Brief - Response, State of Arizona v. Yellen, No. 2:21-cv-00514 (D. Ariz.), Doc. 47 (June 18, 2021)

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Defendants' supplemental brief in opposition to Arizona's motion for preliminary injunction, Document 47 in Case No. 2:21-cv-00514-DJH, filed 06/18/21, in the U.S. District Court for the District of Arizona. The introduction states that on May 12, 2021, Defendants notified the Court of the decision in Ohio v. Yellen denying a preliminary injunction, and that the Court then ordered additional briefing on whether Plaintiff's requested preliminary injunction would redress the alleged harm. Defendants state that they agree with the Ohio court that a preliminary injunction will not redress the State's harm and must be denied. The brief is dated June 18, 2021 and the signature block shows /s/ Stephen Ehrlich.

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“Brief - Response, State of Arizona v. Yellen, No. 2:21-cv-00514 (D. Ariz.), Doc. 47 (June 18, 2021).” Original at storage.courtlistener.com. Archived at Pandemic Darlings, https://pandemicdarlings.com/source-documents/brief-response-state-of-arizona-v-yellen-no-2-21-cv-00514-d-ariz-doc-4-4733d2a667/, SHA-256 d8e9c950e76776200811fc002cf3885a5cb0843f93ba39a83df22402ee302e08.

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Case 2:21-cv-00514-DJH Document 47 Filed 06/18/21 Page 1 of 7

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 PRELIMINARY INJUNCTION
23 Janet Yellen, in her official capacity as
24 Secretary of the Treasury, et al.,

25 Defendants.
26
27
28
Case 2:21-cv-00514-DJH Document 47 Filed 06/18/21 Page 2 of 7

1 INTRODUCTION

2 On May 12, 2021, Defendants notified the Court of a decision in Ohio v.
3 Yellen, No. 1:21-cv-181, 2021 WL 1903908 (S.D. Ohio May 12, 2021), denying a pre-
4 liminary injunction in a similar case. ECF No. 39. “In light of that court’s discus-
5 sion,” this Court ordered “additional, simultaneous briefing . . . on whether
6 Plaintiff’s requested preliminary injunction would redress the alleged harm.”
7 ECF No. 42. Defendants agree with the Ohio court’s conclusion that a preliminary
8 injunction will not redress the State’s harm and that preliminary-injunctive relief
9 must therefore be denied. More fundamentally, however, the Ohio court’s rea-
10 soning highlights the jurisdictional flaws in this case: Arizona lacks standing to
11 bring a facial, pre-enforcement challenge and this case is not ripe for review.
12 ARGUMENT
13 The Ohio court was correct that, in these challenges to the American Rescue
14 Plan Act, a preliminary injunction would not redress any irreparable harm. In
15 Ohio, the court found that, if the State was entitled to additional “clarity” prior to
16 certifying that it would comply with the terms of the grant, then the lack of clarity
17 was an injury-in-fact. 2021 WL 1903908, at *8–11. But “to qualify for the ‘extraor-
18 dinary remedy’ of a preliminary injunction,” the court noted, the State “must
19 show that the requested injunctive relief will prevent or terminate [an] ongoing
20 harm.” Id. at *14 (citation omitted). In Ohio, the State sought to preliminarily en-
21 join the Secretary of the Treasury from exercising her recoupment authority
22 against Ohio. Id. But “there is no reason to believe that the Secretary will exercise
23 those powers any time soon.” Id. So “[a]n Order telling the Secretary not to do
24 that which the Secretary has no current ability—or intent—to do, and likely will
25 not be in a position to at any time soon . . . does not avoid any harm that the State
26 is likely to encounter during the pendency of the preliminary injunction.” Id.
27 Arizona’s request for preliminary relief suffers from the same flaws. Like
28 Ohio, Arizona seeks a preliminary injunction prohibiting the Secretary of the

Defs.’ Supp. Br. in Opp. to Pl.’s Prelim. Inj. Mot.| 1
2:21-cv-00514-DJH
Case 2:21-cv-00514-DJH Document 47 Filed 06/18/21 Page 3 of 7

