King: For Purposes of Standing, Appellate Courts “Must Accept As True All Material Allegations of the Complaint”

February 16th, 2015

There has been much debate of late about whether the plaintiffs in King v. Burwell have standing, and whether the Court should do anything to check on it. Nick Bagley and David Ziff comment.  While I haven’t studied this issue too closely, a recent decision from the 11th Circuit in another Obamacare case may be on point.

In this case, an orthodontist, who employed more than 50 employees, sought a declaration that the delay of the ACA’s employer mandate was invalid. The 11th Circuit, in a divided opinion, found that the plaintiff lacked standing. But the dissent makes the point, which is not disputed, that for purposes of standing, courts should presume the facts in the complaint (and sworn affidavits) are correct:

The majority says that because “Kawa’s complaint does not mention the word ‘interest,’ let alone allege that Kawa had specific plans to invest its money into an interest-bearing asset . . . [its] lost-interest argument is waived.” But I am mindful that “[w]hen the defendant challenges standing via a motion to dismiss, both trial and reviewing courts must accept as true all material allegations of the complaint, and must construe the complaint in favor of the complaining party.” Region 8 Forest Serv. Timber Purchasers Council v. Alcock, 993 F.2d 800, 806 (11th Cir. 1993) (quotation marks omitted). We may find standing “based on the facts alleged in the complaint.” Shotz v. Cates, 256 F.3d 1077, 1081 (11th Cir. 2001) (emphasis added). …

I agree with the majority’s suggestion that Kawa has poorly explained how expending funds in 2013 rather than in 2015 would injure it. However, a party’s deficient enunciation of a legal argument does not strip us of our duty to view the complaint in the light most favorable to the plaintiff and determine whether it has alleged facts sufficient to show standing. See Lawrence v. Dunbar, 919 F.2d 1525, 1529 (11th Cir. 1990) (“Facial attacks on the complaint require the court merely to look and see if the plaintiff has sufficiently alleged a basis of subject matter jurisdiction, and the allegations in his complaint are taken as true for the purposes of the motion.” (quotation marks omitted)).

In other words, at the appellate stage, courts will assume the facts, as pleaded, are true for purposes of standing. If the affidavits, as written, justify standing, it would not seem consistent with precedent to start poking under the covers, especially where the lower courts did not see fit to challenge the case on standing. Note, this is different from a legal determination that standing is lacking–this is always fair game for courts to consider. For example, consider the case of plaintiff Douglas Hurst. Bagley writes:

In his declaration, Hurst also said that he is “not eligible for health insurance from the government or any employer.” This allegation may likewise be false: Hurst’s wifehas described him as a Vietnam veteran, which would qualify him for VA coverage. It’s possible that Hurst has never enrolled in VA coverage; that’s what his lawyers say. If so, he could be eligible for tax credits. But it’s the rare 63-year old who hasn’t needed health care—and rarer still for someone to pay for care when he can get it for free. It’s reasonable to wonder whether Hurst, like King, also has a VA card.

Nick is correct to “wonder” whether Hurst has enrolled for VA Coverage, but to follow these precedents, such inquiries are outside the judicial realm. If Hurst’s sworn statement says he is “not eligible for health insurance from the government or any employer,” then that is the fact the courts should rely on. (I understand this issue was litigated below, and the courts rejected the government’s arguments). David Ziff writes that he could not find a single  “a case in which an appellate court has taken notice of additional facts on appeal to contradict standing-related evidence submitted in the trial court.” That is probably because no such case exists.

Further, to get on old usual hobby horse, the Supreme Court, as are all appellate courts, are not equipped to add factual evidence to the record. The rules of evidence and adversary proceedings are simply not present outside the district court. (Though I wonder if WSJ and Mother Jones would file an investigative reporting amicus!).

If there doubts about standing, the case should be remanded to the district court for further proceedings.

Disclosure: I filed a brief on behalf of petitioners.