The Electrical Welfare Trust Fund v. United States of America et al
MEMORANDUM OPINION. Signed by Judge Deborah K. Chasanow on 7/21/2017. (sat, Chambers)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MARYLAND
THE ELECTRICAL WELFARE TRUST
Civil Action No. DKC 16-2186
UNITED STATES OF AMERICA, et al.
Presently pending and ready for resolution is the motion to
dismiss filed by Defendants Thomas E. Price,1 in his capacity as
Secretary of the United States Department of Health and Human
Health and Human Services, and the United States of America
(collectively, the “United States” or the “Government”).
The issues have been fully briefed, and the court now
rules, no hearing being deemed necessary.
Local Rule 105.6.
Pursuant to Fed.R.Civ.P. 25(d), Thomas E. Price, the
Secretary of the United States Department of Health and Human
Services and the successor of Sylvia Burwell, the original named
Defendant, has been substituted automatically as Defendant.
Plaintiff Electrical Welfare Trust Fund, Inc. (“Plaintiff”)
is a self-funded, self-administered group health plan.
the Patient Protection and Affordable Care Act of 2010 (“ACA”),
existing medical conditions by denying them coverage, 42 U.S.C.
anticipated that the enrollment of a disproportionate number of
insurance market could cause premiums to rise for all insured
years, the ACA established the Transitional Reinsurance Program
See 42 U.S.C. § 18061(c)(1).
The TRP mandates that
all “health insurance issuers, and third party administrators on
applicable reinsurance entity for any plan beginning in the 3year period beginning January 1, 2014.”
Id. § 18061(b)(1)(A).
The “reinsurance entities” then reallocate the money collected
to health insurance issuers that incur higher costs by covering
Id. § 18061(b)(1)(B).
Unless otherwise noted, the facts outlined here are set
forth in the complaint and construed in the light most favorable
requirements . . . with respect to . . . the establishment of
the reinsurance and risk adjustment programs.”
42 U.S.C. §
Specifically, the Secretary has the authority
to determine the methodology for setting the amounts each health
under the reinsurance mandate.
Id. § 18061(b)(3)(A).
to this authority, the Secretary issued a regulation defining a
“contributing entity” with respect to group health plans as: “a
self-insured group health plan . . . whether or not it uses a
third party administrator” for the 2014 benefit year; and “a
self-insured group health plan . . . that uses a third party
administrator” for the 2015 and 2016 benefit years.
45 C.F.R. §
health plans were subject to the reinsurance mandate and had to
contribute to the TRP for 2014, but not for 2015 and 2016.
In rulemaking comments, the Secretary explained this change in
“reasonably be interpreted in more than one way with respect to
the applicability of [the reinsurance mandate] to self-insured,
Care Act; HHS Notice of Benefit and Payment Parameters for 2015,
79 Fed. Reg. 13,773 (Mar. 11, 2014).
The Secretary stated that
reinsurance mandate, but that the government would include these
entities for the 2014 year “in order to avoid disruption to
Plaintiff is a self-funded, self-administered group health
plan that was subject to, and paid, the reinsurance mandate for
the 2014 benefit year.
(ECF No. 1 ¶ 20).
On June 17, 2016,
Plaintiff filed this tax refund suit on behalf of itself and the
administered health plans.
(ECF No. 1).
Plaintiff asserts that
contributions for the benefit year 2014.
It contends that the
ACA is unambiguous with respect to which entities are required
to abide by the reinsurance mandate and maintains that selffunded, self-administered group health plans are not among them.
The Government moved to dismiss the case for lack of subject
matter jurisdiction on November 28.
(ECF No. 18).
responded in opposition (ECF No. 19), and the Government replied
(ECF No. 24).
Standard of Review
The Government moves to dismiss for lack of subject matter
jurisdiction because sovereign immunity bars Plaintiff’s claims.
jurisdiction must be decided first, because they concern the
court’s very power to hear the case.”
Owens-Illinois, Inc. v.
Meade, 186 F.3d 435, 442 n.4 (4th Cir. 1999).
