Irish 4 Reproductive Health v. United States Department of Health And Human Services

          OPINION AND ORDER

          PHILIP P. SIMON, JUDGE

         This lawsuit is the continuation of a longstanding dispute over the provision of contraceptive services for students and employees of the University of Notre Dame. There are really two separate disputes at play here. The first involves a challenge to regulations that would allow Notre Dame to declare itself exempt from the Women's Health Amendment of the Patient Protection and Affordable Care Act (“ACA”). This first challenge is being brought against the federal agencies responsible for the implementation of the challenged regulations - the Department of Health and Human Services, the Department of Labor, and the Department of the Treasury. For ease of reference I will refer to this group as the “Federal Defendants.” The regulations are being challenged under the Administrative Procedures Act (“APA”), and they have already been enjoined by two different district courts and those preliminary injunctions have been affirmed in the Ninth and the Third Circuits.

         The second part of this case presents a wrinkle not present in the cases out of the Third and Ninth Circuits. Notre Dame has been named as a defendant because a week after issuing the interim final rules (“IFRs”), the Federal Defendants executed a private settlement agreement with Notre Dame exempting the university from all existing and future requirements with respect to contraceptive coverage. Notre Dame did not seek input from its students or faculty before entering into the settlement agreement. The Plaintiffs in this case - Irish 4 Reproductive Health (an association of Notre Dame students), Natasha Reifenberg, and Jane Does 1-3 - claim this backroom deal is illegal and unconstitutional.

         Two motions to dismiss the amended complaint are before me: one filed by Notre Dame, and the other by the Federal Defendants. The motions will largely be denied because Plaintiffs have stated plausible claims that the Final Rules violate the procedural requirements of the APA, the Settlement Agreement and Final Rules substantively violate the APA, the Settlement Agreement is void for illegality, and the Settlement Agreement and Rules violate the Establishment Clause. Dismissal is only warranted for two of the constitutional claims.

         Factual Background

         This is not the first time a controversy involving Notre Dame, the ACA and the provision of contraceptive care has arrived at my doorstep. In December 2013, Notre Dame unsuccessfully sought to enjoin an earlier version of the ACA's Women's Health Amendments. Much has changed in the six years since I last considered this issue. But before I dive into the legal morass presently before the court, a brief recounting of the extensive litigation history surrounding the ACA's contraception mandate is necessary to give some context about how we got here. To put it mildly, litigation over the contraceptive mandate of the ACA has been widespread and vigorous. It reached the Supreme Court in 2016 but the Court essentially punted on the issue hoping that the parties could just resolve the matter on their own. No such luck. And so the fight trundles on.

         Here's how we got here: the Women's Health Amendment to the ACA was passed in 2010 and requires insurance plans to cover women's preventive health services. Critically, the services must be provided without cost-sharing. [Am. Compl. ¶ 51; 42 U.S.C. § 300gg-13(a)(4).] While the Act itself does not specify the types of women's preventive care that must be covered, it does require coverage for such “additional preventive care and screenings . . . as provided for in comprehensive guidelines supported by the Health Resources and Services Administration [HRSA].” 42 U.S.C. § 300gg-13(a)(4). HRSA, in turn, commissioned the Institute of Medicine to convene a committee of experts on women's and adolescents' health and disease prevention to review their preventive-health needs and produce a report recommending the preventive services that should be included in the Guidelines. [Am. Compl. ¶ 59; Institute of Medicine, Clinical Prevention Services for Women: Closing the Gaps (2011) (“IOM Report”)^[1].]

         The Institute of Medicine found that access to contraception reduces unintended pregnancies, abortions, adverse pregnancy outcomes, and negative health consequences for women and children, and that even small out-of-pocket costs significantly reduce the use of contraception. [Am. Compl. ¶ 60.] Based on these findings, the Institute recommended that HRSA should include critical preventive services for women that must cover the “full range of Food and Drug Administration-approved contraceptive methods, sterilization procedures, and patient education and counseling for women with reproductive capacity.” [Id.; see IOM Report at 109-10.]

