Brief (Non Appeal), State of Arizona v. Yellen, No. 2:21-cv-00514 (D. Ariz.), Doc. 60 (July 7, 2021)
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Defendants' supplemental brief in opposition to Arizona's motion for final judgment, Case No. 2:21-cv-00514-DJH, in the U.S. District Court for the District of Arizona, dated July 7, 2021. The defendants argue that Arizona lacks Article III standing and cannot succeed on the merits, contending that the offset provision satisfies the Ninth Circuit's standard for Spending Clause unambiguity and that the Rescue Plan is not coercive or commandeering. They also argue that Arizona has not satisfied the remaining three requirements for a permanent injunction. The brief asks the Court to deny Arizona's motion and either dismiss the case or enter judgment for Defendants. The signature block shows /s/ Stephen Ehrlich.
Summary drafted by a model from the document's text below and checked by script against that text before publication. It is a navigation aid, not a reading of what the document proves. Where AI is used
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“Brief (Non Appeal), State of Arizona v. Yellen, No. 2:21-cv-00514 (D. Ariz.), Doc. 60 (July 7, 2021).”
Original at storage.courtlistener.com. Archived at Pandemic Darlings, https://pandemicdarlings.com/source-documents/brief-non-appeal-state-of-arizona-v-yellen-no-2-21-cv-00514-d-ariz-doc-ab2abac5b8/
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1 BRIAN M. BOYNTON
Acting Assistant Attorney General
2 BRIAN D. NETTER
3 Deputy Assistant Attorney General
ALEXANDER K. HAAS
4
Director, Federal Programs Branch
5 BRIGHAM J. BOWEN
6 Assistant Director, Federal Programs Branch
MICHAEL P. CLENDENEN
7
STEPHEN EHRLICH
8 CHARLES E.T. ROBERTS
Trial Attorneys
9
U.S. Department of Justice
10 Civil Division, Federal Programs Branch
11 100 L Street, NW
Washington, DC 20005
12
Tel.: (202) 305-9803
13 Email: stephen.ehrlich@usdoj.gov
14
Counsel for Defendants
15
16 UNITED STATES DISTRICT COURT
17 DISTRICT OF ARIZONA
18 Case No. 2:21-cv-00514-DJH
State of Arizona,
19
20 Plaintiff, DEFENDANTS’ SUPPLEMENTAL
21 BRIEF IN OPPOSITION TO
v. ARIZONA’S MOTION FOR
22 FINAL JUDGMENT
23 Janet Yellen, in her official capacity as
24 Secretary of the Treasury, et al.,
25 Defendants.
26
27
28
1
TABLE OF CONTENTS
2
3
INTRODUCTION .................................................................................................. 1
4
ARGUMENT........................................................................................................... 1
5
6 I. Arizona lacks Article III standing. ............................................................ 1
7 II. Arizona cannot succeed on the merits...................................................... 5
8
A. The offset provision more than satisfies the Ninth
9 Circuit’s standard for Spending Clause unambiguity................ 5
10
B. The Rescue Plan is not coercive or commandeering................... 9
11
12
III. Arizona has not satisfied the remaining three
requirements for obtaining a permanent injunction. ........................... 11
13
CONCLUSION ..................................................................................................... 11
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
Defs.’ Supp. Br. in Opp’n to Pl.’s Mot.|i
2:21-cv-00514-DJH
1 TABLE OF AUTHORITES
2 Cases
3
AFMS LLC v. United Parcel Serv. Co.,
4
105 F. Supp. 3d 1061 (C.D. Cal. 2015) ................................................................... 3
5
Air Line Pilots Ass’n v. Alaska Airlines, Inc.,
6
7 898 F.2d 1393 (9th Cir. 1990) ................................................................................ 11
8 Ariz. Dream Act Coal. v. Brewer,
9 757 F.3d 1053 (9th Cir. 2014) ................................................................................ 11
10 Arlington Cent. Sch. Dist. Bd. v. Murphy,
11 548 U.S. 291 (2006) ................................................................................................... 6
12 Bell v. New Jersey,
13 461 U.S. 773, 790 (1983) .......................................................................................... 3
14 Bennett v. Ky. Dep’t of Educ.,
15
470 U.S. 656 (1985) ............................................................................................... 1, 8
16
Bennett v. New Jersey,
17
470 U.S. 632 (1985) ................................................................................................... 1
18
Benning v. Georgia,
19
391 F.3d 1299 (11th Cir. 2004) ................................................................................ 6
20
Brinkman v. Schriro,
21
22 2013 WL 11311260 (D. Ariz. Mar. 20, 2013), aff’d, 616 F. App’x 227
23 (9th Cir. 2015) ........................................................................................................... 6
24 Bucklew v. Precythe,
25 139 S. Ct. 1112 (2019) ............................................................................................... 5
26 California v. Texas,
27 141 S. Ct. 2104 (2021) ............................................................................................... 4
28
