March 26, 2014
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
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.)

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If CJ Roberts wants a narrow ruling, I've got the vehicle he needs
Posted by Steve Bainbridge

The Wall Street Journal live blog of the contraception mandate cases before the Supreme Court reports that:

Chief Justice John Roberts suggested he was thinking of a narrow ruling allowing closely held companies like Hobby Lobby Stores Inc. to claim a religious exemption, while leaving aside more-complicated ownership structures of publicly traded corporations to another day — a position that Justice Stephen Breyer indicated he might, or might not, be open to.

If you'll pardon one more episode of self-promotion, reverse veil piercing would provide the basis for just such a narrow ruling. As I observed in A Critique of the Corporate Law Professors’ Amicus Brief in Hobby Lobby and Conestoga Wood, which is now available in final form at the the Virginia Law Review Online:

In another red herring, the Brief argues that:

If this Court were to accept the arguments being advanced by Hobby Lobby and Conestoga, it would … invite … disruptive proxy contests … regarding whether the corporation should adopt a religion and, if so, which one.

Proxy contests are principally an issue for public corporations, while RVP-I—like forward veil piercing—is exclusively an issue for close corporations. The claim is thus disingenuous, at best. Nevertheless, this claim—while false—does provide a valuable opportunity for reminding the reader that the Brief’s concern for minority shareholders with diverse interests is largely irrelevant. As this author has noted:

[A] public corporation with many shareholders holding diverse views is a poor candidate for RVP-I. In contrast, a closely held corporation – even if quite large by metrics such as assets or employees – with a small number of shareholders holding common religious beliefs is a good candidate.

Courts routinely differentiate cases for piercing the veil from cases in which the veil should not be pierced based on, inter alia, the number of shareholders in the corporation. There is no reason why they could not do the same in cases like those brought by Hobby Lobby and Conestoga Wood.

So here is a proposed narrow test, taken from my article Using Reverse Veil Piercing to Vindicate the Free Exercise Rights of Incorporated Employers, 16 Green Bag 2d 235 (2013):

Analysis of the RVP-I cases thus suggests a three-pronged version of RVP that should be adopted in the mandate cases:

  1. Is there such substantial identity of the shareholder(s)’s religious beliefs and the manner in which the corporation is operated and the purposes to which it is devoted that the corporation is effectively the shareholder’s alter ego?
  2. How strong is the government’s interest in ensuring that the corporation’s employees get the mandated insurance coverage?
  3. Would reverse piercing this corporation’s veil advance significant public policies?

As to the first prong, Judge Walton’s analysis in Tyndale provides a useful model for future courts to follow.

  • Veil piercing is a close corporation doctrine.39 In this context, in particular, a public corporation with many shareholders holding diverse views is a poor candidate for RVP-I. In contrast, a closely held corporation – even if quite large by metrics such as assets or employees – with a small number of shareholders holding common religious beliefs is a good candidate.
  • Do the corporation’s articles of incorporation include a statement of purpose referencing religious beliefs and goals?
    Is the ownership structure of the corporation designed to ensure continuity of its religious purposes even after the original founders have retired or died?
    Are the directors and officers of the corporation obliged to share the founders’ religious beliefs? If so, are they required to document that fact, such as by signing a statement of faith?
    Are religious practices such as devotions, prayer, scripture reading, or worship services routinely made a part of corporate meetings?
    Are such practices made available to employees?
    Is some substantial portion of the corporation’s profits donated to religious charities or otherwise used to advance the founders’ religious beliefs? The biblical concept of a tithe springs to mind here as a possible metric.

The more of these factors that a court finds to be present, the more willing the court should be to treat the corporation as the shareholder’s alter ego.

Turning to the second prong, the government contends it has an interest in ensuring that Americans have access to the health insurance coverage required by the mandate. Whether or not that interest rises to the level of a compelling one that would justify infringing on free exercise and RFRA rights remains to be deter- mined. In evaluating the government’s interest, however, courts should note that the government has already undermined the mandate by carving out exemptions for grandfathered plans, employers with fewer than 50 employees, “member[s] of a recognized religious sect or division thereof” who have religious objections to the con- cept of health insurance, or religious employers [as defined in the regulations].” As Judge Walton observed, a “law cannot be regarded as protecting an interest of the highest order . . . when it leaves appreciable damage to that supposedly vital interest unprohibited.”

As for the final prong, the government has tried to minimize the significance of the issues at stake by referring to the plaintiffs’ interests rather than their rights. Conduct that is motivated by religious belief is accepted as one of the ways in which people exercise their religious freedom, however, even when the conduct occurs in a commercial setting. As such, the strength of the public policy issues at stake in the mandate cases go far beyond the homestead policy at issue in the seminal Minnesota cases. The issues at stake here arise out of the First Amendment, not a mere statute.