         In August 2011, HRSA adopted the Guidelines, implementing the recommendation requiring coverage of the full range of FDA-approved contraceptive methods for women. [Am. Compl. ¶ 61.^[2] In regulations implementing the Women's Health Amendment, it was acknowledged that “cost sharing can be a significant barrier to effective contraception” and that “[c]ontraceptive coverage, by reducing the number of unintended and potentially unhealthy pregnancies, furthers the goal of eliminating [the gender] disparity [in health coverage] by allowing women to achieve equal status as healthy and productive members of the job force.” [Am. Compl. ¶ 65; 77 Fed. Reg. 8, 725, 8, 728 (Feb. 15, 2012).]

         Shortly thereafter, in 2013, the government created a regulatory exemption from the contraceptive requirement for houses of worship. [Am. Compl. ¶ 66; 78 Fed. Reg. 39, 870-01, 39, 874 (July 2, 2013).] Certain religiously affiliated employers and universities (like Notre Dame) that didn't qualify for the house-of-worship exemption objected to having to include coverage for contraception in their insurance plans. [Am. Compl. ¶¶ 3, 66-67.]

         From this discontent, the so-called “accommodation” was born. See 78 Fed. Reg. 39, 870, 39, 871 (July 2, 2013). Through this process, an objecting employer or university could inform the government, or the entity's insurer or third-party administrator, that it had religious objections to providing coverage for contraceptive services. [Am. Compl. ¶¶ 3, 72; 26 C.F.R. § 54.9815-2713A(2015).] This was accomplished by filling out a one page opt out form and providing it to the entity's insurance issuer or third-party administrator who would, in turn, fulfill its legal obligation by separately providing or arranging payments for contraceptive services, without cost-sharing. [Am. Compl. ¶¶ 3, 73; 78 Fed. Reg. 39, 875-80 (July 2, 2013).] This was an attempt by the government to try and ensure the provision of contraceptive services, on the one hand, while being respectful to the legitimate religious concerns of religiously affiliated employers, on the other.

         But the objectors were not mollified. Notre Dame, along with other nonprofit religious organizations, filed suit challenging the contraceptive mandate under the Religious Freedom Restoration Act (“RFRA”). As referenced earlier, I issued an opinion rejecting Notre Dame's RFRA claim in its quest for a preliminary injunction, finding that making Notre Dame comply with the accommodation did not impose a substantial burden on its religious exercise. See Univ. of Notre Dame v. Sebelius, 988 F.Supp.2d 912, 921-26 (N.D. Ind. 2013). A divided panel of the Seventh Circuit affirmed. See Univ. of Notre Dame v. Sebelius, 743 F.3d 547, 554 (7th Cir. 2014), vacated on other grounds, 135 S.Ct. 1528 (2015).

         Shortly after the Seventh Circuit's decision in Sebelius, the Supreme Court decided Burwell v. Hobby Lobby Stores, Inc., 573 U.S. 682 (2014) in which Hobby Lobby, a closely held corporation, objected under RFRA to providing contraceptive services to its employees. The Supreme Court agreed, holding that a closely held corporation with a religious objection is exempt from the contraceptive mandate if there is a less restrictive means of furthering the law's interest. In response to Hobby Lobby, the government extended the accommodation to certain closely held for-profit entities with religious objections to providing contraceptive coverage. See 80 Fed. Reg. 41, 318; 41, 323-28 (July 14, 2015). But this effort appears to have satisfied no one. Many organizations continued to challenge the contraceptive-coverage mandate.

         Notre Dame's position in the earlier lawsuit was that filling out the opt out form or otherwise notifying the government or their insurance issuer of their religious objection violated RFRA and the United States Constitution. [Am. Compl. ¶¶ 72, 75, 77, 85.] Notre Dame argued that the accommodation made it a “conduit” for the provision of contraceptive coverage, in violation of its religious beliefs. See Univ. of Notre Dame v. Burwell, 786 F.3d 606, 612 (7th Cir. 2015), vacated on other grounds, 136 S.Ct. 2007 (2016). Eight of the nine federal courts of appeals to consider legal challenges to the accommodation, including the Seventh Circuit in Burwell, rejected them.^[3] [Am. Compl. ¶ 78.]

