U.S. District Court Judge Henry Hudson of the Eastern District of Virginia ruled against the Patient Protection and Affordable Care Act on Monday, rejecting the attempt by Congress to force people to buy a product, in this case, health insurance. The core paragraph in his ruling:

The unchecked expansion of congressional power to the limits suggested by the Minimum Essential Coverage Provision would invite unbridled exercise of federal police powers. At its core, this dispute is not simply about regulating the business of insurance – or crafting a scheme of universal health insurance coverage – it’s about an individual’s right to choose to participate.

Virginia Attorney General Ken Cuccinelli, who brought the suit, emphasized constitutional principles in his comments on the court’s ruling: “This is only round one. This lawsuit is not about health-care, it’s about liberty.”

In an interview on WMAL this morning and other comments, the Republican Attorney General responded to questions about expedited review by the Supreme Court by noting the economic consequences of continued undertainty: “With this ongoing court battle, there is a great deal of uncertainty for states, individuals, and businesses as to whether this law will be around two years from now or not. We need this resolved as quickly as possible – for the good of our people and our economy.”

In a Washington Post op-ed — they must have anticipated a defeat — Attorney General Eric Holder and Secretary of Health and Human Services Kathleen Sebelius argued that the health care law brings many goods thing to people and would not be possible without the individual mandate. After leading with an anecdote about the benefits of the law, they argue:

As these lawsuits continue, Americans should be clear about what the opponents of reform are asking the courts to do. Striking down the individual responsibility provision means slamming the door on millions of Americans like Gail O’Brien, who’ve been locked out of our health insurance markets, and shifting more costs onto families who’ve acted responsibly.

It’s not surprising that opponents, having lost in Congress, have taken to the courts. We saw similar challenges to laws that created Social Security and established new civil rights protections. Those challenges ultimately failed, and so will this one.

Thus, the Administration’s argument is a political, not a constitutional one, foreshadowing the 112th Congress and 2012 elections. There appear to be no limits on the federal government’s mandates in this view. And if you oppose their view on health care, you oppose Social Security and civil rights. Clear?

Washington Post, “Cantor, McDonnell call for expedited Supreme Court review of health-care law”
Cuccinelli news release, “Virginia wins federal court challenge over constitutionality of federal health care act: Health insurance mandate is unconstitutional”

Two brief profiles of Cuccinelli:

• Washington Examiner, “Obamacare victory launches Cuccinelli to national stage“
• New York Times, the Caucus blog, “The Man Who Took On Obama Health Care — and Won Round One“

The NAM is not a party to any of the litigation against the federal health care law.

As reported below, Virginia Attorney General Ken Cuccinelli is the latest attorney general to hire private-sector attorneys to sue a company on a contingency basis. Unfortunately, it’s not only state attorneys general who allow profit-seeking trial lawyers to undertake the government’s business. City and county officials have done the same thing.

The most prominent example comes from the oft-bizarre government of Santa Clara County and its running mates in California. In 2000,  Santa Clara and nine other cities and counties retained Motley Rice and three other law firms to bring a lead pigment public nuisance action against a group of manufacturers. The retainer agreement specified that the government would “retain final authority over all aspects” of the litigation, an arrangement that is difficult to maintain in practice — “How’s the case going?” “Oh, good. I’ll fill you in later” — and deeply suspect on policy grounds. Indeed, the trial court held that a previous ruling in the well-known Clancy case (People ex rel. Clancy v. Superior Court, 39 Cal.3d 740) precluded the government from hiring lawyers on a contingency-fee basis.

The California Court of Appeal concluded otherwise, holding that the “control” language in the retainer agreements means that the outside lawyers are merely “assisting” the government in a subordinate role and lack any decision-making authority or control over the case. This July, the California Supreme Court upheld the appellate court’s ruling.

The manufacturers are now appealing the California ruling to the U.S. Supreme Court, and the National Association of Manufacturers and other business groups last week joined in an amicus brief in support of the appeal in Atlantic Richfield et al. vs. Santa Clara County et al. The amicus brief, available here, frames the discussion:

The Supreme Court of California held that govern-mental plaintiffs pursuing civil public nuisance prosecutions brought “in the name of the People of the State of California” may do so under a contin-gency fee retainer agreement with outside plaintiffs’ law firms in which the government entities agree to compensate the law firms by paying them 17 percent of any recovery. This brief addresses the following question:

1. Whether contingency fee agreements that give private prosecutors a direct, personal, and substantial pecuniary interest in the outcome of governmental prosecutions seeking to vindicate the sovereign’s interests in public nuisance cases violate the Due Process Clause of the Fourteenth Amendment of the U.S. Constitution.

Yes, yes they do.

Others joining the brief are the American Chemistry Council, American Coatings Association, National Petrochemical and Refiners Association, Property Casualty Insurers Association, and the Public Nuisance Fairness Coalition. Filing on our behalf is the Houston office of Gardere, Wynne, Sewell LLP. For more background, see the NAM’s Manufacturing Law Center’s entry. We’ve blogged previously on the issue here.

