Pension & Benefits News Nationwide injunction barring religious exemption interim rules for contraceptives ruled improper
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Thursday, January 3, 2019

Nationwide injunction barring religious exemption interim rules for contraceptives ruled improper

By Pension and Benefits Editorial Staff

While the U.S. Court of Appeals for the Ninth Circuit affirmed part of the preliminary injunction barring interim rules for the religious and moral exemption to contraceptives under the Patient Protection and Affordable Care Act (ACA). in five states, the appeals court found that the district court improperly issued a nationwide injunction. The Ninth Circuit found that the federal district court in Oakland, California abused its discretion in granting a nationwide injunction. While the appeals court upheld the injunction barring enforcement of the interim rules in the plaintiff states—California, Delaware, Maryland, New York, and Virginia—the court vacated the portion of the injunction in other states.

Background. The ACA includes a contraceptive coverage requirement. The three agencies responsible for implementing the ACA—the Department of Health and Human Services, the Department of Labor, and the Department of the Treasury (collectively, agencies) issued regulations requiring coverage of all preventive services. In response to several legal challenges, in May 4, 2017, the President issued an executive order directing the secretaries of the agencies to "consider issuing amended regulations, consistent with applicable law, to address conscience-based objections to" the ACA’s contraceptive coverage requirement. On October 6, 2017, the agencies issued two interim final rules (IFRs) without prior notice and comment. On November 15, 2018, the agencies published final versions of the religious and moral exemption IFRs. The final rules are set to supersede the IFRs and become effective on January 14, 2019. The religious exemption IFR expanded the categorical exemption to all entities "with sincerely held religious beliefs objecting to contraceptive or sterilization coverage" and made the accommodation optional for such entities. California, Delaware, Maryland, New York, and Virginia sued the agencies and their secretaries in the Northern District of California. The states sought to enjoin the enforcement of the IFRs. The district court then issued a nationwide preliminary injunction based on the states’ likelihood of success on their Administrative Procedure Act (APA) claim—that the IFRs were procedurally invalid for failing to follow notice and comment rulemaking. The agencies appealed.

Mootness. The court first addressed whether the appeal is moot. If the final rules become effective as planned on January 14, 2019, there will be no justiciable controversy regarding the procedural defects of IFRs that no longer exist. Mootness, if at all, will arise only after the Ninth Circuit decision has issued. Accordingly, the court determined it had jurisdiction to decide the appeal.

Venue. The appeals court then addressed whether venue is proper in the Northern District of California. The agencies argued that California is an "entity" and that its capital Sacramento, located in the Eastern District of California, is the principal place of business for the state. The Ninth Circuit rejected this contention and held that a state is ubiquitous throughout its sovereign borders. The text of the venue statute dictates that a state with multiple judicial districts "resides" in every district within its borders. Therefore, venue is proper in the Northern District of California.

Standing. The court next turned to whether the states have standing to sue. The court held that the states have standing to sue on their procedural APA claim. It is reasonably probable that women in the plaintiff states will lose some or all employer-sponsored contraceptive coverage due to the IFRs. It is also reasonably probable that loss of coverage will inflict economic harm to the states. Women losing coverage from their employers will turn to state-based programs or programs reimbursed by the state. The injury asserted is traceable to the agencies’ issuing the IFRs allegedly in violation of the APA’s requirements. Thus, the states established standing.

Scope of injunction. The court then examined whether the district court properly issued the preliminary injunction. At the threshold question, based on the totality of the circumstances, the agencies likely did not have good cause for bypassing notice and comment. Furthermore, the agencies likely did not have statutory authority for bypassing notice and comment. Bypassing notice and comment likely was not harmless. The district court properly concluded that the states are likely to suffer irreparable harm absent an injunction. The public interest is served by compliance with the APA. Therefore, the court properly issued an injunction.

The Ninth Circuit, however, found that the district court abused its discretion in granting a nationwide injunction. Although there is no bar against nationwide relief in federal district court, such broad relief must be necessary to give prevailing parties the relief to which they are entitled.

While the record before the district court was voluminous on the harm to the plaintiffs, it was not developed as to the economic impact on other states. Therefore, the Ninth Circuit affirmed the preliminary injunction insofar as it bars enforcement of the IFRs in the plaintiff states. Having found the scope of the injunction is overboard, the appeals court vacated the portion of the injunction barring enforcement in other states.

Dissent. Judge Andrew Kleinfield wrote a dissenting opinion arguing that the plaintiff state governments lack standing, so the district court lacked jurisdiction. Judge Kleinfeld pointed to the U.S. Supreme Court case Pennsylvania v. New Jersey,426 U.S. 660 (1976) where monetary harms are "self-inflicted." The statescould have prevented their financial injury by changing their laws. The states lack standing in what the Supreme Court calls "self-inflicted," because the injury arises solely from the states’ legislative decisions to pay money.

SOURCE: California v. Azar, (CA-9), No. 18-15144, December 13, 2018.

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