Memorandum Opinion, State of West Virginia et al. v. U.S. Department of the Treasury, No. 7:21-cv-00465 (N.D. Ala.), Doc. 71 (July 14, 2021)
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Memorandum of Opinion and Order Denying Motion for Preliminary Injunction, filed July 14, 2021 as Document 71 in State of West Virginia, et al. v. United States Department of Treasury, et al., Case No. 7:21-cv-00465-LSC, in the U.S. District Court for the Northern District of Alabama, Western Division. On April 13, 2021, the Plaintiff States moved for an order preliminarily enjoining enforcement of what the opinion calls the "Federal Tax Mandate," a provision of the American Rescue Plan Act of 2021. The court states that it has subject matter jurisdiction but that the Plaintiff States failed to show it can provide preliminary relief addressing their harm, and it denies the motion (doc. 21). It encourages the parties to submit a proposed briefing schedule if they agree no discovery is warranted.
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“Memorandum Opinion, State of West Virginia et al. v. U.S. Department of the Treasury, No. 7:21-cv-00465 (N.D. Ala.), Doc. 71 (July 14, 2021).”
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Case 7:21-cv-00465-LSC Document 71 Filed 07/14/21 Page 1 of 25 FILED
2021 Jul-14 AM 10:00
U.S. DISTRICT COURT
N.D. OF ALABAMA
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF ALABAMA
WESTERN DIVISION
)
State of West Virginia, et al., )
)
Plaintiffs, )
)
vs. ) 7:21-cv-00465-LSC
)
United States Department of )
Treasury, et al., )
)
Defendants. )
)
MEMORANDUM OF OPINION AND ORDER
DENYING MOTION FOR PRELIMINARY INJUNCTION
I. Introduction
On March 31, 2021, Plaintiffs West Virginia, Alabama, Arkansas, Alaska,
Florida, Iowa, Kansas, Montana, New Hampshire, Oklahoma, South Carolina,
South Dakota, and Utah (hereinafter, “the Plaintiff States”) brought this action
against the United States Department of Treasury (“Treasury”), Treasury
Secretary Janet Yellen in her official capacity (“the Secretary”), and Treasury
Inspector General Richard Delmar in his official capacity (collectively, “the
Defendants”). The Plaintiff States seek to invalidate and enjoin one provision of the
American Rescue Plan Act of 2021 (“ARPA”), Pub. L. No. 117-2, § 9901, 135 Stat.
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4 (2021) (codified at 42 U.S.C. §§ 802 et seq.). The ARPA is a $1.9 trillion economic
stimulus bill that was passed by Congress and signed into law by President Joseph
Biden on March 11, 2021. It was enacted to hasten the United States’ recovery from
the economic impact of the COVID-19 pandemic and accompanying recession.
Among many other provisions, the ARPA distributes roughly $195.3 billion directly
to States for specified purposes. 42 U.S.C. § 802(b)(3)(A). However, before a State
can receive those funds, it must certify to the Secretary of the Treasury that it will
comply with multiple conditions that the ARPA imposes. Id. § 802(d)(1). The
Plaintiff States contend that one of those conditions—what they call the “Federal
Tax Mandate”—exceeds Congress’s power under the Spending Clause in Article I,
Section 8 of the U.S. Constitution, and violates the Tenth Amendment to the U.S.
Constitution, because it prohibits States from reducing taxes. Their Complaint seeks
a declaration from this Court stating as much, as well as a declaration that the
Defendants have violated the Plaintiff States’ rights as sovereigns, and an order
permanently enjoining enforcement of the Federal Tax Mandate. (See doc. 1).
On April 13, 2021, the Plaintiff States moved, pursuant to Federal Rule of Civil
Procedure 65, for an order preliminarily enjoining enforcement of the Federal Tax
Mandate, while keeping the remainder of the ARPA intact, while this lawsuit is
pending. (Doc. 21.) The Defendants responded in opposition to the motion, claiming
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that the Court does not have jurisdiction because the Plaintiff States lack standing
and their claims are not ripe, and that, on the merits, the Plaintiff States have failed
to show that a preliminary injunction is warranted. (Doc. 54.) The Plaintiff States
have replied in support of their motion. (Doc. 59). Numerous amici filed briefs in
support of the Plaintiff States’ motion for a preliminary injunction. (Docs. 41 (The
Buckeye Institute); 42 (78 Members of Congress and the American Center for Law
and Justice); 43 (National Taxpayers Union Foundation); 44 (Chamber of
Commerce of the United States); and 48 (The New Civil Liberties Alliance).)
