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

December 29th, 2012

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.”