguably)

inevitably drive the health insurance industry into extinction. The plaintiffs allege

that regardless of whether the individual mandate is well-meaning and essential to

the Act, it is unconstitutional and will have both a “profound and injurious impact”

on the states, individuals, and businesses.

The plaintiffs object to several interrelated portions of the Act as well. First,

the Act significantly alters and expands the Medicaid program. Created in 1965,

Medicaid is a cooperative federal-state program that provides for federal financial

assistance (in the form of matching funds) to states that elect to provide medical

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care to needy persons. The Act will add millions of new enrollees to the states’

Medicaid rolls by expanding the program to include all individuals under the age of

65 with incomes up to 133% of the federal poverty line. Second, the Act provides

for creation of “health benefit exchanges” designed to allow individuals and small

businesses to leverage their buying power to obtain competitive prices. The Act

contemplates that these exchanges will be set up and operated by the states, or by

the federal government if the states elect not to do so. And lastly, the Act requires

that the states (along with other “large employers”) provide their employees with a

prescribed minimum level of health insurance coverage (the “employer mandate”).

The plaintiffs allege that these several provisions violate the Constitution and state

sovereignty by coercing and commandeering the states and depriving them of their

“historic flexibility” to run their state government, healthcare, and Medicaid

programs. The plaintiffs anticipate that these and various other provisions in the

Act will cost Florida (and the other states similarly) billions of dollars between now

and the year 2019, not including the administrative costs it will take to implement

the Act, and that these costs will only increase in the subsequent years. In short,

the plaintiffs contend that the legislation is coercive, intrusive, and could bankrupt

the states.2

B. This Lawsuit and the Motion to Dismiss

The plaintiffs advance six causes of action in their amended complaint, and

they seek declaratory and injunctive relief with respect to each. They contend that

the Act violates the Constitution in the following ways: (1) the individual mandate

and concomitant penalty exceed Congress’s authority under the Commerce Clause

2

 Not all states feel this way, and there is even a division within a few of the

plaintiff states. Three Attorneys General and four Governors previously requested

leave to participate in this case as amici curiae, and they have indicated that they

favor the changes the Act will bring as they believe the new legislation will save

money and reduce their already overburdened state budgets (docs. 57, 59).

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and violate the Ninth and Tenth Amendments (Count I); (2) the individual mandate

and penalty violate substantive due process under the Fifth Amendment (Count II);

(3) “alternatively,” if the penalty imposed for failing to comply with the individual

mandate is found to be a tax, it is an unconstitutional unapportioned capitation or

direct tax in violation of U.S. Const. art. I, § 9, cl. 4, and the Ninth and Tenth

Amendments (Count III); (4) the Act coerces and commandeers the states with

respect to Medicaid by altering and expanding the program in violation of Article I

and the Ninth and Tenth Amendments (Count IV); (5) it coerces and commandeers

with respect to the health benefit exchanges in violation of Article I and the Ninth

and Tenth Amendments (Count V); and (6) the employer mandate interferes with

the states’ sovereignty as large employers and in the performance of government

functions in violation of Article I and the Ninth and Tenth Amendments (Count VI).

See generally Amended Complaint (“Am. Compl.”) (doc. 42).

The defendants seek to have the complaint dismissed on numerous grounds;

four of the counts for lack of jurisdiction (under Rule 12(b)(1)), and all six of them

for failure to state a claim upon which relief can be granted (under Rule 12(b)(6)).

With respect to jurisdiction, the defendants contend that for the challenges to the

individual mandate and employer mandate (Counts I, II, and VI), the plaintiffs lack

standing; the claims are not ripe; and the claims are barred by the Anti-Injunction

Act. (By not raising similar arguments for Counts IV and V, the defendants appear

to impliedly concede that those counts allege injuries that are immediately ripe for

review). As for the plaintiffs’ “alternative” cause of action contending that, if the

individual mandate penalty is deemed to be a tax, then it is an impermissible and

unconstitutional one (Count III), the defendants maintain that, too, is precluded by

the Anti-Injunction Act.

If the foregoing jurisdictional challenges fail, the defendants go on to assert

that those causes of action, and all others, fail to state a claim for which relief can

be granted.

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III. DISCUSSION

A. Is the “Penalty” for Non-Compliance with the Individual Mandate Actually

a “Tax” for Constitutional Analysis?

A fundamental issue overlaps the defendants’ challenges to several of the

plaintiffs’ claims, and that is whether the individual mandate penalty is a “tax”

within Congress’s broad taxing power and thus subject to the Anti-Injunction Act,

or instead, a “penalty” that must be authorized, if at all, by Congress’s narrower

Commerce Clause power. Because of the importance of this issue, I will analyze it

first and at some length.

The defendants contend that the individual mandate penalty is a tax that is

sustainable under Congress’s expansive power to tax for the general welfare. U.S.

Const. art I, § 8, cl. 1 (“The Congress shall have Power To lay and collect Taxes,

Duties, Imposts and Excises, to pay the Debts and provide for the . . . general

Welfare”). The plaintiffs urge that, if it is a tax, it is an unconstitutional one. The

defendants maintain that the plaintiffs have no standing to raise the claim at this

point in time because of the Anti-Injunction Act.

The Anti-Injunction Act [26 U.S.C. § 7421(a)] provides that “no suit for the

purpose of restraining the assessment or collection of any tax shall be maintained

in any court by any person . . . .” The remedy for challenging an improper tax is a

post-collection suit for refund. As the Supreme Court has explained:

The Anti-Injunction Act . . . could scarcely be more

explicit --- “no suit for the purpose of restraining the

assessment or collection of any tax shall be maintained in

any court . . .” The Court has interpreted the principal

purpose of this language to be the protection of the

Government’s need to assess and collect taxes as

expeditiously as possible with a minimum of

preenforcement judicial interference, “and to require that

the legal right to the disputed sums be determined in a

suit for refund.” The Court has also identified “a collateral

objective of the Act --- protection of the collector from

litigation pending a suit for refund.”

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Bob Jones Univ. v. Simon, 416 U.S. 725, 736-37, 94 S. Ct. 2038, 40 L. Ed. 2d

496 (1974) (citations omitted); accord, e.g., United States v. Clintwood Elkhorn

Min. Co., 553 U.S. 1, 10, 128 S. Ct. 1511, 170 L. Ed. 2d 392 (2008) (“[The AntiInjunction Act] commands that (absent certain exceptions) ‘no suit for the purpose

of restraining the assessment or collection of any tax shall be maintained in any

court,’” even if the tax is alleged to be unconstitutional, which means “the

taxpayer must succumb to an unconstitutional tax, and seek recourse only after it

has been unlawfully exacted”); Enochs v. Williams Packing & Navigation Co., 370

U.S. 1, 7, 82 S. Ct. 1125, 8 L. Ed. 2d 292 (1962) (explaining that the “manifest

purpose” of the Anti-Injunction Act “is to permit the United States to assess and

collect taxes alleged to be due without judicial intervention, and to require that the

legal right to the disputed sums be determined in a suit for refund. In this manner

the United States is assured of prompt collection of its lawful revenue.”). The AntiInjunction Act, in short, applies to “truly revenue-raising tax statutes,” see Bob

Jones Univ., supra, 416 U.S. at 743, and seeks “protection of the revenues”

pending a suit for refund. See id. at 737, 740.

Because the individual mandate does not go into effect until 2014, which

means the penalty for non-compliance could not be assessed until that time, the

Anti-Injunction Act, if it applies, could render much of this case premature and

inappropriate as any injunctive or declaratory relief in favor of the plaintiffs could

hinder collection of tax revenue. See id. at 732 n.7, 738-39 (where the outcome of

a suit seeking injunctive or declaratory relief will prevent assessment and collection

of tax revenue, the case “falls within the literal scope and the purposes of the

[Anti-Injunction Act]”). Consequently, whether the individual mandate penalty is a

tax is an important question that not only implicates jurisdiction (vis-a-vis the AntiInjunction Act), and is not only the specific basis of one of the plaintiffs’ causes of

action, but it also goes to the merits of the individual mandate-related challenges of

Counts One and Two (that is, whether the penalty can be justified by, and enforced

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through, Congress’s indisputably broad taxing power), or whether, instead, the

penalty must pass Constitutional muster, if at all, under the more limited Commerce

Clause authority. As noted, I should, and will, consider this significant issue at the

outset.3

(1) Revenue-raising vs. regulatory

The plaintiffs contend that the individual mandate penalty is not a “true tax”

because, among other things, it will (at most) “generate only ‘some revenue,’ and

then only as an incident to some persons’ failure to obey the law.” See Plaintiffs’

Memorandum in Opposition to Defendants’ Motion to Dismiss (“Pl. Mem.”), at 19

(doc. 68). In other words, because its primary purpose is regulatory --- and will only

raise “little” revenue --- it is not a tax as the term is generally understood. It is true,

as held in certain of the early tax cases to which the plaintiffs cite, see, e.g., Lipke

v. Lederer, 259 U.S. 557, 42 S. Ct. 549, 66 L. Ed. 1061 (1922); Hill v. Wallace,

3

 The plaintiffs have briefly suggested that the Anti-Injunction does not apply

to this case because their challenge “is to the individual mandate itself” and not the

“incidental penalty that accompanies the individual mandate.” While it is true that

the language of the Anti-Injunction Act only prohibits suits “for the purpose of

restraining the assessment or collection of any tax,” which would not apply to the

individual mandate for every citizen to maintain healthcare coverage, the mandate

and penalty clearly work in tandem. If the penalty is a legitimate tax, striking the

individual mandate down will necessarily impede assessment and collection of tax

revenue. The Anti-Injunction Act is not limited to direct and actual tax assessment

or collection; the Eleventh Circuit and other courts have held that the statute also

reaches activities that may “eventually” impede the collection of revenue (even if

indirectly). See, e.g., Gulden v. United States, 287 Fed. Appx. 813, 815-17 (11th

Cir. 2008) (explaining that the Anti-Injunction Act is “interpreted broadly” and

“bars not only suits that directly seek to restrain the assessment or collection of

taxes, but also suits that seek to restrain . . . activities ‘which are intended to or

may culminate in the assessment or collection of taxes’”) (citation omitted);

Judicial Watch Inc. v. Rossotti, 317 F.3d 401, 405 (4th Cir. 2003) (“it is clear that

the Anti-Injunction Act extends beyond the mere assessment and collection of

taxes to embrace other activities,” such as those that may eventually “culminate in

the assessment or collection of taxes”).

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259 U.S. 44, 42 S. Ct. 453, 66 L. Ed. 822 (1922), that the Supreme Court once

drew distinctions between regulatory and revenue-raising taxes. However, those

holdings had a very short shelf-life. As noted in Bob Jones Univ., supra, which

cited to Lipke and Hill for that position, “the Court . . . subsequently abandoned

such distinctions.” 416 U.S. at 741 n.12; see also id. at 743 (further stating that

the cases were “of narrow scope” and “produced a prompt correction in course”).

Succeeding case law recognized that “[e]very tax is in some measure regulatory.

To some extent it interposes an economic impediment to the activity taxed as

compared with others not taxed. But a tax is not any the less a tax because it has

a regulatory effect.” Sonzinsky v. United States, 300 U.S. 506, 513, 57 S. Ct.

554, 81 L. Ed. 772 (1937); see also id. (“it has long been established that an Act

of Congress which on its face purports to be an exercise of the taxing power is not

any the less so because the tax . . . tends to restrict or suppress the thing taxed”).

Thus, as the law currently exists, “[i]t is beyond serious question that a tax does

not cease to be valid merely because it regulates, discourages, or even definitely

deters the activities taxed. The principle applies even though the revenue obtained

is obviously negligible, or the revenue purpose of the tax may be secondary.”

United States v. Sanchez, 340 U.S. 42, 44, 71 S. Ct. 108, 95 L. Ed. 47 (1950);

accord United States v. Kahriger, 345 U.S. 22, 27 n.3, 28, 73 S. Ct. 510, 97 L.

Ed. 754 (1953) (holding same and sustaining federal gambling tax even though its

proponents sought to hinder the activity at issue and “‘indulge[d] the hope that the

imposition of this type of tax would eliminate that kind of activity’”), overruled on

other grounds, Marchetti v. United States, 390 U.S. 39, 88 S. Ct. 697, 19 L. Ed.

2d 889 (1968). The elimination of the “regulatory vs. revenue-raising” test does

not necessarily mean, however, that the exaction at issue in this case is a “tax.”

(2) The Court’s role in ascertaining what Congress intended

In deciding this specific question, I will start from the assumption (only for

the analysis of whether it is a tax) that Congress could have used its broad taxing

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power to impose the exaction and that, if it had clearly (or even arguably) intended

to do so, then the exaction would have been sustainable under its taxing authority.

See Kahriger, supra, 345 U.S. at 28, 31 (“As is well known, the constitutional

restraints on taxing are few,” and courts are generally “without authority to limit

the exercise of the taxing power”); see also United States v. Ptasynski, 462 U.S.

74, 103 S. Ct. 2239, 76 L. Ed. 2d 427 (1983) (observing that “Congress’s power

to tax is virtually without limitation”).4

 However, that is not what happened here.

Although factually dissimilar, on this point I find instructive the early case of Helwig

v. United States, 188 U.S. 605, 23 S. Ct. 427, 47 L. Ed. 614 (1903). At issue in

that case was a federal law that required importers to pay a duty on imported items

based on their declared value, plus “a further sum” for any item subsequently found

to have been inadequately valued. The sole question the Supreme Court was called

upon to decide was whether, for jurisdictional purposes, the so-called “further sum”

was “revenue from imports or tonnage” (i.e., a tax), or whether it was in the nature

of a penalty. The Court stated:

Although the statute, under § 7, supra, terms the money

demanded as ‘a further sum,’ and does not describe it as

a penalty, still the use of those words does not change

the nature and character of the enactment. Congress may

enact that such a provision shall not be considered as a

penalty or in the nature of one, . . . and it is the duty of

the court to be governed by such statutory direction, but

the intrinsic nature of the provision remains, and, in the

absence of any declaration by Congress affecting the

manner in which the provision shall be treated, courts

must decide the matter in accordance with their views of

the nature of the act.