As the Court explains below, while it does have subject matter jurisdiction
over this action, the preliminary relief that the Plaintiff States seek is not warranted,
and the motion for a preliminary injunction is thus due to be denied.
II. Background
It goes without saying that the COVID-19 pandemic has caused ongoing
economic harm to individuals, businesses, and state and local governments. To ease
the financial strain, in March 2020, Congress provided $150 billion in direct
assistance for state, local, and Tribal governments under the Coronavirus Aid,
Relief, and Economic Security Act (“CARES Act”). See Pub. L. No. 116-137, § 5001,
134 Stat. 281, 501 (2020) (codified at 42 U.S.C. § 801). However, economic distress
continued. Accordingly, on March 11, 2021, President Joseph Biden signed the
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ARPA, which appropriated approximately $1.9 trillion to provide relief to address
the impact of the COVID-19 pandemic. See Pub. L. No. 117-2, 135 Stat. 4 (codified
at 42 U.S.C. § 802 et seq.). Out of the roughly $1.9 trillion that the ARPA allocates
for pandemic relief, roughly $195.3 billion is tapped for the States. Id. §
802(b)(3)(A). These funds represent an average of about 25% of the thirteen Plaintiff
States’ annual budgets. (Doc. 1 ¶¶ 45–57.) In Arkansas, for instance, anticipated
ARPA funding represents 29% of the State’s annual budget. (Id. ¶ 117.) For West
Virginia and Arkansas, it represents over 25% (id. ¶ 47, 53); for Alabama, over 21%
(id. ¶ 50); and Kansas, over 20% (id. ¶ 56).
The money comes with certain strings attached. In particular, to qualify for
the funding, a State must “provide the Secretary with a certification, signed by an
authorized officer of such State . . . that such State . . . requires the payment . . . to
carry out the activities specified in subsection (c) . . . and will use any payment under
this section . . . in compliance with subsection (c).” 42 U.S.C. § 802(d)(1). The
Secretary is to “make the payment required for the State . . . not later than 60 days
after the date on which th[at] certification . . . is provided to the Secretary.” Id. §
802(b)(6)(A)(i). As the above language suggests, the conditions are set forth in
subsection (c). In that section, Congress specified that States must use ARPA funds
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to respond to the negative economic impacts of the COVID-19 pandemic in one of
four specific ways:
A. to respond to the public health emergency with respect to
COVID-19 or its negative economic impacts, including
assistance to households, small businesses, and nonprofits,
or aid to impacted industries such as tourism, travel, and
hospitality;
B. to respond to workers performing essential work during the
COVID-19 public health emergency by providing premium pay
to eligible workers of the State, territory, or Tribal government
that are performing such essential work, or by providing grants
to eligible employers that have eligible workers who perform
essential work;
C. for the provision of government services to the extent of the
reduction in revenue of such State, territory, or Tribal
government due to the COVID-19 public health emergency
relative to revenues collected in the most recent full fiscal year of
the State, territory, or Tribal government prior to the emergency;
or
D. to make necessary investments in water, sewer, or broadband
infrastructure.
Id. § 802(c)(1)(A)-(D). The States must use the funds by December 31, 2024. Id. §
802(c)(1).
The ARPA also contains two restrictions on the States’ use of the money. One
limitation (not challenged here) provides that a State may not deposit ARPA funds
“into any pension fund.” Id. § 802(c)(2)(B). The other limitation (at issue here)
provides as follows:
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(2) FURTHER RESTRICTION ON USE OF FUNDS. —
(A) IN GENERAL. — A State or territory shall not use the funds
provided under this section or transferred pursuant to section 603(c)(4)
to either directly or indirectly offset a reduction in the net tax revenue
of such State or territory resulting from a change in law, regulation, or
administrative interpretation during the covered period that reduces
any tax (by providing for a reduction in a rate, a rebate, a deduction, a
credit, or otherwise) or delays the imposition of any tax or tax increase.
Id. § 802(c)(2)(A). The phrase “directly or indirectly offset” is not defined. Nor did
Congress extend this prohibition on reducing taxes to cities, localities, or Tribal
governments.
The ARPA also requires States to periodically report to the Treasury any
reductions in their tax revenues. Id. § 802(d)(2). The Treasury can recoup funds
that it interprets were used in violation of the Federal Tax Mandate. Id. § 802(e)(1).
