April 02, 2014
icon Family Film Blogging: Muppets Most Wanted
Posted by Christine Hurt

I like the muppets.  I liked The Muppets.  But I can't say that I am dying to see Muppets Most Wanted again.  Yes, there were parts where I laughed out loud, but I do that a lot.  

As probably ever reviewer has noted, the opening song (which is not memorable except for this line), pretty much tells you how the next 90 minutes is going to go:

We're doing a sequel, We're back a popular demand.
C'mon on everybody, strike up the band.
We're doing a sequel; That's what we do in Hollywood.
And everybody knows, the sequel's never quite as good

Except for Toy Story 2, but this is not TS2.  The movie begins literally at the moment that The Muppets ended.  We see the backsides of the stand-ins for Gary (Jason Segal) and Mary (Amy Adams), who walk away and are never mentioned again.  The rest of the Muppets characters (including Walter, from the first movie) then try to think of what they should do in the sequel (opening number), and decide on the prompting of Dominic Badguy (Ricky Gervais) to do a world tour.  Badguy is secretly working with Constantine, number one criminal mind in the world and dead ringer for Kermit, to use the world tour as a way to pull off various heists, leading to the theft of the crown jewels in London.  To pull this off, Constantine must take Kermit's place, with Kermit being mistaken for Constantine and sent to a Russian gulag, run by Nadya (Tina Fey).  All the best parts of the movie take place in the gulag.

Though I thought the last movie was diminished by the story of Walter, Gary and Mary, here the movie could use a good non-Muppet plot.  Ricky Gervais does not shine in his role.  Whereas Segal and Adams seemed overjoyed to be in a Muppets movie, Gervais seems like someone with the flu showing up for work because he has to do so.  Fey and the gulag cast of characters (Ray Liotta, Daniel Trejo) are definitely worth seeing, including the 15 seconds of Tom Hiddleston (Loki from Thor).  The other human narrative is Ty Burrell, playing an Interpol agent working with muppet Eagle, a CIA agent.  Immediately after the "badge" scene from the trailer, this bit begins to grate.  The jokes all center around how the Interpol agent is European, so he has six hour lunch breaks, two months' summer vacation, etc.  Yeah, the kids didn't really get that.  Burrell also goes through the movie sounding like the French "taunter" from Monty Python and the Holy Grail with the "outrageous French accent."

The plot within the Muppets is pretty thin, unlike the "getting the band back together" plot of the earlier movie.  Here, the other muppets are just putting on the show, with a "new and improved' Kermit who lets them do whatever they want.  Walter, who barely appears in the first half of the movie, puts together that Kermit and Constantine have been switched. With Animal and Fozzie (also minimally used in this movie), he breaks Kermit out of the gulag.  The other thing that is missing from the movie is catchy songs.  We downloaded the soundtrack of the earlier movie pretty quickly, and loved the songs.  Here, I couldn't hum any song in the movie five minutes after it was over.  I will say that the best part of The Muppets was the "Am I a Man (Or Am I a Muppet)" song, in which Jim Parsons (Sheldon from Big Bang Theory) appears as Walter's parallel human.  This movie tried to do the same thing with Miss Piggy and Celine Dion, and it was dumb.  Really dumb.

I hate being so negative, mostly because the six year-old did enjoy it, but I won't put it on my 2014 highlight reel.

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icon Andrew Gold on "Philosophical Foundations of Fiduciary Law"
Posted by Gordon Smith

The following comes to us from Andrew Gold of DePaul University College of Law:

First, Paul Miller and I want to thank Gordon for the opportunity to post on Conglomerate! We are editors of a new collection of essays, Philosophical Foundations of Fiduciary Law, that will be published later this year by Oxford University Press – and we are very grateful for the chance to share some details about the volume.  The book has an outstanding group of contributors, and the chapters span a wide variety of fiduciary topics and methodologies.

Fiduciary law is still an underdeveloped field in private law theory.  Yet fiduciary law is very important to a wide variety of subjects, from corporate law, to lawyer-client and doctor-patient relationships, to parent-child relationships, to political theory.  This new volume should fill a major gap in the literature.  We thought it might be helpful to provide some links to the drafts now available on ssrn.

A series of chapters focus on fiduciary relationships and the core duties associated with those relationships.  For example, Paul Miller provides a new account of fiduciary relationships and their nature.  From a Kantian perspective, Irit Samet considers whether fiduciary loyalty is a virtue.  She suggests that it can be.  Lionel Smith considers whether there is a fiduciary duty of loyalty; he concludes that there is not. In my own chapter, I inquire into the core minimum content of fiduciary loyalty.  In addition to these topics, the book will also include new work on the duty of candor.

