The U.S. Constitution’s Interstate Commerce Clause After the Supreme Court’s Decision on the Affordable Care Act

U.S. Supreme Court Justices, 2012

As has been widely reported, the U.S. Supreme Court on June 28, 2012, decided, 5-4, that the Affordable Care Act (ACA) was constitutional under Congress’ constitutional power in Article I, Section 8(1) to “lay and collect taxes.” The Court’s Chief Justice and four of the Court’s Associate Justices also said in separate opinions that this statute was not constitutional under Congress’ constitutional power in Article I, Section 8(3) to “regulate commerce . . . among the several States.” The other four Associate Justices came to the opposite conclusion that the statute was constitutional under this provision.

This post will review what was said about the interstate commerce clause in the four opinions in the case and then analyze the status of that constitutional provision after this decision.

The Supreme Court’s Opinions on the Interstate Commerce Power

Chief Justice John Roberts’ opinion said that the Affordable Care Act was not constitutional under the interstate commerce clause. The same conclusion was reached in the joint dissenting opinion of Associate Justices Kennedy, Scalia, Thomas and Alito, and Associate Justice Thomas added a separate dissent to express an additional reason why he thinks the statute was invalid under this clause.

The opposite result was reached in the opinion by Associate Justice Ginsburg that was joined by Associate Justices Breyer, Sotomayor and Kagan.

All of these opinions are available online.

1. Chief Justice Roberts’ Opinion.

Chief Justice         John Roberts

First, Roberts gave a fair summary of the existing law on the Constitution’s interstate commerce provision. He said, “Our precedents read that to mean that Congress may regulate ‘the channels of interstate commerce,’ ‘persons or things in interstate commerce,’ and ‘those activities that substantially affect interstate commerce.’  The power over activities that substantially affect interstate commerce can be expansive.  That power has been held to authorize federal regulation of such seemingly local matters as a farmer’s decision to grow wheat for himself and his livestock, and a loan shark’s extortionate collections from a neighborhood butcher shop.” For this summary, Roberts cited  Wickard v.  Filburn, 317 U. S. 111 (1942),which previously had been criticized by Justice Scalia, and  Perez v. United States, 402 U. S. 146 (1971). (Roberts Slip Op. at 4-5.)

Roberts emphasized this concession when he said, “[I]t is now well established [by the Supreme Court’s prior cases] that Congress has broad authority under the Clause.  We have recognized, for example, that ‘[t]he power of Congress over interstate commerce is not confined to the regulation of commerce among the states,’ but extends to activities that ‘have a substantial effect on interstate commerce.'”  Moreover, he said, “Congress’s power . . . is not limited to regulation of an activity that by itself substantially affects interstate commerce, but also extends to activities that do so only when aggregated with similar activities of others.” (Id. at 17-18.)For this last point he again cited the Wickard case. (Id.)

Nevertheless, Roberts continued, “As expansive as our cases construing the scope of the commerce power have been, they all have one thing in common: They uniformly describe the power as reaching ‘activity.'” (Id. at 19.) The Affordable Care Act, however, according to Roberts, would require people to do something, i.e., to buy health insurance. Such a requirement, said Roberts, distinguished all of the prior Supreme Court precedents and, therefore, invalidated the statute. (Id. at 18-24.)

2. Associate Justices Kennedy, Scalia, Thomas and Alito’s Dissenting Opinion.

Associate Justice Anthony Kennedy

Although the joint dissenting opinion did not specifically endorse Roberts’ interpretation and conclusion, it implicitly did so. It did not attempt to overrule any of the Supreme Court’s precedents on the interstate commerce clause. Instead, it said the Wikard case, which Scalia previously had criticized, “held that the economic activity of growing wheat, even for one’s own consumption, affected commerce sufficiently that it could be regulated” and “always has been regarded as the ne plus ultra of expansive Commerce Clause jurisprudence. ” (Joint Dissent Slip. Op. at 2-3.) But Wickard and other precedents, according to the dissenters, “involved commercial activity.” The ACA, on the other hand, attempted to regulate economic inactivity, i.e., the failure to buy health insurance, and, therefore, was unconstitutional under the interstate commerce clause. (Id. at 2-12.)

