Tag Archives: Corporate Law

Some Good Questions About the Corporate Law Scholars’ Hobby Lobby Amicus Brief

Corporate law is not my area and so I have not especially focused on this amicus brief in the Hobby Lobby litigation, filed by 44 corporate law scholars arguing that a corporation cannot (ever?) take on the religious beliefs of its shareholders. It seems to me that whether a corporation does or should take on such beliefs might depend on a number of factors (Michael Helfand, for example, has identified one such possible factor in this paper). But the notion that a corporation should never take on the religious beliefs of its shareholders seems  both counterintuitive and belied by the fact that we often encourage corporations and businesses generally to take on idealistic aims and aspire to socially beneficent ends.

The point is put well in this post by Keith Paul Bishop, a corporate attorney in California:

[T]he law professors make the following apocalyptic claim:

If this Court were to agree that, as a matter of federal law, shareholders holding a control bloc of shares in a corporation may essentially transfer their [social responsibility] beliefs to the corporation, the results could be overwhelming.

Ok, I substituted “social responsibility” for “religious”. However, if the transfer of stockholder religious beliefs to the corporation would be “overwhelming”, why wouldn’t the same be true of beliefs regarding climate change, the environment, or other beliefs animating the corporate social responsibility movement?

The Best Legal Argument For Protection of For-Profits Under RFRA

Several people have asked me about the issue of the protection of for-profit corporations in the ongoing HHS contraceptives mandate controversy.  Generally, skeptics of such protection are apt to jump immediately to policy arguments — for example, “doesn’t giving religious liberty protection to for-profits threaten the rule of law?”

Set those policy arguments, which are certainly worth taking seriously, aside for the moment.  Instead, focus strictly on the legal arguments under the Religious Freedom Restoration Act.  The very best legal argument that I have seen so far that RFRA does, indeed, protect for-profit corporations is set out in this amicus brief filed on behalf of several US Senators in the Hobby Lobby litigation, authored in part by Kevin Walsh (Richmond), and which I was fortunate to have an early look at.  Whatever policy concerns one might have, it seems to me that the Administration’s categorical exclusion of for-profits in its current proposed rule, and its reliance on certain definitions in Title VII of the Civil Rights Act, just is not going to fly in the RFRA context.

Here is one important part of the brief (at 17-18):

In formulating RFRA, Congress heard testimony about the need for greater protection for the free exercise of religion by organizations as well as individuals . . . .  And Congress did not limit RFRA’s protections to individuals. Rather, Congress provided that “[g]overnment shall not substantially burden a person’s exercise of religion,” 42 U.S.C. § 2000bb-1(a), employing a term that ordinarily encompasses “corporations, companies, associations, firms,  partnerships, societies, and joint stock companies, as well as individuals.” 1 U.S.C. § 1.

Rather than reach the obviously incorrect conclusion that RFRA does not extend to corporations at all, the district court created an exception from RFRA’s coverage for “secular, for-profit corporations,” incorrectly concluding that such corporations “are not ‘persons’ for purposes of the RFRA.” Hobby Lobby Stores, Inc. v. Sebelius, 870 F.Supp.2d 1278, 1288, 1291-92 (W.D. Okla. 2012). The district court reasoned that “[g]eneral business corporations do not, separate and apart from the actions or belief systems of their individual owners or employees, exercise religion.” Id. at 1291. But the same can be said of corporations that unquestionably are “persons” under RFRA, such as hospitals, universities, and religious orders.

In attempting to justify their failure to respect religious objections to the HHS mandate asserted by for-profit corporations, Defendants have observed that Congress has sometimes distinguished between nonprofit religious organizations and for-profit secular organizations. 78 Fed. Reg. 8456, 8462 (Feb. 6, 2013) (discussing Title VII of the Civil Rights Act of 1964). This demonstrates that Congress can distinguish between for-profit and nonprofit employers when it wishes to do so. But Congress made no such distinction in RFRA, which applies broadly and generally, subject only to displacement by later enactments that relax its reach in specific areas. Congress plainly wrote RFRA to include corporations, and neither RFRA nor the PPACA excludes for-profit corporations.

On Corporations, Their Purposes, and Their “Exercise of Religion” Under RFRA

Kevin Walsh (Richmond) has a superb post about the question whether for-profit corporations are “persons” who “exercise religion” pursuant to RFRA.  He makes his claims in the context of criticizing a recent panel decision of the Third Circuit.  You should read the whole thing, but here is a selection:

RFRA provides that “[g]overnment shall not substantially burden a person’s exercise of religion” unless the government satisfies strict scrutiny. 42 U.S.C. § 2000bb-1(a) (emphasis added). In the U.S. Code, “person” ordinarily encompasses “corporations, companies, associations, firms, partnerships, societies, and joint stock companies, as well as individuals.” 1 U.S.C. § 1. Nothing in RFRA excludes corporations generally. To the contrary, it is plain that corporations can assert claims under RFRA. The only Supreme Court case applying RFRA against the federal government involved a claim asserted by a corporation, O Centro Espírita Beneficente União do Vegetal . . . .

When one analyzes the claim, it turns out that the argument is not really about the meaning of the word “person” (even though the conclusion of the argument purports to be a claim about the meaning of this word). Rather, the argument pivots on “exercise of religion.” In the words of the district court opinion adopted by the Third Circuit, “a for-profit, secular corporation cannot exercise religion.”