Several authors assess fiduciary law from an economic perspective.  Examples include Robert Sitkoff’s chapter, which provides an economic theory of fiduciary law in general.  Among other things, Sitkoff explains how fiduciary law’s mandatory terms can be squared with efficiency values.  In addition, Henry Smith offers a functional account of the link between fiduciary law and equity.  Further chapters on the significance of economic analysis will be included in the volume.

Other contributions discuss particular types of fiduciary relationship.  For example, Deborah DeMott offers a new account of the interpretation of instructions in agency law.  Hanoch Dagan and Sharon Hannes assess financial fiduciaries as a distinctive private law institution.  Avihay Dorfman provides an innovative theory of the trust relationship, trust law fiduciary duties, and their connection to ownership.  And Martin Gelter and Genevieve Helleringer offer a distinctive account of constituency directors’ fiduciary duties in corporate law.

On the public law side, Evan Fox-Decent provides a new account of fiduciary authority, drawing on the work of Joseph Raz and others on the authority of the state.  Ethan Leib, David Ponet, and Michael Serota consider how public fiduciaries should be defined, and, relatedly, which parties should properly be understood as their beneficiaries. Finally, Evan Criddle considers the relation between fiduciary principles and international law, focusing on the relevance of fiduciary principles to state sovereignty and international institutions.

Additional contributions have been authored by Richard Brooks, Justice James Edelman, Tamar Frankel, Joshua Getzler, Michele Graziadei, Daniel Markovits, and James Penner.  Each offers insightful new theoretical perspectives on fiduciary law.

Paul and I hope that this volume – and other recent work in the field – will encourage more scholarship on fiduciary law topics.  Together with Gordon, and with Evan Criddle, we have also put together some panels on fiduciary law at the upcoming Law & Society conference.  We are very excited about this new volume, and we look forward to future discussion! 

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April 01, 2014
icon University of Chicago Announces New Curriculum Changes
Posted by Christine Hurt

Looking to the future of legal education and the legal services industry, the University of Chicago announced today a radical new curriculum that respond to claims that law school is too expensive, too long, and irrelevant to the delivery of legal services.  These changes will go into effect beginning with the incoming class of 2014-15.

A new orientation day will replace earlier attempts at "welcome to law school" programs.  New legal careers will begin on Day One.  On this day, students will be given a type of aptitude test that will tell students in which broad legal field they may thrive in and in which they are most likely to find satisfaction.  The results of these tests are confidential and not mandatory, students will be able to choose the next day which field of study they will enter; however, this choice is irreversible.  

Chicago has announced five fields of legal study, which will be organized into "factions":  Abnegation, which will focus on public interest work and "street law;" Amity, which will focus on dispute resolution; Erudite, which will focus on the most cerebral of legal work, corporate, securities and tax law; Candor, which will focus on governmental agency work; and Dauntless, which will focus on litigation.  Each field of study will require different lengths of training.  Dauntless training will be completed in three months by zip-lining from the Sears Tower through downtown Chicago.  Erudite training will take six years and take place exclusively indoors.

However, should a student drop out or be counseled out of training, the student will be "factionless," or in other words be unable to sit for the bar unless a law school beyond the fence is willing to retrain the student. 

The law school acknowledges that some educators (and parents) believe that some students may have skills or talents that could serve them well in different factions; however, this gifted "divergent" student is more myth than reality, according to experts.

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March 29, 2014
icon Concluding our Hobby Lobby Symposium
Posted by Gordon Smith

Many thanks to all of those who participated in our symposium on Sebelius v. Hobby Lobby Stores, Inc. (and its companion cases). You can find all of the posts assembled in one place.

Some of our readers have contacted me with praise for the contributors, not merely for their insights, but also for their professionalism. We look forward to more such interactions on the Glom.

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icon Family Film Blogging Divergent
Posted by Christine Hurt

I did not want to interrupt our awesome forum on Hobby Lobby with my pedestrian mommy movie reviews, but here goes:

Opening night for Divergent found me and another lucky mom sitting with four sixth-grade boys (and three girls who pretended to be annoyed that we ran into them) in the IMAX.  Yes, we had all read the book.  (Though, after devoting too much of my life to both the Twilight series and the Catching Fire series, I stopped at the first, which is usually the best.)  And, of course, we are two hours south of pre-dystopian Chicago.

