Motion to Dismiss, State of West Virginia et al. v. U.S. Department of the Treasury, No. 7:21-cv-00465 (N.D. Ala.), Doc. 76 (August 12, 2021)
Summary
Defendants' Combined Motion to Dismiss and Opposition to Plaintiffs' Motion for Permanent Injunction and Declaratory Judgment in State of West Virginia, et al. v. U.S. Department of the Treasury, et al., Case No. 7:21-cv-00465-LSC, filed 08/12/21. Defendants move to dismiss for lack of subject-matter jurisdiction and failure to state a claim. The introduction says Congress appropriated nearly $200 billion for state governments in the American Rescue Plan Act, and that Plaintiffs have not pled a credible threat of enforcement from the offset provision. It states that many Plaintiff States certified compliance in order to receive, to date, over $10.6 billion in federal funds. Stephen Ehrlich signs for Defendants.
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
Cite this document
“Motion to Dismiss, State of West Virginia et al. v. U.S. Department of the Treasury, No. 7:21-cv-00465 (N.D. Ala.), Doc. 76 (August 12, 2021).”
Original at storage.courtlistener.com. Archived at Pandemic Darlings, https://pandemicdarlings.com/source-documents/motion-to-dismiss-state-of-west-virginia-et-al-v-u-s-department-of-the-c4078ace1b/
, SHA-256 b60b5f2d4ac02dab6205c73b1e4c632cf019fe27cdec7359bbb89ae46bba298b.Full text
Case 7:21-cv-00465-LSC Document 76 Filed 08/12/21 Page 1 of 45 FILED
2021 Aug-12 PM 08:56
U.S. DISTRICT COURT
N.D. OF ALABAMA
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ALABAMA
WESTERN DIVISION
STATE OF WEST VIRGINIA, et al., Case No. 7:21-cv-00465-LSC
Plaintiffs,
v.
U.S. DEPARTMENT OF THE
TREASURY, et al.,
Defendants.
DEFENDANTS’ COMBINED MOTION TO DISMISS
AND OPPOSITION TO PLAINTIFFS’ MOTION FOR
PERMANENT INJUNCTION AND DECLARATORY JUDGMENT
Case 7:21-cv-00465-LSC Document 76 Filed 08/12/21 Page 2 of 45
MOTION TO DISMISS
Defendants move to dismiss Plaintiffs’ complaint, Compl., ECF No. 1,
under Federal Rule of Civil Procedure 12(b)(1) and (6) for lack of subject-
matter jurisdiction and failure to state a claim upon which relief can be
granted.
DATED: August 12, 2021 Respectfully submitted,
BRIAN M. BOYNTON
Acting Assistant Attorney General
BRIAN D. NETTER
Deputy Assistant Attorney General
ALEXANDER K. HAAS
Director, Federal Programs Branch
BRIGHAM J. BOWEN
Assistant Director, Federal Programs Branch
/s/ Stephen Ehrlich
MICHAEL P. CLENDENEN
STEPHEN EHRLICH
CHARLES E.T. ROBERTS
Trial Attorneys
Civil Division, Federal Programs Branch
U.S. Department of Justice
1100 L Street, NW
Washington, DC 20005
Phone: (202) 305-9803
Email: stephen.ehrlich@usdoj.gov
Counsel for Defendants
1
Case 7:21-cv-00465-LSC Document 76 Filed 08/12/21 Page 3 of 45
TABLE OF CONTENTS
INTRODUCTION ......................................................................................1
BACKGROUND.........................................................................................3
LEGAL STANDARDS ................................................................................6
ARGUMENT..............................................................................................7
I. PLAINTIFFS HAVE FAILED TO ESTABLISH JURISDICTION..............................7
A. Plaintiffs have neither pled nor proved the required
elements for pre-enforcement standing.....................................8
B. Plaintiffs’ other purported injuries do not suffice for
standing. ................................................................................ 12
II. PLAINTIFFS FAIL TO STATE A CLAIM AND CANNOT SUCCEED ON THE
MERITS.............................................................................................. 15
A. The offset provision is unambiguous. ...................................... 15
1. The Rescue Plan satisfies the unambiguity
requirement................................................................... 16
2. The Rule impliments the unambiguous text of the
offset provision. ............................................................ 21
B. The Rescue Plan is not coercive or commandeering. ................ 26
C. The offset provision relates to the Rescue Plan’s purposes. ...... 30
III. THE COURT SHOULD NOT ENJOIN THE OFFSET PROVISION OR DECLARE
IT UNCONSTITUTIONAL . ...................................................................... 31
A. The States are not entitled to a permanent injunction. .............. 31
B. The Court should not issue a declaratory judgment. ................ 34
CONCLUSION ........................................................................................ 35
i
Case 7:21-cv-00465-LSC Document 76 Filed 08/12/21 Page 4 of 45
TABLE OF AUTHORITIES
Cases
Ameritas Variable Life Ins. Co. v. Roach,
411 F.3d 1328 (11th Cir. 2005) ................................................................ 34
Arizona v. Yellen,
2021 WL 3089103 (D. Ariz. July 22, 2021) ........................................ passim
Arlington Cent. Sch. Dist. Bd. of Educ. v. Murphy,
548 U.S. 291 (2006)................................................................................. 16
Ashcroft v. Iqbal,
556 U.S. 662 (2009)...................................................................................7
Babbitt v. Farm Workers,
442 U.S. 289 (1979)...................................................................................8
Baptist Mem’l Hosp. – Golden Triangle, Inc. v. Azar,
956 F.3d 689 (5th Cir. 2020) .................................................................... 23
Bell v. New Jersey,
461 U.S. 773 (1983)................................................................... 2, 10, 29, 30
Bennett v. Ky. Dep’t of Educ.,
470 U.S. 656 (1985)................................................................. 15, 20, 21, 26
Bennett v. New Jersey,
470 U.S. 632 (1985)................................................................................. 15
Benning v. Georgia,
391 F.3d 1299 (11th Cir. 2004) ......................................................... passim
Bochese v. Town of Ponce Inlet,
405 F.3d 964 (11th Cir. 2005) ....................................................................7
California v. Texas,
141 S. Ct. 2104 (2021) ............................................................................. 14
ii
Case 7:21-cv-00465-LSC Document 76 Filed 08/12/21 Page 5 of 45
Carey v. Throwe,
957 F.3d 468 (4th Cir. 2020) ...............................................................29, 30
Charles v. Verhagen,
348 F.3d 601 (7th Cir. 2003) .................................................... 17, 20, 21, 26
Children’s Hosp. Ass’n of Texas v. Azar,
933 F.3d 764 (D.C. Cir. 2019) .................................................................. 23
City of Los Angeles v. Barr,
929 F.3d 1163 (9th Cir. 2019) .................................................................. 31
Coll. Sav. Bank v. Fl. Prepaid Postsecondary Educ. Expense Bd.,
527 U.S. 666 (1999)................................................................................. 29
Cutter v. Wilkinson,
423 F.3d 579 (6th Cir. 2005) .................................................................... 18
DaimlerChrysler Corp. v. Cuno,
547 U.S. 332 (2006)...................................................................................8
Davis ex rel. Lashonda D. v. Monroe Cnty. Bd. of Educ.,
526 U.S. 629 (1999)...................................................................... 17, 20, 26
ebay Inc. v. MercExchange, L.L.C.,
547 U.S. 388 (2006).......................................................................... 7, 8, 32
Franklin v. Curry,
738 F.3d 1246 (11th Cir. 2013) ..................................................................7
Graham Cnty. Soil & Water Conservation Dist. v. United States,
545 U.S. 409 (2005)................................................................................. 17
Greater Birmingham Ministries v. Alabama,
161 F. Supp. 3d 1104 (N.D. Ala. 2016) ......................................................7
Gruver v. La. Bd. of Supervisors for La. State Univ. Agric. & Mech. Coll.,
959 F.3d 178 (5th Cir. 2020) .................................................................... 27
Harper v. Pro. Prob. Servs. Inc.,
976 F.3d 1236 (11th Cir. 2020) ..................................................................7
iii
Case 7:21-cv-00465-LSC Document 76 Filed 08/12/21 Page 6 of 45
Harris v. Olszewski,
442 F.3d 456 (6th Cir. 2006) .................................................................... 23
Hobson v. Fischbeck,
758 F.2d 579 (11th Cir. 1985) .................................................................. 32
Irving Indep. Sch. Dist. v. Tatro,
468 U.S. 883 (1984)................................................................................. 23
Jackson v. Birmingham Bd. of Educ.,
544 U.S. 167 (2005)...................................................................... 17, 20, 26
King v. Burwell,
576 U.S. 473 (2015)................................................................................. 24
Lujan v. Defs. of Wildlife,
504 U.S. 555 (1992).......................................................................... 7, 8, 12
Maryland v. King,
567 U.S. 1301 (2012) ............................................................................... 33
Massachusetts v. Mellon,
262 U.S. 447 (1923)................................................................................. 30
Mayweathers v. Newland,
314 F.3d 1062 (9th Cir. 2002) ........................................................... passim
Miss. Comm’n on Env’t Quality v. EPA,
790 F.3d 138 (D.C. Cir. 2015) .................................................................. 27
Missouri v. Yellen,
2021 WL 1889867 (E.D. Mo. May 11, 2021) ...................................... passim
Munn v. Illinois,
94 U.S. 113 (1876)................................................................................... 21
Nat’l Fed’n of Indep. Bus. v. Sebelius,
567 U.S. 519 (2012).......................................................................... passim
Ne. Fla. Chapter of Ass’n of Gen. Contractors v. Jacksonville,
896 F.2d 1283 (11th Cir. 1990) ...........................................................32, 33
iv
Case 7:21-cv-00465-LSC Document 76 Filed 08/12/21 Page 7 of 45
New York v. United States,
505 U.S. 144 (1992)............................................................................30, 31
Ohio v. Yellen,
2021 WL 2712220 (S.D. Ohio July 1, 2021) .............................................. 22
Oklahoma v. U.S. Civ. Serv. Comm’n,
330 U.S. 127 (1947)............................................................................10, 30
Pennhurst State Sch. & Hosp. v. Halderman,
451 U.S. 1 (1981) ...............................................................................16, 18
Petit v. U.S. Dep’t of Educ.,
675 F.3d 769 (D.C. Cir. 2012) .................................................................. 23