Id. at 612-13 (emphasis added). In concluding that the provision was a penalty, the

Court stated that, based on the statutory language and its application to the facts

4

 But see the discussion with respect to Count Three, Part III.C(4) infra.

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of the case, it was “impossible . . . to hold this provision to be other than penal in

its nature.” Id. at 613. To be clear, it is not necessarily significant for our purposes

that Helwig found the “further sum” to be in the nature of a penalty and not a tax;

rather, what is significant is what the Supreme Court said along the way to getting

there. In reaching its conclusion, the Court made it a point to stress --- as it did in

the emphasized portion quoted above --- that regardless of the “ordinary or general

meaning of the words” in the statute, and regardless of the “nature and character

of the enactment,” the exaction would not have been found a penalty if Congress

intended otherwise. Thus, “[i]f it clearly appear that it is the will of Congress that

the provision shall not be regarded as in the nature of a penalty, the court must be

governed by that will.” Id. (emphasis added).

As applied to the facts of this case, Helwig can be interpreted as concluding

that, regardless of whether the exaction could otherwise qualify as a tax (based on

the dictionary definition or “ordinary or general meaning of the word”), it cannot be

regarded as one if it “clearly appears” that Congress did not intend it to be. In this

case, there are several reasons (perhaps none dispositive alone, but convincing in

total) why it is inarguably clear that Congress did not intend for the exaction to be

regarded as a tax.5

(3) Congress did not call it a tax, despite knowing how to do so

In addition to the Act, there were several healthcare reform bills introduced

5

 Although it only matters what Congress intended, I note for background

purposes that before the Act was passed into law, one of its chief proponents,

President Barack Obama, strongly and emphatically denied that the penalty was a

tax. When confronted with the dictionary definition of a “tax” during a muchpublicized interview widely disseminated by all of the news media, and asked how

the penalty did not meet that definition, the President said it was “absolutely not a

tax” and, in fact, “[n]obody considers [it] a tax increase.” See, e.g., Obama:

Requiring Health Insurance is Not a Tax Increase, CNN, Sept. 29, 2009, available

at: http://www.cnn.com/2009/POLITICS/09/20/obama.health.care/index.html. 

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and debated during the 111th Congress. For example, “America’s Affordable Health

Choices Act of 2009” (H.R. 3200) was introduced in the House of Representatives

on July 14, 2009. Like the Act, it contained an individual mandate and concomitant

penalty. However, it called the penalty a tax. Section 401 was unambiguously

titled “Tax on Individuals Without Acceptable Health Care Coverage,” and went on

to refer to the exaction as a “tax” no less than fourteen times in that section alone.

See, e.g., id. (providing that with respect to “any individual who does not meet the

requirements of subsection (d) at any time during the taxable year, there is hereby

imposed a tax“). H.R. 3200 was thereafter superseded by a similar bill, “Affordable

Health Care for America Act” (H.R. 3962), which was actually passed in the House

of Representatives on November 7, 2009. That second House bill also included an

individual mandate and penalty, and it repeatedly referred to the penalty as a “tax.”

See, e.g., Section 501 (providing that for any person who does not comply with

the individual mandate “there is hereby imposed a tax,“ and referring to that “tax”

multiple times); Section 307(c)(1)(A) (further referring to the penalty as a “tax[ ] on

individuals not obtaining acceptable coverage”).

While the above bills were being considered in the House, the Senate was

working on its healthcare reform bills as well. On October 13, 2009, the Senate

Finance Committee passed a bill, “America’s Healthy Future Act” (S. 1796). A

precursor to the Act, this bill contained an individual mandate and accompanying

penalty. In the section titled “Excise Tax on Individuals Without Essential Health

Benefits Coverage,” the penalty was called a “tax.” See Section 1301 (“If an

applicable individual fails to [obtain required insurance] there is hereby imposed a

tax”).

In contrast to the foregoing, the Act --- which was the final version of the

healthcare legislation later passed by the Senate on December 24, 2009 --- did not

call the failure to comply with the individual mandate a tax; it was instead called a

“penalty.” The Act reads in pertinent part: “If an applicable individual fails to meet

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the requirement of subsection (a) . . . there is hereby imposed a penalty.” Act §

1501(b)(1). Congress’s conspicuous decision to not use the term “tax” in the Act

when referring to the exaction (as it had done in at least three earlier incarnations

of the legislation) is significant. “‘Few principles of statutory construction are more

compelling than the proposition that Congress does not intend sub silentio to enact

statutory language that it has earlier discarded in favor of other language.’” INS v.

Cardoza-Fonseca, 480 U.S. 421, 442, 107 S. Ct. 1207, 94 L. Ed. 2d 434 (1987).

Thus, “[w]here Congress includes [certain] language in an earlier version of a bill

but deletes it prior to enactment, it may be presumed that the [omitted text] was

not intended.” Russello v. United States, 464 U.S. 16, 23-24, 104 S. Ct. 296, 78

L. Ed. 2d 17 (1983); see also United States v. NEC Corp., 931 F.2d 1493, 1502

(11th Cir. 1991) (changes in statutory language “generally indicate[ ] an intent to

change the meaning of the statute”); Southern Pac. Transportation Co. v. Usery,

539 F.2d 386, 390-91 (5th Cir. 1976) (rejecting the interpretation of a statute that

was based on language in an earlier House version that the Senate changed prior to

passing into law, and attaching “weight to the [Senate’s] conscious and deliberate

substitution of [the House’s] language”) (binding under Bonner v. City of Prichard,

Alabama, 661 F.2d 1206, 1207 (11th Cir. 1981) (en banc)).

Congress’s failure to call the penalty a “tax” is especially significant in light

of the fact that the Act itself imposes a number of taxes in several other sections

(see, e.g., Excise Tax on Medical Device Manufacturers, § 1405 (“There is hereby

imposed on the sale of any taxable medical device by the manufacturer, producer,

or importer a tax”); Excise Tax on High Cost Employer-Sponsored Health Coverage,

§ 9001 (“there is hereby imposed a tax”); Additional Hospital Insurance Tax on

High-Income Taxpayers, § 9015 (“there is hereby imposed a tax”); Excise Tax on

Indoor Tanning Services, § 10907 (“There is hereby imposed on any indoor tanning

service a tax”)). This shows beyond question that Congress knew how to impose a

tax when it meant to do so. Therefore, the strong inference and presumption must

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be that Congress did not intend for the “penalty” to be a tax. See generally Hodge

v. Muscatine County, 196 U.S. 276, 25 S. Ct. 237, 49 L. Ed. 477 (1905) (noting

that “[i]t is not easy to draw an exact line of demarcation between a tax and a

penalty,” but where the statute uses “tax” in one section and “penalty” in another,

courts “cannot go far afield” in treating the exaction as it is called; to do otherwise

“would be a distortion of the words employed”); see also Duncan v. Walker, 533

U.S. 167, 173, 121 S. Ct. 2120, 150 L. Ed. 2d 251 (2001) (“It is well settled that

‘[w]here Congress includes particular language in one section of a statute but omits

it in another section of the same Act, it is generally presumed that Congress acts

intentionally and purposely in the disparate inclusion or exclusion.’”) (citations

omitted); Freemanville Water Sys., Inc. v. Poarch Band of Creek Indians, 563 F.3d

1205, 1209 (11th Cir. 2009) (“[W]here Congress knows how to say something but

chooses not to, its silence is controlling”); DIRECTV, Inc. v. Brown, 371 F.3d 814,

818 (11th Cir. 2004) (“[W]hen Congress uses different language in similar sections,

it intends different meanings.”).

The defendants assert in their memorandum, see Memorandum in Support of

Defendants’ Motion to Dismiss (“Def. Mem.”), at 33, 50 n.23 (doc. 56-1), as they

did during oral argument, that in deciding whether the exaction is a penalty or tax,

“it doesn’t matter” what Congress called it because the label “is not conclusive.”

See Transcript of Oral Argument (“Tr.”), at 27-29 (doc. 77). As a general rule, it is

true that the label used is not controlling or dispositive because Congress, at times,

may be unclear and use inartful or ambiguous language. Therefore, as the Supreme

Court recognized more than 100 years ago in Helwig, supra, the use of a particular

word “does not change the nature and character of the [exaction],” and it is the

ultimate duty of the court to decide the issue based on “the intrinsic nature of the

provision” irrespective of what it is called. See 188 U.S. at 612-13; accord Cooley

v. Bd. of Wardens, 53 U.S. (12 How.) 299, 314, 13 L. Ed. 996 (1851) (“it is the

thing, and not the name, which is to be considered”). However, as also noted in

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Helwig, this rule must be set aside when it is clear and manifest that Congress

intended the exaction to be regarded as one and not the other. For that reason, the

defendants are wrong to contend that what Congress called it “doesn’t matter.” To

the extent that the label used is not just a label, but is actually indicative of

legislative purpose and intent, it very much does matter. By deliberately changing

the characterization of the exaction from a “tax” to a “penalty,” but at the same

time including many other “taxes” in the Act, it is manifestly clear that Congress

intended it to be a penalty and not a tax.6

Quoting the Third Circuit in Penn Mut. Indem. Co. v. C.I.R, 277 F.2d 16, 20

(3d Cir. 1960), the defendants maintain that “‘Congress has the power to impose

taxes generally, and if the particular imposition does not run afoul of any

constitutional restrictions then the tax is lawful, call it what you will.’” Def. Mem.

at 50 n.23. I do not necessarily disagree with this position, at least not when it is

quite clear that Congress intends to impose a tax and is acting pursuant to its

taxing power. However, as will be discussed in the next section, that is not the

situation here. In the Penn Mutual Indemnity case, for example, it was clear and

undisputed that Congress had exercised its taxing authority to impose the exaction;

it was inarguably a “tax,” and the only question was whether it was an excise tax,

an income tax, or some other type of tax. It was in that particular context that the

Third Circuit’s analysis included the quoted statement, and further elaborated that:

“It is not necessary to uphold the validity of the tax imposed by the United States

6

 A hypothetical helps to further illustrate this point. Suppose that after the

Act imposed the penalty it went on to expressly state: “This penalty is not a tax.”

According to the logic of the defendants’ argument, if the intrinsic nature of the

penalty was a tax, it could still be regarded as one despite what it was called and

despite the clear and unmistakable Congressional intent to the contrary. Such an

outcome would be absurd. In my view, changing the word from tax to penalty, but

at the same time including various other true (and accurately characterized) taxes in

the Act, is the equivalent of Congress saying “This penalty is not a tax.” 

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that the tax itself bear an accurate label.” See 277 F.2d at 20. That is obviously a

very different situation from the one presented here, where the precise label of an

acknowledged tax is not being disputed, but rather whether it is even a tax at all. 

(4) Congress did not state that it was acting under its taxing authority, and, 

in fact, it treated the penalty differently than traditional taxes

Congress did not state in the Act that it was exercising its taxing authority

to impose the individual mandate and penalty; instead, it relied exclusively on its

power under the Commerce Clause. U.S. Const. art I, § 8, cl. 3 (“[Congress shall

have Power] To regulate Commerce with foreign Nations, and among the several

States, and with the Indian Tribes”). The Act recites numerous (and detailed)

factual findings to show that the individual mandate regulates commercial activity

important to the economy. Specifically, it states that: “The [individual mandate] is

commercial and economic in nature, and substantially affects interstate commerce”

in that, inter alia, “[h]ealth insurance and health care services are a significant part

of the national economy” and the mandate “will add millions of new consumers to

the health insurance market, increasing the supply of, and demand for, health care

services.” Act § 1501(a)(1)-(2)(B)(C). It further states that health insurance “is in

interstate commerce,” and the individual mandate is “essential to creating effective

health insurance markets.” Id. § 1501(a)(2)(F), (H). The Act contains no indication

that Congress was exercising its taxing authority or that it meant for the penalty to

be regarded as a tax. Although the penalty is to be placed in the Internal Revenue

Code under the heading “Miscellaneous Excise Taxes,” the plain language of the

Code itself states that this does not give rise to any inference or presumption that

it was intended to be a tax. See United States v. Reorganized CF&I Fabricators of

Utah, Inc., 518 U.S. 213, 222-23, 116 S. Ct. 2106, 135 L. Ed. 2d 506 (1996)

(citing to 26 U.S.C. § 7806(b), which provides that: “No inference, implication, or

presumption of legislative construction shall be drawn or made by reason of the

location or grouping of any particular section or provision or portion of this title”).

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In fact, while the penalty is placed under the “Excise Taxes” heading of the Code,

at the same time Congress specifically exempted and divorced the penalty from all

the traditional enforcement and collection methods used by the Internal Revenue

Service, such as tax liens, levies, and criminal proceedings. See Act § 1501(b).

These exemptions from normal tax attributes --- coupled with Congress’s failure to

identify its taxing authority --- belie the claim that, simply because it is mentioned

in the Internal Revenue Code, the penalty must be a tax.7

(5) Lack of statutorily-identified revenue-generating purpose

Perhaps most significantly, the Act does not mention any revenue-generating

purpose that is to be served by the individual mandate penalty, even though such a

purpose is required. See Rosenberger v. Rector and Visitors of Univ. of Virginia,

515 U.S. 819, 841, 115 S. Ct. 2510, 132 L. Ed. 2d 700 (1995) (“‘A tax, in the

general understanding of the term, and as used in the Constitution, signifies an

exaction for the support of the Government’”). In this circuit, the ultimate test of

tax validity “is whether on its face the tax operates as a revenue generating

measure and the attendant regulations are in aid of a revenue purpose.” United

7

 In highlighting that Congress did not identify its taxing power as the basis

for imposing the “penalty,” I am not suggesting that legislative action is invalid if a

power source is not identified. To the contrary, I recognize that “Congress’s failure

to cite [a particular power] does not eliminate the possibility that [said power] can

sustain this legislation.” United States v. Moghadam, 175 F.3d 1269, 1275 n.10

(11th Cir. 1999); see also Wilson-Jones v. Caviness, 99 F.3d 203, 208 (6th Cir.

1996) (“A source of power [can] justify an act of Congress even if Congress did

not state that it rested the act on the particular source of power.”) (citing cases,

including Woods v. Cloyd W. Miller Co., 333 U.S. 138, 144, 68 S. Ct. 421, 92 L.