Beatrice/Tris is our heroine in our dystopian future Chicago.  Though she was raised in the selfless Abnegation faction, she chooses on the appointed choosing day to join the Dauntless faction, which favors crazy bravery in order to be the security force of the city.  Her brother chooses Erudite, which is the faction for academic research/think tank sort of things.  As you might expect, trying to join Dauntless is a harrowing experience, with the prospect of failure and being "factionless" a harsh, but real possibility.  Tris, of course, falls in love with her trainer, Four, because movies with young, female heroes seem to be required to have as a "sub"plot "who is going to be my boyfriend?"

So, many reviews are not very favorable, including the Manohla Dargis one in which the reviewer seems to be puzzled by the magic of mascara.  But I will say that my low expectations aside, I was pleasantly surprised.  No, it's not Harry Potter, and who knows when that will roll around again, but it is completely enjoyable.  And yes, it seems a little derivative of Catching Fire, which features another teenage girl with a secret courageous streak that comes in handy when she has to save the world.  I would argue that it's not as violent as Catching Fire (and less violent than the book), though that may not be saying much.  Many fans have noted that the ending is different, but I actually liked the movie ending better.  My only quibble is that the end of the movie, with plenty of monologuing by Kate Winslet, makes the tension seem more like the Erudite and Dauntless factions v. Abnegation faction, when in the book it seemed more like a few power-hungry Erudite exploiting the Dauntless to grab power with the Abnegation conspiracy charges as obvious ruse.

FYI, all the boys liked the movie.  They also liked the book.  None of them ever mentioned that the main character was a girl.  In case you didn't see this, In Praise of Joanne Rowling's Hermione Granger Series.

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icon Persons, Burdens, and Interests -- A Quick and Dirty Response to Jayne
Posted by Nate Oman

In her last post my colleague Jayne Barnard asks some great questions.  Let me take a stab at some answers.  Jayne writes:

[I]s there a difference between businesses like these where religion is at the core of what they do, and other businesses where religion has little if anything to do with the company's products and services?  Must the Court rule that any corporation with 51% religious owners can claim that it is engaged in religious exercise?   Won't that lead to even more mischief?

Many of those opposed to Hobby Lobby's claim -- including the Obama Administration -- have argued that because Hobby Lobby is a for-profit corporation it cannot be a "person" for purposes of RFRA.  As a matter of statutory interpretation, I find this claim implausible.  I also think that it's a misguided way of dealing with the concerns that one might have about Hobby Lobby's claims.

At the end of the day, I suspect that opposition to Hobby Lobby is less nuanced than much of this debate suggests.  Those who are skeptical of their suit think that the ACA contraception mandate is really important, and that letting a bunch of religious zealots avoid their obligations under the ACA will hurt women and that would be really bad.  This argument has nothing to do with the definition of "person" under RFRA.  Rather, it amounts to the claim that in the ACA the government is pursuing a compelling interest.  Furthermore, dealing with this concern -- compelling government interests -- through the definition of "person" is probably not possible.  You'd need to come up with a defintion of "person" such that only persons asserting religious freedom claims that would never conflict with a compelling government interest would be covered.  I suspect that it's impossible to come up with such a definition.  (Perhaps a rule that only moderate Episcopalians or conservative Unitarians are "persons" under RFRA?)

Alternatively, I think that critics of Hobby Lobby just don't think that their religious exercise is really being burdened.  This isn't a church!  It's a for profit business!  Notice that again in this intuition we are trying to make the definition of "person" do work that is already being done elsewhere in the statute.  To make out a RFRA claim you have to show that there is a "substantial burden" on religious exercise.  Again, one could imagine drafting a definition of person such that the only folks that would qualify would be folks whose religion would be substantially burdened by challenged regulation.  Again, I doubt that it's possible to draft a definition of "person" that would do this well.  Especially if the same definition has to weed out cases with compelling government interests.  (Maybe we say that "person" includes only ultra Orthodox Jews whose lives are pervasively structured by detailed religious rules but can't include lapsed Methodists?)

So my answer to Jayne is, "Yes, the Court must rule that any for-profit corporation can claim to exercise religion."  In other words, yes any for-profit corporation is a "person" for purposes of RFRA.  The fact that any for-profit corporation can now claim to be exercising religion does not mean that it in fact is exercising religion.  If General Electric suddenly claims that it has religious objections to the securities laws that simply isn't the same thing as a Kosher butcher claiming religious objections to health codes that cannot be squared with kashrut.  They are both "persons" under RFRA.  One, I take it, has a good claim that their religious exercise is substantially burdened and one does not.

Creating a very broad definition of person means that you are going to have to weed out pretextual religious claims from good faith claims, substantial burdens from de minimis burdens, and compelling government interests from non-compelling government interests.  But we already have to do all of these things under RFRA when it comes to natural persons.  Courts reject RFRA claims that are pretextual or challenge law placing only de minimis burdens.  At times they find that there is a compelling government interest.  They do this without manipulating the definition of "person" to avoid the issue.