The values protected by the religious freedom clauses of the First Amendment “have been zealously protected, sometimes even at the expense of other interests of admittedly high social importance.” Accordingly, “no official, high or petty, can prescribe what shall be orthodox in politics, nationalism, religion, or other matters of opin- ion or force citizens to confess by word or act their faith therein.” Because that is precisely what the plaintiffs in the mandate cases claim the government is forcing them to do, the policy prong of the RVP-I standard strongly favors the plaintiffs. 

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March 24, 2014
Asking the Wrong Questions in Hobby Lobby
Posted by Marty Lederman

I'm very grateful to Gordon for inviting me to post on the Conglomorate about the Hobby Lobby and Conestoga Wood cases--in particular, to summarize some of the arguments I've made about the cases over on Balkinization and SCOTUSblog.  Links to my posts about various different aspects of the cases, and to some posts of others, are collected here.  As for the issues of particular interest to Conglomorate readers . . . well, I'm afraid I think there's less there than meets the eye as to several of them.

1.  For example, it is widely believed that the central issue in the cases is whether corporations, or for-profit corporations in particular, can exercise religion, or have religious "consciences."  But I don't think the Court needs to, or should, consider that broad question in the abstract.  As I explained in one post, even if for-profit corporations can exercise religion in certain contexts, the particular religious claims in Hobby Lobby and Conestoga Wood cannot be asserted by the corporations themselves:

The Hobby Lobby and Conestoga Wood cases do not require the Court to decide, once and for all, whether and under what circumstances for-profit corporations can ever have religious beliefs or consciences; whether they can exercise religion; or whether they can be “persons” under RFRA.

Those formulations pitch the question at far too broad a level of generality, and one untethered from the facts of these particular cases.  The issue in these cases is much narrower than that. 

This is not a case about whether a particular corporation can "advance" a religious agenda, take steps to further a religious mission (such as by selling religious books), or promulgate religious doctrine; indeed, it's not a case in which the state is alleged to be preventing a corporation from doing anything at all.  Therefore it bears no resemblance to, say, a law restricting for-profit religious bookstores from selling certain books.  The particular burden being alleged here is that the HHS Preventive Services Rule allegedly coerces a violation of religious duties--thatis to say, rather than restricting a religious practice, HHS is alleged to be focring someone to act in a manner contrary to religiously inspired limitations.  The federal government allegedly is putting someone to a choice between compliance with a civil obligation and adherence to a restrictive religious injunction (roughly speaking:  “Thou Shalt Not Cooperate With Evil”).

If there is such a burden on religious exercise here, it is not one that is imposed on the corporations—on Hobby Lobby Stores, Inc., Mardel, Inc. (in the Hobby Lobby litigation) or on Conestoga Wood Specialties Corp.  That's not because those corporations don’t have “consciences”—neither do churches—or because they cannot advance religious objectives (perhaps they can), but because they don’t have religious obligations.  I’m not aware of any religion that imposes duties or injunctions on for-profit corporations.  And, more to the point, the complaints in these cases make countless allegations about religious duties and how the government allegedly is compelling certain parties to violate those duties, but they nowhere allege that any of the three corporations here are subject to any religious obligations.

2.  A conclusion that the HHS Rule does not substantially burden any religious exercise of these corporate plaintiffs, however, hardly resolves the cases.  As you will see if you begin to peruse the plaintiffs' complaints and briefs, the crux of the alleged burden in these cases is not on the corporations’ alleged exercise of religion, but instead on the purported religious exercise of the individual plaintiffs—five members of the Green family in Hobby Lobby, and five members of the Hahn family in Conestoga Wood.

Unfortuantely, however, the complaints are maddeningly imprecise on exactly how federal law is said to implicate or undermine the individual plaintiffs’ religious obligations.  In particular, the complaints (and briefs) are not at all clear on what, exactly, federal law requires or induces the individual plaintiffs to do that would implicate them in their employees’ use of contraception.  Are they burdened in their capacity as shareholders, as managers, or as directors of the companies?  The complaints never specify.  Instead, the allegations toggle back and forth among describing these three distinct roles of the individual plaintiffs, and do so rather indiscriminately and without specification.
 
In my earlier posts, I explained that a careful reading of the briefs reveals that the gravamen of the plaintiffs' complaint is that they are allegedly being required to violate religious obligations in their capacities as corporate directors, or decision-makers, rather than in their capacities as shareholders or managers.  (I argued further that they have failed adequately to allege facts to explain how their religion is burdened in their decision-making capacity, since federal law does not leave them with much of a decision to make in the relevant respects.) 
 
