Supreme Court Roundup Part Two: Burwell v. Hobby Lobby Stores, Inc.

Posted on Categories Business Regulation, Constitutional Law, Corporate Law, First Amendment, Health Care, Public, Religion & Law, U.S. Supreme Court

the bosses of senateOn October 30, I participated in a presentation entitled “Supreme Court Roundup” with Ilya Shapiro of the Cato Institute.  The event was sponsored by the Law School chapters of the Federalist Society and the American Constitution Society.  We discussed three significant cases from the 2013-2014 Supreme Court term: McCutcheon v. FEC, Burwell v. Hobby Lobby and Harris v. Quinn.  It was a spirited discussion, in which Mr. Shapiro and I presented opposing views, but I want to thank Mr. Shapiro for taking the time to visit the Law School and sharing his perspective with the students.

This is the second of three blog posts on the presentation.  Readers can find the first post here.  What follows are my prepared remarks on Burwell v. Hobby Lobby.  Readers interested in Mr. Shapiro’s position on the case can refer to the amicus brief that he filed on behalf of the Cato Institute.

The legal issue in Burwell v. Hobby Lobby Stores can be described simply.  Under the provisions of the Affordable Care Act, the Department of Health and Human Services requires employers to provide health insurance plans making contraception available to their female employees at no cost.  In the NFIB v. Sebelius decision in 2012, the Supreme Court upheld Congress’ power to pass the Affordable Care Act as an exercise of its taxing power.  But even if Congress has the power to pass the law, can a for profit corporation nonetheless avoid following the law by arguing that the contraception provisions burden the corporation’s free exercise of religion in violation of the Religious Freedom Restoration Act (RFRA)?

The rights of the individual shareholders that own the corporation were not at issue.  The law does not act on the individuals, and does not require these human beings to do anything.  The only legal requirement imposed by the law is imposed on the corporate entity.

So what did Congress intend to do when it passed RFRA in 1993?  As I will explain, the Hobby Lobby case presents two opposing views as to what Congress attempted to accomplish by passing that law.  The dissent by Justice Ginsburg argues that the intent of RFRA was to create a statutory remedy for burdens on religious expression that adopted the standard for evaluating First Amendment violations prior to the 1990 Employment Division v. Smith case. The majority opinion by Justice Alito argues that by passing RFRA Congress created a statutory remedy that protected more “persons” than the pre-Smith caselaw protected and that granted them greater protections than the pre-Smith caselaw granted.

The Religious Freedom Restoration Act was passed by Congress in 1993.  It operates as a general exception from federal laws and regulations.  It states that the federal government may not substantially burden a person’s exercise of religion even if the burden results from a rule of general applicability.  However, this rule does not apply where the burden on religious expression furthers a compelling government interest and the rule is the least restrictive way to advance that interest.

The statute was passed in response to the Supreme Court’s Smith decision, which had overruled prior precedent and held that the First Amendment right of free exercise of religion is not offended by laws of general applicability that don’t target religious expression.

If we interpret RFRA as an attempt by Congress to re-impose the standard that applied to free expression claims prior to Smith, but as a statutory right rather than as a constitutional right, then we get three results:

1. Under the Supreme Court precedent prior to Smith, for profit corporations are not “persons” with rights of free exercise;

2. Under Supreme Court precedent prior to Smith, it is the job of the federal courts to determine whether the burden imposed by the congressional law is “substantial;” and

3. Under the Supreme Court precedent prior to Smith, the government is not required to accommodate the person’s exercise of religion if that exercise would cause harm to third parties.

In contrast, the Justice Alito’s majority opinion interprets RFRA as a “clean separation” from prior First Amendment precedent (Majority opinion at p. 7).  The majority opinion contends that the meaning of the statute is not defined by prior precedent, but instead can be derived from the statutory text itself.  This leads to three contrary results:

1. The majority holds that the meaning of the word “person” in RFRA’s text does not explicitly exclude for profit corporations from it protections.  The majority also claims that an amendment of RFRA in 2000 to remove the words “under the First Amendment” from the definition of “free exercise” in the statute is further evidence that Congress intended to give the broadest possible coverage to the meaning of the word “person,” thereby including corporations.  Contrast this broad interpretation of the word “person” with the much narrower ruling by the U.S. Court of Appeals for the District of Columbia Circuit that human beings held in Guantanamo Bay are not considered “persons” under RFRA, and are therefore outside of the statute’s protections.  (Rasul v. Rumsfeld).  The Supreme Court had twice refused to review this holding prior to the Hobby Lobby decision.

2. The majority allows the plaintiff to self-declare the existence of a substantial burden.  (Majority opinion at p. 37)  The majority opinion refuses to question whether under the Affordable Care Act it acts as a substantial burden on an individual’s religious beliefs to require a corporation that you own to provide insurance coverage for contraception, under circumstances where that insurance may or may not actually lead to the use of contraception at the choice of the female employees.  By accepting the plaintiff’s assertion of a burden without question, the majority essentially turns the plaintiff into the judge in his own case.  First Amendment precedent prior the Smith case made it clear that the courts had an obligation to evaluate whether the asserted burden was, in fact, “substantial.” (Dissent at p. 22)

3. The majority applies a more stringent test for determining whether the government has shown a compelling interest for the burden.  In particular, the majority opinion does not consider whether permitting a religious accommodation here would cause harm to third parties – the female employees.  Strict scrutiny as applied in the pre-Smith precedent evaluated harm to third parties when examining the alternatives available to the government, but the majority does not do so here. In Cutter v. Wilkinson the Court stated that “adequate account” must be taken of “the burdens a requested accommodation may impose on non-beneficiaries.” (While the Supreme Court suggested in City of Boerne v. Flores that the least restrictive alternative test set forth by the language of RFRA was different from the strict scrutiny test applied under the First Amendment, such an interpretation seems clearly incorrect.)