The party bringing
suit in federal court bears the burden of proving that subject
matter jurisdiction properly exists.
See Evans v. B.F. Perkins
12(b)(1) motion, the court may consider evidence outside the
pleadings to help determine whether it has jurisdiction over the
case before it.
Richmond, Fredericksburg & Potomac R.R. Co. v.
United States, 945 F.2d 765, 768 (4th Cir. 1991); see also Evans,
166 F.3d at 647.
A court should grant a Rule 12(b)(1) motion
“only if the material jurisdictional facts are not in dispute
and the moving party is entitled to prevail as a matter of law.”
Richmond, Fredericksburg & Potomac R.R. Co., 945 F.2d at 768.
Waiver of Sovereign Immunity Under 28 U.S.C. §
The doctrine of sovereign immunity precludes suit against
the United States, “‘save as it consents to be sued.’”
United States, 492 F.3d 258, 262 (4th Cir. 2007) (quoting United
States v. Sherwood, 312 U.S. 584, 586 (1941)).
consented to tax refund suits under 28 U.S.C. § 1346(a)(1) (the
jurisdiction over “civil action[s] against the United States for
the recovery of any internal-revenue tax alleged to have been
erroneously or illegally assessed or collected . . . or any sum
collected under the internal-revenue laws.”
that the reinsurance mandate constitutes an “internal-revenue
tax” that was “erroneously or illegally assessed or collected”
from it in 2014.
(ECF No. 19, at 17).
maintains that its reinsurance contributions meet the standard
in the “any sum” provision of the Tax Refund Statute.
The Government argues that reinsurance contributions do
not qualify under either provision of the Tax Refund Statute.
Plaintiff contends that the reinsurance mandate is a tax.
It argues that the applicable test in the United States Court of
Appeals for the Fourth Circuit comes from In re Leckie Smokeless
Coal Co., 99 F.3d 573 (4th Cir. 1996).
In Leckie, the court
adopted a four-part test to decide whether a government imposed
exaction was a tax for purposes of the Anti-Injunction Act, 26
collect taxes without judicial delay and interference, the AntiInjunction
refund suits after the taxes have been paid.
Leckie, 99 F.3d at
The court in Leckie determined whether the exaction in
question was a tax “by asking whether [the exaction] had each of
four features: ‘(a) An involuntary pecuniary burden, regardless
of name, laid upon individuals or property; (b) Imposed by or
under authority of the legislature; (c) For public purposes,
including the purposes of defraying expenses of government or
undertakings authorized by it; (d) Under the police or taxing
power of the state.’”
Id. at 583 (quoting United States v. City
of Huntington, W. Va., 999 F.2d 71, 73 nn.4-5 (4th Cir. 1993)).
In Pittston Co. v. United States, 199 F.3d 694, 702 (4th
Cir. 1999), the Fourth Circuit held that the same test applied
to determining whether an exaction fell under the Tax Refund
Noting that “the very purpose of the [Anti-Injunction
Act] is ‘to allow the Federal Government to assess and collect
allegedly due taxes . . . and to compel taxpayers to raise their
objections to collected taxes in suits for refunds,’” the court
held that “a decision that a premium is a tax for the purposes
of the Anti-Injunction [Act] necessarily is a decision that an
objection to that assessment must be litigated in a tax refund
action” under the Tax Refund Statute.
Id. (quoting Leckie, 99
F.3d at 584).
Applying the test from Leckie, Plaintiff contends that its
reinsurance contributions are a tax because they are “(a) an
including . . . defraying health insurance coverage expenses;
(d) under the taxing power of Government.”
(ECF No. 19, at 21).
Plaintiff also argues generally that United States Supreme Court
(ECF No. 19, at 21).
qualifies as a tax.
Instead, it posits,
(Id. at 22).3
Independent Business v. Sebelius, 567 U.S. 519 (2012) (“NFIB”),
limits the applicability of the Leckie test here.