Associate Justice Clarence Thomas

Justice Thomas was a co-author of this joint dissent and, therefore, agreed with all of its contents. His separate dissenting opinion was issued to reiterate his previously expressed view that the Court’s “‘substantial effects’ test under the Commerce Clause is inconsistent with the original understanding of Congress’ powers and with this Court’s early Commerce Clause cases.” (Thomas Slip Op.)

3. Associate Justice Ginsburg’s Opinion.

Associate Justice Ruth Bader Ginsburg

Justice Ginsburg started with her summary of the Supreme Court’s precedents on the interstate commerce clause. She said, “Consistent with the Framers’ intent, we [Supreme Court Justices] have repeatedly emphasized that Congress’ authority under the Commerce Clause is dependent upon ‘practical’ considerations, including ‘actual experience.'” The Court has recognized that Congress has the “power to regulate economic activities ‘that substantially affect interstate commerce'” and regulate “local activities that, viewed in the aggregate, have a substantial impact on interstate commerce.” (Ginsburg Slip Op. at 14-15.)

She added from the Court’s precedents regarding the impact of the Constitution’s Fifth Amendment’s “due process” and implied equal protection clause that the Court repeatedly had said that it owed “a large measure of respect to Congress when it frames and enacts economic and social legislation” and that when “appraising such legislation, we ask only (1) whether Congress had a ‘rational basis’ for concluding that the regulated activity substantially affects interstate commerce, and (2) whether there is a ‘reasonable connection between the regulatory means selected and the asserted ends.'” In addition, Ginsburg stated, “In answering these questions, we presume the statute under review is constitutional and may strike it down only on a ‘plain showing’ that Congress acted irrationally.”  (Id. at 15-16.)

Ginsburg then criticized Roberts’ supposed distinction between the Court’s precedents in this area and the Affordable Care Act. That distinction, she said, had no support in those precedents, and his minor premise–the Affordable Care Act required some people to buy a product (health care) they did not want– was erroneous. (Id. at 18-31.)

The Interstate Commerce Power After the Supreme Court’s Decision

Before the Supreme Court issued its decision in this case, I was concerned that the shrill cries of columnist George Will and two judges on the Court of Appeals for the District of Columbia Circuit that called for the Supreme Court to overrule 75 years of Supreme Court precedents on the scope of the interstate commerce clause would resonate with the five so-called conservative Justices of the Supreme Court. My worries were exacerbated by the initial reports that those five Justices had concluded that the Affordable Care Act did not satisfy their view of what that clause allowed.

When I had read the Court’s opinions, however, I discovered that eight of the nine Justice had not overruled any of those Supreme Court precedents and indeed essentially had endorsed them. Only Justice Thomas called for overruling one subset of those precedents, i.e., those allowing Congress to adopt laws under the interstate commerce clause if there were substantial effects on that commerce from local activities.

Therefore, all of those cases are still good law on the expansive nature of the federal power over such commerce. As an advocate for strong federal powers for the U.S. in the 21st century, I am pleased with this result.

As noted above, five of the current nine Justices believe that all the other Supreme Court precedents over at least the last 75 years can legitimately be distinguished from this case over the validity of the Affordable Care Act on the ground that all of the precedents involved regulation of economic activity whereas this current case involved attempted regulation of economic inactivity. Is this a legitimate distinction?

Justice Ginsburg and three of her colleagues did not think so as previously discussed. I leave it to constitutional scholars to analyze the validity of this purported distinction.

There is also a serious question as to whether Roberts’ opinion on the interstate commerce clause (when coupled with the similar discussion in the joint dissent) together constitute a binding decision of the Court under the doctrine of stare decisis.

