Reply to Response to Motion, State of Ohio v. Yellen, No. 1:21-cv-00181 (S.D. Ohio), Doc. 49 (June 7, 2021)
Summary
The State of Ohio's combined reply in support of a permanent injunction and declaratory judgment, and memorandum opposing dismissal, in State of Ohio v. Janet Yellen, Secretary of the Treasury, et al., Case No. 1:21-cv-181, U.S. District Court for the Southern District of Ohio, Doc. 49, filed June 7, 2021, before Judge Douglas R. Cole. The reply argues that the Secretary's standing arguments fail, that the Tax Mandate violates the Spending Clause as unconstitutionally ambiguous and under the coercion test, and that it violates the Tenth Amendment. It also discusses the Interim Rule at 86 Fed. Reg. 26786 (May 17, 2021). The conclusion asks the Court to declare the Tax Mandate unconstitutional and enjoin it.
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
“Reply to Response to Motion, State of Ohio v. Yellen, No. 1:21-cv-00181 (S.D. Ohio), Doc. 49 (June 7, 2021).”
Original at storage.courtlistener.com. Archived at Pandemic Darlings, https://pandemicdarlings.com/source-documents/reply-to-response-to-motion-state-of-ohio-v-yellen-no-1-21-cv-00181-s-b72f09db21/
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Case: 1:21-cv-00181-DRC Doc #: 49 Filed: 06/07/21 Page: 1 of 28 PAGEID #: 781
IN THE UNITED STATES DISTRICT COURT FOR THE
SOUTHERN DISTRICT OF OHIO
STATE OF OHIO, :
Plaintiff, :
: Case No. 1:21-cv-181
v.
:
JANET YELLEN, in her official : Judge Douglas R. Cole
capacity as Secretary of the :
Treasury; RICHARD K. DELMAR, :
in his official capacity as acting :
inspector general of the Department :
of Treasury; and U.S. :
DEPARTMENT OF THE :
TREASURY, :
Defendants. :
COMBINED REPLY IN SUPPORT OF PERMANENT INJUNCTION AND
DECLARATORY JUDGMENT, AND MEMORANDUM OPPOSING
DISMISSAL
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TABLE OF CONTENTS
Page
TABLE OF CONTENTS ................................................................................................. i
TABLE OF AUTHORITIES .......................................................................................... ii
I. The Secretary’s standing arguments all fail. ............................................... 1
II. Ohio prevails on the merits. .......................................................................... 9
A. The Tax Mandate violates the Spending Clause. ................................... 9
1. The Tax Mandate is unconstitutionally ambiguous. ......................... 9
2. The Tax Mandate fails under the coercion test. .............................. 16
B. The Tax Mandate violates the Tenth Amendment. .............................. 19
III. Ohio is entitled to injunctive or declaratory relief. .................................... 19
CONCLUSION............................................................................................................. 20
CERTIFICATE OF SERVICE ..................................................................................... 22
i
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TABLE OF AUTHORITIES
Cases Page(s)
Abbott v. Perez,
138 S. Ct. 2305 (2018) .............................................................................................. 2
Arlington Cent. Sch. Dist. Bd. of Ed. v. Murphy,
548 U.S. 291 (2006) ................................................................................................ 12
Baptist Mem’l Hosp. – Golden Triangle, Inc. v. Azar,
956 F.3d 689 (5th Cir. 2020) .................................................................................. 11
Barnes v. E-Systems,
501 U.S. 1301 (1991) ................................................................................................ 3
Blum v. Bacon,
457 U.S. 132 (1982) ................................................................................................ 11
Carey v. Piphus,
435 U.S. 247 (1978) .................................................................................................. 2
CFTC v. Erskine,
512 F.3d 309 (6th Cir. 2008) .................................................................................. 12
Chevron, U.S.A., Inc. v. NRDC, Inc.,
467 U.S. 837 (1984) .......................................................................................... 13, 15
Children’s Hosp. Ass’n of Tex. v. Azar,
933 F.3d 764 (D.C. Cir. 2019) ................................................................................ 11
City of Cleveland v. Ohio,
508 F.3d 827 (6th Cir. 2007) .................................................................................. 11
Cleveland Branch, NAACP v. City of Parma,
263 F.3d 513 (6th Cir. 2001) .................................................................................... 5
Cohens v. Virginia,
6 Wheat. 264 (1821) .................................................................................................. 9
Coyle v. Smith,
221 U.S. 559 (1911) ................................................................................................ 19
Doe v. BlueCross BlueShield of Tenn., Inc.,
926 F.3d 235 (6th Cir. 2019) .................................................................................. 15
ii
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Doe v. Congress of the United States,
891 F.3d 578 (6th Cir. 2018) .................................................................................... 8
FEC v. Akins,
524 U.S. 11 (1998) .................................................................................................... 2
Glob. Tech., Inc. v. Yubei (Xinxiang) Power Steering Sys. Co.,
807 F.3d 806 (6th Cir. 2015) .................................................................................... 7
Gruver v. La. Bd. of Supervisors for the La. State Univ. Agric. & Mech.