Attorney General Ken Cuccinelli of Virginia is working to build his reputation as a forceful opponent of government excess and overreach. In his first year in office, the Republican has used the courts to challenge the Environmental Protection Agency’s endangerment finding on greenhouse gases and to block the new federal health care law as unconstitutional.

Cuccinelli has also described himself as leading the fight to “keep Virginia a low-regulation and pro-business state.”

Admirable goals, which is why it’s so disappointing to see the attorney general embrace one of the worst excesses of state governments, the contingency-fee lawsuit in which private, for-pay attorneys are hired to sue a business on behalf of the state.

Cuccinelli announced in February his office was intervening in a lawsuit filed in the U.S. District Court for the Central District of California against JM Eagle, the world-leading manufacturing of plastic and PVC piping. The attorney general threw the state’s lot in with a disgruntled former employee, John Hendrix, who filed a “whistleblower” lawsuit against the California-based company after he was fired, claiming JM Eagle produced inferior pipe that burst under high water pressure.

However, as we described in a September post, “Qui Tam, Attorneys General, and a Company Defends Itself,” the lawsuit rests on thin allegations the company has since refuted, time and time again. (See this recent summary, for starts.)

After three years of investigation, the federal government itself declined to back Hendrix’s suit under the federal False Claims Act. Other attorneys general chose to keep their states out of the litigation: Indiana, California, Massachusetts and Florida. In October, Attorney General Beau Biden took the unusual step of withdrawing  Delaware after it had previously filed as an intervenor. (JM Eagle news release.)

No wonder. In reality, the suit bears all the signs of being another profit-making exercise by the litigation industry, in this case, the qui tam branch of trial lawyerdom.

Successful qui tam – or “whistleblower” – suits allow a winning plaintiff to get a substantial share of the dollars recouped from a company found to have defrauded the government. (The federal False Claims Act, relevant in this case, involves wrongdoing by federal contractors and suppliers.) By trolling for such suits, signing on plaintiffs, and then running a PR and legal campaign to damage the targeted company’s reputation, law firms try to increase the size of their take.

Hendrix is being represented by the biggest player in this branch of anti-business law, the Washington, D.C., and San Francisco law firm of Phillips & Cohen. Given the amount of time, effort and money invested in its legal pursuit of JM Eagle, the lawyers are obviously hoping for a big payday.

Well, that’s what motivates private lawyers, isn’t it, maximizing their law firm’s profits? But attorneys general should first and foremost be representing the interests of a state’s citizens. To start with, Virginians would be best served by officials eschewing flimsy anti-business lawsuits, but for argument’s sake, let’s assume a valid claim. In such a case, Virginians might be better served by an expedited settlement or a non-monetary agreement instead of the biggest payout possible for some San Francisco lawyers.

Attorney General Ken Cuccinelli

Nevertheless, Attorney General Cuccinelli has decided that private contingency-fee attorneys can better represent Virginians than his own office can. He has hired Phillips & Cohen and Washington, D.C., law firm Day Pitney LLP, to serve as “special counsels” to carry out Virginia’s litigation against JM Eagle.

The Aug. 9 contract letter from Assistant Attorney General Eric A. Gregory (available here) specifies the terms of the arrangement, in which Hendrix would receive 20 percent of the state’s recoupment and the two law firms would split a 5 percent contingency fee according to their own terms. The two firms already represent other government plaintiffs, including Tennessee, Santa Cruz and Vallejo, Calif., and various water districts, so they are amassing quite a list of cash-seeking clients – again, with interests distinct from Virginia’s. (continue reading…)

The only good thing about passage of health care legislation is that it will allow the nation to move on to more unifying issues like immigration.

President Obama signs the Senate bill at a White House ceremony today at 11:15 a.m., Politico reports. He will then relocate to the Department of Interior for more expansive comments on the legislation. Insurance companies are anxiously waiting to see if he will restore their citizenship.

Once the bill is signed into law, the Senate will be able to debate H.R.4872, the Health Care and Education Reconciliation Act, with an actual law being reconciliated. The Senate convenes at 2:15 p.m.

Meanwhile, Reuters reports, “Employers brace for health reform changes“:

Companies and their lobbyists said a host of new rules and regulations are likely to increase taxes and health insurance premiums while hampering job growth for manufacturers, retailers and other large businesses.

“This legislation will make it more difficult to offer benefits not just for retirees but also current workers as companies have to weigh these costs,” said Dena Battle, the National Association of Manufacturers’ tax policy director.

It’s not just employers who will have a terrible time bearing these additional costs. The United States, its citizens, taxpayers and the federal government better get ready for rising costs that crowd out other national priorities. As Michael Gerson writes in today’s Washington Post, “Obama shows a president can be both strong and wrong“:

If this health-care reform had passed in, say, 1994, it might have been just another burden borne by a growing economy, and later refined as the predictable, unintended consequences of the law became evident — an economic drag but not a disaster.

