Virginia Shut Down in Its Attempt to Challenge Health Care Reform

(CN) - Virginia used a "smokescreen" to wage war against the new health care law, the 4th Circuit ruled Thursday, overturning a decision that said forcing most Americans to buy insurance is unconstitutional. In a separate ruling, the same appellate panel vacated a different Virginia judge's decision that upheld the law as constitutional. Both lower courts must dismiss the lawsuits on remand.

U.S. District Judge Henry Hudson, appointed by President George W. Bush, had been the first to rule against the Patient Protection and Affordable Care Act. He had said in December that a section of the law requiring most Americans to buy health insurance exceeds Congress' powers under the commerce clause.

On Thursday, a three-judge appellate panel said that the plaintiff in the case, the commonwealth of Virginia, lacked standing to file suit.

"The sole provision challenged here - the individual mandate - imposes no obligations on the sole plaintiff, Virginia," Judge Diana Gribbon Motz wrote for the Richmond, Va.-based court.

Virginia Attorney General Kenneth Cuccinelli III had tried to bypass the federal appeals court by petitioning the U.S. Supreme Court directly, but the high court declined to intervene in April.

The justices' consideration of the health care act is much anticipated as courts across the country have been divided over the issue. Most lawsuits over the law have been dismissed for lack of standing.

Hudson and a Florida federal judge found the law unconstitutional, but three others upheld the law. The 6th Circuit upheld the law as constitutional in June, while the 11th Circuit found otherwise two months later.

In Virginia, the circuit judges said Hudson erred in finding that the commonwealth had standing to sue. Virginia had claimed that the individual mandate conflicts with its newly enacted Virginia Health Care Freedom Act (VHCFA).

The commonwealth signed its legislation on March 24, 2010, one day after President Barack Obama signed the federal act. The challenged individual mandate provision is set to take effect in 2014.

But precedent bars Virginia's lawsuit if the commonwealth is trying to use its law "as a smokescreen for Virginia's attempted vindication of its citizens' interests," according to the 33-page ruling (emphasis in original).

"To permit a state to litigate whenever it enacts a statute declaring its opposition to federal law, as Virginia has in the VHCFA, would convert the federal judiciary into a 'forum' for the vindication of a state's 'generalized grievances about the conduct of government,'" Gribbon Motz wrote for a three-judge panel. "Under Virginia's standing theory, a state could acquire standing to challenge any federal law merely by enacting a statute - even an utterly unenforceable one - purporting to prohibit the application of the federal law." (Emphasis in original.)

This model might let a state block its citizens from paying Social Security taxes, the court noted.

"Thus, if we were to adopt Virginia's standing theory, each state could become a roving constitutional watchdog of sorts; no issue, no matter how generalized or quintessentially political, would fall beyond a state's power to litigate in federal court," according to the court.

The judges noted that the VHCFA "regulates nothing and provides for the administration of no state program."

"Instead, it simply purports to immunize Virginia citizens from federal law," Gribbon Motz wrote. "In doing so, the VHCFA reflects no exercise of 'sovereign power,' for Virginia lacks the sovereign authority to nullify federal law."

If a federal law interferes with the state's right to create and enforce its own statutes, then a state would suffer injury. "Contrary to Virginia's arguments, the mere existence of a state law like the VHCFA does not license a state to mount a judicial challenge to any federal statute with which the state law assertedly conflicts," the decision states.

"Given this fact, the VHCFA merely declares, without legal effect, that the federal government cannot apply insurance mandates to Virginia's citizens," the judge added. "This non-binding declaration does not create any genuine conflict with the individual mandate, and thus creates no sovereign interest capable of producing injury-in-fact."

The court's other decision on health care also rested on jurisdiction. Two weeks before Hudson struck down the law in Richmond, Senior U.S. District Judge Norman K. Moon in Lynchburg, appointed to the bench by President Bill Clinton, upheld it as constitutional.

Liberty University and the other plaintiffs in Moon's case had challenged the individual mandate as well as the employer mandate, two provisions of the federal health care law that amend the Internal Revenue Code. On Thursday, the 4th Circuit said the Anti-Injunction Act strips the courts of jurisdiction because the suit "constitutes a pre-enforcement action seeking to restrain the assessment of a tax."

One of the challenged provisions penalizes taxpayers if they fail to maintain adequate health insurance coverage; the other forces "large employers" to make an "assessable payment" if any of their employees receive tax credits or government subsidies to offset medical expenses.

While both parties to the lawsuit claimed that the Anti-Injunction Act does not bar the case at hand, a majority of the federal appeals court disagreed.

In addition to the 49-page majority opinion authored by Judge Gribbon Motz, the other judges on the panel addressed the merits of the lawsuit. Despite different approaches, both judges said they would uphold the law as constitutional.

Judge James Wynn wrote a 17-page concurring opinion that states he would uphold the constitutionality of the federal health care act on the basis of Congress' plenary taxing power.

Judge Andre Davis' 73-page dissent says that the Anti-Injunction Act does not bar jurisdiction. As to the merits, he said the commerce clause of the Constitution authorizes both of the challenged mandates.

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