Given these two very different interpretations of RFRA, why should we read the statute as argued by the dissent?  There are several good reasons to prefer the dissent’s interpretation of RFRA’s language:

1. Congress has done this sort of thing before.  For example, following the McNally v. United States case rejecting the prosecution of “honest services” fraud under the mail fraud statute, Congress passed a statute re-instating the pre-McNally precedent (a statutory re-instatement of prior precedent that the Supreme Court upheld and applied in Skilling v. United States).  The very title of RFRA makes clear Congress’ intent to “restore” strict scrutiny as the standard by which religious accommodation claims are evaluated, rather than the Smith standard.

2. According for profit corporations the same rights of free exercise as human beings is a bad idea for several reasons:

a. It is non-originalist.  There is no evidence that the Framers’ generation understood corporations to have any rights under the Constitution separate from the rights of the persons who owned the corporation.  In fact, for most of our nation’s history, the Supreme Court denied the existence of any separate rights for corporations under the Constitution at all.

In 1809, Justice John Marshall wrote in Bank of U.S. v. Deveaux that the citizenship of corporations for purposes of diversity jurisdiction under Article III of the Constitution was the same as the citizenship of its shareholders, and that therefore the residence of the plaintiff had to be diverse from the residence of each and every shareholder of the corporation in order for the federal courts to have jurisdiction.  Unfortunately, the result of the ruling was that corporations evaded the jurisdiction of the federal courts in order to avoid paying their debts.  Therefore, the Court subsequently overruled Deveaux and adopted the legal fiction that corporations themselves, separate from their shareholders, could be deemed “citizens” of their state of incorporation for purposes of suing or being sued in federal court.  The Court’s motivation in adopting this legal fiction, however, was to preserve the ability of natural persons harmed by a corporation to avail themselves of the diversity jurisdiction of the federal courts.

In the 1839 case of Bank of Augusta v. Earle, the Court specifically ruled that the treatment of corporations as “persons” for diversity jurisdiction purposes did not grant corporations any of the other rights that the Constitution granted to natural persons.  Justice Taney rejected the argument that the Court should “look behind the act of incorporation” and accord the corporate entity the ability to enforce the constitutional rights of its members.  The Court never extended any of the individual rights provisions of the Constitution to corporations until the end of the 19th century.  Nor did the Court ever suggest that the federal government lacked the power to regulate corporate activity, so long as the government did not violate the literal terms of the corporate charter.

b. It is inconsistent with Natural Law.  The philosophy of natural law holds that human beings possess certain natural rights from the moment of birth, bestowed upon us by our Creator as part of nature’s design, and that these rights do not exist by any grant of positive law.  Rights of conscience, such as freedom to choose our religious beliefs and the right to keep our internal thoughts private, are natural rights and as such belong to human beings and not to artificial entities.  The case of Braswell v. United States, refusing to apply the 5th Amendment right against self-incrimination to corporations, is in accord with this view. It diminishes the dignity of human beings to place for profit corporations on the same level as humans when it comes to natural rights.  If Congress wants to grant these same rights to artificial entities via statute we should demand a more clear statement to that effect.

c. There is an important distinction between for profit corporations, on the one hand, and sole proprietorships and nonprofit corporations on the other.  Much is made of the fact that the First Amendment has been recognized to provide protection to sole proprietorships and nonprofit organizations like churches.  However, for profit corporations differ significantly from these two entities when it comes to the issue of continuity of life.

The Green family, who are the current owners of Hobby Lobby, are deeply religious.  But no matter how religious they are, they will die one day.  Hobby Lobby, however, will live on forever.  Will the children who inherit the stock be as religious as their parents?  Will the third generation of owners? If the future owners of the corporation no longer have strong religious objections to contraception, how will the government know this fact and how will the government go about enforcing compliance with the Affordable Care Act?

In a for profit corporation, the religiosity of the owners will change as the identity of the owners change over time.  This does not happen with a sole proprietorship.  Because the law recognizes no distinction between the business and the owner in a sole proprietorship, when the owner dies so does the business.

In contrast, a nonprofit organization like a church can live forever.  Its members will eventually die and be replaced by new members.  But unlike the situation with a for profit corporation, we know that the new members of the church will always continue to hold the same faith as their predecessors.  That is because the very purpose of the church is to advance a particular religious expression.

A for profit entity is different.  It is unique in that it has perpetual life coupled with the virtual certainty that the religious views of its owners will shift and change over the years.  Once the for profit corporation was granted an accommodation under the law, the government would have no way of policing whether that accommodation was still required in future years.

Remember, the question is “what did Congress intend to do when it passed RFRA?” The majority opinion in the Hobby Lobby case has created an expansive new statutory right, whose boundaries are uncertain.  I don’t believe that Congress intended to undertake a radical break with prior First Amendment precedent, and to extend rights of conscience to for profit corporations, and to make it more difficult for the government to refuse to accommodate the religious beliefs of such corporations — all on the basis of a one sentence amendment to RFRA passed 7 years after the statute’s adoption and that no one noticed or remarked on for another 14 years.

On the other hand, I might be willing to accord the right of free religious expression to corporations if, in return, I was granted perpetual life.

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