Coll.,
959 F.3d 178 (5th Cir. 2020) .................................................................................. 18
Haight v. Thompson,
763 F.3d 554 (6th Cir. 2014) .................................................................................. 12
Hampton v. Bulholtz,
No. 20-3480, 2021 U.S. App. LEXIS 1926 (6th Cir. Jan. 22, 2021) ........................ 6
Harris v. Olszewski,
442 F.3d 456 (6th Cir. 2006) .................................................................................. 11
Irving Indep. Sch. Dist. v. Tatro,
468 U.S. 883 (1984) ................................................................................................ 11
Knox v. Serv. Emps. Int’l Union, Local 1000,
567 U.S. 298 (2012) .................................................................................................. 1
Lujan v. Defs. of Wildlife,
504 U.S. 555 (1992) .................................................................................................. 7
Massachusetts v. EPA,
549 U.S. 497 (2007) .............................................................................................. 2, 9
Merck Sharp & Dohme Corp. v. Albrecht,
139 S. Ct. 1668 (2019) .............................................................................................. 6
Murphy v. NCAA,
138 S. Ct. 1461 (2018) ............................................................................................ 19
Nat’l Fed’n of Indep. Bus. v. Sebelius,
567 U.S. 519 (2012) ...................................................................................... 8, 17, 18
Obama for Am. v. Husted,
697 F.3d 423 (6th Cir. 2012) .................................................................................... 2
iii
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Ohio v. EPA,
969 F.3d 306 (6th Cir. 2020) ................................................................................ 5, 6
Ohio v. Raimondo,
2021 U.S. App. LEXIS 15035 (6th Cir. May 18, 2021)............................................ 7
Online Merchs. Guild v. Cameron,
995 F.3d 540, 2021 U.S. App. LEXIS 12825 (6th Cir. Apr. 29, 2021) .................... 4
Petit v. U.S. Dep’t of Educ.,
675 F.3d 769 (D.C. Cir. 2012) ................................................................................ 11
Robertson v. Allied Sols., LLC,
902 F.3d 690 (7th Cir. 2018) .................................................................................... 6
Rust v. Sullivan,
500 U.S. 173 (1991) .................................................................................................. 5
School District of City of Pontiac v. Secretary of U.S. Department of
Education,
584 F.3d 253 (6th Cir. 2009) (en banc) ............................................................ 12, 20
Snider v. Creasy,
728 F.2d 369 (6th Cir. 1984) .................................................................................. 11
Spencer v. Kemna,
523 U.S. 1 (1998) ...................................................................................................... 5
Steel Co. v. Citizens for a Better Env’t,
523 U.S. 83 (1998) .................................................................................................... 5
Susan B. Anthony List v. Driehaus,
573 U.S. 149 (2014) .................................................................................................. 4
Tex. Educ. Agency v. Usde,
992 F.3d 350 (5th Cir. 2021) .................................................................................. 10
Texas v. United States,
809 F.3d 134 (5th Cir. 2015) .................................................................................... 3
United States v. Miami Univ.,
294 F.3d 797 (6th Cir. 2002) .................................................................................. 11
Util. Air Regul. Grp. v. EPA,
573 U.S. 302 (2014) ................................................................................................ 12
iv
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Va. Dep’t of Educ v. Riley,
106 F.3d 559 (4th Cir. 1997) (en banc) .................................................................. 10
Vitolo v. Guzman,
2021 U.S. App. LEXIS 16101 (6th Cir. May 27, 2021)............................................ 1
Westside Mothers v. Olszewski,
454 F.3d 532 (6th Cir. 2006) .................................................................................. 11
Statutes
86 Fed. Reg. 26786 (May 17, 2021) ......................................................................passim
42 U.S.C. §802 ............................................................................................................ 3, 8
Other Authorities
Florida v. HHS, No. 3:10-cv-91, Second Am. Compl., Doc. 148 (N.D.
Fla.) ......................................................................................................................... 20
School District of the City of Pontiac v. Spellings, No. 2:05-cv-71535,
Compl., R.1-2 (E.D. Mich.) ..................................................................................... 20
v
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Congress passed the American Rescue Plan Act, in part, to help the American
people and the States recover from pandemic-caused economic devastation. But Con-
gress included provisions that violate the Constitution so flagrantly, they appear de-
signed to upend our constitutional order. See, e.g., Vitolo v. Guzman, 2021 U.S. App.
LEXIS 16101, at *11–24 (6th Cir. May 27, 2021). The Tax Mandate is one such pro-
vision. The Secretary insists that is not so, and that Ohio’s arguments are “merit-
less.” Sec. Br., R.45, PageID#720. That is a strange claim to make after the Court’s
likelihood-of-success finding. And the claim is belied by the Secretary’s brief, which
barely engages with Ohio’s arguments. Ohio prevails in this case as a matter of law.
The Court should award it both declaratory and injunctive relief.
I. The Secretary’s standing arguments all fail.
The Secretary begins her defense by pleading with the Court not to decide the
case. She says that Ohio now lacks Article III standing even if (as this Court held)
Ohio had standing when it first sued. In other words, the Secretary argues that the
case is now moot. But “[a] case becomes moot only when it is impossible for a court
to grant any effectual relief whatever to the prevailing party.” Knox v. Serv. Emps.
Int’l Union, Local 1000, 567 U.S. 298, 307 (2012) (quotation omitted). Thus, as “long
as the parties have a concrete interest, however small, in the outcome of the litigation,
the case is not moot.” Id. at 307–08 (quotation omitted). Ohio has such an interest.
The Court should therefore reject the Secretary’s standing arguments.
A. Begin by returning to this Court’s earlier standing analysis. When a party
is denied or deprived of a substantive right, it suffers an injury in fact for purposes of
1
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Article III standing. See, e.g., FEC v. Akins, 524 U.S. 11, 21 (1998); Carey v. Piphus,
435 U.S. 247, 266 (1978). Indeed, the deprivation of a constitutional entitlement
causes irreparable injury. Obama for Am. v. Husted, 697 F.3d 423, 436 (6th Cir.