Defs.’ Supp. Br. in Opp’n to Pl.’s Mot.|ii
2:21-cv-00514-DJH
1 Carney v. Adams,
2 141 S. Ct. 493 (2020) ................................................................................................. 2
3 Charles v. Verhagen,
4
348 F.3d 601 (7th Cir. 2003) ................................................................................. 6, 7
5
Children’s Hosp. Ass’n of Texas v. Azar,
6
933 F.3d 764 (D.C. Cir. 2019) ................................................................................... 8
7
City of Los Angeles v. Barr,
8
929 F.3d 1163 (9th Cir. 2019) ............................................................................. 8, 10
9
Cutter v. Wilkinson,
10
11
423 F.3d 579 (6th Cir. 2005) ..................................................................................... 6
12 DaimlerChrysler Corp. v. Cuno,
13 547 U.S. 332 (2006) .................................................................................................... 1
14 Davis ex rel. Lashonda D. v. Monroe Cnty. Bd. of Educ.,
15 526 U.S. 629 (1999) ................................................................................................ 6, 8
16 eBay Inc. v. MercExchange, L.L.C.,
17 547 U.S. 388 (2006) .................................................................................................... 1
18 Edmo v. Corizon, Inc.,
19
935 F.3d 757 (9th Cir. 2019) ..................................................................................... 1
20
F/W PBS v. City of Dallas,
21
493 U.S. 215 (1990) .................................................................................................... 3
22
Garcia v. Ryan,
23
2018 WL 10128046 (D. Ariz. Oct. 9, 2018) ............................................................. 4
24
Gruver v. La. Bd. of Supervisors for La. State Univ. Agric. & Mech. Coll.,
25
26 959 F.3d 178 (5th Cir. 2020) ..................................................................................... 9
27 Irving Indep. Sch. Dist. v. Tatro,
28 468 U.S. 883 (1984) .................................................................................................... 8
Defs.’ Supp. Br. in Opp’n to Pl.’s Mot.|iii
2:21-cv-00514-DJH
1 Isbell v. Ryan,
2 2011 WL 6050337 (D. Ariz. Dec. 6, 2011)............................................................... 6
3 Jackson v. Birmingham Bd. of Educ.,
4
544 U.S. 167 (2005) ................................................................................................ 6, 8
5
Lujan v. Defs. of Wildlife,
6
504 U.S. 555 (1992) .................................................................................................... 1
7
Maryland v. King,
8
567 U.S. 1301 (2012) ................................................................................................ 11
9
Massachusetts v. Mellon,
10
11
262 U.S. 447 (1923) ................................................................................................ 2, 3
12 Mayweathers v. Newland,
13 314 F.3d 1062 (9th Cir. 2002) ......................................................................... 6, 7, 10
14 Miss. Comm’n on Env’t Quality v. EPA,
15 790 F.3d 138 (D.C. Cir. 2015) ................................................................................... 9
16 Missouri v. Yellen,
17 No. 4:21-cv-376, 2021 WL 1889867 (E.D. Mo. May 11, 2021) ......................... 2, 4
18 Munn v. Illinois,
19
94 U.S. 113 (1876) .................................................................................................... 11
20
Nat’l Fed’n of Indep. Bus. v. Sebelius,
21
567 U.S. 519 (2012) .................................................................................... 3, 9, 10, 11
22
Ohio v. Yellen,
23
2021 WL 2712220 (S.D. Ohio July 1, 2021) ............................................................ 5
24
Organista v. Sessions,
25
26 2018 WL 776241 (D. Ariz. Feb. 8, 2018) ............................................................... 11
27 Pennhurst State Sch. & Hosp. v. Halderman,
28 451 U.S. 1 (1981) ........................................................................................................ 5
Defs.’ Supp. Br. in Opp’n to Pl.’s Mot.|iv
2:21-cv-00514-DJH
1 Petit v. U.S. Dep’t of Educ.,
2 675 F.3d 769 (D.C. Cir. 2012) ................................................................................... 8
3 Religious Sisters of Mercy v. Azar,
4
--- F. Supp. 3d ---, 2021 WL 191009 (D.N.D. Jan. 19, 2021) ................................. 9
5
Rostker v. Goldberg,
6
453 U.S. 57 (1981) ...................................................................................................... 1
7
South Dakota v. Dole,
8
483 U.S. 203 (1987) .................................................................................................. 10
9
Susan B. Anthony List v. Driehaus,
10
11
573 U.S. 149 (2014) ................................................................................................ 1, 2
12 Texas v. United States,
13 523 U.S. 296 (1998) .................................................................................................... 4
14 Trump v. New York,
15 141 S. Ct. 530 (2020) .............................................................................................. 1, 2