3.  Professor Bainbridge continues to argue, however, that the individual plaintiffs ought to be permitted to sue under RFRA in their capacity as shareholders, under an "insider reverse veil-piercing" theory.  For reasons I explained in a post yesterday, I'm dubious.  Of course, unlike many readers of this blog, I am no scholar of corporate law; and so I'll invoke the interloper's prerogative and apologize in advance if I have erred in my analysis.  I'd be very grateful for any corrections or reactions.  In any event, here's my thinking:

For starters, the federal legal obligations in these cases run against the corporations themselves, and/or their insurance plans, not against the shareholders.  So the shareholders are not directly burdened by federal law.  The question, then, is whether shareholders nevertheless can obtain relief for injuries that they allegedly suffer derivatively, by virtue of the state's regulation of the corporation, notwithstanding the black-letter law that corporations and their shareholders are distinct entities for purposes of liability and benefits.  

Individuals typically form a corporation so that they will not be personally liable for any claims against the corporation--indeed, that's one of the principal reasons state law creates the corporate form.  Does it follow that shareholders cannot complain about injuries they suffer derivatively when other actors, including the government, take action against the corporation?  By accepting the “sweet” (limited liability), must shareholders also accept the “bitter,” in the form of abandonment of rights they otherwise might have had to recover for injuries they suffer by virtue of their ownership of the corporate shares?  As Judge Matheson put the question in his separate concurrence in Hobby Lobby, should “[t]he structural barriers of corporate law give [one] pause about whether the plaintiffs can have their corporate veil and pierce it too”?

In response to this question, Professor Bainbridge published an article suggesting that the Court should make use of a corporate law doctrine called "insider reverse veil piercing" in order to allow the Greens and the Hahns to assert RFRA claims as shareholders notwithstanding the fact that they are generally immune from liability for any wrongs committed by their corporations--i.e., to allow them to reap the sweet and also avoid the bitter.

Subsequently, a group of 44 corporate and criminal law professors filed an amicus brief arguing that "reverse veil piercing" would be inappropriate here, and that the Court should not allow the plaintiffs to sue as shareholders.

Professor Bainbridge has now responded with a follow-up article critiquing the corporate law professors' brief.  He argues again that the Court should use "insider reverse veil piercing," or "RVP-I," "to allow . . . shareholder standing to sue if the [C]ourt is unwilling to allow the corporation to do so." 

What (if anything) should the Court make of this corporate law dispute about RVP-I? 

a.  First of all, it's not clear that these cases are even about injuries to the individuals in their capacities as shareholders.  Indeed, it appears that the individual plaintiffs in Hobby Lobby, members of the Green family, are not shareholders of Hobby Lobby and Mardel, the two corporate plaintiffs in that case; they are, instead, trustees of a management trust that owns the companies.  The Greens do not allege that they own the companies; and unless I've missed something, their complaint does not allege any way in which their funds would be used to "pay for" contraception.  As I explained in a recent post, Hobby Lobby's brief confirms that the case is not fundamentally about coercing the Greens to pay forcontraception, or about the Greens' religious exercise in their capacity as shareholders.  The Greens' fundamental complaint, instead, is that federal law coerces them to violate a religious obligation in their capacities as corporate directors, i.e., decision-makers.  "[T]he precise religious [religious] exercise at issue here," the brief explains, is that "the Greens cannot in good conscience direct their corporations to provide insurance coverage for the four drugs and devices at issue because doing so would 'facilitat[e] harms against human beings.'”  

A decision by the Court limited to shareholder rights, therefore, would not resolve Hobby Lobby.

That leaves the Conestoga Wood case.  The individual plaintiffs in that case, members of the Hahn family, also primarily complain about federal law burdening them in their capacity as corporate directors, or decision-makers.  In addition, however, paragraph 11 of their complaint alleges that the Hahns are collectively the “principal[]” owners of the shares of Conestoga Wood.  So perhaps the RVP-I question does arise vis-a-vis the Hahns, whose shareholder funds presumably would be used, not to pay for contraception reimbursement directly, but instead to pay for part of the overall premiums to the plan insurance carrier.  (Remarkably, the Conestoga Wood complaint does not specify whether CW has a self-insured employee health insurance plan or a plan issued through an independent insurer.  But in its Supreme Court brief, it refers to its (unidentified) "issuer" as having "inserted coverage of the contraceptives into its plan over Petitioners’ objection" after the district court denied a preliminary injunction.)  So, in some very attenuated sense, the Hahns' shareholder funds are subsidizing the plan's reimbursement for employees' use of contraception . . . and the complaint might be read to suggest that this use of the Hahns' funds would make the Hahns complicit in their employees' use of so-called "abortifacients" in the rare case (if any) in which use of certain contraceptive methods prevented a fertilized egg from implanting in the uterine wall

b.  But even if the "shareholders' complicity" issue is teed up in Conestoga Wood . . . Honestly? 

Can it really be the case that the Supreme Court of the United States ought to decide Conestoga Wood based upon the assumption that the corporate law "RVP-I doctrine" would apply in this unprecedented context?  This is a state law question, the answer to which depends upon the legal relationship between a corporation and its principal shareholders . . . presumably under Pennsylvania law.  

