Tag Archives: U.S. Court of Appeals

Different US Court of Appeals Issue Conflicting Rulings on Obamacare Subsidies

The political debate and legal battle over the Affordable Care Act continues to dominate the political landscape. The mostly partisan battle is due in my opinion to Congress having passed the law along party lines. On March 23, 2010 during a highly publicized White House ceremony President Obama signed the bill into law. During the ceremony the President was flanked by the bill’s most ardent supporters and Democratic party loyalists. Barack Obama basked in the political glory of the moment. As the ink in the President’s signature was drying lawsuits were being filed challenging the law’s legality. It is unclear why the President did not pay closer attention to some of his legal advisers who warned that some parts of the health care law were unconstitutional.

In deciding the case of National Federation of Independent Businesses, et el v. Sebelius, Secretary of Health and Human Services, et el the US Supreme Court ruled that Obamacare passed constitutional muster. Taking the legal community by surprise, Chief Justice Roberts wrote the decision for the court. He broke with the Court’s conservative bloc to lead its liberal wing in supporting the law upon taxation grounds. Very few people, including the government’s lawyers who argued the case, thought that Court would sustain the law on taxation grounds. Now the courts are wrestling with questions related to the this ruling.

It is highly unusual for two Federal Appeal Courts to issue contradictory rulings on the same point of law on the same day. Yet that is exactly what happened today.

First, the D.C. Circuit Court of Appeals in Halbig v. Burwell ruled in a split decision that the Obamacare does not allow for tax credits to be extended to people who purchased their insurance from the Federal Exchange. According to the decision tax credits, which are intended to subsidize premiums, are available for people who purchased their insurance only on a state-run exchanges. The controlling subsidy provision of the law clearly mentions the requirement of purchasing health insurance through the states, but it is silent about purchases via the Federal Exchanges. Consequently, the Internal Revenue Service has no authority to grant everyone a tax credit regardless from whichever exchange they purchased their insurance from. The appellate judges rejected the government’s argument that ambiguous language should not defeat Congress’s intent that the subsidies should apply to everyone. Some lawyers and congressional staffers who worked on the 2010 health care legislation believe that tax credit-subsidy section should have been drafted with more care.

Second, a few hours later, all three judges on a 4th Circuit Court of Appeal  in Virginia decided in King v. Burwell the opposite on the same facts as were present in the day’s earlier decision. This court declared the tax subsidies to be legal and proper.  The legal arguments presented were similar to those presented in the D.C. Circuit Court’s case.

Let’s agree that today’s decisions were rendered by extremely intelligent and competent jurists. After hearing and reading the arguments and having deliberated thereon the panels interpreted differently the applicable law. Today’s contradictory decisions can explained better by the judges’ position on judicial construction of legislation and not their political affiliations.

The political pundits who argue the legality of the  subsidies make much out of the fact that the D.C. Court’s two Republicans ruled against the government’s position. However, I believe that Court’s decision was squarely based upon legal principles and not politics. It appears that the government disagrees with me. It immediately announced that it would be filing for an en banc hearing and decision. The Administration will be asking for full appeals court to take up the issue. It is more likely than not that the full panel is going to rule the same way on the material questions of law. President Obama is buying time by filing this petition; it is likely that the full court will not decide the case until after the midterm elections.

When the Affordable Care Act was being considered its supporters failed to appreciate the resolve of those Americans who did not welcome the new law. The number of states that set up their own exchanges did not meet pre-legislation projections. Republican governors and state legislators for refused to set up the exchanges. Other states curtailed their efforts to set up exchanges after encountering technical and financial difficulties. As it stands only 14 states have their own exchanges. Removing the subsidies for those who purchased insurance from federal exchanges would deal Obamacare a mortal blow. Without the subsidies the true cost of the insurance would have to be paid.  If the subsidies are ultimately struck down health providers will face the possibility of being legally required to offer insurance that nobody would buy.