I understand if you think that the ACA mandate fufills a compelling government interest.  I get it if you don't think it substantially burdens Hobby Lobby's exercise of religion.  (I have my own doubts on that point.)  I don't think, however, that has anything to do with the definition of persons under RFRA.

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March 28, 2014
icon Laying Blame And The Gupta Appeal
Posted by David Zaring

Over at DealBook, I've got a look at the low-key rejection of Rajat Gupta's criminal appeal:

Judge Jed Rakoff, who presided over Mr. Gupta’s trial, demanded in another case that the government proffer “cold, hard, solid facts, established either by admissions or by trials” in enforcement proceedings against financial firms. He has called for more prosecutions over the crisis, and expressed a desire to see wrongdoing exposed in court. Other trial judges have also expressed some sympathy for public sanctions expressed through judicial orders.

But powerful and influential appellate judges have indicated less interest in sending this sort of a message. The Court of Appeals for the Second Circuit indicated in another case that it thought that Judge Rakoff had been too insistent on admissions of wrongdoing. And, as the opinion in Mr. Gupta’s appeal suggests, the court seems disinclined to make strong statements about appropriate business conduct when it could do so.

For more, head that way!

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March 27, 2014
icon The Supreme Court and Corporate Purpose
Posted by Lyman Johnson

The Supreme Court's ruling in the Hobby Lobby/Conestoga Wood Specialties cases could have a profound impact on the perennial, but critically important, debate about corporate purpose in a democratic society. This is a matter my colleague David Millon and I are now addressing in an article, but here I offer a few thoughts.

The two corporations in these cases expressly have purposes that are religious even as they also seek, quite successfully, to make profits. As noted in my Monday post, the PA corporate statute is remarkable in its breadth of permitted purposes. But as Millon and I have argued since the mid-1980s--along with other long-timers like Professors Stout, Greenfield, Bratton, Dallas, O'Connor, Mitchell, and younger scholars like Professors Bruner and Bodie and others--corporate profit or shareholder wealth maximization is not legally mandated under any state law, with a few(ultimately minor) caveats for Delaware.

If the Supreme Court holds that these two corporations have a free exercise right qua corporations--whatever the ultimate outcome on the merits--hasn't the Court "blessed"(I couldn't resist) their non-profit maximizing purpose? Granted, the Court was not asked per se to rule on whether these two corporations could do what they are doing as a matter of the state law of corporate purpose. [ I think they clearly can, however, and that is why I completely disagree with Mark Underberg's March 4 posting on the Harvard site that raises fiduciary duty concerns that are nonexistent given the corporation's broad purpose]. But that certainly is implicit in the Government's whole case: these are money-making profit-maximizers, not "religious." I think a pro-company ruling on the standing issue will, effectively, vindicate the non-maximizing corporate purpose position many of us have long advocated.

Once a diversity of corporate purposes is seen to be legally permitted--again, I believe this already is the case--then corprate founders and directors can select a particular array of purposes to pursue. Some will choose to advance enlightened or benign environmental or other socially responsible goals, along with profits. Others will seek to couple profit making with generous employment practices or charitable endeavors.[Hobby Lobby, by the way, gives one-third of its profits to charitable and religious causes]. And others yet will bring religious convictions into their thinking about business goals. This means at least two things.

First, freed of a (real or imagined) mandated shareholder primacy or profit primacy obligation, corporations in a democracy will pursue an array of different goals. What is wrong with pluralism? Would some seek to replace the supposed stricture of profit or shareholder primacy with a newly-enshrined narrow set of "correct" corporate purposes? Those of us seeking to end wrong thinking on corporate purpose should not, ironically, fight against it because some don't like a particular purpose, i.e., one shaped by religious belief. As a related example, think here of free speech as a matter of principle, however repugnant the words used by some, yet we support free speech for all. Our ideological commitments should not impede our impartial scholarship.

Second, some(I think most) reform on the corporate purpose front will come through norm shifting and volunteerism, not government mandate. I suspect many progressive corporate law scholars favored the Government position because of a well-intentioned desire to help employees, a central plank in many corporate reform agendas. But ironically, I believe, that position actually hobbles the freedom of corporations, through their boards of directors, to combine profit making with one or more other properly chosen goals, be they religious or environmental or otherwise. Sure, some corporate reformers favor government mandates, in corporate law as in healthcare. But many, like me, prefer the long(frustrating) slog of reform from within, and this for one primary reason from which I have not wavered in 30 years.