Professor Bainbridge cites as his primary authorities two 30-year-old state-law cases--one from Minnesota, the other from Michigan--both involving questions far-flung from the RFRA context in Conestoga Wood.  To be sure, he also cites one Pennsylvania case--Barium Steel Corp. v. Wiley, 108 A.2d 336(1954).  But in that case, which was decided 60 years ago, the Pennsylvania Supreme Court split 3-3 on what we (well, what corporations law professors) would today apparently call an "insider reverse veil piercing" theory, in a case that has almost nothing in common with Conestoga Wood.  And the three Pennsylvania Justices who would not have recognized the RVP-I in Barium Steel wrote this:  "The decisions in this State will be searched in vain for a single instance where a piercing of the corporate veil has been judicially sanctioned in order to confer a benefit upon the ones responsible for the presence of the veil.  Certainly, the opinion for this court in the instant case cites no such decision."

That exhausts my knowledge of how Pennsylvania law treats insider reverse veil-piercing.  Perhaps Professor Bainbridge is right that Pennsylvania (and other state) courts would or should "reverse-pierce" the veil in this RFRA context, in which a federal statute is implicated.  Perhaps he's wrong.  But how should the Supreme Court of the United States resolve that question?  

Bainbridge argues that courts have historically "pierced the corporate veil" in 13.41% of RVP cases, and that the Court should decide whether Conestoga Wood should be among that number based upon the simple test of whether piercing here would advance a "significant public policy."  But he does not cite any other Pennsylvania authority in support of this view, or any case at all involving RVP and RFRA, or RVP and shareholders' religious exercise more broadly, from any jurisdiction.  

This absence of precedent ought to be a serious problem for his RVP-I argument, particularly in light of the principal case cited in the corporate professors' brief (and in the government's brief), Domino's Pizza, Inc. v. McDonald, 546 U.S. 470 (2006).  

McDonald was the sole shareholder of a Nevada corporation.  He alleged that Domino's had broken contracts with that corporation because of racial animus toward him, in violation of 42 U.S.C. § 1981.  The Court held that section 1981 offers relief to a plaintiff when racial discrimination impairs an existing contractual relationship, so long as the plaintiff himself has or would have rights under the existing or proposed contractual relationship.  Of course, the contracts themselves, between corporations, did not afford McDonald any rights, because he was merely a shareholder.  Citing some of the same Minnesota cases Professor Bainbridge cites, however, McDonald argued that "under state law shareholders are at times permitted to disregard the existence of the intermediate corporate entity where failing to do so would impair full enforcement of important . . . statutes."  Resp. Br at 32 n.34. 

At oral argument, Justice Kennedy identified this claim as "kind of an inverse corporate veil piercing," and asked:  "[A]re there any cases where we pierced the corporate veil in order to help the shareholder?"  (The answer, of course, is that the Court has never done so.)

Not surprisingly, the Court unanimously rejected McDonald's inverse veil piercing claim.  Justice Scalia's opinion for the Court explained that "it is fundamental corporation and agency law—indeed, it can be said to be the whole purpose of corporation and agency law—that the shareholder and contracting officer of a corporation has no rights and is exposed to no liability under the corporation's contracts."   

The Court presumably was able to issue such a categorical interpretation of state law because it had been offered no examples, in any jurisdiction, of reverse veil piercing to vindicate shareholder contract rights.  To be sure, Conestoga Wood does not involve shareholders' contract rights, so McDonald does not directly resolve the RVP-I question here.  But the Hahns have the burden to show a RFRA burden, and neither they nor Professor Bainbridge have cited any case, from Pennsylvania or elsewhere, in which shareholders have been permitted to use RVP-I to allege harms to their religious exercise, under a state or local RFRA, resulting from a law that has an impact on corporate funds.  The Court presumably should, therefore, treat the RVP-I argument here the way in which it treated the equally unsupported and unprecedented argument in Domino's--i.e., summarily reject it.      

Domino's appears to be the one and only occasion in which the Supreme Court has specifically considered the relationship between the "RVP" doctrine and a federal statute.  You'd think, therefore, that Professor Bainbridge would devote serious attention to the case.  His analysis of Domino's is relegated to a footnote, however.  And his efforts to distinguish the holding in that case are unpersuasive.  For example, he notes that the shareholder in Domino's raised "only" contractual and statutory rights.  ButConestoga Wood's claim here (the only claim with any traction, anyway) is based on a federal statute (RFRA), just as McDonald's was.  Bainbridge's suggestion that the federal statutory right established by RFRA is more "fundamental" than the federal statutory right against race discrimination established by section 1981--indeed, so much more "fundamental" that it ought to result in an about-face on the Court's RVP-I holding--is so implausible that it doesn't warrant a response.  

