STATE OF OHIO, Plаintiff-Appellee, v. JANET YELLEN, in her official capacity as Secretary of the U.S. Department of the Treasury; RICHARD K. DELMAR, in his official capacity as Acting Inspector General of the U.S. Department of the Treasury; UNITED STATES DEPARTMENT OF THE TREASURY, Defendants-Appellants.
No. 21-3787
UNITED STATES COURT OF APPEALS FOR THE SIXTH CIRCUIT
November 18, 2022
RECOMMENDED FOR PUBLICATION Pursuant to Sixth Circuit I.O.P. 32.1(b)
File Name: 22a0244p.06
Argued: January 26, 2022
Appeal from the United States District Court for the Southern District of Ohio at Cincinnati. No. 1:21-cv-00181—Douglas Russell Cole, District Judge.
Before: GRIFFIN, DONALD, and BUSH, Circuit Judges.
COUNSEL
ARGUED: Daniel Winik, UNITED STATES DEPARTMENT OF JUSTICE, Washington, D.C., for Appellants. Benjamin M. Flowers, OFFICE OF THE OHIO ATTORNEY GENERAL, Columbus, Ohio, for Appellee. ON BRIEF: Daniel Winik, Sarah E. Harrington, Alisa B. Klein, UNITED STATES DEPARTMENT OF JUSTICE, Washington, D.C., for Appellants. Benjamin M. Flowers, Sylvia May Davis, OFFICE OF THE OHIO ATTORNEY GENERAL, Columbus, Ohio, for Appellee. Joseph D. Henchman NATIONAL TAXPAYERS UNION FOUNDATION, Washington, D.C., Paul D. Clement, KIRKLAND & ELLIS LLP, Washington, D.C., Gary P. Gordon, Jason T. Hanselman, Kyle M. Asher, DYKEMA GOSSETT PLLC, Lansing, Michigan, Robert Alt, THE BUCKEYE INSTITUTE, Columbus, Ohio, John J. Vecchione, NEW CIVIL LIBERTIES ALLIANCE, Wаshington, D.C., Timothy Sandefur, Jacob Huebert, GOLDWATER INSTITUTE, Phoenix, Arizona, Drew C. Ensign, OFFICE OF THE ARIZONA ATTORNEY GENERAL, Phoenix, Arizona, for Amici Curiae.
JOHN K. BUSH, Circuit Judge. Seeking to mitigate the devastating economic effects of COVID-19, Congress enacted the American Rescue Plan Act (“ARPA” or “the Act“) in March 2021. See
The Treasury Department appeals, arguing, among other things, that the district court should never have reached the merits of this case, as Ohio failed to establish a justiciable controversy. We agree with Treasury. Regardless of standing, the controversy is moot. Treasury later promulgated a regulation (the “Rule“) disavowing Ohio‘s interpretation of the Offset Provision and explaining that it would not enforce the Provision as if it barred tax cuts per se. See
I.
Like its sister-states, Ohio stood poised to receive billions of dollars from the federal government if it agreed, in accepting its ARPA funds, to abidе by a number of attached conditions. For instance, the Act provides that states must expend their funds in four particular areas that Congress deemed relevant to recovery from the pandemic:
(A) to respond to the public health emergency with respect to the Coronavirus Disease 2019 (COVID-19) or its negative economic impacts, including assistance to households, small businesses, and nonprofits, or aid to impacted industries such as tourism, travel, and hospitality;
(B) to respond to workers performing essential work during the COVID-19 public health emergency by providing premium pay to eligible workers of the State, territory, or Tribal government that are performing such essential work, or by prоviding grants to eligible employers that have eligible workers who perform essential work;
(C) for the provision of government services to the extent of the reduction in revenue of such State, territory, or Tribal government due to the COVID-19 public health emergency relative to revenues collected in the most recent full fiscal year of the State, territory, or Tribal government prior to the emergency; or
(D) to make necessary investments in water, sewer, or broadband infrastructure.
The Act also provides that states may not use their ARPA funds for two particular applications. For instance, “[n]o State or territory may use funds made available under this section for deposit into аny pension fund.”
to either directly or indirectly offset a reduction in the net tax revenue of such State or territory resulting from a change in law, regulation, or administrative interpretation during the covered period that reduces any tax (by providing for a reduction in a rate, a rebate, a deduction, a credit, or otherwise) or delays the imposition of any tax or tax increase.
