Tonn and Blank Construction LLC v. Sebelius et al

Filing 46

OPINION AND ORDER GRANTING 38 MOTION to Stay Proceedings and Notice of Non-Opposition to Plaintiff's Motion for Preliminary Injunction by Defendants Timothy Geithner, Kathleen Sebelius, Hilda Solis, US Department of Health and Human Services, US Department of Labor, US Department of Treasury. This case is temporarily STAYED until thirty (30) days after the Seventh Circuit has issued an opinion on the consolidated Grote and Korte appeal. Either party is permitted to seek relief from this stay order in the interim if circumstances so permit. Signed by Judge Jon E DeGuilio on 8/16/13. (cer)

UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF INDIANA
FORT WAYNE DIVISION
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TONN AND BLANK CONSTRUCTION,
LLC,
Plaintiff,
v.
KATHLEEN SEBELIUS, et al.,
Defendants.

CASE NO. 1:12-CV-325-JD

Opinion and Order
Now before the Court is Defendants’ Motion to Stay Proceedings [DE 38]. In response,
Plaintiff Tonn and Blank Construction, LLC (“T&B”) filed its brief [DE 41], and the Defendants
filed their reply [DE 42]. In addition to this briefing, Defendants filed a Notice of Supplemental
Authority [DE 44], to which T&B responded [DE 45]. For the following reasons, the Court
grants Defendants’ Motion to Stay Proceedings until thirty days after the Seventh Circuit
resolves the Grote and Korte appeals.
I. Background
T&B, an Indiana for profit construction company,1 filed its complaint on September 20,
2012 challenging the Patient Protection and Affordable Care Act (“PPACA”) and the regulations
implementing the Act [DE 1]. Specifically, T&B alleges that portions of the PPACA violate its

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T&B is a for profit entity wholly owned by two non-profit entities. Specifically, T&B is owned 5% by
Franciscan Alliance, Inc. and 95% by Franciscan Holdings, LLC [DE 34 at 10]. T&B asserts that because the beliefs
of a closely-held corporation and its owners are inseparable, the corporation should be deemed the alter-ego of its
owners for religious purposes. Id.

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rights by requiring T&B to provide objectionable contraceptive services to employees through
its health care plan (“contraception mandate”)2 [DE 1 at 9]. T&B asserts that the contraception
mandate violates the Religious Freedom Restoration Act, the First Amendment (Free Exercise,
Establishment, and Free Speech Clauses), and the Administrative Procedures Act [DE 1 at 3143]. Since the filing of the complaint, the undersigned has granted an agreed upon preliminary
injunction to T&B [DE 43], enjoining the Defendants from enforcing the contraception mandate
until thirty days after the resolution of the appeals in Korte v. Sebelius, No. 12-3841 (7th Cir.)
and Grote v. Sebelius, No. 13-1077 (7th Cir.). Currently, Defendants’ motion to dismiss for
failure to state a claim [DE 24] pends before the Court; however, Defendants want the Court to
stay the action and its ruling on their motion to dismiss pending resolution of the appeals in
Korte and Grote, while T&B wishes to proceed with the underlying action.
Both interlocutory appeals in Korte and Grote arose from denials of preliminary
injunctions sought by for profit companies at the district court level. These cases have been
consolidated and are pending before the Seventh Circuit to determine whether preliminary
injunctions should have been granted. In the meantime, the Seventh Circuit enjoined the
Defendants from enforcing the contraception mandate against the plaintiffs in Korte and Grote
pending the resolution of the appeals. See Grote v. Sebelius, 708 F.3d 850 (7th Cir. 2013); Korte
v. Sebelius, 2012 WL 6757353 (7th Cir. Dec. 28, 2012).
II. Discussion
“[T]he power to stay proceedings is incidental to the power inherent in every court to
control the disposition of the causes on its docket with economy of time and effort for itself, for

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42 U.S.C. § 300gg-13(a)(4); 45 C.F.R. § 147.130(a)(1)(iv).

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counsel, and for litigants.” Landis v. N. Am. Co., 299 U.S. 248, 254 (1936). How this can best be
done calls for the exercise of judgment, which must weigh competing interests and maintain an
even balance. Id. at 254-255. The moving party must make a “clear case of hardship or inequity
in being required to go forward” if there is a fair possibility the non-moving party would be
harmed by delay. Id. at 255; see Clinton v. Jones, 520 U.S. 681, 708 (1997) (the movant who
petitions for a stay bears the burden of establishing its need). It is rare that “a litigant in one
cause [will] be compelled to stand aside while a litigant in another settles the rule of law that will
define the rights of both.” Landis, 299 U.S. at 255. However, “in cases of extraordinary public
moment, the individual may be required to submit to delay not immoderate in extent and not
oppressive in its consequences if the public welfare or convenience will thereby be promoted.”
Id. at 256.
District courts in the Seventh Circuit have considered a variety of factors in evaluating
whether or not to grant a stay of proceedings. See Grice Eng'g, Inc. v. JG Innovations, Inc., 691
F. Supp. 2d 915, 920 (W.D. Wis. 2010) (“(1) whether the litigation is at an early stage . . .; (2)
whether a stay will unduly prejudice or tactically disadvantage the non-moving party; (3)
whether a stay will simplify the issues in question and streamline the trial; and (4) whether a stay
will reduce the burden of litigation on the parties and on the court.”); see also Benge v. Eli Lilly
& Co., 553 F. Supp. 2d 1049, 1050 (N.D. Ind. 2008) (“(1) potential prejudice to the non-moving
party; (2) hardship and inequity to the moving party if the matter is not stayed; and (3) economy
of judicial resources.”) (internal citations omitted); Abbott Laboratories v. Matrix Laboratories,
Inc., No. 09-cv-1586, 2009 WL 3719214, *2 (N.D. Ill. Nov. 5, 2009) (whether a stay will unduly
prejudice or tactically disadvantage the non-moving party; whether a stay will simplify the issues

