If anything, challengers of Obamacare lose b/c of Pennhurst

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Under Petitioners’ interpretation, the provision barring federal subsidies in FFE States is buried in two sub-subsections of 26 U.S.C. § 36B. The phrase “an Exchange established by the State under [§] 1311” appears in the provision describing part of the calculation of an individual tax credit (§ 36B(b)(2)(A)), and again in the definition of “coverage month” (§ 36B(c)(2)(A)). Petitioners infer from that usage that Congress intended to deny tax credits to citizens in FFE States in order to pressure States to build their own Exchanges.

But those isolated phrases fail Pennhurst’s clear-notice test. For starters, Congress does not “hide elephants in mouseholes.”91 It is unreasonable to expect State officials to have found clear notice of Congress’s supposed threat in obscure subsubsections of the tax code pertaining to the calculation of an individual’s tax credit.

The Supreme Court’s own decisions support the view that federal grants to states should not be treated differently than federal grants to third parties. In Pennhurst State School and Hospital v. Halderman, a seminal Supreme Court decision laying out the limits of federal conditional grant programs, the Court explained that “legislation enacted pursuant to the spending power is much in the nature of a contract: in return for federal funds, the States agree to comply with federally imposed condition,” adding that “[t]he legitimacy of Congress’ power to legislate under the spending power thus rests on whether the State voluntarily and knowingly accepts the terms of the ‘contract.’”

Obamacare’s opponents . . . “can’t have their cake and eat it too.”
In a 2008 article published in the Duke Law Journal, University of Michigan Law Professor Samuel Bagenstos explains why this contract metaphor is relevant to King. The requirement that Congress speak clearly when it imposes conditions upon a federal grant stems, at least in part, from “the principle that ambiguous terms in contracts are construed against their drafters.” If Ali drafts a contract where he agrees to pay Bob to paint his house, any ambiguities in that contract will be read in the light least favorable to Ali and most favorable to Bob. Similarly, if Ali drafts a contract where he agrees to pay Bob’s brother if Bob paints his house, the ambiguous terms in the contract will also be construed against Bob even though Bob does not receive any actual money from Ali.

Under the Supreme Court’s precedents, the same rule should apply to Congress. If Congress drafts legislation that may or may not be read impose conditions upon the states, it will be construed in favor of the states — that is, it will be construed not to place any obligations on the states. Moreover, this rule should apply regardless of whether Congress offers to give money to the state or to a third party — for the same reason that ordinary contract law applies to Ali regardless of whether he is expected to pay Bob or Bob’s brother.

B. The ACA Is Not Analogous to Conditional Spending Programs
Petitioners’ amici Oklahoma, et al., and Missouri Liberty Project cite a number of federal spending programs. In each one, unlike the ACA under petitioners’ interpretation, the consequences of a State’s failure to participate are obvious and spelled out in the terms of the statute aimed directly at the State, not buried in a provision about individual taxes. None of them includes a federal fallback like the HHS-facilitated Exchanges. In addition, in each one, if the State chooses not to participate, the result is that the State and its residents are left approximately where they would have been if Congress had not offered the State the choice. Not one of the statutes that petitioners and amici cite would impose anything like the dire consequences that petitioners’ reading would impose on a State’s choice not to set up an Exchange.

Under petitioners’ interpretation, the ACA broke completely with this tradition. Petitioners and their amici cite no other statute establishing an elaborate and complex federal regulatory program that offers the States the option to participate and provides a federal fallback if they do not, but then makes it impossible for the federal fallback to function in a way that advances the objectives of the law. Because there is no evidence, let alone certainty, that Congress wrote such a novel, and incomprehensible, feature into the ACA, the Court should reject petitioners’ interpretation.