Source: https://www.schwabe.com/newsroom-publications-13752
Timestamp: 2019-04-26 08:45:29+00:00

Document:
Can A Corporation Be Baptized?
How the Department of Health and Human Services' exceptions to the Contraceptive Mandate proved too wide for the Supreme Court's application of the Religious Freedom Restoration Act.
On June 30, 2014, the Supreme Court released its decision in Burwell, Secretary of Health and Human Services v. Hobby Lobby Stores, Inc.1 The case challenged the Department of Health and Human Services' ("HHS") Contraceptive Mandate ("Mandate") as applied to for-profit closely held religious corporations. The Mandate requires specified employers' insurance plans to provide coverage of preventative care and screenings for women without any cost sharing requirements.2 This includes coverage for the twenty types of contraception approved by the Food and Drug Administration, ("FDA") although only four types of "morning after" pills were challenged.
The owners of Hobby Lobby and Mardel, the Greens, and the owners of Conestoga Wood Specialties, the Hahns, believe that life begins at conception and therefore certain types of contraception included in the Mandate violate their religious beliefs. Hobby Lobby and Mardel are craft stores and Conestoga Wood Specialities is a producer of high end wood products. All of these corporations are privately held by the families and are what is referred to as "closely held" corporations. The Hahns and the Greens brought suit under the Religious Freedom and Restoration Act of 1990 ("RFRA") and the Free Exercise Clause of the First Amendment.3 The Court addressed the case under RFRA first and did not consider the case under the First Amendment. In a 5:4 opinion written by Justice Alito, the Court held that the Mandate was unlawful under RFRA as applied to for-profit closely held religious corporations. Justice Ginsberg, joined by Justice Sotomayor, Justice Breyer and Justice Kagan dissented. Justice Breyer and Justice Kagan agreed with Justice Ginsberg that the case failed on the merits and therefore did not find it necessary to consider whether for-profit corporations or their owners may bring claims under RFRA.
RFRA was a direct result of the holding in Employment Div. v. Smith in which two state workers lost their jobs for using peyote in a religious ceremony.4 The United States Supreme Court upheld their firing and, in 1993, Congress reacted by passing the RFRA, the purpose of which is to place limits on the power of Congress to impinge upon religious freedoms. RFRA prevents the government from substantially burdening a person's free exercise of religion. If the person satisfies that initial burden of proof that a substantial burden on religion exists, the government then has to show a compelling interest for the burden, in this case the Mandate, and that it is the least restrictive means of pursuing that compelling interest.
Absent HHS's ability to make a satisfactory distinction between for-profit and nonprofit corporations in the context of RFRA,HHS's prior inclusion of nonprofit corporations into the definition of "persons" under RFRA extinguished any argument that for-profit corporations are not included in the definition of "persons" under RFRA. The Court challenged HHS's proposition that "persons" included nonprofit corporations and not for-profit corporations by noting that, "no conceivable definition of the term [persons] includes natural persons and nonprofit corporations but not for-profit corporations."8 In the view of the Court, the definition of "persons" either includes only natural persons or it includes natural persons and corporations.
However, because the Court concluded that under RFRA for-profit corporations were included in the term "persons," the Court continued analyzing the case under RFRA and did not apply the First Amendment.
The Court responded that being "for-profit" is not exclusive of promoting a "community of believers" and refused to attach any meaningful significance to whether a corporation's purpose was to maximize profit or not.13 The Court pointed to the myriad of reasons that a corporation may decide to become a for-profit entity beyond maximizing profit, such as the ability to support political candidates who perpetuate the corporation's ideology.14 In light of this, the Court concluded that the HHS's distinction between nonprofit corporations and for-profit corporations based mostly on profit maximization was too simplified. Therefore for the purposes of free exercise under RFRA, profit maximization is not a meaningful factor to separate two entities for the purposes of their ability to exercise religion.
In Braunfeld, two Orthodox Jewish merchants brought suit under the Free Exercise Clause in response to a Pennsylvania law that required businesses of certain types, including the merchants', to close on Sunday.16 Because the merchants were Orthodox, they closed their businesses on Saturday and claimed that preventing them from opening on Sunday was a violation of their free exercise of religion as they were forced to choose between opening on Saturday, a violation of their faith, or closing for Saturday and losing profit.17 Furthermore, violations of the Sunday closing law resulted in criminal penalties.18 Analyzing the case under the First Amendment Free Exercise Clause, Chief Justice Warren held that a secular law within the state's authority is not invalid for an indirect effect on religion unless the state may accomplish its purpose without such a burden.19 The state's interest was to establish a uniform day of rest for all workers and the Court held that the law was valid given that the state could not accomplish this purpose by a means that did not create a burden to someone.20 Thus, the Court ruled against the merchants.