2012); see also Abbott v. Perez, 138 S. Ct. 2305, 2324 (2018). As this Court already
observed, the ambiguity in the Tax Mandate denies Ohio the clarity to which it is
constitutionally entitled. That denial constitutes an injury. And the injury arose
“immediately” upon the Mandate’s enactment. Op., R.36, PageID#549. At that mo-
ment, Ohio was injured by having to “determine how to respond to the offer of funding
under the cloud of an ambiguous term.” Id., PageID#550. (As an aside, it makes no
difference whether Ohio could have accepted the offer at the moment the Rescue Plan
passed. See Sec. Br., R.45, PageID#726. The State’s opportunity to accept was either
actual or imminent, and so the injury caused by having to decide how to respond to
the offer was either actual or imminent, too. And an imminent injury, just like an
actual one, satisfies Article III. See Massachusetts v. EPA, 549 U.S. 497, 521 (2007).
The Secretary does not argue otherwise.)
All this shows that Ohio was injured when it sued. The remaining question is
whether the Mandate continues to injure Ohio. The answer is “yes.” It is undisputed
that Ohio submitted its certification to the Secretary, thereby accepting Rescue Plan
funds and subjecting itself to the Tax Mandate. See Murnieks Decl., R.38-1, PageID
#603. While Ohio no longer has to decide whether to accept the offer, it does have to
decide whether and how to spend the money, and its legislature and administrative
officers do have to make budgeting decisions, set tax policy, and interpret State tax
2
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laws. But the Mandate is just as ambiguous today as it was when Ohio sued. And
as a result, Ohio and its officials must make these spending, budgeting, policy, and
interpretive decisions without any clarity regarding which decisions violate the Man-
date’s prohibition. Thus, the Mandate’s lack of clarity continues to frustrate Ohio’s
exercise of sovereign prerogatives, including by interfering with the State’s exercise
of its financial and legislative authority. That interference is an injury, Barnes v. E-
Systems, 501 U.S. 1301, 1304 (1991) (Scalia, J., in chambers)—an injury worsened by
the fact that Ohio is in the middle of its biennial budgeting process, Op., R.36, Page
ID#553–54—as are intrusions on State authority more generally, Texas v. United
States, 809 F.3d 134, 153 (5th Cir. 2015), aff’d 136 S. Ct. 2271 (2016).
If anything, the injury is worse today than ever before. First, by submitting
the certification, Ohio agreed to comply with a provision in the Rescue Plan that re-
quires the State to provide the Secretary with a “detailed accounting” that proves
compliance with the Mandate. 42 U.S.C. §802(d)(2). The Interim Rule lays out the
complex process by which States are expected to provide this detailed accounting. See
Coronavirus State and Local Fiscal Recovery Funds, 86 Fed. Reg. 26786, 26807–810
(May 17, 2021). If, as Ohio alleges, the Mandate is unconstitutional, then Ohio is
entitled not to engage in this federally directed monitoring of Tax Mandate compli-
ance. Making Ohio do so anyway injures the State by (further) wrongfully intruding
on the State’s exercise of its financial and legislative authority. Barnes, 501 U.S. at
1304; Texas, 809 F.3d at 153. The federally directed monitoring additionally injures
Ohio by forcing it to allocate scarce resources to a task it is entitled not to perform.
3
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See Online Merchs. Guild v. Cameron, 995 F.3d 540, 2021 U.S. App. LEXIS 12825,
*13 (6th Cir. Apr. 29, 2021). Finally, the prospect of future enforcement is now suffi-
ciently “imminent” to constitute an injury in fact. See Susan B. Anthony List v.
Driehaus, 573 U.S. 149, 161, 162, 164 (2014). While the Court previously found the
threat of enforcement to be non–imminent, two events change the analysis. The first
is Ohio’s acceptance of funds, which subjects it to the Tax Mandate. The second is
the Secretary’s commitment to enforcement—a commitment any reasonable onlooker
can glean from the Interim Rule’s aggressive system of accounting and monitoring.
Ohio suffered, and will continue to suffer, injuries fairly traceable to the Tax
Mandate. Relief in this case will redress those injuries. Ohio thus has standing.
B. The Secretary offers several counterarguments, none persuasive. She first
insists that, because Ohio accepted Rescue Plan funds, the State is no longer injured
by having to determine whether to accept a deal comprising ambiguous terms. Sec.
Br., R.45, PageID#727. Under the Secretary’s heads-I-win–tails-you-lose approach,
States lack standing to challenge Spending Clause conditions that they have not ac-
cepted and also lack standing to challenge conditions that they have accepted. The
Court should reject the Secretary’s argument because, as just discussed, the Man-
date’s ambiguity continues to injure Ohio. See also Op., R.36, PageID#550 (“Ohio
could claim that it is injured upon sending its certification to the Secretary. After all,
it is the certification that binds Ohio to the conditions—including the Tax Mandate
that Ohio maintains is unconstitutional.”). Moreover, the Secretary’s argument has
no bearing on the other just-discussed harms that the Mandate imposes now that
4
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Ohio has accepted the funds. Because standing need not rest on the exact same injury
at all stages of the case, see Spencer v. Kemna, 523 U.S. 1, 7–8 (1998), any new injuries
arising at the moment of certification bolster Article III standing now that they exist.
The Secretary next argues that the Interim Rule “moots” Ohio’s “supposed am-
biguity-as-injury claim” by providing the needed clarity. Sec. Br., R.45, PageID#727.