Accompanying the Offset Provision are a couple of related enforcement mechanisms. First is the statute‘s reporting requirement, which instructs the states:
To provide to the Secretary periodic reports providing a detailed accounting of—
(A) the uses of funds by such State, territory, or Tribal government, including, in the case of a State or a territory, all modifications to the State‘s or territory‘s tax revenue sources during the covered period; and
(B) such other information as the Secretary may require for the administration of this section.
Six days after President Biden signed this text into law, Ohio filed its complaint outlining its objections to the Offset Provision. First was its Spending Clause coercion argument. In essence, Ohio said, by offering such a generous aid package during an economic crisis, the federal government left Ohio with “no real choice” but to accept the funds. Complaint ¶40, R. 1. And such coercion was especially egregious because of its intrusion upon Ohio‘s “sovereign authority to set tax policy as it sees fit.” Id. ¶41. Specifically, “because changes to tax policy that reduce revenues violate the Tax Mandate,” Ohio alleged, the federal government had essentially conditioned the aid on Ohio‘s promise not to reduce taxes during ARPA‘s “covered period.” Id. Otherwise, “[s]uch violations could be used to force the State to return funding received through the Act.” Id. Second, Ohio claimed that the Offset Provision also violates the Spending Clause because “it is ambiguous regarding what precisely constitutes a change in tax policy that ‘indirectly’ offsets a loss in revenue.” Id. ¶43. Yet “Spending Clause legislation must articulate ‘unambiguously’ the conditions it imposes on the states.” Id. (citing South Dakota v. Dole, 483 U.S. 203, 207 (1983)).1 And last, Ohio relatedly alleged that Congress had violated the Tenth Amendment by “commandeer[ing] state taxing authority” with the Offset Provision. Id. ¶48.
On the same day it filed its complaint, Ohio also moved for a preliminary injunction. See Mot. for Prelim. Injunction, R. 3. It asked the district court to restrain the Treasury Department from pursuing any rеcoupment action during the litigation—until the district court could rule on Ohio‘s ultimate request for permanent-injunctive relief. And its accompanying memorandum further described the nature of Ohio‘s constitutional challenges. As to ambiguity,
Treasury responded about a month later. It argued as an initial matter that Ohio‘s challenge was not justiciable under Article III. Ohio lacked standing, it said, because it had not alleged that it planned to enact “any tax cut, let alone shown that any hypothetical tax cut [would] decrease net tax revenue[,] or that the State plans to use Rescue Plan funds to offset that theoretical reduction.” Opp‘n to Mot. for Prelim. Injunction at 1, R. 29. Relatedly, it argued that Ohio‘s challenge was unripe. Id. at 1–2; see also id. at 8–12. Ohio‘s asserted injury was a potential reсoupment action, yet Ohio had given the court no reason to think such enforcement proceedings were imminent. And it opposed Ohio‘s merits arguments across the board, contending that the Offset Provision was neither coercive (it does not threaten to take away
existing state funds) nor ambiguous (it clearly conditions states’ receipt of ARPA funds on a promise not to use such funds to finance state tax cuts). See id. at 12–23.
Soon after that briefing, the district court held a hearing on the preliminary injunction, and it issued its decision denying such relief in May 2021. It agreed with the Treasury Department that Ohio‘s imminent-recoupment theory could not suffice for Article III jurisdiction, given that an enforcement aсtion was then “too remote to satisfy the injury-in-fact requirement.” Op. & Order at 17, R. 36. The district court reasoned that Ohio had not yet accepted ARPA funds at that point, so it was difficult to see why any enforcement proceeding might soon transpire. Id. For the same reason, it declined to issue a preliminary injunction on the merits: Because it was doubtful that Treasury would pursue recoupment before the district court could rule on Ohio‘s request for permanent relief, the district court exercised its equitable discretion to withhold preliminary relief. Id. at 32–35.