His principal argument fares no better.  He insists that Domino's is a "weak precedential reed" because the Court in that case "made no effort to analyze the issues raised by RVP, but simply dismissed it out of hand," without addressing "any of the points made [by Prof. Bainbridge] in defense of the doctrine."  In other words, Bainbridge thinks that the Court should ignore its unanimous holding in Domino's because the Court did not do its homework in that case, even after Justice Kennedy had specifically teed up the question as whether the Court should recognize a claim of "inverse corporate veil piercing."  Suffice it to say that that argument is unlikely to have any traction with the Court.  Moreover, it misses the point:  The Court rejected the RVP-I claim in Domino's because the plaintiff there gave the Court absolutely no basis for concluding that state law would recognize such an exception to the default "fundamental corporation and agency law" principle that a corporate shareholder has no rights and is exposed to no liability under the corporation's contracts.  The same thing is true in this case:  Neither the Hahns nor Professor Bainbridge has offered the Court any authority at all in support of the proposition that the Pennsylvania Supreme Court -- or other state courts, for that matter -- would recognize an RVP-I claim in a case involving RFRA.

Moreover, even if the Court were somehow able to answer the RVP-I question as a matter of Pennsylvania law (after certifying it to the Pennsylvania Supreme Court, perhaps?), that state-law-based judgment would not govern similar cases arising in the other 49 states and the District of Columbia, and therefore would hardly be a satisfactory resolution of the question on which the Court granted certiorari in Conestoga Wood.  (And it wouldn't have any impact on a non-shareholder case such as Hobby Lobby.)

* * * *

In the absence of any indication that Pennsylvania law would allow RVP-I in this novel context, the more appropriate approach for the Court would be to follow its example in Domino's, and simply move on from a shareholder-injury inquiry to address the principal question raised both in Conestoga Wood and in Hobby Lobby--namely, whether federal law coerces the individual plaintiffs (the Hahns and the Greens) to violate religious injunctions in their capacities as decision-makers, or directors, of the three corporations in question in these two cases.  In an earlier post, I discuss why I think the plaintiffs have failed to adequately plead facts to support such a claim.

4.  Finally, and most importantly, in posts at both SCOTUSblog and Balkinization, I've tried to explain that, wholly apart from the questions regarding corporations and shareholders, a broad ruling in favor of Hobby Lobby and Conestoga Wood could mark a sea-change in the way the Court has traditionally resolved claims for religious exemptions in the commercial sector, with potentially dramatic ramifications for an array of laws involving taxes, wages and hours, antidiscrimination norms, etc.  This is so because, when it comes to regulation of commercial activities, the Supreme Court—and virtually every other court and legislature, for that matter—has consistently construed the Free Exercise Clause and religious accommodation statutes not to require religious exemptions from generally applicable regulations.  The Supreme Court, in particular, has rejected such claims in at least nine cases, from 1944 through 1990--and has almost always done so without a dissenting vote.

This long line of consistent denials of exemptions to actors in the commercial sphere reflects the view of Justice Jackson in the first such case (Prince v. Massachusetts), in which he wrote in his concurrence that “money-raising activities on a public scale are, I think, Caesar's affairs, and may be regulated by the state so long as it does not discriminate against one because he is doing them for a religious purpose and the regulation is not arbitrary and capricious, in violation of other provisions of the Constitution.” 

A unanimous Court put the point this way in U.S. v. Lee, in 1982:   “When followers of a particular sect enter into commercial activity as a matter of choice, the limits they accept on their own conduct as a matter of conscience and faith are not to be superimposed on the statutory schemes which are binding on others in that activity,” at least where “[g]ranting an exemption . . . to an employer operates to impose the employer’s religious faith on the employees.” 

Whether or not this was a stand-alone “holding” in Lee, there is no doubt that the statement did—and continues to—fairly reflect the Court’s unbroken line of decisions over many decades.  (The singular exception to the rule is Hosanna-Tabor, which, unlike Hobby Lobby, involved the right of nonprofit, specifically religious organizations to determine the “ministers” who speak on their behalf.) 

And the Lee statement further points to the principal reason for this uniform treatment of religious exemption claims in the commercial sphere—namely, that in such cases it is virtually always the case that conferral of an exemption would require third parties (customers, employees, competitors) to bear significant burdens in the service of another’s religion, something the Court has understandably been loath to sanction.  As I wrote on SCOTUSblog,

Contrary to the views of some, I think it overstates matters to say that such a significant third-party burden invariably renders a permissive religious accommodation unconstitutional.  The Court’s jurisprudence in the area of permissive accommodations is not so unequivocal.  But this much is clear:  Such a significant third-party burden at a minimum raises profound constitutional concerns.  For that reason, as Chip Lupu and Bob Tuttle explain, the Court has regularly construed permissive accommodation statutes – using the avoidance canon either expressly or implicitly – to recognize a compelling government interest in avoiding the imposition of significant third-party harms. 

