NFIB v. Sebelius: A Case About Sovereignty

I have spent the last several days reading and re-reading the opinions in NFIB v. Sebelius, hoping to find a unifying “theme” to organize all my thoughts about the case before posting about any of them.  This exercise has left me with a deeper appreciation of how blogging differs from other forms of expository writing; a headache; and a vague sense that NFIB v. Sebelius is in part a case about sovereignty (as I had thought when I submitted this amicus brief (link no longer available) to the Eleventh Circuit).   

One, two, or all three of these factors are to blame for the random quality of the observations that follow.  They concern Part IV of the lead opinion (in which Justices Ginsburg and Sotomayor did not join).  Part IV concludes that the Medicaid expansion provisions of the Affordable Care Act exceeded Congress’s powers under the Spending Clause insofar as they authorized the termination of federal grants for pre-Act state programs under Medicaid for states that decline to expand Medicaid eligibility.

1.  The reasoning in Part IV may be very significant for future cases, particularly because Justices Breyer and Kagan joined in Part IV.  However, I think there is an important general observation to be made before taking up any of the specifics.  I think the most noteworthy feature of the Chief Justice’s opinion on the Medicaid expansion question is not what it says, but what it does not say, in support of a limitation on Congressional power under the Spending Clause.  The Tenth Amendment is never mentioned in Part IV of the Chief Justice’s opinion.

Instead, the limitation on Congress’s power under the Spending Clause is described as springing from the systemic requirements of the governmental structure of the United States, i.e., from federalism – and in this context, federalism proper as opposed to merely “our Federalism.”  This is apparent from a passage in Part IV-A that begins on page 46 of the Slip Opinion and ends on page 50.  The essence of that passage is that the contract-like character of conditional grants to the states is critical to ensuring that Spending Clause legislation does not undermine the status of states as “independent sovereigns in our federal system;” that the status of the states as sovereigns underlies the Court’s anti-commandeering jurisprudence; that forcing the states to become the agents of federal policy would threaten “the political accountability key to our federal system;” and that the Constitution protects a state’s sovereignty in cases where it cannot “act like [a sovereign]” because of federal coercion.

Thus, at least in this regard, Part IV falls into the same category of “federalism” rulings as Justice Scalia’s opinion in Printz v. United States (1997) and Justice Kennedy’s opinion in Alden v. Maine (1999) (both of which the Chief Justice cites in Part IV).  All three are based on the concept that the residual sovereignty of the states is itself a limitation on the exercise of Congress’s enumerated powers.

Justice Kennedy’s opinion for the Court in Alden v. Maine, from which Justice Breyer dissented, made it unmistakably clear that the residual sovereignty of the states can be the source of a limitation on the exercise of federal legislative power.  The question in that case was whether a state could be held liable under the federal Family and Medical Leave Act in an action commenced in its own courts.  After noting that the Eleventh Amendment was irrelevant to the matter at hand, Justice Kennedy wrote that a rule of sovereign immunity nonetheless limited the authority of the national government to make a state answerable in its own courts without its consent for allegedly violating a statute regulating employment.

[T]he States’ immunity from suit is a fundamental aspect of the sovereignty which the States enjoyed before the ratification of the Constitution, and which they retain today (either literally or by virtue of their admission into the Union upon an equal footing with the other States) except as altered by the plan of the Convention or certain Constitutional amendments.

2. There is nothing new about the recognition that some features of the original sovereignty of the states survived the adoption of the Constitution.  Instead, the significance of Part IV of the Chief Justice’s opinion is that, taken together with the joint dissent, it shows that at least seven current Justices recognize that the character of that sovereignty changed under the Constitution.  After the Constitution went into force, the sovereignty of a ratifying state could not be regarded as a special case of a more general principle applicable to monarchies, republics, and democracies alike.  The residual sovereignty of the states is not a set of prerogatives that “belong” to a particular government as an “entity” because of its de facto or de jure control over its territory and its inhabitants.   Instead, Part IV of the Chief Justice’s opinion indicates that the Constitution’s preservation of the residual sovereignty of the states reflects the Founders’ preference for relying primarily on structural devices rather than “parchment barriers” to preserve individual liberty.

3.  Now on to one of the specifics.  Part IV of the opinion acknowledges that Congress may condition grants to the states on their assent to restrictions on the use of those funds.  It also acknowledges that the federal government may require the states to agree to regulate  in ways that the federal government could not compel them to regulate under Congress’s other enumerated powers.

However, as all parties agreed, the ACA does more than merely offering grants conditioned on a state’s expanding the eligibility criteria under its Medicaid program.  The Act also exposed any state that might decline the new grant to the possibility of losing federal funding for its existing state Medicaid programs.  This aspect of Medicaid expansion prompted the Chief Justice to agree with the plaintiff states that the ACA’s provision for Medicaid expansion exceeds Congress’s authority under the Spending Clause because it crosses the line from encouragement to coercion.

 Conditions that do not here govern the use of the funds, however, cannot be justified on that basis. When, for example, such conditions take the form of threats to terminate other significant independent grants, the conditions are properly viewed as a means of pressuring the States to accept policy changes.

4.  As noted above, the application of this principle to the Act’s Medicaid expansion provision depended on the conclusion (shared by the dissenters) that federal grants to the states are “’in the nature of a contract.’  Barnes v. Gorman,536 U. S. 181, 186 (2002) (quoting Pennhurst State Schooland Hospital v. Halderman, 451 U. S. 1, 17 (1981)).”  By explicit analogy to the law of contract, Part IV concludes that the legitimacy of an exercise of the Spending Power under these circumstances depends upon a state’s knowing and voluntary consent to the terms of the “contract.”  Part IV also relies on the Pennhurst contract analogy as a basis for rejecting the Government’s primary counter-argument, which was that “the Medicaid expansion is properly viewed merely as a modification of the existing program because the States agreed that Congress could change the terms of Medicaid when they signed on in the first place.”

But “if Congress intends to impose a condition on the grant of federal moneys, it must do so unambiguously.” Pennhurst, 451 U. S., at 17. A State confronted with statutory language reserving the right to “alter” or “amend” the pertinent provisions of the Social Security Act might reasonably assume that Congress was entitled to make adjustments to the Medicaid program as it developed.

5.  I think there are some very interesting  potential implications of Part IV of the Chief Justice’s opinion in NFIB v. Sebelius, particularly to the extent it relies on concepts underlying the law of contract (such as the reasonable expectations of the parties).  To keep the length of today’s post within reasonable limits, however, I will save those observations for another day.  However, I cannot leave the topic before pointing out that the line of reasoning in Part IV owes a great deal to an argument developed by my friend, Vanderbilt Law School Professor James Blumstein, for a presentation on the constitutionality of various provisions of the Act that we did together in early December, 2010.  I am very grateful that Jim also placed his argument at the Court’s disposal in the amicus brief (link no longer available) he filed on the Medicaid expansion question.