Critics lament that with Burwell v. Hobby Lobby Stores, Inc., the Supreme Court further expanded corporate personhood powers. My forthcoming article offers an alternative reading. It suggests that Hobby Lobby might actually provide a tool for limiting previously recognized corporate constitutional rights. To those who oppose the decision, this assertion might seem unduly optimistic. After all, the Court did determine that three family-owned business corporations were “persons” with sincere religious beliefs entitled to use the Religious Freedom Restoration Act (“RFRA”) to deprive employees of federally mandated healthcare insurance coverage. Given that the Court determined that certain “closely held” business corporations possessed statutory rights previously thought reserved to real human beings, it would not seem to presage the future restriction of corporate constitutional rights. However, by designating (thus far) just closely-held corporations as persons with free-exercise rights under RFRA the Court invites us to question whether other corporations (that lack similar attributes) would be denied such personhood. And, if so, whether a distinction between closely-held corporations and others could be applied to curtail corporate constitutional rights.
Determining how Hobby Lobby restricts corporate personhood rights is not a mere thought experiment. It has become immediately necessary as a practical matter. Because the Court held that the contraceptive mandate under the Patient Protection and Affordable Care Act (“ACA”) as applied to the three corporate litigants violated RFRA, the Department of Health and Human Services (“HHS”) was obligated to fashion an exemption for them and similar organizations. Yet, notwithstanding the apparent importance of the term to its central holding, the Court majority failed to define what it meant by a closely-held corporation. Moreover, there is no uniform state or federal law defining this now critical category. Further, the decision seemed to discourage “discriminating” between classes of corporate entities. Wrestling with this apparent indefiniteness, HHS sought through a proposed rulemaking to create a diagnostic test to identify the circumstances when business corporations could become eligible for the exemption from the contraceptive mandate.
The Hobby Lobby majority opinion does provide some guidance. The Court’s threshold determination that the three corporations were persons under RFRA appears to have depended upon the existence of three conditions. First, upon looking-through the corporate entity, the Court was able to see human owners that were co-extensive with the corporation. This move ignored the “separateness” that state corporate law recognizes between a corporation and its owners. Second, it appears that only because the identified human owners held (or agree to share) the same sincere religious beliefs, and third, openly ran the corporation in accordance with those beliefs, did the Court conclude the beliefs of these human beings could be attributed to the corporate entity. Arguably, only with these three factors present, did the Court determine that the contraceptive mandate substantially burdened the sincere religious beliefs of each corporation. The majority opinion suggests that to be deemed a person under RFRA, a corporation would not need to be closely-held. Thus, so long as each of these three conditions was met a corporation could be considered a person under RFRA. Conversely, not all closely held corporations could meet the test.
The decision arguably provides tools to curtail certain corporate constitutional rights. The rights that could be subject to restriction are those that the Court has recognized as deriving from looking through the entity to the owners. This could include the First Amendment corporate political spending rights recognized in Citizens United. A statute should be upheld that limits corporate political spending to those entities where there is an identity of interest between the human owners and the corporation, where there is shareholder consent (on a majority, supermajority, or unanimous basis) to the specific spending, and where there is public disclosure of such spending.
The preceding post comes to us from Jennifer Taub, Professor of Law, Vermont Law School. The post is adapted from the introduction to her forthcoming article, entitled “Is Hobby Lobby a Tool for Limiting Corporate Constitutional Rights” and is forthcoming in 30 Const. Comment. 403 (2015). The article is available here.