The Court’s decision in Hobby Lobby is likely to have a profound effect upon how other courts treat state and federal RFRA claims in the commercial sector going forward.  If the Court were to hold that RFRA requires an exemption in these cases—and were to hold, in particular, in the case brought by a very large for-profit employer, that the law substantially burdens plaintiffs’ religious exercise and that the government lacks a compelling interest in denying religious exemptions—that would be a groundbreaking departure from the judiciary’s (and Congress’s) historical practice, one that could pave the way for claims for “myriad exceptions flowing from a wide variety of religious beliefs” (Lee) by commercial enterprises with respect to many other statutes, including nondiscrimination requirements, zoning regulations, taxes, and so on. 

 

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Corporate Conscience
Posted by Brett Scharffs

Hi, Gordon, et al, I'm looking forward to discussing Hobby Lobby with you this week. It isn't too often that a case involving my two primary interests, corporate law and law and religion intersect, so it should be fun. The big question of corporate conscience I find fascinating. We urge corporations to be socially responsible and to be good corporate citizens, and we praise Coca Cola for its interest in arctic wildlife, but somehow Hobby Lobby is told they aren't behaving like a corporation should when they express a conscientious interest in protecting human life. I may or may not agree with their views about when human life begins, but it seems odd that they are treated as not behaving as a business should when the conscientious views of their owners are injected into the corporation's life.

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Pardon my self-promotion #2: My critique of the corporate law professors' brief in Hobby Lobby
Posted by Steve Bainbridge

As mentioned in my opening post, I think a key issue in the contraception mandate cases is whether form should trump substance. In my second post, I discussed my article, Using Reverse Veil Piercing to Vindicate the Free Exercise Rights of Incorporated Employers, 16 Green Bag 2d 235 (2013), in which I proposed that courts should use reverse veil piercing to provide a more coherent doctrinal framework for analyzing when substance out to trump form. As I noted in that post, some 44 corporate law professors filed an amicus brief in these cases that, at least in part, was intended to attack my argument.

I responded in A Critique of the Corporate Law Professors’ Amicus Brief in Hobby Lobby and Conestoga Wood, which is now available in final form at the the Virginia Law Review Online. In it, I argued, as the abstract explains, that:

The Patient Protection and Affordable Care Act (ACA) effected numerous changes in the legal regime governing health care and health insurance. Among the ACA’s more controversial provisions is the so-called contraceptive mandate, which requires employer-provided health care insurance plans to provide coverage of all FDA approved contraceptive methods. 

On March 25, 2014, the Supreme Court will hear oral argument in the Hobby Lobby and Conestoga Wood cases, in which the shareholders of two for-profit family-owned corporations argue that requiring them to comply with the contraception mandate violates the Religious Freedom Restoration Act. 

Forty-four law corporate law professors filed an amicus brief in these cases, arguing that the essence of a corporation is its “separateness” from its shareholders and that, on the facts of these cases, there is no reason to disregard the separateness between shareholders and the corporations they control. The Brief is replete with errors, overstated claims, or red herrings, and misdirection.

Contrary to the Brief’s arguments, basic corporate law principles strongly support the position of Hobby Lobby and Conestoga Wood. In particular, the doctrine known as reverse veil piercing provides a clear and practical vehicle for disregarding the legal separateness of those corporations from their shareholders and thus granting those shareholders standing to assert their free exercise rights.

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Are the cases distinguishable?
Posted by Ronald Colombo

Thank you to Gordon Smith and the organizers of this symposium for allowing me to participate.

Rather than repeat the very fine comments and observations that have already been posted, I'd like to take this opportunity to say something that I have not heard said before:

Although Hobby Lobby and Conestoga have been treated identically by commentators, perhaps there is a means by which they could be distinguished.

As i read Hobby Lobby, an effort is made to claim that the company itself has a religious identity.  In Conestoga, however, that claim isn't really pressed.  I think this may be an important distinction.

For as I see things, a corporation's ability to avail itself of Free Exercise rights should turn largely on its categorization as a(n) (religiously)  expressive association.  Justice O'Connor's reservations notwithstanding, it would seem to me as though corporations can indeed be expressive associations (and some apparently are).  Although Dale calls the expressive / non-expressive dichotomy into question, it does so by making the test even more lenient -- not stricter.  Thus, to the extent that a corporation qualifies as an expressive association, I believe it ought to be able to bring forth a free exercise claim.  (Shameless plug:  I expound upon this in The Naked Private Square, 51 Hous. L. Rev. 1 (2013)).

However, the mere fact that a corporation's shareholders happen to be religious do not, I suggest, transform the corporation itself into a religiously expressive association.

Now, there may be other reasons to find in favor of the free exercise claimants in such cases.  For example, Prof. Bainbridge's arguments on PCV strike me as compelling.  But those arguments are different, I suggest, than the arguments why a genuinely religiously expressive corporation ought to be able to avail itself of the Free Exercise Clause.

 

-Ron Colombo

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Pardon my self-promotion: Hobby Lobby and reverse veil piercing
Posted by Steve Bainbridge

As mentioned in my opening post, I think a key issue in the contraception mandate cases is whether form should trump substance. If Hobby Lobby were David Green's sole proprietorship, there is no question but that he would be able to assert his RFRA and First Amendment claims. Should that change simply because he incorporated his business?

