Wisconsin Legislature Reply Memorandum on Motion to Intervene, West Virginia v. Treasury (N.D. Ala. 2021)

Summary

In Case No. 7:21-cv-00465-LSC, the Wisconsin Legislature, a proposed intervenor-plaintiff, filed this reply memorandum in support of the opposed motion to intervene as plaintiff in the suit by the State of West Virginia and other states against the U.S. Department of the Treasury. The memorandum argues that the Legislature has Article III standing because the Federal Tax Mandate harms Wisconsin's interest in the validity of its laws and the Legislature's institutional role in cutting taxes. It argues that the Legislature may intervene as of right or, alternatively, by permissive intervention, and that the Court should decide the motion now. Counsel J. Houston Shaner and Misha Tseytlin signed it, with a certificate of service dated June 4, 2021.

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                                                                                             FILED
                                                                                    2021 Jun-04 PM 12:45
                                                                                    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, by and through
Patrick Morrisey, Attorney General of the State of
West Virginia; STATE OF ALABAMA, by and
through Steve Marshall, Attorney General of the
State of Alabama; STATE OF ARKANSAS, by
and through Leslie Rutledge, Attorney General of
the State of Arkansas; STATE OF ALASKA, by             Case No. 7:21-cv-00465-LSC
and through Treg R. Taylor, Attorney General of the
State of Alaska; STATE OF FLORIDA, by and
through Ashley Moody, Attorney General of the          PROPOSED INTERVENOR-
State of Florida; STATE OF IOWA; STATE OF              PLAINTIFF WISCONSIN
KANSAS, by and through Derek Schmidt, Attorney         LEGISLATURE’S REPLY
General of the State of Kansas; STATE OF               MEMORANDUM IN SUPPORT OF
MONTANA, by and through Austin Knudsen,                ITS OPPOSED MOTION TO
Attorney General of the State of Montana; STATE        INTERVENE AS PLAINTIFF
OF NEW HAMPSHIRE; STATE OF
OKLAHOMA, by and through Mike Hunter,
Attorney General of the State of Oklahoma; STATE
OF SOUTH CAROLINA, by and through Alan
Wilson, Attorney General of the State of South
Carolina; STATE OF SOUTH DAKOTA, by and
through Jason R. Ravnsborg, Attorney General of
the State of South Dakota; and STATE OF UTAH,
by and through Sean Reyes, Attorney General of the
State of Utah,
       Plaintiffs,
v.
UNITED STATES DEPARTMENT OF THE
TREASURY;
JANET YELLEN, in her official capacity as the
Secretary of the Department of the Treasury; and
RICHARD K. DELMAR, in his official capacity
as acting inspector general of the Department of the
Treasury,
       Defendants.
                                        TABLE OF CONTENTS

INTRODUCTION ..................................................................................................... 1
ARGUMENT ............................................................................................................. 1
   I. The Legislature Has Article III Standing ........................................................ 1
   II. The Legislature May Intervene As Of Right ................................................... 5
   III. Alternatively, This Court Should Grant Permissive Intervention ................... 8
   IV. This Court Should Decide The Legislature’s Motion Now ............................ 9
CONCLUSION ........................................................................................................ 10
                                 INTRODUCTION

      The Wisconsin Legislature—which, under Wisconsin law, has the authority

to speak for the State’s sovereign interest in defending State law—has moved to

intervene here for the same reason that all of the Plaintiff States’ attorneys general

filed this lawsuit: to defend the sovereign right to cut taxes without unconstitutional

punishment. Thus, all considerations of sovereign comity and judicial efficiency

militate strongly in favor of granting the Legislature’s intervention motion, rather

than forcing the Legislature to begin anew a duplicative action in another court.

                                   ARGUMENT

I.    The Legislature Has Article III Standing

      The Legislature has shown “injury in fact” “caus[ed]” by Federal Tax

Mandate for two independent reasons, which injuries this Court can “redress[]” by

enjoining the Mandate as to Wisconsin. Lujan v. Defs. of Wildlife, 504 U.S. 555,

560–61 (1992) (citation omitted). First, the Mandate harms the State of Wisconsin’s

interest in the validity of its laws—which the Legislature has the authority to advance

in court, see Wis. Stat. §§ 803.09(2m); 13.365(3); Democratic Nat’l Comm. v.

Bostelmann, 949 N.W.2d 423, 424 (Wis. 2020)—by punishing Wisconsin for

enacting tax laws under an impermissibly vague standard for when that punishment

will occur. See Dkt. 58 at 6–7, 8–9. Second, and independently sufficient for Article
III standing, the Mandate undermines the Legislature’s specific, institutional role

under the Wisconsin Constitution to cut taxes. See Dkt. 58 at 8–9.