16 United States v. Butler,
17 297 U.S. 1 (1936) ...................................................................................................... 10
18 United States v. Miami University,
19
294 F.3d 797 (6th Cir. 2002) ..................................................................................... 8
20
United States v. Morrison,
21
529 U.S. 598 (2000) .................................................................................................... 5
22
Va. Dep’t of Educ. v. Riley,
23
106 F.3d 559 (4th Cir. 1997) ..................................................................................... 8
24
White v. Linderman,
25
26 2013 WL 4496364 (D. Ariz. Aug. 22, 2013)............................................................ 6
27 Whitman v. Am. Trucking Ass’ns,
28 531 U.S. 457 (2001) .................................................................................................... 9
Defs.’ Supp. Br. in Opp’n to Pl.’s Mot.|v
2:21-cv-00514-DJH
1 Statutes
2
42 U.S.C. § 802 .......................................................................................................passim
3
Regulations
4
5 86 Fed. Reg. 26,822 (May 17, 2021) ........................................................................ 2, 4
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
Defs.’ Supp. Br. in Opp’n to Pl.’s Mot.|vi
2:21-cv-00514-DJH
1 INTRODUCTION
2 Converting Arizona’s preliminary-injunction motion to a final-judgment
3 motion makes more apparent the problems with its suit. For permanent-injunc-
4 tion purposes, Arizona cannot demonstrate with evidence that this Court’s has
5 jurisdiction. Nor can Arizona show that the American Rescue Plan Act is uncon-
6 stitutional on its face. A permanent injunction is an “extraordinary remedy never
7 awarded as of right.” Edmo v. Corizon, Inc., 935 F.3d 757, 784 (9th Cir. 2019); eBay
8 Inc. v. MercExchange, L.L.C., 547 U.S. 388, 391 (2006) (reciting permanent-injunc-
9 tion factors). And invalidating an Act of Congress is “the gravest and most del-
10 icate duty that” federal courts are “called on to perform.” Rostker v. Goldberg, 453
11 U.S. 57, 64 (1981) (quotation marks omitted). So this Court should be wary of
12 enjoining portions of the Rescue Plan based on the State’s speculative concerns
13 about possible future disputes. Its motion should be denied.
14 ARGUMENT
15 I. ARIZONA LACKS ARTICLE III STANDING.
16 In seeking judgment, Arizona must adduce actual evidence to support
17 standing for each claim it presses. Lujan v. Defs. of Wildlife, 504 U.S. 555, 560
18 (1992); DaimlerChrysler Corp. v. Cuno, 547 U.S. 332, 352 (2006). It has not done so.
19 The State’s standing arguments—some raised for the first time after its re-
20 ply and none grounded in evidence—cannot distract from two fundamental
21 flaws: (1) the State lacks allegations or evidence demonstrating the concrete in-
22 tent and credible threat of enforcement required for pre-enforcement standing;
23 and (2) no other theory that Arizona now posits meets the State’s burden. At
24 bottom, Arizona lacks standing to press its premature and unripe claims. Susan
25 B. Anthony List v. Driehaus, 573 U.S. 149, 159 (2014); Trump v. New York, 141 S. Ct.
26 530, 535–36 (2020). Instead, recoupment proceedings, should they ever occur,
27 would be the proper forum to address a State’s challenge to this grant condition.
28 Bennett v. Ky. Dep’t of Educ., 470 U.S. 656, 669 (1985); Bennett v. New Jersey, 470
Defs.’ Supp. Br. in Opp’n to Pl.’s Mot.| 1
2:21-cv-00514-DJH
1 U.S. 632, 637 (1985). Unless and until Treasury institutes those proceedings, Ar-
2 izona cannot overcome the jurisdictional problems with its claims. Missouri v.
3 Yellen, No. 4:21-cv-376, 2021 WL 1889867, at *1 (E.D. Mo. May 11, 2021).
4 First, Arizona makes no effort to satisfy Driehaus’s two required elements
5 for pre-enforcement standing, effectively conceding that it cannot. Article III de-
6 mands proof of a concrete intention to engage in conduct proscribed by the stat-
7 ute. Driehaus, 573 U.S. at 159; see Carney v. Adams, 141 S. Ct. 493, 495 (2020).
8 Nowhere does Arizona state its intended uses of Rescue Plan funds, let alone that
9 it has a concrete plan to impermissibly offset net-tax-revenue reductions result-
10 ing from changes in state law. Missouri, 2021 WL 1889867, at *4. Nor has Arizona
11 demonstrated a credible threat of enforcement. Driehaus, 573 U.S. at 159. Not
12 only does the State lack any facts to suggest such a threat, but the Rule 1 —which
13 explains in detail how Treasury will enforce the offset provision—forecloses the
14 possibility of recoupment based on Arizona’s broad misreading of the statute.
15 Missouri, 2021 WL 1889867, at *5. As the Court noted at oral argument, “these
16 decisions are much further down the road so that the harm isn’t really imminent;
17 it’s more along the lines of possible.” Tr. 13–14; see Trump, 141 S. Ct. at 535–36
18 (“The Government’s eventual action will reflect both legal and practical con-
19 straints, making any prediction about future injury just that—a prediction.”).