Pub. Serv. Comm’n of Utah v. Wycoff Co.,
344 U.S. 237 (1952)................................................................................. 15
Religious Sisters of Mercy v. Azar,
513 F. Supp. 3d 1113, 2021 WL 191009 (D.N.D. Jan. 19, 2021),
appeal pending on other grounds, No. 21-1890 (8th Cir. 2021)..................... 27
Renne v. Geary,
501 U.S. 312 (1991)...................................................................................7
Reno v. Condon,
528 U.S. 141 (2000)................................................................................. 21
Rosen v. Cascade Int’l, Inc.,
21 F.3d 1520 (11th Cir. 1994) .................................................................. 32
Rostker v. Goldberg,
453 U.S. 57 (1981)................................................................................... 21
Rust v. Sullivan,
500 U.S. 173 (1991)................................................................................. 30
Sabri v. United States,
541 U.S. 600 (2004)...................................................................... 10, 15, 30
v
Case 7:21-cv-00465-LSC Document 76 Filed 08/12/21 Page 8 of 45
Sampson v. Murray,
415 U.S. 61 (1974)................................................................................... 33
School Dist. of City of Pontiac v. Sec’y of U.S. Dep’t of Educ.,
584 F.3d 253 (6th Cir. 2009) .................................................................... 29
South Dakota v. Dole,
483 U.S. 203 (1987)...................................................................... 28, 29, 31
Steward Mach. Co. v. Davis,
301 U.S. 548 (1937)................................................................................. 13
Susan B. Anthony List v. Driehaus,
573 U.S. 149 (2014)........................................................................ 8, 10, 12
United States v. Butler,
297 U.S. 1 (1936) ...............................................................................28, 29
United States v. Miami University,
294 F.3d 797 (6th Cir. 2002) .................................................................... 23
United States v. Morrison,
529 U.S. 598 (2000)................................................................................. 21
United States v. Oakland Cannabis Buyers’ Coop.,
532 U.S. 483 (2001)................................................................................. 33
Va. Dep’t of Educ. v. Riley,
106 F.3d 559 (4th Cir. 1997) .................................................................... 18
W. Va. Dep’t of Health & Hum. Res. v. Sebelius,
649 F.3d 217 (4th Cir. 2011) .................................................................... 20
W. Va. v. U.S. Dep’t of Treasury,
2021 WL 2952863 (N.D. Ala. July 14, 2021) ...................................... passim
Walters v. Nat’l Ass’n of Radiation Survivors,
468 U.S. 1323 (1984) ............................................................................... 34
vi
Case 7:21-cv-00465-LSC Document 76 Filed 08/12/21 Page 9 of 45
Wash. State Grange v. Wash. State Republican Party,
552 U.S. 442 (2008)................................................................................. 15
Statutes
28 U.S.C. §2201 ..................................................................................... 7, 34
42 U.S.C. § 802................................................................................... passim
American Rescue Plan Act, Pub. L. No. 117-2, 135 Stat. 4 (2021) (“Rescue
Plan” or “Act”), Pub. L. No. 117-2............................................................1
Rules
Fed. R. Civ. P. 12 ........................................................................................7
Fed. R. Civ. P. 56 ........................................................................................6
Regulations
Coronavirus State and Local Fiscal Recovery Funds,
86 Fed. Reg. 26,786 (May 17, 2021). ................................................. passim
Other Authorities
Ilya Somin, Making Federalism Great Again,
97 Tex. L. Rev. 1247 (2019) ..................................................................... 18
vii
Case 7:21-cv-00465-LSC Document 76 Filed 08/12/21 Page 10 of 45
INTRODUCTION
As part of the American Rescue Plan Act (“Rescue Plan” or “Act”),
Congress appropriated nearly $200 billion in new funding for state govern-
ments. 42 U.S.C. § 802. Congress gave States considerable flexibility to use
these new federal funds, which may be directed to a broad variety of state
efforts to respond to the public health emergency created by the COVID-19
pandemic and to its economic effects. Id. § 802(c). But to ensure that the new
federal funds would be used for the broad categories of state expenditures it
identified, Congress specified that States cannot use the federal funds to off-
set a reduction in net tax revenue resulting from changes in state law. Id.
§ 802(c)(2)(A) (the “offset provision”). Congress also gave the Secretary of
the Treasury the power to “issue such regulations as may be necessary or
appropriate to carry out” Section 802, id. § 802(f), and the Treasury Depart-
ment exercised this authority by issuing an Interim Final Rule, see Notice of
Interim Final Rule, 86 Fed. Reg. 26,786 (May 17, 2021) (“the Rule”), ECF
No. 33. In addition to implementing the permissible uses of Rescue Plan
funds, the Rule outlines a step-by-step process that Treasury will follow to
determine whether States are impermissibly using Rescue Plan funds to off-
set net-tax-revenue reductions. Id. at 26,807.
This lawsuit by thirteen Plaintiff States—seeking to prematurely enjoin
the offset provision—is one of six around the country. In two of the three
cases already decided, district courts in Missouri and Arizona dismissed
nearly-identical complaints for lack of standing. See Arizona v. Yellen,
2021 WL 3089103, at *6 (D. Ariz. July 22, 2021), appeal filed, No. 21-16227 (9th
Cir. July 26, 2021); Missouri v. Yellen, 2021 WL 1889867, at *5 (E.D. Mo.
May 11, 2021), appeal filed, No. 21-2118 (8th Cir. May 18, 2021). This Court
should do the same because Plaintiffs have not pled, let alone proved, that
1
Case 7:21-cv-00465-LSC Document 76 Filed 08/12/21 Page 11 of 45
there is a credible threat of enforcement from the offset provision or that they
have suffered any other cognizable injury.
Failing that, the Court should dismiss this case because Plaintiffs can-
not succeed on the merits. The offset provision is not ambiguous because
“nobody questions the [offset provision] exists as a condition to [States] ac-
cepting the [Rescue Plan] funds,” and “[i]n that regard, Congress fulfilled its
duty under” the Spending Clause. Arizona, 2021 WL 3089103, at *3. In any
event, the offset provision provides far more information than the Spending
Clause requires, explaining the nature and scope of the funding condition.
Not to mention that the Rule lays out a comprehensive framework for im-
plementing the offset provision, a framework that many Plaintiff States un-
derstood when they certified compliance with the offset provision in order
to receive, to date, over $10.6 billion in federal funds. See Joint Stipulation of
Facts, ECF No. 74.
Nor is the offset provision coercive or commandeering. Plaintiffs were
(and are) free to decline Rescue Plan funds if they dislike the offset provision.
Nothing happens if States do so, a result that all Justices deemed acceptable
in Nat’l Fed’n of Indep. Bus. v. Sebelius, 567 U.S. 519 (2012) [“NFIB”]. And
while Plaintiffs complain that the offset provision “intrudes on [their] State
sovereignty,” Mot. for Permanent Inj. & Declaratory J. at 2, (“FJ Mot.”), ECF
No. 75, the Supreme Court has said the opposite: “[r]equiring States to honor
the obligations voluntarily assumed as a condition of federal funding before
recognizing their ownership of funds simply does not intrude on their sov-
ereignty.” Bell v. New Jersey, 461 U.S. 773, 790 (1983). Indeed, “state officials
can fairly be held politically accountable for choosing to accept or refuse the
federal offer.” NFIB, 567 U.S. at 578.
2
Case 7:21-cv-00465-LSC Document 76 Filed 08/12/21 Page 12 of 45
Many of these issues were previously briefed at length when Plaintiffs
moved for a preliminary injunction. See generally Opp’n to Mot. for Prelim.
Inj. (“PI Opp’n”), ECF No. 54. Defendants incorporate that briefing and ar-
gument in full, and now ask the Court to dismiss Plaintiffs’ meritless case.
BACKGROUND
As part of the American Rescue Plan Act, Congress established the
Coronavirus State Fiscal Recovery Fund, which provides nearly $200 billion
to the States and the District of Columbia. 42 U.S.C. § 802(b)(2)(A). The Res-
cue Plan provides States with considerable latitude, in scope and duration,
to use the Rescue Plan funds for pandemic-related purposes. Through the
“covered period,” a State may use the funds “to cover costs incurred”:
(A) to respond to the public health emergency with respect to the
Coronavirus Disease 2019 (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 es-
sential work;
(C) for the provision of government services to the extent of the
reduction in revenue of such State, territory, or Tribal govern-
ment 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 broad-
band infrastructure.
3
Case 7:21-cv-00465-LSC Document 76 Filed 08/12/21 Page 13 of 45
Id. § 802(c)(1). 1
The Rescue Plan includes two “further restrictions” to ensure that the
broad outlay of funds is used for the identified purposes while funds are
available. 42 U.S.C. § 802(c)(2). One limitation (not challenged here) pro-
vides that a State may not “deposit” Rescue Plan funds “into any pension
fund.” Id. § 802(c)(2)(B). The other limitation (at issue here) provides in rel-
evant part that a State:
shall not use the funds provided under [§ 802] . . . to either di-
rectly 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).
By its terms, the funding condition is a “[f]urther restriction on [the]
use of funds,” which applies only to reductions in “net” tax revenue. Id. The
statute thus does not prevent a State from changing its tax policy or modify-
ing its tax code—including by cutting taxes. But if a State chooses to reduce
its net tax revenue, it may not use the Rescue Plan funds to “offset” that re-
duction.
The Rescue Plan also authorizes the Secretary of the Treasury “to issue
such regulations as may be necessary or appropriate to carry out” the appli-
cable statutory provisions. Id. § 802(f). On May 10, 2021, Treasury posted
an Interim Final Rule implementing the Rescue Plan, which was published
1 The “covered period” began on March 3, 2021 and “ends on the last day of the
fiscal year of such State . . . in which all funds received by the State . . . have been ex-
pended or returned to, or recovered by, the Secretary.” 42 U.S.C. § 802(g)(1).