Unfortunately, whether they have allowed incorporated employers to raise such claims or not, courts have failed to articulate a coherent doctrinal justification for their holdings. 

In my article, Using Reverse Veil Piercing to Vindicate the Free Exercise Rights of Incorporated Employers, 16 Green Bag 2d 235 (2013), I proposed that courts should use reverse veil piercing to provide a more coherent doctrinal framework.

Reverse veil piercing (RVP) is a corporate law doctrine pursuant to which a court disregards the corporation’s separate legal personality, allowing the shareholder to claim benefits otherwise available only to individuals. The thesis of this article is that RVP provides the correct analytical framework for vindicating certain constitutional rights.

Assume that sole proprietors with religious objections to abortion or contraception are protected by the free exercise clause of the First Amendment and the Religious Freedom Restoration Act (RFRA) from being obliged to comply with the government mandate that employers provide employees with health care plans that cover sterilizations, contraceptives and abortion-inducing drugs. Further assume that incorporated employers are not so protected. This article analyzes whether the shareholders of such employers can invoke RVP so as to vindicate their rights.

At least one court has recognized the potential for using RVP in the mandate cases, opining that these cases “pose difficult questions of first impression, including whether it is “possible to ‘pierce the veil’ and disregard the corporate form in this context.” The court further opined that that question, among others, merited “more deliberate investigation.” This article undertakes precisely that investigation.

Invoking RVP in the mandate cases would not be outcome determinative. Instead, it would simply provide a coherent doctrinal framework for determining whether the corporation is so intertwined with the religious beliefs of its shareholders that the corporation should be allowed standing to bring the case. Whatever demerits RVP may have, it provides a better solution than the courts’ current practice of deciding the issue by mere fiat.

This proposal met with some considerable hostility from a segment of the corporate law academy, which will be the subject of my next post.

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Symposium on Sebelius v. Hobby Lobby Stores, Inc.
Posted by Gordon Smith
On Tuesday, March 25, the United States Supreme Court with hear arguments in Sebelius v. Hobby Lobby Stores, Inc. The question presented in that case is whether the Religious Freedom Restoration Act of 1993 "allows a for-profit corporation to deny its employees the health coverage of contraceptives to which the employees are otherwise entitled by federal law, based on the religious objections of the corporation’s owners." This case has attracted the attention of corporate law scholars, and for the next four days, we will be hosting an online symposium about the case. We have invited scholars on both sides of the issue to weigh in, and we invite you to join us for a vigorous, respectful debate over this important issue.

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July 17, 2012
The Youth Mission Trip Industry: Voluntourism Meets Summer Camp
Posted by Christine Hurt

Part of my travels this summer included a week-long high school mission trip with my daughter and the rest of her church youth group.  For the past three years, I've accompanied her on these trips, which are sort of organized by the Presbyterian church we attend.  I say "sort of" because all we do is show up.  Then, a larger organization takes over.  This year, we went to The Pittsburgh Project, which describes itself as follows:

The Pittsburgh Project is a nonprofit community development organization with a 25-year track record of developing leaders and serving the city’s most vulnerable residents. Our year-round staff of 51 operates a progressive series of afterschool and summer programs for 450 urban young people, deploys over 2800 people annually to perform free home repairs for Pittsburgh’s elderly homeowners, and spearheads economic development and job training efforts in our Pittsburgh neighborhood.

We were part of the 2800. The Project, which is a permanent, year-round installation, offers "service camps" for youth groups, where students and their chaperones (me) stay in dorm-like (un-airconditioned) bunks, eat sort of marginal food, and go each day to a worksite for a week.  The adults do not observe; we lead work teams of 4-8 students made up from the 20 or so youth groups that show up all week.  It is not easy on either the students or the adults, but the students love it.  There is nondenominational programming in the morning and the evening, and a rec center for free time.  (There's not much free time.)

In other years, we've done mission trips to Tennessee and the Quad Cities (Iowa) area through a different nonprofit, YouthWorks:

YouthWorks believes short term youth mission trips can bring life change to youth, a community and the Church. Within a relatively short period of time, your own life and a stranger’s life can be powerfully changed through the desire to give to a community. Your presence during a mission trip speaks more than a thousand words through your simple love and willingness to serve. YouthWorks believes in stories – in telling Jesus’ story, in listening to other’s life stories and in bringing our stories together to transform hearts; a mission trip is the perfect time to tell those stories.

One of the big differences is that Youthworks sets up in various cities throughout the U.S., sending college students there for the summer to organize a number of rotating projects, which usually include children's day camps, eldercare, and care of adults with special needs, along with physical labor projects. Unlike Pittsburgh Project, they do not have a professional staff of technicians, so most of the rehab projects are clean-up, painting, etc., not drywall, roofing, etc. I would also say that Youthworks emphasizes the religious component with greater success.