         As referenced above, the United States Supreme Court granted certiorari in seven of these cases and ultimately vacated and remanded them, instructing that the parties “should be afforded an opportunity to arrive at an approach going forward that accommodates [the entities'] religious exercise while at the same time ensuring that women covered by [the entities'] health plans receive full and equal health coverage, including contraceptive coverage.” Zubik v. Burwell, 136 S.Ct. 1557, 1560 (2016) (internal quotation marks omitted). The Zubik Court remanded the Notre Dame decision for further proceedings while the parties tried to reach an accord. Univ. of Notre Dame v. Burwell, 136 S.Ct. 2007 (2016). This was the punt that I referred to earlier.

         To put it bluntly, the Supreme Court's attempt to nudge a settlement has gone nowhere. Here's what happened instead: First, the government issued a Request for Information soliciting comments as to how it might alter the regulations to implement the compromise contemplated by the Supreme Court in Zubik. See 81 Fed. Reg. 47, 741-01 (July 22, 2016). After receiving 54, 000 comments, the government announced in January 2017 that no “feasible approach has been identified” and reiterated that “the Departments continue to believe that the existing accommodation regulations are consistent with RFRA . . . .” [Am. Compl. ¶ 82; see Dept. Of Labor, FAQs About Affordable Care Act Implementation Part 36, 4 (Jan. 9. 2017).^[4]] Meanwhile, on remand, the various cases were held in abeyance while the parties tried to negotiate resolutions. [Am. Compl. ¶83.]

         The tide in favor of the contraceptive mandate turned against it in 2017. President Trump issued an Executive Order in May of that year directing the Federal Defendants in this case to issue the rules which are challenged here. [Am. Compl. ¶¶86-87; Exec. Order No. 13, 798, Promoting Free Speech and Religious Liberty, 82 Fed. Reg. 21, 675 (May 4, 2017)]. The Federal Defendants complied and issued two interim final rules (IFRs) which created exemptions from the ACA contraceptive coverage requirement for entities asserting religious and moral objections, and made the accommodation process optional. 82 Fed. Reg. 47, 792-01, 47, 848 (Oct. 13, 2017). The first rule expanded the religious exemption because the Federal Defendants “determined that an expanded exemption, rather than the existing accommodation [wa]s the most appropriate administrative response to the religious objections raised by certain entities and organizations.” Id. at 47, 799. The second rule created a similar exemption for entities with sincerely held moral objections issued “in part to bring the [m]andate into conformity with Congress's long history of providing or supporting conscience protections in the regulation of sensitive health-care issues.” Id. at 47, 844.

         There was no public notice or comment before the issuance of the IFRs; comments were only solicited after the IFRs went into effect. [Am. Comp. ¶¶ 88-89.] In December 2017, two federal courts issued nationwide preliminary injunctions blocking the IFRs. Am. Compl. ¶¶ 92-95; see Pennsylvania v. Trump, 281 F.Supp.3d 553, 576 (E. D. Pa. 2017); California v. Health & Human Servs., 281 F.Supp.3d 806, 829 (N.D. Cal. 2017), affirmed in part and vacated in part by California v. Azar, 911 F.3d 558 (9th Cir. 2018) (affirming the preliminary injunction, but finding it should only be issued as to plaintiff states and not nationwide). These courts found the plaintiffs would likely succeed on the merits of the claims that the IFRs were substantively unlawful because they were promulgated without statutory authority and procedurally infirm for failing to follow the APA's notice and comment procedures. The United States Court of Appeals for the Ninth Circuit affirmed the ruling that the states in the California case were likely to succeed on their procedural APA claim. Azar, 911 F.3d at 575.

         One week after issuing the IFRs, on October 13, 2017, the Federal Defendants executed a Settlement Agreement with Notre Dame and more than 70 other entities to resolve pending challenges to the ACA's contraceptive coverage requirement. [Am. Compl. ¶¶ 106-07.] Depending on what side you're on, the Settlement Agreement was either a monumental victory for the religious employers or a total capitulation by the Government. Specifically, the Agreement exempts Notre Dame, along with its “subsidiaries, affiliates, and successors; and related entities that offer coverage through the [signatories'] health plan[s]” from the contraceptive coverage requirement and “any materially similar regulation or agency policy.” [Am. Compl. ¶¶ 107-08; Settlement Agreement, DE 1-1, at 5, 13.] In other words, the Settlement Agreement inoculates Notre Dame in perpetuity from any future regulation that might mandate the provision of contraception to its students or employees. Under the terms of the Settlement Agreement, “[n]o person may receive [contraceptive coverage] as an automatic consequence of enrollment in any health plan sponsored by Plaintiffs.” [Am. Compl. ¶ 109; Settlement Agreement at 6, ¶ 2(e).] And for good measure, the Government tossed in $3 million for legal fees to boot. [Settlement Agreement at 8, ¶ 7.]