4
Case 7:21-cv-00465-LSC Document 76 Filed 08/12/21 Page 14 of 45
in the Federal Register the following week. See 86 Fed. Reg. 26,786. The Rule
sets forth a framework for determining when a State has used Rescue Plan
funds to “directly or indirectly offset” a reduction in net tax revenue:
1. For each year during the covered period, a State will use its or-
dinary budget-scoring process to evaluate whether changes in law, regula-
tion, or interpretation will result in a reduction in tax revenue. If so, the
amount of the reduction is the amount a State needs to “pay for” with
sources other than Rescue Plan funds.
2. A State need not show how reductions are paid for if the reduc-
tions are de minimis, defined as less than 1% of the State’s inflation-adjusted
2019 tax revenue. Under those circumstances, a State will not be subject to
recoupment.
3. A State will consider the amount of actual tax revenue recorded
in the reporting year. If the State’s actual tax revenue is greater than its in-
flation-adjusted 2019 tax revenue, the State did not violate the offset provi-
sion (regardless of what changes it made to its tax laws) because it
experienced no reduction in net tax revenue.
4. If a State’s actual tax revenue in the reporting year is less than
the State’s inflation-adjusted 2019 tax revenue, the State will identify any
sources of funds that have been used to permissibly offset the total value of
covered tax changes. These include any tax changes that increase tax reve-
nue and any spending cuts in areas where the State is not spending Rescue
Plan funds. The State then subtracts those permissible offsets from the total
value of revenue-reducing changes calculated in Step 1 to determine what
portion of the revenue-reducing changes has not been paid for. The State is
5
Case 7:21-cv-00465-LSC Document 76 Filed 08/12/21 Page 15 of 45
then potentially subject to recoupment for that amount or the difference be-
tween the State’s actual tax revenue and its inflation-adjusted 2019 tax reve-
nue, whichever is greater.
5. If there are any amounts that could be subject to recoupment,
Treasury will provide notice to the State and the State will have an oppor-
tunity to respond.
See 86 Fed. Reg. at 26,806–10.
On March 31, 2021, the thirteen Plaintiff States filed a complaint alleg-
ing that the offset provision is unconstitutional on its face. Plaintiffs then
moved for a preliminary injunction, which this Court denied. West Virginia
v. U.S. Dep’t of Treasury, 2021 WL 2952863, at *10 (N.D. Ala. July 14, 2021).
Between May and July 2021, ten of the thirteen Plaintiff States submitted
their certifications to Treasury under 42 U.S.C. § 802(d), agreeing to abide by
the offset provision and Treasury’s implementing regulations. See Joint Stip-
ulation of Facts, ECF No. 74. To date, those States have received a total of
over $10.6 billion in federal funds through the Rescue Plan. Id.
LEGAL STANDARDS
Plaintiffs seek a permanent injunction and declaratory judgment. Such
relief is only appropriate “if the movant shows that there is no genuine dis-
pute as to any material fact and the movant is entitled to judgment as a mat-
ter of law.” Fed. R. Civ. P. 56(a). A permanent injunction requires not only
success on the merits, but also a demonstration that (1) the movant has suf-
fered an irreparable injury; (2) remedies available at law, such as monetary
damages, are inadequate to compensate for that injury; (3) an equity remedy
is warranted after balancing the hardships; and (4) the public interest would
not be disserved by a permanent injunction. eBay Inc. v. MercExchange,
L.L.C., 547 U.S. 388, 391 (2006). “In a case of actual controversy within [a
6
Case 7:21-cv-00465-LSC Document 76 Filed 08/12/21 Page 16 of 45
district court’s] jurisdiction,” the Declaratory Judgment Act also authorizes
the court, in its discretion, to “declare the rights and other legal relations of
any interested party seeking such declaration, whether or not further relief
is or could be sought.” 28 U.S.C. § 2201.
But Plaintiffs have not even made plausible allegations in their com-
plaint that would support this Court’s jurisdiction or a valid claim on the
merits. “Standing is a doctrine that stems directly from Article III’s ‘case or
controversy’ requirement, and thus implicates [a court’s] subject matter ju-
risdiction.” Greater Birmingham Ministries v. Alabama, 161 F. Supp. 3d 1104,
1113 (N.D. Ala. 2016) (Coogler, J.) (some internal quotation marks omitted)
(quoting Bochese v. Town of Ponce Inlet, 405 F.3d 964, 974 (11th Cir. 2005)); see
Lujan v. Defs. of Wildlife, 504 U.S. 555, 561 (1992). And courts should “pre-
sume that [they] lack jurisdiction unless the contrary appears affirmatively
from the record.” Renne v. Geary, 501 U.S. 312, 316 (1991) (citations omitted).
For purposes of Defendants’ Rule 12(b)(6) motion, the Court must “accept as
true all non-conclusory allegations in the plaintiffs’ complaint” and deter-
mine whether they state a plausible claim for relief. Harper v. Pro. Prob. Servs.
Inc., 976 F.3d 1236, 1238 n.1 (11th Cir. 2020). “Mere ‘labels and conclusions
or a formulaic recitation of the elements of a cause of action will not do,’ and
a plaintiff cannot rely on ‘naked assertions devoid of further factual enhance-
ment.’” Franklin v. Curry, 738 F.3d 1246, 1251 (11th Cir. 2013) (quoting Ash-
croft v. Iqbal, 556 U.S. 662, 678 (2009)).
ARGUMENT
I. PLAINTIFFS HAVE FAILED TO ESTABLISH JURISDICTION.
The party that invokes federal jurisdiction must establish its standing
at every stage of the litigation “for each claim [it] seeks to press,” Daim-
lerChrysler Corp. v. Cuno, 547 U.S. 332, 352 (2006)), with a burden of proof that
7
Case 7:21-cv-00465-LSC Document 76 Filed 08/12/21 Page 17 of 45
increases “with the manner and degree of evidence required at the succes-
sive stages of litigation,” Lujan, 504 U.S. at 561. So for final judgment, Plain-
tiffs must adduce actual evidence to prevail. Id. But Plaintiffs have not
sufficiently pled, much less proved, that they can satisfy Article III’s require-
ments. The Court should follow the lead of two other district courts and
dismiss this case for lack of subject matter jurisdiction. See Arizona,
2021 WL 3089103, at *6; Missouri , 2021 WL 1889867, at *5.
A. Plaintiffs have neither pled nor proved the required elements
for pre-enforcement standing.
When a plaintiff seeks to enjoin the future enforcement of a statute,
“the injury-in-fact requirement” demands that the plaintiff “allege[] ‘an in-
tention to engage in a course of conduct arguably affected with a constitu-
tional interest, but proscribed by a statute, and [that] 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));
see id. at 161–67 (analyzing these three elements separately). In other words,
the prospect of enforcement must be “sufficiently imminent” to create a con-
crete injury. Id. at 159.
At the preliminary-injunction phase, the Court found pre-enforcement
standing on the following theory:
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 stat-
ute” (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).
8
Case 7:21-cv-00465-LSC Document 76 Filed 08/12/21 Page 18 of 45
West Virginia, 2021 WL 2952863, at *7. Defendants respectfully submit that
this analysis was incorrect. But regardless, at the final-judgment phase,
Plaintiffs must prove standing, and they have not done so.
Here, the course of conduct that is proscribed by statute is not “accept-
ing ARPA funds and reducing state taxes.” 2 Id. But the offset provision re-
stricts a State only from using Rescue Plan funds to “offset a reduction in the
net tax revenue . . . resulting from a change in law,” 42 U.S.C. § 802(c)(2)(A);
it does not prohibit the proposal or adoption of any tax change. As other
courts have put it, “State tax cuts are not proscribed by the ARPA,” and
States are “free to propose and pass tax cuts as [they] see[] fit.” Missouri,
2021 WL 1889867, at *4; Arizona, 2021 WL 3089103, at *5 (finding that Arizona
lacked standing in this context because it did not “claim to have directly or
indirectly used ARPA funds to supplement a reduction in its net income”).
This Court recognized as much: “before recoupment could occur [under the
offset provision], the Plaintiff States must first . . . 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.”
West Virginia, 2021 WL 2952863, at *7 (emphasis added). Because Plaintiffs
have neither alleged nor proved any intent to violate the offset provision,
they cannot establish standing under Driehaus.
For similar reasons, Plaintiffs have not engaged in a “course of con-
duct” that is “arguably affected with a constitutional interest.” Driehaus, 573
U.S. at 159. Again, the offset provision does not “intrude[] into [States’] sov-
ereign authority to set their own tax policy,” West Virginia, 2021 WL 2952863,
2 Of course, “accepting ARPA funds” is not “proscribed by statute”; the whole
purpose of the Rescue Plan is for States to accept this federal gift and “mitigate the fiscal
effects stemming from the public health emergency.” 42 U.S.C. § 802(a)(1).
9
Case 7:21-cv-00465-LSC Document 76 Filed 08/12/21 Page 19 of 45
at *7, because it merely restricts a State’s ability to use federal funds distrib-
uted under the Rescue Plan to offset a reduction in net tax revenue. No State
has a sovereign interest in using federal funds for that purpose, so the States’
“sovereign power to set [their] own tax policy is not implicated by the [Res-
cue Plan].” Missouri, 2021 WL 1889867, at *4.
Quite the opposite: the Supreme Court has repeatedly made clear that
Congress has a sovereign interest in conditioning the receipt of federal funds
“on the States’ complying with restrictions on the use of those funds, because
that is the means by which Congress ensures that the funds are spent accord-
ing to its view of the ‘general Welfare.’” NFIB, 567 U.S. at 580; see Sabri v.
United States, 541 U.S. 600, 608 (2004) (“The power to keep a watchful eye on
expenditures . . . is bound up with congressional authority to spend in the
first place.”); Oklahoma v. U.S. Civ. Serv. Comm’n, 330 U.S. 127, 143 (1947) (ex-
plaining that Congress has the “power to fix the terms upon which its money
allotments to [S]tates shall be disbursed”). Put simply, “[r]equiring States to
honor the obligations voluntarily assumed as a condition of federal funding
before recognizing their ownership of funds simply does not intrude on their
sovereignty.” Bell, 461 U.S. at 790.