Courts place a “heavy burden” on parties arguing mootness. Cleveland Branch,
NAACP v. City of Parma, 263 F.3d 513, 531 (6th Cir. 2001). And, in trying to meet
that burden, the Secretary assumes the (wrong) answer to the merits question
whether the Interim Rule can or does provide the clarity needed to resuscitate the
otherwise-unconstitutional Mandate. See below 9–16; Ohio Br., R.38, PageID#587–
93. The Secretary cannot defeat standing by assuming she wins on the merits. See
Steel Co. v. Citizens for a Better Env’t, 523 U.S. 83, 89 (1998). Further, even if the
Interim Rule clarifies the Mandate, the Interim Rule is not etched in stone. While it
is “final” in the sense that it binds those to whom it apples, see Sec. Br., R.45, PageID
#734, the comment period remains open, meaning the Treasury is actively consider-
ing whether to make changes (unless the comment period is a sham). Further, be-
cause agencies can always repeal and replace their rules, see Rust v. Sullivan, 500
U.S. 173, 186 (1991), the Treasury will remain free to change the Interim Rule going
forward. Further still, “given the recent proliferation of nationwide injunctions,” it
remains possible that the Interim Rule will cease to bind anyone. Ohio v. EPA, 969
F.3d 306, 310 (6th Cir. 2020). Indeed, in Ohio v. EPA, the Sixth Circuit specifically
held that when a new regulation repeals an old one, the possibility of the new
5
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regulation’s being enjoined kept alive a challenge to the old regulation. Id. In sum,
the Interim Rule does not provide the needed clarity (a merits issue), and the Interim
Rule (because it can be changed or enjoined) could not definitively remove any ambi-
guity from the Mandate regardless. Thus, a ruling enjoining the Mandate will pro-
vide the States with some “effectual relief,” defeating the mootness argument.
If the Secretary is suggesting that the challenge to the statute is moot because
the Interim Rule is now what governs, she is wrong. A federal “agency literally has
no power to act, let alone pre-empt the validly enacted legislation of a sovereign State,
unless and until Congress confers power upon it.” Merck Sharp & Dohme Corp. v.
Albrecht, 139 S. Ct. 1668, 1679 (2019) (quotation omitted). Thus, if the Court enjoins
the Tax Mandate or declares it unconstitutional, the defendants would be barred from
enforcing the Mandate against Ohio through the Interim Rule. And that would be
“effectual relief.”
The Secretary raises some procedural challenges to standing also, but they fare
no better. For example, she asserts that the Court found Article III standing based
on “a theory absent from Ohio’s complaint.” Sec. Br., R.45, PageID#726 (citing Op.,
R.36, PageID#553). But Ohio did not need to allege a “theory” of standing in its com-
plaint—it needed to allege facts sufficient to allow a plausible inference of standing.
See Hampton v. Bulholtz, No. 20-3480, 2021 U.S. App. LEXIS 1926, at *4 (6th Cir.
Jan. 22, 2021); Robertson v. Allied Sols., LLC, 902 F.3d 690, 695 (7th Cir. 2018). Ohio
did that. It quoted the Tax Mandate, the text of which establishes the provision’s
ambiguity, thereby establishing that Congress injured Ohio by denying it the clear
6
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terms to which it was entitled. Compl., R.1, PageID#5. Ohio also alleged that it had
no choice but to accept the money being offered given economic circumstances that
all parties agree are dire. Id., PageID#6–9; 86 Fed. Reg. at 26786–87. That suffices
to permit the inference that the State was injured by being illegally coerced into ac-
quiescing to federal conditions. For good measure, Ohio specifically alleged that the
Mandate injured it by “unconstitutionally intruding on the State’s sovereign author-
ity, by interfering with the State’s orderly management of its fiscal affairs, and by
subjecting the State to the risk that it may be made to return funding to the federal
government.” Id., PageID#3. The State did not have to plead “detailed descriptions”
of its actual harm. Lujan v. Defs. of Wildlife, 504 U.S. 555, 564 (1992). Ohio pleaded
all that it had to.
The Secretary also faults Ohio for failing to “adduce[] any evidence” of its inju-
ries. Sec. Br., R.45, PageID#727. Even if that argument had merit, it would establish
only that Ohio is not entitled to the expedited final judgment it seeks—it would not
justify dismissal under Rule 12(b)(1). After all, Ohio adequately pleaded standing.
That satisfies Rule 12, since the Secretary has not challenged the factual predicates
of Ohio’s standing theories. Glob. Tech., Inc. v. Yubei (Xinxiang) Power Steering Sys.
Co., 807 F.3d 806, 810 (6th Cir. 2015). Anyway, Ohio proved standing. The Court
previously found an injury in fact based on Congress’s failure to provide clear terms.
See Op., R.36, PageID#552–54. That injury is established, as a matter of law, by the
text of the Mandate itself, id., and by the undisputed fact that Ohio wants the funds—
no further evidence is required. Cf. Ohio v. Raimondo, 2021 U.S. App. LEXIS 15035,
7
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at *1 (6th Cir. May 18, 2021) (denying Ohio information to which it was entitled was
an injury in fact as a matter of law). Further, Ohio introduced undisputed evidence
that it accepted the Rescue Plan funds, Murnieks Decl., R.38-1, PageID#603, which
proves both that Ohio wanted the funds and that Ohio continues to be harmed by
Congress’s failure to provide the States with the notice to which it is entitled. See
above 2–4. That Ohio took the funds is additionally consistent with (even if not dis-
positive of) its argument that it lacked any real option not to take the funds and their
accompanying conditions—a position already established by the Rescue Plan’s undis-
puted size, see 42 U.S.C. §802(a), and the pandemic’s undisputed negative economic
impacts, see 86 Fed. Reg. at 26786–87; Op., R.36, PageID#538; see also Nat’l Fed’n of
Indep. Bus. v. Sebelius (“NFIB”), 567 U.S. 519, 575–85 (2012) (op. of Roberts, C.J.)