Ed. 596 (1948) (“The question of the constitutionality of action taken by Congress

does not depend on recitals of the power which it undertakes to exercise.”)). Thus,

to be clear, I am not saying that the penalty is invalid as a tax because Congress

did not expressly identify its taxing power. Rather, its failure to do so (particularly

when it took time to extensively identify its Commerce Clause power), is merely

one of several facts that shows Congress was not exercising its taxing authority

and did not intend for the penalty to be regarded as a tax.

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States v. Ross, 458 F.2d 1144, 1145 (5th Cir. 1972) (emphasis added) (binding

under Bonner, supra, 661 F.2d at 1207).

The revenue-generating provisions in the Act were an important part of the

legislation as they were necessary under current Congressional procedure to score

its final cost. To be sure, much of the debate within and outside Congress focused

on the bill’s final price tag and whether it would exceed the threshold of $1 trillion

over the course of the first ten years; and while the legislation was being debated,

Congress worked closely and often with the Congressional Budget Office (“CBO”)

to ensure that it did not. Obviously, if the penalty had been intended by Congress

to be a true revenue-generating tax (that could be used to keep the Act’s final cost

down) then it would have been treated as a tax “on its face.” During oral argument,

defense counsel stated that “[t]he purpose of the [penalty] is . . . to raise revenue

to offset expenditures of the federal government that it makes in connection, for

example, with the Medicaid expansion.” See Tr. at 9. However, there is absolutely

no support for that statement in the statute itself.

On its face, the Act lists seventeen “Revenue Offset Provisions” (including

the several taxes described supra), and, as reconciled, it further includes a section

entitled “Provisions Relating to Revenue” (which also references those taxes and

other revenue offsetting provisions). However, the individual mandate penalty is

not listed anywhere among them. Nowhere in the statute is the penalty provision

identified or even mentioned as raising revenue and offsetting the Act’s costs. It is

especially noteworthy that the Act does not identify revenue to be generated from

the penalty (which the defendants now maintain would raise about $4 billion each

year), but the statute identifies the tanning salon tax as revenue-raising (even

though that tax is expected to raise a significantly smaller $300 million annually).

See Joint Committee on Taxation, Estimated Revenue Effects of the Manager’s

Amendment to the Revenue Provisions Contained in the “Patient Protection and

Affordable Care Act,” as Passed by the Senate on December 24, 2009 (JCX-10-

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10), March 11, 2010, at 2. If Congress had intended and understood the penalty to

be a tax that would raise revenue for the government, which could in turn be used

to partially finance the Act’s budgetary effect and help keep its ten-year cost below

the $1 trillion threshold by offsetting its expenditures, it makes little sense that

Congress would ignore a “tax” that could be expected to raise almost $20 billion in

revenue between the years 2015-2019, yet mention another tax that was expected

to raise less than one-tenth of that revenue annually during the same time period.

To the extent there is statutory ambiguity on this issue, both sides ask that I

look to the Act’s legislative history to determine if Congress intended the penalty to

be a tax. Ironically, they rely on the same piece of legislative history in making their

respective arguments, to wit, the 157-page “Technical Explanation” of the Act that

was prepared by the Staff of the Joint Committee on Taxation on March 21, 2010

(the same day the House voted to approve and accept the Senate bill and two days

before the bill was signed into law). The plaintiffs highlight the fact that the report

“consistently” refers to the penalty as a penalty and not a tax, see Pl. Mem. at 19

(as compared, for example, with the tanning salon tax that is consistently referred

to as a “tax” in that same report, see JCT, Technical Explanation of the Revenue

Provisions of the “Reconciliation Act of 2010,” as amended, in Combination with

the “Patient Protection and Affordable Care Act” (JCX-18-10), March 21, 2010, at

108). The defendants, on the other hand, highlight the fact that the JCT referred to

the penalty as an “excise tax” in a single heading in that report. See Def. Mem. at

51.

As the Supreme Court has repeatedly held, “the authoritative statement is

the statutory text, not the legislative history or any other extrinsic material.

Extrinsic materials have a role in statutory interpretation only to the extent they

shed a reliable light on the enacting Legislature’s understanding of otherwise

ambiguous terms.” Exxon Mobil Corp. v. Allapattah Services, Inc., 545 U.S. 546,

568, 125 S. Ct. 2611, 162 L. Ed. 2d 502 (2005) (emphasis added). On the facts

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of this case, “penalty” is not an ambiguous term, but rather was a carefully and

intentionally selected word that has a specific meaning and carries a particular

import (discussed infra). Moreover, even if the term was ambiguous, the Supreme

Court has pointed out two “serious criticisms” of attempting to rely on legislative

history:

Not all extrinsic materials are reliable sources of insight

into legislative understandings . . ., and legislative history

in particular is vulnerable to two serious criticisms. First,

legislative history is itself often murky, ambiguous, and

contradictory. Judicial investigation of legislative history

has a tendency to become, to borrow Judge Leventhal’s

memorable phrase, an exercise in “‘looking over a crowd

and picking out your friends.’” See Wald, Some

Observations on the Use of Legislative History in the

1981 Supreme Court Term, 68 Iowa L. Rev. 195, 214

(1983). Second, judicial reliance on legislative materials

like committee reports, which are not themselves subject

to the requirements of Article I, may give

unrepresentative committee members --- or, worse yet,

unelected staffers and lobbyists --- both the power and

the incentive to attempt strategic manipulations of

legislative history to secure results they were unable to

achieve through the statutory text. Id.

In this case, both criticisms are directly on the mark. The report is ambiguous

and contradictory, as evidenced by the simple fact that both sides claim it supports

their position. Should I look to the heading (that calls the exaction an “excise tax”),

or should I look to the actual body of the report (that calls it a penalty no less than

twenty times with no mention of it being a tax)? It is, as Judge Leventhal said, like

“looking over a crowd and picking out your friends.” Further, a strong argument

could be (and has been) made that the staffers who drafted the report were merely

engaging in last minute “strategic manipulation” to secure results they were unable

to achieve through the Act itself. See, e.g., The Insurance Mandate in Peril, Wall

St. J., Apr. 29, 2010, at A19 (opining that the “excise tax” heading in the JCT

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report should not be used to convert the penalty into a tax because the Supreme

Court “will not allow staffers and lawyers to change the statutory cards that

Congress already dealt when it adopted the Senate language”). For these reasons,

as recognized by the Supreme Court, resort to, or reliance upon, the JCT staff’s

Technical Explanation would be inappropriate on the facts of this case --- even if

the term “penalty” was ambiguous (which it is not).

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.

The defendants have not pointed to any reported case decided by any court

of record that has ever found and sustained a tax in a situation such as the one

presented here, and my independent research has also revealed none. At bottom,

the defendants are asking that I divine hidden and unstated intentions, and despite

considerable evidence to the contrary, conclude that Congress really meant to say

one thing when it expressly said something else. The Supreme Court confronted

the inverse of this situation in Sonzinsky, supra, and I believe the rationale of that

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case forecloses the defendants’ argument.

The issue in Sonzinsky was whether a levy on the sale of firearms was a tax.

The exaction was called a tax on its face, and it was undisputed that it had been

passed pursuant to Congress’s taxing power. Nonetheless, the petitioner sought to

invalidate the tax because it was “prohibitive in effect and [disclosed] unmistakably

the legislative purpose to regulate rather than to tax.” The petitioner argued that it

was not “a true tax, but a penalty.” In rejecting this argument, the Supreme Court

explained:

Inquiry into the hidden motives which may move

Congress to exercise a power constitutionally conferred

upon it is beyond the competency of courts. They will not

undertake, by collateral inquiry as to the measure of the

regulatory effect of a tax, to ascribe to Congress an

attempt, under the guise of taxation, to exercise another

power.

Stated somewhat differently, reviewing courts cannot look beyond a statute

and inquire as to whether Congress meant something different than what it said. If

an exaction says “tax” on its face and was imposed pursuant to Congress’s taxing

power, courts “are not free to speculate as to the motives which moved Congress

to impose it, or as to the extent to which it may [be a penalty intended] to restrict

the activities taxed.” See generally Sonzinsky, supra, 300 U.S. at 511-14; accord

Kahriger, supra, 345 U.S. at 22 (similarly declining invitation to hold that “under

the pretense of exercising” a particular power, Congress was, in fact, exercising

another power). 

The holding of Sonzinsky cuts both ways, and applying that holding to the

facts here, I have no choice but to find that the penalty is not a tax. Because it is

called a penalty on its face (and because Congress knew how to say “tax” when it

intended to, and for all the other reasons noted), it would be improper to inquire as

to whether Congress really meant to impose a tax. I will not assume that Congress

had an unstated design to act pursuant to its taxing authority, nor will I impute a

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revenue-generating purpose to the penalty when Congress specifically chose not to

provide one. It is “beyond the competency” of this court to question and ascertain

whether Congress really meant to do and say something other than what it did. As

the Supreme Court held by necessary implication, this court cannot “undertake, by

collateral inquiry as to the measure of the [revenue-raising] effect of a [penalty], to

ascribe to Congress an attempt, under the guise of [the Commerce Clause], to

exercise another power.” See Sonzinsky, supra, 300 U.S. at 514. This conclusion

is further justified in this case since President Obama, who signed the bill into law,

has “absolutely” rejected the argument that the penalty is a tax. See supra note 5. 

To conclude, as I do, that Congress imposed a penalty and not a tax is not

merely formalistic hair-splitting. There are clear, important, and well-established

differences between the two. See Dep’t of Revenue of Montana v. Kurth Ranch,

511 U.S. 767, 779-80, 114 S. Ct. 1937, 128 L. Ed. 2d 767 (1994) (“Whereas

[penalties] are readily characterized as sanctions, taxes are typically different

because they are usually motivated by revenue-raising, rather than punitive,

purposes.”); Reorganized CF&I Fabricators of Utah, Inc., supra, 518 U.S. at 224

(“‘a tax is a pecuniary burden laid upon individuals or property for the purpose of

supporting the Government,’” whereas, “if the concept of penalty means anything,

it means punishment for an unlawful act or omission”); United States v. La Franca,

282 U.S. 568, 572, 51 S. Ct. 278, 75 L. Ed. 551 (1931) (“A ‘tax’ is an enforced

contribution to provide for the support of government; a ‘penalty,’ as the word is

here used, is an exaction imposed by statute as punishment for an unlawful act.’”).

Thus, as the Supreme Court has said, “[t]he two words are not interchangeable one

for the other . . . ; and if an exaction be clearly a penalty it cannot be converted

into a tax by the simple expedient of calling it such.” La Franca, supra, 282 U.S. at

572. 

(6) Does the Anti-Injunction Act apply anyway?

The defendants insist that the Anti-Injunction Act should still preclude the

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individual mandate challenges even if the penalty is not a tax. For this argument,

the defendants rely on Title 26, United States Code, Section 6671, which states

that the “penalties” provided under subchapter B of chapter 68 of the IRS Code (a

classification that includes the individual mandate penalty) “shall be assessed and

collected in the same manner as taxes.” If the penalty is intended to be assessed

and collected in the same manner as a tax, the defendants contend, then the AntiInjunction Act should apply. I do not agree. First of all, the penalty is obviously not

to be collected and treated “in the same manner as taxes” in light of the fact that

Congress specifically divorced the penalty from the tax code’s traditional collection

and enforcement mechanisms. Further, and more significantly, as noted supra, the

whole point of the Anti-Injunction Act is to protect the government in the collection

of its lawful tax revenues, and thus it applies to “truly revenue-raising tax

statutes,” which Congress plainly did not understand and intend the penalty to be.

The Eleventh Circuit has recognized (albeit by implication) that the Anti-Injunction

Act does not reach penalties that are, as here, “imposed for substantive violations

of laws not directly related to the tax code” and which are not good-faith efforts to

enforce the technical requirements of the tax law. Cf. Mobile Republican Assembly

v. United States, 353 F.3d 1357, 1362 n.5 (11th Cir. 2003). The defendants have

cited two out-of-circuit cases in support of their contention that Section 6671(a)

requires penalties to be treated the same as taxes for Anti-Injunction Act purposes,

Barr v. United States, 736 F.2d 1134 (7th Cir. 1984); Warren v. United States, 874

F.2d 280 (5th Cir. 1989). Although those cases did indeed hold that the penalties at

issue fell under the Anti-Injunction Act, they do not really support the defendants’

position. As the plaintiffs note, the penalties in both those cases were imposed for

failing to pay an undisputed tax, that is, falsely claiming an exemption in Barr, and

refusing to sign a tax return in Warren. In other words, the penalties were “directly

related to the tax code.” Cf. Mobile Republican Assembly, supra, 353 F.3d at 1362

n.5. Allowing IRS penalties such as those to qualify as a tax for Anti-Injunction Act

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purposes “is simply a means for ensuring that the [underlying] tax is paid.” See

Botta v. Scanlon, 314 F.2d 392, 393 (2d Cir. 1963). That is not the situation here.

It would be inappropriate to give tax treatment under the Anti-Injunction Act to a

civil penalty that, by its own terms, is not a tax; is not to be enforced as a tax; and

does not bear any meaningful relationship to the revenue-generating purpose of the

tax code. Merely placing a penalty (which virtually all federal statutes have) in the

IRS Code, even though it otherwise bears no meaningful relationship thereto, is not

enough to render the Anti-Injunction Act (which only applies to true revenue-raising

exactions) applicable to this case. 

(7) Accountability

I will say one final thing on the tax issue, which, although I believe it to be

important, is not essential to my decision. For purposes of this discussion, I will

assume that the defendants are correct and that the penalty is (and was always

intended to be) a tax.

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

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defendants’ “newfound”8 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

8

 See, e.g., Changing Stance, Administration Now Defends Insurance

Mandate as a Tax, N.Y. Times, July 17, 2010, at A14 (“When Congress required

most Americans to obtain health insurance or pay a penalty, Democrats denied that

they were creating a new tax. But in court, the Obama administration and its allies

now defend the requirement as an exercise of the government’s ‘power to lay and

collect taxes.’”).

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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.