The Plaintiff States allege that they are or were actively considering various
forms of tax relief for individuals and small businesses, whether directly related to
state pandemic-relief efforts or through unrelated policy measures. (Doc. 1 ¶¶ 76–
83.) They claim that the Federal Tax Mandate has cast significant uncertainty over
these efforts as it is unclear whether States can pass any tax relief measures
throughout the covered period without running afoul of the Federal Tax Mandate.
On March 16, 2021, twenty-one State attorneys general wrote a letter to the
Secretary, seeking guidance as to the scope of the Federal Tax Mandate. (Doc. 21–1
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at 4.) The letter listed several tax cuts proposed by legislatures in Georgia, West
Virginia, Alabama, Indiana, Kansas, Kentucky, Montana, and other States and asked
if those cuts would expose the States to ARPA recoupment. The letter included the
following concern:
The import of [the ARPA’s] prohibition against “offsetting”
reductions in state tax revenue is unclear, but potentially breathtaking.
This provision might have been intended merely to prohibit States from
expressly taking COVID-19 relief funds and rolling them directly into a
tax cut of a similar amount. But its prohibition on “indirectly”
offsetting reductions in tax revenue, combined with the list of
prohibited kinds of tax reductions (rate cuts, rebates, deductions,
credits, or “otherwise”), could also be read to prohibit tax cuts or relief
of any stripe, even if wholly unrelated to and independent of the
availability of relief funds. After all, money is fungible, and States must
balance their budgets. So, in a sense, any tax relief enacted by a state
legislature after the State has received relief funds could be viewed as
“using” those funds as an “offset” that allows the State to provide that
tax relief.
(Id. at 5.)
The Secretary responded on March 23, 2021, writing as follows:
Nothing in the Act prevents States from enacting a broad variety of tax
cuts. That is, the Act does not “deny States the ability to cut taxes in
any manner whatsoever.” It simply provides that funding received
under the Act may not be used to offset a reduction in net tax revenue.
If states lower certain taxes but do not use funds under the Act to offset
those cuts—for example, by replacing the lost revenue through other
means—the [Federal Tax Mandate] is not implicated.
(Doc. 21-1 at 12.) The Secretary’s letter did not respond to the States’ questions
regarding the specific tax modification proposals pending in the States.
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On March 31, 2021, the Plaintiff States, believing the Federal Tax Mandate to
be unconstitutional, sued for declaratory and injunctive relief in this Court. The
Plaintiff States’ Complaint alleges that the Federal Tax Mandate is unconstitutional
for two reasons: (1) it violates the Spending Clause by being coercive and ambiguous
(Count 1); and (2) it violates the Tenth Amendment in that it commandeers state
taxing authority (Count 2). On April 13, 2021, the Plaintiff States moved for the
preliminary injunction that is the subject of this opinion. (Doc. 21.)
On May 11, 2021, the Department of Treasury submitted an “Interim Final
Rule” for publication in the Federal Register, which expounded on the ARPA,
including the Federal Tax Mandate, and provided notice to this Court of that event.
(Doc. 55). The Interim Final Rule was published in the Federal Register on May 17,
2021. Relevant here, the Interim Final Rule announces the Treasury’s current
approach to enforcing the Federal Tax Mandate. It sets forth “a step-by-step process
for determining whether, and the extent to which, [ARPA] funds have been used to
offset a reduction in net tax revenue.” (Doc. 55-1 at 84.)
The Plaintiff States have not advised this Court whether, during the time that
the motion for a preliminary injunction has been pending, they have submitted their
certifications stating that they would participate under the ARPA, and, if so, whether
the Treasury has doled out any ARPA funds.
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III. Discussion
This Court would typically begin its analysis by determining whether it has
subject matter jurisdiction over the Plaintiff States’ claims because the Defendants
have contended that the Plaintiff States lack standing and that their claims are not
yet ripe. See Bochese v. Town of Ponce Inlet, 405 F.3d 964, 974 (11th Cir. 2005)
(“[S]tanding is a threshold jurisdictional question which must be addressed prior to
and independent of the merits of a party’s claims.”) (quoting Dillard v. Baldwin
Cnty. Comm’rs, 225 F.3d 1271, 1275 (11th Cir. 2000)). Here, however, the
jurisdictional and merits issues are so related that the Court feels it necessary to first
discuss the nature of the rights that the Plaintiff States are claiming under both their
Spending Clause and Tenth Amendment violation claims, because whether the
Plaintiff States have suffered or will suffer an injury in fact for standing purposes
turns on how their rights under those constitutional provisions are characterized.
