Summary
In Sears v. Corbett, 49 A.3d 463 (Pa.Cmwlth.2012), this Court struck down legislation that redirected funding from the tobacco settlement account and effected legislative changes to building permits, heritage areas and crime victim compensation.
Summary of this case from Washington v. Dep't of Pub. WelfareOpinion
2012-06-27
Sheryl SEARS; Ronald J. Guiney; Florence Spanos; Barbara L. Miller; Randell Devlin; Kathleen Devlin; Sallye Fiscus; Nicholas Balandiat; Loretta E. Maierhofer; Mary Gallagher; Daniel Cecchetti; Michele Yamshon; Vicki L. Mazzaferro; Madeline Martucci; Gary Carpinello; Karen Carpinello; Diane Holbert; Arthur W. Cunningham, Jr.; Dana Cunningham; Dolores Lobiondo; Michael Lobiondo; Carol Kuhns; Tammy Bevan; Alicia Rager; Teresa Liberato; Valerie Benko; John C. Egan; Tammy Gross; Blanche Hoover; Joseph D. Steiner; Cynthia Brazen; Susan Antoszewski; Angela Stetz; Bonnie Zuzo; Carol Weiss; Linda Saunders; Louise Schneider; Linda Gorsuch; Alex J. Deritis, Sr.; Sharon Thir; Becky Thir; Barbara Sims; Frank Sims; Carol L. Devers; Debbie A. Kraft; Deborah A. McGrady; Jeff C. Miller; David Lipstein; Bonnie Lipstein; Thomas R. Haberman; William A. Roth; David Dawson; Victoria D. Hartsek; Jeanine Richards; Kelly Richards; William Ainsworth; William Briggs; Lorraine Capalbo; Chris Iams; Ronald Kaplan; Joan O'Shea; Kimberly Thomas; Bianca Willis; Shawn Willis; Pamela R. Alwine; Barbara A. Beam; Beverly A. Corcoran; James J. Corcoran; Kristyn L. Corcoran; Billye Glenn; David McKee; Christina A. Miller; Particia Vargulish; Dora M. Alexander; and Joda L. Schena, on behalf of themselves and all others similarly situated, Petitioners v. Tom CORBETT as Governor of the Commonwealth of Pennsylvania; Charles Zogby as Secretary of Budget of the Commonwealth of Pennsylvania; House of Representatives of the Commonwealth of Pennsylvania; Samuel H. Smith as Speaker of the House; Senate of the Commonwealth of Pennsylvania; Joseph B. Scarnati, III, as President Pro Tempore of the Senate; and Department of Treasury of the Commonwealth of Pennsylvania, Respondents.
William R. Caroselli, Pittsburgh, for petitioners. Jonathan F. Bloom, Philadelphia, for respondents.
William R. Caroselli, Pittsburgh, for petitioners. Jonathan F. Bloom, Philadelphia, for respondents.
BEFORE: LEADBETTER, President Judge
, and McGINLEY, Judge, and PELLEGRINI, Judge, and SIMPSON, Judge, and LEAVITT, Judge, and BROBSON, Judge
This case was assigned to the opinion writer before Judge Pellegrini succeeded Judge Leadbetter as President Judge.
, and McCULLOUGH, Judge.
OPINION BY Judge McCULLOUGH.
This case was argued before an en banc panel of the Court that included former Judge Johnny J. Butler. Because Judge Butler's term on the Court ended January 2, 2012, this matter was submitted on briefs to Judge Brobson as a member of the en banc panel.
Presently before the Court are the preliminary objections of Governor Tom Corbett, Budget Secretary Charles Zogby, the General Assembly of the Commonwealth of Pennsylvania and its elected, presiding officers (hereafter Respondents) to the second amended petition for review in the nature of a class action complaint filed by Petitioners seeking declaratory, mandamus, and equitable relief with respect to Respondents' alleged violations of the Tobacco Settlement Act (TSA), Act of June 26, 2001, P.L. 755, as amended,35 P.S. §§ 5701.101–5701.5103, and the Pennsylvania Constitution.
Petitioners are former recipients of adultBasic insurance, a low-cost health insurance program for certain qualifying adults in Pennsylvania. Historically, adultBasic was funded by the proceeds of a 1998 Master Settlement Agreement (MSA) between certain United States tobacco product manufacturers, the Commonwealth of Pennsylvania, and 46 other states.
Among other things, the MSA provided for the payment of funds over time into an escrow account from which certain amounts would be disbursed to each of the “Settling States,” including the Commonwealth.
The participating tobacco manufacturers included Phillip Morris Incorporated, R.J. Reynolds Tobacco Company, Brown & Williamson Tobacco Corporation, Lorillard Tobacco Company, and Liggett & Myers. The states of Mississippi, Florida, Texas, and Minnesota were not included in the MSA because each of these states had reached earlier individual settlements with these manufacturers. The MSA applied to the remaining states, the District of Columbia, and five United States territories, including the Commonwealth of Puerto Rico, Guam, the Virgin Islands, American Samoa, and the Northern Mariana Islands.
The MSA also provided that no person or entity other than a “Settling State” (such as the Commonwealth) or a “Released Party” (such as the tobacco manufacturers) was intended to have any rights to enforce the agreement.
The MSA required the tobacco manufacturers to make annual payments to the Settling States totaling approximately $206 billion through the year 2025.
Following the execution of the MSA in 1998, the General Assembly and Governor enacted the TSA in 2001, providing for, among other things, the handling and distribution of the MSA's expected proceeds. More specifically, section 303(a) of the TSA, 35 P.S. § 5701.303(a), established a fund known as the Tobacco Settlement Fund (Fund), into which tobacco settlement monies were to be deposited. Section303(b) created a Health Endowment Account for Long–Term Hope (Health Account) within this Fund to receive certain payments from the MSA as well as various investment earnings. 35 P.S. § 5701.303(b). Section 306 of the TSA, 35 P.S. § 5701.306, set forth a formula pursuant to which monies in the Fund were appropriated to certain programs, including 8% to the Health Account and 30% to be shared between the adultBasic program and the medical assistance purchase program for workers with disabilities, known by the acronym “MAWD,” established by sections 1303 and 1503 of the TSA, 35 P.S. §§ 5701.1303, 5701.1503, respectively.
Pursuant to certain acts enacted by the General Assembly and signed into law by former Governor Ed Rendell and current Governor Tom Corbett, including Act 46 of 2010, Act No. 46, P.L. 279 (Act 46) and Act 26 of 2011, Act No. 26, P.L. 159 (Act 26), the tobacco settlement monies received under the MSA were redirected from the Fund and the Health Account. Specifically, Act 46 directed that $250 million be transferred from the Fund to the Commonwealth's General Fund, and Act 26, while not specifying a dollar figure, directed that one-third of the monies that would have been directed to MAWD and adultBasic be withheld and redirected elsewhere. As a result of the redirection of these monies, adultBasic lacked necessary funding and it ceased operations on February 28, 2011. On March 14, 2011, Petitioners commenced the present action with the filing of a petition for review in the nature of a class action seeking declaratory, mandamus, and injunctive relief. On April 4, 2011, Petitioners filed an application seeking a preliminary injunction, but the same was denied by order of this Court dated April 14, 2011. Petitioners have since amended their petition twice, the last of which was filed on July 28, 2011.
Petitioners raised five separate counts in their second amended petition for review. In Count I, Petitioners sought declaratory relief, alleging that the redirecting of the tobacco settlement monies away from the Fund and the Health Account constituted a violation of the TSA. In Count II, Petitioners sought mandamus relief, alleging that Respondents had a statutory duty to deposit these monies in accordance with the TSA. In Count III, Petitioners sought declaratory and mandamus relief, alleging that the amendment of the requirements of the TSA constituted a violation of Article III, sections 3, 6, and 11 of the Pennsylvania Constitution. In Count IV, Petitioners sought declaratory and mandamus relief, alleging that the submission of a budget which redirected tobacco settlement monies constituted a violation of Article IV, section 2 of the Pennsylvania Constitution. Finally, in Count V, Petitioners sought injunctive relief seeking to prevent the Treasury Department from disbursing any further tobacco settlement monies until this matter is resolved.