Congress should not be permitted to secure and cast politically difficult votes

on controversial legislation by deliberately calling something one thing, after which

the defenders of that legislation take an “Alice-in-Wonderland” tack9

 and argue in

court that Congress really meant something else entirely, thereby circumventing the

safeguard that exists to keep their broad power in check. If Congress intended for

9

 Lewis, Carroll, Through the Looking-Glass, Chapter 6 (Heritage 1969):

“When I use a word,” Humpty Dumpty said, in a rather

scornful tone, “it means just what I choose it to mean ---

neither more or less.”

“The question is,” said Alice, “whether you can make

words mean so many different things.” 

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the penalty to be a tax, it should go back and make that intent clear (for example,

by calling it a tax, relying on Congress’s Constitutional taxing power, allowing it to

be collected and enforced as a tax, or identifying revenue to be raised) so it can be

“scrutinized” as a tax and Congress can accordingly be held accountable. They

cannot, however, use a different linguistic with a perhaps secret understanding

between themselves that the word, in fact, means something else entirely. As the

First Circuit has explained, the integrity of the process must be guaranteed by the

judiciary:

In our republican form of government, legislators make

laws by writing statutes --- an exercise that requires

putting words on paper in a way that conveys a

reasonably definite meaning. Once Congress has spoken,

it is bound by what it has plainly said, notwithstanding

the nods and winks that may have been exchanged. . . .

And the judiciary must stand as the ultimate guarantor of

the integrity of an enacted statute’s text.

State of Rhode Island v. Narragansett Indian Tribe, 19 F.3d 685, 699-70 (1st Cir.

1994).

(8) For Constitutional purposes, it is a penalty, and must be analyzed under

Congress’s Commerce Clause power

For all the above reasons, I conclude that the individual mandate penalty is

not a “tax.” It is (as the Act itself says) a penalty. The defendants may not rely on

Congress’s taxing authority under the General Welfare Clause to try and justify the

penalty after-the-fact. If it is to be sustained, it must be sustained as a penalty

imposed in aid of an enumerated power, to wit, the Commerce Clause power. See

Sunshine Anthracite Coal Co. v. Adkins, 310 U.S. 381, 393, 60 S. Ct. 907, 84 L.

Ed. 1263 (1940) (“Congress may impose penalties in aid of the exercise of any of

its enumerated powers“). Therefore, the Anti-Injunction Act does not deprive this

court of jurisdiction. See Lipke, supra, 259 U.S. at 562 (“The collector demanded

payment of a penalty, and [thus the Anti-Injunction Act], which prohibits suits to

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restrain assessment or collection of any tax, is without application.”). I will next

consider the rest of the defendants’ jurisdictional challenges.

B. Rule 12(b)(1) (“Lack of Subject Matter Jurisdiction”) Challenges

The defendants raise two additional jurisdictional arguments: first, that the

individual plaintiffs and the NFIB do not have standing to pursue Counts One and

Two, and the state plaintiffs do not have standing with respect to Count Six; and

second, that those same causes of action are not ripe. 

(1) Standing

The Constitution limits the subject matter of the federal courts to “cases”

and “controversies.” U.S. Const. art III, § 2. “[T]he core component of standing is

an essential and unchanging part of the case-or-controversy requirement of Article

III.” Lujan v. Defenders of Wildlife, 504 U.S. 555, 560, 112 S. Ct. 2130, 119 L.

Ed. 2d 351 (1992). The “irreducible constitutional minimum of standing” contains

three elements: “(1) an injury in fact, meaning an injury that is concrete and

particularized, and actual or imminent, (2) a causal connection between the injury

and the causal conduct, and (3) a likelihood that the injury will be redressed by a

favorable decision.” Granite State Outdoor Advertising Inc. v. City of Clearwater,

351 F.3d 1112, 1116 (11th Cir. 2003). The defendants appear to concede that (2)

and (3) are present in this litigation, but contend that the plaintiffs cannot establish

an injury-in-fact. Accordingly, only element (1) is at issue here.

For purposes of ruling on the defendants’ motion to dismiss, I simply need to

examine the plaintiffs’ factual allegations:

At the pleading stage, general factual allegations of injury

resulting from defendant’s conduct may suffice, for on a

motion to dismiss we “presum[e] that general allegations

embrace those specific facts that are necessary to

support the claim.”

Lujan, supra, 504 U.S. at 561 (quoting Lujan v. Nat’l Wildlife Federation, 497 U.S.

871, 889, 110 S. Ct. 3177, 111 L. Ed. 2d 695 (1990)). Thus, “mere allegations of

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injury” are sufficient to withstand a motion to dismiss based on lack of standing.

Dep’t of Commerce v. U.S. House of Representatives, 525 U.S. 316, 329, 119 S.

Ct. 765, 142 L. Ed. 2d 797 (1999); accord Miccosukee Tribe of Indians of Florida

v. Southern Everglades Restoration Alliance, 304 F.3d 1076, 1081 (11th Cir. 2002)

(noting “at the motion to dismiss stage [the plaintiff] is only required to generally

allege a redressable injury caused by the actions of [the defendant] about which it

complains”). 

The individual plaintiffs make numerous allegations in the amended complaint

that are relevant to the standing issue. According to those allegations, Mary Brown

is a small business owner and current member of the NFIB. She has not had health

insurance for the last four years. She devotes her available resources to maintaining

her business and paying her employees. She does not currently qualify for Medicaid

or Medicare, and she does not expect to qualify for those programs prior to the

individual mandate taking effect. Thus, “Ms. Brown will be subject to the mandate

and objects to being forced to comply with it” because, inter alia, it will force her

(and other NFIB members) “to divert resources from their business endeavors” and

“reorder their economic circumstances” to obtain qualifying coverage. Similarly, Kaj

Ahlburg has not had health insurance for more than six years; he has no intention

or desire to get health insurance; he does not qualify for Medicaid or Medicare and

will thus be subject to the individual mandate and penalty; and he is, and expects

to remain, financially able to pay for his own healthcare services if and as needed.

The individual plaintiffs object to the Act’s “unconstitutional overreaching” and

claim injury because the individual mandate will force them to spend their money to

buy something they do not want or need (or be penalized). See Am. Compl. ¶¶ 27-

28, 62. The defendants make several arguments why these claims are insufficient

to establish an injury-in-fact.

First, quoting Lujan, supra, the defendants contend that “[a] plaintiff alleging

‘only an injury at some indefinite future time’ has not shown injury in fact.” Def.

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Mem. at 26. While that statement is certainly true, the injury alleged in this case

will not occur at “some indefinite future time.” Instead, the date is definitively fixed

in the Act and will occur in 2014, when the individual mandate goes into effect and

the individual plaintiffs are forced to buy insurance or pay the penalty. See ACLU of

Florida, Inc. v. Miami-Dade County School Bd., 557 F.3d 1177, 1194 (11th Cir.

2009) (standing shown in pre-enforcement challenge where the claimed injury was

“pegged to a sufficiently fixed period of time”). Because time is the primary factor

here, this case presents a durational issue, and not a contingency issue. “A plaintiff

who challenges a statute must demonstrate a realistic danger of sustaining a direct

injury as a result of the statute’s operation or enforcement. But, ‘one does not have

to await the consummation of threatened injury to obtain preventive relief. If the

injury is certainly impending, that is enough.’” Babbitt v. United Farm Workers Nat’l

Union, 442 U.S. 289, 298, 99 S. Ct. 2301, 60 L. Ed. 2d 895 (1979) (citations and

brackets omitted). The defendants contend that the forty-months gap between now

and 2014 is “too far off” and not immediate enough to confer standing. However,

as the Eleventh Circuit has expressly held:

[P]laintiffs here have alleged when and in what manner

the alleged injuries are likely going to occur. Immediacy

requires only that the anticipated injury occur with some

fixed period of time in the future, not that it happen in the

colloquial sense of soon or precisely within a certain

number of days, weeks, or months.

Fla. State Conf. of the NAACP v. Browning, 522 F.3d 1153, 1161 (11th Cir. 2008)

(citing Adarand Constructors, Inc. v. Pena, 515 U.S. 200, 115 S. Ct. 2097, 132 L.

Ed. 2d 158 (1995)); accord 520 Michigan Ave. Associates, Ltd. v. Devine, 433

F.3d 961, 962 (7th Cir. 2006) (“Standing depends on the probability of harm, not

its temporal proximity. When injury . . . is likely in the future, the fact that [the

complained of harm] may be deferred does not prevent federal litigation now.”).

The defendants concede that an injury does not have to occur immediately

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to qualify as an injury-in-fact, but they argue that forty months “is far longer than

typically allowed.” Def. Mem. at 27. It is true that forty months is longer than the

time period at issue in the particular cases the defendants cite. See, e.g., ACLU,

supra, 557 F.3d at 1194 (harm was six weeks away); Nat’l Parks Conservation

Ass’n v. Norton, 324 F.3d 1229, 1242 (11th Cir. 2003) (harm was between one

week to one month away). But, the fact that the harm was closer in those cases

does not necessarily mean that forty months is ipso facto “too far off.” In Village

of Bensenville v. FAA, 376 F.3d 1114 (D.C. Cir. 2004), for example, the plaintiffs

challenged a passenger fee at Chicago’s O’Hare International Airport that was not

scheduled to be imposed until thirteen years in the future. The District of Columbia

Circuit held that, despite the significant time gap, there was an “‘impending threat

of injury’” to plaintiffs that was “‘sufficiently real to constitute injury-in-fact and

afford constitutional standing’” because the decision to impose the fee was “final

and, absent action by us, come 2017 Chicago will begin collecting [it].” See id. at

1119 (citations omitted). That is the same situation at issue here. Imposition of the

individual mandate and penalty, like the fee in Village of Bensenville, is definitively

fixed in time and impending. And absent action by this court, starting in 2014, the

federal government will begin enforcing it. 

The defendants suggest that the individual plaintiffs may not have to be

forced to comply with the individual mandate in 2014. They contend that the

individual plaintiffs “cannot reliably predict that insurance will be an economic

burden” to them when the individual mandate is in place because, once the Act

“mak[es] health insurance more affordable,” they may decide to voluntarily buy

insurance on their own. Def. Mem. at 26. This argument appears to presuppose

that the individual plaintiffs object to the individual mandate solely on the grounds

that it will be an “economic burden” to them, and that they do not currently have

insurance because they cannot afford it. That does not appear to be the case. Ms.

Brown alleges in the amended complaint that she devotes her resources to running

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and maintaining her business and paying her employees; she does not allege that

she has no money left over after doing so or that she is otherwise unable to buy

insurance if she wanted it. Rather, she has apparently just made the decision that

she would prefer to direct and divert her resources elsewhere because obtaining

insurance, in her particular situation, is not “a worthwhile cost of doing business.”

See Am. Comp. ¶¶ 27, 62. Further, Mr. Ahlburg has affirmatively stated that he is

financially able to pay for all of his own healthcare-related services. Thus, both he

and Ms. Brown do not want to be forced to spend their money (whether they have

a little or a lot) on something they do not want (or feel that they need), and, in this

respect, they object to the individual mandate as “unconstitutional overreaching.”

See Am. Comp. at ¶¶ 27, 28.10

Continuing this argument, the defendants further contend that there is too

much “uncertainty” surrounding the individual plaintiffs’ allegations. They allege,

for example, that while Ms. Brown may not want to purchase healthcare insurance

now (because she would rather devote her resources to her business), and although

Mr. Ahlburg does not need insurance now (because he is financially able to pay for

his own healthcare out-of-pocket and as needed), the “vagaries” of life could alter

their situations by 2014. Def Mem. at 26. The defendants suggest that because

“businesses fail, incomes fall, and disabilities occur,” by the time the individual

mandate is in effect, the individual plaintiffs “could find that they need insurance,

or that it is the most sensible choice.” See id. That is possible, of course. It is also

10 And in any event, the defendants’ argument seems to assume that the Act

will, in fact, reduce premiums so that insurance is “more affordable.” That claim is

both self-serving and far from undisputed. Indeed, most objective analyses indicate

an insurance premium increase, and the CBO itself has predicted that premiums will

rise 10-13% under the Act, at least with respect to individuals with certain policies

who do not qualify for government subsidies. See Congressional Budget Office, An

Analysis of Health Insurance Premiums Under the Patient Protection and Affordable

Care Act, November 30, 2009.

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“possible” that by 2014 either or both the plaintiffs will no longer be alive, or may

at that time fall within one of the “exempt” categories. Such “vagaries” of life are

always present, in almost every case that involves a pre-enforcement challenge. If

the defendants’ position were correct, then courts would essentially never be able

to engage in pre-enforcement review. Indeed, it is easy to conjure up hypothetical

events that could occur to moot a case or deprive any plaintiff of standing in the

future. In Pierce v. Society of Sisters, 268 U.S. 510, 45 S. Ct. 571, 69 L. Ed. 2d

1070 (1925), for example, a private school sought and obtained review of a law

that required children to attend public schools, even though that law was not to

take effect for more than two years. Under the defendants’ position, there was no

standing to consider the case because --- since “businesses fail” --- it was possible

that the school may have closed down by the time the law finally went into effect.

However, the Supreme Court found that it had standing to consider the challenge,

notwithstanding the universe of possibilities that could have occurred between the

filing of the suit and the law going into effect years later. The Court concluded that

it was appropriate to consider the challenge because the complained of injury “was

present and very real, not a mere possibility in the remote future,” and because the

“[p]revention of impending injury by unlawful action is a well-recognized function of

courts of equity.” Id. at 536.

In short, to challenge the individual mandate, the individual plaintiffs need

not show that their anticipated injury is absolutely certain to occur despite the

“vagaries” of life; they need merely establish “a realistic danger of sustaining a

direct injury as a result of the statute’s operation or enforcement,” see Babbitt,

supra, 442 U.S. at 298, that is reasonably “pegged to a sufficiently fixed period of

time,” see ACLU, supra, 557 F.3d at 1194, and which is not “merely hypothetical

or conjectural,” see NAACP, supra, 522 F.3d at 1161. Based on the allegations in

the amended complaint, I am satisfied that the individual plaintiffs have done so.

Accordingly, they have standing to pursue Counts One and Two.