Finally, Plaintiffs have not come close to proving that there is a “cred-
ible threat of [enforcement]”—that is, recoupment of misspent funds.
Driehaus, 573 U.S. at 159. As this Court already explained, “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 Sec-
retary would have to determine that ARPA funds ‘directly or indirectly off-
set’ the net reduction.” West Virginia, 2021 WL 2952863, at *9. Plaintiffs have
neither pled nor proved that those steps have occurred or will imminently
occur, especially any net-tax-revenue reduction or any impermissible offset.
10
Case 7:21-cv-00465-LSC Document 76 Filed 08/12/21 Page 20 of 45
See generally Compl. ¶¶ 58–100. So “there is virtually no likelihood that the
Secretary will recoup ARPA funds from the Plaintiff States” any time soon.
West Virginia, 2021 WL 2952863, at *9; see also id. (“[A]n injunction stopping
the Secretary from recouping ARPA funds while this case is pending stands
no real prospect of ever being enforced.”). Two other courts have properly
denied standing on this basis. See Missouri, 2021 WL 1889867, at *4 (denying
standing because “recoupment is not triggered by a reduction in State tax
revenue, it is triggered by a State’s use of federal recovery fund to offset a
reduction in its net tax revenue,” which was not imminent); Arizona, 2021
WL 3089103, at *5 (denying standing because Arizona did not “claim to have
directly or indirectly used ARPA funds to supplement a reduction in its net
income” or “even claim the tax cut will result in a reduction in Arizona’s net
income”).
This is especially true in light of the Rule, which outlines a comprehen-
sive step-by-step process that Treasury will follow to determine whether
States are impermissibly using Rescue Plan funds to offset net-tax-revenue
reductions. See 86 Fed. Reg. at 26,807. So regardless of whether Plaintiffs
misinterpret the offset provision as prohibiting any tax reductions, the Treas-
ury Department—charged with enforcing the offset provision—has affirm-
atively rejected that reading. Under the Rule, “[a] recipient government
would only be considered to have used [Rescue Plan] Funds to offset a re-
duction in net tax revenue . . . if, and to the extent that, the recipient govern-
ment could not identify sufficient funds from sources other than the [Rescue
Plan] Funds to offset the reduction in net tax revenue.” Id. And state tax-
law changes that increase tax revenue, certain spending cuts, and organic
revenue growth—increased tax revenue from existing sources due to, for ex-
ample, an improved economy—can all be used to “offset” net-tax-revenue
11
Case 7:21-cv-00465-LSC Document 76 Filed 08/12/21 Page 21 of 45
reductions. Id.; 86 Fed. Reg. at 26,809–10. Plaintiffs have said nothing con-
crete about any reduction in net tax revenue, how they intend to offset it, or
whether any such offsets would contravene the Rule. See generally Compl.
¶¶ 58–100; FJ Mot. 1–25. So they have not proved, with evidence, that there
is any credible threat of enforcement.
Plaintiffs have developed no factual record demonstrating “‘an inten-
tion to engage in a course of conduct arguably affected with a constitutional
interest, but proscribed by a statute, and [that] there exists a credible threat
of [enforcement] thereunder.’”3 Driehaus, 573 U.S. at 159. Because they have
not—which is required for pre-enforcement standing—the Court should
deny Plaintiffs’ motion and dismiss this action.
B. Plaintiffs’ other purported injuries do not suffice for standing.
As the Court implied, any injury that does not meet the requirements
of Driehaus “is not sufficiently ‘concrete and particularized’ enough to satisfy
Article III.” West Virginia, 2021 WL 2952863, at *7 (quoting Lujan, 504 U.S. at
560). In any event, Plaintiffs’ other purported injuries are not cognizable.
For starters, Plaintiffs do not have an “injury in fact” based on their
“anti-commandeering doctrine claim” that they must “choose between for-
going a benefit (federal funds) or accepting that benefit on unconstitutional
terms.” West Virginia, 2021 WL 2952863, at *7. Plaintiffs are free to decline
Rescue Plan funds if they dislike Congress’s offer; there are no consequences
for doing so. See Section II.B., infra; Steward Mach. Co. v. Davis, 301 U.S. 548,
590–91 (1937) (holding that where Congress places conditions on how fed-
eral funds are used, “[i]n such circumstances, if in no others, inducement or
persuasion does not go beyond the bounds of power”). So Plaintiffs cannot
3 For the same reasons, this case is not ripe for review. See PI Opp’n at 13–15;
Missouri, 2021 WL 1889867, at *4–5.
12
Case 7:21-cv-00465-LSC Document 76 Filed 08/12/21 Page 22 of 45
manufacture standing based on their incorrect legal conclusions about “co-
ercion” or “commandeering.” Arizona, 2021 WL 3089103, at *5 (denying
standing based on coercion because “ARPA will not revoke any federal
funding Arizona enjoyed prior to accepting”, so “[t]he downside to declin-
ing the ARPA funds is just that—Arizona would not have received ARPA
funds”); Missouri, 2021 WL 1889867, at *4 (“Missouri’s sovereign power to
set its own tax policy is not implicated by the ARPA. The Missouri legisla-
ture is free to propose and pass tax cuts as it sees fit.”).
Plaintiffs also did not suffer “an injury in fact when Congress passed
the ARPA because they were presented with an unconstitutionally ambigu-
ous deal.” 4 West Virginia, 2021 WL 2952863, at *6. Neither Plaintiffs nor the
Court cited any Spending Clause cases finding pre-enforcement standing for
a purported ambiguity injury. And that makes sense because Congress must
only “make the existence of the condition itself—in exchange for the receipt
of federal funds—explicitly obvious.” Benning v. Georgia, 391 F.3d 1299, 1307
(11th Cir. 2004) (quoting Mayweathers v. Newland, 314 F.3d 1062, 1067 (9th
Cir. 2002)); see Section II.A.1., infra. Congress has done so here, which is why
another court recently rejected this exact theory of standing. Arizona, 2021
WL 3089103, at *3–4. As that court explained, Congress “made the existence
of the condition upon which [States] could accept funds ‘explicitly obvi-
ous.’” Id. at *4 (quoting Mayweathers, 314 F.3d at 1067). That States may be
“unsure of ‘every factual instance’ of possible noncompliance does not
4 This goes double for the ten Plaintiff States that have already certified and re-
ceived billions in Rescue Plan Funds. See Joint Stipulation of Facts. At the preliminary-
injunction stage, the Court’s exercise of jurisdiction hinged on the States’ supposed un-
certainty over whether to certify. West Virginia, 2021 WL 2952863, at *6. Regardless of
whether the States suffered a cognizable injury from uncertainty when they brought this
action (and they did not), accepting the deal moots that injury as to those ten States.
13
Case 7:21-cv-00465-LSC Document 76 Filed 08/12/21 Page 23 of 45
amount to a violation of Congress’ duty.” Id. (quoting Mayweathers, 314 F.3d
at 1067). Plaintiffs therefore have “not suffered a cognizable injury simply
because” they allege “that the [offset provision] is ambiguous.”5 Id.
Finally, Plaintiffs’ newfound suggestion that they are suffering an in-
jury stemming from “intrusive reporting requirements” is meritless. FJ
Mot. 1. They have not challenged the source of these requirements: the stat-
utory provision requiring a “detailed accounting” of “all modifications to”
States’ “tax revenue sources during the covered period,” 42 U.S.C.
§ 802(d)(2), or the reporting requirements implemented in the Rule. And the
Supreme Court recently rejected this exact standing theory—premised on
harms from unchallenged statutory provisions—because it was not traceable
to the provision at issue. California v. Texas, 141 S. Ct. 2104, 2119 (2021). Not
to mention that the Rule allows States to use Rescue Plan funds to cover re-
porting costs, 86 Fed. Reg. at 26,822, so States need not use their own re-
sources to meet the reporting requirements.
Given the nature of the Plaintiffs’ pre-enforcement facial challenge to
a federal statute, it is especially critical to ensure that the jurisdictional pre-
requisites for this suit are satisfied. See Pub. Serv. Comm’n of Utah v. Wycoff
Co., 344 U.S. 237 (1952). “Facial challenges,” as opposed to as-applied chal-
lenges, “are disfavored” because “they raise the risk of a premature inter-
pretation of statutes on the basis of factually barebones records,” and this is
especially true of pre-enforcement facial challenges. Wash. State Grange v.
Wash. State Republican Party, 552 U.S. 442, 450 (2008) (quoting Sabri, 541 U.S.
5 As the Arizona court recognized, the Ohio court’s contrary conclusion was unsup-
ported by any case law. Arizona, 2021 WL 3089103, at *4 n.2. It also contravened numer-
ous Spending Clause precedents—including Maywaeathers, which was adopted by the
Eleventh Circuit in Benning. See id.; Benning, 391 F.3d at 1307; Section II.A., infra.
14
Case 7:21-cv-00465-LSC Document 76 Filed 08/12/21 Page 24 of 45
at 609). Indeed, courts routinely review agency decisions requiring the re-
payment of federal funds after they occur. See, e.g., Bennett v. Kentucky, 470
U.S. 656, 658 (1985) (explaining that “the dispute is whether the Secretary
correctly demanded repayment based on a determination that Kentucky vi-
olated requirements that Title I funds be used to supplement, and not to sup-
plant, state and local expenditures for education”); Bennett v. New Jersey, 470
U.S. 632, 637 (1985) (explaining that the dispute arose out of the Secretary’s
final decision ordering repayment of specified federal education funds).
That is exactly the path the Court should take here by dismissing this case
for lack of jurisdiction.
II. PLAINTIFFS FAIL TO STATE A CLAIM AND CANNOT SUCCEED ON THE
MERITS .
A. The offset provision is unambiguous.
Plaintiffs’ principal contention on the merits is that the offset provision
is unconstitutionally ambiguous. FJ Mot. 8–16; Compl. ¶¶ 104–05. But
Plaintiffs’ arguments misunderstand the nature of the constitutional inquiry.