Petitioners sought relief in the nature of an order declaring that the action is properly maintained as a class action, that Respondents violated the TSA and the Pennsylvania Constitution, that any future tobacco settlement monies be deposited in accordance with the TSA, that the Fund be reimbursed for these redirected monies, and that the adultBasic program be reinstated retroactively to March 1, 2011. Petitioners also sought an injunction requiring the Treasury Department to maintain within its accounts any tobacco settlement monies received pursuant to the MSA until such time as the Court rules on the merits of their petition for review.
Respondents Corbett and Zogby filed preliminary objections, as did Respondents General Assembly and its elected, presiding officers. In their preliminary objections in the nature of a demurrer, Respondents Corbett and Zogby contend that Petitioners' second amended petition for review was insufficient as a matter of law and fails to set forth a claim as to any purported violations of Article III, sections 3, 6, and 11 of the Pennsylvania Constitution. Respondents Corbett and Zogby also cite the lack of entitlement to adultBasic as set forth in section 1303(c) of the TSA, in contrast to MAWD, an entitlement program. Additionally, Respondents Corbett and Zogby claim sovereign immunity to the extent that Petitioners seek to compel the restoration of the adultBasic program in the absence of appropriations or to hold them responsible for any effects of its termination.
Respondents General Assembly and its elected, presiding officers similarly contend in their preliminary objections in the nature of a demurrer that Petitioners second amended petition for review was insufficient as a matter of law. Respondents General Assembly and its elected, presiding officers note that, through the express language of section 1303(c) of the TSA, the Legislature anticipated the possibility that at some point the adultBasic program might lack funding and foreclosed any challenges relating to the same. Respondents General Assembly and its elected, presiding officers also assert sovereign immunity, specifically with respect to any claim for money damages or the disbursement of Commonwealth funds, and note the lack of any express waiver of the same. Additionally, Respondents General Assembly and its elected, presiding officers contend that the relief sought by Petitioners, i.e., for the Treasury Department to deposit and apply tobacco settlement monies in a manner contrary to law (Act 46 of 2010 and Act 26 of 2011) and in the absence of proper warrants, constitutes a violation of Article III, section 24 of the Pennsylvania Constitution.
Respondents General Assembly and its elected, presiding officers next contend that the legislative power vested in them by Article II, section 1 of the Pennsylvania Constitution permits them to adjust the formula for allocation of the tobacco settlement monies and that such legislative activity is immune from assault by Petitioners under Article II, section 15, the Speech or Debate Clause. Respondents General Assembly and its elected, presiding officers next contend that they complied with the requirements of Article III, sections 3, 6, and 11, that Petitioners did not act diligently in filing their action, and that this lack of diligence resulted in prejudice. Further, Respondents General Assembly and its elected, presiding officers assert that, to the extent Petitioners seek a redirection of tobacco settlement monies unrelated to the expiration of the adultBasic program, they lack standing.
Finally, Respondents General Assembly and its elected, presiding officers assert that Petitioners' second amended petition for review was inappropriately brought as a class action because the relief sought by Petitioners individually would have the same practical effect as if the relief were sought on behalf of a class. Petitioners filed answers to each set of Respondents' preliminary objections essentially denying the allegations contained therein.
Sovereign Immunity
We begin with a preliminary objection common to all Respondents, i.e., that they enjoy sovereign immunity. Respondents correctly note that our General Assembly has declared, consistent with Article I, section 11 of our Pennsylvania Constitution, that “the Commonwealth, and its officials and employees acting within the scope of their duties, shall continue to enjoy sovereign immunity and official immunity....” 1 Pa.C.S. § 2310. Respondents also correctly cite Philadelphia Life Insurance Company v. Commonwealth, 410 Pa. 571, 190 A.2d 111 (1963), for the proposition that suits which seek to compel affirmative action on the part of state officials to obtain money damages or to recover property from the Commonwealth are within the rule of immunity; whereas suits which simply seek to restrain state officials from performing affirmative acts are not within this rule.
In Philadelphia Life Insurance Company, the Philadelphia Life Insurance Company (Philadelphia Life) filed a complaint in equity against numerous state officials seeking to have a statute which imposed a state tax of two percent on gross premiums obtained by insurance companies declared unconstitutional and seeking to restrain these officials from enforcing the same. The Commonwealth filed preliminary objections, which were denied by the common pleas court, and an appeal to our Supreme Court followed. On appeal, the court considered whether the state officials were immune from suit and concluded that they were not. Rather, the court referenced a long line of cases holding that suits which seek to restrain state officials from performing affirmative acts are not within the rule of immunity. The court further held that there could be no question as to equity's jurisdiction to entertain Philadelphia Life's action challenging the validity and constitutionality of a tax-levying statute.
Recently, we expounded upon this proposition in Finn v. Rendell, 990 A.2d 100 (Pa.Cmwlth.2010).
In Finn, the Montour County Commissioners filed a mandamus action against the Commonwealth, the Governor, the State Treasurer and the General Assembly, seeking to compel them to reimburse the county 65% of the salary of its full-time district attorney for 2008 and 2009 in accordance with section 1401(p) of The County Code, Act of August 9, 1955, P.L. 323, as amended, 16 P.S. § 1401(p) (this section provided that the Commonwealth “shall” annually provide such reimbursement to each county with a full-time district attorney). The Commissioners also sought an order directing the respondents to appropriate sufficient funds to comply with section 1401(p).
Finn was a single-judge opinion authored by then-President Judge Bonnie Brigance Leadbetter. Pursuant to section 414 of the Commonwealth Court's Internal Operating Procedures, a single-judge opinion, even if reported, shall not be cited as binding precedent, but may be cited for its persuasive value. 210 Pa.Code § 67.55.
The Commonwealth and the General Assembly filed preliminary objections asserting, inter alia, sovereign immunity. This Court ultimately sustained the preliminary objections of the General Assembly relating to sovereign immunity, noting that although sovereign immunity does not bar a declaratory judgment action or injunction seeking to prohibit state parties from acting, it does apply to an action seeking to compel state parties to act or seeking to obtain money damages or recover property from the Commonwealth.
Because the Commissioners in Finn were seeking to compel affirmative action on the part of the General Assembly, i.e., the allocation of monies, we held that the General Assembly was immune from suit.
This Court also noted that the Commonwealth and its various agencies and officers are separate entities and that the former enjoys absolute immunity under 1 Pa.C.S. § 2310. We also noted that the essence of any mandamus action is that a specific actor has a nondiscretionary duty to perform a particular act and that a request that the Commonwealth be ordered to do something begs the question which of the many actors comprising state government is to be held accountable. Since merely naming the Commonwealth was insufficient and the Commissioners already named the Governor and State Treasurer as defendants, we similarly sustained the Commonwealth's preliminary objection relating to immunity.
We further noted an exception to the rule barring mandatory injunctions against the Commonwealth, i.e., an action in mandamus will lie to compel a state officer or agency to perform a ministerial or mandatory statutory duty. However, we concluded that the exception did not apply because the General Assembly does not have a ministerial or mandatory duty to appropriate the funds sought by the Commissioners. Rather, we indicated that the amount of funds appropriated by the General Assembly and the purposes for which those funds are dedicated are matters of legislative discretion.
This Court's decision in Finn was consistent with our earlier decision in Joint Bargaining Committee of the Pennsylvania Social Services Union, Local #668 v. Commonwealth, 109 Pa.Cmwlth. 11, 530 A.2d 962 (1987). In that case, the Union and the Commonwealth had entered into a contract on July 1, 1983, whereby the Commonwealth agreed that if the actual employee health care costs were less than $1,650.00 per employee, it would deposit the difference into an unfunded reserve account, which was intended to offset health care costs in future years where said costs exceeded the negotiated Commonwealth contribution limit. The Governor's operating budget for the years 1984 through 1986 requested a sum less than $1,650.00 per employee, but no funds were deposited into the reserve account.