So, are these youth mission trips better than summer camp?  Maybe.  Though I loved church camp, I can see that camps minister to the youth, but service camps minister to the youth by empowering them to minister to others.  However, before you get all weapy-eyed, note that these service camps are not cheap.  The Pittsburgh Project trip ran $370 per person for a week, including adults, and you have to bring one (21+) adult per 5 students plus vehicles, which are used every day.  And that does not count getting to/from Pittsburgh.  Based on the accommodations (16 to a room, bring your own bedding), meals (fairly austere, with sack lunches each day, filled with what you didn't eat the day before), the tuition cost must subsidize the work.

I know I am new to this, and that these types of trips abound, from Habitat for Humanity youth trips to numerous, lesser-known organizations.  A quick Google search tells me that organizations that host mission trips for youth both domestic and abroad are everywhere.  And this phenomenon is not just limited to teens; Philanthro Travel or Voluntourism are big trends.  In fact, there is a new book entitled The Voluntourist about a man who set off to save the world and himself "two weeks at a time."

I think youth and adults doing service work is great; I'm a little less sanguine about marketing "vacations with a purpose" as win-wins where you come back refreshed and help someone in the process.

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May 02, 2012
Lawyers as Transaction Cost Engineers in Medieval Germany
Posted by Erik Gerding

Here is a highly productive way for business law professors to procrastinate from grading exams:

The National Bureau of Economic Research just circulated a new version of a paper that provides a medieval complement to the law & finance literature and to Gilson's lawyer as transaction cost engineer idea.  The paper by Davide Cantoni and Noam Yuchtman presents evidence that the training of commercial lawyers by new universities contributed to the expansion of economic activity in medieval Germany.  Here is the abstract:

We present new data documenting medieval Europe's "Commercial Revolution'' using information on the establishment of markets in Germany. We use these data to test whether medieval universities played a causal role in expanding economic activity, examining the foundation of Germany's first universities after 1386 following the Papal Schism. We find that the trend rate of market establishment breaks upward in 1386 and that this break is greatest where the distance to a university shrank most. There is no differential pre-1386 trend associated with the reduction in distance to a university, and there is no break in trend in 1386 where university proximity did not change. These results are not affected by excluding cities close to universities or cities belonging to territories that included universities. Universities provided training in newly-rediscovered Roman and Canon law; students with legal training served in positions that reduced the uncertainty of trade in medieval Europe. We argue that training in the law, and the consequent development of legal and administrative institutions, was an important channel linking universities and greater economic activity.

A very interesting read.

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February 17, 2012
Mormon Population Density
Posted by Gordon Smith

I grew up in a county with 0.0% Mormons, and I now live in a county with 88.13% Mormons. See here for an interactive map.

Yes ... they are a lot different.

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January 15, 2012
Mormon of the Year
Posted by Gordon Smith

Not Mitt Romney. He got it in 2008

It's Jimmer! See Times & Seasons

Last week T&S cited to a court case, Kiewit Power Constructors Co. v. NLRB, 10th Cir., pg. 10 (Aug. 3, 2011), in which DC Circuit judge Tom Griffith -- who also is an adjunct professor at BYU -- quotes a news story "describing college basketball phenom Jimmer Fredette as 'destroy[ing]' an opponent with his combination of longrange proficiency and acrobatic drives." This is the only case currently in the Westlaw "allcases" database referring to Fredette. It's only a matter of time, I suspect, before other cases get jimmered.

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January 13, 2012
"Does God Care Who Wins Football Games?"
Posted by Gordon Smith

Fran Tarkington, prompted by Tim Tebow, asks that question in a WSJ editorial.

I can answer definitively: No. And I know this because of Fran Tarkington.

When I was young, I was a passionate Minnesota Vikings fan in the heart of Packer Country. (Even though I don't follow the NFL anymore, I still hate the Packers. Blech!)

Fran was our quarterback, and, after Alan Page, was my favorite player on the team. Fran led the Vikings to three Super Bowls during my formative years. Each time I prayed fervently that the Vikings would win, and each time my request was denied.

Not surprisingly, Fran had the same experience with prayer and those Super Bowls:

I prayed fervently before each of the three Super Bowls we Minnesota Vikings played in. We played against the Dolphins, the Steelers and the Raiders. I don't know about the first two games, but I was sure God would be on our side for the game against the Raiders! After all, they were the villains of the league, and it was hard to believe they had more Christians on their team than on our saintly Vikings. We lost. 

If you need further proof that God doesn't care about the outcome of football games, just look at the result of last year's Super Bowl.

QED

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August 09, 2010
Eugene Volokh on the Proposed NYC Mosque Near Ground Zero
Posted by Christine Hurt
This post is just one example out of many in the past seven years or so when Eugene cuts through all of the blogo-clutter and and reasonably analyzes a hot-button issue. 

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