  • First, there is no official “Opinion of the Court” on the interstate commerce issue that could be considered as the basis for stare decisis. Roberts’ opinion on this issue is his alone. The similar opinion of the other four Justices (Kennedy, Scalia, Thomas and Alito) is a dissenting opinion that does not express concurrence in Roberts’ opinion on the issue.
  • This careful reading of the opinions, however, may be overcome by section III-C of the Roberts’ opinion on the taxing power issue that states, “The Court today holds that our Constitution protects us from federal regulation under the Commerce Clause so long as we abstain from regulated activity.” This section of the Roberts’ opinion is concurred in by four other Justices (Ginsburg, Breyer, Sotomayor and Kagan), but they disagreed with this interpretation of the commerce clause. (Roberts Slip Op. at 41-42; Ginsburg Slip Op. at 2-36.) And Justice Thomas in his own dissent said, “The joint dissent and Chief Justice Roberts correctly apply our precedents to conclude that the Individual Mandate is beyond the power granted to Congress under the Commerce Clause and the Necessary and Proper Clause.” Perhaps these oddities are merely evidences of plain sloppiness in finishing the opinions in this case.
  • Second and more important, the opinions of Roberts and the four dissenters on the interstate commerce issue might be regarded as dicta and, therefore, not binding on the Court in subsequent cases or on lower federal courts. Since the Affordable Care Act was held to be constitutional on a different ground (the power to tax), then all of the discussion about the interstate commerce clause was not necessary to the decision and, therefore, dicta.
  • Justice Ginsburg was alluding to this principle in her opinion when she said that Roberts’ conclusion that the statute was constitutional under the taxing power should have meant there was “no reason to undertake a Commerce Clause analysis that is not outcome determinative.” (Ginsburg Slip. Op. at 37 n.2.)
  • Roberts responded to this argument in his opinion: “It is only because the Commerce Clause does not authorize such a command [to buy health insurance] that it is necessary to reach the taxing power question. And it is only because we have a duty to construe a statute to save it, if fairly possible, that . . . [the relevant statutory provision] can be interpreted as a tax.  Without deciding the Commerce Clause question, I would find no basis to adopt such a saving construction.” (Roberts Slip Op. at 44-45.)
  • All of this discussion might be regarded as hyper-technical because so long as the Court’s composition remains the same, a majority (five Justices) is clearly on record on the limitation on the commerce clause power expressed in their opinions.

There is also disagreement on the significance of the new limitation on the interstate commerce power announced by Roberts and the four dissenters. Justice Ginsburg’s opinion says that Roberts ‘ opinion on the issue exhibits “scant sense and is stunningly retrogressive” and a “crabbed reading of the Commerce Clause [that] harks back to the era in which the Court routinely thwarted Congress’ efforts to regulate the national economy in the interest of those who labor to sustain it.” (Ginsburg Slip Op. at 2-3, 37.) This view was echoed by George Will and other commentators who said the reading of the commerce clause was an ultimate victory for libertarians and conservatives. However, one of those conservatives–John Yoo— said this reading of the clause “does not put any other federal law in jeopardy and is undermined by its ruling on the tax power” and in fact is “a constitutional road map for architects of the next great expansion of the welfare state.”

I am an agnostic on the question of the significance of the new limitation. I think Justice Ginsburg overstates the fear of horrible consequences because at least four of the Justices who articulated the new limitation also endorsed the 75 years of precedents expanding the scope of the interstate commerce power. Moreover, Chief Justice Roberts in his opinion in the Citizens United case articulated his concept of stare decisis that makes it unlikely that he would countenance such a large-scale overruling of precedents, in my opinion. A lot depends upon who wins the 2012 presidential election and who will be appointed to the Court over the next four years.

It is interesting and somewhat ironic that while the Supreme Court was struggling with legal arguments that would restrict the power of the U.S. federal government to respond to national economic problems, European countries were struggling with how to create a central power or authority to rescue the  European economy and currency from imminent collapse.

U.S. Supreme Court Hears Case That May Decide If Corporations Are Liable Under the Alien Tort Statute

On February 28th the U.S. Supreme Court heard arguments in Kiobel v. Royal Dutch Petroleum (Sup. Ct. No. 10-1491). The transcript of that hearing is available online.

This case involved claims by a putative class of Nigerians against a corporation (Royal Dutch Petroleum Co. (Shell)) for allegedly assisting in certain human rights violations in Nigeria in 1993-95. Prior posts reviewed the procedural background of this case and the Second Circuit decision rejecting such liability.

