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To Understand King V. Burwell Look To Yates V. US

Law360
03/20/15

On March 4, 2015, the U.S. Supreme Court heard argument in King v. Burwell, the most publicized case to reach the high court in some time. The issue is whether certain tax subsidies essential to the proper fiscal management of the Affordable Care Act will only be available on exchanges "established by the state," or whether those words can be interpreted to mean that the tax subsidies apply to exchanges established by the federal government in various states as well, where those states have failed to set the exchanges up. It is generally considered that if the Supreme Court rules that the tax subsidies will not be available to federally created exchanges, the entire ACA may collapse due to a crescendo of events: tax penalties for subscribers, withdrawal of those subscribers to avoid such penalties, a consequent rise in insurance premiums which will cause more withdrawals from the system and, perhaps, even failure of the participating insurance companies because of what will then be an insufficient subscriber base.

There has been much speculation about the Supreme Court's likely analysis; but just one week before the argument, the high court provided what should be a strong guide to its reasoning in this case, if the rules of statutory interpretation are to be consistent from one case to the next. However, strangely, little attention was paid to this seeming parallelism at the argument in King v. Burwell.

A week before this case was heard, the Supreme Court decided that a provision of a criminal statute that criminalizes the destruction of any "tangible object" "with the intent to impede" a government investigation is not to apply to the destruction of undersize fish that the defendant had illegally caught but threw into the ocean after a patrol officer had instructed him to bring the fish ashore. That case, Yates v. United States, turned on whether the just-quoted statute "covers the waterfront, including fish from the sea." (Until otherwise noted below, all quoted passages are from the Supreme Court's opinion in the Yates case.)

The Supreme Court was plain and clear in its approach to the subject: it noted that "the ordinary meaning of an ‘object' ... is ‘a discrete ... thing,'" citing Webster's Dictionary. That definition would include a fish. But the Supreme Court continued: "Whether a statutory term is unambiguous ... does not turn solely on dictionary definitions of its component words. Rather, ‘[t]he plainness or ambiguity of statutory language is determined [not only] by reference to the language itself, [but as well by] the specific context in which that language is used, and the broader context of the statute as a whole." After extensive analysis to support that position, the Supreme Court said: "In short, although dictionary definitions ... bear consideration, they are not dispositive of the meaning of 'tangible object‘ in Section 1519."

The Supreme Court went on for many pages to examine the context of the language within the broader scheme of the statute as well as the rules of noscitur a sociis ("a word is known by the company it keeps") and ejusdem generis ("to ensure that a general word will not render specific words meaningless"). It held that from the context of its review of related parts of the statute, "Congress had no reason to enact" this section when literally read. The court also stated that, "We have several times affirmed that identical language may convey varying content when used in different statutes, sometimes even in different provisions of the same statute." And it also stated that "[i]n law as in life ... the same words, placed in different contexts, sometimes mean different things." It cited a 1932 decision (Atlantic Cleaners & Dyers Inc. v. United States, 286 U.S. 427), for the proposition that:

Where the subject matter to which the words refer is not the same in the several places where [the words] are used, or the conditions are different, or the scope of the legislative power exercised in one case is broader than that exercised in another, the meaning well may vary to meet the purposes of the law, to be arrived at by a consideration of the language in which those purposes are expressed, and of the circumstances under which the language was employed.

The Supreme Court thus ruled that small fish were not the kinds of "tangible objects" whose destruction Congress intended to criminalize in this statute.

This reasoning should clearly support the government's interpretation of the ACA in King v. Burwell. I quoted from the four-justice plurality opinion in Yates, but I read the fifth, concurring opinion of Justice Samuel Alito as based on the same essential reasoning, "that traditional tools of statutory construction confirm that John Yates has the better of the argument."

And the dissenters, if anything, add to the strength of the system of statutory interpretation used by the plurality. Justice Elena Kagan, writing also for Justices Antonin Scalia, Anthony Kennedy and Clarence Thomas, argues that "context confirms what bare text says" and "agree[s] with the plurality (really, who does not?) that context matters in interpreting statutes." She then devotes over a dozen pages to an exposition why, by her interpretation of the same principles of statutory interpretation, the critical words "tangible object" should not be read as the plurality and Justice Alito did.

In my reading of the argument in King v. Burwell, nothing was presented that would provide a logical structure for allowing the tax subsidies only where a state, not the federal government, operates the relevant exchange within a given state's borders. The challengers simply relied on the bare language of the statute. (Mr. Carvin: And it shows that Congress knew how to create equivalence between non-state exchanges and [state-sponsored exchanges] if and when it wanted to.") That and all following quotations are from the oral arguments in King v. Burwell. Later, the same attorney argued, "[R]emember, we are interpreting these statutes to avoid an absurd result. And it's a basic principle of statutory construction that you will give a plausible, if not the most persuasive, reading to a statute to avoid the [illogical] result."

Several justices noted that the result sought by the petitioners was indeed an illogical result. Thus, Justice Kennedy said, "[F]rom the standpoint of the dynamics of federalism, it does seem to me that there is something very powerful to the point that if your argument is accepted, the states are being told either create your own exchange, or we'll send your insurance market into a death spiral." Or Justice Kagan: "[T]here's at least a presumption, as we interpret statutes, that Congress does not mean to impose heavy burdens and draconian choices on states unless it says so awfully clearly. And here ... there's really nothing clear about this. I mean, this took a year and a half for anybody to even notice this language."

Much of the argument in King v. Burwell was consumed with discussion about the dire consequences if plaintiffs prevailed, with their counsel beginning his argument by saying "[t]his is a straightforward case of statutory construction where the plain language of the statute dictates the result" and making several further references to the statutory words' literal meaning, even while conceding that "these exchanges don't work without subsidies." But I was surprised to find that only days after the Supreme Court issued the Yates opinion, which so plainly rejects a literal reading of another statute if that reading seemed to produce results the high court deemed extreme with regard to the facts of the case, in this argument nobody, from the lectern or from the bench, referred to that decision.

In King v. Burwell, both sides seemed to agree at the argument that a literal, "dictionary-style" reading of the statute in question would produce a total collapse of a health insurance market that Congress had created through an intense (and strongly opposed) effort, and that this collapse would come over the meaning of four words in a 2,000 page law. Objectively considered, that would be a much more absurd result than the possible 20-year sentence in the Yates case for destroying a few fish that were one or two inches short of the minimum harvestable size. It seems that there should be little need to risk such an outcome. When considered against the Supreme Court's pronouncements on statutory construction just within the same week, it should be apparent that in the case of the ACA insurance exchanges, the standard statutory construction rules that the high court has so recently applied should result in a victory for the federal government.

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