San Francisco's universal health care law officially survived the 9th U.S. Circuit Court of Appeals on Monday, but with eight conservative judges now raising the specter of a circuit split, business interests hope the Supreme Court will step in.
The court, led by Judge William Fletcher, denied en banc review to the Golden Gate Restaurant Association, which had challenged San Francisco's ordinance in November 2006 after the county board of supervisors gave it unanimous approval.
But Judge Milan Smith Jr. and seven colleagues sharply critiqued the majority's decision, saying it contradicts the 4th Circuit's ruling in a similar case and flouts Congress' 35-year-old Employee Retirement Income Security Act.
"In my view, if our decision in this case remains good law, similar laws will become commonplace, and the congressional goal of national uniformity in the area of employer-provided health care will be thoroughly undermined, with significant adverse consequences to employers and employees alike," Smith wrote. He was joined by Chief Judge Alex Kozinski, and Judges Diarmuid O'Scannlain, Andrew Kleinfeld, Richard Tallman, Jay Bybee, Consuelo Callahan and Carlos Bea.
The San Francisco Health Care Security Ordinance requires city employers to spend a minimum amount on employee health care plans. If a company spends less on health care than the amount required by the city, the company makes up the difference in the form of a tax paid to San Francisco's "Health Access Program," which provides free care to low- and moderate-income residents, according to Monday's ruling.
Fletcher wrote the September opinion for the panel that sided with San Francisco, and on Monday he came to his own defense, accusing the dissenters of omitting key language from the 4th Circuit's 2007 opinion in Retail Industry Leaders Association v. Fielder, 475 F.3d 180 (pdf).
"This is fairly sharp jousting here," said Arthur Hellman, a federal courts expert at the University of Pittsburgh School of Law. Hellman said several factors make him think the U.S. Supreme Court will grant review, and that Fletcher's Monday concurrence seemed aimed at undercutting the most prominent: the prospect of a conflict between circuits.
But despite Fletcher's efforts, Hellman said, larger forces are at play. San Francisco's ordinance "is something you can expect to see more of in the current economic conditions," he said, "and I think it is part of the court's responsibility to lay down the guidelines so cities know what they can do, how far they can go."
Richard Rybicki, an attorney with the Napa-based Employment Law Advocates who helped represent the GGRA, said the plaintiffs will petition the Supreme Court.
Rybicki said that the laws regulating health care benefits, unlike those that cover other employment issues like minimum wage or severance pay, were never eligible for cities or states to "tinker" with, since a nationwide standard allows employers "to give better coverage to millions across the country."
He said he sees this case, Golden Gate Restaurant Association v. City and County of San Francisco, 07-17370, as "the court's opportunity to both rectify an anomaly in the system -- and an opportunity for the court to clarify the reach of [federal health care law] pre-emption."
David Bacon, a Los Angeles partner at Nixon Peabody who's also representing the GGRA, added, "I think that there's a very dramatic dissent here with eight judges, including Chief Judge Alex Kozinski, and I think the stage is very clearly set for a Supreme Court showdown."
Vince Chhabria, the deputy city attorney who could find himself arguing before the nation's high court for the first time if the case gets there, said he doesn't see a circuit conflict. The 4th Circuit was considering a Maryland law that penalized businesses for failing to pay a minimum amount toward health care benefits. The money essentially went into a "government black hole," he said. That meant employers had to change their benefits packages or take a hit.
But in San Francisco, Chhabria said, the health care "tax" pays for "meaningful, comprehensive" care, so businesses don't need to adjust their existing plans, and the law doesn't conflict with the federal ERISA.
"Those two decisions are in harmony, and taken together they stand for the proposition that a local government can impose health care expenditure requirements on employers, but a local government cannot impose requirements that force employers to disrupt [health care] uniformity," he said.
If Chhabria ends up standing before the high court, he'll come prepared: He clerked for Justice Stephen Breyer during the 2001 term, and saw around 100 oral arguments.
"So I think my comfort level would be better than most first-time arguers at the court," he said. "But I have to tell you that I think it's unlikely that the Supreme Court will take the case."