(finding coercion based on similar considerations); id. at 680–89 (Scalia, Kennedy,
Thomas, and Alito, JJ., dissenting) (same). Being forced to accept conditions that
Congress cannot impose directly is an injury all its own. See Doe v. Congress of the
United States, 891 F.3d 578, 585–86 (6th Cir. 2018).
Two final points. First, the Secretary says (without elaborating) that “even if
the Court still finds standing for the Spending Clause ambiguity claim, it should dis-
miss the State’s remaining coercion and commandeering claims for lack of standing.”
Sec. Br., R.45, PageID#728. Although the Court need not reach the issue if it rules
for Ohio on its ambiguity claim, this argument makes little sense. The foregoing
shows that Ohio is injured by the Tax Mandate. Because the State is injured, because
those injuries are fairly traceable to the Mandate, and because the State’s injuries
8
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would be redressed by a court order striking down the Mandate under any of the
State’s theories, the State has standing to bring all of its claims. Regardless, the size
of the Rescue Plan offer and the economically dire circumstances in which the offer
was made establish coercion- and federalism-based injuries. Second, there is no merit
to the Secretary’s argument that, if the standing issue is “close,” the Court should
rule for her. Id., PageID#728. If the Court has jurisdiction, it must exercise it. Courts
“have no more right to decline the exercise of jurisdiction which is given, than to usurp
that which is not given. The one or the other would be treason to the constitution.”
Cohens v. Virginia, 6 Wheat. 264, 404 (1821). If any principle resolves a close case,
it is the rule that States are “entitled to special solicitude in [the] standing analysis.”
Massachusetts, 549 U.S. at 520.
II. Ohio prevails on the merits.
A. The Tax Mandate violates the Spending Clause.
This Court already held that the Tax Mandate likely violates the Spending
Clause. Op., R.36, PageID#537. Indeed, the Mandate violates the Spending Clause
twice over, because it is unconstitutionally ambiguous and part of an unconstitution-
ally coercive offer. The Secretary has no sound counterargument.
1. The Tax Mandate is unconstitutionally ambiguous.
Even after “poring over” the Mandate’s text, the Court could not make heads
or tails of what it means. Id., PageID#561. The case now presents this question:
Does the Interim Rule cure the unconstitutional ambiguity? No, for two reasons.
First, agencies cannot resuscitate laws that Congress lacked authority to pass. This
follows from first principles. Ohio Br., R.38, PageID#587–88. And it follows from
9
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case law, too. Id., PageID#588–89; see, e.g., Va. Dep’t of Educ v. Riley, 106 F.3d 559,
567 (4th Cir. 1997) (en banc); Tex. Educ. Agency v. Usde, 992 F.3d 350, 361–62 (5th
Cir. 2021). Second, even if agencies could promulgate regulations to cure constitu-
tional defects in laws Congress lacked authority to pass, the Treasury’s Interim Rule
would not do so. Ohio Br., R.38, PageID#590–93.
a. The Secretary largely ignores the State’s arguments, focusing instead on
straw men. The Secretary does address, barely, the relevant case law. Specifically,
she acknowledges the existence of the Fourth Circuit’s decision in Riley, which refutes
her position. The acknowledgment comes in a footnote that, despite its brevity, con-
tains one inaccuracy and one irrelevancy. The inaccuracy is the Secretary’s claim
that Riley stands only for the proposition “that an agency could not, by regulation,
act ultra vires to impose spending conditions that did not exist as part of the statute.”
Sec. Br., R.45, PageID#731–32 n.4. If that were what Riley said, it would still support
Ohio; the Tax Mandate is so vacuous that any regulation necessarily imposes a spend-
ing condition that does not exist in the statute. But what Riley actually said is this:
“It is axiomatic that statutory ambiguity defeats altogether a claim by the Federal
Government that Congress has unambiguously conditioned the States’ receipt of fed-
eral monies in the manner asserted.” 106 F.3d at 567. The rest of the opinion leaves
no doubt that the Fourth Circuit rejected the notion that regulations could resuscitate
unconstitutionally ambiguous Spending Clause conditions. Id. at 567–68. The Fifth
Circuit recently reached the same conclusion. Usde, 992 F.3d at 361–62. As for the
irrelevancy, the Secretary says: “In any event, soon after [Riley] was issued, Congress
10
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ratified the agency interpretation that the Fourth Circuit had doubted.” Sec. Br.,
R.45, PageID#732 n.4. It is impossible to understand how Congress’s response to the
Fourth Circuit’s ruling sheds any light whatsoever on the correctness of that ruling.
What really stands out in the Secretary’s discussion of case law, however, is
her failure to cite a single case holding that agencies can repair a constitutionally
flawed statute with a regulation. To be sure, she cites cases for the proposition that
agency interpretations of Spending Clause conditions may be entitled to deference.
See, e.g., Blum v. Bacon, 457 U.S. 132, 141 (1982); Harris v. Olszewski, 442 F.3d 456,
467–68 (6th Cir. 2006); Westside Mothers v. Olszewski, 454 F.3d 532, 543–44 (6th Cir.
2006); City of Cleveland v. Ohio, 508 F.3d 827, 843 (6th Cir. 2007); United States v.