A. The Plaintiff States’ Spending Clause Violation Claim (Count 1)
The Constitution empowers Congress to “lay and collect Taxes, Duties,
Imposts and Excises, to pay the Debts and provide for the common Defence and
general Welfare of the United States.” U.S. Const. Art. I, § 8, cl. 1. “Incident to this
power, Congress may attach conditions on the receipt of federal funds, and has
repeatedly employed the power ‘to further broad policy objectives by conditioning
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receipt of federal moneys upon compliance by the recipient with federal statutory
and administrative directives.’” South Dakota v. Dole, 483 U.S. 203, 206 (1987)
(quoting Fullilove v. Klutznick, 448 U.S. 448, 474 (1980)). However, Congress’s
spending power is not unlimited. Id. at 207. Although Congress can condition a
State’s receipt of federal money, any such condition must comply with several
requirements (the “Dole factors”). See id. at 207–08. First, the condition must “be
in pursuit of ‘the general welfare.’” Id. at 207 (quoting Helvering v. Davis, 301 U.S.
619, 640–41 (1937)). Second, the condition must be unambiguous so that States can
“exercise their choice [whether to accept federal funds] knowingly, cognizant of the
consequences of their participation.” Id. (quoting Pennhurst State Sch.& Hosp. v.
Halderman, 451 U.S. 1, 17 (1981)). Third, the condition must be reasonably related
to a “federal interest in particular national projects or programs.” Id. (quoting
Massachusetts v. United States, 435 U.S. 444, 461 (1978)). Fourth, no condition
attached to receipt of federal funds may violate another provision of the U.S.
Constitution. Id. at 208. Beyond those four limitations, the Supreme Court has
“recognized that in some circumstances the financial inducement offered by
Congress might be so coercive as to pass the point at which ‘pressure turns into
compulsion.’” Id. at 211 (quoting Steward Mach. Co. v. Davis, 301 U.S. 548, 590
(1937)). If a federal condition induces a State to act “not of her unfettered will, but
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under the strain of a persuasion equivalent to undue influence,” then the condition
exceeds Congress’s Spending Clause authority. Steward Mach., 301 U.S. at 590.
The Plaintiff States claim in Count 1 of their Complaint that, while Congress
may have exercised its spending power for the general welfare through the Federal
Tax Mandate provision of the ARPA, the mandate violates every other Dole factor.
First, they contend that the mandate is unconstitutionally coercive because the
amount of ARPA funding offered to the States is so large a percentage of their annual
budgets that they have no real choice but to accept the mandate’s restriction on their
sovereign taxing powers. Second, they claim that the mandate is unconstitutionally
ambiguous because it contains no explanation as to how the Treasury will determine
whether a State has—either directly or indirectly—offset its tax cuts with ARPA
funds. Thus, the Plaintiff States state that they are unable make an informed choice
of whether to accept or decline ARPA funds, and if they accept ARPA funds,
whether to cut taxes without putting those ARPA funds at risk of being recouped by
the Treasury. Third, they contend that the mandate is not reasonably related to the
purpose that the ARPA serves—to assist in the rebound from the COVID-19
pandemic’s economic devastation—because prohibiting state tax reductions does
not advance the goal of providing economic relief to individuals and entities affected
by the pandemic. Finally, they claim that the mandate violates an independent
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constitutional provision—the Tenth Amendment, which reserves power to the
States.
In order to explain its decision on standing and ripeness in the next sections,
this Court must further explain the law supporting the Plaintiff States’ argument that
the Federal Tax Mandate is unconstitutionally ambiguous. In Pennhurst, the
Supreme Court likened Congress’s conditioning of federal money to a contract: “in
return for federal funds, the States agree to comply with federally imposed
conditions.” 451 U.S. at 17. Just as a contract requires a knowing acceptance of the
offer’s terms, conditioned federal money must “enable the States to exercise their
choice knowingly, cognizant of the consequences of” their acceptance. Id. The
Court in Pennhurst continued, “There can, of course, be no knowing acceptance if a
State is unaware of the conditions or is unable to ascertain what is expected of it.
Accordingly, if Congress intends to impose a condition on the grant of federal
moneys, it must do so unambiguously.” Id. (internal citations and footnote omitted).
