The Yale Law Journal


The Jurisdictional Question in Hobby Lobby

06 Sep 2014

Burwell v. Hobby Lobby Stores, Inc. may well be the biggest case of the past Term.1 But by its own rules, the Supreme Court lacked jurisdiction to decide the case. An obscure statute, the Anti-Injunction Act of 1867 (AIA), imposes a pay-first requirement on federal tax challenges. The deeply held conventional wisdom is that the AIA is a jurisdictional statute,2 and there is a good argument that the AIA applies to the contraception mandate at issue in Hobby Lobby. In National Federation of Independent Business v. Sebelius, the Court held that Congress’s decision to label something a tax provides the best evidence as to whether Congress intended the AIA to apply.3 The contraception mandate, 26 U.S.C. § 4980D (2012), expressly refers to its employer assessment as a tax—twenty-four times. As a result, the Court’s failure to address the AIA in Hobby Lobby was a serious mistake.

In National Federation of Independent Business v. Sebelius, Chief Justice Roberts famously—or perhaps infamously, depending on your point of view—concluded that the enforcement provision for the individual healthcare mandate, 26 U.S.C. § 5000A (2012), was a penalty for statutory purposes and yet a tax for constitutional purposes.4 This creative reasoning was occasioned by the AIA, which prevents a taxpayer from bringing a preemptive challenge to a federal tax. Because the government depends upon the prompt collection of tax revenues, the 1st Congress, and every Congress since, has enforced taxes “by summary and stringent means.”5 The AIA thus requires a taxpayer to pay the disputed tax and exhaust an administrative appeal before raising a constitutional or other challenge through a refund action.6

The AIA received a lot of attention in NFIB. Four months before oral argument, the Supreme Court appointed an amicus curiae to argue “in support of the position that the [AIA] bars the . . . challenge [to] the minimum coverage provision of the Patient Protection and Affordable Care Act.”7 As the Court explained, there was a “reasonable argument that the Anti-Injunction Act deprived [the Court] of jurisdiction” to hear the case.8 The Court also directed the parties to brief the issue, and it reserved a full day of oral argument for the AIA question. Three different views of the AIA were presented. The Federal Government argued that the AIA was jurisdictional but did not apply because § 5000A was a penalty rather than a tax.9 The States and NFIB argued that the AIA was not jurisdictional, and since the Government had forfeited any such defense, the Court did not need to address the AIA at all.10 The court-appointed amicus,Robert Long, argued that the AIA required the Court to dismiss the case because the AIA was jurisdictional and § 5000A was a tax, not a penalty.11

The Court seriously considered Robert Long’s assessment. “Before turning to the merits,” the Court wrote, “we need to be sure we have the authority to do so.”12 The AIA, the Court explained, “protects the Government’s ability to collect a consistent stream of revenue, by barring litigation to enjoin or otherwise obstruct the collection of taxes.”13 As a result, “taxes can ordinarily be challenged only after they are paid, by suing for a refund.”14 Characterizing § 5000A as a tax would have created significant problems for the individual mandate challenges: because the mandate did not become enforceable until 2014, no plaintiff had yet paid Treasury.15 Consequently, the challenges were not the sort of refund suit typically allowed under the AIA, but rather suits to restrain collection under § 5000A—and thus potentially barred by the AIA.

The Court avoided this conclusion, but only by holding that § 5000A imposes a penalty and not a tax—at least for statutory purposes. The “best evidence” as to whether Congress intended the AIA to apply to the individual mandate, concluded the Court, is the “statutory text.”16 Because the AIA and the Affordable Care Act “are creatures of Congress’s own creation,” the Court wrote, the issue of how they relate is for Congress to determine.17 Congress’s choice “to describe the ‘[s]hared responsibility payment’ imposed on those who forgo health insurance not as a ‘tax,’ but as a ‘penalty’” was dispositive.18 Therefore, according to the Court, the AIA did not apply to the suit.19

This brings us to the present conundrum: the Court’s text-based reasoning in NFIB raises a significant question as to whether the AIA applies to the contraception mandate at issue in Hobby Lobby. Under NFIB, there is a “reasonable argument” that the AIA should have deprived the Court “of jurisdiction to hear challenges to the [contraception] mandate.”20 That mandate requires employers of a certain size who offer health insurance to provide coverage for all FDA-approved contraceptives.21 Employers who fail to provide such coverage must pay $100 per employee per day.22 The statute provides: “There is hereby imposed a tax on any failure of a group health plan to meet the requirements of chapter 100 (relating to group health plan requirements).”23 It continues, “The amount of the tax imposed . . . on any failure shall be $100 for each day in the noncompliance period with respect to each individual to whom such failure relates.”24