See PI Opp’n 26–28. To uphold a statute as constitutional, Congress must
simply make clear that acceptance of federal funds obligates States to com-
ply with a condition. Id. That is exactly what the Rescue Plan does: “a state
official who is engaged in the process of deciding whether the State should
accept [Rescue Plan] funds and the obligations that go with those funds”
would “clearly understand that one of the obligations of the Act is the obli-
gation” not to use Rescue Plan funds to offset a net-tax-revenue reduction
resulting from changes in state law. Arlington Cent. Sch. Dist. Bd. of Educ. v.
Murphy, 548 U.S. 291, 296 (2006). As one court recently held, “nobody ques-
tions the [offset provision] exists as a condition to [States] accepting the
15
Case 7:21-cv-00465-LSC Document 76 Filed 08/12/21 Page 25 of 45
funds,” and “[i]n that regard, Congress fulfilled its duty under Pen[n]hurst
and Arlington Central.” Arizona, 2021 WL 3089103, at *3.
1. The Rescue Plan satisfies the unambiguity requirement.
Precedent on Spending Clause unambiguity establishes that Congress
must only make clear that acceptance of federal money obligates the States
to comply with a condition. In Pennhurst—the origin of the Spending Clause
unambiguity requirement—the Supreme Court held that “if Congress in-
tends to impose a condition on the grant of federal moneys, it must do so un-
ambiguously.” Pennhurst State Sch. & Hosp. v. Halderman, 451 U.S. 1, 24
(1981) (emphasis added). There, the statute provided money to States and
contained a “bill of rights” provision specifying that mentally disabled citi-
zens “have a right to appropriate treatment, services, and habilitation for
such disabilities” to be provided “in the setting that is least restrictive of the
person’s personal liberty.” Id. at 13. The Court held that these statements
“represent general statements of federal policy, not newly created legal du-
ties” and “in no way suggests that the grant of federal funds is ‘conditioned’
on a State’s funding the rights described therein.” Id. at 23. The Pennhurst
Court then explicitly recognized that a State’s obligations may be “largely
indeterminate,” so long as Congress gives “clear notice to the States that
they, by accepting funds under the Act, would indeed be obligated to com-
ply with” the condition. Id. at 25.
Numerous Spending Clause cases—in the Supreme Court, the Elev-
enth Circuit, and other Circuits—all confirm that States make an “informed
choice” when Congress simply makes clear that acceptance of federal money
16
Case 7:21-cv-00465-LSC Document 76 Filed 08/12/21 Page 26 of 45
obligates the States to comply with a condition. 6 Id. The Supreme Court
itself has repeatedly affirmed that “there [i]s sufficient notice under
Pennhurst where a statute ma[kes] clear that some conditions [a]re placed on
the receipt of federal funds.” Jackson v. Birmingham Bd. of Educ., 544 U.S. 167,
183 (2005); Davis ex rel. Lashonda D. v. Monroe Cnty. Bd. of Educ., 526 U.S. 629,
650 (1999). And the Circuits have done the same, holding that the Spending
Clause is satisfied where a “statute’s intention to impose a condition is ex-
pressed clearly,” even though the operation of a funding condition “is per-
haps unpredictable.” Mayweathers v. Newland, 314 F.3d 1062, 1067 (9th Cir.
2002); Charles v. Verhagen, 348 F.3d 601, 607–08 (7th Cir. 2003) (“[T]he exact
nature of the conditions may be ‘largely indeterminate,’ provided that the
existence of the conditions is clear . . . .” (emphasis added)); Benning, 391 F.3d
at 1307 (“The federal law in Pennhurst was unclear as to whether the [S]tates
incurred any obligations at all by accepting federal funds, but [the statute at
issue] is clear that [S]tates incur an obligation when they accept federal
funds, even if the method for compliance is left to the [S]tates.” (emphasis
added)); Cutter v. Wilkinson, 423 F.3d 579, 586 (6th Cir. 2005). Congress must
only “make the existence of the condition itself—in exchange for the receipt
of federal funds—explicitly obvious.” Benning, 391 F.3d at 1307 (quoting
Mayweathers, 314 F.3d at 1067).
6 Plaintiffs oddly cite Graham County for the proposition that a condition is uncon-
stitutionally ambiguous when “a provision’s text, literally read, admits of two plausible
interpretations.” FJ Mot. 8 (quoting Graham Cnty. Soil & Water Conservation Dist. v. United
States, 545 U.S. 409, 419 n.2 (2005)). But Graham County was not a Spending Clause case
and it says nothing about the proper inquiry for funding conditions. In fact, the quoted
language is drawn from a footnote explaining that where “there are two plausible con-
structions of a statute of limitations, we should adopt the construction that starts the time
limit running when the cause of action [ ] accrues.” Graham Cnty., 545 U.S. at 419.
17
Case 7:21-cv-00465-LSC Document 76 Filed 08/12/21 Page 27 of 45
When Pennhurst (and the legion of other cases) are properly applied,
agency regulations have no bearing on the Spending Clause analysis. If a
statutory funding condition exists, the implementing agency could regulate
the details of the condition subject to the Administrative Procedure Act and
the other typical constraints; if not, any agency regulation imposing funding
conditions would be unauthorized by the statute. That is the upshot of
Plaintiffs’ own cited materials. FJ Mot. 11–13; Va. Dep’t of Educ. v. Riley, 106
F.3d 559, 568 (4th Cir. 1997) (en banc) (reasoning that an agency could not,
by regulation, act ultra vires by imposing spending conditions that did not
exist as part of the statute); Ilya Somin, Making Federalism Great Again, 97 Tex.
L. Rev. 1247, 1284 (2019) (arguing that the Executive should not be able “to
attach conditions to federal grants that were not authorized by Congress” (em-
phasis added)). And that’s exactly what Pennhurst requires: Congress must
provide only “clear notice to the States that they, by accepting funds under
the Act, would indeed be obligated to comply with” a condition. Pennhurst,
451 U.S. at 25. The idea is simply to keep Congress from “surprising partic-
ipating States with post-acceptance or retroactive conditions.” NFIB, 567
U.S. at 584 (quoting Pennhurst, 451 U.S. at 25).
Here, Congress made abundantly clear that the acceptance of Rescue
Plan funds obligates the State to comply with the offset provision, easily
passing muster under binding Supreme Court and Eleventh Circuit prece-
dent. 42 U.S.C. § 802(c)(1) (delineating “[f]urther restriction[s] on the use of
funds,” including the offset provision, which governs a State’s “use [of] the
funds provided under this section”). As one court recently held in this con-
text, “nobody questions the [offset provision] exists as a condition to [States]
accepting the funds,” and “[i]n that regard, Congress fulfilled its duty un-
der” Spending Clause precedents. Arizona, 2021 WL 3089103, at *3.
18
Case 7:21-cv-00465-LSC Document 76 Filed 08/12/21 Page 28 of 45
But the Rescue Plan does not just provide the existence of a condition;
it explains the nature and scope of the condition as well. By its plain terms,
the offset provision only applies when a State uses Rescue Plan funds to “off-
set” a reduction in “net” tax revenue resulting from changes in state law. 42
U.S.C. § 802(c)(2)(A). Taken together, the statute’s language simply ensures
that States are not using federal funds to finance state tax cuts that decrease
net tax revenue. See PI Opp’n 17–18. And while Plaintiffs ask “whether its
prohibition reaches all tax rate reductions, even if such a reduction is ex-
pected to be—or is actually—revenue neutral,” that question is already an-
swered by the plain text. FJ Mot. 9. The statute restricts only the use of
Rescue Plan funds to offset reductions in net tax revenue resulting from
changes in state law, not every tax reduction. See PI Opp’n 17. So if a State
balances some tax reductions with other tax increases or implements reve-
nue-neutral tax reductions, then the offset provision is not implicated. Id.
Had Congress sought to prohibit every reduction in taxes, it could easily
have said so explicitly. Contra FJ Mot. 10.
Likewise, the meaning of “directly or indirectly offset” is clear. See PI
Opp’n 17–18. For example, assuming no other changes, a State could not
receive $2 billion in Rescue Plan funds, cut its income tax by an amount equal
to $2 billion, and use the Rescue Plan funds to offset the revenue loss. That
would be using Rescue Plan funds to “directly” offset a net-tax-revenue re-
duction. 42 U.S.C. § 802(c)(2)(A); see Directly, Oxford English Dictionary
Online, available here (last visited August 12, 2021) (defining “directly” as
“[i]n a direct manner or way”). Similarly, again assuming no other changes,
a State could not use Rescue Plan funds to replace $2 billion in planned state
expenditures on COVID-19 testing and then use the $2 billion it had origi-
19
Case 7:21-cv-00465-LSC Document 76 Filed 08/12/21 Page 29 of 45
nally budgeted for that purpose to offset a $2 billion reduction in state in-
come tax. That would be using Rescue Plan funds to “indirectly” offset a
net-tax-revenue reduction. 42 U.S.C. § 802(c)(2)(A); see Indirectly, Oxford
English Dictionary Online, available here (last visited August 12, 2021) (de-
fining “indirectly” as “through some intervening person or thing”). But
States are free to offset such reductions by other means, including certain
spending cuts and revenue increases from macroeconomic growth.
Especially in the context of an emergency aid statute that Congress en-
acted quickly, “[t]here are far too many circumstances affecting the States in
different ways for Congress to have envisioned all aspects of compliance and
noncompliance.” Charles, 348 F.3d at 608. Instead, “Congress permissibly
conditioned the receipt of federal money in such a way that each State is
made aware of the condition and is simultaneously given the freedom to tai-
lor compliance according to its particular . . . circumstances.” Benning, 391
F.3d at 1307 (quoting Charles, 348 F.3d at 608). That is straightforwardly al-
lowed by the Spending Clause. Id. Plaintiffs’ argument—that Congress it-
self must essentially specify minute details of a funding condition—is
wrong. See FJ Mot. 9–10. “[I]t is simply impossible” for Congress to “delin-
eate every instance in which a State may or may not comply with” the offset
provision. Charles, 348 F.3d at 608; Mayweathers, 314 F.3d at 1067; Arizona,
2021 WL 3089103, at *3–4. As the Supreme Court has admonished, “every
improper expenditure” need not be “specifically identified and proscribed”
in the statute. Bennett, 470 U.S. at 666; Jackson, 544 U.S. 167 at 183 (reiterating
Bennett); Davis, 526 U.S. at 650 (same); see W. Va. Dep’t of Health & Hum. Res.
v. Sebelius, 649 F.3d 217, 223 (4th Cir. 2011) (“Congress need not spell out
every condition with flawless precision for a provision to be enforceable.”).