20 Second, Arizona’s three “main” standing theories (sovereignty, uncertainty,
21 and coercion) and two additional theories (the Rule and diverting resources) are
22 futile. Tr. 10; see id. 19–20, 22–23, 52–53. To begin, the State identifies no analo-
23 gous case to support its novel harm-to-sovereignty theory. Tr. 10, 14, 18; see
24 Defs.’ Opp’n 6, ECF No. 31. As Defendants, the Rule, and the Missouri court have
25 all stated: merely enacting a tax cut does not implicate—or violate—the offset
26 provision. Defs.’ Opp’n 5–6, ECF No. 31; 86 Fed. Reg. 26,786; Missouri, 2021 WL
27
28
1 Notice, ECF No. 35; 86 Fed. Reg. 26,786 (May 17, 2021)
Defs.’ Supp. Br. in Opp’n to Pl.’s Mot.| 2
2:21-cv-00514-DJH
1 1889867, at *3–4. That provision does not implicate any sovereign interest in set-
2 ting tax policy. Missouri, 2021 WL 1889867, at *4; Bell v. New Jersey, 461 U.S. 773,
3 790 (1983) (“Requiring States to honor the obligations voluntarily assumed as a
4 condition of federal funding . . . simply does not intrude on their sovereignty.”);
5 Massachusetts v. Mellon, 262 U.S. 447, 479–80, 485–86 (1923).
6 Next, the State’s uncertainty-as-injury theory is unsupported. As the Court
7 recognized at argument, any such “harm”—premised on Arizona’s uncertainty
8 about accepting funds it has now accepted—is moot. Tr. 12–13. Arizona pivots
9 to the residual uncertainty about making tax changes. Tr. 11–16; see Compl.
10 ¶¶ 22, 39. But that purported injury does not “affirmatively appear in the rec-
11 ord.” 2 F/W PBS v. City of Dallas, 493 U.S. 215, 231 (1990). And it ignores that
12 (a) the offset provision does not implicate every tax change, and (b) the Rule de-
13 tails how Treasury will implement the offset provision. So Arizona has more
14 than sufficient information to understand the deal it has accepted. Tr. 19 (admit-
15 ting that the “regulation makes clear what was not clear when we filed our com-
16 plaint”). And again, Arizona cannot demonstrate a credible threat of
17 enforcement because the State nowhere explains (much less proves) that it will
18 misuse federal funds in a way that implicates the offset provision and the Rule.
19 Arizona’s coercion theory based on NFIB fares no better. See Tr. 17; 49–50.
20 There, States stood to lose preexisting funding if they declined new conditioned
21 funding. Despite a lack of immediate consequences, harm was certain because
22
23 2 In its fourth substantive brief, Arizona cites a local news article for the
proposition that the State’s current budget process is stalling “in the shadow of
24
the [offset provision].” Supp. Br. 4, ECF No. 48. That article includes no mention
25 of the Rescue Plan or the offset provision. Thus, the State bases this theory en-
26 tirely on guesswork, while also conceding that “[i]t’s hard to get inside the poli-
cymakers’ heads and figure out exactly how [the offset provision’s effects] play[]
27
out in practice.” Tr. 13. That cannot suffice for standing, especially because even
28 a relevant news article would be inadmissible hearsay. AFMS LLC v. United Parcel
Serv. Co., 105 F. Supp. 3d 1061, 1070 (C.D. Cal. 2015).
Defs.’ Supp. Br. in Opp’n to Pl.’s Mot.| 3
2:21-cv-00514-DJH
1 States would either lose preexisting funds or would accept the new funding un-
2 der threat of losing preexisting funds. Nat’l Fed’n of Indep. Bus. v. Sebelius, 567
3 U.S. 519, 575–85 (2012). Here, in contrast, the Rescue Plan did not threaten any
4 preexisting funds. Unlike NFIB, any “harm” (i.e., recoupment) is entirely uncer-
5 tain for the reasons explained above. See also Tr. 51 (Arizona effectively conced-
6 ing that the amount of funds is not coercive because recoupment is based on
7 misused funds, if any, which is indeterminate at this time); Section II.B., infra.
8 The State’s remaining theories (about the Rule and diverting resources) do
9 not appear in the Complaint and should not be entertained. Garcia v. Ryan, 2018
10 WL 10128046, at *14 (D. Ariz. Oct. 9, 2018) (Humetewa, J.). But the lynchpin to
11 both theories is Arizona’s professed concern about compliance costs, see Resp. to
12 Notice 1–2, ECF No. 49; 3 Tr. 19–20, 22–23, 52–53, which the State has not substan-
13 tiated. And Arizona has not challenged the source of these supposed costs: the
14 statutory provision requiring a “detailed accounting” of “all modifications to”
15 its “tax revenue sources during the covered period,” 42 U.S.C. § 802(d)(2), or the
16 Rule itself. The Supreme Court recently rejected this exact standing theory—
17 premised on harms from unchallenged statutory provisions—because it was not
18 traceable to the provision at issue. California v. Texas, 141 S. Ct. 2104, 2119 (2021).
