Yesterday, two circuit courts issued opposite decisions on the Affordable Care Act. The Fourth Circuit held that individuals could obtain subsidies through the federal healthcare site.
The D.C. Circuit, by a vote of 2-1 held the reverse. The D.C. Circuit opinion (Halbig v. Burwell) included on the panel judges Griffith, Edwards and Randolph. Edwards and Randolph are senior judges. The majority, Griffith and Randolph, were appointed by Republican presidents while the dissent, Edwards, was appointed by a Democratic president.
While it is difficult to attribute political leanings to judges (all are motivated by a desire to interpret the law fairly), the reality is, that until recently, the D.C. Circuit was made up of a majority of judges who showed very little deference towards administrative agencies. The SEC was a particularly common recipient of this lack of deference. The D.C. Circuit's decision in Business Roundtable v. SEC, the case that struck down the shareholder access rule, was a particularly egregious case of a lack of deference, and one hard to defend under existing case law.
When the Commission would lose (as in the shareholder access case), appeal to the full court (en banc) was mostly pointless. With a panel already uniting in opposition, the full court was not likely to produce enough votes to overturn the decision. Business Roundtable was not, therefore, appealed (although some argued that it should have been).
The membership of the D.C. Circuit remained static (except for some retirements) during the current President's first term. He was the first president in memory to obtain no appointments to the D.C. Circuit. That changed, however, during his second term. The President has succeeded in obtaining approval for three judges on the court. There are now 7 non-retired judges appointed by Democratic presidents and four appointed by Republican presidents.
The result, at least so it seem, is that deference has, to some degree, returned. Thus, the SEC's decision in National Association of Manufacturers v. SEC (the conflict minerals case) was an administrative law victory for the SEC.
The NAM decision was not, however, a complete victory. The Commission saw a small portion of the rule struck down on questionable first amendment grounds. Unlike past cases, however, the Commission did not just take the shellacking. First, the SEC, showing verve, indicated its intent to implement the rule (staying only the portions held to have violated the first amendment) and denied a motion for a stay. For the statement from CorpFin on the issue, go here.
The Commission then went even further. It contested the first amendment decision. In other words, the Agency declined to take 90% of a loaf (the portions of the rule not overturned) and opted for a strategy seeking the whole loaf. The Commission asked to have the case held. See Petition of the SEC for Rehearing or Rehearing En Banc Pending the Decision in American Meat Institute v. United States (May 29, 2014).
What has changed? Two things.
First, the constitutional question was already pending before the D.C. Circuit en banc, the issue having been raised in a different case. Second, given the shift in the make up of the court, there is a real chance that the law will shift to a place more in keeping with the SEC's view. If that happens, the Commission will likely ask the panel to alter its constitutional analysis and uphold the rule in its entirety.
All of this brings us back to the Affordable Care Act. The DOJ has already announced (within hours) that it would take the case en banc in the D.C. Circuit. A victory for the United States (something highly probable) would confirm that, no matter what the individual panels do, the court en banc stands ready to change the reigning philosophy of the court.
If the United States wins, it should embolden the SEC to appeal cases, to the full court en banc, that it loses where a panel was insufficiently deferential. In other words, the SEC would be in a position to no longer significantly fear legal challenges to rules (at least based on administrative law grounds). A loss like the one in Business Roundtable would no longer go unchallenged.