Two Major Supreme Court Case Decisions Released: DRI Weighs in on Opinions
This morning the U.S. Supreme Court released decisions on two cases of critical importance to the defense bar. DRI filed an amicus curiae brief in First America v. Edwards, the case was dismissed. Additionally, U.S. Department of Health and Human Services v. Florida (Affordable Care Act) was decided in a 5-4 vote upholding the law.
In First America v. Edwards, First American Title Insurance Company filed a certiorari petition in a nationwide class action case that threatened to undermine one of the most basic safeguards against opportunistic, entrepreneurial litigation – the requirement that a plaintiff demonstrate actual injury before being allowed to sue.
Edwards v. First American Title Insurance Co. involves the Real Estate Settlement Procedures Act (“RESPA”), a statute that requires complete disclosures of settlement fees and that prohibits certain abusive practices that Congress believed had inflated settlement costs. The provision at issue bars “kickbacks” – payments in exchange for referrals of settlement service business. The Edwards plaintiff claims that First American’s partial ownership of the title insurance agency that sold her a title insurance policy underwritten by First American was a per se violation of that anti-kickback provision. The plaintiff sought to recover, on behalf of a nationwide class of consumers, three times all settlement service charges (i.e., title insurance policy premiums) that each member of the class paid to title insurance agencies affiliated with First American.
This matter is of grave concern to the title insurance industry, not least because many title insurers similarly have invested in title insurance agencies across the country. (Indeed, the practice is well known to HUD, which is responsible for administering and enforcing RESPA, and to state regulators, none of which have challenged or investigated the practice.)
In the U.S. Department of Health and Human Services v. Florida otherwise known as the Patient Protection and Affordable Care Act, the Court upheld the most important feature of the Act -- the individual mandate, which requires that individuals not covered by health insurance buy coverage or face a “shared responsibility payment.” This mandate was critical to the success of the Act because the availability of affordable coverage for the millions of uninsured Americans required a large pool of customers. In reviewing the authority of Congress to require this mandate, the Court found that it falls within the taxing power of Article I, Section 8 of the Constitution. The Court also noted that the individual mandate was not an appropriate exercise of Congressional power under the Commerce Clause or the Necessary and Proper Clause. Writing for a plurality of justices, Chief Justice Roberts noted that the questions of the soundness of the policy is not an issue for the court to consider, but only to decide whether it is an appropriate exercise of Congressional authority. Ultimately the Court found that the mandate’s imposition of a penalty for failing to purchase insurance was not commerce that could be regulated by Congress, but would fall within its taxing power. In finding that the mandate was a tax, the Court adopted the position of the Solicitor General and guaranteed that the issue will continue to resonate in political debates through the November election.
A separate part of the decision considered the constitutionality of a provision of the Act that expanded Medicaid coverage to millions of new individuals. As a result, states were required to adopt new eligibility requirements or risk losing all of its Medicaid funding. The coercive nature of this requirement was the critical feature of the review of this portion of the Act. A complicated plurality of justices held that the expansion was unconstitutionally coercive, but that the remedy for this violation is to strike down the provision allowing the federal government to withhold all Medicaid funds unless a state agrees to the expansion. Accordingly, states that do not agree to the expansion will only lose new Medicaid funding.