Posted on by Marc O. DeGirolami · 2 Comments

Seventh Circuit Enjoins Enforcement of Contraception Mandate Against For-Profits

In an extensive decision, a divided panel of the U.S. Court of Appeals for the Seventh Circuit has enjoined the enforcement of the HHS contraception mandate against several for-profit corporations as well as the individual owners of those corporations. The majority held that “the corporate plaintiffs are ‘persons’ under RFRA and may invoke the statute’s protection; the contraception mandate substantially burdens the religious-exercise rights of all the plaintiffs; and the government has not carried its burden under strict scrutiny.” Since RFRA does not itself define “person,” the majority reached the conclusion that corporations are “persons” under RFRA by consulting the Dictionary Act and finding that nothing in the text of RFRA indicates that the Dictionary Act definition would be a “poor fit” with the statutory scheme (this is the standard announced in a 1993 Supreme Court case).  In both O Centro and Lukumi Babalu, the Supreme Court enforced the free exercise rights of corporations, so the relevant context did not indicate that the Dictionary Act definition of “person” was inapposite here. The court proceeded through a very thorough analysis of the strict scrutiny inquiry. Judge Rovner dissented.

I’ll use the occasion to update my running tally of where we are now in the circuit courts of appeals with respect to this class of litigation:

  • Circuits that have rejected claims in which for-profit corporations are plaintiffs as to the corporations and the individual owners: Third Circuit, Sixth Circuit.
  • Circuits that have accepted claims in which for-profit corporations are plaintiffs as to the corporations and the individual owners: Seventh Circuit.
  • Circuits that have accepted claims in which for-profit corporations are plaintiffs as to the corporations but not the individual owners: Tenth Circuit.
  • Circuits that have accepted claims in which for-profit corporations are plaintiffs as to the individual owners but not the corporations: D.C. Circuit.
Posted on by Marc O. DeGirolami

D.C. Circuit Holds that Owners of For-Profit Corporations Are Injured by Contraception Mandate

This news is a little late in coming, but readers here should know that the United States Court of Appeals for the D.C. Circuit, in a 2-1 panel decision (as to this specific issue), has reversed the district court’s denial of a preliminary injunction barring enforcement of the federal government’s contraception mandate against the owners of a for-profit business. Though the panel was unanimous as to the issue of the individual plaintiffs’ standing to bring a claim under RFRA, only two judges (Judge Brown and Judge Randolph) held that the plaintiffs had satisfied the standard to obtain a preliminary injunction against the government. The court also held, 2-1, that corporations themselves do not have standing to exercise religion and so it dismissed those RFRA claims.

I recommend this thorough analysis and critique of the opinion by Kevin Walsh. For the record, and by my count (though I may have erred in my counting, and please write me if so), we now have the following breakdown among the federal circuit court of appeals:

  • Circuits that have rejected claims in which for-profits are plaintiffs on behalf of the corporation and the individual owners: Third Circuit, Sixth Circuit.
  • Circuits that have accepted claims in which for-profits are plaintiffs on behalf of the corporation but not the individual owners: Tenth Circuit.
  • Circuits that have accepted claims in which for-profits are plaintiffs on behalf of the individual owners but not the corporation: D.C. Circuit.
Posted on by Marc O. DeGirolami

Sixth Circuit Holds that “Secular, Profit-Seeking” Corporations are Not “Persons” under RFRA

In a terse and unsatisfying opinion, the United States Court of Appeals for the Sixth Circuit has held that “secular, profit-seeking” corporations have no standing to sue under the Religious Freedom Restoration Act. The plaintiffs, Roman Catholic owners of a closely held corporation that manufactures automotive and medical products, alleged that the HHS Contraception Mandate violated their religious free exercise under RFRA. After holding that the individual plaintiffs did not have standing, the court said this about the corporation’s standing:

Looking to RFRA’s relevant context, we find strong indications that Congress did not intend to include corporations primarily organized for secular, profit-seeking purposes as “persons” under RFRA. Again, Congress’s express purpose in enacting RFRA was to restore Free Exercise Clause claims of the sort articulated in Sherbert and Yoder, claims which were fundamentally personal . . . .

While the Supreme Court has recognized the rights of sole proprietors under the Free Exercise Clause during this period, it has never recognized similar rights on behalf of corporations pursuing secular ends for profit . . . .

Moreover, the Supreme Court has observed that the purpose of the Free Exercise Clause “is to secure religious liberty in the individual by prohibiting any invasions thereof by civil authority.” Sch. Dist. of Abington Twp., Pa. v. Schempp, 374 U.S. 203, 223 (1963) (emphasis added); see also Conestoga, 2013 WL 3845365, at *5 (“[W]e simply cannot understand how a for-profit, secular corporation–apart from its owners–can exercise religion.”).

