Federal Court Denies JUA Injunction Blocking Latest Attempt of State Takeover

Last Updated: Jul 24, 2019

gavel-red-stethoscopeIn a memorandum published July 17, 2019, the United States District Court for the Middle District of Pennsylvania’s Chief Judge Christopher C. Conner declined to grant the Pennsylvania Professional Liability Joint Underwriting Association (JUA) an injunction blocking the latest attempt of a state takeover of the JUA by the Pennsylvania General Assembly.

In recent years, the General Assembly has attempted several times to transfer $200 million from the JUA to help balance the state’s budget. Previous attempts included the possible elimination of the JUA if it refused to transfer the funds within a specified time frame. Each attempt to transfer that money has been momentarily blocked by a federal court due to lawsuits initiated by the JUA.

This budget season, the General Assembly sought more state oversight of the JUA instead of the direct transfer of funds. Act 15 of 2019 essentially moves the JUA administratively under the authority of the Commonwealth. However, Act 15 does not include any provisions either directly or indirectly taking funds from the JUA. A more detailed analysis of this legislation can be found here.

Almost immediately after Act 15 was signed into law, the JUA initiated a lawsuit against Governor Wolf and the General Assembly seeking an injunction to block the law’s enactment.

Pennsylvania courts apply a four-factor test to determine whether to grant injunctive relief. The party requesting such relief must first demonstrate the two most critical of these factors: the claim’s likelihood of success on the merits and the irreparable harm suffered if injunctive relief is not granted. Only if both of these gateway factors are established, will a court consider the third and fourth factors: the potential for harm to others if relief is granted and whether the public interest favors injunctive relief.

Regarding the first factor, Chief Judge Conner reasoned that the JUA has arguably demonstrated a “significantly better than negligible” likelihood of success on the merits of at least some of its claims. Although the decisions in previous JUA suits against the Assembly are not dispositive as to the new claims raised in the current action, these decisions are controlling and confirm that there are limits to the Commonwealth’s power over the JUA. The exact extent to which the Commonwealth may exert authority over the JUA, however, was left unresolved in these previous suits.

Nevertheless, injunctive relief was ultimately denied because, as Chief Judge Conner opined, the JUA did not make a clear showing that irreparable harm was likely in the absence of an injunction. In reaching this decision, Chief Judge Conner noted the differences between Act 15 and the previous legislative attempts to exert authority over the JUA.

Specifically, Chief Judge Conner noted that Act 15 stands in stark contrast and bears little resemblance to its predecessors as it takes nothing directly from the JUA, contains no deadline for compliance, articulates no penalties for noncompliance, and requires no immediate action by or toward the JUA. Chief Judge Conner further differed the instant case from the previous JUA suits against the Assembly by noting that the previous actions involved the unconstitutional taking of a private entity’s assets for public use without just compensation. Although injunctions were granted in these previous cases, the federal court did acknowledge that the Commonwealth may exercise authority over the JUA; however, the court left the limits of this authority undefined.

Amongst other claims, the JUA argued that much mischief could come from application of Act 15’s budget and appropriation provisions as it grants the Commonwealth power to control all of the JUA’s funds. However, relying on past caselaw precedent, Chief Judge Conner opined that mere speculation about the possibility of an injury will not suffice. Creedence was also given by the court to counsel for the Governor who gave assurances that the Governor will not take the actions that the JUA fears.

Because the court found that the JUA’s motion did not show an imminent likelihood of irreparable harm, no determination as to whether all or part of Act 15 is likely to survive constitutional scrutiny was offered. In the event of a material change in circumstances, the court did leave open the possibility of a later granting of injunctive relief in reaction to a renewed motion.

The Pennsylvania Medical Society (PAMED) will continue to monitor for additional developments and share all updates with members.

Information about prior events concerning the JUA can be accessed in PAMED’s JUA Timeline of Events here

Leave a comment

ng5136-PA-PAMedSociety-DigitalAd-Brand-300x225
Norcal Mutual

Learn More 
ng5136-PA-PAMedSociety-DigitalAd-Brand-970x90