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in question and streamline the trial; and whether a stay will reduce the burden of litigation on the
parties and on the court) (citation omitted). Such factors, which will be considered herein,
“balance the competing interests of the parties and the interest of the judicial system.” Markel
Am. Ins. Co. v. Dolan, 787 F. Supp. 2d 776, 779 (N.D. Ill. 2011).
While the present case was initially filed about one year ago, it was expected that
Defendants would make amendments to the contraception mandate this year. In fact, in July,
Defendants recently issued final regulations which made changes with respect to the
contraceptive coverage requirement for group health plans established or maintained by eligible
organizations. See 78 Fed. Reg. 39,870 (July 2, 2013). However, the ultimate changes did not
affect for profit companies such as T&B, and the Court must determine whether to proceed to the
merits of this case or stay the matter pending the resolution of the appeals in Korte and Grote.
Despite the fact that Korte and Grote are interlocutory appeals on the denial of
preliminary injunctions, the Court believes that the Seventh Circuit’s ultimate decision on the
appropriateness of issuing a preliminary injunction will overlap with the substantive legal issues
raised therein. This is so because it is well settled that (in relevant part) a reasonable likelihood
of success on the merits must be proven by the proponent of a preliminary injunction. Planned
Parenthood of Indiana, Inc. v. Comm. of Ind. State Dept. Health, 699 F.3d 962, 972 (7th Cir.
2012). Moreover, the more likely it is that the moving party will win its case on the merits, the
less the balance of harms need weigh in its favor. Id. So the Seventh Circuit will inevitably be
faced with the need to evaluate the merits of the substantive issues raised to resolve the
interlocutory appeals in Korte and Grote.
This is important because the plaintiffs in Korte and Grote have explicitly requested the

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Seventh Circuit to address the very same substantive claims raised by T&B in the underlying
case against the very same government defendants. Specifically, the appellant’s brief in Grote
asks the Seventh Circuit to consider the likelihood of success for the following claims:
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Does the contraception mandate violate the Religious Freedom Restoration Act?
Does the contraception mandate violate the Free Exercise Clause?
Does the contraception mandate violate the Establishment Clause?
Does the contraception mandate violate the Free Speech Clause?
Does the contraception mandate violate the Due Process Clause?
Does the contraception mandate violate the Administrative Procedures Act?

2013 WL 816519, *iii (Appellants’ Brief); see Korte, 2013 WL 431686 (Appellants’ Brief).
And the only issue contested by the government at oral argument in Korte, concerned whether or
not the contraception mandate places a substantial burden on the plaintiff’s religious exercise.
Korte v. Sebelius, No. 12-3841, Oral Argument held on May 22, 2013. Thus, there is little to no
doubt that in determining whether a preliminary injunction ought to issue, the Seventh Circuit
will ultimately address the merits of the same substantive issues raised by T&B. Even if there
are some factual differences involved in the cases, such as T&B’s being owned by a religious
order rather than by individuals, the Seventh Circuit’s decision on the consolidated appeal will
provide precedential guidance on the legal issues surrounding this case. This is true because
T&B is a for profit company like the plaintiffs in Grote and Korte, raising the same theory of
redress—that the rights of a closely held corporation are indistinguishable from those of the
controlling owners and the contraception mandate substantially burdens their exercise of
religion. Thus, the outcome of the consolidated appeal is likely to substantially affect the
outcome of this litigation even if the Seventh Circuit’s ruling does not entirely dispose of this
case.
In fact, T&B and Defendants’ co-mingled briefs filed in this case relative to the
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appropriateness of dismissal for failure to state a claim and the issuance of a preliminary
injunction [DE 25, 34] further demonstrate the unavoidable over-lapping analysis that must be
conducted when considering the appropriateness of issuing a preliminary injunction and the
merit of the claims raised. In other words, both parties to the instant lawsuit addressed the
propriety of a preliminary injunction while simultaneously (and extensively) detailing (in
approximately 100 pages) the substance of the claims and their likely merit. Again, this is
because the analysis of whether a preliminary injunction ought to issue must include
consideration of the likely merit of the claims—the same analysis the Seventh Circuit will
confront in Korte and Grote.
Despite the substantially similar legal arguments to be addressed in Korte and Grote,
T&B argues it will suffer prejudice if the Court stays the proceedings because of the delay and
uncertainty surrounding its future legal obligations thereby affecting its ability to budget and
negotiate its health plans [DE 41 at 4]. However, even if the Court were to proceed with the
instant action, thereby first ruling on the motion to dismiss, T&B risks dismissal of its case and
forced compliance with the contraception mandate. And, regardless of the outcome of
Defendants’ motion to dismiss, T&B continues to face the uncertainty of the Seventh Circuit’s
decision in Korte and Grote which will indicate whether the contraception mandate can likely be
enforced against for profit companies like T&B. Thus, the Court believes that guidance
provided by the Seventh Circuit will make up for any delay caused by a temporary stay, and will
prevent the Court’s determination on issues that may ultimately be supplanted by the Seventh
Circuit’s decision. And most importantly, T&B cannot be harmed by the enforcement of the
contraception mandate against it during the course of any stay, because this Court has already

