Legal Briefing: Should Attorneys General Be Sanctioned for Frivolous Health Care Suit?

A daily look at legal news and the business of law:

AGs Should Pay Sanctions Personally, Says Law Prof

In an editorial in the National Law Journal, Washington and Lee University Law professor Timothy Stoltzfus Jost seemingly dismantles the 18 attorneys general's case against the new health care reform law, charging the complaint "makes several claims that on their face are neither factually nor legally true."

The editorial takes on several claims in the complaint, such as one that under the new law, states have to set up and operate health insurance exchanges, and another that states will have to set up offices to assist insurance customers. Jost calls the first "simple nonsense," pointing out that states can opt out at will; the federal government is willing to set up and run the exchanges for them. He similarly dismisses the second claim as "simply false," noting that states are merely authorized but not required to create such offices. U.S. Supreme Court precedent prevents the federal government from requiring states to enforce federal laws, and Jost says the new health care reform law was drafted with that decision in mind.

Jost addresses four other claims in similar fashion, though he says his list is just a start, and points out other, big-picture problems with the states' anti-reform lawsuit. First, U.S. Supreme Court precedent dating back to 1923 holds that states don't have standing to challenge the constitutionality of a federal law. Second, Jost asserts that the doctrine of "ripeness" -- the question of whether a controversy has developed sufficiently that ruling on it is appropriate -- is a problem since the law won't even take effect until 2014. Finally, Jost claims that the Tax Injunction Act would forbid the courts from giving the states the relief sought, namely "enjoining the collection of a tax."

If Jost is accurately dissecting the complaint (and I don't know the statute or the case law well enough to say) then he's right: Frivolous lawsuit sanctions against the state attorneys general who filed the suit are appropriate. Why? Because attorneys filing in federal court must certify "the claims, defenses, and other legal contentions are warranted by existing law" and "the factual contentions have evidentiary support." Based on Jost's argument, those conditions weren't met.

While the frivolous lawsuit rule does not designate a minimum penalty, in the past, courts have made sanctioned lawyers pay the other side's litigation costs, and often imposed other fines.

Any effort to dismiss the attorneys general's lawsuit as frivolous and to sanction them for filing it will surely be derided by some as political, but what about this lawsuit isn't deeply political? Granted, Jost's editorial is as intrinsically one-sided as a legal brief, but reading it leaves me hoping that the other side will respond in kind. After all, two Baker Hostetler partners, for whom purely political considerations surely play a smaller role than they do for the attorneys general, have been heavily involved in bringing the suit. If they were willing to get involved, could the frivolity of the case really be that clear cut? Oh, the embarrassment for the firm if it is.

Insurance Case Headed for Page Six?

The Wall Street Journal reports that AIG is fighting a $15 million life insurance claim under circumstances begging for a Law and Order episode to be based on them. Seems that an elderly woman drowned, fully clothed and profoundly drunk, in her bathtub, and her much younger friend and business associate sought payment of the policy which he had taken out on her life. Her death, which was investigated as a homicide but ultimately ruled accidental, nonetheless occurred two days before a massive loan the business associate took out to fund the policy was scheduled to come due. Because he had been unable to refinance the loan, the policy was in danger of being canceled. The business associate was also the last person to see the woman alive that night.

And in the Business of Law...

Susan Merrill, recently the head of enforcement for the Financial Industry Regulatory Authority, will now help those she once regulated get approvals and defend investigations as a partner for Bingham McCutchen.