The Union filed a petition for review against the Commonwealth, then-Governor Thornburgh, and various Commonwealth officials. In addition to alleging a violation of the aforementioned contract, the Union also alleged numerous violations of the Pennsylvania Constitution, including Article VIII, section 10 (relating to audits of Commonwealth entities and compliance with generally accepted auditing standards), Article VIII, section 12 (relating to the Governor's submission of a balanced budget), and Article VIII, section 14 (relating to the appropriation of surplus funds). The Union sought relief in the nature of a declaratory judgment as to the existence and amount of the reserve account. The Union also sought relief in the nature of an order mandating the respondents to allocate the difference, allegedly a minimum of $4,320,000.00, to the reserve account, as well as the issuance of a mandatory injunction requiring the respondents to present legislation to the General Assembly requesting appropriation of these surplus funds.
The respondents filed preliminary objections alleging, inter alia, sovereign immunity. Relying on the principle enunciated in Philadelphia Life Insurance Company that sovereign immunity bars any suit seeking to compel affirmative action on the part of state officials, this Court sustained the respondents' preliminary objection relating to sovereign immunity. We explained that the affirmative action which the Union sought to compel, i.e., the allocation of funds to the reserve account and the presentation of legislation to the General Assembly requesting the appropriation of surplus funds, was beyond the scope of relief that we could direct.
In the present case, Petitioners seek similar relief. For example, Petitioners seek an order mandating that all future tobacco settlement monies be deposited in accordance with the TSA, that the Fund and Health Account be reimbursed these monies, and that the adultBasic program be reinstated retroactively to March 1, 2011. Given that the General Assembly has already provided for the redirection of these monies via Acts 46 and 26, Respondents General Assembly and its elected, presiding officers would be required to take affirmative action, including the enactment of new legislation, in order to effectuate such relief. Consistent with our decisions in Finn and Joint Bargaining Committee of the Pennsylvania Social Services Union, Local #668, we conclude that the doctrine of sovereign immunity bars such relief against Respondents General Assembly and its elected, presiding officers herein and we sustain their preliminary objection in this regard.
Nevertheless, a question remains as to the constitutionality of Acts 46 and 26. Should this Court ultimately conclude that the aforementioned Acts were unconstitutional, we could certainly direct Respondents Corbett and Zogby to refrain from enforcing this legislation. Because suits which seek to restrain state officials from performing affirmative acts are not within the rule of immunity, the preliminary objections of Respondents Corbett and Zogby in this regard are overruled.
Demurrer for Insufficiency/Failure to State a Claim
We next address another preliminary objection common to all Respondents, that Petitioners' second amended petition for review was insufficient as a matter of law and fails to set forth a claim under section 1303(c) of the TSA or Article III, sections 3, 6, or 11 of the Pennsylvania Constitution.
In reviewing preliminary objections, we are required to accept as true all well-pled averments set forth in the pleadings and all inferences reasonably deducible therefrom. Pennsylvania Builders Association v. Department of Labor & Industry, 4 A.3d 215 (Pa.Cmwlth.2010). However, we need not accept as true conclusions of law, unwarranted inferences, argumentative assertions or expressions of opinion. Id. In order to sustain preliminary objections, it must appear with certainty that the law will not permit a different result; where any doubt exists as to whether the preliminary objections should be sustained, the doubt must be resolved in favor of overruling the preliminary objections. Id.
Section 1303 of the TSA
We begin with section 1303 of the TSA.
This section provides for the establishment of the adultBasic program. Section 1303(c) addresses the purchase of insurance, an eligible adult's payment for the benefit package, and the use of the program's appropriations to pay the difference between the premium cost of the benefit package and the eligible adult's payment. This section further states that subsidization of the benefit package is contingent upon the amount of the appropriation to the program and that “[n]othing under this section shall constitute an entitlement derived from the Commonwealth or a claim on any funds of the Commonwealth.” 35 P.S. § 5701.1303(c).
Section 1303 provides, in relevant part, as follows:
(a) PROGRAM ESTABLISHMENT.—There is established in the department an adult basic coverage insurance program. Fund appropriations to the department for the program shall be used for contracts to provide basic health care insurance for eligible adults and outreach activities. The department shall, to the greatest extent practicable, ensure that all eligible adults in this Commonwealth have access to the program established in this section.
(b) ELIGIBLE ADULT RESPONSIBILITIES.—An eligible adult seeking to purchase adult basic coverage insurance shall:
(1) Submit an application to the department.
(2) Pay to the department or its contractor an amount of $30 per month of coverage. Beginning January 1, 2003, the monthly payment amount shall be adjusted based on the annual change in the Consumer Price Index for the 12 preceding months for which data is available. Notification of any change in the monthly payment amount shall be provided to eligible adults participating in the program.
(3) Be responsible for any required copayments for health care services rendered under the benefit package in subsection (f)(2).
(4) Notify the department or its contractor of any change in the eligible adult's income.
(c) PURCHASE OF INSURANCE.—An eligible adult's payment to the department or its contractor under subsection (b)(2) shall be used to purchase the benefit package and shall be received in a timely manner. The appropriations for the program shall be used by the department to pay the difference between the premium cost of the benefit package and the eligible adult's payment. Subsidization of the benefit package is contingent upon the amount of the appropriations to the program and limited to eligible adults in compliance with subsection (b). Nothing under this section shall constitute an entitlement derived from the Commonwealth or a claim on any funds of the Commonwealth.
35 P.S. § 5701.1303(a)-(c).
Nevertheless, Petitioners are not alleging an entitlement, nor are they asserting a claim to Commonwealth funds. Rather, Petitioners are challenging the redirection of MSA monies away from the Fund. We agree with Petitioners' interpretation of section 1303, i.e., the entitlement language was meant to address the expiration of the annual MSA payments in 2025 or a substantial decrease in MSA funds. Section 1303(c) contains no language which would preclude Petitioners from challenging the allegedly unlawful redirection of these MSA monies. Indeed, if these monies had not been redirected, it appears that there would have been sufficient funding for adultBasic in 2011. Thus, Respondents' preliminary objection in this regard must be overruled.
Article III, Sections 3, 6, and 11
Article III, section 3 of the Pennsylvania Constitution addresses the form of bills and provides that “[n]o bills shall be passed containing more than one subject, which shall be clearly expressed in its title, except a general appropriation bill or a bill codifying or compiling the law or a part thereof.” Article III, section 6 addresses the amendment of laws and provides that “[n]o law shall be revived, amended, or the provisions thereof extended or conferred, by reference to its title only, but so much thereof as is revived, amended, extended or conferred shall be re-enacted and published at length.” Article III, section 11 specifically applies to general appropriation bills and states that such bills “shall embrace nothing but appropriations for the executive, legislative and judicial departments of the Commonwealth, for the public debt and for public schools. All other appropriations shall be made by separate bills, each embracing but one subject.”
In broad terms, Article III endeavors to place restraints on the legislative process and to encourage an open and accountable government. Pennsylvanians Against Gambling Expansion Fund, Inc. v. Commonwealth, 583 Pa. 275, 877 A.2d 383 (2005). In other words, these sections ensure full notice of all legislative enactments and prevent the passage of omnibus bills or so-called “sneak” legislation. Christ the King Manor v. Department of Public Welfare, 911 A.2d 624, 638 (Pa.Cmwlth.2006), affirmed, 597 Pa. 217, 951 A.2d 255 (2008) (citation omitted). Moreover, in addressing these challenges, we are mindful of the strong presumption in the law that legislative enactments do not violate the Constitution and that one who challenges the constitutionality of a statute carries a very heavy burden. Pennsylvanians Against Gambling Expansion Fund, Inc. Indeed, a statute will not be declared unconstitutional unless it clearly, palpably, and plainly violates the Constitution, and all doubts are to be resolved in favor of finding that the legislative enactment passes constitutional muster. Id.
We begin by noting that Respondents do not assert the exception set forth in Article III, section 3, i.e., that Acts 46 and 26 constitute general appropriation bills. Rather, Respondents refer to Acts 46 and 26 as amendments to the Fiscal Code.
If Respondents are correct, then Article III, section 11 would be inapplicable. Petitioners, however, question the proper characterization of Acts 46 and 26 and alternatively address why, under either such characterization, the Acts are unconstitutional. We agree with Respondents that Acts 46 and 26 are not general appropriation bills.
Act of April 9, 1929, P.L. 343, as amended, 72 P.S. §§ 1–1804.