But as the dissent's comparisons pointed out, analogizing this case to Braunfeld could be considered comparing apples to oranges. For example, Braunfeld involved a sole proprietorship; thus the individuals and the business were one and the same.22 In contrast, Hobby Lobby involves incorporated entities, meaning that the entity is legally separate and distinct from its owners.23 Furthermore, in Braunfeld, the free exercise claim was rejected on the merits; therefore the issue of a for-profit corporation's ability to assert a Free Exercise Claim was not adjudicated.24 But these facts were unavailing to the Court here, who asked, "If Braunfeld allowed a sole proprietorship that seeks to make a profit to assert a free exercise claim, why can't Hobby Lobby, Conestoga and Mardel do the same?"25 In addition, the Court relied on the holding from Justice Scalia's opinion in Smith that the exercise of religion involves not only belief and profession but the performance of (or abstention from) physical acts engaged in for religious reasons.26 The Court concluded that business practices that are compelled or limited by religion are firmly within the definition of religious exercise.
One of the concerns voiced by Justice Ginsberg in dissent in both the holding that included for-profit corporations into the definition of "persons" under RFRA and in the holding that determined that these corporations can "exercise religion" is an increase in religious objections from corporations under RFRA to laws like the Mandate. With regard to the ability to "exercise religion" the Court posited that the sincerity of belief requirement under RFRA is a reliable safeguard against a flood of religious objections in the future. The Court cited U.S. v. Quaintance for the rule that to qualify for RFRA's protection, an asserted belief must be "sincere" and then concluded that a large corporation's objection under RFRA would fail because it could not meet the sincerity requirement.45 In this case neither HHS nor the dissent challenged the sincerity of the beliefs held by the Hahns and the Greens. In response to the consideration of whether Courts were equipped to consider the sincerity of "persons'" beliefs, the Court pointed to RLUIPA. Noting that if Congress allowed the courts to consider the claims of prisoners without a concern that courts could not discern sincerity, there was no issue in regards to corporations on this point.
The certainty to gather from the above is that the Court interprets "religious exercise" under RFRA inclusively, beyond what is established prior to Smith, in respect to both the types of religious exercise that are included and also the types of "persons" who can do actions that constitute the "exercise of religion."
The main disagreement between the Court and the dissent on this prong centered on whether the term "substantial" was one of fact as viewed from the perspective of the Hahns and the Greens or one of law; i.e., according to legal precedent is this the type of burden that the Court has held before as substantial as a matter of law?
In addressing the burden aspect of the analysis, the Court looked to the large amount of money that Hobby Lobby, Mardel and Conestoga would pay if they did not comply with the Mandate. One argument made by amici for HHS suggested that the penalty for not providing any insurance at all is actually less than providing insurance.53 Given that HHS for unknown reasons had not previously made this argument, the Court effectively refused to consider it. However, the Court mentioned this was not a plausible argument because providing health insurance is one of the religious beliefs of the Hahns and the Greens; therefore, asking them not to provide it at all would be a substantial burden, as well.
In what seemed like a refusal to consider the substantiality of the burden as a question of legal interpretation, the Court concluded that the Mandate did constitute a "substantial burden" under RFRA. The corporations were put in a position between choosing to pay large financial sums for noncompliance with the Mandate or to reject what the corporations argued were their sincerely held religious beliefs as expressed in their capacity as an employer.
The Court did implicitly agree that the Mandate furthered a "compelling interest" but also refused to adjudicate it further.
The Court dismissed HHS's analogy of this case under Lee, because unlike in this case where the HHS has foreclosed arguments that widespread application of the Mandate furthers the compelling interest of the government due to the accommodations and exemptions to the Mandate, in Lee "there was simply no less restrictive alternative." The Court did not address the exemption granted in Lee for self-employed Amish and why that was not a direct analogy to the exemption created by HHS for nonprofit religious corporations.
Resting on the above statements that seemingly harmonized the accommodation as the perfect solution to respect the religious beliefs of companies such as Hobby Lobby, Mardel and Conestoga while also making all twenty FDA approved birth control methods available to the female employees of these corporations without cost sharing, the Court held that the Mandate was not the least restrictive means to further the compelling governmental interest. However, as will be clear below, the Court did not actually rule on the legality of the accommodation under RFRA. Therefore those who felt secure that the accommodation would be the way to provide for contraceptive coverage without any effects felt by the employees of the companies will no longer read this aspect of the Hobby Lobby decision as a settling comfort or the Court's attempt to meet HHS halfway.
Thus the Court, held that the Mandate was unlawful as applied against Hobby Lobby, Mardel and Conestoga Wood Specialties.