(ECF No. 24,
In NFIB, the Supreme Court considered, inter alia,
whether the individual insurance mandate in the ACA, which was
Plaintiff also argues for the application of the approach
used by the district court in Ohio v. United States, 154
F.Supp.3d 621, 629 (S.D.Ohio 2016), aff’d, 849 F.3d 313 (6th Cir.
jurisdictional challenge to the TRP, the trial court applied the
“broader view” of the term “internal-revenue tax” adopted by the
United States Court of Appeals for the Sixth Circuit originally
in Horizon Coal Corp. v. United States, 43 F.3d 234 (6th Cir.
Ohio v. United States, 154 F.Supp.3d at 629.
Leckie and Pittston were decided by the Fourth Circuit after
Horizon Coal without adopting its analysis, and there is no
indication that any court in the Fourth Circuit has ever applied
that Sixth Circuit standard. More importantly, as discussed in
detail below, the Government here argues that both the Sixth and
Fourth Circuits’ approaches must be viewed in light of the
Supreme Court’s decision in National Federation of Independent
Business v. Sebelius, 567 U.S. 519 (2012), an argument neither
made to nor considered by the court in Ohio.
labeled a “penalty” instead of a “tax,” qualified as a tax under
“creatures of Congress’s own creation,” Congress is generally
free to choose how statutes relate to each other.
Id. at 544.
According to the Court, Congress’s decision not to label certain
exactions as taxes, especially in light of labelling several
other exactions as taxes elsewhere in the ACA, was an expression
of its intent as to how the individual mandate should relate to
The Court thus rejected an approach
like a tax,” and held that Congress’s label as a “penalty” meant
that the Anti-Injunction Act did not apply.
Id. at 544-546.
Plaintiff counters that the decision in
as to the
applicability of the Anti-Injunction Act is not determinative.
(ECF No. 19, at 28).
Plaintiff appears to be arguing that,
although “a decision that a premium is a tax for the purposes of
objection to that assessment must be litigated in a tax refund
action” under the Tax Refund Statute, Pittston Co., 199 F.3d at
702, a decision that a premium is not a tax for the purposes of
exaction does not qualify as a tax under the Tax Refund Statute
Injunction Act addresses the timing of the filing of a claim,
whereas the Tax Refund Statute addresses whether and where a
claim can be brought at all.
Plaintiff’s arguments ignore the reasoning in the Supreme
Congress passed the ACA, it chose to label some exactions taxes
but to use a variety of other labels for other exactions.
Court held that Congress chose these words with purpose, and
that one of the purposes of choosing not to use the label “tax”
in the ACA was to avoid the statutory repercussions of that
That analysis applies regardless of whether the Anti-
court’s holding that “[h]ow [two statutes] relate to each other
is up to Congress, and the best evidence of Congress’s intent is
the statutory text,” NFIB, 567 U.S. at 544, applies to both the
Anti-Injunction Act and the Tax Refund Statute.
In some cases, Plaintiff also ignores the direct effect of
NFIB. For example, it points out that the Government’s current
position is in conflict with its position at the district court
level in NFIB, where it asserted that individual mandate
plaintiffs could challenge the law in tax refund proceedings
after making their payments.
(ECF No. 19, at 28 (citing
Memorandum in Support of Defendants’ Motion to Dismiss at 34,
Florida ex rel. McCollum v. U.S. Dep’t of Health & Human Servs.,
No. 10-cv-00091, 2010 WL 2000518 (N.D.Fla. Apr. 8, 2010)).
does not bear on this case, however, that the Government
originally argued that the individual mandate penalties could be
blocked under the Anti-Injunction Act and raised subsequently
under the Tax Refund Statute.
The Supreme Court rejected that
argument, and the Government is correct to change its position
The Government’s NFIB argument is bolstered by two Fourth
Circuit decisions as to insurance mandates from the ACA.
Liberty University, Inc. v. Geithner, 671 F.3d 391, 404-06 (4th
Cir. 2011) (“Liberty I”), vacated, 133 S.Ct. 679 (2012), the
Fourth Circuit had found that the ACA’s individual insurance
mandate and employer insurance mandate were taxes, even though
The court held that the Anti-Injunction
Act thus stripped the court of jurisdiction to hear the case.