Generally, an appropriation bill is “a vehicle for allocating money to government departments to enable them to conduct their operations....” Uniontown Hospital v. Department of Health, 905 A.2d 560, 564 (Pa.Cmwlth.2006). We have also described an appropriation bill as a “measure before a legislative body authorizing the expenditure of public moneys and stipulating the amount, manner, and purpose of the various items of expenditure....” Common Cause v. Commonwealth, 668 A.2d 190, 205 (Pa.Cmwlth.1995), affirmed, 544 Pa. 512, 677 A.2d 1206 (1996) (citing Black's Law Dictionary at 102 (6th Ed., 1990)). In the present case, neither Act 46 nor Act 26 specifically allocates public monies from the General Fund to budget line items or otherwise authorizes the expenditure of these monies. Simply stated, neither of these Acts appropriated any funds. Instead, Acts 46 and 26 served to implement the operating budget of the Commonwealth for the respective fiscal years. Thus, Respondents' preliminary objection with respect to Article III, section 11 is sustained.
Having concluded that Article III, section 11 is inapplicable, we turn our attention to Article III, sections 3 and 6. Our Pennsylvania Supreme Court has recognized Article III, section 3 as a means to curb the previous practice of incorporating a variety of distinct and independent subjects into one bill, with reasonable notice being the keystone of that section. Pennsylvanians Against Gambling Expansion Fund, Inc.Article III, section 3 sets forth two distinct types of challenges, single subject challenges and clear expression of title challenges. The former are subject to a “practical germaneness test,” as set forth by our Supreme Court in City of Philadelphia v. Commonwealth, 575 Pa. 542, 838 A.2d 566 (2003). Under this test, the single subject requirement is satisfied so long as the legislation at issue possesses some “single unifying subject to which all of the provisions of the act” are relevant. 575 Pa. at 579, 838 A.2d at 589. The latter can be established by showing that the title of the act, on its face, is such that no reasonable person would have been on notice as to the act's contents.
Pennsylvanians Against Gambling Expansion Fund, Inc. Acts 46 and 26 fail both tests.
A clear expression of title challenge may also be established by showing that the legislators and the public were actually deceived as to the act's content at the time of passage. Pennsylvanians Against Gambling Expansion Fund, Inc. However, Petitioners did not plead this type of challenge.
Our review of this issue must begin with the titles of each of these Acts. The title of Act 46 was as follows:
‘AN ACT RELATING TO THE FINANCES OF THE STATE GOVERNMENT; PROVIDING FOR THE SETTLEMENT, ASSESSMENT, COLLECTION, AND LIEN OF TAXES, BONUS, AND ALL OTHER ACCOUNTS DUE THE COMMONWEALTH, THE COLLECTION AND RECOVERY OF FEES AND OTHER MONEY OR PROPERTY DUE OR BELONGING TO THE COMMONWEALTH, OR ANY AGENCY THEREOF, INCLUDING ESCHEATED PROPERTY AND THE PROCEEDS OF ITS SALE, THE CUSTODY AND DISBURSEMENT OR OTHER DISPOSITION OF FUNDS AND SECURITIES BELONGING TO OR IN THE POSSESSION OF THE COMMONWEALTH, AND THE SETTLEMENT OF CLAIMS AGAINST THE COMMONWEALTH, THE RESETTLEMENT OF ACCOUNTS AND APPEALS TO THE COURTS, REFUNDS OF MONEYS ERRONEOUSLY PAID TO THE COMMONWEALTH, AUDITING THE ACCOUNTS OF THE COMMONWEALTH AND ALL AGENCIES THEREOF, OF ALL PUBLIC OFFICERS COLLECTING MONEYS PAYABLE TO THE COMMONWEALTH, OR ANY AGENCY THEREOF, AND ALL RECEIPTS OF APPROPRIATIONS FROM THE COMMONWEALTH, AUTHORIZING THE COMMONWEALTH TO ISSUE TAX ANTICIPATION NOTES TO DEFRAY CURRENT EXPENSES, IMPLEMENTING THE PROVISIONS OF SECTION 7(A) OF ARTICLE VIII OF THE CONSTITUTION OF PENNSYLVANIA AUTHORIZING AND RESTRICTING THE INCURRING OF CERTAIN DEBT AND IMPOSING PENALTIES; AFFECTING EVERY DEPARTMENT, BOARD, COMMISSION, AND OFFICER OF THE STATE GOVERNMENT, EVERY POLITICAL SUBDIVISION OF THE STATE, AND CERTAIN OFFICERS OF SUCH SUBDIVISIONS, EVERY PERSON, ASSOCIATION, AND CORPORATION REQUIRED TO PAY, ASSESS, OR COLLECT TAXES, OR TO MAKE RETURNS OR REPORTS UNDER THE LAWS IMPOSING TAXES FOR STATE PURPOSES, OR TO PAY LICENSE FEES OR OTHER MONEYS TO THE COMMONWEALTH, OR ANY AGENCY THEREOF, EVERY STATE DEPOSITORY AND EVERY DEBTOR OR CREDITOR OF THE COMMONWEALTH,’ FURTHER PROVIDING FOR INVESTMENT, FOR STATE DEPOSITORIES, FOR REQUISITIONS, FOR AUDIT OF REQUISITIONS AND ISSUANCE OF WARRANTS AND FOR PAYMENTS; PROVIDING FOR ADDITIONAL TRANSFER, FOR BONDS, FOR EDUCATIONAL TAX CREDITS, FOR PERMIT EXTENSIONS, FOR HERITAGE AREAS AND FOR SPECIAL PROVISIONS RELATING TO VICTIMS OF CRIME; FURTHER PROVIDING FOR THE PENNSYLVANIA EMERGENCY MANAGEMENT AGENCY, FOR THE JUDICIAL COMPUTER SYSTEM AUGMENTATION ACCOUNT AND FOR THE ACCESS TO JUSTICE ACCOUNT; PROVIDING FOR THE STATE GAMING FUND; FURTHER PROVIDING FOR THE TOBACCO SETTLEMENT FUND; PROVIDING FOR 2010–2011 BUDGET IMPLEMENTATION, FOR 2010–2011 RESTRICTIONS ON APPROPRIATIONS FOR FUNDS AND ACCOUNTS AND FOR RETIREMENT; AND MAKING RELATED REPEALS.
(Appendix to Petitioners' Brief at A–119.) Similarly, the title of Act 26 stated as follows:
‘An act relating to the finances of the State government; providing for the settlement, assessment, collection, and lien of taxes, bonus, and all other accounts due the Commonwealth, the collection and recovery of fees and other money or property due or belonging to the Commonwealth, or any agency thereof, including escheated property and the proceeds of its sale, the custody and disbursement or other disposition of funds and securities belonging to or in the possession of the Commonwealth, and the settlement of claims against the Commonwealth, the resettlement of accounts and appeals to the courts, refunds of moneys erroneously paid to the Commonwealth, auditing the accounts of the Commonwealth and all agencies thereof, of all public officers collecting moneys payable to the Commonwealth, or any agency thereof, and all receipts of appropriations from the Commonwealth, authorizing the Commonwealth to issue tax anticipation notes to defray current expenses, implementing the provisions of section 7(a) of Article VIII of the Constitution of Pennsylvania authorizing and restricting the incurring of certain debt and imposing penalties; affecting every department, board, commission, and officer of the State government, every political subdivision of the State, and certain officers of such subdivisions, every person, association, and corporation required to pay, assess, or collect taxes, or to make returns or reports under the laws imposing taxes for State purposes, or to pay license fees or other moneys to the Commonwealth, or any agency thereof, every State depository and every debtor or creditor of the Commonwealth,’ PROVIDING FOR TIME FOR FILING RETURNS FOR CERTAIN SALES AND USE TAXPAYERS; ESTABLISHING A RESTRICTED ACCOUNT WITHIN THE AGRICULTURAL COLLEGE LAND SCRIP FUND; IN BORROWING FOR CAPITAL FACILITIES, FURTHER PROVIDING FOR DEFINITIONS, FOR NEIGHBORHOOD IMPROVEMENT ZONE FUND, FOR KEYSTONE OPPORTUNITY ZONE AND FOR DURATION AND PROVIDING FOR COMMONWEALTH PLEDGES AND FOR CONFIDENTIALITY, PROVIDING FOR FINANCIALLY DISTRESSED MUNICIPALITIES AND FOR KEYSTONE SPECIAL DEVELOPMENT ZONES; IN EDUCATION TAX CREDITS, MAKING AN EDITORIAL CHANGE AND PROVIDING FOR DEPARTMENT OF REVENUE AND FOR DEPARTMENT OF COMMUNITY AND ECONOMIC DEVELOPMENT; IN SPECIAL FUNDS, FURTHER PROVIDING FOR FUNDING AND reviving and further providing for investments; PROVIDING FOR 2011–2012 BUDGET IMPLEMENTATION AND RESTRICTIONS; IN GENERAL BUDGET IMPLEMENTATION, FURTHER PROVIDING FOR EXECUTIVE OFFICES AND FOR THE AUDITOR GENERAL, PROVIDING FOR PENNSYLVANIA INFRASTRUCTURE INVESTMENT AUTHORITY ACCOUNTS, FURTHER PROVIDING FOR THE PENNSYLVANIA HIGHER EDUCATION ASSISTANCE AGENCY, REPEALING PROVISIONS RELATED TO THE LEGISLATIVE DEPARTMENT, PROVIDING FOR THE CATASTROPHIC LOSS BENEFITS CONTINUATION FUND AND FURTHER PROVIDING FOR THE STATE GAMING FUND; IN 2010–2011 BUDGET IMPLEMENTATION, FURTHER PROVIDING FOR THE DEPARTMENT OF EDUCATION; PROVIDING FOR AUDITS; AND MAKING RELATED REPEALS.in special funds,
(Appendix to Petitioners' Brief at A–263–64.)