The Court's opinion in Burwell, Secretary of Health and Human Services v. Hobby Lobby Stores could signify a "decision of startling breadth" or a victory for the religious freedom that is protected by the "stringent test" for government action under RFRA.71 But one thing is clear: RFRA is interpreted by the Court as a powerful statute with application to "persons" potentially beyond whom were contemplated before this opinion. Furthermore, while HHS was likely trying to avoid turbulence in implicating the Mandate with accommodations for religious nonprofits and churches built in, these accommodations arguably crushed HHS's chances of prevailing and thus rendered HHS's arguments in support of the Mandate "knapsacks" destined for a rough impact, instead of "parachutes," able to carry the day.
Two main aspects of the Court's analysis in Hobby Lobby are brought to the forefront in this case. First, the Court's interpretation of "substantial" in Hobby Lobby, which conflates burdens which are sincerely felt with burdens which meet the legal standard for a "substantial burden," leaves this prong of the analysis in the hands of the objector and opens the door for claims such as Wheaton's. Wheaton's objection does not result from a compulsion or restriction on its action but rather from the action of a third-party, the insurance issuer or third-party administrator who will pay for coverage in place of Wheaton. Given that "the law and regulations require that some entity provide contraceptive coverage," there needs to be a way for the insurance issuers and third-party administrators to gain notice of their obligation to provide the coverage in the event that a religious nonprofit makes an objection. The Internal Revenue Service and Department of Labor are using the accommodation form for just this purpose.
The dissent called the grant of the injunction an "unwarranted and unprecedented burden on the Government's ability to administer an important regulatory scheme."82 In ordering that Wheaton need not comply with the EBSA self-certification form by sending it to health insurers and administrators pending appeal, the Court has enjoined Wheaton's compliance with what the dissent calls "the least intrusive way for the government to administer the accommodation."
The Court's recent grant of an injunction in Wheaton certainly calls into question the stability of what seemed like essential holdings in Hobby Lobby. While it is unclear whether the accommodation as it stands will now be held as unlawful under RFRA, it is certain that those with an interest in this issue will be tuned sharply to the further moves of the Court on this issue.
Submitted by Bruce Frederick Howell, J.D., M.S., with grateful thanks to Gabrielle Hansen, third year law student at Willamette College of Law, for her excellent and concise analysis.
As published The Health Lawyer, American Bar Association Health Law Section, March 2015.
1 573 U.S. ___ (2014).
2 42 U.S.C. § 300 gg—13(a)(4).
3 42 U.S.C. § 2000bb (Government shall not substantially burden a person's exercise of religion even if that burden results from a law of general applicability unless the law is in furtherance of a compelling government interest and is the least restrictive means to further the interest); U.S. Const. amend. I. These cases were filed separately but consolidated for the purposes of argument.
4 Employment Div. v. Smith, 494 U.S. 872 (1989).
5 1 U.S.C. § 1.
6 1 U.S.C. § 1.
7 Hobby Lobby, 573 U.S. ___, 18.
8 Id. at 20 (citing Clark v. Martinez, 543 U.S. 371, 378 (2005)).
9 Employment Div. v. Smith, 494 U.S 872, 878 (1989).
10 Hobby Lobby, 573 U.S. ___, 7 (Ginsburg, J., dissenting) (citing Wisconsin v. Yoder, 406 U.S. 205, 230 (1972)).
11 Hobby Lobby, 573 U.S. __ , 8 (Ginsburg, J., dissenting).
12 Id. at 22, 18 (Ginsburg, J., dissenting).
13 Id. at 22 n. 23 (citing Hobby Lobby's statement of purpose proclaiming that the company "is committed to … Honoring the Lord in all we do by operating . . . in a manner consistent with Biblical principles").
14 26 CFR § 1.501(c)(3)-1(c)(3).
15 366 U.S. 599 (1961).
16 366 U.S. at 601.
18 366 U.S. at 600 n. 1.
20 Braunfeld, 366 U.S. at 609.
21 Hobby Lobby, 573 U.S. ___, 21.
22 Sole proprietorship: a business that legally has no separate existence from its owner. Income and losses are taxed on the individual's personal income tax return, available at www.entrepreneur.com/encyclopedia/sole-proprietorship.
23 Definition of Corporation available at www.investopedia.com/terms/c/corporation.asp.
24 366 U.S. at 568 (holding that the State's regulation of conduct by enacting a general law in its power with a secular purposes is valid despite its indirect burden on religious observance unless the state may accomplish the same purpose with means that do not impose such a burden).
25 Hobby Lobby, 573 U.S. ___, 22.
26 494 U.S. 872, 877 (1990).