That reason is that I simply do not believe that shareholder wealth maximization or profit maximization is conguent with widely shared social norms. Profit making certainly is, profit pursuit is, and private enterprise is; but not the belief that the singular goal of such activity is pursuit of some maximand for a single constituency. I simply do not believe that the vast majority of Americans(or other global citizens) believe that their individual role in American working life is to maximize profits--how spiritually deadening and depressing is the thought. Nor do I think most Americans believe that the great institutions in our collective life--including the business corporation--should have as their very institutional raison d'etre the maximizing of a share price or other narrow commitment. Some institutional pursuit of the common good(narrowly or widely conceived) sustains most healthy institutions. I think the founders and directors of Hobby Lobby and Conestoga Wood Specialties, whether you agree with them or not, are resisting just this shrunken vision of life in the American business world today. A win for them will vindicate a larger quest that many of us favor, though by different paths and for different ends.

There are many cross currents in corporate law today besides that pushed so hard by law and econ folks for so long. These have the potential through our young scholarly colleagues to reopen our field to new breakthroughs that can move corporate law into a more central role in our collective life and make it, frankly, more important. One of the ironies of my own thinking on these larger issues in corporate law is that I disagree in these two cases with so many people with whom I typically agree about corporate purpose in other contexts. And that while I agree with my good friend Stephen Bainbridge on these two cases, I disagree with him on corporate purpose. Who said con law has all the fun and that corporate law had to be dull...

 

Lyman Johnson

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March 26, 2014
icon Four Questions to Ponder
Posted by Jayne Barnard

Well, the punditocracy has concluded (and I agree) that a majority of the Court is likely to find that a for-profit corporation may be considered a "person exercising religion" under RFRA.  If that is so, and putting aside all the other elements of the RFRA analysis, it seems to me a few questions are still in the air.

First, Chief Justice Roberts indicates that he is inclined to limit his ruling to "a Chapter S corporation [sic] that is closely-held."   Is there some principled basis for concluding that an S corporation is a person capable of exercising religion while a C corporation is not? And, putting aside the tax code, upon what basis will the Court decide which corporations are protected by RFRA and which are not?  Shouldn't the Court offer some kind of guidance on this issue?  Is it enough to say, as Chief Justice Roberts does, that any corporation in which 51% of the shareholders agree to some sort of religious belief may be a "person exercising religion" under RFRA?  Won't that lead to all kinds of mischief?  Should the Court care?

Second, Justice Alito expressed concern about the plight of Kosher and halal slaughterhouses which might find themselves facing regulation requiring humane slaughter.  Shouldn't these businesses, even if incorporated, be able to assert religious claims under RFRA?  Few would say no.  But, is there a difference between businesses like these where religion is at the core of what they do, and other businesses where religion has little if anything to do with the company's products and services?  Must the Court rule that any corporation with 51% religious owners can claim that it is engaged in religious exercise?   Won't that lead to even more mischief?  Should the Court care?

Third, assuming RFRA standing, is it not fair to predict, as Justice Kagan suggested, that corporations will now feel free to assert religious objections to employment discrimination laws, minimum wage laws, the Family and Medical Leave Act, child labor laws and more?  Is there a principled basis upon which the Court might limit its holding to religious objections to health care mandates?  Or will the floodgates open?   Should the Court care?

Finally, (irony alert) Paul Clement argued that the "least restrictive means" of implementing the contraceptive mandate would be for the government to pay for employees' contraceptive care.   Where was Clement when advocates for a single-payer health care system could have used his help?

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icon Is the Mandate mandatory?
Posted by Brett Scharffs

Professor Lederman scolds me for saying that the mandate, indeed the entire Affordable Care Act, does not apply to employers with fifty or fewer employees. He asserts, “That’s just wrong,” and provides a link.

Under a headline, “The mythical ‘small employer” exception,” Marty explains:

"Small employers that choose to offer health insurance plans to their employees must provide coverage for recommended preventive services -- including contraceptive services -- without cost-sharing, just as larger employers do.

Conestoga Wood points out that the ACA does not require employers with fewer than 50 full-time employees ”to offer healthcare coverage at all.”  That’s true."                                

This is what I meant when I said the ACA does not apply to employers with fewer than 50 employees. They may choose not to offer health care without suffering a penalty. When I talk to my neighbor across the street who is a small businessman who is capping his workforce at 49, it is because he does not want to become subject to the ACA’s requirements or its penalties. 

Professor Lederman continues: 

"But as I’ve explained at great length in previous posts, the ACA doesn’t require any employer to offer healthcare coverage.  If an employer -- large or small -- does not offer an employee plan, its employees will be eligible for coverage on a government-subsidized exchange, which must include the required preventive services."