If the NFIB Court really meant what it said, then this statutory text should have engendered some serious jurisdictional qualms for the Hobby Lobby Court. The language of the mandate could not be clearer: the statute refers to the contraception assessment as a “tax” no less than twenty-four times.25 Moreover, in holding that the individual mandate penalty in the ACA was not a tax for the purposes of the AIA, the NFIB Court found it “significant” that the “Affordable Care Act describes many other exactions it creates as ‘taxes.’”26 “Where Congress uses certain language in one part of a statute and different language in another,” the Court wrote, “it is generally presumed that Congress acts intentionally.”27 But surely the twenty-four instances of contrasting language in § 4980D suggest that Congress, here, too, should be presumed to have acted intentionally. Finally, like any other tax, § 4980D is located in the Internal Revenue Code, enforced by the Internal Revenue Service, and performs a revenue-raising function.28

Indeed, at oral argument, the Justices repeatedly characterized § 4980D as a tax. As Justice Kagan put it, “[Section 4980D]’s not even a penalty . . . in the language of the statute. It’s a payment or a tax.”29 Justice Sotomayor similarly observed, “It’s not called a penalty. It’s called a tax.”30 Invoking memories of the NFIB decision (and audience laughter), the Chief Justice agreed: “She’s right about that.”31 In its decision, moreover, the Court casually referred to the “taxes” imposed by the contraception mandate.32 Given the prevalence of such sentiments among the Justices, one would expect a follow-up discussion about the AIA—perhaps a question along the lines of, “So, counsel, if this payment is a tax, then doesn’t the AIA bar this lawsuit unless and until your clients have paid the tax?” Yet not a single Justice raised the possibility of an AIA bar at oral argument or in any opinion.

The Court’s silence is puzzling given that Court precedent and academic commentators have cast the AIA as jurisdictional.33 Granted, the AIA may not satisfy the Court’s recently created clear statement requirement for jurisdictional provision—more about this later. Such a possibility, however, does not explain the Supreme Court’s failure to address the Act given that the Court’s most recent precedents on the AIA—and every court of appeals to address the issue—label it jurisdictional. Where a requirement is jurisdictional, waiver and forfeiture do not apply.34 Because a jurisdictional limitation goes to the very power of the court to hear a case, a jurisdictional question must be raised and decided sua sponte, even where all parties desire a decision on the merits.35That’s why the Court appointed an amicus to argue the jurisdictional issue in NFIB. And that’s why the Hobby Lobby Court’s failure to address the AIA question was a serious mistake.

In short, there is a good argument to be made that the AIA applies to the challenges brought by Hobby Lobby. Hobby Lobby was seeking to enjoin the collection of the contraception mandate payment. Section 4980D expressly (and repeatedly) imposes a “tax” on an employer’s failure to provide contraceptive coverage, and Congress’s choice to call the assessment a “tax” is a strong indication that the AIA applies.36 In contrast to NFIB, where there may have been “no immediate reason to think that a statute applying to ‘any tax’ would apply to a penalty,”37 in Hobby Lobby there was every reason to think that a statute applying to “any tax” would apply to a “tax.”

Why was the Hobby Lobby Court unconcerned about the AIA? Did the same Court that directed briefing on, and reserved an entire day of oral argument for, the AIA question in NFIB simply overlook the jurisdictional issue lurking in Hobby Lobby? Given that NFIB was decided merely two years ago (and was hardly a minor case), this seems unlikely. The possibility also seems remote given that, in his concurrence to the Tenth Circuit’s Hobby Lobby opinion, Judge Gorsuch concluded that there was “a non-trivial argument” that the AIA applied to the contraception mandate.38

Perhaps the SupremeCourt said nothing about the AIA because it agreed with the Tenth Circuit’s conclusion that the AIA does not apply to regulatory taxes.39 While the Court once contemplated a revenue-raising/regulatory distinction,40 however, that line of argument has not been viable since the 1930s.41 As the Court stated in NFIB, “taxes that seek to influence conduct are nothing new.”42 Congress has long enforced its regulatory purposes through the tax code—indeed, one scholar estimates that over half of the IRS’s resources are devoted to non-revenue raising measures.43 Furthermore, the individual mandate provision at issue in NFIB was no less “regulatory” than the contraception mandate, and yet the Court suggested that Congress’s decision to label that assessment a “tax” was dispositive for AIA purposes.44 If the Court wanted to revive a regulatory-purposes exception to the AIA, it is difficult to imagine unanimous agreement on the issue; at the very least, the Court likely would request briefing on the question.