27 Hobby Lobby, 573 U.S. ___, 20 n. 19 (Ginsburg, J., dissenting).
29 374 U.S. 398 (1963) (establishing the Sherbert Test which required a compelling government interest and the least restrictive means for laws challenged under the Free Exercise Clause); 406 U.S. 205 (1972).
30 494 U.S. at 874.
33 Smith, 494 U.S. at 890.
34 521 U.S. at 533-534.
35 374 U.S. 398 (1963); 406 U.S. 205 (1972).
36 H. R. Rep. No. 103-88, pp. 6-7 (1993).
37 Brief for Senator Murray et al. as Amici Curiae 8; 139 Cong. Rec. 26178 (statement of Sen. Kennedy).
38 28 U.S.C. §2254(d)(1) (citing Federal law as determined by the Supreme Court of the United States as a standard for habeas relief).
39 Hobby Lobby, 573 U.S. ___, 10 (Ginsburg, J., dissenting) (citing H.R. Rep. No. 106-219, p. 30 (1999).
43 366 U.S. 617 (1961) (However as pointed out by the dissent, the suit was brought by more than one party which included both a for-profit corporation and individuals, so there was no need to address the issue of standing, therefore arguing that the Court's inference means less than it asserts).
44 Hobby Lobby, 573 U.S. ___, 28 (citing Title VII 42 U.S.C. § 300a-7-(b)(2); § 238n(a). The dissent cited § 238n(a) and its addition of healthcare entities to mean that because this was enacted after RFRA, this means that RFRA did not codify a religious protection for healthcare entities. The Court rejected this argument because the protections provided to a healthcare entity under § 238n(a) are wholly different from those provided by RFRA.
45 608 F. 3d 717, 718-719 (CA10 2010) (holding that two individuals indicted for conspiracy and possession with intent to distribute did not have a claim under RFRA because their religious beliefs were not sincerely held and were instead only a cover to pursue secular drug trafficking activities). It is curious to note that Hobby Lobby was found to have had 401K investments in drug manufacturers who make the "morning after" pills prior to and after this litigation was filed. See Mother Jones Magazine, April 1, 2014.
46 Hobby Lobby, 573 U.S. ___, 31.
47 476 U.S. 693 (1986).
50 Id. at 700-701, n. 6.
52 Brief for Religious Organizations 22.
54 Hobby Lobby, 573 U.S. ___, 39 (citing Gonzales v. O'Centro, 546 U.S. 418, 430-431 (quoting § 2000bb-1(b)).
55 Brief for HHS in No. 13-354, at 46, 49.
56 Brief for HHS in No. 13-356, at 10, 48.
57 381 U.S. 479, 485-486 (1965).
58 Commonwealth of Pennsylvania v. Dept. of Health and Human Serv., 723 F.3d 1114, 1143 (CA10 2013) (estimating that the contraceptive mandate "presently does not apply to tens of millions of people"). Plans that were enacted prior to March 23, 2010 and have not since changed in ways that substantially cut benefits or costs may not be required to cover contraceptives without cost sharing.
59 While HHS argued that grandfathered plans could not sustain forever, the agency's inability to present a date that there would be no more grandfathered plans was an aspect of its case that that the Court took issue with. Hobby Lobby, 573 U.S. ___, 11 n. 10.
60 455 U.S. 252 (1981).
61 Hobby Lobby, 573 U.S. ___, 43.
62 Lee,455 U.S. at 256.
66 Lee, 455 U.S. at 261.
67 Lee, 455 U.S. at 261.
68 Instead the Court classified this as Congressional sensitivity to religion. Id. at 260.
69 Hobby Lobby, 573 U.S. ___, 3.
71 573 U.S. ___ (2014) (Kennedy, J., concurring) (Ginsburg, J., dissenting).
76 Ibid. (The Court "may issue all writs necessary or appropriate in aid of [its]… jurisdictio[n] and agreeable to the usages and principles of law").
77 Wheaton, 573 U.S. ___, 4 (citing Turner Broadcasting System, 507 U.S. 1301,1303 (1993).
78 Id. at 8 (citing Lux v. Rodrigues, 561 U.S. 1306, 1308 (2010) (ROBERTS, C.J. in chambers).
79 Emergency Application for Injunction Pending Appellate Review 11.
80 Hobby Lobby, 573 U.S. ___ (majority opinion).
81 Hobby Lobby, 573 U.S. ___ (Kennedy, J., concurring).
82 Wheaton, 573 U.S. ___ (2014).
84 Hobby Lobby Stores, Inc. v. Burwell et al, USDC Cause No. 5:12-CV-01000(WD OKLA).

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