The Obama administration’s immediate reaction to the 4th Circuit ruling was to argue politics over law. This may have been because the Administration is still reeling from the Supreme Court’s Hobby Lobby decision. In that case a 5-4 Court ruled that the Human Services regulations requiring a closely held religious corporations to offer certain contraceptives in their the health insurance policies violated the Religious Freedom Restoration Act. That decision compelled Josh Earnest, White House spokesman, to stand behind a podium to brief the press on the Administration’s opinion on today’s wild legal roller coaster ride. While speaking at the briefing Mr. Earnest stated that contrary ruling “had little practical impact.” We are confident in the legal position we have . . . the Department of Justice will litigate these claims through the federal court system.”

The White House should be able to see what many legal experts believe is happening; the Supreme Court is methodically deciding cases that restore the constitution’s system of check and balances and reimpose the rule of law over politics. President Obama has pushed the envelop of constitutionality by his over use of Executive Orders and instructing administrative agencies to use regulations to bypass Congress. The Obama Administration should not lower its guard for a moment. I think President Obama will continue to his political agenda overturned by the judiciary.



Argentina Suffers a Stunning Defeat in America’s Court of Last Resort

For more than 12 years the Republic of Argentina has battled so-called vulture funds in US federal courts. This litigation grew out of the country’s massive sovereign debt default in 2001. At that time most investors did everything possible to unload their portfolios of the country’s debt. Yet, there were courageous investors who were willing to speculate on the country’s debt rising up from the financial abyss. A few funds invested billions into purchasing Argentina’s junk bonds. Though Argentina has renegotiated much of its 2001 debt with bondholders and has paid these “exchange bondholders” pennies on their original debt, the funds who took the risk of investing in the junk bonds have refused to renegotiate the contractual terms of their bonds. These funds want to be paid what they were promised and not a penny less. Who can blame them for demanding full payment.

Most legal experts and financial advisers close to the litigation have little sympathy for the former South American economic powerhouse. Don’t Cry for Me Argentina is their response when Argentina demands justice that it does not deserve. On October 26, 2012 the United States Court of Appeals for the

Picture from Newsweek

Second Circuit decided the case of NML Capital v. the Republic of Argentina. The Court affirmed in part and remanded in part the lower court’s decision of Federal Judge Griesa of the Southern District. In the case Judge Griesa ruled against Argentina in granting the applications of the Plaintiffs. Much to the chagrin of Argentina; its fiery pronunciations of sovereign integrity and legal (quasi political) arguments that it had a sovereign right to force restructuring upon debt holders were judicially debunked by the District Court.

It did not surprise anyone that Argentina appealed the court’s decision to the Supreme Court. While Argentina was litigating its case before the Supreme Court Argentinians in high office were waging a battle to wind public opinion. Clearly Argentina was (is) looking to negotiate a settlement with the non-exchange bondholders. Yet the country’s last formal offer of settlement was rejected on or about March 27, 2013 by the U.S. Court of Appeals for the 2nd Circuit as being inadequate. I wrote at that time that Argentina was heading for another debt default. The U.S. courts are not going to let politics trump the law or their decisions. Argentina’s total disregard for the judicial decisions and judgments makes a mockery of America’s judicially system and the sanctity of the law.

The high court next considered and disposed of Argentina’s (its banks’ claim) that its foreign assets were not subject to discovery by the non-exchange bondholders. The Justice’s were almost unanimous in deciding against the Latin America country. Justice Anthony Scalia writing for the court held that the Foreign Sovereign Immunities Act did not limit the scope of discovery available to a judgment creditor in a federal post-judgment execution proceeding against a foreign sovereign. In the well written decision Justice Scalia specifically alluded to the fact that Argentina had waived part of its immunity by choosing to litigate in the U.S. courts. The Republic of Argentina stands properly before the court like any other person. Argentina’s dreaded “vulture funds” are now positioned to discovery the Republic’s assets worldwide. What follows next is rather obvious; the non-exchange bondholders will seek to attach the discovered assets in hopes of satisfying their judgments.