      Defendants argue, Dkt. 67 at 10–12, that the Legislature lacks authority to

advance the first of these interests—Wisconsin’s interest in the validity of its laws—

but they are wrong under binding Wisconsin law. The Wisconsin Supreme Court

has unambiguously and definitively held that Section 803.09(2m) gives the

“Legislature [ ] the authority to represent the State of Wisconsin’s interest in the

validity of state laws.” Democratic Nat’l Comm., 949 N.W.2d at 424. The Mandate,

in turn, coercively punishes the State for enacting tax cuts for three years. See Dkt.

58 at 6–7. A Spending Clause-based penalty that is so coercive as to make the State’s

passage of a contrary law prohibitive is indistinguishable from a direct invalidation

of state law, which is why such a mandate is unconstitutional in the first place. See

Nat’l Fed’n of Indep. Bus. v. Sebelius, 567 U.S. 519, 576–77 (2012). And, at the

pleading stage, this Court must “assume that on the merits the plaintiffs would be

successful in their [coercion] claim[ ].” Culverhouse v. Paulson & Co. Inc., 813

F.3d 991, 994 (11th Cir. 2016) (citation omitted).          Thus, the Legislature’s

intervention here is, in the Wisconsin Supreme Court’s words interpreting Section

803.09(2m), “represent[ing] the State of Wisconsin’s interest in the validity of state

laws.” Democratic Nat’l Comm., 949 N.W.2d at 424.




                                        -2-
      Defendants also argue that any injury to the State of Wisconsin is

“hypothetical and speculative,” since the Legislature has not alleged how

“Wisconsin . . . intends to use Rescue Plan funds.” Dkt. 67 at 13–14. This argument

misunderstands the Legislature’s allegations of injury. The Mandate coercively

limits the States’ sovereign lawmaking power to reduce taxes and introduces grave

uncertainty into the lawmaking process with its hopelessly vague terms. Supra pp.

1–2. The existence of those alleged injuries does not in any way depend upon how

the Legislature “intends to use Rescue Plan funds.”         Dkt. 67 at 13.    Rather,

Wisconsin is experiencing these injuries now, making them “actual or imminent, not

conjectural or hypothetical,” Lujan, 504 U.S. at 560 (citations omitted).

      Defendants’ reliance on Missouri v. Yellen, No. 4:21-cv-376, 2021 WL

1889867 (E.D. Mo. May 11, 2021), is misplaced. There, the district court did not

conclude that plaintiff-Missouri’s injury in fact was hypothetical or speculative—

Defendants’ argument here—but rather that Missouri lacked a constitutionally

protected interest in receiving funds under the ARPA, since Congress “placed a

condition on a State’s receipt of the funds.” Id. at *4. Notably, Defendants do not

advance that Article III position here, and for good reason, since the Yellen court

appears to have “confuse[d]” what it considered to be “weakness on the merits” of

the State’s claim “with [an] absence of Article III standing.” Ariz. State Legislature

v. Ariz. Indep. Redistricting Comm’n, 576 U.S. 787, 800 (2015) (brackets altered).


                                        -3-
      Defendants argue that the Legislature lacks standing because it has not

“suggest[ed] that the State plans to use Rescue Plan funds in a manner inconsistent

with the offset provision or the IFR” or “point[ed] to tax changes that are under

consideration in the State of Wisconsin.” Dkt. 67 at 13–14 (emphasis omitted).

Defendants have simply ignored the Legislature’s proposed Complaint, which

explicitly alleges that “the Legislature has considered and is considering various tax

relief bills for its citizens and businesses,” but “[t]he Mandate’s prohibition would

deprive the Legislature of its constitutional and sovereign authority to enact these

various tax bills for the general welfare.” Dkt. 58-1, ¶ 37 (emphasis added). That

is a straightforward allegation, which must be accepted as true at this stage. See

Jackson v. BellSouth Telecomm’ns, 372 F.3d 1250, 1262 (11th Cir. 2004).

      Finally, as to the Legislature’s second, independent basis for Article III

standing—its own special, institutional authority to cut taxes under the Wisconsin

Constitution—Defendants’ reliance on Arizona State Legislature, Dkt. 67 at 14–15,

backfires. There, the Supreme Court concluded that the Arizona Legislature, “an

institutional plaintiff asserting an institutional injury,” could challenge the

constitutionality of a state initiative because the initiative “would completely nullify

any vote by the Legislature, now or in the future, purporting to adopt a redistricting

plan.” Ariz. State Legislature, 576 U.S. at 791–93, 799–804 (citations and brackets

omitted). Here, the Wisconsin Legislature is also “an institutional plaintiff asserting


                                         -4-
an institutional injury,” id. at 803, alleging that the Mandate “deprive[s] the