B. The Plaintiff States’ Tenth Amendment Violation Claim (Count 2)
The Plaintiff States also believe that the Federal Tax Mandate violates the
Tenth Amendment’s reservation of power to the States and the
“anticommandeering doctrine.” The anti-commandeering doctrine generally
precludes Congress from forcing States to implement its laws and policies. See Printz
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v. United States, 521 U.S. 898, 925 (1997). The Constitution confers on Congress not
plenary legislative power but only certain enumerated powers. Therefore, all other
legislative power is reserved to the States, as the Tenth Amendment confirms. And
a State’s authority to set its tax policy is “central to state sovereignty.” Dep’t of
Revenue of Or. v. ACF Indus., Inc., 510 U.S. 332, 345 (1994); see also McCulloch v.
Maryland, 17 U.S. 316, 428 (1819) (“[T]he power of taxing the people and their
property[] is essential to the very existence of government.”).
Federal orders to the States are unconstitutional under the
anticommandeering doctrine where they implicate either of two concerns. First, the
doctrine applies where federal action threatens the “healthy balance of power
between the States and the Federal Government.” Murphy v. Nat’l Collegiate Ath.
Ass’n, 138 S. Ct. 1461, 1477 (2018) (quoting New York v. United States, 505 U.S. 144,
181–82). Second, the doctrine “promotes political accountability” by keeping
decisions that affect the States in the hands of state leaders. Id. (“[I]f a State imposes
regulations only because it has been commanded to do so by Congress, responsibility
is blurred.”). The Plaintiff States contend that the Federal Tax Mandate upsets both
interests. They claim that, by implementing a mandatory state tax policy preference
of Congress—to allow tax increases but forbid tax reductions by States—the Federal
Tax Mandate both blurs the political accountability necessary to have an effective
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dual sovereignty governmental structure and commandeers the Plaintiff States’
sovereign power to tax and spend and determine their own fiscal policies.
C. Standing
Keeping the aforementioned principles in mind, the Court turns to whether
this Court has subject matter jurisdiction over the Plaintiff States’ Complaint.
Article III of the Constitution restricts federal courts to the resolution of cases and
controversies. “Standing is a doctrine that ‘stems directly from Article III’s “case
or controversy” requirement,’ and thus it ‘implicates [this Court’s] subject matter
jurisdiction.’” Bochese, 405 F.3d at 974 (quoting Nat’l Parks Conservation Ass’n v.
Norton, 324 F.3d 1229, 1242 (11th Cir. 2003)). Plaintiffs are required to “‘alleg[e]
such a personal stake in the outcome of the controversy’ as to . . . justify [the]
exercise of the court’s remedial powers on [their] behalf.” Simon v. E. Ky. Welfare
Rights Org., 426 U.S. 26, 38 (1976) (quoting Warth v. Seldin, 422 U.S. 490, 498–99
(1975)). To show standing, a plaintiff must generally demonstrate that he suffered or
shall immediately suffer an injury in fact, that the injury was caused by the
defendant’s conduct, and that the injury is redressable by a favorable court decision.
See Fla. State Conf. of N.A.A.C.P. v. Browning, 522 F.3d 1153, 1159 (11th Cir. 2008).
Further, “‘a plaintiff must demonstrate standing for each claim he seeks to press’
and ‘for each form of relief’ that is sought.” Davis v. Fed. Election Comm’n, 554 U.S.
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724, 734 (2008) (quoting DaimlerChrysler Corp. v. Cuno, 547 U.S. 332, 352 (2006)).
Jurisdiction is assessed under the facts as they existed when the complaint was filed.
See Lujan v. Defenders of Wildlife, 504 U.S. 555, 606 n.4 (1992).
Defendants focus on the injury in fact element, arguing that the Plaintiff States
lack standing because they have not yet alleged that any tax cuts that they have
already enacted, or any that are under consideration by their legislatures, will
decrease their net tax revenue, let alone alleged that they intend to use ARPA funds
to offset that theoretical net revenue reduction. Thus, according to Defendants,
since recoupment of ARPA funds by the Treasury is not imminent, the Plaintiff
States have not suffered an injury in fact to establish standing.
True, an injury sufficient to satisfy Article III must be “concrete and
particularized” and “actual and imminent, not ‘conjectural or hypothetical.’” See
Lujan, 504 U.S. at 560 (quoting Whitmore v. Arkansas, 495 U.S. 149, 155 (1990)).
Yet, the Court disagrees that the Plaintiff States lack standing because it does not
consider recoupment to be the only injury that the Plaintiff States have, or will,
suffer.