The court emphasized that the Supreme Court had “specifically
found an exaction’s label immaterial to the applicability of the
[Anti-Injunction Act],” id. at 404 (citing Lipke v. Lederer, 259
U.S. 557 (1922)), and cited a string of cases in which the Court
had “repeatedly instructed that congressional labels have little
statutory purposes,” id. at 404.
The Supreme Court vacated the
judgment in light of its decision in NFIB that the individual
mandate was not a tax for Anti-Injunction Act purposes.
whether the employer mandate was a tax in light of NFIB and
found that the “Supreme Court made clear [in NFIB] that the AIA
Liberty Univ., Inc. v. Lew, 733 F.3d 72, 87 (4th Cir. 2013)
It noted that “the Court in NFIB found it most
significant that Congress chose to describe the [exaction] as a
‘penalty’ rather than a ‘tax.’”
Id. at 87-88 (citing NFIB, 567
determined that the employer mandate was not a tax.
Id. at 89.
Curiously, Plaintiff’s opposition, without citing to the
citations nearly word for word to support its argument that the
“essential character” of the exaction overrides congressional
(Compare ECF No. 19, at 21-22, with Liberty I, 671 F.3d
That analysis is no longer applicable after NFIB and
Here, Congress labelled the reinsurance mandate a “payment”
and a “contribution.”
See 42 U.S.C. §§ 10861(b).
Secretary of Health and Human Services as opposed to the IRS or
Title 42 of the U.S. Code as opposed to the Internal Revenue
Accordingly, the conclusion is inescapable that Congress
Given these other factors, it is questionable whether
Plaintiff’s arguments would have sufficed under the Liberty I
standard, which concluded only that “the term ‘tax’ in the
[Anti-Injunction Act] reaches any exaction imposed by the
[Internal Revenue] Code and assessed by the tax collector
did not intend for the reinsurance mandate to be considered an
cannot be premised on the “internal revenue tax” provision of
the Tax Refund Statute.
Plaintiff next argues that, even if the reinsurance mandate
is not a tax, it qualifies under the Tax Refund Statute’s “any
(ECF No. 19, at 29-30).
As noted above, the
Tax Refund Statute also applies to “any sum alleged to have been
(“Flora II”), in which the Court held that the “tax,” “penalty,”
and “any sum” provisions should be read disjunctively, such that
“‘any sum,’ instead of being related to ‘any internal-revenue
tax’ and ‘any penalty,’ may refer to amounts which are neither
included the ‘any sum’ language to ensure a broad interpretation
of the statute.”
(ECF No. 19, at 30).6
The Tax Refund Statute,
however, refers to “any sum . . . collected under the internalpursuant to his general revenue authority.”
Liberty I, 671 F.3d
Plaintiff’s opposition appears to quote Flora II for its
interpretation” of the “any sum” provision, but no such language
can be found in the opinion.
revenue laws,” 28 U.S.C. § 1346(a)(1) (emphasis added), and the
Supreme Court’s decision in Flora II held only that the “any
sum” provision reached sums related to taxes, such as partial
payments of income taxes and interest on tax payments.
Flora II, 362 U.S. at 149-150.
Plaintiff cites just one other
case applying the “any sum” provision, which similarly related
to interest on income taxes levied under the Internal Revenue
Code and collected by the IRS.
See E.W. Scripps Co. v. United
States, 420 F.3d 589, 590-91, 596-97 (6th Cir. 2005).
of the limited number of cases applying the “any sum” provision
shows that the language has only been used to reach payments
that could be described as “incidental to the recovery of an
internal revenue tax,” IRS, Tech. Advice Memorandum 200446021
(2004), 2004 WL 2567715 (analyzing the legislative history of
the “any sum” provision from Flora II and other cases), revoked,
IRS, Tech. Advice Memorandum 200750018 (2007), 2007 WL 4358501.