On Marty’s reading, not only is the mandate not mandatory, the entire ACA is optional. I guess we can all call it a day. In a sense this is technically true. If Hobby Lobby choses to drop its health care plan, it will be required to pay what the justices yesterday were describing as a “penalty” or (in a nod to Chief Justice Roberts’ earlier ACA opinion) a “tax” of $2,000 per employee, or about $26 million. On the other hand, if Hobby Lobby continues to offer health care but excludes the contraceptives at issue here, then they will be subject to a daily fine of about $1.3 million, which is where the $475 million number came from that appeared in the exchange between Hobby Lobby’s lawyer, Paul Clements and Justice Kagan. 

In that exchange, Justice Kagan said, “These employers could choose not to give health insurance and pay not that high a penalty – not that high a tax.” 

Mr. Clement answered, “Well, just to put this in concrete terms, for Hobby Lobby, for example, the choice is between paying a 500 – a $475 million per year penalty and paying a $26 million per year coverage.”

Justice Kagan responded, “No, I don’t think that that’s the same thing, Mr. Clement. There’s one penalty that is if the employer continues to provide health insurance without this part of the coverage, but Hobby Lobby could choose not to provide health insurance at all. And in that case Hobby Lobby would pay $2,000 per employee, which is less than Hobby Lobby probably pays to provide insurance to its employees.” 

Thus, technically speaking the mandate is not mandatory, but Hobby Lobby will be subject to taxes of $26 million if it discontinues its health care plan, or penalties of $475 million if it refuses to bend to the ACA’s contraceptive mandate. Justice Kagan seemed to be suggesting that at least the $26 million option might not constitute a substantial burden since that might be the approximate cost of providing health care. Chief Justice Roberts injected that he understood Hobby Lobby to feel a religious obligation to provide health care to its employees, and the discussion then shifted to how this might affect how much Hobby Lobby would have to pay employees if they dropped their health care plan. Also interesting are the implications for whether imposing the health care mandate on Hobby Lobby furthers a compelling state interest in the event the mandate is not mandatory at all.

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icon Corporate Law in the Arguments
Posted by Lyman Johnson

I briefly highllight a few pertinent corporate law-specific points that were made during yesterday's argument. Much of the proceeding, of course, was focused on burdens and compelling interest and alternatives, including the posing of many hypotheticals. And I too was as struck as Rick at the large number of interruptions. I resolve to be a more polite listener.

The Solicitor General conceded, in response to a question by Justice Alito, that the corporate form per se was not inconsistent with a free exercise claim; instead, it was the pursuit of for profit activity. It strikes me that this move, designed to preserve the current government stance against these two closely held corporations, potentially would permit a future attack by the government against an individual's free exercise claim. At a time when the government would seemingly want to cabin off the for profit corporate sector as unable to make a free exercise claim, that seemed an odd move.

In a classic half empty/half full exchange with Justice Scalia, the SG conceded that there was not a single case holding that a for profit corporation does not have a free exercise claim.

Again, in an exchange with Justice Scalia, the SG ruminated over the position of a minority shareholder in a close corporation who disagrees with the controlling shareholders about policy. Scalia curtly replied that those in control of the company make the decisions. To the SG's suggestion that that might be oppression, CJ Roberts replied that that was a state corporate law question. Three cheers for some answers our 2L law students could have made about corporate governance. Maybe we corporate types don't know con law but we have our own arguments they could brush up on, a point I made in my opening post on Monday.

Finally, even late in the SG's argument, Justice Breyer pressed him yet again on why corporate form should matter to a free exercise claim. The SG moved to the employees' interests and how they needed to be considered.

Who can predict such things, but my impression is as stated Monday: this case will, however narrowly, conclude that these two companies have a free exercise claim. Whatever the outcome of the case(given the other steps in the RFRA analysis), that initial ruling will, as I will post tomorrow, have intriguing consequences for corporate law, not just con law.

Lyman Johnson

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icon Rick Garnett: “the position and the rights of . . . the employees”
Posted by Gordon Smith

The following is from Rick Garnett at Notre Dame Law School:

Thanks very much to Gordon for including me in this very rich and thoughtful discussion.  The care and civility with which the various questions raised in the Hobby Lobby case are being handled here at The Conglomerate is a model, and should be an inspiration, for all of us.

