Texas v. United States, 352 F. Supp. 3d 665

Background

States and two individuals sued federal officials challenging the ACA’s Individual Mandate (26 U.S.C. §5000A(a)) as unconstitutional after the Tax Cuts and Jobs Act (TCJA) set the shared-responsibility payment to $0; plaintiffs sought a declaration the mandate is invalid and the ACA is inseverable.
The district court previously denied a preliminary injunction but on December 14, 2018 granted summary judgment on Count I, holding the Individual Mandate unconstitutional and inseverable from key ACA provisions.
Intervenor States (including California, New York, etc.) moved to clarify whether that order was immediately binding, asked for certification under Rule 54(b) or final judgment, and moved to stay and/or to permit immediate appeal; the court expedited briefing.
The district court exercised Rule 54(b) to enter partial final judgment on Count I (finding it an ultimate disposition of an individual claim and that there was no just reason to delay appeal) and simultaneously granted a stay of that judgment pending appeal.
On the stay analysis the court applied the Nken factors, concluding intervenors were unlikely to succeed on the merits (addressing standing, tax-power saving construction from NFIB, commerce-power arguments, Frost, and severability), but that the equities and public interest supported a stay to avoid marketplace disruption.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether the district court may enter final judgment on Count I under Rule 54(b)	Plaintiffs sought resolution of Count I and immediate appellate review of mandate ruling	Intervenors argued the Amended Complaint presents one claim only and Counts I–V are alternative remedies, so Rule 54(b) is inappropriate	Court certified partial final judgment under Rule 54(b): Count I is an ultimate disposition and there was no just reason to delay appeal
Whether the December 14 Order should be stayed pending appeal (Nken factors)	Plaintiffs did not oppose a stay; they left it to the court’s discretion	Intervenors urged no stay only if likely to succeed on appeal; argued disruption if judgment takes effect	Court granted a stay: found intervenors unlikely to succeed on merits but equities, potential disruption, and agreement of other parties warranted a stay
Standing of the Individual Plaintiffs to challenge the mandate	Plaintiffs allege they are required to maintain ACA-compliant coverage and thus suffer a concrete constitutional injury	Intervenors argued that with the penalty set to $0 plaintiffs lack an injury and thus lack standing	Court held plaintiffs sufficiently alleged Article III injury: they are regulated by and directly subject to the mandate; Hotze is distinguishable; standing survives
Merits: whether the Individual Mandate is constitutional and severable after TCJA	Plaintiffs: TCJA eliminated the tax feature that supported NFIB’s saving construction, so the mandate cannot be upheld under Congress’s Tax Power, still fails under Commerce Clause, and is inseverable from core ACA reforms	Intervenors: mandate can still be upheld under the Tax Power or (alternatively) is non-coercive under the Commerce Clause now that the penalty is $0; if invalid, argue severability because Congress left the rest of ACA intact when zeroing the penalty	Court held (in the December 14 Order, reiterated here): NFIB’s saving construction cannot survive because the payment no longer produces revenue; mandate remains a binding requirement and thus fails under Commerce Power; Frost does not compel voiding the TCJA; the mandate is inseverable from the ACA’s guaranteed-issue/community-rating provisions

Key Cases Cited

Nat'l Fed'n of Indep. Bus. v. Sebelius, 567 U.S. 519 (2012) (Supreme Court upheld ACA by saving construction treating the shared-responsibility payment as a tax; held the mandate not supportable under Commerce Clause)
Nken v. Holder, 556 U.S. 418 (2009) (stay-pending-appeal standard and factors)
Frost v. Corp. Comm'n of Okla., 278 U.S. 515 (1929) (held a later statute may be severable from an earlier one when appropriate; discussed by the court but deemed inapposite)
Bond v. United States, 564 U.S. 211 (2011) (structural limits and federalism protect individual liberty; cited on standing and separation-of-powers principles)
Pilgrim Enters. v. Briargrove Shopping Ctr. Joint Venture, 170 F.3d 536 (5th Cir. 1999) (Rule 54(b) certification requirements)
United States v. Ardoin, 19 F.3d 177 (5th Cir. 1994) (tax-power precedent cited by intervenors; court distinguished Ardoin from present facts)