The claims in this case were asserted under the U.S. Alien Tort Statute (ATS) that provides that U.S. federal district courts have “jurisdiction of any civil action by an alien for a tort only, committed in violation of the law of nations or a treaty of the United States.” (Earlier posts have reviewed the history of the ATS for the periods 1789-1979, 1980, 1980-2004, the U.S. Supreme Court decision in 2004 and 2004-present.)

 Merits Issue: Are Corporations Liable Under the ATS?

A review of the transcript of the hearing reveals that the entire hour was devoted to only one of the two issues previously identified by the Court as being raised by this case:

  • Whether corporations are immune from tort liability for violations of the law of nations such as torture, extrajudicial executions or genocide, as the court of appeals decisions provides, or if corporations may be sued in the same manner as any other private party defendant under the ATS for such egregious violations, as the [U.S.] Eleventh Circuit [Court of Appeals] has explicitly held.

All of the Justices (except Justice Thomas) actively participated in this argument with comments and questions that make it difficult to make any prediction of the ultimate decision in the case, except that it probably will be a decision by a divided Court. Here are samples of some of the comments and questions.

Justice Samuel Alito asked,  “What business does a case like [this alleging human rights violations in Nigeria] have in the courts of the United States? There’s no connection to the United States whatsoever.”

Justice Ruth Bader Ginsburg tried to focus the discussion on the precise issue raised by the case, whether it is only individual defendants [who are liable under ATS] or are corporate defendants also liable?”

Justice Stephen Breyer apparently had difficulty with the Second Circuit’s categorical rule in this case that corporations could never be liable under the ATS. He said he could think of instances where that should not be the case. One he cited was “Pirates Incorporated.”

Justice Elena Kagan also expressed skepticism about an assertion by the attorney for the defendant-respondent that international human rights treaties excluded corporations from liability. Justice Kagan said she thought “the international sources are simply silent as to this question [of corporate liability].” She also observed that such treaties were silent on this issue “mostly because all of these are written to prohibit certain acts,” rather than focusing on who commits such acts.

Justice Anthony Kennedy, who often is seen as the swing vote when the Court is divided, asked the first question almost before the attorney for the plaintiffs-petitioners could open his mouth. Justice Kennedy said, “For me, the case turns in large part on this,” (quoting from the defendant-respondent’s brief), ‘International law does not recognize corporate responsibility for the alleged offenses here.’ Justice Kennedy immediately followed with this quotation from an amicus brief by Chevron Corporation, which is a defendant in another ATS case, “No other nation in the world permits its courts to exercise universal civil jurisdiction over alleged extraterritorial human rights abuses to which the nation has no connection.”

Justice Anthony Kennedy also noted that international criminal law made a distinction between individuals and corporations with only the former being subject to criminal sanctions. Yet later he mentioned the legal principle of respondeat superior (that a corporation or other principal is legally responsible for the wrongs of its employee or agent under certain conditions) and said that it was a very simple proposition of U.S. law and perhaps implicitly suggested it was applicable in this case.

Subject Matter Jurisdiction Issue

The second issue raised by this case was not discussed at the February 28th hearing. It was the following: Whether the issue of corporate civil tort liability under the Alien Tort Statute (“ATS”), 28 U.S.C. § 1350, is a merits question, as it has been treated by all courts prior to the decision below, or an issue of subject matter jurisdiction, as the court of appeals held for the first time.

The Second Circuit in an opinion by Judge Cabranes held, without much discussion, that the ATS incorporates any limitation arising from customary international law on whom may properly be sued as a defendant under the statute and that this was a requirement for subject-matter jurisdiction of the federal courts that was not met in this case.

In my opinion, the Second Circuit was clearly wrong on this conclusion on subject-matter jurisdiction. The ATS states that federal courts have “jurisdiction of any civil action by an alien for a tort only, committed in violation of the law of nations or a treaty of the United States.” Thus, to establish subject-matter jurisdiction, (i) the plaintiff must be an “alien” (a non-citizen of the U.S.); (ii) the lawsuit must be for a tort; and (iii) the tort must allegedly be set forth in “the law of nations” (customary international law) or a treaty of the U.S. All of these requirements are met in this case. It then becomes an issue on the merits as to whether the alleged conduct in fact violates the “law of nations” or a treaty of the U.S.

