The (Possibly) Frightening Implications of the Halbig Case

| Tue Jul. 22, 2014 12:07 PM EDT

In the Halbig case that struck down subsidies on federal Obamacare exchanges earlier today, one of the key issues was deference to agency interpretation of the law. Longstanding precedent holds that courts should generally defer to agency interpretations as long as they're plausible. They don't have to be perfect. They don't even have to be the best possible interpretations. They merely have to make sense.

The DC circuit court decided that there really wasn't any serious ambiguity in the law, and therefore no deference was due to the IRS's interpretation that state and federal exchanges were meant to be treated the same. The dissent was scathing about this, since the record pretty clearly showed tons of ambiguity. So if and when this case makes it up to the Supreme Court, what's going to happen? A lawyer buddy of mine is pessimistic:

Sadly, I think the Supreme Court will eagerly uphold the challenge because it gets to an issue that conservatives have generally despised: deference to administrative agencies' interpretation of statutes.

It's long been a fundamental principle in administrative law that an agency's interpretation of a federal statute that they are charged with enforcing is entitled to judicial deference, unless such deference is unreasonable. Conservatives would prefer that courts not defer to the government because #biggovernment. Thus, they want to weaken the deference standard and Halbig gives them basically a two-fer. Or a three-fer since the agency interpreting the statute is the IRS: Take out Obamacare, knock back the deference standard, and punch the IRS. This invariably will help advance the conservatives' legal goals because with a lower deference standard, their eccentric theories (such as on tax issues) have a better chance of surviving.

In normal times, the deference standard would likely be left intact because weakening it raises serious issues with government enforcement across all agencies, and courts are loath to send the country into a tailspin. But those days are apparently long past. Truly frightening times.

So what's next? In breaking news, the Fourth Circuit court has just upheld the federal subsidies in Obamacare, ruling squarely on deference grounds—and disagreeing completely with the DC circuit opinion, which held that the legislative language in Obamacare was clear and plain. In fact, said the Fourth Circuit, the statute is ambiguous, and therefore the court owes deference to the IRS interpretation. This is good news for Obamacare, especially if today's DC circuit decision by a three-judge panel is overturned by the full court, thus giving the government two appellate court wins. If that happens, it's even possible that the Supreme Court would decline to hear an appeal and simply leave the lower court opinions in place.

But I'd say an eventual Supreme Court date still seems likely. There's no telling if my friend's read of the politico-legal climate among the Supreme Court's conservative majority is correct, but I thought it was worth sharing.

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