But the district court declined to dismiss Ohio‘s entire case on justiciability grounds, given its conclusion that Ohio was suffering a distinct, justiciable injury: the receipt of an “unconstitutionally ambiguous” spending offer. Id. at 15, 17–18. The district court reasoned that, under the Supreme Court‘s Spending Clause jurisprudence, states have the right to receive a
A day later, on May 13, 2021, Ohio accepted its ARPA funds. See Murnieks Dec. ¶3, R. 38-1. It thus certified to the federal government that it would comply with the Offset
Provision and the “regulations implementing [it].” Award Terms & Conditions, R. 38-1. Six days later, however, it filed its combined motion for a declaratory judgment that the Offset Provision is unconstitutional and a permanent injunction against the Offset Provision‘s enforcement.
Treasury‘s response argued, once again, that Ohio‘s challenge was both nonjusticiable and failed on the merits. At the permanent-injunction stage, however, it offered slightly different justiciability objections. First, Treasury pointed out that Ohio could no longer rely upon the injury the district court had first found persuasive: that the state was being forced to decide whether to accept the funds under the cloud of allegedly ambiguous conditions. Opp‘n to Mot. for Permanent Injunction at 7–8, R. 45. For Ohio now had accepted the funds, mooting any concern about whether Ohio was suffering “a cognizable injury from uncertainty over the proposed deal.” Id. at 8. Second, even if the Offset Provision itself were ambiguous, Treasury had now prоmulgated an Interim Final Rule (“IFR“)—posted three days before Ohio had accepted the funds and published in the Federal Register four days after—that clarified Ohio‘s particular obligations. Id. at 8–9. And, indeed, the IFR disavowed Ohio‘s broad, money-is-fungible reading of the Offset Provision. See
The district court confronted these issues in its opinion and order on the permanent injunction, issued on July 1, 2021. See Ohio, 547 F. Supp. 3d at 713. Of particular importance is the district court‘s rationale for why it believed Ohio‘s challenge remained justiciable—even after Ohio‘s acceptance of the funds and after Treasury‘s promulgation of the IFR. The district court acknowledged that the initial reason for why it believed Ohio‘s challenge justiciable—that
Ohio wаs “contemplating whether to accept an ambiguous deal“—was “now gone.” Id. at 724–25. Ohio had
This particular theory of injury was intertwined with the district court‘s merits conclusion about the Offset Provision—that it is “unconstitutionally ambiguous” under the Spending Clause. Id. In essence, it said, because оf the Offset Provision‘s indeterminacies, Ohio still labors under significant uncertainty about when Treasury might deem it to have “indirectly offset” a tax cut with ARPA spending. Id. at 725–27. And so the Offset Provision continued to unlawfully intrude upon Ohio‘s sovereign taxing authority, since it “cast[s] a pall over legislators’ abilities to contemplate such tax changes.” Id. at 725. Moreover, it concluded, the IFR could not cure that “pall” by providing the guidance required to make the funding conditions sufficiently clear to satisfy the Spending Clause. It grounded that conclusion on two bases. First, as it had already explained in its preliminary-injunction opinion, the IFR was just that—an interim final rule—and so its details could at least potentially change after the notice-and-comment period when Treasury promulgated its Final Rule. Op. at 28, R. 36. And second, in any event, the district court suggested that the Rule was simply ultra vires agency action. Ohio, 547 F. Supp. 3d at 734-39. For under the federalism canon and the major-questions doctrine, Congress had not delegated to Treasury, with sufficient clarity, the authority to promulgate a rule attempting to clarify the Offset Provision. Id. The district court thus concluded that the IFR‘s promulgation had not mooted Ohio‘s case.
On the merits, the district court then explained its view that the Offset Provision is “unconstitutionally ambiguous” under the Spending Clause. Id. at 740. Two major indeterminacies in the text of the Provision drove that conclusion. First, its prohibition on “indirect” offsets provides little guidance about when Treasury might dеem Ohio to have used ARPA funds for an impermissible purpose. Id. at 731–33. Money is fungible, after all, and so the Offset Provision at least arguably could be read to proscribe Ohio‘s desired tax cuts during
ARPA‘s “covered period.” Id. at 733. Moreover, the Offset Provision itself never explains the fiscal-year baseline against which Treasury will measure a “reduction” in net tax revenue. Id. at 731-32. And, depending on whichever baseline Treasury selects, Ohio‘s obligations could change substantially. The district court thus permanently enjoined the Treasury Department from enforcing the Offset Provision against Ohio. Id. at 741. Treasury timely appealed.