Respondents assert that Acts 46 and 26 complied with the single subject requirement of Article III, section 3 because the titles of these Acts were not deceptive, i.e., both titles refer specifically to the Fund, and all of the provisions of these Acts relate to a single, unifying subject, i.e., implementation of the Commonwealth's operating budget for each respective fiscal years. We disagree. While the title of Act 46 references the Fund, it does so in a general and nondescript manner, merely stating “FURTHER PROVIDING FOR THE TOBACCO SETTLEMENT FUND.” This language provides no indication as to the substantial impact of the Act on the Fund or its provisions. Additionally, contrary to Respondents, the title of Act 26 makes no reference at all to the Fund.
Moreover, it is evident from both titles that these Acts refer to multiple diverse subjects unrelated to the Commonwealth's operating budget for the respective fiscal years. For example, Act 46 contains various sections pertaining to building/construction permits, heritage areas and the establishment of a heritage area program within the Department of Conservation and Natural Resources, victims of crime and the establishment of a Special Juvenile Compensation Fund, and semi-annual reports of the Pennsylvania Emergency Management Agency. Thus, Respondents' preliminary objection with regard to Article III, section 3 must be overruled.
With respect to Article III, section 6, the Court in Pennsylvanians Against Gambling Expansion Fund, Inc. explained that this provision requires, at a minimum, that any section of a law being repealed be set forth in its entirety with brackets surrounding the repealed text, such that legislators may see the elimination of existing provisions on the face of the pending bill without having to refer to the existing legislation for comparison. However, our Supreme Court long ago recognized that section 6 “does not make the obviously impractical requirement that every act shall recite all other acts that its operation may incidentally affect, either by way of repeal, modification, extension or supply.” L. J. W. Realty Corp. v. Philadelphia, 390 Pa. 197, 205, 134 A.2d 878, 882 (1957) (citation omitted).
Petitioners contend that Acts 46 and 26 violate Article III, section 6 because the Acts sought to amend the TSA by reference solely to its title. Respondents contend that no violation of this section occurred because neither of these Acts did in fact amend, revive, extend, or confer the TSA. Instead, Respondents contend that these Acts only temporarily overrode that portion of the TSA providing a default formula for disbursement of Fund monies and substituted an alternate disbursement formula for each respective fiscal year. Respondents indicate that, at all times, the TSA's disbursement formula remained intact and was never repealed or amended.
Respondents rely on this Court's prior decision in Christ the King Manor in support of these arguments. In Christ the King Manor, the petitioners, which included 24 nursing facilities participating in Pennsylvania's medical assistance (MA) program, had filed a petition for review challenging the validity of certain amendments to Department of Public Welfare (DPW) regulations exempting DPW from the normal regulatory oversight in promulgating new rate-making regulations.
The petitioners challenged these amendments as unconstitutional under, inter alia,Article III, section 6, alleging that the amendments had the effect of amending, repealing, or otherwise suspending section 814–A(b) of the Public Welfare Code.
More specifically, these amendments permitted DPW to expeditiously amend its rate-setting methodology for nursing facilities participating in the MA program to better control inflation increases and to do so with notice-omitted rulemaking. These amendments resulted from the failure of the General Assembly to appropriate sufficient funds for DPW to cover the anticipated rate of inflation in its rate-making formula.
This Court rejected the petitioners' challenge, concluding that the amendments did not specifically repeal, amend, extend, or confer any part of section 814–A(b), that the amendments only resulted in a temporary holiday from the requirements of that section, and that such a holiday was specifically authorized by other sections of the Public Welfare Code and the Commonwealth Documents Law under certain circumstances.
Act of June 13, 1967, P.L. 32, added by the Act of September 30, 2003, P.L. 169, as amended, 62 P.S. § 814–A(b). This section addressed the procedure for adoption of regulations pertaining to nursing facility assessments, including the requirement of a notice and comment period.
Act of July 31, 1968, P.L. 769, as amended, 45 P.S. §§ 1102–1602.
However, Respondents' reliance on Christ the King Manor is misplaced, as that case is distinguishable from the present matter. The amendments in Christ the King Manor represented a minor deviation from the notice requirements relating to ratemaking regulations and, by their very terms, expired at the end of the calendar year in which they were enacted. In the present case, while Acts 46 and 26 only addressed their respective fiscal years, the impact of these Acts was quite substantial, not only to adultBasic, but to all of the programs funded by the tobacco settlement monies. Additionally, the impact was not limited to the respective fiscal years; instead, the impact of these Acts will be felt by these programs well into the future. Acts 46 and 26 effectively amended section 306(b) of the TSA, which set forth the default disbursement formula for monies in the Fund. More importantly, unlike the Public Welfare Code and the Commonwealth Documents Law at issue in Christ the King Manor, none of the provisions of the TSA specifically authorized the General Assembly to redirect these monies. Thus, Respondents' preliminary objection with regard to Article III, section 6 must be overruled.
Article III, Section 24
Next, we address Respondents' preliminary objection that Article III, section 24 of the Pennsylvania Constitution, which states in pertinent part that “[n]o money shall be paid out of the Treasury, except appropriations made by law and on warrant issued by the proper officers ...,” precludes this Court from granting relief. We do not agree.
Contrary to Respondents' contention, Petitioners are not seeking to have the Treasury make payment in the absence of an appropriation. Rather, Petitioners are seeking compliance with section 306(b) of the TSA, which provides for a continuing appropriation of tobacco settlement monies to various programs, including adultBasic.
Additionally, as Petitioners note in their brief to this Court, evidence that this appropriation was meant to be continuing can be found by examining prior general appropriation acts, none of which include a line item or provision relating to an appropriation of the monies within the Fund to any of the programs outlined in section 306(b) of the TSA. This is so because the appropriations set forth in section 306(b) were understood to occur on a continuing basis.
Section 306(b) provides as follows:
(b) APPROPRIATIONS.—
(1) The General Assembly hereby appropriates funds in the fund in accordance with the following percentages based on actual funds received in each year or upon receipt of the final annual payment:
(i) Eight percent for deposit into the Health Account pursuant to this chapter, which shall be deposited immediately upon receipt.
(ii) Thirteen percent for home and community-based services pursuant to Chapter 5. For fiscal year 2001–2002, up to $13.5 million may be used for expanded counseling, area agency on aging training and education, assistive technology and for reducing waiting lists for services in the Department of Aging.
(iii) Twelve percent for tobacco use prevention and cessation programs pursuant to Chapter 7.