First, the Court considers the Spending Clause violation claim in Count 1 of
the Complaint, and specifically, the Plaintiff States’ argument that Congress violated
the Spending Clause in passing the Federal Tax Mandate because the text of the
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mandate is unconstitutionally ambiguous. The Spending Clause jurisprudence
discussed above requires Congress to state clearly the terms upon which it extends
an offer of conditional funding to the States. See Pennhurst, 451 U.S. at 17. That
clarity is critical to a State’s ability to exercise its sovereign power in deciding
whether to accept or decline an offer of funds. If this Court takes the Plaintiff States’
allegations as true, it follows that Congress violated the Constitution when it passed
the ARPA, because it offered federal funds to the States based on unconstitutionally-
ambiguous terms. Thus, the Plaintiff States suffered an injury in fact when Congress
passed the ARPA because they were presented with an unconstitutionally ambiguous
deal. In other words, it was Congress passing the Act, not the States accepting the
money, nor the Treasury eventually recouping the money, if that ever happens, that
violated the Constitution. So, for standing purposes, the injury in fact that the
Plaintiff States have suffered is that they were not offered a clear understanding of
the deal that Congress is offering.1
1
The Court notes that the argument could be made that the Secretary’s Interim Final Rule
“cures” any ambiguity in the text of the Federal Tax Mandate. However, the Defendants have not
yet presented that argument. Indeed, the implication of the Interim Final Rule on the Plaintiff
States’ claim that the mandate is ambiguous under the Spending Clause has not been briefed by
the parties. In any event, the Interim Final Rule has no bearing on the standing analysis because
the Plaintiff States’ standing is determined at the time of the filing of their Complaint, and the
Interim Final Rule was not promulgated until later. Lujan, 504 U.S. at 606 n.4.
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The Court also finds that the Plaintiff States have suffered an injury in fact for
standing purposes with regard to the anti-commandeering doctrine claim in Count 2
of their Complaint. The Plaintiff States allege that the Defendants have already
intruded into their sovereign authority to set their own tax policy. Their injury in fact
is having to choose between forgoing a benefit (federal funds) or accepting that
benefit on unconstitutional terms. According to the Plaintiff States, the legislatures
of Alabama, Oklahoma, and New Hampshire have already announced proposed
State budgets that include future tax cuts, and the legislatures of Utah, West
Virginia, and Montana have already enacted tax cuts. (Doc. 59 at 17–19.) These
Plaintiff States must either revise their laws or budget for possible recoupment by
the Treasury.
Even if one might argue that the injury that the Plaintiff States are currently
suffering—i.e., having to choose whether to accept ARPA funds on unconstitutional
terms—is not sufficiently “concrete and particularized” enough to satisfy Article
III, see Lujan, 504 U.S. at 560, the Plaintiff States can nonetheless establish standing
under the line of federal cases permitting pre-enforcement review of an
unconstitutional law. When a plaintiff seeks to enjoin the future enforcement of a
statute, “the injury-in-fact requirement” demands that the plaintiff “allege[] ‘an
intention to engage in a course of conduct arguably affected with a constitutional
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interest, but proscribed by a statute, and there exists a credible threat of
[enforcement] thereunder.’” Susan B. Anthony List v. Driehaus, 573 U.S. 149, 159
(2014) (quoting Babbitt v. Farm Workers, 442 U.S. 289, 298 (1979)). Here, the
Plaintiff States have alleged “an intention to engage in a course of conduct”
(accepting ARPA funds and reducing state taxes) that is “arguably affected with a
constitutional interest” (the Plaintiff States’ Tenth Amendment rights and inherent
limits on Congress’s Spending Clause power) that is “proscribed by a statute”
(based on a plain reading of the Federal Tax Mandate) and that comes with a
“credible threat of [enforcement] thereunder” (recoupment of ARPA funds by the
Treasury). See id.
Finally, there is no question that the injuries in fact as discussed above are
fairly traceable to the Federal Tax Mandate, and they can be redressed by a court
order invalidating the mandate. See Browning, 522 F.3d at 1159. Accordingly, the
Plaintiff States possess standing.
D. Ripeness
“The ripeness doctrine protects federal courts from engaging in speculation
or wasting their resources through the review of potential or abstract disputes.”
Digital Props., Inc. v. City of Plantation, 121 F.3d 586, 589 (11th Cir. 1997). The
ripeness inquiry requires a two-part determination of “(1) the fitness of the issues
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for judicial decision and (2) the hardship to the parties of withholding court
consideration.” Id. (citing Abbott Lab. v. Gardner, 387 U.S. 136, 148–49 (1967)).
