Tuesday, December 14, 2010

Judge Hudson's Misguided Focus on "Activity"

By Mike Dorf

In striking down the individual mandate provision of the Patient Protection and Affordable Care Act, Judge Hudson reached a conclusion that I think is pretty clearly wrong, as I've noted before and as I'll unpack a bit more below.  But first I should say that en route to that conclusion, Judge Hudson did get something important right: He rejected the federal government's argument that because the Act was challenged on its face, it had to be upheld unless, pursuant to United States v. Salerno, the Act would be invalid in any set of circumstances to which it might be applied.  Judge Hudson cited the Supreme Court's decision in City of Chicago v. Morales for the proposition that the Salerno no-set-of-circumstances test is not generally the law.  (Morales and other opinions by Justice Stevens in turn cite my 1994 Stanford Law Review article for this proposition.)  Even more importantly, Judge Hudson pointed out the oddity of judging the question of whether a law falls within the powers of Congress by how it affects particular individuals in particular cases.  I believe he is right on this point too, although he did not really address the fact that the Supreme Court sometimes treats questions of Congressional power on an as-applied basis.  (Consider, e.g., Tennessee v. Lane.)  So while I commend Judge Hudson for his logic in rejecting the federal government's attempt to apply a narrow facial standard here, I don't think he adequately dealt with the (somewhat confused) Supreme Court case law on how to evaluate facial challenges to Congressional power.

On the merits, Judge Hudson's analysis of the Commerce Clause issue strikes me as profoundly mistaken.  He seized on the fact that prior precedents--especially the Lopez and Morrison cases--talked about federal power to regulate "economic activity," treating "activity" as a constitutional requirement. The federal government had argued that the right focus for analysis is not, as Virginia claimed, discrete decisions not to purchase health insurance, but each person's overall set of decisions, over the course of a lifetime, about how to fund his or her healthcare: whether by purchasing private insurance, finding a job that provides health insurance, receiving govt health insurance, or by simply imposing costs on the system by periodically walking uninsured into an ER.  The government said that each of us--including those who, for discrete periods, are uninsured--is engaged in economic activity involving health care and health care costs in the aggregate.

That strikes me as a good argument but it struck Judge Hudson as a bad one.  Nor did Judge Hudson consider what I regard as a still stronger argument for sustaining the mandate: There is no constitutional prohibition on Commerce Clause regulation of inactivity, at least where that inactivity is economic in nature.  Judge Hudson accorded talismanic significance to the fact that prior cases had used the phrase "economic activity," without ever pausing to explain why the government cannot regulate inactivity that is in its nature economic.  Consider, in this regard, the provisions of federal labor law and federal antitrust law that have been construed to forbid secondary boycotts .  A boycott, of course, is economic inactivity--a refusal to purchase goods or services from the target--in exactly the same way that the non-purchase of health insurance is economic inactivity.  Under Judge Hudson's analysis, such prohibitions are constitutionally invalid, even though no one even thought to question them on these grounds during the decades they have been enforced.

But doesn't the case law require that the underlying predicate for regulation be some sort of affirmative activity?  The short answer is no.  Although the cases talk about "economic activity," that's only because the predicate for regulation in the prior cases happened to be activity rather than inactivity.  Consider a quite closely related question.  In Gonzales v. Raich, the Supreme Court for the first time defined the "economic" aspect of "economic activity," borrowing from Webster's dictionary: "the production, distribution, and consumption of commodities."  Does this mean that the purchase of services is not economic activity for Commerce Clause purposes?  Of course not.  The Court in Raich had before it a case involving a commodity (marijuana) and so it chose a definition that focuses on commodities.  In a subsequent case involving services the Court will undoubtedly say that they are included too.  In the meantime, it would take a particularly obtuse district court judge to think that because of the definition in Raich, services are not covered by "economic activity."  Likewise, the use of the term "activities" must be understood as a product of the context of the cases in which the term was used, rather than any consideration of the constitutional difference between activity and inactivity.

At best, the question whether Congress can regulate "inactivity" is an open one--and thus one would have expected that Judge Hudson would have offered some functional explanation why regulation of economic inactivity is beyond the scope of Congressional power.  But he did not, simply relying on the language of the earlier cases taken out of context.  One could make a libertarian argument against Congressional power to regulate inactivity, but it's hardly clear that the Commerce Clause incorporates strongly libertarian views, and even if it did, for reasons I have previously laid out, the libertarian objections to the individual mandate are weak.

Finally, I should say that I found Judge Hudson's tax analysis utterly unpersuasive but nonetheless defensible.  He invokes Lochner-era cases that narrowly construe the ability of Congress to impose taxes that have a regulatory purpose, and then he goes on to say that because the Act calls the tax a "penalty," it is not within Congress's taxing power.  This view has been superseded by more recent cases that uphold taxes imposed for clearly regulatory purposes, so long as the law had some revenue-raising purpose, even a very modest one.  But I find Judge Hudson's analysis here defensible nonetheless because the older cases have not been formally overruled, and as I have noted recently in discussing the Prop 8 litigation and Baker v. Nelson, lower courts have very little freedom to say that an old Supreme Court case is no longer good law.  Still, because Judge Hudson should have sustained the Act under the Commerce Clause, he shouldn't have had to reach the taxing power question.