Where to begin? The court recognizes that its emphasis on religious freedom that is “personal” or “individual” has, in fact, been totally irrelevant in many, many cases involving the Free Exercise Clause and RFRA in which the plaintiff corporations have prevailed. So why emphasize it? The distinction can do nothing by itself to justify the outcome, and the court seems to say as much.

“Personal” vs. “Group or Corporate” is doing no work here. Instead, there are two phrases that ground the decision: “secular” and “profit-seeking.” And, as I have said before, if courts are to deny religious freedom claims by corporations on these grounds–on the ground of a distinction between the secular and the religious, on the one hand, or of a distinction between profit-seeking and non-profit-seeking, on the other–then they will need to develop a theory of what “secular” means, and what “religious” means, and why the distinction matters in law. Or, they will need to make arguments about what precisely the difference is between “for profit” and “nonprofit” in this context and why it matters.

I should say straightaway that there may well be a discussion to be had, and arguments to be made, about the legal significance of the distinction between the “secular” and the “religious.” I recommend especially much of Steven D. Smith’s recent work on this issue, including this article. But there is not a single word in this decision about that distinction. Likewise, there is nothing about the conceptual distinction between for-profit and nonprofit in this specific context and its import (there is, at the end of the decision, a dubious interpretation of RFRA’s legislative history, but there is nothing of the sort of conceptual work that would be necessary to sustain a holding of this kind).

The Sixth Circuit joins the Third Circuit in reaching this result. Both courts are at odds with the Tenth Circuit. The case is Autocam Corp. v. Sebelius.

Posted on by Marc O. DeGirolami

Third Circuit Denies Rehearing En Banc in Corporate Free Exercise Case

Yesterday, the U.S. Court of Appeals for the Third Circuit denied rehearing en banc in Conestoga Wood Specialties Corp. v. Secretary of the U.S. Department of Health and Human Services. The vote was 7 to 5.

In light of the many problems with Judge Cowen’s opinion for the panel majority as well as the circuit split that is developing over the issue of corporate free exercise of religion (for constitutional and statutory purposes) and the dichotomous confusions that the issue is generating (religious vs. secular, for-profit vs. non-profit), it would not be surprising if one or more of these cases found their way to the Supreme Court relatively soon. On the other hand, these kinds of predictions have an uncanny way of being wrong.

Posted on by Marc O. DeGirolami

Walsh on the Third Circuit’s Contraception Mandate Decision

Center for Law and Religion friend Kevin Walsh has a thoughtful and informative post about the Third Circuit’s recent decision in Conestoga Wood Specialties Corp. v. US Department of Health and Human Services, which I noted and discussed here. One thing that Kevin’s post makes me think is that given the nature of the legislative purpose for enacting RFRA, it is probable that the meaning of “exercise” was intended to be close to the constitutional meaning (pre-Smith). It would have been useful to have more statutory analysis of this type from the Third Circuit. From Kevin’s post:

Consider the facts of Sherbert v. Verner, 374 U.S. 398 (1963), one of the two cases singled out in RFRA. The exercise of religion in that case was Adele Sherbert’s religion-based refusal to work on Saturday. See id. at 403 (describing the relevant conduct as “appellant’s conscientious objection to Saturday work”).

A corporation can engage in this kind of “exercise of religion” if a corporation can refuse, for religious reasons, to do something otherwise required by law. And it plainly can. Suppose a federal law requiring fast-food restaurants located near interstate highways to be open seven days a week. Chick-fil-A’s religion-based refusal to operate on Sundays in violation of this law would surely be an “exercise of religion” akin to Ms. Sherbert’s refusal to work on Saturdays.

The profit-making character of the corporation does not change the analysis of whether the corporation can make a religion-based decision. Chick-fil-A is a profit-making business. Yet it foregoes the profits it would otherwise make through Sunday operation because its religion-based corporate policy controls the manner in which it seeks to make a profit. Similarly, Ms. Sherbert was working for money (and later seeking unemployment benefits). Yet her religious obligation not to work on Saturday conditioned the manner in which she could go about earning money.

The panel majority opinion simply does not address this line of argument. One way in which its failure to address RFRA independently may have contributed to this failure to analyze what counts as a protected “exercise of religion” emerges from a word search for that phrase. It does not appear until page 28, after the majority has already concluded its Free Exercise analysis. In the course of its Free Exercise analysis, the Third Circuit panel majority does not ask whether a corporation can engage in the “exercise of religion” (RFRA’s words), but rather whether corporations can “engage in religious exercise” [11] or whether corporations can “exercise religion” [15]. The wording shift is subtle and almost certainly unintentional, but it nevertheless tends to lead analysis in the wrong direction. For the panel majority’s rephrasing suggests asking whether a corporation can engage in religious exercises like prayer, worship, participation in sacraments, and so on. But that is not what the governing law requires.