“Courts must resolve ‘whether there is sufficient injury to meet Article III’s
requirement of a case or controversy and, if so, whether the claim is sufficiently
mature, and the issues sufficiently defined and concrete, to permit effective
decisionmaking by the court.’” Id. (quoting Cheffer v. Reno, 55 F.3d 1517, 1524 (11th
Cir. 1995)).
Defendants again argue that the Plaintiff States’ claims are not ripe because
the claimed harm is potential recoupment of some ARPA funds by the Treasury,
which is not imminent. True, before recoupment could occur, the Plaintiff States
must first submit certifications that they plan to accept ARPA funds, receive those
funds from the Treasury, reduce state taxes or enact some other changes in state tax
laws, have those reductions or changes cause their net tax revenues to decrease, and
use ARPA funds to offset that reduction. However, as noted in the above section on
standing, Defendants mischaracterize the harm suffered by the Plaintiff States. It is
not that the Treasury may recoup ARPA funds at some point in the future; it is that
the Plaintiff States do not have the constitutionally-required clarity to make an
informed decision on whether to accept ARPA funds now. Alternatively, it is that
the Plaintiff States’ sovereign power to determine their own fiscal policies has
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already been intruded upon. Thus, the Court easily concludes that the Plaintiff
States’ constitutional claims are ripe.
E. Preliminary Injunction
Having found that the Plaintiff States possess standing to pursue the claims in
their Complaint and that those claims are ripe, the Court turns to whether the
Plaintiff States are due a preliminary injunction—which would enjoin the Secretary
from enforcing the Federal Tax Mandate—during the pendency of this lawsuit.
The purpose of a preliminary injunction is “merely to preserve the relative
positions of the parties until a trial on the merits can be held.” Univ. of Tex. v.
Camenisch, 451 U.S. 390, 395 (1981). Parties seeking a preliminary injunction must
demonstrate (1) substantial likelihood of success on the merits, (2) that they will
suffer irreparable injury unless the injunction issues, (3) that the threatened injury to
the movant outweighs any damage the injunction might cause the opposing party,
and (4) that the injunction would not be adverse to the public interest. See
McDonald’s Corp. v. Robertson, 147 F.3d 1301, 1306 (11th Cir. 1998). “The
preliminary injunction is an extraordinary and drastic remedy not to be granted
unless the movant ‘clearly carries the burden of persuasion’ as to the four
prerequisites.” United States v. Jefferson Cnty., 720 F.2d 1511, 1519 (11th Cir. 1983)
(quoting Canal Auth. of State of Fla. v. Callaway, 489 F.2d 567, 573 (5th Cir. 1974)).
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Preliminary injunctive relief is always “the exception rather than the rule.” Texas v.
Seatrain Int’l, S.A., 518 F.2d 175, 179 (5th Cir. 1975).
The Court would typically begin with the first element—whether the Plaintiff
States can show a substantial likelihood of success on the merits of their claims.
However, the Court need not reach a decision on that element because it finds that
the Plaintiff States cannot establish the second element—that they will suffer
irreparable injury unless this Court issues a preliminary injunction. See United States
v. Lambert, 695 F.2d 536, 540 (11th Cir. 1983) (the plaintiff’s “success in establishing
a likelihood it will prevail on the merits does not obviate the necessity to show
irreparable harm”).
A substantial threat of irreparable injury “is an indispensable prerequisite to a
preliminary injunction.” Siegel v. LePore, 234 F.3d 1163, 1179 (11th Cir. 2000). It’s
the “sine qua non of injunctive relief.” Ne. Fla. Chapter of the Ass’n of Gen. Contractors
of Am. v. City of Jacksonville, 896 F.2d 1283, 1285 (11th Cir. 1990) (quoting Frejlach
v. Butler, 573 F.2d 1026, 1027 (8th Cir. 1978)). Because “[p]reservation of the status
quo enables the court to render a meaningful decision on the merits,” the “harm
considered by the district court is necessarily confined to that which might occur in
the interval between ruling on the preliminary injunction and trial on the merits.”
Lambert, 695 F.2d at 540. An injury is irreparable “only if it cannot be undone
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through monetary remedies.” City of Jacksonville, 896 F.2d at 1285. As the Eleventh
Circuit stated in City of Jacksonville, quoting the Supreme Court:
The key word in this consideration is irreparable. Mere injuries,
however substantial, in terms of money, time and energy necessarily
expended in the absence of a stay, are not enough. The possibility that
adequate compensatory or other corrective relief will be available at a
later date, in the ordinary course of litigation, weighs heavily against a
claim of irreparable harm.