(iv) Eighteen percent for health and related research pursuant to section 906 and one percent for health and related research pursuant to section 909.
(v) Ten percent for the uncompensated care payment program pursuant to Chapter 11.
(vi) Thirty percent for health investment insurance pursuant to Chapter 13 and for the purchase of Medicaid benefits for workers with disabilities pursuant to Chapter 15.
(vii) Eight percent for the expansion of the PACENET program pursuant to Chapter 23.
(2) In addition, any Federal funds received for any of these programs is hereby specifically appropriated to those programs.
35 P.S. § 5701.306(b) (footnotes omitted.)
Our Supreme Court's decision in Stilp v. Commonwealth, 601 Pa. 429, 974 A.2d 491 (2009), offers further support for our conclusions above. In Stilp, the Court examined whether the funds maintained by the General Assembly in legislative leadership accounts constituted surplus funds subject to appropriation in the ensuing fiscal year under Article VIII, section 14 of the Pennsylvania Constitution,
or whether such funds constituted continuing appropriations beyond the scope of Article VIII, section 14. The Court concluded that these funds constituted continuing appropriations. In reaching this conclusion, the Court explained that “surplus” funds are “funds that remain unspent and uncommitted at the end of the fiscal year for which they were appropriated,” whereas “continuing appropriations” are “committed” funds which have been “appropriated for a duration that exceeds the end of the fiscal year in which the appropriations are made.” Stilp, 601 Pa. at 447, 974 A.2d at 501. More importantly, the Court noted that the Pennsylvania Constitution contains no express prohibition against continuing appropriations.
.Article VIII, section 14 provides that “[a]ll surplus of operating funds at the end of the fiscal year shall be appropriated during the ensuing fiscal year by the General Assembly.”
The same is true with respect to Respondents' argument concerning the lack of warrants, and we agree with Petitioners that the absence of such warrants does not bar their claims. In the years prior to Acts 46 and 26, the various departments that received monies from the Fund would submit warrants to the Treasury for the transfer of these monies in accordance with the appropriations set forth in section 306(b). The absence of such warrants for fiscal years 2010 and 2011 was the direct result of the purportedly unlawful redirection of these monies and does not preclude Petitioners' present claims. Hence, Respondents' preliminary objection with regard to Article III, section 24 must be overruled.
Article II, Section 1
Next, we address Respondents' preliminary objection that the relief sought by Petitioners violates Article II, section 1of the Pennsylvania Constitution, which vests the legislative power of this Commonwealth in the General Assembly. Again, we do not agree. Contrary to Respondents' assertion, Petitioners are not arguing that Respondents are forever constrained from altering the allocation of tobacco settlement monies in the Fund. Rather, Petitioners are challenging the manner in which Respondents exercised this power, i.e., whether Acts 46 and 26 violated the constitutional mandates addressed above. While recognizing the General Assembly's legislative power under Article II, section 1, as well as its exclusive power over its internal affairs and proceedings under Article II, section 11 (“each House shall have power to determine the rules of its proceedings”), in Common Cause/Pennsylvania v. Commonwealth, 710 A.2d 108 (Pa.Cmwlth.1998), affirmed, 562 Pa. 632, 757 A.2d 367 (2000), this Court further indicated that this power “does not give the General Assembly the right to usurp the judiciary's function as ultimate interpreter of the Constitution.” 710 A.2d at 118. Rather, we observed that an inherent duty of the courts is “to invalidate legislative action that is repugnant to the Constitution.” Id. Thus, Respondents' preliminary objection with regard to Article II, section 1 must be overruled.
Article II, Section 15—The Speech and Debate Clause
Respondents' next preliminary objection asserts that the Speech and Debate Clause of Article II, section 15, which provides that members of the General Assembly “shall not be questioned in any other place” regarding “any speech or debate in either House,” precludes the relief sought by Petitioners. We agree.
We also addressed the Speech and Debate Clause in Common Cause/Pennsylvania. In that case, Common Cause/Pennsylvania and several other groups filed a petition for review against the Commonwealth, Governor, and Secretaries of Revenue and Transportation, challenging the constitutionality of the procedures followed by the General Assembly in enacting substantial amendments to the Public Transportation Law and Vehicle Code.
Specifically, the petitioners alleged violations of Article II, section 1 and Article III, sections 1– 5 of the Pennsylvania Constitution.
.74 Pa.C.S. §§ 1101–1520 and 75 Pa.C.S. §§ 101–9805, respectively.
The Commonwealth, Governor and Secretaries, along with the President Pro Tempore of the Senate and the Speaker of the House of Representatives, who intervened in the matter, filed preliminary objections alleging, inter alia, that the Speech and Debate Clause precluded judicial inquiry into the constitutional violations alleged by the petitioners in that case.
.Article II, section 1 relates to the General Assembly's legislative power. Article III, section 1 prohibits the alteration or amendment of a bill on its passage through the General Assembly. Article III, section 2 addresses reference of a bill to a committee. As noted above, Article III, section 3 sets forth the single subject rule. Article III, section 4 relates to voting on a bill. Article III, section 5 relates to voting on amendments.
In reviewing this preliminary objection, we began by noting that the text of the Speech and Debate Clause of the Pennsylvania Constitution is essentially the same as its federal counterpart, U.S. Const. art. I, § 6. We also noted that the Speech and Debate Clause had been read broadly to prohibit inquiries “into those things generally said or done in the House of Representatives or Senate in the performance of official duties and into the motivation for those acts.” Id., 710 A.2d at 118. We further indicated that “the very core of the Speech and Debate Clause is the protection of ‘the integrity of the legislative process by insuring the independence of individual legislators.’ ” Id. (citations omitted).
However, we went on to hold that the legislative immunity created by the Speech and Debate Clause did not bar all judicial review of legislative acts. We recognized that the petitioners in that case had alleged that the General Assembly as a whole had violated the mandatory provisions of the Pennsylvania Constitution in enacting the new act. Ultimately, this Court concluded in Common Cause/Pennsylvania that, based upon the pleadings, judicial review of the legislative action taken by the General Assembly in that case was not inappropriate, that the petitioners' claims were not barred by the Speech and Debate Clause, and that the respondents' preliminary objection must be overruled. The same cannot be said of the present matter.
As noted above, Petitioners in the present case seek the enactment of new legislation in order to effectuate their requested relief. Additionally, Petitioners' second amended petition for review can be read as if they seek to preclude the General Assembly from enacting future legislation, at least until 2025, affecting the tobacco settlement monies and the programs funded from these monies, including adultBasic. To the extent that Petitioners seek relief in the nature of an order requiring the General Assembly and its individual members to enact new legislation or restrain from enacting future litigation, this is precisely the type of relief that the Speech and Debate Clause sought to foreclose.
Thus, the preliminary objection of Respondents General Assembly and its elected, presiding officers in this regard must be sustained.
Indeed, as our United States Supreme Court explained in Powell v. McCormack, 395 U.S. 486, 89 S.Ct. 1944, 23 L.Ed.2d 491 (1969), the Speech and Debate Clause of the United States Constitution precludes actions against Congressmen. In other words, the Speech and Debate Clause essentially entitled Congressmen to “legislative immunity.” Powell, 395 U.S. at 503, 89 S.Ct. 1944.Powell involved a complaint filed by Adam Clayton Powell, Jr., a duly elected Congressman from New York, against the Speaker of the House of Representatives and its members after the latter voted to expel him and refused to allow him to take his seat in the 90th Congress. This vote followed a finding by the 89th Congress that Powell had filed deceptive travel expense reports and made illegal salary payments to his wife.
Standing
Respondents' next preliminary objection asserts that, to the extent that their second amended petition for review challenges any provisions of the Fiscal Code amendments unrelated to adultBasic, Petitioners lack standing. We agree.