20
Case 7:21-cv-00465-LSC Document 76 Filed 08/12/21 Page 30 of 45
The Court should find the offset provision plainly within Congress’s
Spending Clause authority because “[i]t made the existence of the condition
upon which [States] could accept funds explicitly obvious.” Arizona, 2021
WL 3089103, at *4 (citation omitted). And States are not without recourse if
they dislike the offset provision or have concerns about its ambiguity: they
may decline the Rescue Plan funds, seek a better bargain in the halls of Con-
gress, or work cooperatively with the Treasury Department. See Bennett, 470
U.S, at 669 (describing a conditional grant program “an ongoing, cooperative
program” in which “grant recipients ha[ve] an opportunity to seek clarifica-
tion of the program requirements”); Charles, 348 F.3d at 608 (explaining that
States who dislike the ambiguity of an imposed condition “certainly could
have refused federal funding”). But because declaring an Act of Congress
unconstitutional is “the gravest and most delicate duty that” federal courts
are “called on to perform,” Rostker v. Goldberg, 453 U.S. 57, 64 (1981) (quota-
tion marks omitted), “[d]ue respect for the decisions of a coordinate branch
of Government demands that [courts] invalidate a congressional enactment
only upon a plain showing that Congress has exceeded its constitutional
bounds,” United States v. Morrison, 529 U.S. 598, 607 (2000); Reno v. Condon,
528 U.S. 141, 148 (2000); Munn v. Illinois, 94 U.S. 113 (1876). Plaintiffs have
not come close to making such a showing here.
2. The Rule implements the unambiguous text of the offset
provision.
Plaintiffs’ additional arguments about the major-questions doctrine
and the ambiguity of the Rule are inapposite here because they are not chal-
lenging the Rule. Compare FJ Mot. 13–16 with Compl. ¶¶ 101–31. And Plain-
tiffs’ quibbles with the Rule cannot inform the Article I inquiry of whether
21
Case 7:21-cv-00465-LSC Document 76 Filed 08/12/21 Page 31 of 45
Congress properly exercised its Spending Clause authority (it has). 7 Accord
FJ Mot. 11. But if the Court disagrees, then the Rule—which is authorized
by the statute—supplies the requisite notice.
The Rule sets forth a comprehensive framework for the Treasury De-
partment to make the determination called for by the statute: whether a State
has “directly or indirectly offset” a “reduction in net tax revenue” with Res-
cue Plan funds. See Background, supra. The Rule explains that, in projecting
whether a State will experience a reduction in net tax revenue, the State may
rely on the same budget model and reasonable assumptions that it uses in
the ordinary course of its own budgetary processes. 86 Fed. Reg. at 26,809.
As for offsets—both direct and indirect—the Rule covers that as well. A
State “would only be considered to have used [Rescue Plan] Funds to offset
a reduction in net tax revenue” if the State “could not identify sufficient
funds from sources other than the [Rescue Plan] Funds to offset the reduc-
tion in net tax revenue.” Id. at 26,807. “If sufficient funds from other sources
cannot be identified to cover the full cost of the reduction in net tax revenue,”
the “remaining amount not covered by these sources will be considered to
have been offset by [Rescue Plan] Funds, in contravention of the offset pro-
vision.” Id. State tax-law changes that increase tax revenue, certain spend-
ing cuts, and organic revenue growth—increased tax revenue from existing
sources due to, for example, an improved economy—can all be used to “off-
set” net-tax-revenue reductions. Id.; 86 Fed. Reg. at 26,809–10; see PI
Opp’n 16–19. And States need not demonstrate how they have offset net-
7 The Ohio court’s contrary holding misreads governing precedent and miscon-
ceives the Spending Clause inquiry. Compare Section II.A.1. with FJ Mot. at 13–16 (quoting
Ohio v. Yellen, 2021 WL 2712220, at *18–20 (S.D. Ohio July 1, 2021)).
22
Case 7:21-cv-00465-LSC Document 76 Filed 08/12/21 Page 32 of 45
tax-revenue reductions at all if the reductions are less than 1% of their infla-
tion-adjusted 2019 tax revenue. Fed. Reg. at 26,809.
Not only did Treasury have explicit statutory authority to issue that
guidance, 42 U.S.C. § 802(f), but this type of implementation is common in
Spending Clause programs. Agencies are routinely empowered to opera-
tionalize statutory funding conditions, and courts have long deferred to
agency interpretations of Spending Clause legislation, such as education
statutes and Medicaid. See, e.g., Irving Indep. Sch. Dist. v. Tatro, 468 U.S. 883,
891–92 (1984) (Education of the Handicapped Act); Baptist Mem’l Hosp. –
Golden Triangle, Inc. v. Azar, 956 F.3d 689, 692-93 (5th Cir. 2020) (Medicaid);
Children’s Hosp. Ass’n of Texas v. Azar, 933 F.3d 764, 770 (D.C. Cir. 2019) (Med-
icaid); Petit v. U.S. Dep’t of Educ., 675 F.3d 769, 778 (D.C. Cir. 2012) (Individ-
uals with Disabilities Education Act); Harris v. Olszewski, 442 F.3d 456, 466-
67 (6th Cir. 2006) (Medicaid); United States v. Miami University, 294 F.3d 797,
811-15 (6th Cir. 2002) (Family Educational Rights and Privacy Act). Here,
Defendants are not asking the Court to defer to the Rule because Plaintiffs
have not challenged it. See Compl. ¶¶ 101–31. But these cases illustrate that
when Congress clearly attaches a funding condition, agency regulations can
play a role in implementing the condition.
Both sides agree that agencies cannot impose funding conditions that
Congress itself has not attached. See Section II.A.1., supra. Plaintiffs err,
however, in suggesting that Treasury is essentially without power to opera-
tionalize the offset provision when its existence is “explicitly obvious.” Ari-
zona, 2021 WL 3089103, at *4 (citation omitted). For example, Plaintiffs
complain that the Rule cannot implement the offset provision because the
provision “implicates several questions of deep economic and political sig-
nificance.” See FJ Mot. 13–15 (quoting King v. Burwell, 576 U.S. 473, 485
23
Case 7:21-cv-00465-LSC Document 76 Filed 08/12/21 Page 33 of 45
(2015)). But Plaintiffs nowhere explain what those purported “major ques-
tions” are. See id. And, in any event, their citation to King v. Burwell is inapt.
There, addressing the question whether the Internal Revenue Service (IRS)
could have interpreted a provision of the Patient Protection and Affordable
Care Act in a way that would have destabilized insurance markets, the Su-
preme Court found it “especially unlikely that Congress would have dele-
gated this decision to the IRS, which has no expertise in crafting health
insurance policy of this sort.” King, 576 U.S. at 486. Here, by contrast, the
offset provision involves tax issues, which are at the core of Treasury’s ex-
pertise. So Plaintiffs cannot rely on King to nullify both the offset provision
and the very rulemaking authority that Congress included to effectuate its
purposes. 42 U.S.C. § 802(f).
Nor are Plaintiffs correct that the Rule itself is “unconstitutionally am-
biguous.” FJ Mot. 15–16. Again, Plaintiffs have not challenged the Rule on
ambiguity or any other grounds. But, procedurally improper arguments
aside, Plaintiffs identify only three minor aspects in the 66-page single-
spaced Rule that are purportedly ambiguous. None is.
First, Plaintiffs note Treasury’s guidance that “administrative interpre-
tations” do not implicate the offset provision if they are “corrections to re-
place prior inaccurate interpretations.” FJ Mot. 15 (quoting 86 Fed. Reg. at
26,808). But Plaintiffs do not explain how that is in any way unclear: while
“new” or “changed” administrative interpretations that reduce net tax reve-
nue fall within the offset provision, “corrections to replace prior inaccurate
interpretations” do not because “the operative change in those circum-
stances is the underlying legislation or regulation that occurred prior to the
covered period.” 86 Fed. Reg. at 26,808.
24
Case 7:21-cv-00465-LSC Document 76 Filed 08/12/21 Page 34 of 45
Second, Plaintiffs take issue with the word “areas,” as in States “may
cut spending in certain areas to pay for covered changes that reduce tax rev-
enue.” Id. at 26,809. But Plaintiffs almost immediately acknowledge that the
Rule fully describes this feature. See FJ Mot. 16 n.4. “To better align with
existing reporting and accounting,” Treasury considers “whether the recipi-
ent government has spent [Rescue Plan] Funds on th[e] same department,
agency, or authority” from which that government has cut spending. 86 Fed.
Reg. at 26,809–10. If the recipient governments “have not spent [Rescue
Plan] Funds in a department, agency, or authority, the full amount of the
reduction in spending counts as a [permissible] covered spending cut, up to
the recipient government’s net reduction in total spending.” Id. at 26,810.
“If they have, the [Rescue Plan] Funds generally would be deemed to have
replaced the amount of spending cut and only reductions in spending above
the amount of [Rescue Plan] Funds spent on the department, agency, or au-
thority would count” as permissible offsets for a reduction in net tax reve-
nue. Id. By “prevent[ing] recipient governments from using [Rescue Plan]
Funds to supplant State or territory funding in the eligible use areas, and
then us[ing] those State or territory funds to offset tax cuts,” Treasury’s ap-
proach implements the plain text of the offset provision by “ensur[ing] that
[Rescue Plan] Funds are not used to ‘indirectly’ offset revenue reductions
due to covered changes.” Id.; see Section II.A.1., supra; PI Opp’n 16–18.