19 The Rule also explicitly allows States to use Rescue Plan funds to cover reporting
20 costs, 86 Fed. Reg. 26,822, so Arizona need not use its own resources at all.
21 Because this case “involves too remote and abstract an inquiry for the
22 proper exercise of the judicial function,” Missouri, 2021 WL 1889867, at *5 (quot-
23 ing Texas v. United States, 523 U.S. 296, 301 (1998)), the Court should deny the
24 State’s motion and dismiss the Complaint.
25
26
3 Arizona also misreads Lujan when it argues that it is “an ‘object’ of the
27
Interim Rule” and therefore has standing. Resp. to Notice, 1–2. The Supreme
28
Court in Lujan did not disturb the requirements for pre-enforcement standing dis-
cussed above and since reaffirmed by the Court in Driehaus.
Defs.’ Supp. Br. in Opp’n to Pl.’s Mot.| 4
2:21-cv-00514-DJH
1
II. ARIZONA CANNOT SUCCEED ON THE MERITS.
2 Arizona fails to meet its heavy burden to show that the offset provision is
3 “unconstitutional in all its applications.” Bucklew v. Precythe, 139 S. Ct. 1112, 1127
4 (2019); United States v. Morrison, 529 U.S. 598, 607 (2000).
5 A. The offset provision more than satisfies the Ninth Circuit’s standard
for Spending Clause unambiguity.
6
7 Precedent regarding Spending Clause unambiguity establishes that Con-
8 gress must only make clear that acceptance of federal money obligates the States
9 to comply with a condition. 4 In Pennhurst—the origin of the Spending Clause
10 unambiguity requirement—the Supreme Court held that “if Congress intends to
11 impose a condition on the grant of federal moneys, it must do so unambiguously.”
12 Pennhurst State Sch. & Hosp. v. Halderman, 451 U.S. 1, 24 (1981) (emphasis added).
13 There, the statute provided money to States and contained a “bill of rights” pro-
14 vision specifying that mentally disabled citizens “have a right to appropriate
15 treatment, services, and habilitation for such disabilities” to be provided “in the
16 setting that is least restrictive of the person’s personal liberty.” Id. at 13. The
17 Court held that these statements “represent general statements of federal policy,
18 not newly created legal duties” and “in no way suggests that the grant of federal
19 funds is ‘conditioned’ on a State's funding the rights described therein.” Id. at 23.
20 The Pennhurst Court then explicitly recognized that a State’s obligations may be
21 “largely indeterminate,” so long as Congress gives “clear notice to the States that
22 they, by accepting funds under the Act, would indeed be obligated to comply
23 with” the condition. Id. at 25.
24 Numerous Spending Clause cases—in the Supreme Court, the Ninth Cir-
25 cuit, and other Circuits—all confirm that the existence of a condition is what en-
26 sures that States make “an informed choice” when accepting federal funds. Id.
27
4 The Ohio court’s contrary holding misreads governing precedent and mis-
28
conceives the Spending Clause inquiry. Compare Section II. A. & Tr. 35–36, 39–42
with Ohio v. Yellen, 2021 WL 2712220, at *10–20 (S.D. Ohio July 1, 2021).
Defs.’ Supp. Br. in Opp’n to Pl.’s Mot.| 5
2:21-cv-00514-DJH
1 The Supreme Court itself has repeatedly affirmed that “there [i]s sufficient notice
2 under Pennhurst where a statute ma[kes] clear that some conditions [a]re placed
3 on the receipt of federal funds.” Jackson v. Birmingham Bd. of Educ., 544 U.S. 167,
4 183 (2005); Davis ex rel. Lashonda D. v. Monroe Cnty. Bd. of Educ., 526 U.S. 629, 650
5 (1999). And the Circuits have done the same, holding that the Spending Clause
6 is satisfied where a “statute’s intention to impose a condition is expressed clearly,”
7 even though the operation of a funding condition “is perhaps unpredictable.”
8 Mayweathers v. Newland, 314 F.3d 1062, 1067 (9th Cir. 2002); Charles v. Verhagen,
9 348 F.3d 601, 607–08 (7th Cir. 2003) (“[T]he exact nature of the conditions may be
10 ‘largely indeterminate,’ provided that the existence of the conditions is clear . . . .”
11 (emphasis added)); Benning v. Georgia, 391 F.3d 1299, 1307 (11th Cir. 2004); Cutter
12 v. Wilkinson, 423 F.3d 579, 586 (6th Cir. 2005). Congress must only “make the
13 existence of the condition itself—in exchange for the receipt of federal funds—
14 explicitly obvious.” Mayweathers, 314 F.3d at 1067.