Posted on by Marc O. DeGirolami

Baude on the Third Circuit’s Contraceptive Mandate Opinion

Will Baude has a strong post discussing the takeaway from the opinion of the United States Court of Appeals for the Third Circuit yesterday upholding the denial of a preliminary injunction in a contraceptives mandate case. In Conestoga Wood Specialties Corporation v. Department of HHS, a for-profit corporation sued the federal government to stop enforcement of the contraceptives mandate against it. The court, in a divided opinion, held that for-profit corporations cannot “exercise” religion and that they therefore can have no constitutional free exercise or RFRA claims.

Will asks some very good questions about the court’s analysis. I think he is right that the court proves far too much. All of the arguments it makes against the free exercise rights of corporations would apply equally to non-profit corporations like churches. Though the majority recognizes this problem, it does not discuss sufficiently (or really, at all) what for it are the key distinctions–the distinction between “for profit” and “nonprofit,” and the distinction between “religious” and “secular.” There may well be strong arguments to exclude corporations that fall on one side of these distinctions from the category of those entities that can “exercise” religion. But they do not appear in the majority’s opinion.

There is another odd portion of the majority’s opinion that Will does not discuss. Will’s post is largely focused on the Free Exercise Clause and the constitutional question. But there is a RFRA claim as well. As to that claim, the majority’s argument was surprisingly short:

Next, we consider Conestoga‘s RFRA claim. Under the RFRA, ―[g]overnment shall not substantially burden a person‘s exercise of religion even if the burden results from a rule of general applicability [unless the burden] (1) is in furtherance of a compelling governmental interest; and (2) is the least restrictive means of furthering that compelling governmental interest.‖ 42 U.S.C. §§ 2000bb-1(a)-(b). As with the inquiry under the Free Exercise Clause, our preliminary inquiry is whether a for-profit, secular corporation can assert a claim under the RFRA. Under the plain language of the statute, the RFRA only applies to a ―person‘s exercise of religion.‖ Id. at § 2000bb-1(a).

Our conclusion that a for-profit, secular corporation cannot assert a claim under the Free Exercise Clause necessitates the conclusion that a for-profit, secular corporation cannot engage in the exercise of religion. Since Conestoga cannot exercise religion, it cannot assert a RFRA claim. We thus need not decide whether such a corporation is a “person” under the RFRA.

With respect, this is very strange. Normally, one does not simply assume that a term as used in the Constitution must mean exactly the same thing as a term used in a statute. That’s not a rule of statutory interpretation I ever heard of. Normally, one interprets the statutory language independently, using the accepted tools of statutory interpretation. It is true that one should avoid construing a statute in such a way that it violates the Constitution, but that canon does not apply here. It is perfectly possible that there may be different, and distinct, linguistic usages in a statute and in other legal texts. As an example, the majority’s own preferred approach to divining the meaning of “exercise” under the Free Exercise Clause is to engage in what it calls a “historical” analysis. But presumably to divine the meaning of the statutory language, one would begin with the “plain meaning” of the words in the statute as used today. The court uses the words “plain meaning” in the first paragraph, but it does not discuss the plain meaning of the words as used in the RFRA. Perhaps the usage is the same in the RFRA as in the Free Exercise; perhaps not. But simply to assume this about the meaning of the statute because one has decided on the constitutional question has got to be in error.

ADDENDUM: A recent prominent example of different constitutional and statutory meanings concerns the term “tax” as used in the Anti-Injunction Act and in Article I Section 8 of the Constitution. The Supreme Court has held that “tax” in the AIA is to be understood in its broadest possible sense, but a different, and narrower, meaning has been said to apply to the term as used in the Constitution (see, e.g., the Child Labor Tax Case). The same thing might be true of the term “exercise.” See 42 USC s. 2000bb-2(4) (exercise of religion “includes any exercise of religion, whether or not compelled by, or central to, a system of religious belief”) (emphasis added).

Posted on by Marc O. DeGirolami · 2 Comments

What Does Delay of the Big Mandate Suggest for the Little Mandate?

As has been widely reported, the Obama Administration has decided to delay by one year implementation of the mandate that all employers with more than 50 employees must provide insurance for their employees (I’ll call this the “big” mandate). The reason for the delay seems to be largely economic and administrative: the White House has been persuaded to delay in order to ease the transition for employers.

Over at Religion Clause blog, Professor Friedman suggests that delay in enforcement of the big mandate may also mean that courts will now find greater attraction in dismissing suits against the contraception mandate (which is one small piece of the larger requirement to provide insurance–I’ll call it the “little” mandate) on grounds of ripeness. I confess that this was my first reaction as well; delay in enforcement means that there is more time for the Administration to change its mind, tweak the rule, etc.

