Dec 29, 2012

Posted in Corporate Prayer, Uncategorized

7th Circuit Implies That Corporations Have Rights Under RFRA In Light of Citizens United

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In the past, I have queried whether corporations have First Amendment rights to free exercise of religion.

Tyndale, a D.D.C. contraception mandate opinion addressed, but did not decide this issue.

This Court, like others before it, declines to address the unresolved question of whether for-profit corporations can exercise religion within the meaning of the RFRA and the Free Exercise Clause. See, e.g., First Nat’l Bank v. Bellotti, 435 U.S. 765, 777-78 n.14 (1978) (recognizing that corporations have First Amendment speech rights, but declining to “address the abstract question whether corporations have the full measure of rights that individuals enjoy under the First Amendment”); Stormans, Inc. v. Selecky, 586 F.3d 1109, 1119 (9th Cir. 2009) (“We decline to decide whether a for-profit corporation can assert its own rights under the Free Exercise Clause . . .”); Church of Scientology of Cal. v. Cazares, 638 F.2d 1272, 1280 n.7 (5th Cir. 1981) (same).

Now the 7th Circuit has implied that corporations do not lack protection under RFRA. Judges Sykes and Flaum barred the enforcement of the contraceptive mandate against a company operated by Catholic owners. In deciding this case, the court refuted the government’s claim that rights under RFRA do not apply to a corporation with a citation to Citizens United. Here is the key passage:

In response, the government’s primary argument is that because K & L Contractors is a secular, for‐profit enterprise, no rights under RFRA are implicated at all. This ignores that Cyril and Jane Korte are also plaintiffs. Together they own nearly 88% of K & L Contractors. It is a family‐run business, and they manage the company in accordance with their religious beliefs. This includes the health plan that the company sponsors and funds for the benefit of its nonunion workforce. That the Kortes operate their business in the corporate form is not dispositive of their claim. See generally Citizens United v. Fed. Election Comm’n, 130 S. Ct. 876 (2010).  The contraception mandate applies to K & L Contractors as an employer of more than 50 employees, and the Kortes would have to violate their religious beliefs to operate their company in compliance with it.

Though this passage only applies to rights under RFRA, following Citizens United, I don’t think any thing precludes entities under a corporate form from claiming free exercise rights. Another front for corporate personhood.

Judge Rovner disagrees in dissent, though does not outright reject the proposition that corporations can receive protections under RFRA:

Although the Kortes contend that complying with the Patient Protection and Affordable Care Act’s insurance mandate violates their religious liberties, they are removed by multiple steps from the contraceptive services to which they object.  First, it is the corporation rather than the Kortes individually which will pay for the insurance coverage. The corporate form may not be dispositive of the claims raised in this litigation, but neither is it meaningless:  it does separate the Kortes, in some real measure, from the actions of their company.

At Volokh, Jon Adler writes: ” I agree with the Seventh Circuit that the use of the corporate form is not dispositive, but I would place more weight on the nature of the “corporation” involved.”

A related question. The 10th Circuit denied an injunction in the Hobby Lobby case. The 7th Circuit granted the injunction. Does that mean that Hobby Lobby employees in Illinois  Indiana, and Wisconsin are exempt from the mandate, and that Hobby Lobby employees in the 10th Circuit states are not exempt? Or is it based on the principle place of business (Oklahoma in the case of Hobby Lobby)? How does this work?

Update: Lyle Denniston weighs in here:

Moreover, it sounds somewhat strange for a commercial entity that is considered to have an artificial legal personality, like a corporation, to “exercise” religion.

But to the family-run corporations that have sued to challenge the new contraceptives mandate, that is not strange at all. In fact, Cyril and Jane Korte in their lawsuit explicitly claimed that their construction company has its own right to exercise religion, and as its principal owners, they have insisted that they run its operations every day to reflect their personal religious convictions. The company’s business is, to them, another form of putting their Roman Catholic faith into daily practice.

The federal government challenged those claims in the Kortes’ lawsuit, noting that the family business was organized as a profit-making, secular business that makes no mention of a religious purpose in its incorporation papers, and that it sells no religious products or services. “The government is aware of no case in which a for-profit, secular employer with K&L’s characteristics prevailed” on a religious freedom claim, it said in a court document in the case.