Again, the claim is not that corporations cannot engage in exercise of religion. After all, corporations can, and do, exercise religion. Consider, for example,Church of Lukumi Babalu Aye, Inc. or Corporation of the Presiding Bishop of the Church of Jesus Christ of Latter-Day Saints. The claim, rather, is limited to “secular, for-profit corporations.” But the claim rests on a mistake about “exercise of religion” under federal law and a mistake about corporate action.

For Kevin’s arguments about the meaning of “exercise of religion” under RFRA and about the purposes of corporate action, read the post.  I will add that on the former point, it is unquestionably the case that as a historical matter, refusals to behave in a certain way may be “exercises of religion”: two of the earliest religious exemption questions — the Quakers’ resistance to military conscription and the opposition in some religious communities to swearing oaths — take just this form.

District Court Rules Against For-Profit Plaintiff in Contraception Mandate Litigation

The United States District Court for the Western District of Oklahoma has denied a preliminary injunction to a for-profit company which had sued the Department of Health and Human Services on the grounds that the contraception mandate violated its religious liberty.  Hobby Lobby Stores, Inc. is a closely held corporation whose business is arts and crafts — operating over 500 stores in 41 states and with over 13,000 employees.  The company, the court says, is “secular,” but also operated by the owners “according to their Christian faith.”  This is confusing.

At any rate, the court denied the PI both as to the Free Exercise Clause claim and the RFRA claim.  On the particular issue of whether a corporation can exercise religion (see CLR Forum posts here (Professor Colombo’s paper) and here), the court had this to say:

General business corporations do not, separate and apart from the
actions or belief systems of their individual owners or employees, exercise religion. They do not pray, worship, observe sacraments or take other religiously-motivated actions separate and apart from the intention and direction of their individual actors. Religious exercise is, by its nature, one of those “purely personal” matters referenced in [Nat'l Bank of Boston v.] Bellotti  which is not the province of a general business corporation.  (18)

This is a bizarre and unnecessarily maximalist statement.  It is not needed to reach the result in the case.  It also seems untrue: it is perfectly natural to say that a corporate body can exercise religion.  I take it that at least one of the reasons that even the government itself carved out an exception in the mandate for houses of worship was that it recognized that corporate bodies can and do exercise religious freedom.  To the extent that the court is drawing a line between for-profit and not for-profit “businesses,” one might have wished for a bit more discussion about what it is exactly about the for-profit context that makes it conceptually impossible for such businesses to exercise religion.  The interesting question, I had thought, about the issue of for-profit corporations was not whether it is impossible conceptually for corporations to exercise religion full stop.  Surely it is.  The interesting question is also clearly not whether religious exercise is “a purely personal matter”; it isn’t, and in any case, one wonders why the court is qualified to opine on that sort of issue.  The interesting question, I thought, has to do with how we can know, when a corporation is very large and diffuse, or is owned by many people with different religious beliefs, what the corporation’s religious beliefs are.

The case is Hobby Lobby Stores, Inc. v. Sebelius.  Lawyers for the plaintiff have said that they will appeal.

Colombo on the Naked Private Square

Ronald J. Colombo  (Hofstra U. School of Law) has posted The Naked Private Square. The abstract follows.

In the latter half of the twentieth century, America witnessed the construction of a “wall of separation” between religion and the public square. What had once been commonplace (such as prayer in public schools, and religious symbols on public property) had suddenly become verboten. This phenomenon is well known and has been well studied.

Less well known (and less well studied) has been the parallel phenomenon of religion’s expulsion from the private square. Employment law, corporate law, and constitutional law have worked to impede the ability of business enterprises to adopt, pursue, and maintain distinctively religious personae. This is undesirable because religious freedom does not truly and fully exist if religion expression and practice is restricted to the private quarters of one’s home or temple.

Fortunately, a corrective to this situation exists: recognition of the right to free exercise of religion on the part of business corporations. Such a right has been long in the making, and the jurisprudential trajectory of the courts (especially the U.S. Supreme Court), combined with the increased assertion of this right against certain elements of the current regulatory onslaught, suggests that its recognition is imminent.

Corporate Exercise of Religion and Other Thoughts on the RFRA Claim in the Mandate Litigation

There has been a curious silence in the news and on the blogs about the preliminary injunction in Newland v. Sebelius.  True, there are some unique issues involving the nature of the plaintiffs, but the case may indicate the direction that courts which get over the ripeness hump and do reach the RFRA claim might tend (and, as in all things, ripeness will come with time).  Here are two questions that interested me.

First, on the issue of substantial burden, I was struck by the fact that Judge Kane did not really answer the question at all.  He seemed to assume the substantial burden — or perhaps to hold the “difficult questions” about substantial burden in abeyance.  One of those difficult questions, he said, was: “Can a corporation exercise religion?”  Three reactions:

  1. The answer to this question, posed in this way, must be yes.  The Catholic Church is a non-profit corporation, and it certainly can exercise religion — the free exercise component of the holding in Hosanna Tabor would make no sense if it and other religious non-profits could not.  Indeed, some folks have made something like the claim that corporate free exercise, rather than individual free exercise, is the foundational right. 
  2. Though the doctrine is controversial, we do say that corporations have rights of free speech.  See Citizens United.  If a corporation can speak in a way that is protected by the Speech Clause, why can it not exercise religion in a way that is protected by the Free Exercise Clause?  And by extension, why can it not suffer substantial burdens on its free exercise under RFRA?
  3. Still, there is an interesting issue about who is exercising religion when what we’ve got is a publicly traded corporation.  Suppose the shareholders do not care at all about the religious issue that the corporation has taken a stand on.  What does it mean to say in that circumstance that the corporation is exercising religion?

Second, I was surprised at the court’s skepticism with respect to the question of compelling interest. 

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