         Despite the two preliminary injunctions prohibiting the IFRs, the Final Rules were promulgated on November 15, 2018, with an effective date of January 14, 2019. [Am. Compl. ¶ 97.] The religious exemption allows all nongovernmental entities, including for-profit businesses, nonprofits, and universities, to declare themselves exempt from the ACA's contraceptive coverage requirement based on religious beliefs. [Am. Compl. ¶ 100; 83 Fed. Reg. 57, 536 (Nov. 15, 2018).] The moral exemption allows all nongovernmental entities except publicly traded corporations to exempt themselves from the law based on “moral convictions.” 83 Fed. Reg. 57, 592 (Nov. 15. 2018). Those entities refusing to provide contraceptive coverage do not need to explain their decision, and “do not need to file notices or certifications of their exemption, and [the Rules] do not impose any new notice requirements on them . . . .” Id. at 57, 558, 57, 614.

         In January 2019, just before the Final Rules were supposed to take effect, federal district courts in California and Pennsylvania preliminarily enjoined them. The Eastern District of Pennsylvania preliminarily enjoined the Final Rules nationwide, finding the Final Rules both substantively and procedurally unlawful. Pennsylvania v. Trump, 351 F.Supp.3d 791 (E.D. Pa. 2019). The Third Circuit recently affirmed this decision. Pennsylvania v. President United States, 930 F.3d 543 (3d Cir. 2019), petition for cert. filed Oct. 7, 2019. The Northern District of California also preliminarily enjoined the Final Rules for substantive illegality in 13 states and the District of Columbia. California v. Health & Human Servs., 351 F.Supp.3d 1267 (N.D. Cal. 2019). The Ninth Circuit followed suit and affirmed this decision too. California v. U.S. Dep't of Health & Human Servs., 941 F.3d 410 (9th Cir. 2019).

         All of which brings us to the present dispute. Notre Dame sponsors health insurance plans for students, faculty and staff (and their dependents). [Am. Compl. ¶ 19.] After the Settlement Agreement, Notre Dame amended its health plans to terminate coverage for certain FDA-approved contraceptives which it views as abortifacients or sterilization, and to impose cost-sharing (including co-payments and deductibles), for other types of contraceptives (like birth control pills). [Id. ¶¶ 128-49.] The members of Irish 4 Reproductive Health and the individual plaintiffs in this case are women of child-bearing age who are enrolled in health plans sponsored by Notre Dame. [Id. ¶¶ 14-17.] They have been denied coverage for some contraceptives, and must engage in cost-sharing for others. [Id. ¶¶ 13-17.]

         Plaintiffs filed suit in this case on June 26, 2018. [DE 1.] They filed an amended complaint on December 5, 2018, to reflect they are now challenging the Final Rules (instead of the interim rules). [DE 43.] The amended complaint states the following claims: (1) the Settlement Agreement violates the APA; (2) the Settlement Agreement is void under federal common law because it is illegal under the Zubik remand order, the ACA, and the Constitution; (3) the Final Rules procedurally violate the APA because the IFRs were issued without pre-promulgation notice-and-comment; (4) the Final Rules substantively violate the APA because they contradict the Constitution and the ACA; (5) the Settlement Agreement and the Final Rules violate the Establishment Clause; (6) the Settlement Agreement and the Final Rules violate the Due Process Clause by depriving Plaintiffs of a fundamental right (access to contraceptives); and (7) the Settlement Agreement and Final Rules violate the Equal Protection Clause because, inter alia, they “target women for adverse treatment.” [Am. Compl. ¶¶ 165-232.]

         Both the Federal Defendants and Notre Dame seek dismissal of the amended complaint [DE 58 and 59]. At the request of the Plaintiffs, I held a hearing in this matter and heard oral argument from all parties.