I had the chance, yesterday afternoon, to read the transcript of the oral arguments in the case.  The usual caveats apply:  it is difficult and dangerous to make confident predictions about the Court based on oral arguments.  That said, it appears that at least three justices are highly skeptical regarding Hobby Lobby’s RFRA claim and also that at least four justices are similarly skeptical -- as I think they should be -- with respect to the notions that (a) “corporations” or “businesses” are categorically excluded from RFRA’s protections; (b) that it would violate the Establishment Clause to accommodate Hobby Lobby; and (c) that the contraception-coverage provisions at issue do not “substantially burden” Hobby Lobby’s exercise of religion.

One thing that stood out, for me, in the argument (besides some of the justices’ maddening habit of so frequently interrupting counsel and each other as to make the arguments near useless) was Paul Clement’s exchange with Justice Kennedy about “the position and the rights of . . . the employees.”  In some places, it has been suggested that accommodating the religious-liberty rights of the employer would violate the religious liberty of an employee who did not share the employer’s religious beliefs.  (An example “close to home”:  some have argued that it would violate the religious freedom of Notre Dame faculty or students who do not accept Catholic teaching regarding the use of contraception to exempt Notre Dame from the contraception-coverage rules.)  In my view, this suggestion is not convincing -- it conflates state-imposed burdens and state coercion with the presumptive right of non-state institutions, including employers, to act in accord with a religious mission or character.  In any event, I don’t think Justice Kennedy was making this suggestion.  His concern seemed, instead, to be with accommodations that put the employees of some employers in a “disadvantageous position.”

Paul Clement was (sigh) interrupted by another justice before he was able to answer Justice Kennedy but it appeared to me that he wanted to make the point (and he did say something like this in conversation with Justices Sotomayor and Kagan) that we should not regard it as “imposing a burden on” or “disadvantaging” an employee to say that it was not lawful – because it violated RFRA – to require the employer to provide a benefit to that employee in the first place.  This is, of course, the “where’s the baseline?” point with which we law professors are so familiar.  (For more on this, take a look at this short essay I did for the Vanderbilt Law Review’s “En Banc” feature.)

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March 25, 2014
icon The Ave Maria Mutual Funds
Posted by Ronald Colombo

Jennifer kicks off her last post by asking whether a mutual fund can have a religion.  I would ask that in response to that interesting question, we consider the example of the Ave Maria Mutual Funds.

Calling itself "America’s Largest Family of Catholic Mutual Funds," the Ave Maria Mutual Funds represent just one of many mutual funds that cater to socially responsible investors. 

In addition to seeking a return on investment, the Ave Maria Mutual Funds employ a "Catholic Advisory Board" which "is loyal to the Magisterium of the Church [and] sets the criteria for screening out companies based on religious principles. They actively seek the advice and counsel of Catholic clergy in making these determinations."

To me at least, the question of whether a mutual fund can have a religious identity seems moot.  Some already do.

And I see no reason why a business corporation couldn't just as explicitly adopt a religious persona.  To be clear, that's not what Hobby Lobby and Conestoga have done.  And from my perspective, that is a factor that seriously undermines their claims.  As I suggested a few posts below, I do not believe that a corporation is necessarily the religion of its shareholders. Rather, a corporation's religion is the religion the corporation, as an enterprise, chooses to embrace: in its practices, policies, and, preferably, in its charter as well. 

All that said, in today's oral argument, the Court didn't seem particularly fixated on this particular issue.

 

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icon Does Your Mutual Fund Have a Religion?
Posted by Jennifer Taub

Does your mutual fund have a religion?  If so, how would you find out what it is? If it changes, would the fund's investment adviser have to inform you? These questions came to mind after reading the transcript for today's argument in the Hobby Lobby and Conestoga Wood cases. Don't get me wrong. None of the justices or attorneys mentioned mutual funds. But let me explain why they should have. 

Mutual funds own approximatley 25 percent of U.S. equities. Thus if a Supreme Court majority determines that corporations may have religious beliefs (for purposes of the Religious Freedom Restoration Act and/or the Free Exercise Clause of the First Amendment), it will be necessary to come up with a methodology for determining what a given corporation's religion is. If the Court decides that the religion of the shareholders (as opposed to that of its employees, for example) dictates the religion of the corporation, one would need to know who the shareholders are as of the particular point in time when the sincerity of the religious belief is being measured. 

Of course this poses challenges in a world of high-frequency trading. But that would not be insurmountable as a practical matter; we do have record dates for other purposes. But it would make a mockery of religious beliefs if they can shift in fractions of a second. And, it becomes additionally complicated when the owners of shares are not real people, but instead institutional investors. About 70 percent of U.S. equities are owned by institutional investors (with mutual funds taking up a large slice).