In Count I of Petitioners' second amended petition for review, Petitioners sought declaratory relief alleging that the redirection of tobacco settlement monies away from the Health Account constituted a violation of the TSA. As noted above, section 303(b) of the TSA created the Health Account and directed that a variety of monies were to be deposited into this account. Section 306(b)(1)(i) of the TSA further provided for an appropriation of 8% of the tobacco settlement monies to be deposited into this account. 35 P.S. § 5701.306(b)(1)(i). Section 307 of the TSA provided for the use of the Health Account, stating as follows:
Whenever the Governor determines that money from the Health Account is necessary to meet the extraordinary or emergency health care needs of the citizens of this Commonwealth, the Governor shall present a detailed spending proposal with a request for an appropriation and any necessary legislation to the chair and minority chair of the Appropriations Committee of the Senate and the chair and minority chair of the Appropriations Committee of the House of Representatives. The General Assembly may, through approval of a separate appropriation bill by a vote of two-thirds of the members elected to the Senate and to the House of Representatives, appropriate money from the Health Account to meet the needs identified in the Governor's request. Any money appropriated under this section that lapses shall be returned to the Health Account.
35 P.S. § 5701.307.
Petitioners allege that they have standing because, had Acts 46 and 26 not redirected the tobacco settlement monies away from the Health Account, the Governor could have accessed those monies to fund adultBasic. However, the language of section 307 of the TSA and our Supreme Court's recent opinion in Pennsylvania Medical Society v. Department of Public Welfare, ––– Pa. ––––, 39 A.3d 267 (2012), suggest otherwise. In Pennsylvania Medical Society, the Pennsylvania Medical Society, its individual members, and numerous other healthcare providers filed a petition for review seeking a declaratory judgment that the Department of Public Welfare and Office of the Budget (collectively the Commonwealth) had violated the Health Care Provider Retention Law (also known as and hereafter referred to as the Abatement Law)
by failing to transfer sufficient monies from the HCPR Account to the MCARE Fund to cover, dollar for dollar, all abatements of annual assessments granted to healthcare providers from 2003 to 2007. Instead, the General Assembly, via the same amendments to the Fiscal Code that repealed the Abatement Law in October 2009, abolished the HCPR Account and redirected all cigarette tax revenue ($708 million) to the Commonwealth's General Fund.
The Abatement Law was originally enacted as part of the Public Welfare Code, Act of December 23, 2003, P.L. 237, 62 P.S. §§ 443.7, 1301–A–1310–A, but was repealed and reenacted in 2005 as an amendment to the Medical Care Availability and Reduction of Error (MCARE) Act, Act of March 20, 2002, P.L. 154, as amended, 40 P.S. §§ 1303.1100–1303.1115. However, the Abatement Law has since been repealed by the Act of October 9, 2009, P.L. 537. The Abatement Law served to temporarily abate, or reduce, the MCARE assessments paid by certain healthcare providers from 2003 to 2007 (the MCARE assessments are mandatory annual assessments levied upon healthcare providers, and deposited into a special fund in the Commonwealth's Treasury known as the MCARE Fund and administered by the Department of Insurance, for the purpose of providing a secondary layer of liability insurance coverage for these providers). While most providers received a 50% abatement, certain providers in high-risk specialties received a 100% abatement. In exchange for these abatements, the Abatement Law required providers to continue to provide healthcare services in the Commonwealth for at least one year following the year for which the abatement was sought. The General Assembly established a special account in the General Fund, known as the Health Care Provider Retention (HCPR) Account, which was funded by taxes on cigarettes and motor vehicle violation surcharges and administered by the Department of Public Welfare (DPW). The Abatement Law directed that the HCPR Account funds be subject to an annual appropriation by the General Assembly to DPW.
The redirection away from the MCARE Fund was of critical significance to the petitioners in that case because the MCARE Fund was only temporary and would cease providing coverage at a time when the Insurance Commissioner determinesthat the private insurance market has the capacity to handle the professional responsibility requirements of all healthcare providers in this Commonwealth. Should the MCARE Fund be terminated, the MCARE Act provides that, upon satisfaction of all fund liabilities, any balance remaining in the MCARE Fund is to be proportionately returned to the healthcare providers who paid assessments in the year preceding its termination.
In support of their claim that the Commonwealth was required to make dollar for dollar transfers from the HCPR Account to the MCARE Fund, the petitioners in Pennsylvania Medical Society noted certain amendments to the Abatement Law in 2004. Most importantly, these amendments included the appointment of the Budget Secretary to make transfers from the HCPR Account to the MCARE Fund and to determine the amount of these transfers, up to a certain limit. Specifically, section 1112(c) of the now-repealed Abatement Law, 40 P.S. § 1303.1112(c), provided that “[t]he Secretary of the Budget may annually transfer from the [HCPR] account to the [MCARE] Fund an amount up to the aggregate amount of abatements granted by the Insurance Department....”
In granting an application for summary relief filed by the petitioners, this Court held that section 1112(c) of the Abatement Law, when read in conjunction with other provisions of the Abatement Law and MCARE Act, which provide for mandatory abatements, a mandatory account from which to fund the abatements, and two mandatory funding sources for the abatements, imposes a duty upon the Budget Secretary to transfer monies from the HCPR Account to the MCARE Fund in an amount equal to the total abatements of annual assessments for 2003 to 2007.
This Court further held that the petitioners had established vested rights in these monies which could not be extinguished by the October 2009 budget legislation.
See Pennsylvania Medical Society v. Department of Public Welfare, 994 A.2d 33 (Pa.Cmwlth.2010), reversed,––– Pa. ––––, 39 A.3d 267 (2012). We note that current President Judge Pellegrini filed a dissenting opinion noting that all abatements had been paid and that the healthcare providers had received everything to which they were entitled under the preceding legislation. President Judge Pellegrini further stressed the consequential effect of rendering the 2009–2010 Commonwealth budget out of balance.
On appeal, however, the Pennsylvania Supreme Court reversed this Court's order and concluded that section 1112(c) of the Abatement Law gave the Budget Secretary the discretion, not the obligation, to transfer monies into the MCARE Fund in an amount up to the total amount of the abatements. Our Supreme Court cited the discretionary language of this section and held that the Budget Secretary's exercise of discretion in refusing to transfer monies beyond that which he had already transferred ($330 million) did not violate the Abatement Law. Having concluded that the petitioners had no statutory entitlement to these monies, our Supreme Court further held that the petitioners had no vested right to such monies.
In the present case, the language of section 307 of the TSA provides discretionary authority similar to the language of the now-repealed section 1112(c) of the Abatement Law. Specifically, section 307 of the TSA first requires a determination by the Governor that money from the Health Account “is necessary to meet the extraordinary or emergency health care needs of the citizens of this Commonwealth.” Clearly, such a determination is within the Governor's discretion. Only after such a determination is made shall the Governor submit “a detailed spending proposalwith a request for an appropriation and any necessary legislation” to the General Assembly. Further, section 307 explicitly provides the General Assembly with additional discretionary authority, stating that it “may ... appropriate money from the Health Account to meet the needs identified in the Governor's request.” The language of section 307 creates no mandatory duty on the part of the Governor or the General Assembly, nor any vested right in Petitioners with respect to the monies in the Health Account. Thus, Respondents' preliminary objection with regard to standing to challenge the provisions of the Fiscal Code amendments unrelated to adultBasic must be sustained.
Class Action
Respondents' final preliminary objection asserts that Petitioners' suit is not properly pleaded as a class action. More specifically, Respondents allege that a class action is not a fair and efficient method of adjudicating this case because the relief sought by any individual member of the class, if granted, would afford the same relief to all members of the class. Petitioners contend that Respondents' challenge to their class action allegations is improper because a court cannot make a class action determination until the close of pleadings. We agree with Petitioners.
Rule 1702 of the Pennsylvania Rules of Civil Procedure (Pa. R.C.P.) sets forth the following prerequisites to a class action: (1) the class is so numerous that joinder of all members is impracticable; (2) there are questions of law or fact common to the class; (3) the claims or defenses of the representative parties typical of the claims or defenses of the class; (4) the representative parties will fairly and adequately assert and protect the interests of the class; and (5) a class action provides a fair and efficient method for adjudication of the controversy under the criteria set forth in Pa. R.C.P. No. 1708.
However, Pa. R.C.P. No. 1705, which addresses preliminary objections, specifically states that “[i]ssues of fact with respect to the Class Action Allegations may not be raised by preliminary objections but shall be raised by the answer.” Additionally, Pa. R.C.P. No. 1707 provides that, when faced with a motion for certification of a class action, a court shall hold a hearing limited solely to the class action allegations “within thirty days after the pleadings are closed or within thirty days after the last required pleading was due....”