         Discussion

         In the midst of this extended litigation with complicated issues, it is important to keep in mind the procedural posture of the present motions. This case is before me on two motions to dismiss the amended complaint. The Federal Defendants have moved to dismiss all the claims in the amended complaint under Federal Rule of Civil Procedure 12(b)(1) and 12(b)(6). Notre Dame has moved to dismiss all the claims in the amended complaint under Rule 12(b)(6).

         In order to survive a motion to dismiss under Rule 12(b)(6) for failure to state a claim upon which relief can be granted, “a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (internal quotation marks and citation omitted); accord Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). While I must accept all factual allegations as true and draw all reasonable inferences in the complainant's favor, I don't need to accept threadbare legal conclusions supported by purely conclusory statements. See Iqbal, 556 U.S. at 678. Plaintiffs must allege “more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.” Twombly, 550 U.S. at 555. Making the plausibility determination is “a context-specific task that requires the reviewing court to draw on its judicial experience and common sense.” Iqbal, 556 U.S. at 679.

         When evaluating a facial challenge to subject matter jurisdiction under Rule 12(b)(1), I must use the same “plausibility” standard; therefore, I must accept alleged factual matters as true and draw all reasonable inferences in favor of Plaintiffs. Silha v. ACT, Inc., 807 F.3d 169, 174 (7th Cir. 2015). Plaintiffs bear the burden of establishing the jurisdictional requirements. Ctr. For Dermatology and Skin Cancer, Ltd. v. Burwell, 770 F.3d 586, 588-89 (7th Cir. 2014). “Subject-matter jurisdiction is the first question in every case, and if the court concludes that it lacks jurisdiction it must proceed no further.” Illinois v. Chicago, 137 F.3d 474, 478 (7th Cir. 1998). Therefore, I'll start with the Federal Defendants' arguments under Rule 12(b)(1) first.

         I. Federal Defendants' 12(b)(1) Arguments

         In claiming that this Court lacks jurisdiction over Plaintiffs' claims, the Federal Defendants initially make two arguments that can be disposed of quickly. First, they contend the APA only permits judicial review of final agency actions “for which there is no other adequate remedy in a court, ” 5 U.S.C. § 704, and second, they argue Plaintiffs have alternative remedies. The Federal Defendants then set forth a much closer issue relating to the Settlement Agreement. They claim that the decision to refrain from enforcement is a decision that is committed to agency discretion as a matter of law, and beyond the scope of judicial review. And so, when the Federal Defendants decided to settle the protracted litigation with Notre Dame, that was an enforcement decision beyond judicial review. Finally, they argue Plaintiffs don't have standing to challenge the Final Rules. As detailed below, none of these jurisdictional attacks have merit.

         A. The Availability of Alternative Remedies

         The APA only permits a plaintiff to obtain judicial review of a “final agency action for which there is no other adequate remedy in a court.” 5 U.S.C. § 704; U.S. Army Corps of Eng'rs v. Hawkes Co., 136 S.Ct. 1807, 1815 (2016); Brem-Air Disposal v. Cohen, 156 F.3d 1002, 1004 (9th Cir. 1998) (holding a court lacks jurisdiction over an APA claim where Congress has provided an adequate alternative remedy under another statute). The Federal Defendants essentially argue that because Count I states a claim for violation of the Settlement Agreement under the APA, and Count II states a cause of action that the Settlement Agreement is void for illegality, Plaintiffs are already pursuing alternative remedies because “[i]f Plaintiffs were to prevail on any of the[] non-APA challenges to the Settlement Agreement and it were voided, then the Settlement Agreement could not cause Plaintiffs to lose meaningful access to contraceptive services.” [DE 58-1 at 28.]^[5]