Legislature of its constitutional and sovereign authority to enact [ ] various tax bills

for the general welfare,” through unconstitutionally coercive conditions, Dkt. 58-1,

¶ 37 (emphasis added).        Relatedly, Arizona State Legislature also refutes

Defendants’ thesis that any institutional harm would occur only “after the

Legislature passes [tax] legislation,” Dkt. 67 at 15, by holding that a legislature need

not pass a “specific legislative act” that violates a legal provision in order to have

standing, 576 U.S. at 801 (citations omitted). Finally, Defendants claim that “the

only consequence” to Wisconsin from passing a tax-relief law barred by the Mandate

would be a “recoupment action . . . directed at [Wisconsin’s] treasury,” which does

not inflict an “injury” on the Legislature, Dkt. 67 at 15 n.6. Once again, Defendants

are wrong; the Legislature has “the power of the purse” under the Wisconsin

Constitution, so any harm to the State’s treasury directly “implicate[s]” its interests,

Serv. Emps. Int’l Union, Loc. 1 v. Vos, 946 N.W.2d 35, 56 (Wis. 2020).

II.   The Legislature May Intervene As Of Right

      As the Legislature explained, it has satisfied the four required showings for

intervention as of right. Dkt. 58 at 4–11; Fed. R. Civ. P. 24(a); Mt. Hawley Ins. Co.

v. Sandy Lake Props., Inc., 425 F.3d 1308, 1311 (11th Cir. 2005). The Legislature’s

Motion is timely because the Legislature moved to intervene shortly after Plaintiff

States filed their Complaint. Dkt. 58 at 5–6. The Legislature has an “interest . . .


                                         -5-
that is the subject of the action,” Fed. R. Civ. P. 24(a)(2), because the Mandate

coercively conditions Wisconsin’s receipt of federal funds on the State not enacting

unspecific tax cuts.        Dkt. 58 at 6–9.         The Legislature will be “practically

disadvantaged” if the Court “exclu[des]” it “from the proceedings,” Huff v. Comm’r,

743 F.3d 790, 800 (11th Cir. 2014), because this is the first, largescale, multi-state

challenge to the Mandate, and Wisconsin may lose out on the benefits of any

injunction the Court enters here if the Legislature cannot intervene, Dkt. 58 at 9–10.

And the Legislature has made the “minimal” showing needed to establish that the

existing parties “may be” inadequate to represent its interests, Trbovich v. United

Mine Workers of Am., 404 U.S. 528, 538 n.10 (1972); Fed. R. Civ. P. 24(a)(2), as

Defendants are diametrically opposed and Plaintiffs are separate sovereigns who are

unable to represent Wisconsin’s independent sovereign interests, Dkt. 58 at 10.

       Defendants only dispute the Legislature’s showing on “the second and third

prongs for intervention as of right,” Dkt. 67 at 16, thus waiving any argument on the

first and fourth prongs.* The arguments that they do make are unpersuasive.

       As to the second intervention-as-of-right element—the Legislature’s interest

in this action—Defendants reiterate their arguments with respect to the Legislature’s




       * Defendants’ footnoted contention that the timing of the Legislature’s motion prevented

them from addressing the Legislature’s standing in their “opposition to the PI Motion,” ignores
that they presented those same arguments fully in their Opposition here, Dkt. 67 at 12–15, 16 n.7.


                                              -6-
standing, claiming that the Legislature has no “cognizable injury.” Dkt. 67 at 16.

As explained above, Defendants are incorrect on this score. Supra pp. 1–5.

       Defendants’ argument on the third prong—whether this Court’s disposition of

the action will impair the Legislature’s interests—makes little sense in the context

of the Legislature intervening as a plaintiff here. Defendants contend that because

the Legislature can litigate its claims in the Seventh Circuit, this “defeats the

impairment element.” Dkt. 67 at 16–19 (citation omitted). But the Legislature is no

different from any other State Plaintiff to this lawsuit, twelve of which did not file

this lawsuit in district courts located in their States.

       In any event, “the potential negative stare decisis effects” from a first lawsuit

may create a “practical impairment” justifying intervention, and a district-court

decision may create such a “practical impairment” and so “warrant intervention”

because of its “significant persuasive effects,” although another “district court would

not be bound to follow” the decision. Stone v. First Union Corp., 371 F.3d 1305,

1310 (11th Cir. 2004). Here, this Court’s decision is likely to have “significant

persuasive effects” on any challenge that the Legislature brought against the

Mandate in a Wisconsin-based district court. Id. Defendants recognize the potential

persuasive effects of district courts’ decisions considering the Mandate, given that

they cite one such decision in their opposition. See Dkt. 67 at 14 (citing Missouri v.