15 Contrary to Arizona’s fleeting argument, the same analysis still applies af-
16 ter Arlington Central. See Tr. 50. There, the Supreme Court examined whether
17 the specific conduct at issue—payment of expert fees—clearly existed in the stat-
18 ute as a funding condition. Arlington Cent. Sch. Dist. Bd. v. Murphy, 548 U.S. 291,
19 296 (2006). As in Pennhurst, the Court performed a statutory analysis, determin-
20 ing that expert-fee payments were not a statutory funding condition because the
21 statute’s text was insufficiently broad to place States on notice that they might
22 need to pay expert fees. Id. at 297–99. But nothing in Arlington Central changed
23 the Pennhurst analysis applied in Mayweathers. That’s why courts have continu-
24 ally followed the holding of Mayweathers long after Arlington Central. See, e.g.,
25 Brinkman v. Schriro, 2013 WL 11311260, at *5 (D. Ariz. Mar. 20, 2013), aff’d, 616 F.
26 App’x 227 (9th Cir. 2015); White v. Linderman, 2013 WL 4496364, at *8 (D. Ariz.
27 Aug. 22, 2013); Isbell v. Ryan, 2011 WL 6050337, at *9 (D. Ariz. Dec. 6, 2011).
28
Defs.’ Supp. Br. in Opp’n to Pl.’s Mot.| 6
2:21-cv-00514-DJH
1 Here, Congress made abundantly clear that the acceptance of Rescue Plan
2 funds obligates the State to comply with the offset provision, easily passing mus-
3 ter under binding Supreme Court and Ninth Circuit precedent. 42 U.S.C.
4 § 802(c)(1) (delineating“[f]urther restriction[s] on the use of funds,” including the
5 offset provision, which governs a State’s “use [of] the funds provided under this
6 section”). But the offset provision provides far more notice than the Spending
7 Clause requires, establishing not only the existence of a condition but the nature
8 and scope of the condition. By its plain terms, the offset provision applies only
9 when a State uses Rescue Plan funds to “offset” a reduction in “net” tax revenue
10 resulting from changes in state law. 42 U.S.C. § 802(c)(2)(A); see Defs.’ Opp’n 8–
11 9 (describing the undisputed meaning of “net” and “offset”). Taken together, the
12 statute’s language simply ensures that States are not using federal funds to fi-
13 nance state tax cuts that decrease net tax revenue. For example, assuming no
14 other changes, a State could not receive $2 billion in Rescue Plan funds, cut its
15 income tax by an amount equal to $2 billion, and use the Rescue Plan funds to
16 offset the revenue loss. That would be using Rescue Plan Funds to “directly”
17 offset a net-tax-revenue reduction. 42 U.S.C. § 802(c)(2)(A). Similarly, again as-
18 suming no other changes, a State could not use Rescue Plan funds to replace $2
19 billion in planned state expenditures on COVID-19 testing and then use the $2
20 billion it had originally budgeted for that purpose to offset a $2 billion reduction
21 in state income tax. That would be using Rescue Plan Funds to “indirectly” offset
22 a net-tax-revenue reduction. Id. But States are free to offset such reductions by
23 other means, including certain spending cuts.
24 Arizona’s argument—that Congress itself must specify minute details of a
25 funding condition—is wrong. See Tr. 50–52. “[I]t is simply impossible” for Con-
26 gress to “delineate every instance in which a State may or may not comply with”
27 the offset provision. Charles, 348 F.3d at 608; Mayweathers, 314 F.3d at 1067. As
28 the Supreme Court has admonished, “every improper expenditure” need not be
Defs.’ Supp. Br. in Opp’n to Pl.’s Mot.| 7
2:21-cv-00514-DJH
1 “specifically identified and proscribed” in the statute. Bennett, 470 U.S. at 666;
2 Jackson, 544 U.S. 167 at 183 (reiterating Bennett); Davis, 526 U.S. at 650 (same).
3 Imposing that unreachable standard would render unconstitutional nu-
4 merous funding regimes, like Medicaid and education statutes. This is not hy-
5 pothetical. Arizona says that agency regulations implementing Spending Clause
6 statutes can never get Chevron deference because an “agency’s power to fill in
7 necessary details in this context could only arise if the Constitution were already
8 violated.” Pl.’s Reply 10. But courts have deferred to such regulations for dec-
9 ades. See, e.g., Irving Indep. Sch. Dist. v. Tatro, 468 U.S. 883, 891–92 (1984) (Educa-
10 tion of the Handicapped Act); Children’s Hosp. Ass’n of Texas v. Azar, 933 F.3d 764,
11 770 (D.C. Cir. 2019) (Medicaid); Petit v. U.S. Dep’t of Educ., 675 F.3d 769, 778 (D.C.