Moreover, the ATS does not specify as to whom the defendant must be, unlike the Torture Victims Protection Act (TVPA) which states the defendant has to be an “individual.” If the ATS did specify in some fashion what kind of defendant was permissible, then that would make the nature of the defendant an issue for subject-matter jurisdiction. (Whether the word “individual” in the TVPA includes corporations was the issue presented in the other case heard by the Supreme Court on February 28th.)

The procedural posture of this case makes my opinion, if it is correct, an important one for The Supreme Court’s disposition of this case. Federal courts are courts of limited jurisdiction requiring such courts always to determine if they have such jurisdiction and prohibiting the litigating parties from conferring such jurisdiction on the courts by not themselves raising problems over such jurisdiction. This basic principle enabled Judge Cabranes in the Second Circuit to raise, discuss and decide the issue of corporate liability under the ATS in this case even though that issue had not been briefed or argued by the parties themselves.

The failure of the defendant Shell to raise the merits issue of corporate liability at the trial court and at the Second Circuit should mean that it is deemed to have waived the issue.

Under this analysis the Supreme Court should reverse the Second Circuit on procedural grounds and not reach the substantive issue of corporate liability.

Conclusion

A Supreme Court decision in this case is expected by the end of June. I reiterate that this is a case of statutory interpretation and the Court’s development of federal common law, and at any time the Congress with a presidential signature could amend the statute to make corporate liability express or to exclude such liability explicitly.

Under the infamous Citizens United decision the Court treats corporations as individual human beings for purposes of the Free Speech clause of the First Amendment to the U.S. Constitution and the right to make unlimited political contributions. If the Court were to decide that corporations, unlike individual human beings, are not liable under the ATS, this would and should present the Court with at least a public relations problem.

U.S. Supreme Court Hints That It Will Decide That Corporations Are Not Liable Under the Torture Victims Protection Act

On February 28th the U.S. Supreme Court heard arguments in Mohamad v. Palestinian Authority (Sup. Ct. No. 11-88) on the issue of whether corporations are liable under the Torture Victims Protection Act (TVPA). The transcript of that hearing is available online.

Before that hearing, a prior post discussed this case and expressed my opinion that the Court would decide that corporations were not so liable. In summary, the TVPA provides a civil cause of action for money damages by an “individual” who is a victim of torture or by his or her representative for extrajudicial killing against the “individual” who committed the wrong, and the ordinary meaning of the word “individual” as used in federal statutes encompasses only natural persons and not corporations or other organizations.

Although one needs to be cautious in evaluating oral arguments before the Supreme Court, the argument on February 28th in this case did not provide any reason to change my opinion on the likely outcome. Indeed, my review of the transcript of the argument confirms my previously expressed view of this case. To illustrate, I make the following four points.

First, Chief Justice John G. Roberts Jr. summarized what he thought was the plaintiffs position: “You are saying, ‘Well, we want a term that is going to include individual persons and organizations but not state organizations. And the only term that fits perfectly is ‘individual.’ ”

“Exactly,” the plaintiffs lawyer responded. “That’s our argument.”

Chief Justice Roberts was incredulous. “Really?” he asked, to laughter in the courtroom, which the Chief Justice joined.

Second, Justice Samuel Alito had a humorous exchange with the U.S. Justice Department lawyer who argued that corporations could not be liable under the TVPA, but earlier that same morning in another case (Kiobel) argued that corporations could be liable under the Alien Tort Statute. Justice Alito observed that the government’s position meant an alien could recover while a U.S. citizen could not. “Too bad, then, that Mr. Rahim [the plaintiff in Mohamad] became a U.S. citizen,” Justice Alito said. “I guess that was a mistake [on his part].”

Third, even Justice Steven Breyer, who is seen as more sympathetic to plaintiffs’ arguments, told the plaintiffs lawyer, “I think I have to say that you are on a weak wicket.”

Four, three other liberal Justices (Justices Ginsburg, Sotomayor and Kagan) also asked questions indicating skepticism of the plaintiffs’ arguments.

A Supreme Court decision in this case is expected by the end of June. I also reiterate that this is a case of statutory interpretation, and at any time the Congress with a presidential signature could amend the statute to make corporate liability express or to exclude such liability explicitly.