(applying “any sum” provision to a payment made to the IRS to
remove a tax lien on a house for tax deficiencies accrued by
plaintiff’s ex-husband); Brennan v. Sw. Airlines Co., 134 F.3d
1405, 1410 (9th Cir. 1998) (applying “any sum” language in 26
U.S.C. § 7422 to overpayments of excise taxes collected by an
airline and paid to the IRS);7 Strategic Hous. Fin. Corp. v.
The Supreme Court has held that the mirror language in the
United States, 608 F.3d 1317, 1326-27 (Fed.Cl. 2010) (applying
“any sum” provision in § 7422 to arbitrage rebates under the
Internal Revenue Code); J.O. Johnson, Inc. v. United States, 476
F.2d 1337, 1341 (Cl.Ct. 1973) (determining that the “any sum”
earnings tax); see also Reilly v. United States, No. IP-87-629C, 1987 WL 49366, at *3 (S.D.Ind Dec. 30, 1987) (explaining that
expansive interpretation” of the “any sum” provision).
exactions under the reinsurance mandate are not related to an
Statute’s waiver of sovereign immunity.
Waiver of Sovereign Immunity Under the Administrative
Administrative Procedure Act (“APA”), 5 U.S.C. § 702.
19, at 36).
The APA provides that “[a] person suffering legal
Tax Refund Statute and § 7422 are meant to be coextensive.
Flora v. United States, 357 U.S. 63, 65 (1958) (“Flora I”); see
also United States v. Clintwood Elkhorn Min. Co., 553 U.S. 1, 4
(2008) (noting that the requirements of § 7742 must be met
before a plaintiff can bring an action under the Tax Refund
Statute). But see Horizon Coal, 43 F.3d at 240 (applying
different definitions of an “internal revenue tax” for purposes
of the Tax Refund Statute and § 7422).
aggrieved by agency action within the meaning of a relevant
statute, is entitled to judicial review thereof.”
5 U.S.C. §
This waiver of sovereign immunity is limited, however, to
actions “seek[ing] relief other than money damages.”
Government argues that the APA’s waiver of sovereign immunity
does not apply because Plaintiff seeks money damages here.
No. 18-1, at 20).
Plaintiff does not dispute that the damages it seeks are
money damages as defined in the APA.
Instead, Plaintiff argues
payments on behalf of those class members who have yet to make
the payments satisfies the APA requirement.
(ECF No. 19, at
dismissed because Plaintiff itself could not bring such a claim.
Plaintiff has submitted its reinsurance payments and now seeks
allegations of personal injury made by the named plaintiffs.”
Beck v. McDonald, 848 F.3d 262, 269 (4th Cir. 2017) (citing Doe
v. Obama, 631 F.3d 157, 160 (4th Cir. 2011)).
It is insufficient
unidentified members of the class to which they belong and which
(quoting Simon v. E. Ky. Welfare Rights Org., 426 U.S. 26, 40
Accordingly, Plaintiff has not alleged a claim
over which subject matter jurisdiction would exist under the
APA’s waiver of sovereign immunity.
Plaintiff cannot show that any waiver of sovereign immunity
jurisdiction, and the Government’s motion to dismiss will be
For the foregoing reasons, the motion to dismiss filed by
the Government will be granted.
A separate order will follow.
DEBORAH K. CHASANOW
United States District Judge
As noted by the Government, jurisdiction over Plaintiff’s
claims may lie in the United States Court of Federal Claims,
pursuant to the Tucker Act, 28 U.S.C. § 1491, which provides:
The United States Court of Federal
Claims shall have jurisdiction to render
judgment upon any claim against the United
States founded either upon the Constitution,
or any Act of Congress or any regulation of
an executive department, or upon any express
or implied contract with the United States,
or for liquidated or unliquidated damages in
cases not sounding in tort.
See also, Batsche v. Burwell, 210 F.Supp.3d 1130, 1136 (D.Minn.
The parties have not sought a transfer to that court,
see 28 U.S.C. § 1631, and the court declines to consider that
alternative sua sponte.
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