12 Cir. 2012) (IDEA); United States v. Miami University, 294 F.3d 797, 811-15 (6th Cir.
13 2002) (Family Educational Rights and Privacy Act). And Arizona’s position can-
14 not be squared with the Ninth Circuit’s application of Chevron deference while
15 simultaneously finding no Spending Clause violation. City of Los Angeles v. Barr,
16 929 F.3d 1163 (9th Cir. 2019).
17 Instead, when Pennhurst (and the legion of other cases) are properly ap-
18 plied such that Congress must simply make clear that acceptance of federal funds
19 obligates the State to comply with a condition, agency regulations have no bear-
20 ing on the Spending Clause analysis. If a statutory funding condition exists, the
21 implementing agency could regulate the details of the condition subject to the
22 Administrative Procedure Act and the other typical constraints; if not, any
23 agency regulation imposing funding conditions would be unauthorized by the
24 statute. That is the upshot of the Riley case cited by Arizona. Tr. 53; Va. Dep’t of
25 Educ. v. Riley, 106 F.3d 559, 568 (4th Cir. 1997) (en banc) (reasoning that an agency
26 could not, by regulation, act ultra vires by imposing spending conditions that did
27 not exist as part of the statute). And, unlike Arizona’s theory, that is consistent
28 with the well-settled rule that Congress may confer decisionmaking authority on
Defs.’ Supp. Br. in Opp’n to Pl.’s Mot.| 8
2:21-cv-00514-DJH
1 agencies if it “lay[s] down by legislative act an intelligible principle.” Whitman
2 v. Am. Trucking Ass’ns, 531 U.S. 457, 472 (2001).
3 The Court should find the offset provision plainly within Congress’s
4 Spending Clause authority and reject Arizona’s attempt to impose an unambi-
5 guity standard that would render a myriad of federal statutes unconstitutional.
6 B. The Rescue Plan is not coercive or commandeering.
7 Originally, Arizona did not raise an independent coercion or anti-comman-
8 deering argument. 5 The State simply contended that a broad (and atextual) in-
9 terpretation of the offset provision that “prohibit[s] any change in tax policy
10 whatsoever that reduces tax revenue”—which Defendants affirmatively rejected
11 in the Rule—would be “coercive.” PI Mot. 12–16. But Arizona has now seem-
12 ingly changed tack, emphasizing at oral argument that the offset provision is un-
13 constitutionally coercive. Tr. 25. The State is wrong.
14 For starters, Congress has full “authority to condition the receipt of funds
15 on the States’ complying with restrictions on the use of those funds, because that
16 is the means by which Congress ensures that the funds are spent according to its
17 view of the ‘general Welfare.’” NFIB, 567 U.S. at 580; Defs.’ Opp’n 14. That is
18 exactly what Congress has done here: titled “[f]urther restriction on the use of
19 funds,” the offset provision only applies to a State’s “use [of] the funds provided
20 under this section.” 42 U.S.C. § 802(c)(2) (emphasis added). So a coercion anal-
21 ysis is inapplicable because Congress here is not “pressuring the States to accept
22 policy changes” independent of the new federal funds. NFIB, 567 U.S. at 580;
23 Gruver v. La. Bd. of Supervisors for La. State Univ. Agric. & Mech. Coll., 959 F.3d 178,
24 183–84 (5th Cir. 2020); Miss. Comm’n on Env’t Quality v. EPA, 790 F.3d 138, 179
25 (D.C. Cir. 2015); Religious Sisters of Mercy v. Azar, --- F. Supp. 3d ---, 2021 WL
26 191009, at *25 (D.N.D. Jan. 19, 2021), appeal pending on other grounds, No. 21-1890
27
28 5 The parties agree that the inquiry under both the Spending Clause and the
Tenth Amendment is the same. Defs.’ Opp’n 15; PI Mot. 8 n.1.
Defs.’ Supp. Br. in Opp’n to Pl.’s Mot.| 9
2:21-cv-00514-DJH
1 (8th Cir.). Arizona is free to do what it wants with its own money or tax scheme,
2 including cutting taxes, providing rebates, increasing spending, or cutting ex-
3 penditures. See Defs.’ Opp’n 9–10. The State must simply refrain from using the
4 federal money to “directly or indirectly offset a reduction in net tax revenue” re-
5 sulting from state tax-law changes. 6 42 U.S.C. § 802(c)(2).
6 Even if the coercion analysis did apply here, Arizona would lose under
7 NFIB. As Defendants previously explained, the key aspect of the Medicaid ex-
8 pansion that NFIB found to be coercive was that Congress “penalize[d] States
9 that choose not to participate in that new program by taking away their existing
10 Medicaid funding.” NFIB, 567 U.S. at 585. Here, in stark contrast, there are no
11 monetary consequences if a State chooses to decline the Rescue Plan funds.
12 Defs.’ Opp’n 14–16. Contrary to Arizona’s contention, Tr. 26–27, the amount of
13 funding at issue in NFIB was only relevant to the preexisting funding that would
14 be withdrawn if States declined the Medicaid expansion. Compare NFIB, 567 U.S.