.Pa. R.C.P. No. 1708 provides that, in determining whether a class action is a fair and efficient method of adjudicating a controversy, a court shall consider whether common questions of law or fact predominate over any question affecting only individual members; the size of the class and the difficulties likely to be encountered in the management of a class action; whether separate actions would create a risk of inconsistent or varying adjudications or adjudications which would be dispositive of the interests of other members; the extent and nature of any litigation already commenced; whether the particular forum is appropriate for litigation of class claims; whether separate claims would be sufficient in view of the complexities of the issues or the expenses of litigation; whether the amount which may be recovered by individual members would be so small in relation to the expense and effort of administering the action; and whether the party opposing the class acted or refused to act on grounds generally applicable to the class.
In Stranahan v. County of Mercer, 697 A.2d 1049 (Pa.Cmwlth.1997), appeal denied,563 Pa. 695, 760 A.2d 858 (2000), this Court confirmed that the procedural rules discussed above provide that a class action should not be dismissed until the pleadings are closed and a class certification hearing is held. This Court further agreed with the plaintiffs in Stranahan that, generally, it is improper to dismiss a properly pleaded class action on preliminary objections. Nevertheless, we held in Stranahan that the plaintiffs' procedural arguments were unavailing because Pennsylvania law prohibited the use of class actions to obtain individual tax refunds where a specific statutory remedy was available. In other words, we noted that without a substantive cause of action, the plaintiffs' procedural arguments were irrelevant. In contrast, in the present case, we have rejected Respondents' substantive challenges, as discussed above.
Moreover, we note that Respondents' reliance on Smith v. Beard, 26 A.3d 551 (Pa.Cmwlth.2011), in support of this preliminary objection is misplaced. In Smith, Emory Smith filed a petition for review in the nature of a class action challenging the constitutional validity of a regulation of the Department of Corrections (DOC) relating to inmate mail and publications. DOC filed preliminary objections in the nature of demurrers alleging, inter alia, that the regulation was reasonably related to legitimate penological interests, that the regulation was not overbroad or overly restrictive, and that class action status was not necessary because any decision on the constitutionality of the regulation would be binding on DOC as it applies to all institutions and inmates. This Court sustained all of DOC's preliminary objections.
Similar to Stranahan, in sustaining DOC's preliminary objections, we held that Smith's substantive challenges lacked merit, thereby warranting a dismissal of Smith's petition for review. Having sustained DOC's preliminary objections concerning the merits of Smith's claims, arguably, the discussion regarding the nature of Smith's suit as a class action is dicta.
In any event, the Court in Smith addressed the criteria for class certification under Pa. R.C.P. No. 1708 without regard to the express limitation on class action preliminary objections discussed in Pa. R.C.P. No. 1705 or the requirement for a hearing in Pa. R.C.P. No. 1707. Thus, the holding in Smith does not control and Respondents' preliminary objection with regard to Petitioners' class action must be overruled.
We note that Smith did not offer any argument in opposition to this preliminary objection by DOC.
Accordingly, Respondents' preliminary objections are sustained in part and overruled in part in accordance with this opinion.
Judge COHN JUBELIRER did not participate in the decision of this case.
We note that Respondents raise an additional claim in their preliminary objections that Petitioners have not acted diligently in pursuing their constitutional claims and, hence, such claims are barred by laches and must be dismissed. Respondents indicate that they have relied upon Acts 46 and 26, and their predecessor Fiscal Code enactments, for nearly a decade without any procedural challenges. We do not agree. In order for laches to apply, Respondents are required to prove a delay arising from Petitioners' failure to exercise due diligence which resulted in prejudice to them. White v. Township of Upper St. Clair, 968 A.2d 806 (Pa.Cmwlth.2009), appeal denied,606 Pa. 668, 995 A.2d 355 (2010). In this case, however, Petitioners were not aggrieved and did not have a valid cause of action until the adultBasic program was terminated. Petitioners instituted the present action immediately after this termination. Thus, laches does not apply.
ORDER
AND NOW, this 27th day of June, 2012, the preliminary objections of the Respondents are hereby sustained in part and overruled in part, consistent with the foregoing opinion. With respect to any remaining issues, Respondents are directed to file an answer within 30 days of the date of this order.
DISSENTING OPINION BY Judge SIMPSON.
I respectfully dissent from the thoughtful majority opinion. As a result of the plain language of Section 1303 of the Tobacco Settlement Act (TSA),
I would sustain the preliminary objection in the nature of a demurrer and dismiss the second amended petition for review with prejudice.
Act of June 26, 2001, P.L. 755, as amended, 35 P.S. § 5701.1303.
By way of brief context, the predicate for the TSA was the settlement of nationwide tobacco litigation. In 1998, Pennsylvania and 46 other states entered into a Master Settlement Agreement with certain United States tobacco product manufacturers. The Agreement required the tobacco manufacturers to make annual payments for the benefit of the Settling States until 2025. The Agreement also provided that no person or entity other than a “Settling State” or a “Released Party” was intended to have any rights to enforce the Agreement.
The TSA was enacted in 2001 in order to arrange for use of the revenue stream. The TSA created certain accounts and established various programs. Among these programs was adultBasic insurance, a low-cost health insurance program for certain adults in Pennsylvania, of which the Petitioners are former beneficiaries. Particularly relevant for my analysis, Section 1303 of the TSA established the adultBasic program, but it placed express limits on privileges of eligible adults.
The specific language in question is as follows: “Nothing under this section shall constitute an entitlement derived from the Commonwealth or a claim on any funds of the Commonwealth.” 35 P.S. § 5701.1303(c).
Section 1303 provides, in relevant part, with emphasis added, as follows:
(a) Program establishment.—There is established in the department an adult basic coverage insurance program. Fund appropriations to the department for the program shall be used for contracts to provide basic health care insurance for eligible adults and outreach activities. The department shall, to the greatest extent practicable, ensure that all eligible adults in this Commonwealth have access to the program established in this section.
(b) Eligible adult responsibilities.—An eligible adult seeking to purchase adult basic coverage insurance shall:
(1) Submit an application to the department.
(2) Pay to the department or its contractor an amount of $30 per month of coverage. Beginning January 1, 2003, the monthly payment amount shall be adjusted based on the annual change in the Consumer Price Index for the 12 preceding months for which data is available. Notification of any change in the monthly payment amount shall be provided to eligible adults participating in the program.
(3) Be responsible for any required copayments for health care services rendered under the benefit package in subsection (f)(2).
(4) Notify the department or its contractor of any change in the eligible adult's income.
(c) Purchase of Insurance.—An eligible adult's payment to the department or its contractor under subsection (b)(2) shall be used to purchase the benefit package and shall be received in a timely manner. The appropriations for the program shall be used by the department to pay the difference between the premium cost of the benefit package and the eligible adult's payment. Subsidization of the benefit package is contingent upon the amount of the appropriations to the program and limited to eligible adults in compliance with subsection (b). Nothing under this section shall constitute an entitlement derived from the Commonwealth or a claim on any funds of the Commonwealth.
35 P.S. § 5701.1303(a)-(c).
Significant budget problems spurred a statutory redirection of money away from the account which funded the adultBasic program. This redirection of funds is the impetus for the current lawsuit, and Petitioners seek to reverse it.
Respondents raise preliminary objections, including one in the nature of a demurrer based on the quoted language.
Petitioners argue that they are not alleging an entitlement or making a claim to Commonwealth funds. They assert that the non-entitlement language was not intended to prevent claims to secure adultBasic benefits or funding; rather, the non-entitlement language was intended only to address the financial shortfall to occur in 2025 when tobacco settlement monies are scheduled to cease. Pet'rs' Br. in Opp'n to Prelim. Objections at 33.
Petitioners' arguments are not persuasive. By whatever name, they seek return of funds from the Commonwealth's General Fund back to an account where it will be available for the adultBasic program. The plain language of Section 1303 does not enable them to do so. Nor does the plain language even hint that non-entitlement begins in 2025. To the extent that the majority reaches a different conclusion, I respectfully part company. As a result of this conclusion, I need not address the other preliminary objections.