336 F. Supp. 3d 664
N.D. Tex.2018Background
- Six states sued HHS and the federal government challenging the ACA Health Insurance Provider Fee (HIPF) and an HHS Certification Rule that required states to account for the HIPF in Medicaid MCO capitation rates.
- The ACA text labels the HIPF a "fee" but treats it as an excise "tax" for certain Internal Revenue Code (IRC) purposes; Congress exempted states from being "covered entities."
- Earlier orders: the court dismissed the states' IRC tax-refund claim (28 U.S.C. § 7422) and granted summary judgment invalidating the Certification Rule under the Constitution and APA, but awarded only declaratory relief (no disgorgement) and denied a permanent injunction against HIPF collection.
- Plaintiffs moved under Rule 54(b) to reconsider (1) whether HIPF is a "tax" for the Anti-Injunction Act (AIA), (2) whether they may obtain equitable disgorgement of past HIPF payments under the APA, (3) reconsideration of the dismissed tax-refund claim, and (4) entry of a final judgment including a permanent injunction.
- The court treated the motion as Rule 54(b) reconsideration and addressed each issue: it confirmed HIPF is a "tax" for AIA purposes but a "fee" under APA/DJA, granted equitable disgorgement under the APA to enforce the ACA exemption, declined to revisit the § 7422 dismissal as unnecessary, and denied a permanent injunction.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether HIPF is a "tax" for the AIA and a "fee" for APA/DJA purposes | HIPF should be treated as a "fee" (not a tax) for AIA/DJA/APA purposes | No response on reconsideration; prior briefing treated HIPF as tax for some purposes | Court: HIPF is a "fee" under APA/DJA (per statute) but a "tax" for AIA purposes (per NFIB) |
| Whether Plaintiffs may obtain equitable disgorgement of past HIPF payments under the APA (§702 sovereign-immunity waiver) | Disgorgement is equitable, enforces statutory mandate exempting states, and falls within §702 waiver | Request is effectively money-damages/substitute relief because the specific funds are untraceable; thus barred by sovereign immunity | Court: §702 permits disgorgement to enforce statutory mandate; plaintiffs entitled to equitable disgorgement |
| Whether to reconsider dismissal of the IRC refund claim (Count VII) | Reconsideration requested to permit refund remedy | Defendants previously argued plaintiffs are not "taxpayers" under IRC and §7422 bars refund | Court: Reconsideration unnecessary because disgorgement provides complete relief; denies reconsideration of Count VII dismissal |
| Whether to enter a permanent injunction prohibiting HIPF liability on states | Plaintiffs seek permanent injunction to block future imposition/collection of HIPF from states | Defendants argue prospective relief is unnecessary/overbroad; court must require clear showing of irreparable harm | Court: Denies permanent injunction as plaintiffs failed to show substantial, imminent irreparable harm given declaratory relief and presumption agencies will follow the law |
Key Cases Cited
- Nat'l Fed'n of Indep. Bus. v. Sebelius, 567 U.S. 519 (2012) (AIA applies to exactions treated as taxes for IRC purposes)
- Porter v. Warner Holding Co., 328 U.S. 395 (1946) (equitable disgorgement may be ordered to enforce statutory mandates)
- Bowen v. Massachusetts, 487 U.S. 879 (1988) (APA §702 waives sovereign immunity for specific relief, not ordinary money damages)
- Dep't of the Army v. Blue Fox, Inc., 525 U.S. 255 (1999) (distinguishing specific relief from substitute money damages for purposes of §702)
- United States v. Williams, 514 U.S. 527 (1995) (limitations on who qualifies as a "taxpayer" for refund actions under the IRC)
- South Carolina v. Regan, 465 U.S. 367 (1984) (AIA exceptions and scope of suits to restrain tax collection)