If religion is determined by shareholder vote, would that be acquired through a management resolution on the proxy ballot? What would happen when even a single corporation in an index held such a vote?  Would the funds abstain? Or would the fund that held that corporation's shares vote in support of management's religious resolution? If so, would that single vote establish the religion for that fund, thus precluding it from voting in favor of a different corporation's suggestion religion? Or, can a single fund be one religion for purposes of one stock in its portfolio and a different religion for another? And who decides? Do fund shareholders get a say on the fund's religion?

This line of thought may seem far-fetched, given that the parties in this case are closely-held corporations owned by family members. Yet Justice Roberts acknowledged that a decision that a for-profit corporation has religious beliefs and rights could go beyond the facts presented today. He said:

"Whether it applies in the other situations is a question that we'll have to await another case when a large publicly­ traded corporation comes in and says, we have religious principles, the sort of situation, I don't think, is going to happen."

But these are the very real concerns. And, it was associated practical questions that Justice Sotomayor raised with Paul Clement, counsel for the corporations. Sotomayor asked him:

"[H]ow do we determine when a corporation has that [religious] belief? Whos says it? The majority of shareholders? The corporate officers? The––is it 51 percent? What happens to the minority? And how much of the business has to be dedicted to religion? 5 percent 10 percent? 3 percent?"

Clement responded:

"You look to the governance doctrines. . .And I think that's a really critical question, which is ultimately, I think this line of questioning goes to a question of sincerity."

Am I sincere? This is a thought exercise, and a scary one at that. The idea that the Court may actually permit a for-profit corporation to pierce the veil for purposes of gaining benefits that deprive its employees of rights under federal law, but use the veil to shield its shareholders from personal liability is, in my sincere opinion, absurd.

 

Update: In response to Ron's insightful response, I should note that I was referring to "mainstream" mutual funds and not SRI funds. I should have made that more clear, particularly given that I have written about them in the past.  

That said, the existence of SRI funds or shareholder activists that invest in or engage with corporations to encourage them to pursue envriomental, social, and/or governance agendas, whether motivated by religious views or otherwise is separate from the problem presented by the case at hand. As noted above, if this door opens, there will be a need to determine whether a corporation's religious beliefs are sincere and to the extent that involves polling the shareholders, this is fraught with challenges, not the least of which is shareholder turnover. In contrast, the current system which does allow for SRI funds and other activists to influence corporate governance does not require the fiction of a consistent adherence to a particular religious belief system for a legal entity with fluctuating shareholders.

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icon The myth of "exemptions" that are said to undermine the government's compelling interests
Posted by Marty Lederman

I have no time just now to respond to some of the thoughtful reactions to my earlier post.  But a quick follow-up is in order to refute the repeated assertions by Professors Scharffs and Bainbridge that the law is shot through with exemptions, thereby undermining the government's compelling interest in reducing unintended pregnancies (and abortions) by ensuring that women have affordable access to the FDA-approved contraceptive methods.

For one thing, even if there were many exemptions, that would not undermine the government's compelling interest, any more than the numerous legal exemptions to tax laws, antidiscrimination laws, wage and hour laws, etc., undermine the compelling interests that have historically sufficed to justify denial of religious exemptions under those statutes.  See, e.g., Tony & Susan Alamo Foundation, 471 U.S. at 300 n.21 (although Fair Labor Standards Act contains many exceptions to the definition of “employee” (see 29 U.S.C. 203(e)) and to the requirement of minimum wages (see 29 U.S.C. 213(a)), the Court deemed them to be “not relevant here,” and denied the requested religious exemption); Hernandez, 490 U.S. at 700 (“The fact that Congress has already crafted some deductions and exemptions in the Code . . . is of no consequence . . . .”); see also the examples in the government's reply brief at 19-22.

More to the point, the Professors fundamentally misunderstand this law.  As I’ve explained in previous posts, with one minor exception, the purported “exemptions” the Professors identify are not exemptions at all; in each case, women will be entitled to cost-free contraception insurance.  And that one exception—HHS’s exemption for churches—will affect very few female employees who would otherwise make claims for cost-free contraception coverage.  The contraceptive coverage here, therefore—like all of the other preventive care services the statute requires, such as immunizations and colo-rectal cancer screening—is a benefit to which virtually all women in the United States will be entitled, and the government has a compelling interest in ensuring that remains the case. 

(Also, one important specific correction on a major misunderstanding:  Professor Scharffs writes that "the mandate (indeed the entire Affordable Care Act) does not apply to employers with fifty or fewer employees."  That's just wrong.)

Permalink | Constitutional Law, Corporate Law, Hobby Lobby, Religion, Supreme Court | Comments (View) | TrackBack (0) | Bookmark

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