Miami Univ., 294 F.3d 797, 814–15 (6th Cir. 2002); Snider v. Creasy, 728 F.2d 369,
371–73 (6th Cir. 1984); Irving Indep. Sch. Dist. v. Tatro, 468 U.S. 883, 891–92 (1984);
Baptist Mem’l Hosp. – Golden Triangle, Inc. v. Azar, 956 F.3d 689, 692–93 (5th Cir.
2020); Children’s Hosp. Ass’n of Tex. v. Azar, 933 F.3d 764, 770 (D.C. Cir. 2019); Petit
v. U.S. Dep’t of Educ., 675 F.3d 769, 778 (D.C. Cir. 2012). But no one disputes that
proposition. Ohio assumes arguendo that, “if a statute meets the Spending Clause’s
clarity threshold,” agencies may “resolve any remaining ambiguity.” Op., R.36, Page
ID#558. The relevant question is whether “an Executive Branch agency can whole-
sale fix a constitutionally defective statute.” Id. The Secretary has already conceded
that the answer is “no,” Tr., R.32, PageID#328–29, and her cases do not say otherwise.
Instead of addressing the question this case presents, the Secretary rehashes
an argument the Court already rejected. Op., R.36, PageID#562. Specifically, she
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says that Congress need not clearly state the substance of Spending Clause condi-
tions, only that there are conditions. Sec. Br., R.45, PageID#731. The Secretary says
the Court reached its contrary conclusion based on a misreading of School District of
City of Pontiac v. Secretary of U.S. Department of Education, 584 F.3d 253 (6th Cir.
2009) (en banc). In fact, Pontiac Schools supports the Court’s ruling, see id. at 277
(plurality), id., at 284 (Sutton, J., concurring), and other binding precedents do so
even more directly, see Arlington Cent. Sch. Dist. Bd. of Ed. v. Murphy, 548 U.S. 291,
300–01 (2006); Haight v. Thompson, 763 F.3d 554, 569 (6th Cir. 2014).
b. Even assuming that agency rules could cure unconstitutional ambiguity in
a statutory condition, the Interim Rule does not. For one thing, the Interim Rule
leaves many issues unclear. More importantly, the Interim Rule’s supposed inter-
pretation of the Mandate is not entitled to any deference, meaning the Interim Rule’s
salvage attempt should play no role in the Court’s interpretation of the Mandate.
The conclusion that the agency is not entitled to deference follows for two rea-
sons. The first is the major-questions doctrine. Congress must speak clearly if it
“wishes to assign to an agency decisions of vast economic and political significance.”
Util. Air Regul. Grp. v. EPA, 573 U.S. 302, 324 (2014) (quotation omitted). Nothing
in the Tax Mandate or the Rescue Plan clearly gives the Treasury Department the
power to set rules governing state tax policy—and that is what the Interim Rule does.
Thus, the Interim Rule is not eligible for any deference on this issue. Ohio Br., R.38,
PageID#592–93. The Secretary does not respond to this argument at all, forfeiting
her ability to do so. Cf. CFTC v. Erskine, 512 F.3d 309, 314 (6th Cir. 2008) (agency
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waived deference argument by failing to raise it).
But even putting the major-questions doctrine to the side, the Interim Rule is
still not entitled to any deference because it does not rest on a “permissible construc-
tion of the statute.” Chevron, U.S.A., Inc. v. NRDC, Inc., 467 U.S. 837, 843 (1984).
That is a problem for the Secretary, because only permissible interpretations receive
deference. Id. The Secretary continues to insist that the Mandate is unambiguous
even without the regulations. Sec. Br., R.45, PageID#733. But her argument in sup-
port of that position is pure ipse dixit. She simply quotes words in the statute and
declares them clear. Id. At no point does she explain how, in a world where money
is fungible, one can determine what uses of federal funds “indirectly offset” losses in
“net tax revenue” caused by changes to tax law. So the latest attempt at statutory
interpretation fails to move the ball. And indeed, the Secretary has already conceded
that the substance of the Mandate’s prohibitions are not set out in the statute itself,
see, id., Tr., R.32, PageID#329-30, but rather “through Treasury regulations,” Opp’n
to Mot. for Prelim. Inj., R.29, PageID#258.
The Secretary then turns to the Interim Rule, claiming that it “removes any
doubt” regarding the substance of Ohio’s obligation under the statute. Sec. Br., R.45,
PageID#735. She says Ohio must agree, since it accepted the funds. Id. Not so. Ohio
has always argued that it had no choice but to accept the Rescue Plan’s funding,
which meant agreeing to the Mandate. Compl., R.1, PageID#9. And of course, a State
might reasonably determine that the costs of accepting an unconstitutionally ambig-
uous condition are worth the benefits. Further, by the time the State submitted its
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certification, this Court had already determined that the Mandate was likely uncon-
stitutional, giving Ohio reason to believe the Mandate would be unenforceable.
In any event, the Interim Rule provides little clarity. More importantly, the
clarity it attempts to provide has no basis in the statutory text, meaning the supposed
“interpretation” it embodies should receive no deference. This Court has already de-
termined that two phrases in the Mandate—“indirectly” and “reduction in the net tax
revenue of such State”—are hopelessly muddled. Op., R.36, PageID#561. Precisely
because those statutory phrases lack meaning in this context, Treasury could not,
and so did not, interpret them. Instead, the Interim Rule sets forth a four-part test,
replete with exceptions and caveats, that has little if any discernable connection to
the statutory text. See 86 Fed. Reg. at 26807–08.