The key dispute in this context thus appears to turn on whether the faith preferences of the owners of a profit-making corporation can be transferred to the business entity so that it is not an independent entity but rather, for constitutional purposes, an alter ego. The Kortes argue that, since the couple owns 88 percent of the construction company, they do treat it as an alter ego to express their faith. And it appears that, at least for the time being, that claim has prevailed in the courts in their case.

Also, Lyle offers this quote from Justice Sotomayor’s opinion as Circuit Justice in the Hobby Lobby case.

“This Court has not previously addressed [religious freedom] or free exercise claims brought by closely held for-profit corporations and their controlling shareholders alleging that the mandatory provision of certain employee benefits substantially burdens their exercise of religion.”

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  • Griff

    I’ve admittedly only skimmed this order, but my reading was different than yours — I thought the Seventh Circuit was agreeing with the government that corporations don’t have rights under RFRA, but was saying that the owners of the corporation in their individual capacities can state a claim based on what the corporation is being required to do.

    • http://joshblackman.com/ Josh Blackman

      Is that really much different than the import of Citizens United? That members of a corporation can state a claim for a violation of their religious liberties, as they are exercised through the management of the company? RFRA is a slightly different beast than the 1st Amendment under the lens of Citizens United, but the effect is largely the same.

      • Griff

        I think it is a little different. My impression of CItizens United is that the Court was protecting the speech rights _of corporations_ in order to protect the speech rights of individuals. The difference here is that the corporation itself has no rights; we’re protecting the individuals’ free exercise rights, as you say, as exercised through the management of the company. This is a subtle difference but I would expect that only owners of relatively small closely held corporations would be plausible plaintiffs under this theory.

        • http://joshblackman.com/ Josh Blackman

          Thank you for the reply. I think that’s correct. In other words, by the very nature of free exercise rights, large companies (like GM or Apple) would have a hard time arguing that they exercise their religious rights through the management of the companies. It would probably only work for closely held corporations, likely those not publicly traded. Though, it seems Hobby Lobby has hundreds of stores (including one right by me–I had no clue what it was before this suit!). So size wouldn’t be the limiting factor. It would seem to be how closely faith is incorporated into its managerial principles.

  • Steve Rappoport

    Suppose closely held corporations are found to have a First Amendment right to deny contraceptive coverage to their employees. A victory for religious belief, you would say. But suppose the issue is whether a private employer can require its employees to attend a work-related meeting at the place of business during work hours when the meeting begins with a prayer. That was held to violate Title VII. See Young v. Southwestern S&L, 509 F.2d 140 (1975). Text: http://scholar.google.com/scholar_case?case=10691128417567290843&hl=en&as_sdt=2&as_vis=1&oi=scholarr

    If that case came up today, would Title VII be held unconstitutional as applied because the outcome would prevent an employer from opening a business meeting with a prayer if any employee were to object? Would the employer’s freedom of belief trump that of an objecting employee?

    • http://joshblackman.com/ Josh Blackman

      I think a natural corollary of a corporation having free exercise rights under RFRA is the same corporation having free exercise rights under the 1st Amendment, in light of Citizens United. Though, after Smith, free exercise doctrine for people and corporations is somewhat weak.

      This opinion predated RFRA by 20 years. I don’t know if it would violate the 1st Amendment, though it may have RFRA problems (the issue at hand in Hobby Lobby).

      • S

        So are you suggesting that RFRA modifies Title VII?

        The problem for me with using RFRA to counter the ACA , Title VII, and any other federal statute is that those statutes are federal laws just like RFRA. (I do not know whether RFRA has a provision giving its precedence unless the otehr federal statute explicitly says that RFRA does not apply.) As I recall, courts have already used Title VII’s pregnancy discrimination amendment to challenge, successfully, employer policies regarding contraception. Title VII has also been used to bar employers from imposing religious practices on employees. Do you really think that there are five votes on the Supreme Court that would wipe out protection for employees in such matters?

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