Yellen, 2021 WL 1889867). Furthermore, Defendants’ argument on this score says


                                           -7-
nothing about the other “practical[ ] disadvantage[s]” that the Legislature would face

from this Court excluding it from this case, Huff, 743 F.3d at 800; Dkt. 58 at 10,

such as the waste of sovereign resources arising from separately litigating an

identical action anew.

III.   Alternatively, This Court Should Grant Permissive Intervention

       The Legislature also respectfully requests that this Court grant it permissive

intervention under Rule 24(b). Dkt. 58 at 11–12. The Motion to Intervene is timely,

Dkt. 58 at 11, and the Legislature’s proposed Complaint raises the exact same claims

as those of the Plaintiff States; thus, there are “common” questions of law or fact

here, Fed. R. Civ. P. 24(b); Dkt. 58 at 11–12. The Legislature’s intervention would

not prejudice any party or unduly burden this Court, as the Legislature proposes to

join in Plaintiff States’ preliminary-injunction motion and has no desire to duplicate

the parties’ existing efforts to promptly resolve this case. Fed. R. Civ. P. 24(b).

       Defendants do not dispute the timeliness of the Legislature’s Motion, the

Legislature’s claim that common questions of law or fact exist here, or even the

Legislature’s argument that intervention would not prejudice Defendants or unduly

burden this Court. Dkt. 67 at 19–20. Instead, Defendants reiterate their argument

that the Legislature could bring a separate lawsuit against the Mandate. Dkt. 67 at

19. No better is Defendants’ argument that a separate lawsuit would serve the

“public interest” by encouraging “percolat[ion]” of the important questions here.


                                         -8-
Dkt. 67 at 19–20. As Defendants admit, six actions challenging the Mandate are

already pending in federal courts across the country. Dkt. 67 at 2–3 & n.1.

      Defendants’ claim that the Legislature’s decision to move to intervene in this

action “raises at least the appearance of forum shopping” is bizarre. Dkt. 67 at 19.

As the Legislature explained, this action is the first, by far the largest (in terms of

number of States) multi-state challenge to the Mandate, making it the most natural

candidate for the Legislature to seek to join. Dkt. 58 at 10; supra pp. 6. There is

nothing unusual about the Legislature seeking to join thirteen of its Sister States—

eleven of which are also not within the Eleventh Circuit—in the lead lawsuit on this

issue of state sovereignty, rather than duplicating litigation by filing in a new court,

or joining a lawsuit that has only one other sister State as plaintiff.

IV.   This Court Should Decide The Legislature’s Motion Now
      Defendants’ final argument is that this Court should hold the Legislature’s

Motion to Intervene in abeyance until this Court determines whether Plaintiff States

have standing. Dkt. 67 at 20–21. Defendants have not offered a persuasive reason

for this Court to hold the Legislature’s Motion to Intervene in abeyance. As already

discussed, the Legislature has sought to assert the very same claims that Plaintiff

States have asserted here. Supra pp. 8. Further, the Legislature has sought to join

Plaintiff States’ preliminary-injunction motion, including as to the arguments in

support of that motion. Supra pp. 8; see generally Dkt. 58-2. This Court resolving


                                          -9-
Plaintiffs’ preliminary-injunction motion (including any question of standing),

together with the Legislature’s Motion to Intervene, would ensure that any relief

against the Mandate that this Court issues to Plaintiff States would also extend to

Wisconsin. That is the most appropriate course of action here.

                                 CONCLUSION

      The Court should grant the Legislature’s Motion To Intervene.



Respectfully submitted,

/s/J. Houston Shaner                      /s/Misha Tseytlin
J. HOUSTON SHANER                         MISHA TSEYTLIN*
Local Counsel                             Counsel of Record
TROUTMAN PEPPER                           SEAN T.H. DUTTON*
HAMILTON SANDERS LLP                      TROUTMAN PEPPER
600 Peachtree Street, N.E.                HAMILTON SANDERS LLP
Suite 3000                                227 West Monroe Street
Atlanta, GA 30308                         Suite 3900
Telephone: (404) 885-3909                 Chicago, IL 60606
Facsimile: (404) 885-3900                 Telephone: (608) 999-1240
houston.shaner@troutman.com               Facsimile: (312) 759-1939
                                          misha.tseytlin@troutman.com
                                          sean.dutton@troutman.com

                                          * Admitted pro hac vice

           Counsel for Proposed Intervenor the Wisconsin Legislature




                                      - 10 -
                         CERTIFICATE OF SERVICE

      I hereby certify that on this 4th day of June, 2021, I filed the foregoing Brief

with the Clerk of the Court using the CM/ECF System, which will send notice of

such filing to all registered CM/ECF users.

                                              Dated: June 4, 2021

                                              /s/Misha Tseytlin
                                              MISHA TSEYTLIN


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