Two examples help illustrate the Interim Rule’s deficiencies. (Ohio included a
more thorough discussion in its previous brief. Ohio Br., R.38, PageID#581–84, 590–
92.) The first is the Interim Rule’s catch-all provision, which empowers Treasury to
recoup funds when, in its best judgment, a once-permissible spending cut is “subse-
quently replaced” with Rescue Plan funds. 86 Fed. Reg. at 26810; Ohio Br., PageID#
583–84. The Interim Rule provides no meaningful guidance as to how the Secretary
will identify impermissible replacements. True, Spending Clause conditions need not
list “every improper expenditure.” Sec. Br., R.45, PageID#737. But they must pro-
vide clear notice as to what is permitted. The open-ended catch-all does not do that.
And the Secretary does not seriously argue otherwise. She instead offers one hypo-
thetical offset and asserts the offset would be captured by the catch-all. Id., PageID
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#738. But she cannot, and so does not, announce any standard for determining what
the catch-all catches. What is more, the broad, open-ended scope of the catch-all
seems to contradict the narrowing construction for which the Secretary still advo-
cates—a construction that requires reading the word “indirectly” out of the Tax Man-
date. See, e.g., id., PageID#733.
Now consider the Interim Rule’s interpretation of “reduction in the net tax rev-
enue,” which is perhaps a bit clearer but even less textually justified. The Interim
Rule establishes a baseline against which “actual changes in tax revenue” are to be
measured. Specifically, the Interim Rule adopts the inflation-adjusted 2019 tax rev-
enue as its baseline. 86 Fed. Reg. at 26808. The Secretary says the Interim Rule
further clarifies the phrase’s meaning by defining “reduction in the net tax revenue”
not to include de minimis reductions equal to 1 percent or less of the 2019 baseline.
Id., PageID#736. But this 2019 baseline and the de minimis exception are inventions,
not interpretations; no one could interpret the phrase “reduction in net tax revenue”
to mean “reduction in net tax revenue that exceeds 1 percent of inflation-adjusted
2019 revenue.” “While agencies may have authority to interpret statutes, they do not
have authority to rewrite them.” Doe v. BlueCross BlueShield of Tenn., Inc., 926 F.3d
235, 240 (6th Cir. 2019). The Interim Rule’s arbitrary definition of “reduction in the
net tax revenue” reflects rewriting, not interpretation, and is therefore not entitled
to deference. Chevron, 467 U.S. at 843.
The Interim Rule provides little clarity. And it is so divorced from the Man-
date’s text that it must not receive any deference. Thus, even if an agency could save
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an unconstitutionally ambiguous Spending Clause condition by plausibly interpret-
ing the condition to provide the needed clarity, the Interim Rule would fall short.
c. The Secretary concludes by asserting that “Ohio’s present concerns with the
statutory and regulatory framework are decidedly on the margins,” and pleading with
the Court not to enjoin the Mandate “based on the State’s speculative concerns about
possible future disputes.” Sec. Br., R.45, PageID#737. All of that is wrong. This is
not a dispute about the Mandate’s application to discrete cases. It is a dispute about
whether Congress had constitutional authority to enact the Mandate—a provision
that causes irreparable harm to Ohio every day it remains in force. See above 2–4.
Because the Mandate is unconstitutionally ambiguous, and because the regulations
cannot (and in any event do not) cure the constitutional defect, Congress lacked au-
thority to impose this condition on the States. The only proper remedy is to enjoin its
enforcement or, at the very least, declare it unconstitutional.
2. The Tax Mandate fails under the coercion test.
The Tax Mandate is also unconstitutional, and so unenforceable, because the
condition is attached to an unconstitutionally coercive offer. The States can avoid the
Mandate’s terms only by turning down billions of dollars in much-needed funding.
That is not realistic; by turning down this money, Ohio would affirmatively harm its
citizens, who would be put at an immense disadvantage relative to their peers in
States that do take the money. In other words, the Rescue Plan is not an all-upside
offer of the sort that States can freely accept or reject; States that reject it will inflict
great harm on themselves and their citizens. This is the sort of “gun to the head”
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that the Spending Clause prohibits. NFIB, 567 U.S. at 581 (op. of Roberts, C.J.).
The government responds by raising the same arguments it has raised already.
It first claims that the coercion test does not apply because the Mandate only limits
what Ohio can do with federal funds, and places no limits at all on what Ohio can do
with its own funds. Not so. The Mandate is drafted to look like a limit on the use of
federal funds. But given the apparent breadth of the prohibition on indirect offsets,
the Mandate in fact pressures the States into pursuing Congress’s preferred tax pol-
icies. See Reply in Supp. of Prelim. Inj., R.30, PageID#279–80. Congress cannot cre-
atively draft its way around the coercion analysis. NFIB, 567 U.S. at 582 (op. of
Roberts, C.J.). The Secretary further argues that States are not coerced into accept-
ing the Tax Mandate’s terms because violations of the Mandate are subject to a sup-
posedly minor penalty. Sec. Br., R.45, PageID#740. This confuses the question
whether the States are coerced with the question of what they are coerced to accept.
“‘Your money or your life’ is a coercive proposition, whether you have a single dollar
in your pocket or $500.” NFIB, 567 U.S. at 582 n.12 (op. of Roberts, C.J.).
The Secretary raises a few new arguments also. Each fails. For example, the
Secretary claims that “there are no monetary consequences if a State chooses to de-
cline the Fiscal Recovery Funds.” Sec. Br., R.45, PageID#739. That is not true.