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The defendants next contend that the state plaintiffs do not have standing to

pursue the employer mandate being challenged in Count Six. They devote less than

one paragraph to this argument, see Def. Mem. at 21, and I can be equally brief in

addressing it. For this count, the state plaintiffs contend that in their capacities as

“large employers,” they will have to offer and enroll state employees in federallyapproved health plans, which they currently do not do. They claim, for example,

that under existing Florida law, thousands of OPS (Other Personnel Services)

employees are excluded from that state’s healthcare plan, but under the Act the

employees will have to be enrolled in an approved health plan, which will cost the

state money if they do, and will cost the state money (in the form of penalties) if

they do not. I am satisfied that this qualifies as an injury-in-fact, for essentially the

same reasons discussed with respect to the individual mandate --- to wit, the state

plaintiffs have established a realistic (and not hypothetical or conjectural) danger of

sustaining a redressable injury at a sufficiently fixed point in time as a result of the

Act’s operation or enforcement.

The individual plaintiffs thus have standing to pursue Counts One and Two,

and the state plaintiffs have standing to pursue Count Six. Because those are the

only causes of action for which the defendants have challenged standing, this

eliminates any need to discuss whether the NFIB also has standing. See Watt v.

Energy Action Educational Foundation, 454 U.S. 151, 160, 102 S. Ct. 205, 70 L.

Ed. 2d 309 (1981) (“Because we find California has standing, we do not consider

the standing of the other plaintiffs.”); Village of Arlington Heights v. Metropolitan

Housing Dev. Corp., 429 U.S. 252, 264 n.9, 97 S. Ct. 555, 50 L. Ed. 2d 450

(1977) (“Because of the presence of this plaintiff, we need not consider whether

the other individual and corporate plaintiffs have standing to maintain this suit.”);

see also Mountain States Legal Found. v. Glickman, 92 F.3d 1228, 1232 (D.C. Cir.

1996) (“For each [challenged] claim, if . . . standing can be shown for at least one

plaintiff, we need not consider the standing of the other plaintiffs to raise that

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claim.”) (citing Watt and Village of Arlington Heights, supra).

However, for the sake of completeness, I will briefly discuss whether the

NFIB has standing as well. Under Hunt v. Washington State Apple Advertising

Comm’n, 432 U.S. 333, 97 S. Ct. 2434, 53 L. Ed. 2d 383 (1977), an association

has representative standing when “(a) its members would otherwise have standing

to sue in their own right; (b) the interests it seeks to protect are germane to the

organization’s purpose; and (c) neither the claim asserted nor the relief requested

requires the participation of individual members in the lawsuit.” Id. at 343. All three

elements have been satisfied here. First, the NFIB’s members (including Ms. Brown,

as noted) plainly have standing to challenge the individual mandate, thus meeting

Hunt’s first element. Furthermore, the interests that the NFIB seeks to protect in

challenging the individual mandate on behalf of its members --- certain of whom

operate sole proprietorships and will suffer cost and cash flow consequences if

they are compelled to buy qualifying healthcare insurance --- are germane to the

NFIB’s purpose and mission “to promote and protect the rights of its members to

own, operate, and earn success in their businesses, in accordance with lawfullyimposed governmental requirements.” Am. Comp. ¶ 26; see, e.g., New York State

Club Ass’n, Inc. v. City of New York, 487 U.S. 1, 10 n.4, 108 S. Ct. 2225, 101 L.

Ed. 2d 1 (1988) (consortium of private clubs had standing to sue on behalf of its

members to enjoin state anti-discrimination law because the interests it sought to

protect were “clearly” germane to its broad purpose “‘to promote the common

business interests of its [member clubs]’”) (brackets in original). And lastly,

because the NFIB seeks injunctive relief which, if granted, will benefit its individual

members, joinder is generally not required. See, e.g., NAACP, supra, 522 F.3d at

1160 (Hunt’s third element satisfied because, “when the relief sought is injunctive,

individual participation of the organization’s members is ‘not normally necessary’”)

(citation omitted). 

In light of the foregoing, the plaintiffs have standing to pursue their claims. 

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(2) Ripeness

There is a “conspicuous overlap” between the doctrines of standing and

ripeness and the two “often converge[ ].” See Elend v. Basham, 471 F.3d 1199,

1205 (11th Cir. 2006). Nevertheless, they warrant separate analyses.

“Ripeness is peculiarly a question of timing. Its basic rationale is to prevent

the courts, through premature adjudication, from entangling themselves in abstract

disagreements.” Thomas v. Union Carbide Agr. Products Co., 473 U.S. 568, 580,

105 S. Ct. 3325, 87 L. Ed. 2d 409 (1985) (citations and alterations omitted). “A

claim is not ripe for adjudication if it rests upon contingent future events that may

not occur as anticipated, or indeed may not occur at all.” Texas v. United States,

523 U.S. 296, 300, 118 S. Ct. 1257, 140 L. Ed. 2d 406 (1998) (citation omitted).

The ripeness inquiry turns on “‘the fitness of the issues for judicial decision’ and

‘the hardship to the parties of withholding court consideration.” Pacific Gas and

Elec. Co. v. State Energy Resources Conservation & Dev. Comm’n, 461 U.S. 190,

201, 103 S. Ct. 1713, 75 L. Ed. 2d 752 (1983) (citation omitted). In the context

of a facial challenge, as in this case, “a purely legal claim is presumptively ripe for

judicial review because it does not require a developed factual record.” Harris v.

Mexican Speciality Foods, Inc., 564 F.3d 1301, 1308 (11th Cir. 2009).

Because the individual mandate and employer mandate will not take effect

until 2014, the defendants contend that those claims are unripe because no injury

can occur before that time. However, “[w]here the inevitability of the operation of

a statute against [plaintiffs] is patent, it is irrelevant to the existence of a justiciable

controversy that there will be a time delay before the disputed provisions come into

effect.” Blanchette v. Connecticut Gen. Ins. Corps., 419 U.S. 102, 143, 95 S. Ct.

335, 42 L. Ed. 2d 320 (1974). “The Supreme Court has long . . . held that where

the enforcement of a statute is certain, a preenforcement challenge will not be

rejected on ripeness grounds.” NAACP, supra, 522 F.3d at 1164 (citing Blanchette,

supra, 419 U.S. at 143).

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The complained of injury in this case is “certainly impending” as there is no

reason whatsoever to doubt that the federal government will enforce the individual

mandate and employer mandate against the plaintiffs. Indeed, with respect to the

individual mandate in particular, the defendants concede that it is absolutely

necessary for the Act’s insurance market reforms to work as intended. In fact, they

refer to it as an “essential” part of the Act at least fourteen times in their motion to

dismiss. It will clearly have to be enforced. See Commonwealth of Pennsylvania v.

State of West Virginia, 262 U.S. 553, 592-93, 262 U.S. 553, 43 S. Ct. 658

(1923) (suit filed shortly after the challenged statute passed into law and before it

was enforced was not premature where the statute “certainly would operate as the

complainant states apprehended it would”). The individual mandate will have to be

imposed and enforced against the plaintiffs and others because if it is not, and with

proscriptions against insurance companies denying coverage for pre-existing

medical conditions, there would the potential for an enormous moral hazard.

The fact that the individual mandate and employer mandate do not go into

effect until 2014 does not mean that they will not be felt in the immediate or very

near future. To be sure, responsible individuals, businesses, and states will have to

start making plans now or very shortly to comply with the Act’s various mandates.

Individuals who are presently insured will have to confirm that their current plans

comply with the Act’s requirements and, if not, take appropriate steps to comply;

the uninsured will need to research available insurance plans, find one that meets

their needs, and begin budgeting accordingly; and employers and states will need

to revamp their healthcare programs to ensure full compliance. I note that at least

two courts considering challenges to the individual mandate have thus far denied

motions to dismiss on standing and ripeness grounds. See Virginia, supra, 702 F.

Supp. 2d at 607-08 (determining that because the individual mandate “radically

changes the landscape of health insurance coverage in America,” it will be felt by

individuals, insurance carriers, employers, and states “in the near future”); Thomas

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More Law Center v. Obama, 2010 WL 3952805, at *4 (E.D. Mich. Oct. 7, 2010)

(“[T]he government is requiring plaintiffs to undertake an expenditure, for which the

government must anticipate that significant financial planning will be required. That

financial planning must take place well in advance of the actual purchase of

insurance in 2014 . . . There is nothing improbable about the contention that the

Individual Mandate is causing plaintiffs to feel economic pressure today.”)11

The Supreme Court and the Eleventh Circuit, as noted, have not hesitated to

consider pre-enforcement challenges to the constitutionality of legislation when the

complained of injury is certainly impending and more than a hypothetical possibility.

Because the issues in this case are fully framed, and the relevant facts are settled,

“[n]othing would be gained by postponing a decision, and the public interest would

be well served by a prompt resolution of the constitutionality of [the statute].” See

Thomas, supra, 473 U.S. at 582. Therefore, the case is ripe for review.12

Because the defendants’ jurisdictional challenges fail, I will now turn to their

arguments for failure to state a claim upon which relief can be granted under Rule

11 The defendants have recently filed a notice of supplemental authority in

which they have attempted to distinguish Thomas More Law Center by claiming

that the standing analysis in that case “hinge[d] on allegations not present here;”

specifically, according to the defendants, the plaintiffs alleged in that case that

“they were being compelled to ‘reorganize their affairs,’ and ‘forego certain

spending today, so they will have the funds to pay for health insurance when the

Individual Mandate takes effect in 2014” (doc. 78 at 1-2). The defendants allege

that “[t]he individual plaintiffs here make no comparable assertion.” See id. That

does not appear to be so. Ms. Brown has alleged that the individual mandate will

force her to “divert resources from [her] business” and “reorder [her] economic

circumstances” in order to obtain qualifying coverage. Am. Comp. ¶ 62.

12 Further strengthening the conclusion that the public interest would be best

served by a prompt resolution, I recognize that this court is but the first of probably

several steps this case will take. Because that process will likely take another year

or two, and because this court “will be in no better position later than we are now”

to decide the case, see Blanchette, supra, 419 U.S. at 145, it would not serve the

public interest to postpone the first step of this litigation until at least 2014.

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12(b)(6), Fed. R. Civ. P. 

C. Rule 12(b)(6) Challenges for Failure to State a Claim Upon which Relief

Can be Granted

A motion to dismiss for failure to state a claim under Rule 12(b)(6) will be

granted if the complaint alleges no set of facts that, if proved, would entitle the

plaintiff to relief. Blackston v. Alabama, 30 F.3d 117, 120 (11th Cir. 1994). On a

motion to dismiss, the court must accept all the alleged facts as true and take all

the inferences from those facts in the light most favorable to plaintiff. See Cruz v.

Beto, 405 U.S. 319, 322, 92 S. Ct. 1079, 31 L. Ed. 2d 263 (1972); Hunnings v.

Texaco, Inc., 29 F.3d 1480, 1484 (11th Cir. 1994). Although the Federal Rules do

not require plaintiffs to set out in detail the facts on which they base their claim ---

Rule 8(a) only requires a “short and plain statement” showing that the plaintiff is

entitled to relief --- the complaint’s “factual allegations must be enough to raise a

right to relief above the speculative level.” Bell Atlantic Corp. v. Twombly, 550

U.S. 544, 555, 127 S. Ct. 1955, 167 L. Ed. 2d 929 (2007); accord Ashcroft v.

Iqbal, --- U.S. ---, 129 S. Ct. 1937, 1949, 173 L. Ed. 2d 868 (2009) (explaining

that “the pleading standard Rule 8 announces does not require ‘detailed factual

allegations,’ but it demands more than an unadorned, the-defendant-unlawfullyharmed-me accusation’”). Thus, “to survive a motion to dismiss, a complaint must

contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is

plausible on its face.’“ Iqbal, supra, 129 S. Ct. at 1949 (quoting Twombly, supra,

550 U.S. at 570). This does not “impose a probability requirement at the pleading

stage.” See Twombly, 550 U.S. at 556. Rather, the test is whether the complaint

“succeeds in ‘identifying facts that are suggestive enough to render [the claim]

plausible.’“ See Watts v. Florida Int’l University, 495 F.3d 1289, 1296 (11th Cir.

2007) (quoting Twombly, supra, 550 U.S. at 556).

The defendants claim that all counts in the amended complaint are deficient

under Rule 12(b)(6); in other words, no cause of action is “plausible.” Each claim

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must be both factually and legally plausible. This requires me to examine each of

the claims factually and to “take a peek” at the status of the applicable existing

Constitutional law. Several of the plaintiffs’ claims arise under Constitutional

provisions for which the Supreme Court’s interpretations have changed over the

years. But, of course, the court is bound by the law as it exists now. Each count

will be discussed below, in reverse order.

(1) Interference with state sovereignty as employers and performance of 

governmental functions (Count VI)

For this count, the plaintiffs object to the Act’s employer mandate which

requires the states, in their capacities as large employers, to offer and automatically

enroll state employees in federally-approved insurance plans or else face substantial

penalties and assessments. These “extensive new benefits,” the plaintiffs contend,

will “impose immediate and expensive requirements on the States that will continue

to increase,” see Pl. Mem. at 55-56, and “burden[ ] the States’ ability to procure

goods and services and to carry out governmental functions,” see Am. Compl. ¶

90. The employer mandate allegedly exceeds Article I of the Constitution and also

runs afoul of state sovereignty in violation of the Ninth and Tenth Amendments.

Regardless of whether the employer mandate will be costly and burdensome

to the states in their capacity as large employers (which at this stage of the case is

assumed to be true), it is a “generally applicable” law that reaches both public and

private employers alike. Although a law of general applicability, as opposed to one

directed only at the states, is not per se Constitutional, it is a factor that the

Supreme Court and the courts of appeal have consistently found to be significant.

In the landmark case of Garcia v. San Antonio Metro. Transit Auth., the Supreme

Court held that a city’s transit authority (SAMTA) was bound by the minimum

wage and overtime pay provisions in the Fair Labor Standards Act (“FLSA”). During

the course of its decision, the Court stated:

[W]e need go no further than to state that we perceive

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nothing in the overtime and minimum-wage requirements

of the FLSA, as applied to SAMTA, that is destructive of

state sovereignty or violative of any constitutional

provision. SAMTA faces nothing more than the same

minimum-wage and overtime obligations that hundreds of

thousands of other employers, public as well as private,

have to meet.