But some friends with whom I batted the idea around have persuaded me that such dismissals are not probable. The reason is that as recently as June 25 (exactly 1 week before the announcement about delay), the Administration announced the “final rule” involving the little mandate. That means that the injury (assuming that there is an injury) is no longer speculative. It is certain. Ripeness doctrine aims to ensure than an issue is sufficiently final that it is ready for judicial review.  “A claim is not ripe for adjudication if it rests upon contingent future events that may not occur as anticipated, or indeed may not occur at all.” Texas v. United States, 523 U.S. 296, 300 (1998). But the little mandate is now final. So unless, as part of its delay on the big mandate, the Administration also indicates that it is now reconsidering the finality of the little mandate, dismissal of a lawsuit against the little mandate on ripeness grounds seems unlikely.

There is another way that delay of the big mandate might affect arguments about the little mandate. The RFRA test demands that once the plaintiffs show that the particular law or rule represents a substantial burden on their religious exercise, the government is required to show that the burden is justified by a compelling interest and that it is pursuing that compelling interest by the least restrictive means. Most of the attention thus far has focused on the means element; many arguments have been advanced that there are many less restrictive means for the government to achieve its interest, assuming that interest to be compelling.

But delay of the big mandate might go to the question of whether the government’s interest actually is compelling at all. It has always been difficult to know precisely what it is that makes a government interest compelling. It may be somewhat easier to identify those characteristics that make an interest not compelling. In his article, “A RFRA Runs Through It: Religious Freedom and the US Code,” Professor Michael Stokes Paulsen wrote that an interest is not compelling if it involves only issues of expense or administration: “Government–except in perhaps the most exceptional situations–does not have a compelling interest in bureaucratic convenience or ease of administration.”

The situation here, however, is a little bit different. The government can say that its interest in, say, “public health” continues to be compelling and continues to be the ground of the contraception mandate. But another even more compelling interest–the economic and administrative expenses that employers will suffer as a result of (what the Administration now believes is) premature enforcement of the big mandate–is more important than whatever interest it has in enforcement of the little mandate right now. The idea is: yes, the contraceptives mandate is important. But it’s even more important that we make it easy for businesses to implement the employee coverage mandate in an economically and administratively feasible manner. We are willing to delay implementation of the mandate to cover employees generally (for economic/administrative reasons), at the expense of getting immediate coverage for contraceptives for those selfsame employees.

In order for that argument to work, however, one would have to be persuaded that the easing of economic and administrative expenses for employers faced with implementing the big mandate is itself a compelling government interest. Up until yesterday, one might have thought that the pursuit of the “public health” represented by the big mandate was more compelling than such economic and/or administrative interests. But now the issue is less clear. And if it is less clear for the sort of public health to be achieved by the big mandate, it may be less clear for the more particular sort of public health to be achieved by the little mandate. It does not seem very persuasive to claim that the government’s interest in the little mandate becomes compelling only at such time when it is more palatable or economically feasible for employers to comply with the big mandate.

It’ll be interesting to see how this shakes out.

Posted on by Marc O. DeGirolami

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

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

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

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

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

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

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

Posted on by Marc O. DeGirolami · 1 Comment

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

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

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

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

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

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

Posted on by Marc O. DeGirolami

New York Times Story on the HHS Mandate Suits

Here’s a story published yesterday in the Times on the HHS Mandate law suits.  The story has several problems, among which are:

(1) It gives the impression that courts are, at this point, either dismissing these cases because they believe that “contraception is a vital health need and a compelling interest” or finding for the plaintiffs because “they [the plaintiffs] have been told that their beliefs appear to outweigh any state interest and that they may hold off complying with the law until their cases have been judged.”  The reality is that the large majority of these  suits have been dismissed without prejudice on standing or ripeness grounds, as we have noted again and again here at CLR Forum.  Standing does not appear at all in the story.

(2) Its focus on the Free Exercise Clause is odd.  It mentions the Religious Freedom Restoration Act, but it focuses on the Free Exercise Clause and it mistakenly calls the O Centro case a free exercise case.  It was a RFRA case.  Here is some important language in that case:

The Government’s argument echoes the classic rejoinder of bureaucrats throughout history: If I make an exception for you, I’ll have to make one for everybody, so no exceptions. But RFRA operates by mandating consideration, under the compelling interest test, of exceptions to “rule[s] of general applicability.”

The discussion of the Smith decision in the news story also gives the misimpression that Smith is an iron clad rule with no exceptions, but that is not true, as I have noted before.

(3) The story references the possibility that “[a] compromise for religious institutions may be worked out” and then proceeds to talk about the previously announced putative plan to shift the cost of contraception to insurers.  Standing alone — i.e., without an expansion of the category of religious employers and without dealing with the issue of self-insured plaintiffs — that compromise will work very little out for religious institutions.  But I guess we’ll see by roughly the end of the first quarter.

That said, the reporter is to be commended for getting a variety of perspectives on the issue.