Id. (quoting Sampson v. Murray, 415 U.S. 61, 90 (1974)).
The problem for the Plaintiff States in their quest for a preliminary injunction
is that the preliminary injunctive relief that they request from this Court is an order
prohibiting the Secretary from exercising her recoupment powers until this Court
issues a merits decision in this case. But recoupment of ARPA funds is a quintessentially
reparable injury because it can be “undone through monetary remedies.” See City of
Jacksonville, 896 F.2d at 1285. Indeed, if the Secretary were to recoup ARPA funds
from the Plaintiff States during the pendency of this lawsuit, this Court could
simply—assuming it ultimately issues a permanent injunction and declares the
Federal Tax Mandate unconstitutional—order the funds returned to the Plaintiff
States. Cf. id. (“The possibility that adequate compensatory or other corrective
relief will be available at a later date, in the ordinary course of litigation, weighs
heavily against a claim of irreparable harm.”).
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Moreover, the Court cannot even provide preliminary relief that would
address the harm that the Plaintiff States claim they would suffer absent a
preliminary injunction. As noted previously, the Plaintiff States claim that they are
being harmed because they must soon make the decision whether to certify
compliance with ARPA’s substantive provisions, meaning that they will have to
promise to comply with an allegedly ambiguous unconstitutional condition or lose
billions in federal aid. They also claim that they are being harmed in that their
legislatures do not currently know if they can reduce the taxes of their constituents
without suffering future recoupment of ARPA funds and thus may be forced to delay
passing fiscal legislation until next year. However, consider the fact that, whether
this Court grants or denies the motion for preliminary relief, the Plaintiff States will
still have to take into consideration, when accepting the ARPA funds, that the funds
are subject to possible recoupment if this Court were to ultimately issue a merits
decision declining to issue a permanent injunction. Thus, granting a preliminary
injunction in this case does nothing to remedy the Plaintiff States’ alleged harm,
which is that they are having to decide whether to certify participation in ARPA
without clarity as to what the Federal Tax Mandate means. Indeed, the only
difference stemming from whether this Court grants or denies the motion for a
preliminary injunction is that, if the Court were to grant the motion, the Secretary
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could not recoup funds in between now and when the Court decides the ultimate
issues in this case. However, there is virtually no likelihood that the Secretary will
recoup ARPA funds from the Plaintiff States during this time frame. Indeed, recall
that for recoupment to happen, first the Plaintiff States would have to certify ARPA
compliance, receive ARPA funds, pass a net reduction in tax revenue, and then the
Secretary would have to determine that ARPA funds “directly or indirectly offset”
the net reduction. This is extremely unlikely to happen between now and this
Court’s final decision. In other words, an injunction stopping the Secretary from
recouping ARPA funds while this case is pending stands no real prospect of ever
being enforced. And even if the Secretary did recoup some ARPA funds in the near
future, as already noted, this Court could order those funds returned to the States
should it ultimately decide this case in the Plaintiff States’ favor.
Accordingly, because proof of irreparable injury is an indispensable
prerequisite to a preliminary injunction, the Plaintiff States are not entitled to a
preliminary injunction at this time. As previously noted, the Court declines to decide
whether the Plaintiff States have established a substantial likelihood of success on
the merits of their claims because such an analysis would require the Court to reach
the Plaintiff States’ constitutional arguments. The Court finds this to be the
appropriate approach due to the “fundamental and longstanding principle of judicial
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restraint . . . that courts avoid reaching constitutional questions in advance of the
necessity of deciding them.” Lyng v. Nw. Indian Cemetery Protective Ass’n, 485 U.S.
439, 445 (1988).
Nonetheless, the Court is of the opinion that this action is well suited for an
expedited decision on the merits. This action appears to present purely legal issues,
meaning that the parties do not need discovery. If the parties agree that no discovery
is warranted, they are encouraged to submit a proposed briefing schedule that would
aid in a prompt resolution of this action.
IV. Conclusion
The Plaintiff States’ request for a preliminary injunction is due to be denied
because they have failed to show that this Court can provide preliminary relief that
would address the harm they will suffer in the absence of the injunction. As a result,
their Motion for a Preliminary Injunction (doc. 21) is DENIED.
DONE and ORDERED on July 14, 2021.
_____________________________
L. Scott Coogler
United States District Judge
160704
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