469 U.S. 528, 554, 105 S. Ct. 1005, 83 L. Ed. 2d 1016 (1985); see also Reno v.

Condon, 528 U.S. 141, 151, 120 S. Ct. 666, 145 L. Ed. 2d 587 (2000) (generally

applicable law upheld that regulated the entire “universe of entities” in the market,

both in the public and private realm, and applied “to individuals as well as States”);

see also Oklahoma Dep’t of Public Safety v. United States, 161 F.3d 1266, 1271

(10th Cir. 1998) (noting the “logical distinction” that the Supreme Court has drawn

between generally applicable laws that “incidentally apply to states” and those that

apply only to states; explaining that “because generally applicable laws are not

aimed at uniquely governmental functions,” and because such “laws affecting both

private and public interests are subject to stricter political monitoring by the private

sector,” a law is less likely to be found oppressive “where the law is aimed at both

private and public entities”). The Seventh Circuit has thus stated:

Neutrality between governmental and private spheres is a

principal ground on which the Supreme Court has held

that states may be subjected to regulation when they

participate in the economic marketplace --- for example,

by hiring workers covered by the Fair Labor Standards

Act. So long as public market participants are treated the

same as private ones, they enjoy the protection the latter

have been able to secure from the legislature; and as

Congress is not about to destroy private industry (think

what that would do to the tax base!) it can not hobble

the states either.

Travis v. Reno, 163 F.3d 1000, 1002-03 (7th Cir. 1998) (citations omitted). I find

these cases to be instructive. Although a law of general applicability may not be

per se Constitutional, see Condon, supra, 528 U.S. at 151 (leaving the question

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open), the fact that the employer mandate is generally applicable goes a long way

toward sustaining it.

Further, in this case, the mere fact that the states will be required to provide

the same healthcare benefits to employees as private employers does not, by itself,

implicate or interfere with state functions and sovereignty. In Maryland v. Wirtz,

392 U.S. 183, 88 S. Ct. 2017, 20 L. Ed. 2d 1020 (1968), the Supreme Court

rejected the argument that extending FLSA wage and overtime pay provisions to

the states would violate state sovereignty by telling public hospitals and schools

how to carry out their sovereign functions:

The Act establishes only a minimum wage and a

maximum limit of hours unless overtime wages are paid,

and does not otherwise affect the way in which school

and hospital duties are performed. Thus appellants’

characterization of the question in this case as whether

Congress may, under the guise of the commerce power,

tell the States how to perform medical and educational

functions is not factually accurate. Congress has

“interfered with” these state functions only to the extent

of providing that when a State employs people in

performing such functions it is subject to the same

restrictions as a wide range of other employers whose

activities affect commerce, including privately operated

schools and hospitals.

Id. at 193-94. The state plaintiffs allege that the employer mandate will interfere

with their sovereignty and impede state functions insofar as it will be financially

burdensome and that, if it is allowed to stand, the state’s authority “to define the

conditions of its officeholders and employees and to control appropriations [will be]

usurped.” Pl. Mem. at 57; see also id. at 56 n.59 (contending that “Congress may

[not] decree the basic terms of the employment relationship with State officers and

employees and usurp the States’ authority over their budgets and resources”).

However, virtually any and all attempts to regulate the wages and conditions

of employment in the national labor market (which Congress has long done) will

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result in similar restrictions and adversely impact the state fisc. The minimum wage

and overtime pay provisions in the FLSA, which the Supreme Court upheld against

the states in Wirtz and Garcia, supra, certainly had much the same effect, as the

dissenters in those cases made it a point to emphasize. See Garcia, supra, 469

U.S. at 528 (“The financial impact on States and localities of displacing their

control over wages, hours, overtime regulations, pensions, and labor relations with

their employees could have serious, as well as unanticipated, effects on state and

local planning, budgeting, and the levying of taxes.”) (Powell, J., dissenting); Wirtz,

supra, 392 U.S. at 203 (stating that “[t]here can be no doubt” that if the FLSA is

extended to the states it could “disrupt the fiscal policy of the States and threaten

their autonomy in the regulation of health and education”) (Douglas, J., dissenting).

The majority opinions in those two cases control here, unless there is a discernable

reason to treat healthcare benefits differently than compensation and conditions of

employment.

I see no persuasive reason why healthcare benefits --- which are generally

viewed as a condition of employment and part of an employee’s compensation

package13 --- should be treated differently than other aspects of compensation and

conditions of employment that the Supreme Court has already held Congress may

regulate and mandate against the states (such as wages, hours, overtime pay, etc).

This is particularly so in light of the fact that, as the defendants correctly point out,

13 Cf., e.g., Owen v. McKibben, 78 Fed. Appx. 50, 51 n.3 (10th Cir. 2003)

(compensation package at issue included healthcare insurance); United States v.

City of New York, --- F. Supp. 2d ---, 2010 WL 1948562, at *1 (S.D.N.Y. May 13,

2010) (same); Portugues-Santa v. B. Fernandez Hermanos, Inc., 614 F. Supp. 2d

221, 228 (D.P.R. 2009) (same); Laselva v. Schmidt, 2009 WL 1312559, *1

(N.D.N.Y. May 7, 2009) (same); Plitt v. Ameristar Casino, Inc., 2009 WL

1297404, at *1 (E.D. Mo. May 6, 2009) (same); Perrotti v. Wal-Mart Stores, Inc.,

2006 WL 146232, *1 (D.N.H. Jan. 19, 2006) (same); Hudson v. International

Computer Negotiations, Inc., 2005 WL 3087865, at *1 (M.D. Fla. Nov. 16, 2005)

(same).

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to some extent Congress already regulates health benefits for state employees, for

example, with respect to COBRA’s temporary continuation of coverage provisions

and HIPAA’s restrictions on the ability of group plans to deny coverage due to preexisting conditions. See Def. Mem. at 22. If the employer mandate in the Act is

unconstitutional as applied to the states, for the reasons claimed by the plaintiffs,

then the FLSA (and arguably COBRA and HIPAA) are likewise unconstitutional as

applied to the states. The plaintiffs tried to distinguish Garcia during oral argument

by contending that the case was justified because Congress there was trying to

ensure that workers “were, in effect, not going to be abused with regard to hours

or inadequate wages.” Tr. at 79. Whether the plaintiffs feel that Congress had a

more noble and well-meaning purpose in passing the FLSA is irrelevant. The power

that Congress asserted (and the effect it would have on the state fisc) is essentially

the same as here. 

For the foregoing reasons, I believe Wirtz and Garcia control. I recognize that

Wirtz (state employers subject to the FLSA) was overruled by National League of

Cities v. Usery, 426 U.S. 833, 96 S. Ct. 2465, 49 L. Ed. 2d 245 (1975) (state

employers not subject to the FLSA), which was in turn overruled by Garcia (state

employers once again subject to the FLSA). Accordingly, in light of this “unsteady

path” of Supreme Court jurisprudence, New York v. United States, 505 U.S. 144,

160, 112 S. Ct. 2408, 120 L. Ed. 2d 120 (1992), the plaintiffs would most likely

have stated a plausible claim if it had been brought between 1975 and 1985. But,

of course, I am required to apply the law as it now exists. 

Because the Act’s employer mandate regulates the states as participants in

the national labor market the same as it does private employers, and because the

Supreme Court has held in this context that adversely impacting the state fisc (by

requiring a minimum level of employment-based benefits) does not interfere with

state sovereignty and impede state functions, the employer mandate does not

violate the Constitution as a matter of law --- under the current law. Therefore,

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Count Six does not state a plausible claim upon which relief can be granted and

must be dismissed.14

(2) Coercion and commandeering as to healthcare insurance (Count V)

 The Act provides for the creation of health benefit exchanges to foster and

provide “consumer choices and insurance competition.” The Act gives the states

the option to create and operate the exchanges themselves, or have the federal

government do so. The plaintiffs acknowledge that they have a choice, but they

claim it is tantamount to no choice because the Act forces them to operate the

exchange “under threat of removing or significantly curtailing their long-held

regulatory authority” (see Am. Compl. ¶ 88), which will “displace State authority

over a substantial segment of intrastate insurance regulation . . . that the States

have always possessed under the police powers provided in the Constitution.” See

id. ¶ 44. This is improper “coercion and commandeering” in violation of the Ninth

and Tenth Amendments, according to the plaintiffs.

The plaintiffs’ argument for this claim is directly foreclosed by Hodel v.

Virginia Surface Min. & Reclamation Association, Inc., 452 U.S. 264, 101 S. Ct.

2352, 69 L. Ed. 2d 1 (1981). That case involved a pre-enforcement challenge to

the Surface Mining Control and Reclamation Act, which was a comprehensive

statute designed to “‘establish a nationwide program to protect society and the

14 The plaintiffs argue that the employer mandate runs afoul of the intergovernmental-tax-immunity doctrine, see Pl. Mem. at 58-60, but the defendants

persuasively respond that the claim has not been pled in the amended complaint

and that, in any event, it must fail as a matter of law, see Reply in Support of

Defendants’ Motion to Dismiss (“Reply Mem.”), at 8-11 (doc. 74). Indeed, under

the current state of the law, it is unclear if the inter-governmental-tax-immunity

even retains any viability. See South Carolina v. Baker, 485 U.S. 505, 518 n.11,

108 S. Ct. 1355, 99 L. Ed. 2d 592 (1988) (noting the inter-governmental-taximmunity doctrine has “shifted into the modern era,” and declining to decide “the

extent, if any, to which States are currently immune from direct nondiscriminatory

federal taxation”) (emphasis added).

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environment from the adverse effects of surface coal mining operations.’” Id. at

268. Pursuant to the statute, “any State wishing to assume permanent regulatory

authority over the surface coal mining operations” was required to submit a

“proposed permanent program” demonstrating compliance with federal regulations.

Id. at 271. If any state chose not to do so, the statute provided that the Secretary

of the Interior would “develop and implement” the program for that particular state.

Virginia filed suit and alleged that the statute violated the Constitution in that “the

threat of federal usurpation of their regulatory roles coerces the States into

enforcing the Surface Mining Act.” Id. at 289. The district court agreed, reasoning

that while the statute “allows a State to elect to have its own regulatory program,

the ‘choice that is purportedly given is no choice at all’ because the state program

must comply with federally prescribed standards.” Id. at 285 n.25. However, the

Supreme Court flatly rejected the argument and reversed. In doing so, the Court

explained that the statute merely established “a program of cooperative federalism

that allows the States, within limits established by federal minimum standards, to

enact and administer their own regulatory programs, structured to meet their own

particular needs.” Id. at 289. It “prescribes federal minimum standards governing

surface coal mining, which a State may either implement itself or else yield to a

federally administered regulatory program.” Id. The Supreme Court further stated

that:

A wealth of precedent attests to congressional authority

to displace or pre-empt state laws regulating private

activity affecting interstate commerce when these laws

conflict with federal law. Although such congressional

enactments obviously curtail or prohibit the States’

prerogatives to make legislative choices respecting

subjects the States may consider important, the

Supremacy Clause permits no other result.

* * *

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Thus, Congress could constitutionally have enacted a

statute prohibiting any state regulation of surface coal

mining. We fail to see why the Surface Mining Act should

become constitutionally suspect simply because Congress

chose to allow the States a regulatory role.

Id. at 290 (citations omitted). Notably, the Court made it a point to emphasize that

its conclusion applied even though --- as the plaintiffs maintain in this case --- “the

federal legislation displaces laws enacted under the States’ ‘police powers.’” Id. at

291.

Commandeering was found in New York, supra, 505 U.S. at 144, where

Congress passed a statute requiring state legislatures to enact a particular kind of

law, and that holding was later extended in Printz v. United States, 521 U.S. 898,

117 S. Ct. 2365, 138 L. Ed. 2d 914 (1997), to apply to individual state officials.

Id. at 935 (holding that “Congress cannot circumvent [the prohibition in New York]

by conscripting the State’s officers directly”). The plaintiffs rely heavily on these

two decisions for their argument, but both cases are factually and substantively

different from the one here. The plaintiffs have not identified any provision in the

Act that requires the states to enact a particular law or regulation, as in New York,

nor have they identified any provision that requires state officials to enforce federal

laws that regulate private individuals, as in Printz. “[T]he anti-commandeering rule

comes into play only when the federal government calls on the states to use their

sovereign powers as regulators of their citizens.” Travis, supra, 163 F.3d at 1004-

05 (emphasis added); see also id. at 1004 (noting that states may be objects of

regulation but “cannot be compelled to become regulators of private conduct”).

Indeed, both New York and Printz cited Hodel with approval and distinguished it

from the facts presented in those two cases. See Printz, supra, 521 U.S. at 925-26

(explaining “the Federal Government may not compel the States to implement, by

legislation or executive action, federal regulatory programs,” which the legislation

at issue in Hodel did not do “because it merely made compliance with federal

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standards a precondition to continued state regulation in an otherwise pre-empted

field”); New York, supra, 505 U.S. at 161, 167 (the statute at issue in Hodel was

an example of “cooperative federalism” that did not commandeer the legislative

process because the states were not compelled to enforce the statute, expend any

state funds, or participate in the program “in any manner whatsoever”; they could

have elected not to participate and “the full regulatory burden will be borne by the

Federal Government”). Because the health benefit exchanges are voluntary and do

not compel states to regulate private conduct of their citizens, Count Five does not

state a claim upon which relief can be granted. The Act gives the states the choice

to establish the exchanges, and is therefore the type of cooperative federalism that

was authorized in Hodel, supra.

15 

(3) Coercion and commandeering as to Medicaid (Count IV)

For this claim, the state plaintiffs object to the “fundamental changes in the

nature and scope of the Medicaid program” that the Act will bring about. See Am.

Comp. ¶ 86. They have described these changes at length in their complaint, see

Am. Comp. ¶¶ 39-60, and they need not be repeated here in any great detail. It is

sufficient to say that the state plaintiffs maintain that the Act drastically expands

and alters the Medicaid program to such an extent they cannot afford the newlyimposed costs as it will force them to “run [their] budgets off a cliff.” Tr. 72. The

Medicaid provisions in the Act allegedly run afoul of Congress’s Article I powers;

exceed the Commerce Clause; and violate the Ninth and Tenth Amendments. 