Yet if the American government is headed toward a general entitlement crisis, Obama’s health reform will be seen as historically irresponsible. He is adding a massive entitlement on top of a structure of entitlements that is already precarious. The costs of this new commitment are projected to grow at about 8 percent a year — faster than the economy or tax revenue. And this entitlement is substantially funded by the easiest cuts in current entitlements — money that cannot be used to honor existing, unfunded entitlement promises.

Citizens, right, not subjects? The American Legislative Exchange Council drafted model legislation that has proved popular around the country, the Freedom of Choice in Health Care Act. From a March 22 news release, “Texas Is 39th State to Defend Health Care Choice“:

Washington, D.C.—The American Legislative Exchange Council (ALEC), the nation’s largest individual membership association of state legislators, today congratulates Texas Representative Bryan Hughes for announcing his intention to file legislation to protect Texans from a federal requirement to purchase health insurance. Texas now becomes the 39th state where legislators have introduced, or will introduce, legislation modeled after ALEC’s Freedom of Choice in Health Care Act.

“The bill that passed last night is a radical departure from the role of government our founders put in the Constitution,” said Hughes. “There is no question that it will lead to increased taxes, fewer health care options, and more government control of our most basic personal decisions. For these reasons and so many others, I will file legislation protecting Texans from the federal bill as soon as we are back in session.”

Attorneys general are also active. From Greta van Susteran’s show, a transcript of her interviews with AG Ken Kuccinelli of Virginia and AG Henry McMaster of South Carolina, “Legal Challenges Await Health Care Bill.”

Virginia Attorney General Ken Cuccinelli was the first attorney general out of the box this morning to announce litigation against the health care bill President Obama plans to sign into law. Cuccinelli’s argument is a straightforward one challenging the constitutionality of an individual mandate. Excerpt from Cuchinelli’s statement:

With this law, the federal government will force citizens to buy health insurance, claiming it has the authority to do so because of its power to regulate interstate commerce. We contend that if a person decides not to buy health insurance, that person – by definition – is not engaging in commerce, and therefore, is not subject to a federal mandate.

Virginia is in a unique situation that allows it the standing to file such a suit since Virginia is the only state so far to pass a law protecting its citizens from a government-imposed mandate to buy health insurance. The health care reform bill, with its insurance mandate, creates a conflict of laws between the federal government and Virginia. Normally, such conflicts are decided in favor of the federal government, but because we believe the federal law is unconstitutional, Virginia’s law should prevail.

Just being alive is not interstate commerce. If it were, there would be no limit to the U.S. Constitution’s commerce clause and to Congress’s authority to regulate everything we do. There has never been a point in our history where the federal government has been given the authority to require citizens to buy goods or services.

Washington Post, March 11, “Va. assembly approves bill to bar health-insurance mandate”
Heritage Foundation, Dec. 9, 2009, “The Individual Mandate in Obamacare is Unconstitutional“

Office of Gov. Rick Perry, Texas, “Texas Takes Legal Action Against Federal Government Over EPA CO2 Mandates“:

AUSTIN – Gov. Rick Perry, Attorney General Greg Abbott and Agriculture Commissioner Todd Staples today announced that the state is taking legal action in the U.S. Court of Appeals challenging the Environmental Protection Agency’s (EPA) endangerment finding for greenhouse gases.

“Texas is aggressively seeking its future in alternative energy through incentives and innovation, not mandates and overreaching regulation,” Gov. Perry said. “The EPA’s misguided plan paints a big target on the backs of Texas agriculture and energy producers and the hundreds of thousands of Texans they employ. This legal action is being taken to protect the Texas economy and the jobs that go with it, as well as defend Texas’ freedom to continue our successful environmental strategies free from federal overreach.”

• Petition for Reconsideration of Endangerment Cause
• Petition for Review

Washington Post, “Virginia challenges U.S. greenhouse gas curbs”

Virginia Attorney General Ken Cuccinelli II (R) on Tuesday filed paperwork attacking the legal underpinnings of an Obama administration effort to regulate greenhouse gas emissions, joining a crowd of political conservatives and business groups with similar objections.

Cuccinelli sent a petition to the U.S. Environmental Protection Agency, asking the agency to reconsider its finding in December that greenhouse gases pose a danger to public health by contributing to climate change. That finding is a legal trigger, which would allow the EPA to regulate those gases under the Clean Air Act, the same way it regulates the pollutants that cause smog.

Cuccinelli also filed a separate petition asking a federal court to review the EPA’s finding.

See also Richmond Times-Dispatch, “Va. challenges EPA’s stance on global warming”

The National Association of Manufacturers and other major business and agriculture groups also filed a petition for review on Tuesday.