King vs. Burwell (A dark day for the SCOTUS)
Dear Clients, Colleagues, and Friends,
Getting dressed for work yesterday morning, I was taken aback when I heard the outcome of the US Supreme Court’s 6-3 majority vote in the case of King vs. Burwell in favor of upholding Obamacare.
After reading the Court’s opinion, and especially Judge Alito’s vigorous dissent, I received an e-mail from a colleague, David Hiersekorn, who shared his thoughts about the decision that really caught my attention. A local tax and business lawyer, my colleague’s comments about the Burwell case were so spot-on that I called to commend him and ask permission to share his blog in its entirety with my loyal Client Alert readers. Then, when you attempt to reconcile the Burwell decision with that of Robert’s dissent in the SCOTUS same sex marriage case, you come away more confused than ever.
David’s blog should help give some perspective and context on how this gosh-awful decision is not simply about Obamacare but cuts right to the heart of our judicial system and the manner in which courts will interpret the “plain meaning” of statutes, documents, agreements and other related cases.
This decision turns out to be far bigger than Obamacare.
David Allen Hiersekorn writes:
I wrote this for another forum, but I’m cross-posting here. I’m not trying to stir a political debate. But, as I explain at the end, I think this case affects US and we ought to be aware of the practical effect is that the IRS just got a lot stronger …
This opinion troubles me deeply. I’m not really “mad.” Believe it or not, I don’t really care about the outcome of the case. I don’t really have a compelling desire to impose a disjointed system on the country, and I’m not looking for a “poison pill” to kill the ACA.
But, holy crap! This opinion is genuinely illogical and destructive.
Instead of killing Obamacare, Justice Roberts instead decided to kill the definition of the word “ambiguous” and stab a knife through the heart of logic and the canons of construction.
He offers this telling little nugget: “with respect to this Act, rigorous application of the canon [of construction] does not seem a particularly useful guide to a fair construction of the statute.”
In other words, “we start with the desired outcome and then ignore, twist or bend the rules in order to achieve that result.”
AMBIGUITY. I highly suggest that you NOT read Roberts’ explanation why the language is ambiguous. It could result in a traumatic brain injury and perhaps a lengthy hospitalization.
It’s not without precedent, though. In fact, as a former Wills & Trusts professor, I can’t miss the very obvious similarity to a famous wills case. The (lack of) logic is identical.
So, the rule has always been that courts must construe wills as written. They can’t add language to a will in order to save it. This sometimes results in unintended results. For example, imagine my will leaves $10,000 to “John A. Sample of Happytown.” But, suppose that my FRIEND is actually John B. Sample, and there is another guy named John A. Sample who lives in Happytown. And, suppose my actual friend has never actually lived in Happytown. He lives one town over, in Sadtown.
Under the longstanding rule, the bequest would go to the guy whose name appears in the will, not my friend. There is nothing ambiguous about “John A. Sample who lives in Happytown.” And, they couldn’t REWRITE the will so that it said Sadtown instead of Happytown.
But, over time, courts tired of defeating the plain intent by following the plain language. So, one enterprising judge got the idea that they can’t ADD language, but they can STRIKE OUT language – if it is ambiguous.
So, they pretended that the EXISTENCE of the other John Sample created an ambiguity. And, even though they couldn’t rewrite the will, they could strike out portions in order to “resolve” the “ambiguity.”
They could strike the middle initial and the name of the town. “John A. Sample of Happytown” becomes merely “John Sample.”
That approach violates every rule of construction in order to achieve the result that the judge wants. It may be pragmatic, but it is not logical or correct. And, that’s exactly what Roberts did with Obamacare.
The only “ambiguity” he cites is the mere fact that the words have meaning. In other words, “if the words weren’t there, then we would have a different result. Therefore, the words are ambiguous.”
Yes, yes, Mr. Chief Justice. That’s what words do. They add meaning to things.
The part of the opinion that causes me the most grief is found at the bottom of Page 14. Roberts writes (citations omitted) that…
“The Affordable Care Act contains more than a few examples of inartful drafting. (To cite just one, the Act creates three separate Section 1563s.) Several features of the Act’s passage contributed to that unfortunate reality. Congress wrote key parts of the Act behind closed doors, rather than through ‘the traditional legislative process.’ And Congress passed much of the Act using a complicated budgetary procedure known as ‘reconciliation,’ which limited opportunities for debate and amendment, and bypassed the Senate’s normal 60-vote filibuster requirement. As a result, the Act does not reflect the type of care and deliberation that one might expect of such significant legislation.”
Then, Roberts refers to an eerily prescient cartoon from 1947 “in which a senator tells his colleagues ‘I admit this new bill is too complicated to understand. We’ll just have to pass it to find out what it means.'”
Indeed, reading THAT, you almost get the impression that Roberts is gearing up to rule AGAINST the government. But, instead, Roberts says that this inartfully drafted, backroom-deal that was passed without care and deliberation somehow reflects such a CLEAR manifestation of congressional intent that we can twist the meaning of words and phrases to accomplish the Ouija Board divination of what Congress must have intended.
I know some of you are probably sitting there thinking “aw, Dave, why can’t you just be happy that health care is safe?” So, let me close with this – my big fear.
In two decisions on healthcare, Roberts has ruled (1) that Congress has almost plenary taxing powers, to the point that levies not labeled as a tax will be construed as a tax if necessary to save the statute; and (2) the IRS has the power to go beyond – even outside – the text of the statute in order to achieve the broad legislative purpose.
As someone who does tax planning for a living, I find those two rules to be terrifying. Roberts has killed almost every principle we tax lawyers rely on when advising our clients.
Because, at the end of the day, every time the IRS makes regulations that eliminate exemptions and increase taxes, the Court can come in and say “Congress intended to raise tax revenues.”
Tax lawyers rely on hyper-precise interpretations of statutes and regulations. With these two decisions, we can no longer do that. It’s a very bad day for the Court and for the law.
This morning, the Supreme Court issued its much anticipated opinion in Obergefell v. Hodges, holding same sex marriages must be recognized in all 50 states. Justice Roberts, dissenting in this case forcefully argues that the states should be allowed to retain the right to regulate the institution of marriage for its citizens. This is 180 degrees from his opinion of the state’s right to decide if it will establish a state exchange, and that the word “state” means the Federal Government, thus Federal subsidies should be allowed regardless of the plain meaning of the famous 4 words in Obamacare (ACA).
Legal scholars will attempt to reconcile these two decisions for decades to come. Private lawyers and government litigators will use these two cases to attempt to rewrite the plain meaning of existing statutes. As a lawyer who designs and drafts estate plans to last, in some cases generations, the reliance on the plain meaning of statues, regulations, and rulings — the interpretation of which may not come up for many years into the future — is most troubling about these decisions.
More troubling about these two decisions is the Court’s willingness to cede more of the state’s powers to the Fed. Extending this trend to its logical conclusion, it would certainly not be a stretch to see the “State” usurping the private property of the citizen for the greater good. Frankly, it is beginning to happen now with the proposal to limit the amount of money you should be able to withdraw from your private retirement plan, thereby taking the excess contributions through the government’s power to tax. The effect is to take your property and redistribute it to others.
So those fortunate enough to have accumulated wealth should be paying close attention to these incremental steps to take what’s yours, and employ those solutions to avoid being a victim. I will have more to say about these two decisions and the far reaching implications. Many of our clients have already placed their assets into structures to neuter such outcomes should the “what if” actually happen. Elections have consequences and keeping this in mind when you visit your local ballot boxes is paramount.