15 The plaintiffs appear to suggest that our case is distinguishable from Hodel

because, unlike the statute under review in that case, the federal government here

has not accepted the “full regulatory burden” of the health benefit exchanges. For

this, the plaintiffs rely on six statutory provisions that they maintain “conscript and

coerce States into carrying out critical elements of the insurance exchange

program.” See Pl. Mem. at 51-54. As the defendants correctly point out, however,

see Reply Mem. at 6-7, upon close and careful review, each challenged provision is

voluntary and generally applicable only if the state elects to establish the exchange. 

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The defendants do not appear to deny that the Act will significantly alter and

expand the Medicaid program as it currently exists (although they do point out that

the federal government will be absorbing 100% of the new costs for the first three

years16). Rather, the defendants rest their argument on this simple and unassailable

fact: state participation in Medicaid under the Act is, as it always has been, entirely

voluntary. When the freedom to opt out of the program is considered in conjunction

with the fact that Congress has expressly reserved the right to alter and amend the

program, see 42 U.S.C. § 1304 (“The right to alter, amend, or repeal any provision

of this chapter is hereby reserved to the Congress.”), and, in fact, it has done so

numerous times over the years, see Def. Mem. at 10, the defendants contend that

the state plaintiffs have failed to state a claim. See Harris v. McRae, 448 U.S. 297,

301, 100 S. Ct. 2671, 65 L. Ed. 2d 784 (1980) (noting “[a]lthough participation in

the Medicaid program is entirely optional, once a State elects to participate, it must

comply with the requirements” that Congress sees fit to impose).

The state plaintiffs assert that they do not actually have the freedom to opt

out. They note that “‘Medicaid is the single largest Federal grant-in-aid program to

the States, accounting for over 40 percent of all Federal grants to states.’” See Pl.

Mem. at 50 (quoting Bipartisan Comm’n on the Medicaid Act of 2005, H.R. 985,

109th Cong. § 2(13) (2005)). They further note that in Florida, for example, 26% of

its budget is presently devoted to Medicaid outlays, and because the federal

government contributes an average of 55.45% of Medicaid costs, Florida’s outlays

would have to be more than doubled (to the point of consuming more than 58% of

its state budget) to offer the same level of benefits that its Medicaid enrollees now

receive. In short, the plaintiffs contend that the Act imposes a Hobson’s Choice.

16 One could argue, however, that the “federal government” will not really be

absorbing the costs as the government has little money except through taxpayers,

who almost exclusively reside within the states.

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They must either: (1) accept the Act’s transformed Medicaid program with all its

new obligations and costs that the states cannot afford; or (2) exit the program

altogether and lose federal matching funds that are necessary and essential for

them to provide healthcare to their neediest citizens (along with other Medicaidlinked federal funds). Either way, they contend that their Medicaid systems will

eventually collapse, leaving millions of their neediest residents without any health

insurance. Consequently, they claim that they are being forced into accepting the

changes to the Medicaid program --- even though they cannot afford it and doing

so will work an enormous financial hardship --- because they “effectively have no

choice other than to participate.” See Am. Comp. ¶ 84. Although this claim has

intuitive appeal, the status of existing law makes it a close call as to whether it

states a “plausible” claim upon which relief can be granted.

The underlying question presented is whether the Medicaid provisions satisfy

the Spending Clause. There are four “general restrictions” on Congress’s spending

power: (1) the exercise of spending power must be for the general welfare; (2) the

conditions must be stated clearly and unambiguously; (3) the conditions must bear

a relationship to the purpose of the program; and (4) the conditions imposed may,

of course, not require states “to engage in activities that would themselves be

unconstitutional.” See generally South Dakota v. Dole, 483 U.S. 203, 207-10, 107

S. Ct. 2793, 97 L. Ed. 2d 171 (1987). The plaintiffs do not appear to dispute that

the Act meets these restrictions. Rather, their claim is based principally on a single

sentence near the end of Dole, where the Supreme Court speculated that “in some

circumstances the financial inducement offered by Congress might be so coercive

as to pass the point at which ‘pressure turns into compulsion.’” Id. at 211. For that

statement, the Court relied upon an earlier decision, Steward Machine Co. v. Davis,

301 U.S. 548, 57 S. Ct. 883, 81 L. Ed. 1279 (1937), which likewise speculated

that there may be a point at which Congressional pressure turns into impermissible

coercion. However, the Steward Machine Court made no attempt to define exactly

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where that line might be drawn and, in fact, suggested that no such line could be

drawn. Justice Cardozo cautioned that any spending measure (in that case, in the

form of a tax rebate) “conditioned upon conduct is in some measure a temptation.

But to hold that motive or temptation is equivalent to coercion is to plunge the law

in endless difficulties.” Id. at 589-90. 

Accordingly, the coercion theory has been often discussed in case law and

scholarship, but never actually applied. While it appears that the Eleventh Circuit

has not yet been called upon to consider the issue, the courts of appeal that have

considered the theory have been almost uniformly hostile to it. See, e.g., Doe v.

Nebraska, 345 F.3d 593, 599 (8th Cir. 2003) (acknowledging what the Supreme

Court said in Dole, but going on to note that the “circuits are in accord” with the

view that no coercion is present if a state --- even when faced with the possible

“sacrifice” of a large amount of federal funding --- voluntarily exercises its own

choice in accepting the conditions attached to receipt of federal funds; noting that

a “politically painful” choice does not compulsion make); Kansas v. United States,

214 F.3d 1196, 1201-02 (10th Cir. 2000) (“The cursory statements in Steward

Machine and Dole mark the extent of the Supreme Court’s discussion of the

coercion theory. The Court has never employed the theory to invalidate a funding

condition, and federal courts have been similarly reluctant to use it”; the theory is

“unclear, suspect, and has little precedent to support its application.”); Nevada v.

Skinner, 884 F.2d 445, 448 (9th Cir. 1989) (“The coercion theory has been much

discussed but infrequently applied in federal case law, and never in favor of the

challenging party. . . . The difficulty if not the impropriety of making judicial

judgments regarding a state’s financial capabilities renders the coercion theory

highly suspect as a method for resolving disputes between federal and state

governments.”); Oklahoma v. Schweiker, 655 F.2d 401, 413-14 (D.C. Cir. 1981)

(pre-Dole) (coercion argument rejected because courts “are not suited to evaluating

whether states are faced here with an offer they cannot refuse or merely a hard

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choice. Even a rough assessment of the degree of temptation would require

extensive and complex factual inquiries on a state-by-state basis. We therefore

follow the lead of other courts that have explicitly declined to enter this thicket

when similar funding conditions have been at issue.”); State of New Hampshire

Dep’t of Employment Sec. v. Marshall, 616 F.2d 240, 246 (1st Cir. 1980) (preDole) (“Petitioners argue, however, that this option of the state to refuse to

participate in the program is illusory, since the severe financial consequences that

would follow such refusal negate any real choice . . . . We do not agree that the

carrot has become a club because rewards for conforming have increased. It is not

the size of the stakes that controls, but the rules of the game.”).

Perhaps the case most analogous to this one is California v. United States,

104 F.3d 1086 (9th Cir. 1997), where California challenged the Medicaid program,

in pertinent part, because it conditioned the receipt of federal matching funds on

the provision of emergency medical services to illegal aliens. Because illegal aliens

comprised 5% of its population, the state was having to spend $400 million each

year on providing health care to the aliens. California objected to having to spend

that money and argued, like plaintiffs here, that it was being coerced into doing so

because, while its initial decision to participate in Medicaid was voluntary, “it now

has no choice but to remain in the program in order to prevent a collapse of its

medical system.” In rejecting this argument, the Ninth Circuit questioned the

“viability” of the coercion theory, as well as the possibility that any “sovereign

state which is always free to increase its tax revenues [could] ever be coerced by

the withholding of federal funds.” The Court of Appeals concluded --- as have all

courts to have considered the issue --- that the state was merely presented with a

“hard political choice.” See generally id. at 1089-92; accord Padavan v. United

States, 82 F.3d 23, 28-29 (2d Cir. 1996) (holding same and noting that “Medicaid

is a voluntary program in which states are free to choose whether to particulate. If

New York chose not to participate, there would be no federal regulation requiring

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the state to provide medical services to illegal aliens”).

The Fourth Circuit appears to be the one circuit where the coercion theory

has been considered and “is not viewed with such suspicion.” West Virginia v. U.S.

Dep’t of Health & Human Servs., 289 F.3d 281, 290 (4th Cir. 2002) (referencing a

prior decision of that court, Commonwealth of Virginia Dep’t of Education v. Riley,

106 F.3d 559 (4th Cir. 1997), where six of the thirteen judges on the en banc panel

stated in dicta that coercion theory may be viable). Notwithstanding that the theory

may be available in the Fourth Circuit, West Virginia acknowledged that because of

“strong doubts about the viability of the coercion theory”; in light of the fact that it

is “somewhat amorphous and cannot easily be reduced to a neat set of black-letter

rules of application”; and given the “difficulties associated with [its] application,”

there is “no decision from any court finding a conditional grant to be impermissibly

coercive.” Therefore, “most courts faced with the question have effectively

abandoned any real effort to apply the coercion theory” after finding, in essence,

that it “raises political questions that cannot be resolved by the courts.” See id. at

288-90. All this to say, if the coercion theory stands at all, it stands on extremely

“wobbly legs.” See Skinner, supra, 884 F.2d at 454. 

In light of the foregoing, the current status of the law provides very little

support for the plaintiffs’ coercion theory argument. Indeed, when the “pressure

turns into compulsion” theory is traced back, its entire underpinning is shaky. In

Steward Machine Co., supra, the Supreme Court held that there was no coercion

because “[n]othing in the case suggests the exertion of a power akin to undue

influence, if we assume that such a concept can ever be applied with the fitness to

the relations between state and nation.” 301 U.S. at 590 (emphasis added). Thus,

in addition to being left undefined, the theory appears to stem from a “what if”

assumption. Nevertheless, while the law does not provide much support for the

plaintiffs’ argument, it does not preclude it either (at least not in this circuit).

Further, I cannot ignore that, based on the allegations in the complaint, the

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plaintiffs are in an extremely difficult situation. They either accept the sweeping

changes to Medicaid (which they contend will explode their state budgets), or they

withdraw from the system entirely (which they allege could leave millions of their

poorest and neediest citizens without any medical coverage). The plaintiffs have

argued that this is tantamount to no choice at all, which can perhaps be inferred

from the fact that Congress does not really anticipate that the states will (or could)

drop out of the Medicaid program. To be sure, since the Act seeks to reduce costs,

reduce uncompensated care, and reduce the number of uninsured, it would make

little sense for Congress to expect that objecting states would opt out of Medicaid

and leave millions of the country’s poorest citizens without medical coverage, and

thus make each of those stated problems significantly worse.

In addition, if the state plaintiffs make the decision to opt out of Medicaid,

federal funds taken from their citizens via taxation that used to flow back into the

states from Washington, D.C., would instead be diverted to the states that have

agreed to continue participating in the program.17

If the Supreme Court meant what it said in Dole and Steward Machine Co.

(and I must presume that it did), there is a line somewhere between mere pressure

and impermissible coercion. The reluctance of some circuits to deal with this issue

because of the potential legal and factual complexities is not entitled to a great deal

of weight, because courts deal every day with the difficult complexities of applying

17 See, e.g., Lynn A. Baker, The Spending Power and the Federalist Revival,

4 Chap. L. Rev. 195, 213-14 (2001) (“[S]hould a state decline proffered federal

funds because it finds a condition intolerable, it receives no rebate of any tax

dollars that its residents have paid into the federal fisc. In these cases, the state

(through its residents) contributes a proportional share of federal revenue only to

receive less than a proportional share of federal spending. Thus, when the federal

government offers the states money, it can be understood as simply offering to

return the states’ money to them, often with unattractive conditions attached.”).

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Constitutional principles set forth and defined by the Supreme Court. Because the

Eleventh Circuit (unlike the other circuits) has apparently not directly addressed and

foreclosed this argument, and because, in any event, “the location of the point at

which pressure turns into compulsion, and ceases to be inducement, would be a

question of degree, at times, perhaps, of fact,” Steward Machine Co., supra, 301

U.S. at 590 (emphasis added), the plaintiffs have stated a “plausible” claim in this

circuit.

(4) Violation of constitutional prohibition of unapportioned capitation or direct

tax (Count III)

For this count, the plaintiffs object to the individual mandate penalty. They

make an “alternative” claim that, if the penalty is a tax (which they do not believe

it is, and some Constitutional authorities have concluded it could not be18), it is an

unconstitutional capitation or direct tax, prohibited by Article I, Section 9, Clause 4

of the Constitution.19 Although the argument is not only plausible, but appears to

have actual merit, as some commentators have noted, see, e.g., Steven J. Willis

and Nakku Chung, Constitutional Decapitation and Healthcare, Tax Notes (2010), I

need not be concerned with the issue. As previously explained, it is quite clear that

Congress did not intend the individual mandate penalty to be a tax; it is a penalty.

18 See, e.g., Randy Barnett, Commandeering the People: Why the Individual

Health Insurance Mandate is Unconstitutional, N.Y.U. J.L. & Liberty (forthcoming),

at 27 (stating that the argument for the penalty being justified under Congress’s

broad taxing authority is based on a “radical” theory that, if accepted, would

authorize Congress “to penalize or mandate any activity by anyone in the country,

provided it limited the sanction to a fine enforced by the Internal Revenue Service,”

which would “effectively grant Congress a general police power”).

19 This is the same Constitutional provision under which the Supreme Court

held that the first attempt to impose a federal income tax was unconstitutional to

the extent it was not apportioned. See generally Pollock v. Farmers’ Loan & Trust

Co., 157 U.S. 429, 15 S. Ct. 673, 39 L. Ed. 759 (1895). Subsequently, passage

of the Sixteenth Amendment in 1913 authorized the imposition of an income tax

without the need for apportionment among the states.

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It must be analyzed on the basis of whether it is authorized under Congress’s

Commerce Clause power, not its taxing power. Therefore, Count Three will be

dismissed as moot.

