Fighting over remedies in the exchange litigation

A new fight has recently erupted in the Halbig litigation. If the D.C. Circuit decides that the IRS’s regulation extending tax credits to those purchasing health plans on federally facilitated exchanges is unlawful, what sort of remedy should the court enter? In a letter submitted after briefing closed, the government argued that the court should, consistent with the typical rule in litigation, just say that the IRS can’t apply the rule to the named plaintiffs—and not invalidate the regulation on a nationwide basis.

The challengers have responded with a motion to strike the letter as legally without foundation, asserting that “the Government appears to be laying the groundwork to openly flout any decision by this Court invalidating the IRS Rule.” The Wall Street Journal repeated the charge in an editorial yesterday, and asserted that “[t]here are few if any precedents for such a remarkable argument.”

But that’s not true. From the beginning of the modern administrative state, agencies have engaged in a practice known as “agency nonacquiescence” when lower courts invalidate their rules. Although agencies treat such invalidations as binding on the litigants, they regularly decline to acquiesce in lower-court rulings until the Supreme Court issues an authoritative decision. In so doing, agencies can maintain national uniformity in administration even as they continue to vigorously litigate in favor of their preferred position.

Allowing for agency nonacquiescence makes a lot of sense. The main virtue of having thirteen different federal courts of appeals is that each court can independently tackle difficult legal problems—and perhaps reach divergent conclusions. If the first circuit court to rule against the government could enter a nationwide injunction, one circuit court could, in effect, speak for all the rest. As Richard Revesz and Samuel Estreicher explained in a seminal article (gated) about the practice back in 1989, “[t]o compel an agency to follow the adverse ruling of a particular court of appeals would be to give that court undue influence in the intercircuit dialogue by diminishing the opportunity for other courts of proper venue to consider, and possibly sustain, the agency’s position.”

To be sure, agency nonacquiescence can be controversial. It’s especially controversial in those cases—like in Halbig—where the law gives litigants a choice of filing either in the circuit that they reside or in the D.C. Circuit. In such cases, as the D.C. Circuit explained in 1998, “our refusal to sustain a broad injunction is likely merely to generate a flood of duplicative litigation” because each and every litigant would naturally head to Washington for relief. That’s why, in the D.C. Circuit, “the ordinary result is that the rules are vacated” for anyone and everyone across the nation, not just for the litigants in the case.

But there’s nothing inappropriate about the government pressing the claim that “the ordinary result” ought not to apply here. That’s especially so given that the Supreme Court has never ruled on the propriety of nationwide injunctions in agency cases. (The Court agreed to consider the question back in 2008 but ultimately didn’t address it.) The government’s absolutely right that applying a judicial decision to individuals who haven’t appeared before the court raises due process concerns. Those concerns lend force to the United States’ consistent position that judicial relief ought to be narrowly tailored whenever such relief would fully redress the plaintiffs’ injuries, as it would here.

All of which is to say that there’s nothing especially “remarkable” about the government’s argument. In any event, the fight over remedies is really just a sideshow. If the D.C. Circuit finds the IRS rule unlawful—and in the unlikely event that the court doesn’t reverse that decision en banc—the government will take this case to the Supreme Court, which would have the final say on the matter. Let’s just hope it doesn’t come to that.


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