Again, Ohio would put itself and its citizens at an immense competitive disadvantage
if it refused the funds. The Secretary does not dispute the point, but she says it is
irrelevant. Congress has been “generous,” she says, and the Court should not apply
“increased scrutiny” to “increased generosity.” Id., PageID#740. Of course, Congress
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is being “generous” with money it acquired by taxing Americans, including Ohioans.
But regardless, scrutiny should increase with generosity. The “practice of attaching
conditions to federal funds greatly increases federal power.” NFIB, 567 U.S. at 675
(Scalia, Kennedy, Thomas, and Alito, JJ., dissenting). The coercion test imposes a
check; it prevents Congress from circumventing the limits on its powers through
Spending Clause legislation that couples otherwise-unconstitutional conditions with
offers the States cannot refuse. The Secretary would acknowledge that Congress can-
not circumvent those limits with coercive threats to withhold previously available
funds in future years. NFIB, 567 U.S. at 582 (op. of Roberts, C.J.). Why should it be
allowed to circumvent those limits by attaching the same conditions to offers of new
funding that are too generous to refuse?
The Secretary next takes issue with Ohio’s argument that the Interim Rule, by
requiring States to monitor and report their own compliance with the Tax Mandate,
worsens the coercion problem. Sec. Br., R.45, PageID#740–41. The objection is con-
fusing. The coercion test, everyone agrees, applies when Congress imposes “condi-
tions that do not … govern the use of [federal] funds.” Gruver v. La. Bd. of Supervisors
for the La. State Univ. Agric. & Mech. Coll., 959 F.3d 178, 183 (5th Cir. 2020) (quoting
NFIB, 567 U.S. at 580 (op. of Roberts, C.J.)). Because the monitoring requirements
“conscript” States into “the national bureaucratic army,” NFIB, 567 U.S. at 585 (op.
of Roberts, C.J.) (quotation omitted), they go beyond imposing mere limits on the use
of funds. These requirements thus bolster the coercion test’s applicability.
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B. The Tax Mandate violates the Tenth Amendment.
Because the States are coerced into accepting the Mandate, the Mandate con-
stitutes direct regulation of the States themselves. And because Congress has no
power to directly regulate States, the Mandate violates the Tenth Amendment. Mur-
phy v. NCAA, 138 S. Ct. 1461, 1476 (2018). The Mandate further violates the Tenth
Amendment by attempting to regulate an issue—state tax policy—that Congress can-
not regulate even indirectly. Cf. Coyle v. Smith, 221 U.S. 559, 565 (1911). See also
Mot. for Prelim. Inj., R.3, PageID#43–45; Reply in Supp. of Prelim. Inj., R.30, Page
ID#282–84; Ohio Br., R.38, PageID#596.
The Secretary now contends that there are no subject-matter limits at all on
Congress’s power to regulate state governments via Spending Clause conditions.
Thus, while Congress’s power to admit States into the Union does not empower it to
condition admission on a State’s agreeing to make a particular city its capital, Coyle,
221 U.S. at 565, the Secretary says Congress could dictate a State’s capital through
a Spending Clause condition, Sec. Br., R.45, PageID#741. That view is irreconcilable
with the States’ sovereign status. The Founders split the atom of sovereignty; the
Secretary wishes to fuse it back together.
III. Ohio is entitled to injunctive or declaratory relief.
Because Ohio prevails on the merits, because an injunction will redress the
irreparable harms it is suffering, and because the balance of harms and public inter-
est justify enjoining an unconstitutional law, the Court should enjoin the Mandate in
its application to Ohio. Ohio is entitled to declaratory relief, too. The Secretary
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argues otherwise, contending that because Ohio can raise its objections as defenses
in any future recoupment action, the State does not need injunctive or declaratory
relief. Sec. Br., R.45, PageID#742–44. But pre-enforcement review generally, and
declaratory-judgment actions in particular, exist precisely so that parties can avoid
“the choice of abandoning their legal claim[s] or risking sanctions.” Pontiac Schools,
584 F.3d at 278 (Sutton, J., concurring). In any event, Ohio’s option to raise these
arguments in a later proceeding would not spare it from the injury it is suffering now
from the Mandate’s failure to provide it with the clarity to which it is constitutionally
entitled. See Op., R.36, PageID#545 (citations omitted). Indeed, if the Secretary is
right, it is not clear why parties should ever be allowed to sue for declaratory and
injunctive relief in Spending Clause litigation. But in reality, parties bring such
claims and courts entertain them. See, e.g., Florida v. HHS, No. 3:10-cv-91, Second
Am. Compl., Doc. 148 at 22–31 (N.D. Fla.); Pontiac Schools, No. 2:05-cv-71535,
Compl., R.1-2, PageID#56–58.
CONCLUSION
The Court should declare the Tax Mandate unconstitutional and enjoin it.
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Respectfully submitted,
DAVE YOST (0056290)
Ohio Attorney General
/s/ Benjamin M. Flowers
BENJAMIN M. FLOWERS* (0095284)
Solicitor General
*Trial Attorney
ZACHERY P. KELLER (0086930)
MAY DAVIS (pro hac vice)
Deputy Solicitors General
30 East Broad Street, 17th Floor
6l4-466-8980
614-466-5087 fax
benjamin.flowers@ohioattorneygeneral.gov
Counsel for the State of Ohio
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CERTIFICATE OF SERVICE
I hereby certify that on June 7, 2021, a copy of the foregoing was filed electron-
ically. Notice of this filing will be sent to all parties for whom counsel has entered an
appearance by operation of the Court’s electronic filing system.
/s/ Benjamin Flowers
BENJAMIN FLOWERS (0095284)
Solicitor General
22
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