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enjoined Defendants from enforcing the mandate against T&B until thirty days from resolution
of the appeals in Korte and Grote. Therefore, the preliminary injunction will maintain the status
quo during any stay and T&B’s argument that delay may cause prejudice is not well-taken.
It comes as no surprise that the contraception mandate is being challenged in courts
across the country, with appeals pending in eleven (11) circuits. See The Becket Fund,
http://www.becketfund.org/hhsinformationcentral/ (last visited Aug. 11, 2013). Of the cases
filed in the United States, approximately thirty-six (36) cases involve for profit companies. Id.
The significance of the issues to be addressed in these cases and by our own Court of Appeals
will have far reaching importance to the public and the parties. Given that district court’s across
the country, including this one, are confronted with issues of first impression relating to the
lawfulness of the contraception mandate—certainly an issue of “extraordinary public
moment”—direction from the Seventh Circuit would be invaluable. And the Court believes that
given the time and expense involved in such complex litigation, moving forward on the present
case seems inefficient and prejudicial for all involved when a temporary stay pending the
outcome of Korte and Grote would resolve many unanswered questions this lawsuit raises with
regard to the contraception mandate. No doubt, it would be an unnecessary waste of judicial
resources for this Court to engage in the substantially same analysis the Seventh Circuit will
embark upon in issuing its decision in the near future (given that oral argument was heard in
Korte and Grote almost three months ago).
Of final note, the Court has considered T&B’s argument that it would be “odd” for this
Court to stay the instant proceedings when the district court in Grote has proceeded to the merits
[DE 41 at 8]. Yet, none of the parties in Grote ever moved to stay proceedings, and thus, the
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district court never expressed whether a stay might be appropriate. Additionally, while Grote
has not been formally stayed by the district court, the docket reflects that no activity has taken
place in the case since January of this year, when the notice of appeal was filed. See Grote v.
Sebelius, No. 4:12-cv-00134-SEB-DML, docket entries 45-52. In addition, district court’s have
stayed proceedings in similar circumstances in litigation challenging the contraception mandate.
See Triune Health Group, Inc. v. Sebelius, No. 1:12-cv-06756, docket entry 64 (N.D. Ill. Apr. 2,
2013); Korte v. Sebelius, No. 3:12-cv-01072-MJR-PMF, docket entry 63 (S.D. Ill. Dec. 28,
2012).
Ultimately, Defendants have sufficiently shown that granting a temporary stay is proper
where Korte and Grote are substantially similar to the instant case because each plaintiff has
named the same government defendants and each plaintiff represents a for profit company
seeking to escape the contraception mandate on the grounds that it interferes with and burdens
the religious beliefs of the company’s owners. Because the interests of judicial economy and the
other factors detailed herein weigh in favor of temporarily staying the proceedings until the
Seventh Circuit has had an opportunity to decide Grote and Korte, the Court grants the
Defendants’ request for a stay. See Finova Capital Corp. v. Ryan Helicopters U.S.A., Inc., 180
F.3d 896, 898 (7th Cir. 1999) (noting that “[a]lthough federal courts have a ‘virtually unflagging
obligation’ to exercise the jurisdiction conferred on them by Congress, in exceptional cases, a
federal court should stay a suit and await the outcome of parallel proceedings as a matter of
‘wise judicial administration, giving regard tot he conservation of judicial resources and
comprehensive disposition of litigation.”).

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III. Conclusion
For the foregoing reasons, the Court GRANTS the Defendants’ Motion to Stay and
temporarily STAYS the case until thirty (30) days after the Seventh Circuit has issued an opinion
on the consolidated Grote and Korte appeal. Either party is permitted to seek relief from this
stay order in the interim if circumstances so permit.
SO ORDERED.
ENTERED: August 16, 2013
/s/ JON E. DEGUILIO
Judge
United States District Court

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