         In other words, the Federal Defendants think the non-APA challenges to the settlement can and should stand alone. But it isn't quite so binary. Plaintiffs' claims challenging the Settlement Agreement are intertwined - they are claiming both that the Settlement Agreement violates the APA and is an illegal contract under Zubik, the Women's Health Amendment, and the Constitution. The Federal Defendants' argument seems to be that because the Plaintiffs might prevail on their non-APA challenges, they are prevented from pursuing their APA challenge simultaneously. In other words, under the Federal Defendants' conception of the statute, the Plaintiffs have to fully litigate, through appeal, the non-APA challenge to the Settlement Agreement, and then if they lose, come back and assert their APA claims. This seems like a hopelessly inefficient way to conduct litigation - one claim at a time. At this point, who's to say whether the Plaintiffs have “an adequate remedy in court” as that phrase is used in the APA. It is way too early to know that; their non-APA challenges to the Settlement Agreement might be complete duds. And because Plaintiffs are allowed to plead in the alternative, see Fed. R. Civ. P. 8(d)(2), it is senseless to require litigation to proceed ad seriatim as the Federal Defendants propose. While it is true that “courts routinely dismiss alternatively pled APA claims upon finding that another statute offers an adequate alternative remedy, ” here, the Federal Defendants have not pointed to another such statute. R.J. Reynolds Tobacco Co. v. United States Dep't of Agriculture, 130 F.Supp.3d 356, 379 (D.D.C. 2015). In fact, their argument that Plaintiffs have another “adequate remedy” in this situation is unsupported by any case law whatsoever, and can better be considered at the summary judgment stage of litigation, when all parties and the Court have a better sense of the challenges and remedies. For now, both claims will go forward.

         The Federal Defendants also argue that Plaintiffs Natasha Reifenberg, Jane Doe 2, and Jane Doe 3 (all who are enrolled as dependents in Notre Dame's faculty and staff health plan), have an additional adequate alternative remedy under ERISA. [DE 58-1 at 28-29.] This is totally beside the point. Even though in theory these plaintiffs could bring a civil action under ERISA to enjoin an act or practice that they believe violates a term of the ACA or a provision of ERISA, the Settlement Agreement (which effectively immunizes Notre Dame from coverage), would stand in the way of any other mechanism to address the injury at issue in this case.

         B. Whether The Decision to Settle Litigation is Committed to Agency Discretion and Not Reviewable By This Court

         The much meatier jurisdictional issue is whether the decision to settle litigation is subject to judicial review. The Federal Defendants argue Plaintiffs' APA challenges to the Settlement Agreement should be dismissed for lack of jurisdiction because the deal is an exercise of enforcement discretion that is “committed to agency discretion by law, ” 5 U.S.C. § 701(a)(2), and therefore beyond the scope of APA review. [DE 58-1 at 29.] Notre Dame makes a similar assertion that the Settlement Agreement is not judicially reviewable, although Notre Dame does this under the guise of its 12(b)(6) motion. [DE 59-1 at 16-19.] From a procedural point of view, Notre Dame has correctly advanced this issue, as the Seventh Circuit has agreed “that this issue is not termed properly one of jurisdiction: This is not a question of whether this court has the authority to review, but rather whether the lack of any judicially manageable standard makes any review within our power, as a practical matter, impossible.” Vahora v. Holder, 626 F.3d 907, 917 (7th Cir. 2010) (internal quotation marks and quotation omitted). Regardless of how the different defendants have procedurally postured their arguments, they will both be addressed together in this section.

         Defendants say this matter is governed by Heckler v. Chaney, 470 U.S. 821 (1985). In that case, inmates sentenced to death challenged a decision by the Food and Drug Administration not to enforce a statute it administered in the context of lethal injections. The Court held that section 701(a)(2) of the APA prevented review because there was “no meaningful standard against which to judge the agency's exercise of discretion.” Id. at 830; see also Vahora, 626 F.3d at 917 (commenting on Heckler). The Seventh Circuit has noted that a “classic example of such a[] [non reviewable] action is an agency's decision not to prosecute.” Home Builders Ass'n of Greater Chi. v. U.S. Army Corps of Eng'rs, 335 F.3d 607, 615 (7th Cir. 2003).

         However, Heckler itself gives indications that its ruling should not dictate what happens in a case like this. Heckler explained that “Congress did not set agencies free to disregard legislative direction in the statutory scheme that the agency administers, ” and that it was not addressing reviewability of an agency decision to “consciously and expressly adopt [] a general policy that is so extreme as to amount to an abdication of its statutory responsibilities.” Heckler, 470 U.S. at 833 n.4 (internal ...