II.
The district court‘s permanent-injunction order was a “final decision.” See, e.g., Trayling v. St. Joseph Cnty. Emps. Chap. of Local #2995, 751 F.3d 425, 426 (6th Cir. 2014). As a rеsult, we have statutory jurisdiction to consider Treasury‘s appeal under
III.
A fundamental principle under Article III is that we may adjudicate only live cases or controversies. See, e.g., Hollingsworth v. Perry, 570 U.S. 693, 700 (2013). Thus, the plaintiff must show at the outset of the suit its standing to sue—that it has suffered
Applying those principles, we conclude that, irrespective of whether Ohio established its initial standing to sue, its challenge is now moot.2 As the district court itself acknowledged, the injury that Ohio asserted in its complaint—that it was “ponder[ing]” whether to accept its ARPA funds under a cloud of uncertainty about the Offset Provision‘s meaning—“is now gone.” Ohio, 547 F. Supp. 3d at 724. Ohio accepted the funds nonetheless, and so it is no longer contemplating whether to take them. That alleged injury is now well in the past. But there is, of course, no jurisdiction for injunctive relief unless the plaintiff establishes why a past harm is inflicting some injury at present or is likely to inflict some injury in the future. City of Los Angeles v. Lyons, 461 U.S. 95, 105 (1983); see also Kanuszweski v. Mich. Dep‘t of Health & Hum. Servs., 927 F.3d 396, 406 (6th Cir. 2019). Thus, as the district court recognized, Ohio cannot rest on its claim that it was injured by having had to “ponder” a deal with unclear conditions. Ohio, 547 F. Supp. 3d at 724. It instead must illustrate some ongoing or imminent future injury to keep the case alive.
The district court thought that showing satisfied, however, by what we will label the “pall” theory—that, at present, the Offset Provision “casts a pall over [Ohio‘s] abilities to contemplate” desired tax changes because it must labor under “an unlawfully-imposed quandary in determining how to exercise its sovereign taxing power.” Id. at 725. The district court believed that this “pall” theory was distinct from the question whether any recoupment action is imminent, and so Ohio‘s challenge remained live even if there were no realistic, imminent prospect of recoupment. Id. at 726–27 (claiming that Ohio “need not rely on the prospect of future recoupment to avoid mootness“). So it deemed the case live on that basis and entered its injunction accordingly.
Yet we cannot agree that Ohio‘s challenge remained live even absent any
But in this regard, Ohio came up short. Its steadfast contention below was that Treasury could read the Offset Provision in a broad way—as barring any tax cut during ARPA‘s covered period—and thus that it risked recoupment should it exercise its sovereign prerogative to cut taxes. Yet Treasury repeatedly disavowed Ohio‘s money-is-fungible reading of the statute. It did so in its briefing below, in the Interim Final Rule,4 in its briefing before us, and in the Final
Rule as well.5 See, e.g., Opp‘n
Resisting that conclusion, Ohio claims on appeal that it still suffers five distinct and cognizable injuries from the Offset Provision, and so its challenge remains live. We find none of those arguments persuasive, however, and we will address them one by one.
First, Ohio says, it was injured when it was denied its entitlement to an unambiguous and non-coercive offer. Appellee‘s Br. at 46–48. Yet we have already largely dealt with this assertion above. Even assuming that the initial offer was ambiguous or coercive, those are
analysis of the questions presented.“). So even if there were a possibility Treasury could have modified its view of the Offset Provision from the Interim Final Rule to the Final Rule in a way that could have saved Ohio‘s claims, in actual fact, it did not.
merely past injuries. That a past offer could have been clearer or fairer does not create jurisdiction for injunctive relief. Rather, Ohio had to establish why that past injury had some continuing negative effect redressable with a prospective remedy. See Lyons, 461 U.S. at 105; see also Kanuszweski, 927 F.3d at 406. So this theory of injury is insufficient, by itself, to establish jurisdiction.