1 Treasury from exercising her recoupment powers under the offset provision. See
2 PI Mot. 3, ECF No. 11. But “there is no reason to believe that the Secretary will
3 exercise those powers any time soon.” Ohio, 2021 WL 1903908, at *14. Arizona
4 submitted its certification to Treasury on May 21, 2021. In that certification, Ari-
5 zona agreed to comply with the terms of the statute and the Rule, 1 and the State
6 received its first payment of over $2 billion on May 28. Arizona has not alleged
7 (let alone proved) that it has violated its agreement, or even that it is contemplat-
8 ing violating that agreement, by using Rescue Plan funds to offset a net-tax-reve-
9 nue reduction resulting from a change in state law. 2 There are no foreseeable
10 recoupment proceedings against Arizona that an injunction would prevent.
11 The reasoning of the Ohio court also supports Defendants’ arguments that,
12 based on the factual circumstances present here, Arizona lacks standing and of-
13 fers no ripe dispute. In Ohio, the court found that the only theory sufficient to
14 support standing was the State’s claim that it needed information in order to de-
15 cide whether to submit a certification. 2021 WL 1903908, at *8–11. Here, Arizona
16 has already submitted its certification and received over $2 billion. Arizona’s re-
17 maining theories of injury fail for the reasons stated in Ohio: there are no immi-
18 nent recoupment proceedings, both because Arizona has not announced any
19 intention to misuse Rescue Plan funds to offset a net-tax-revenue reduction re-
20 sulting from a change in state law and because, even if Arizona were to misuse
21 Rescue Plan funds in this way, the Secretary of the Treasury may exercise her
22
23
1 Notice of Interim Final Rule, ECF No. 35; 86 Fed. Reg. 26,786 (May 17,
24 2021) (“the Rule”).
2 In reply, Arizona notes that the Arizona Legislature passed S.B. 1752,
25
which simply conforms certain Arizona tax laws with federal tax laws. See Pl.’s
26 Reply 5, ECF No. 32. But Treasury explained long ago that such conforming
changes do not run afoul of the offset provision. See Treasury Statement on State
27 Fiscal Recovery Funds and Tax Conformity (Apr. 7, 2021),
https://go.usa.gov/xHW6R. And that position has since been codified in the
28 Rule. See 86 Fed. Reg. at 26,808. Moreover, Arizona has nowhere explained how
S.B. 1752 impacts its net tax revenue or even suggested that it might impermissi-
bly offset any reduction in net tax revenue with Rescue Plan funds.

Defs.’ Supp. Br. in Opp. to Pl.’s Prelim. Inj. Mot.| 2
2:21-cv-00514-DJH
Case 2:21-cv-00514-DJH Document 47 Filed 06/18/21 Page 4 of 7

1 enforcement discretion not to seek recoupment. So Arizona lacks standing. Re-
2 latedly, Arizona’s pre-enforcement challenge is not ripe. Without any foreseeable
3 recoupment proceedings, Arizona cannot demonstrate any “concrete action ap-
4 plying [Treasury’s] regulation to [Arizona’s] situation in a fashion that harms or
5 threatens to harm [it].” Id. at 7 (citation omitted). These realities led another dis-
6 trict court to dismiss that State’s similar challenge to the offset provision. Missouri
7 v. Yellen, 2021 WL 1889867, at *3–5 (E.D. Mo. May 11, 2021).
8 Arizona largely ignores these arguments (and binding precedent), relying
9 on shifting theories of standing in an attempt to establish jurisdiction. But no
10 amount of contrivance can change the fact that Arizona is concerned about re-
11 coupment proceedings that rest upon “contingent future events that may not oc-
12 cur as anticipated, or indeed may not occur at all.” Trump v. New York, 141 S. Ct.
13 530, 535 (2020) (citation omitted).
14 First, the State insists that the Court should adopt its misreading of the offset
15 provision’s plain text to find standing. Reply 3. But as explained, the offset pro-
16 vision does not prohibit cutting or changing any state taxes; it merely prohibits
17 using new federal funds to offset a reduction in net tax revenue resulting from such
18 changes. Opp’n 5; Missouri, 2021 WL 1889867, at *4. Arizona cannot establish
19 standing by rewriting the statute, especially because Treasury has now issued
20 regulations concerning enforcement of the offset provision that reject Arizona’s
21 misreading. See Missouri, 2021 WL 1889867, at *5; 86 Fed. Reg. at 26,807–11. And
22 the State does not even attempt to show a net-tax-revenue reduction resulting
23 from state tax-law changes, let alone any intent to use Rescue Plan funds to offset
24 any such reduction. So there is no injury in fact or irreparable harm. Susan B.
25 Anthony List v. Driehaus, 573 U.S. 149, 159 (2014) (requiring both intent to engage
26 in a proscribed course of conduct and credible threat of enforcement for a pre-
27 enforcement injury in fact).
28

Defs.’ Supp. Br. in Opp. to Pl.’s Prelim. Inj. Mot.| 3
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Case 2:21-cv-00514-DJH Document 47 Filed 06/18/21 Page 5 of 7