(5) Challenge to individual mandate on due process grounds (Count II)

The plaintiffs next allege that the individual mandate violates their rights to

substantive due process under the Fifth Amendment. Again, this claim would have

found Constitutional support in the Supreme Court’s decisions in the years prior to

the New Deal legislation of the mid-1930’s, when the Due Process Clause was

interpreted to reach economic rights and liberties. See Lochner v. New York, 198

U.S. 45, 25 S. Ct. 539, 49 L. Ed. 937 (1905); see also Coppage v. Kansas, 236

U.S. 1, 35 S. Ct. 240, 59 L. Ed. 441 (1915), Adkins v. Children’s Hospital, 261

U.S. 525, 43 S. Ct. 394, 67 L. Ed. 785 (1923); Jay Burns Baking Co. v. Bryan,

264 U.S. 504, 44 S. Ct. 412, 68 L. Ed. 813 (1924). However, “[t]he doctrine that

prevailed in Lochner, Coppage, Adkins, Burns, and like cases --- that due process

authorizes courts to hold laws unconstitutional when they believe the legislature

has acted unwisely --- has long since been discarded.” Ferguson v. Skrupa, 372

U.S. 726, 730, 83 S. Ct. 1028, 10 L. Ed. 2d 93 (1963); see also New Motor

Vehicle Bd. v. Orrin W. Fox Co., 439 U.S. 96, 106-07, 99 S. Ct. 403, 58 L. Ed. 2d

361 (1978) (since the demise of substantive due process in the arena of economic

regulation, legislatures have “broad scope to experiment with economic problems”). 

Therefore, as the law now exists, if a challenged statute does not implicate

the very limited and narrow class of rights that have been labeled “fundamental,”

courts reviewing legislative action on substantive due process grounds will accord

substantial deference to the legislative judgments. In the absence of a fundamental

right, the question is not whether the court thinks the legislative action is wise, but

whether the legislature could reasonably conclude that the measure at issue is

“rationally related” to a legitimate end. As the Eleventh Circuit has explained:

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Substantive due process claims not involving a

fundamental right are reviewed under the rational basis

test. The rational basis test is not a rigorous standard

[and] is generally easily met. A searching inquiry into the

validity of legislative judgments concerning economic

regulation is not required. . . . The task is to determine if

“any set of facts may be reasonably conceived to justify”

the legislation. . . . To put it another way, the legislation

must be sustained if there is any conceivable basis for the

legislature to believe that the means they have selected

will tend to accomplish the desired end. Even if the court

is convinced that the political branch has made an

improvident, ill-advised or unnecessary decision, it must

uphold the act if it bears a rational relation to a legitimate

governmental purpose. 

TRM, Inc. v. United States, 52 F.3d 941, 945-46 (11th Cir. 1995) (citations

omitted).

 The plaintiffs contend that the individual mandate does, in fact, implicate

fundamental rights to the extent that people have “recognized liberty interests in

the freedom to eschew entering into a contract, to direct matters concerning

dependent children, and to make decisions regarding the acquisition and use of

medical services.” See Pl. Mem. at 43-44; accord Tr. at 82 (“The fundamental

interest involved here, aside from the liberty of contract, is the right to . . . bodily

autonomy and use of medical care . . . the right to run your family life as you see

fit with some limited intrusions available”). Fundamental rights are a narrow class

of rights involving the rights to marry, have children, direct the education of those

children, marital privacy, contraception, bodily integrity, and abortion; and the

Supreme Court is “very reluctant to expand” that list. See Doe v. Moore, 410 F.3d

1337, 1343 (11th Cir. 2005). There is, to be sure, a liberty interest in the freedom

to be left alone by the government. We all treasure the freedom to make our own

life decisions, including what to buy with respect to medical services. Is that a

“fundamental right”? The Supreme Court has not indicated that it is --- at least not

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yet. That is the current state of the law, and it is not a district court’s place to

expand upon that law. 

Congress made factual findings in the Act and concluded that the individual

mandate was “essential” to the insurance market reforms contained in the statute.

This is a “rational basis” justifying the individual mandate --- if it does not relate to

a fundamental right, which only the Supreme Court can recognize. In the absence

of such a recognized fundamental right, that stated “rational basis” is sufficient to

withstand a substantive due process challenge. This count must be dismissed.

(6) Challenge to individual mandate as exceeding Commerce Clause (Count I)

Under the Commerce Clause, Congress may regulate: (1) the channels of

interstate commerce; (2) the instrumentalities of interstate commerce; and (3)

activities “affecting” interstate commerce. Perez v. United States, 402 U.S. 146,

150, 91 S. Ct. 1357, 28 L. Ed. 2d 686 (1971). Only (3) is at issue here.

For this count, the plaintiffs maintain that the individual mandate does not

regulate activity affecting interstate commerce; instead, it seeks to impermissibly

regulate economic inactivity. The decision not to buy insurance, according to the

plaintiffs, is the exact opposite of economic activity. Because the individual

mandate “compels all Americans to perform an affirmative act or incur a penalty,

simply on the basis that they exist and reside within any of the United States,” the

plaintiffs contend that it will deprive them of “their rights under State law to make

personal healthcare decisions without governmental interference.” Am. Comp. ¶¶

70, 75. Thus alleged, the individual mandate exceeds the Commerce Clause, and

violates the Ninth and Tenth Amendments.

The defendants, of course, have a different take. They contend that “[t]he

appearance of inactivity here is just an illusion” because the people who decide to

not buy insurance are participating in the relevant economic market. See Tr. at 30.

Their argument on this point can be broken down to the following syllogism: (1)

because the majority of people will at some point in their lives need and consume

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healthcare services, and (2) because some of the people are unwilling or unable to

pay for those services, (3) Congress may regulate everyone and require that

everyone have specific, federally-approved insurance. Framed this way, the

defendants insist that the individual mandate does not require people to pay for a

service they do not want; rather, it merely tells them how they must pay for a

service they will almost certainly consume in the future.

It is, according to the defendants, no different than Congress telling people

“you need to pay by cash instead of check or credit card.” Tr. at 88; accord Def.

Mem. at 43 (“[Individuals who choose not to buy insurance] have not opted out of

health care; they are not passive bystanders divorced from the health care market.

Instead, they have chosen a method of payment for services they will receive, no

more ‘inactive’ than a decision to pay by credit card rather than by check.”). Also,

because the individual mandate is essential to the insurance market reforms in the

Act, the defendants argue that it is sustainable for the “second reason” that it falls

within the Necessary and Proper Clause. See Def. Mem. at 44-48. 

At this stage in the litigation, this is not even a close call. I have read and am

familiar with all the pertinent Commerce Clause cases, from Gibbons v. Ogden, 22

U.S. (9 Wheat.) 1, 6 L. Ed. 23 (1824), to Gonzales v. Raich, 545 U.S. 1, 125 S.

Ct. 2195, 162 L. Ed. 2d 1 (2005). I am also familiar with the relevant Necessary

and Proper Clause cases, from M’Culloch v. Maryland, 17 U.S. (4 Wheat.) 316, 4

L. Ed. 579 (1819), to United States v. Comstock, --- U.S. ---, 130 S. Ct. 1949,

176 L. Ed. 2d 878 (2010). This case law is instructive, but ultimately inconclusive

because the Commerce Clause and Necessary and Proper Clause have never been

applied in such a manner before. The power that the individual mandate seeks to

harness is simply without prior precedent. The Congressional Research Service (a

nonpartisan legal “think tank” that works exclusively for Congress and provides

analysis on the constitutionality of pending legislation) advised Congress on July

24, 2009, long before the Act was passed into law, that “it is unclear whether the

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[Commerce Clause] would provide a solid constitutional foundation for legislation

containing a requirement to have health insurance.” The analysis goes on to state

that the individual mandate presents “the most challenging question . . . as it is a

novel issue whether Congress may use this clause to require an individual to

purchase a good or service.” Congressional Research Service, Requiring Individuals

to Obtain Health Insurance: A Constitutional Analysis, July 24, 2009, at 3. Even

Thomas More Law Center, supra, 2010 WL 3952805, which recently upheld the

individual mandate, seems to recognize that the individual mandate is without any

precedent. See id. at *8 (“The Supreme Court has always required an economic or

commercial component in order to uphold an act under the Commerce Clause. The

Court has never needed to address the activity/inactivity distinction advanced by

plaintiffs because in every Commerce Clause case presented thus far, there has

been some sort of activity”).20

The defendants “firmly disagree” with the characterization of the individual

mandate as “unprecedented” and maintain that it is “just false” to suggest that it

breaks any new ground. See Tr. 31, 33. During oral argument, as they did in their

memorandum, see Def. Mem. at 44, they attempted to analogize this case to Heart

of Atlanta Motel, Inc. v. United States, 379 U.S. 241, 85 S. Ct. 348, 13 L. Ed. 2d

258 (1964), which held that Congress had the power under the Commerce Clause

and the Civil Rights Act to require a local motel to rent rooms to black guests; and

Wickard v. Filburn, 317 U.S. 111, 63 S. Ct. 82, 87 L. Ed. 122 (1942), which held

that Congress could limit the amount of wheat grown for personal consumption on

a private farm in an effort to control supply and avoid surpluses or shortages that

20 The district court, however, went on to adopt the government’s argument

that the Commerce Clause should not only reach economic activity --- which had

“always” been present in “every Commerce Clause case” decided to date --- but it

should be applied to “economic decisions” as well, such as the decision not to buy

health insurance.

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could result in abnormally low or high wheat prices. The defendants have therefore

suggested that because the motel owner in Heart of Atlanta was required to rent

rooms to a class of people he did not want to serve, Congress was regulating

inactivity. And, because the farmer in Wickard was limited in the amount of wheat

he could grow for his own personal consumption, Congress was forcing him to buy

a product (at least to the extent that he wanted or needed more wheat than he was

allowed). There are several obvious ways in which Heart of Atlanta and Wickard

differ markedly from this case, but I will only focus on perhaps the most significant

one: the motel owner and the farmer were each involved in an activity (regardless

of whether it could readily be deemed interstate commerce) and each had a choice

to discontinue that activity. The plaintiff in the former was not required to be in the

motel business, and the plaintiff in the latter did not have to grow wheat (and if he

did decide to grow the wheat, he could have opted to stay within his allotment and

use other grains to feed his livestock --- which would have been most logical, since

wheat is usually more expensive and not an economical animal feed --- and perhaps

buy flour for him and his family). Their respective obligations under the laws being

challenged were tethered to a voluntary undertaking. Those cases, in other words,

involved activities in which the plaintiffs had chosen to engage. All Congress was

doing was saying that if you choose to engage in the activity of operating a motel

or growing wheat, you are engaging in interstate commerce and subject to federal

authority.

But, in this case we are dealing with something very different. The individual

mandate applies across the board. People have no choice and there is no way to

avoid it. Those who fall under the individual mandate either comply with it, or they

are penalized. It is not based on an activity that they make the choice to undertake.

Rather, it is based solely on citizenship and on being alive. As the nonpartisan CBO

concluded sixteen years ago (when the individual mandate was considered, but not

pursued during the 1994 national healthcare reform efforts): “A mandate requiring

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all individuals to purchase health insurance would be an unprecedented form of

federal action. The government has never required people to buy any good or

service as a condition of lawful residence in the United States.” See Congressional

Budget Office Memorandum, The Budgetary Treatment of an Individual Mandate to

Buy Health Insurance, August 1994 (emphasis added). 

Of course, to say that something is “novel” and “unprecedented” does not

necessarily mean that it is “unconstitutional” and “improper.” There may be a first

time for anything. But, at this stage of the case, the plaintiffs have most definitely

stated a plausible claim with respect to this cause of action.21 

IV. CONCLUSION

The Supreme Court has said:

Some truths are so basic that, like the air around us, they

are easily overlooked. Much of the Constitution is

concerned with setting forth the form of our government,

and the courts have traditionally invalidated measures

deviating from that form. The result may appear

“formalistic” in a given case to partisans of the measure

at issue, because such measures are typically the product

21 Starting in the First World War, there have been at least six attempts by

the federal government to introduce some kind of universal healthcare insurance

coverage. At no point --- until now --- did it mandate that everyone buy insurance

(although it was considered during the healthcare reform efforts in 1994, as noted

above). While the novel and unprecedented nature of the individual mandate does

not automatically render it unconstitutional, there is perhaps a presumption that it

is. In Printz, supra, 521 U.S. at 898, the Supreme Court stated several times that

an “absence of power” to do something could be inferred because Congress had

never made an attempt to exercise that power before. See id. at 905 (stating that

if “earlier Congresses avoided use of this highly attractive power, we would have

reason to believe that the power was thought not to exist”); see id. at 907-08

(“the utter lack of statutes imposing obligations [like the one at issue there]

(notwithstanding the attractiveness of that course to Congress), suggests an

assumed absence of such power”) (emphasis in original); see id. at 918 (stating

“almost two centuries of apparent congressional avoidance of the practice [at

issue] tends to negate the existence of the congressional power asserted here”).

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of the era’s perceived necessity. But the Constitution

protects us from our own best intentions: It divides

power among sovereigns and among branches of

government precisely so that we may resist the

temptation to concentrate power in one location as an

expedient solution to the crisis of the day.

New York, supra, 505 U.S. at 187. As noted at the outset of this order, there is a

widely recognized need to improve our healthcare system. How to accomplish that

is quite controversial. For many people, including many members of Congress, it is

one of the most pressing national problems of the day and justifies extraordinary

measures to deal with it. However, “a judiciary that licensed extraconstitutional

government with each issue of comparable gravity would, in the long run, be far

worse.” See id. at 187-88. In this order, I have not attempted to determine

whether the line between Constitutional and extraconstitutional government has

been crossed. That will be decided on the basis of the parties’ expected motions

for summary judgment, when I will have the benefit of additional argument and all

evidence in the record that may bear on the outstanding issues. I am only saying

that (with respect to two of the particular causes of action discussed above) the

plaintiffs have at least stated a plausible claim that the line has been crossed.

Accordingly, the defendants’ motion to dismiss (doc. 55) is GRANTED with

respect to Counts Two, Five, and Six, and those counts are hereby DISMISSED.

The motion is DENIED with respect to Counts One and Four. Count Three is also

DISMISSED, as moot. The case will continue as to Counts One and Four pursuant

to the scheduling order previously entered.

 

DONE and ORDERED this 14th day of October, 2010.

/s/ Roger Vinson 

ROGER VINSON

Senior United States District Judge

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