Third, Plaintiffs complain that Treasury has not spelled out every cir-
cumstance in which a State could “eva[de]” the offset provision through “a
spending cut [that] is subsequently replaced with [Rescue Plan] Funds and
used to indirectly offset a reduction in net tax revenue.” FJ Mot. 16 (citing
86 Fed. Reg. at 26,810). But it is not difficult to understand what the regula-
tory language refers to: the prospect that a State might cut spending in an
25
Case 7:21-cv-00465-LSC Document 76 Filed 08/12/21 Page 35 of 45
area where it is not spending Rescue Plan funds in a given year, then might
spend Rescue Plan funds in that area in a subsequent year, effectively using
the Rescue Plan funds to backfill the earlier cut. For example, if a State claims
to be funding a $1 billion tax cut with spending cuts on necessary sewer in-
frastructure, only to turn around the next year and spend $1 billion of Rescue
Plan funds on necessary sewer infrastructure, then Treasury may scrutinize
that action to “ensure recipient governments use [Rescue Plan] Funds in a
manner consistent with the prescribed eligible uses” and not to “indirectly
offset a reduction in net tax revenue.” 86 Fed. Reg. at 26,810. At any rate,
not “every improper expenditure” must be “specifically identified and pro-
scribed” to satisfy the Spending Clause. Bennett, 470 U.S. at 666; Jackson, 544
U.S. at 183 (same); Davis, 526 U.S. at 650 (same). Such premonition is “im-
possible” for both Congress and the agency. See Charles, 348 F.3d at 608;
Mayweathers, 314 F.3d at 1067.
Because Congress made “the existence of the condition upon which
[States] could accept funds explicitly obvious,” Congress “fulfilled its duty
under” the Spending Clause. Arizona, 2021 WL 3089103, at *4 (citation omit-
ted). That Congress also described the nature and scope of the condition,
and that Treasury implemented the statute’s plain text with the Rule, only
highlights that the offset provision is not unconstitutionally ambiguous.
B. The Rescue Plan is not coercive or commandeering.
Plaintiffs fare no better in arguing that the offset provision violates the
Tenth Amendment and unconstitutionally coerces States into accepting Res-
cue Plan funds with the attendant conditions. Compl. ¶¶ 114–21, 123–28; FJ
Mot. 17–19, 20–22; PI Opp’n 25 (explaining that the inquiry under both the
Spending Clause and the Tenth Amendment is the same). The offset provi-
26
Case 7:21-cv-00465-LSC Document 76 Filed 08/12/21 Page 36 of 45
sion is, by any measure, a modest restriction on an otherwise generous out-
lay of federal funds. It simply ensures that Congress’s substantial monetary
outlay will be used as intended for the public-health and economic-recovery
purposes. PI Opp’n 18. And if Plaintiffs disliked the offset provision, they
were (and are) free to simply decline the federal money.
In arguing otherwise, Plaintiffs misconstrue governing law. For start-
ers, Congress has full “authority to condition the receipt of funds on the
States’ complying with restrictions on the use of those funds, because that is
the means by which Congress ensures that the funds are spent according to
its view of the ‘general Welfare.’” NFIB, 567 U.S. at 580; PI Opp’n 22–23.
That is exactly what Congress has done here: titled “[f]urther restriction on
the use of funds,” the offset provision only applies to a State’s “use [of] the
funds provided under this section.” 42 U.S.C. § 802(c)(2) (emphasis added).
So a coercion analysis is inapplicable because Congress here is not “pressur-
ing the States to accept policy changes” independent of the new federal
funds. NFIB, 567 U.S. at 580; Gruver v. La. Bd. of Supervisors for La. State Univ.
Agric. & Mech. Coll., 959 F.3d 178, 183–84 (5th Cir. 2020); Miss. Comm’n on
Env’t Quality v. EPA, 790 F.3d 138, 179 (D.C. Cir. 2015); Religious Sisters of
Mercy v. Azar, 513 F. Supp. 3d 1113 (D.N.D. Jan. 19, 2021), appeal pending on
other grounds, No. 21-1890 (8th Cir. Apr. 21, 2021). Plaintiffs are free to do
what they want with their own money or tax scheme, including cutting
taxes, providing rebates, increasing spending, or cutting expenditures. See
PI Opp’n 16–18, 20–23. The States must simply refrain from using the federal
money to “directly or indirectly offset a reduction in net tax revenue” result-
ing from state tax-law changes. 42 U.S.C. § 802(c)(2)(A).
27
Case 7:21-cv-00465-LSC Document 76 Filed 08/12/21 Page 37 of 45
Even if the coercion analysis did apply here, Plaintiffs would lose un-
der NFIB. As Defendants previously explained, the key aspect of the Medi-
caid expansion that NFIB found to be coercive was that Congress
“penalize[d] States that choose not to participate in that new program by tak-
ing away their existing Medicaid funding.” NFIB, 567 U.S. at 585 (emphasis
added). Here, in stark contrast, there are no monetary consequences if a
State chooses to decline the Rescue Plan funds. PI Opp’n 23–25. As one
court recently explained in rejecting this exact argument, the Rescue Plan
“will not revoke any federal funding [States] enjoyed prior to accepting. The
downside to declining the ARPA funds is just that—[States] would not have
received ARPA funds.” Arizona, 2021 WL 3089103, at *5.
Contrary to Plaintiffs’ contention, FJ Mot. 17–19, the amount of fund-
ing at issue in NFIB was only relevant to the preexisting funding that would
be withdrawn if States declined the Medicaid expansion. Compare NFIB, 567
U.S. at 582 (finding that a threatened loss of preexisting Medicaid funds—ten
percent of States’ overall budgets—was coercive) with South Dakota v. Dole,
483 U.S. 203, 211 (1987) (finding that a threatened five-percent loss of preex-
isting highway funds was not coercive). After all, “[t]hreat of loss, not hope
of gain, is the essence of economic coercion.” United States v. Butler, 297 U.S.
1, 81 (1936) (Stone, J., dissenting). And all Justices in NFIB agreed that, de-
spite the amount of funding at issue, “Congress could have made just the
new funding provided under the ACA contingent on acceptance of the terms
of the Medicaid Expansion.” NFIB, 567 U.S. at 687–88 (joint dissent); id. at
576, 585 (plurality) (same); id. at 624–46 (Ginsburg, J., concurring in part)
(finding no coercion). That holding defeats Plaintiffs’ claim that the sheer
amount of offered funding is dispositive, regardless of whether it is being
newly provided or eliminated. Notably, the offset provision is more modest
28
Case 7:21-cv-00465-LSC Document 76 Filed 08/12/21 Page 38 of 45
than the prospective funding condition that all Justices in NFIB indicated
was permissible: a State does not lose all of its Rescue Plan funding if it vio-
lates the offset provision, but only the amount it uses as an improper offset.
See 42 U.S.C. § 802(e)(1).
Perhaps recognizing these fatal flaws, Plaintiffs look to the Tenth
Amendment, arguing that the offset provision intrudes on States’ sovereign
authority to set tax policy. FJ Mot. 22. But, again, the offset provision does
not regulate “States’ ability to cut at least some taxes,” id.; it simply precludes
States from using federal funds to offset a reduction in net tax revenue. See
Section II.A., supra. More fundamentally, though, Plaintiffs continue to mis-
understand both the Spending Clause and the Tenth Amendment. It has
long been established that “Congress can use [its Spending Clause] power to
implement federal policy it could not impose directly under its enumerated
powers.” NFIB, 567 U.S. at 578; Coll. Sav. Bank v. Fl. Prepaid Postsecondary
Educ. Expense Bd., 527 U.S. 666, 686 (1999) (same); Dole, 483 U.S. at 207 (same);
Butler, 297 U.S. at 66 (same). And “[r]equiring States to honor the obligations
voluntarily assumed as a condition of federal funding before recognizing
their ownership of funds simply does not intrude on their sovereignty.”8
8 Plaintiffs miscite Carey v. Throwe for the proposition that it is “immaterial whether
states voluntarily choose to be part of a federal program, if Congress lacked the power to
create such a program in the first place.” FJ Mot. 22 (quoting 957 F.3d 468, 481 (4th Cir.
2020)). But Congress did not lack the power to enact the Rescue Plan using its Spending
Clause authority, which was not at issue in Carey. And while Congress may not, for ex-
ample, “force state law enforcement agencies to issue certain identification as part of a
federal concealed carry scheme,” Carey, 957 F.3d at 481, Congress can always “use [its
Spending Clause] power to implement federal policy it could not impose directly under
its enumerated powers,” NFIB, 567 U.S. at 578. As Carey recognizes, “[t]he anticomman-
deering doctrine turns on the nature of the federal ask,” Carey, 957 F.3d at 481, and the
“federal ask” in the Spending Clause context is only an offer of money that States may
decline. See Bell, 461 U.S. at 790; Massachusetts v. Mellon, 262 U.S. 447, 482 (1923).
29
Case 7:21-cv-00465-LSC Document 76 Filed 08/12/21 Page 39 of 45
Bell, 461 U.S. at 790; School Dist. of City of Pontiac v. Sec’y of U.S. Dep’t of Educ.,
584 F.3d 253, 283 (6th Cir. 2009) (Sutton, J., concurring) (“[T]he Tenth
Amendment, the Eleventh Amendment and the Constitution’s other struc-
tural limitations on congressional authority do not limit properly enacted
spending-clause legislation.”).
Because Plaintiffs had (and have) “a legitimate choice whether to ac-
cept the federal conditions in exchange for federal funds,” NFIB, 567 U.S. at
578, their coercion and Tenth Amendment arguments should be rejected.
They are free to say “no thanks” to the federal money, FJ Mot. 19; their voters
know where to turn if they like, or dislike, the States’ choice. NFIB, 567 U.S.
at 578 (explaining that “state officials can fairly be held politically accounta-
ble for choosing to accept or refuse the federal offer”); New York v. United
States, 505 U.S. 144, 168 (1992).