The Court’s silence on the jurisdictional question is especially puzzling in light of a different case argued the same day as Hobby Lobby—and just a few blocks away. In Halbig v. Burwell, the government argued that the AIA divested the district court of jurisdiction over plaintiffs’ claims that the Affordable Care Act does not offer tax credits to individuals who purchase insurance through federal exchanges.45 According to the government, § 4980H, which fines large employers that fail to provide adequate coverage, was a “tax” within the meaning of the AIA.46 The government’s briefing maintained that the reasoning in NFIB was controlling47: “[T]he express characterization of Section 4980H as a ‘tax’ leaves no doubt that the Anti-Injunction Act precludes the employer plaintiffs’ claims here.”48 The District Court for the District of Columbia agreed. Judge Freidman concluded that “for purposes of the Anti-Injunction Act the assessable payment described in 26 U.S.C. § 4980H must be considered a tax.”49 His conclusion was compelled by NFIB, which “held that the label that Congress gives an assessment collected by the IRS matters for purposes of the AIA.”50

There is no reason why the same analysis should not have applied to the contraception mandate in Hobby Lobby. In a footnote in its Halbig briefing, the Government sought to distinguish § 4980H from § 4980D (the provision at issue in Hobby Lobby) on the grounds that the latter provision triggers non-tax consequences. In contrast to § 4980H, the Government argued, the tax imposed by § 4980D “is just one of the many collateral consequences that can result from a failure to comply with the contraceptive-coverage requirement.”51 But there is no “collateral consequences” exception to the AIA—at least not one previously endorsed by the Supreme Court.52 The Government’s contemporaneous claim that the AIA is jurisdictional highlights the Court’s failure to consider whether the AIA applied in Hobby Lobby.

One explanation for the Court’s reticence may be the harsh consequences of applying a jurisdictional AIA. In fact, Hobby Lobby exemplifies several problems with the conventional view of the AIA as jurisdictional. If the contraception assessment is a tax, then Hobby Lobby’s case may not go forward. In order to raise their religious liberty claims, the company must wait for the regulation to go into effect, pay the tax ($1.3 million a day), and file a refund action. This is in stark contrast to the rule that, subject to justiciability concerns, pre-enforcement review of substantial monetary penalties is ordinarily available.53 For some plaintiffs, the difficult choice between paying a large tax and exercising conscience rights may not be economically viable. More importantly, even if Hobby Lobby were ultimately to prevail in their refund suit, a refund remedy is generally considered insufficient to compensate a plaintiff for the loss of a civil or political right.54 As the D.C. Circuit put it in Halbig, a tax refund suit offers only “‘doubtful and limited relief’”—it is an often an inadequate remedy compared to ordinary judicial review with the possibility of prospective relief.55

Another possible explanation is that the Supreme Court’s jurisdictional faux pas was not really an error. There is a good argument that the conventional view of the AIA as jurisdictional is wrong.56 As I have argued elsewhere, the view that the AIA is jurisdictional is based upon an overbroad understanding of what counts as jurisdictional57—one from which the Court has recently backed away,58 indicating that jurisdictional holdings must be reevaluated.59 The Court has directed courts to return to text, structure, and context to determine whether a provision is in fact jurisdictional,60 and to use a demanding test: a provision may only be considered jurisdictional if Congress “clearly” says so.61 A reexamination of the text, structure, and context of the AIA reveals that the statute is not jurisdictional.62 On this reading, the Government’s failure to press the AIA defense would have permitted Hobby Lobby’s suit to go forward. Even so, the Court’s most recent precedents label the AIA jurisdictional,63 and the Government continues to argue that the AIA is a jurisdictional statute.64 These factors and the Supreme Court’s decision in NFIB should have required an analysis into whether Hobby Lobby’s lawsuit was barred by the AIA.

We may never be certain why the Court expressed so much concern over the AIA in NFIB and none in Hobby Lobby. Could it be that issues of religious conscience have a special salience? Are passive virtues more important in cases involving congressional power than those involving individual rights? Did the Court’s view of Hobby Lobby as presenting two conflicting statutes (RFRA and the ACA) push the AIA—yet a third statute—into the background? If so, did RFRA not only trump the substantive provisions of the ACA but also the procedural ones of the AIA? All of these are promising avenues for future research, but the Court’s treatment of Hobby Lobby itself yields few clues. Given the contentious nature of the case, one would expect a dissenting Justice at least to raise the AIA issue. Under current precedent, after all, there is a good argument that the Court reached out to decide a highly politicized case in which it had no jurisdiction. Then again, maybe the dissenting Justices—all usually chary of provisions that strip jurisdiction from the federal courts—were playing the long game and thus were unwilling to suggest that the AIA is in fact jurisdictional. Only time will tell.

Erin Morrow Hawley is Associate Professor of Law, University of Missouri. She would like to thank James E. Pfander, Carl Esbeck, William Baude, and Joshua D. Hawley for their helpful comments on earlier drafts.

Preferred Citation: Erin Morrow Hawley, The Jurisdictional Question in Hobby Lobby, 124 Yale L.J. F. 63 (2014),