1 Second, the State cannot rely on the merits of its ambiguity argument to
2 show it has standing. Reply 3. As explained, Congress need only provide “clear
3 notice” of the existence of a funding condition, not every possible application of
4 that condition. PI Opp’n 11–13; see Mayweathers v. Newland, 314 F.3d 1062, 1067
5 (9th Cir. 2002). And the offset provision (especially when considered alongside
6 the Rule that Arizona has agreed to follow) provides more than sufficient clarity
7 as to the nature of the condition. PI Opp’n 8–11. The State’s assertion that De-
8 fendants failed to cite any case for these propositions is puzzling. Reply 3. De-
9 fendants cited numerous controlling and persuasive cases for each. PI Opp’n 8–
10 13. Instead, it is Arizona that lacks any precedent supporting a party’s standing
11 to prematurely rewrite an accepted bargain before any imminent harm. “Requir-
12 ing States to honor the obligations voluntarily assumed as a condition of federal
13 funding before recognizing their ownership of funds simply does not intrude on
14 their sovereignty.” Bell v. New Jersey, 461 U.S. 773, 790 (1983).
15 Third, where, as here, only new federal funding is at issue, the State cannot
16 show standing through coercion. Arizona relies entirely on NFIB, Reply 3–4, but
17 everyone there agreed that “Congress could have made just the new funding pro-
18 vided under the ACA contingent on acceptance of the terms of the Medicaid Ex-
19 pansion.” 567 U.S. at 687–88 (joint dissent); 567 U.S. at 575–85 (plurality). The
20 coercive threat there was loss of preexisting Medicaid funding. Here, Arizona
21 identifies no threat of loss, much less an imminent one. Indeed, the only potential
22 loss is speculative: recoupment of misused funds far in the future.
23 Fourth, there are no unconstitutional conditions here. Reply 4. This is not a
24 case about “denial of equal treatment” among bidders in a bargaining process.
25 Ne. Fla. Chapter of Associated Gen. Contractors of Am. v. City of Jacksonville, 508 U.S.
26 656, 666 (1993). The offset provision applies equally to any State that, like Ari-
27 zona, chooses to accept the funds.
28

Defs.’ Supp. Br. in Opp. to Pl.’s Prelim. Inj. Mot.| 4
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Case 2:21-cv-00514-DJH Document 47 Filed 06/18/21 Page 6 of 7

1 Fifth, standing cannot be based on Arizona’s supposed diversion of re-
2 sources. Every funding condition imposes some compliance costs, yet courts
3 have consistently identified enforcement proceedings, should they ever occur, as
4 the proper context for addressing a State’s challenge to grant conditions. Arling-
5 ton Cent. Sch. Dist. Bd. of Educ. v. Murphy, 548 U.S. 291 (2006); Bennett v. Ky. Dep’t
6 of Educ., 470 U.S. 656, 669 (1985); Bennett v. New Jersey, 470 U.S. 632, 637 (1985).
7 And here, the Rule allows States to use Rescue Plan funds to cover administrative
8 costs, 86 Fed. Reg. 26,822, so Arizona need not divert any resources at all.
9 The State’s remaining arguments about imminence and ripeness rely on the
10 misreadings discussed above. Reply 4–6. Arizona can make any tax-law changes
11 it wishes. Missouri, 2021 WL 1889867, at *4. What it may not do (and what it has
12 failed to allege it is even considering doing) is use federal funds to pay for net-
13 tax-revenue reductions resulting from those changes. Id. Unless Arizona intends
14 to use federal funds for that purpose, there is no threat of enforcement, no stand-
15 ing, and no ripeness. Driehaus, 573 U.S. at 159; Nat’l Park Hosp. Ass’n v. Dep’t of
16 Interior, 538 U.S. 803, 807–08 (2003). That is especially true for Arizona’s pursuit
17 of injunctive relief because the only “penalty” for a violation of the offset provi-
18 sion is recoupment of misused funds, and monetary penalties are the quintessen-
19 tial example of harm that is not irreparable. See Opp’n to PI Mot. 16.
20 In the end, though, even if there were standing, ripeness, and irreparable
21 harm, the preliminary relief that Arizona seeks would not redress that harm be-
22 cause hypothetical recoupment proceedings are far in the future. Ohio, 2021 WL
23 1903908, at *14. The Ohio court was correct in that respect. This Court should
24 follow that reasoning to its logical conclusion, join the Missouri court, and hold
25 that it lacks jurisdiction to grant any form of relief, preliminary or otherwise.
26 CONCLUSION
27 For the reasons explained above and in Defendants’ opposition to Arizona’s
28 preliminary-injunction motion, the Court should deny Arizona’s motion.

Defs.’ Supp. Br. in Opp. to Pl.’s Prelim. Inj. Mot.| 5
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Case 2:21-cv-00514-DJH Document 47 Filed 06/18/21 Page 7 of 7

1 DATED: June 18, 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. to Pl.’s Prelim. Inj. Mot.| 6
2:21-cv-00514-DJH

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