Justices Drop Another Clue About Obamacare's Future

Kennedy votes with the liberals in an obscure letter-of-the-law case.

Everyone wants to know what he's thinking.

Photographer: Pete Marovich/Bloomberg

Is it better to follow the strict letter of the law or to adjust it where appropriate to produce a more equitable result? This is one of the oldest questions in legal thought, one that can be traced back at least to Aristotle -- and on Wednesday the U.S. Supreme Court weighed in, 5-4, on the side of equity, with Justice Anthony Kennedy providing the deciding vote.

Ordinarily, a decision like this one, involving the interpretation of the Federal Tort Claims Act would be of interest only to practitioners who are specialists in statutory interpretation. But this isn’t an ordinary spring. In June, the Supreme Court will hand down its most important statutory interpretation case in a generation, essentially deciding whether the Affordable Care Act will survive or fall. The interpretation question before the court in that high profile case, King v. Burwell, bears a striking structural resemblance to the obscure one the court decided Wednesday. And, not for the first time, Kennedy is the justice whose intentions we can’t help trying to predict.

The technical issue before the justices in federal courts case, U.S. v. Kwai Fun Wong, had to do with what happens when a plaintiff who alleges that he’s been injured by the government files suit after the statute of limitations has run its course. The law says, rather biblically, that a suit “shall be forever barred” if the plaintiff misses one of the required deadlines.

Sounds pretty clear, right? Well, yes -- except what should be done if the reason the plaintiff couldn’t file was that she was blocked from doing so by a court that didn’t do its job right or by the government that injured her failing to provide information necessary for her to file?

Under those circumstances, courts have the established authority to engage in what’s called “equitable tolling of the statute of limitations.” The “tolling” part means that the statute of limitations will be frozen at the moment when the plaintiff was blocked from filing, thus allowing the suit to go forward later.

The “equitable” part means that the court is exercising the form of justice known as “equity.” That’s the English translation of what Aristotle had in mind when he proposed that the strict letter of the law should be overridden when following it would produce an unjust result.

The Supreme Court had to decide whether the words “shall be forever barred” do or don’t permit equitable tolling. The majority decision, written by Justice Elena Kagan, analyzed the issue by asking whether Congress had made a “clear statement” that equitable tolling shouldn't apply to a suit brought under the FTCA.

According to Kagan, if Congress clearly stated that a court lacked the jurisdiction to proceed on a time-barred claim, then equitable tolling shouldn’t be allowed. But she concluded that Congress had made no such clear statement. It followed that equitable tolling is allowed, and that the law can be bent when there is good reason to do so.

The key to Kagan’s opinion was to establish it as the default position that a statute of limitations may be tolled in a suit against the government. In other words, Kagan was implying that the primary job of the courts is to do substantial justice, which means using equity. Only if Congress expressly tells the courts not to use equity should the strict letter of the law be maintained.

The dissent, by Justice Samuel Alito, took the opposite tack. Alito pointed out that the words “shall be forever barred” sound like a pretty clear statement that courts lack jurisdiction to proceed. Indeed, Alito went on to say, even if there is no barrier to a court’s jurisdiction once the statute of limitations has run, the statute clearly should be interpreted literally -- to prohibit equitable tolling.

Alito made the argument very powerfully. Congress, he said, meant “to keep the universally recognized meaning of the words.” And “that meaning, of course, cannot change over time.” It would be difficult to imagine a more explicit statement of the view that courts should follow the strict meaning of the law, not treat the law as malleable or evolving in order to reach a better result.

What does all this tell us about the ACA? The uncomfortable truth (for liberals, at least) is that the ACA case arises from a piece of statutory language that on its face explicitly says that tax subsidies are only available for health insurance purchased on an exchange “established by the state.”

Liberals have tried to explain why, correctly interpreted, this language really means “established by the state or the federal government on the state’s behalf.” But their theories seem forced. Congress never went through the usual reconciliation process when it produced the ACA, and a single, contradictory sentence made its way to into the statute. If it were followed literally, it would have the effect of destroying the state exchanges and rendering Obamacare ineffective in the states that haven’t established their own exchanges but rely on exchanges created for them by the federal government.

The simplest way for the liberals to win the Obamacare case, King v. Burwell, is to convince Kennedy that the ACA shouldn’t be read literally, as doing so would produce a disastrous and therefore unjust result. If the law is interpreted flexibly in accordance with equity, the Obama administration wins. If it’s read strictly, the administration loses.

There may be other ways for the liberals to win the ACA case, including a constitutional avoidance theory that Kennedy tried out in oral argument and that appeared aimed at Chief Justice John Roberts. But regardless of the reasoning adopted, the true question in the ACA case is the same one the court decided today. Tune in to see whether Kennedy will follow it consistently.

This column does not necessarily reflect the opinion of Bloomberg View's editorial board or Bloomberg LP, its owners and investors.

    To contact the author on this story:
    Noah Feldman at nfeldman7@bloomberg.net

    To contact the editor on this story:
    Stacey Shick at sshick@bloomberg.net

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