Second, perhaps realizing this prospectivity issue, Ohio asserts that the Offset Provision “arguably proscribes” its desired tax policies. Appellee‘s Br. at 41–43, 49. Ohio makes that argument by asserting, again, that “any revenue-negative reduction in tax rates could be read to contravene the Mandatе.” Id. at 42. But even assuming that‘s true, Treasury subsequently explained that it does not, in fact, read the Offset Provision as proscribing “any revenue-negative reduction in tax rates.” Id. (emphasis added). Nor will it take enforcement actions based on tax cuts per se. Rather, it has repeatedly explained its position that it will pursue recoupment under the Offset Provision only should a state enact a revenue-reducing tax cut and then fail to identify a permissible source of offsetting funds, such as those derived
Third, Ohio asserts, with little elaboration, that the Offset Provision interferes with its sovereign authority and the “orderly management” of its affairs. Appellee‘s Br. at 43–44. Again, however, we cannot see how this can be so, when, after Treasury‘s disavowals, Ohio never established any particular conduct it wishes to pursue but against which Treasury may credibly take action. Nor, as we explain below, did Ohio put forth any concrete evidence about how the Offset Provisiоn interferes with the “orderly management” of its affairs, at least in a way that might be redressed by enjoining enforcement solely of the Offset Provision.
Fourth, Ohio argues that it was injured when it was forced to choose between “receiving federal benefits” or “surrendering some of its sovereign authority over tax policy.” Appellee‘s Br. at 45. But for the reasons we have already explained, a past choice without a demonstrated
continuing negative effect does not establish jurisdiction for injunctive relief. See Lyons, 461 U.S. at 105; see also Kanuszweski, 927 F.3d at 406. Nor has Ohio established a continuing and concrete harm, given that it has identified no policy it wishes to pursue but that Treasury regards as proscribed. So there is no reasоn to suppose, based on what Ohio has shown it wishes to do, that there is a reasonable possibility Treasury will hale it into a recoupment action that a federal court of equity might enjoin.
Fifth and last, Ohio claims that the Offset Provision inflicts compliance costs upon it that would be redressed by letting the injunction stand. Appellee‘s Br. at 45–46. It says that these costs arise in two discrete ways. First, “States that accept Rescue Plan funds are statutorily bound to provide a ‘detailed accounting’ proving their compliance with, among other things, the Mandate.” Id. at 46 (citing
Take the point about the reporting requirement first. Unlike the Offset Provision—which represents a substantive prohibition on how states may use ARPA funds—the reporting requirement simply instructs states to report “the uses of [such] funds” and “other information” pertinent to “the administration of this section.”
But those facts are fatal to Ohio‘s compliance-costs argument. For even if enforcement of the Offset Provision were enjoined, Ohio still would have to furnish a “detailed accounting” of how it used its ARPA funds so that Treasury could ensure Ohio‘s compliance with all the other
unchallenged use restrictions. See, e.g.,
That leaves us with Ohio‘s vague claim about how it has been “forced to reallocate resources to ensuring compliance with the Mandate.” Appellee‘s Br. at 46. Ohio never made this allegation in its complaint, see Recording of Oral Arg. at 12:20–12:40; cf. Lynch v. Leis, 382 F.3d 642, 647 (6th Cir. 2004) (“Standing is to be determined as of the time the complaint is filed.” (cleaned up)), and it has provided no insight about the alleged resources it is referring to. Moreover, Ohio had the burden to establish whatever such costs have ensued with evidence; conclusory allegations about them in its briefing could not suffice. Yet Ohio put forth no “specific facts” by “affidavit or other evidence” about what, if any, particular resources it has reallocated to ensure compliance with the Offset Provision. Lujan, 504 U.S. at 561.6 As to the resource-reallocation claim, therefore, we lack the requisite basis to conclude that Ohio established a concrete and particularized injury in fact.
IV.
As Treasury itself acknowledges, our decision today does not permanently deprive Ohio of the opportunity to challenge any of ARPA‘s funding conditions. Appellants’ Br. at 10–11; Reply Br. at 7–8. Rather, should a future, justiciable dispute arise, Ohio may reassert its merits arguments therein. Id. But Ohio did not establish that this challenge is justiciable. Accordingly, we reverse the district court‘s determination otherwise and vacate the permanent injunction.