C. The offset provision relates to the Rescue Plan’s purposes.
Plaintiffs also incorrectly argue that the offset provision is not suffi-
ciently related to the Rescue Plan’s purposes. FJ Mot. 19–20; Compl. ¶¶ 106–
13. But the paragon of a condition that is related to the purposes of federal
spending is one that ensures “that public funds [are] spent for the purposes
for which they were authorized.” Rust v. Sullivan, 500 U.S. 173, 196 (1991).
And that’s exactly what the offset provision does: it merely specifies how
States may use the newly appropriated federal funds to ensure that they are
used for the public-health and economic-recovery purposes of the Act. See
Sabri, 541 U.S. at 608; Oklahoma, 330 U.S. at 143; Section II.B., supra. Congress
did not provide the Rescue Plan funds as a means to replace purposeful de-
creases in net tax revenue; it provided the money to help States economically
recover from the pandemic in ways they otherwise could not.
30
Case 7:21-cv-00465-LSC Document 76 Filed 08/12/21 Page 40 of 45
This is more than sufficient to meet the “minimal standard of rational-
ity” required of Spending Clause legislation. Benning, 391 F.3d at 1308; see
New York, 505 U.S. at 172 (finding funding conditions sufficiently related
where “both the conditions and the payments embody Congress’ efforts to
address the pressing problem of radioactive waste disposal”); Dole, 483 U.S.
at 208–09 (finding that the federal interest in a uniform drinking age was
sufficiently related to States’ receipt of highway funds). In fact, Plaintiffs
point to no case, and Defendants are aware of none, in which a court has
struck down a funding condition on relatedness grounds. See City of Los An-
geles v. Barr, 929 F.3d 1163, 1175 (9th Cir. 2019) (recognizing that the related-
ness standard “is not demanding” and that “the Court has never struck
down a condition on federal grants based on this relatedness prong”). Plain-
tiffs’ relatedness argument should be rejected.
III. THE COURT SHOULD NOT ENJOIN THE OFFSET PROVISION OR DECLARE IT
UNCONSTITUTIONAL.
Even if the Court finds a constitutional defect in the offset provision,
neither a permanent injunction nor a declaratory judgment is appropriate.
A. The States are not entitled to a permanent injunction.
A court, in its “equitable discretion,” may enter a permanent injunc-
tion if a plaintiff can demonstrate:
(1) that it has suffered an irreparable injury; (2) that remedies
available at law, such as monetary damages, are inadequate to
compensate for that injury; (3) that, considering the balance of
hardships between the plaintiff and defendant, a remedy in eq-
uity is warranted; and (4) that the public interest would not be
disserved by a permanent injunction.
eBay, 547 U.S. at 391 (citations omitted).
31
Case 7:21-cv-00465-LSC Document 76 Filed 08/12/21 Page 41 of 45
Plaintiffs fail each of these requirements. “It is axiomatic that equitable
relief is only available where there is no adequate remedy at law.” Rosen v.
Cascade Int’l, Inc., 21 F.3d 1520, 1527 (11th Cir. 1994) (adding that “cases in
which the remedy sought is the recovery of money damages do not fall
within the jurisdiction of equity”); see also Hobson v. Fischbeck, 758 F.2d 579,
581 (11th Cir. 1985) (holding equitable relief unavailable because plaintiff
“has an adequate remedy at law—he could pay the disputed tax and then
sue for a refund”). Even if Plaintiffs were to use Rescue Plan funds to offset
a reduction in net tax revenue and face potential recoupment by the Secre-
tary, any such recoupment proceedings would be an adequate forum for
Plaintiffs’ to present their defenses. See 86 Fed. Reg. at 26,811–12 (detailing
the recoupment process, including a “reconsideration process [that] pro-
vides a recipient the opportunity to submit additional information it believes
supports its request” for reconsideration). Because the States may assert
their constitutional argument as a legal defense to a recoupment action, and
could sue for a refund if necessary, they therefore have an adequate remedy
at law. 9 See Hobson, 758 F.2d at 581. And if the States were unable to succeed
in such hypothetical future proceedings, the result would simply be that it
has to repay money—the quintessential example of harm that is not irrepa-
rable. Ne. Fla. Chapter of Ass’n of Gen. Contractors v. Jacksonville, 896 F.2d 1283,
1285 (11th Cir. 1990) (“An injury is ‘irreparable’ only if it cannot be undone
through monetary remedies. . . . Mere injuries, however substantial, in terms
of money, . . . are not enough.” (quoting Sampson v. Murray, 415 U.S. 61, 90
See FJ Mot. 23.
9 Plaintiffs’ argument that relief would be unavailable is incorrect.
States could get improperly recouped funds set aside under the Administrative Proce-
dure Act if they properly brought a challenge seeking to do so.
32
Case 7:21-cv-00465-LSC Document 76 Filed 08/12/21 Page 42 of 45
(1974))). With potential recoupment nowhere in sight, Plaintiffs’ challenge
is premature and no injunction should issue.
Indeed, the Court has already found that Plaintiffs cannot demonstrate
irreparable harm. In denying the motion for preliminary injunction, the
Court noted that “recoupment of ARPA funds is a quintessentially reparable
injury because it can be ‘undone through monetary remedies.’” West Vir-
ginia, 2021 WL 2952863, at *9 (quoting Jacksonville, 896 F.2d at 1285). And “if
the Secretary were to recoup ARPA funds from the Plaintiff States,” a court
adjudicating a properly filed Administrative Procedure Act claim could es-
sentially “order the funds returned to the Plaintiff States.” Id.; see Note 9,
supra. A showing of irreparable injury is required for both preliminary and
permanent injunctions, so Plaintiffs’ inability to satisfy this element defeats
their claim for a permanent injunction. See Winter v. Nat. Res. Def. Council,
Inc., 555 U.S. 7, 32 (2008).
By contrast, enjoining an Act of Congress would unquestionably im-
pose irreparable harm on the federal government and contravene the public
interest. See United States v. Oakland Cannabis Buyers’ Coop., 532 U.S. 483, 497
(2001) (emphasizing that “a court sitting in equity cannot ignore the judg-
ment of Congress, deliberately expressed in legislation” (quotation marks
omitted)); see also Maryland v. King, 567 U.S. 1301, 1303 (2012) (Roberts, C.J.,
in chambers) (“[A]ny time a [government] is enjoined by a court from effec-
tuating statutes enacted by representatives of its people, it suffers a form of
irreparable injury.” (citation omitted)). “The presumption of constitutional-
ity which attaches to every Act of Congress is not merely a factor to be con-
sidered in evaluating success on the merits, but an equity to be considered
in favor of [the government] in balancing hardships.” Walters v. Nat’l Ass’n
of Radiation Survivors, 468 U.S. 1323, 1324 (1984) (Rehnquist, J., in chambers).
33
Case 7:21-cv-00465-LSC Document 76 Filed 08/12/21 Page 43 of 45
An injunction would thus irreparably harm the United States and under-
mine the public interest. That is only more evident where, as here, the leg-
islation at issue is a direct response to a national health and economic
emergency of historic proportions.
B. The Court should not issue a declaratory judgment.
A court may issue a declaratory judgment “[i]n a case of actual contro-
versy within its jurisdiction.” 28 U.S.C. §2201(a). Assuming the threshold
requirements of standing and ripeness are met, the Court may consider var-
ious factors in determining whether to issue a declaratory judgment, includ-
ing whether the declaratory judgment would serve a useful purpose in
clarifying the legal relations and whether there is an alternative remedy that
is better or more effective. Ameritas Variable Life Ins. Co. v. Roach, 411 F.3d
1328, 1331 (11th Cir. 2005).
Here, a declaratory judgment is not necessary to clarify any legal rela-
tions. As discussed above, the Rescue Plan—especially in combination with
the Rule—provides more than sufficient clarity. And if Plaintiffs’ have any
lingering questions, “Treasury encourages State, local, and Tribal govern-
ments in particular to provide feedback and to engage with Treasury regard-
ing issues that may arise regarding all aspects of th[e] [Rule] and Treasury’s
work in administering the [Rescue Plan] Funds.” 86 Fed. Reg. at 26,788.
A declaratory judgment also should not issue because there is an alter-
native remedy available: Plaintiffs may assert their constitutional arguments
as a defense to a recoupment action. This alternative is superior to a declar-
atory judgment because a recoupment action may never come to pass at all,
either because Plaintiffs do not use Rescue Plan funds to offset a reduction
in net tax revenue, or because the Secretary may exercise her enforcement
34
Case 7:21-cv-00465-LSC Document 76 Filed 08/12/21 Page 44 of 45
discretion not to seek recoupment. Plaintiffs’ request for declaratory judg-
ment should therefore be denied.
CONCLUSION
For the reasons explained above, Plaintiffs’ final-judgment motion
should be denied and this case should be dismissed. But if the Court were
to enjoin or declare unconstitutional any aspect of the Rescue Plan, that rul-
ing should be tailored to the portion of the program that the Court believes
to be unconstitutional and only to the Plaintiff States. See PI Opp’n 32–33.
35
Case 7:21-cv-00465-LSC Document 76 Filed 08/12/21 Page 45 of 45
DATED: August 12, 2021 Respectfully submitted,
BRIAN M. BOYNTON
Acting Assistant Attorney General
BRIAN D. NETTER
Deputy Assistant Attorney General
ALEXANDER K. HAAS
Director, Federal Programs Branch
BRIGHAM J. BOWEN
Assistant Director, Federal Programs Branch
/s/ Stephen Ehrlich
MICHAEL P. CLENDENEN
STEPHEN EHRLICH
CHARLES E.T. ROBERTS
Trial Attorneys
Civil Division, Federal Programs Branch
U.S. Department of Justice
1100 L Street, NW
Washington, DC 20005
Phone: (202) 305-9803
Email: stephen.ehrlich@usdoj.gov
Counsel for Defendants
36
File and source
- File
- 76-motion-to-dismiss.pdf
- Size
- 410,093 bytes
- SHA-256
- b60b5f2d4ac02dab6205c73b1e4c632cf019fe27cdec7359bbb89ae46bba298b
- Our copy
- 76-motion-to-dismiss.pdf
- Original
- storage.courtlistener.com