15 at 582 (finding that a threatened loss of preexisting Medicaid funds—ten percent
16 of States’ overall budgets—was coercive) with South Dakota v. Dole, 483 U.S. 203,
17 211 (1987) (finding that a threatened five-percent loss of preexisting highway
18 funds was not coercive). After all, “[t]hreat of loss, not hope of gain, is the es-
19 sence of economic coercion.” United States v. Butler, 297 U.S. 1, 81 (1936) (Stone,
20 J., dissenting). And all Justices in NFIB agreed that, despite the amount of fund-
21 ing at issue, “Congress could have made just the new funding provided under
22 the ACA contingent on acceptance of the terms of the Medicaid Expansion.”
23
24 6 Because the offset provision merely specifies how States may use the
25 newly appropriated federal funds, it is, by definition, related to the purposes of
the Act. See Defs.’ Opp’n 10. Congress did not provide the Rescue Plan funds as
26 a means to replace purposeful decreases in net tax revenue; it provided the money
to help States economically recover from the pandemic in ways they otherwise
27 could not. This is more than sufficient to meet the “low-threshold relatedness
test” that the Ninth Circuit has called “not demanding.” City of Los Angeles, 929
28 F.3d at 1175; Mayweathers, 314 F.3d at 1067. In fact, neither Arizona nor the Ninth
Circuit have found a case that “struck down a condition on federal grants based
on this relatedness prong.” City of Los Angeles, 929 F.3d at 1175.
Defs.’ Supp. Br. in Opp’n to Pl.’s Mot.| 10
2:21-cv-00514-DJH
1 NFIB, 567 U.S. at 687–88 (joint dissent); id. at 576, 585 (plurality) (same). That
2 holding defeats Arizona’s claim that the sheer amount of offered funding is dis-
3 positive, regardless of whether it is being newly provided or eliminated. Nota-
4 bly, the offset provision is even more modest than the prospective funding
5 condition that NFIB indicated was permissible: a State does not lose all of its Res-
6 cue Plan funding if it violates the offset provision, but only the amount of funds
7 it uses as an improper offset. See 42 U.S.C. § 802(e)(1).
8 Arizona had “a legitimate choice whether to accept the federal conditions
9 in exchange for federal funds.” NFIB, 567 U.S. at 578. So its newfound coercion
10 arguments should be rejected.
11 III. ARIZONA HAS NOT SATISFIED THE REMAINING THREE REQUIREMENTS
FOR OBTAINING A PERMANENT INJUNCTION.
12
13 Arizona will suffer no irreparable harm if its motion is denied because the
14 State will have “an adequate remedy” if recoupment proceedings ever material-
15 ize. Defs.’ Opp’n 16–17 (citing Ariz. Dream Act Coal. v. Brewer, 757 F.3d 1053, 1068
16 (9th Cir. 2014)). In contrast, an injunction would irreparably harm the United
17 States because “[a]ny time a [government] is enjoined by a court from effectuat-
18 ing statutes enacted by representatives of its people, it suffers a form of irrepara-
19 ble injury.” Maryland v. King, 567 U.S. 1301, 1303 (2012) (Roberts, C.J., in
20 chambers). And “[i]f there is doubt, the expressed will of the legislature should
21 be sustained.” Munn v. Illinois, 94 U.S. 113 (1876).
22 CONCLUSION
23 The Court should deny Arizona’s motion and either dismiss the case or en-
24 ter judgment for Defendants. See Air Line Pilots Ass’n v. Alaska Airlines, Inc., 898
25 F.2d 1393, 1397 n.4 (9th Cir. 1990); Organista v. Sessions, 2018 WL 776241, at *3 (D.
26 Ariz. Feb. 8, 2018).
27
28
Defs.’ Supp. Br. in Opp’n to Pl.’s Mot.| 11
2:21-cv-00514-DJH
1 DATED: July 7, 2021 Respectfully submitted,
2 BRIAN M. BOYNTON
3 Acting Assistant Attorney General
4
BRIAN D. NETTER
5 Deputy Assistant Attorney General
6
ALEXANDER K. HAAS
7
Director, Federal Programs Branch
8
BRIGHAM J. BOWEN
9
Assistant Director, Federal Programs Branch
10
11 /s/ Stephen Ehrlich
MICHAEL P. CLENDENEN
12
STEPHEN EHRLICH
13 CHARLES E.T. ROBERTS
14 Trial Attorneys
Civil Division, Federal Programs Branch
15 U.S. Department of Justice
16 1100 L Street, NW
Washington, DC 20005
17
Phone: (202) 305-9803
18 Email: stephen.ehrlich@usdoj.gov
19
Counsel for Defendants
20
21
22
23
24
25
26
27
28
Defs.’ Supp. Br. in Opp’n to Pl.’s Mot.| 12
2:21-cv-00514-DJH
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