My early take on the ACA-contraception-mandate-case argument: Alito conflates the Securities Exchange Act with state-law corporate-structure statutes (yikes); Kennedy really, really wants to give corporations the full complement of human constitutional rights; and Scalia really, really needs to limit this ruling to an interpretation of the Religious Freedom Restoration Act.
When [U.S. Solicitor General Donald] Verrilli said the Court has never found a right to exercise religion for corporations, Alito wondered if there was something wrong with the corporate form that it would not be accorded religion freedom rights. Did Verrilli agree, Alito said, with a lower court’s view that the only reason for a corporation to exist was to “maximize profits?” Verrilli said no, but Alito had made his point.
— Argument recap: One hearing, two dramas, Lyle Denniston , SCOTUSblog, reporting on this morning’s Supreme court argument in Sebelius v. Hobby Lobby Stores and Conestoga Wood Specialties v. Sebelius.
That paragraph was one of two in Denniston’s recap that dismayed me, albeit only momentarily. Unquestionably, a threshold issue in these cases is whether or not the proverbial corporate veil–a shorthand legal term that conveys that the very purpose of the state-created corporate structure is a severance of the rights and liabilities of corporations from those of its shareholders–can be “pierced” in order to allow the shareholders in these two closely-held corporations to confer to the corporation their personal legal right of religious exercise under the First Amendment or under a federal statute called the Religious Freedom Restoration Act, the latter which expressly uses the term “person” to identify its beneficiaries. I addressed this in detail in this post here yesterday.
But Alito is, at least I suspect, the justice least respected for intellect. He makes downright jaw-droppingly bizarre comments at oral arguments, and regularly makes clear his intention to impose upon the country what amounts to the Reagan-era Conservative Movement’s wish list, come hell or high water. But in that particular statement that Denniston recounts, Alito comes off as just plain ignorant. He’s conflating the Securities Exchange Act, which regulates publicly traded corporations, with state-law corporate structure.
The Securities Exchange Act does (I believe; that’s not my area of expertise) require for-profit corporations to try to maximize profits–albeit not to the exclusion of all else–but the purpose of the corporate structure (as opposed to an unincorporated, for-profit business) is to enable the business itself, in its own name rather than in its owners’, to incur debt (stocks, bonds, bank loans, etc.), make contracts (including purchase and sales contracts), and generally do business as an entity separate from its shareholders. A critical purpose of the corporate structure is, in other words, to remove the shareholders from financial liabilities of the business.
The only reason, normally, for a for-profit business, incorporated or not, to exist is to make money. But making money is not the sole reason for incorporation of the business; a legal separation between the business and its owners is the main reason for incorporation of the business. So the point Alito had made is that he doesn’t (or pretends not to) know that. Or that he misunderstood the lower appellate court’s point.
So Alito wondered if there was something wrong with the corporate form that it would not be accorded religion freedom rights. Well, maybe, but the remedy is to lobby state legislators to amend the states’ incorporation laws. Or to amend the Religious Freedom Restoration Act to accord corporations religious freedom, should they wish to pray or something. Or to amend the First Amendment’s religious-exercise clause to do that. But although the plaintiffs had been relying upon Citizens United’s ruling not that corporations themselves are people, who have First Amendment speech rights, but instead upon First Amendment speech rights derivative of its owners as “associations of citizens”–and that the public is entitled to hear the political views of that association of citizens (or, actually, of its CEO)–Alito thinks the corporate form itself, not the derivative rights of the corporation’s shareholders, accords the corporation religion freedom rights. And that if not, there’s something wrong with the corporate form.
I ended my post yesterday with this:
Okay, my eve-of-oral-argument hunch is that the court will back away somewhat from its Citizens United claim that corporate CEOs can, in the name of the corporation, access the constitutional rights of citizen-association members. The Court will find some way to segregate speech rights from other constitutional rights, and will rule against the plaintiffs in these two cases. That’s because, well, apparently a slew of other associations of citizens–e.g., the business community at large–are making it known, including in amicus briefs to the court, that they’re downright scared to death of this end-to-the-corporate-veil/corporations-are-groups-of-citizens (who can be held individually responsible for their for-profit association’s liabilities) thing.
Or maybe they’re just scared to death at the thought of ExxonMobil or Amazon marauding through their towns bearing AK-47s in exercise of their derivative Second Amendment rights. It could be time for some for-profit associations of citizens to pray.
Turns out, what I thought was a joke in that last paragraph may not be funny, after all.
The second momentary jolt for me was Kennedy’s repeated indication that he believes that the constitutional rights that he said in Citizens United–he wrote that opinion–accrued to the corporation only derivatively as an “association of citizens,” in other words, through its members rather than as a separate entity, extend to all constitutional rights. Denniston writes:
Early in the argument, Justice Kennedy asked non-committally how the Court could avoid the constitutional issue of the mandate’s impact on the right to freely exercise religion. Clement said it would be easy, and relying only on a federal law, the Religious Freedom Restoration Act, would clearly favor a corporate exemption to the mandate.
The low point for Verrilli, however, came late in his argument, when Justice Kennedy told him bluntly: “Under your view, for-profit corporations can be forced to pay for abortion. Your reasoning would permit that….You say that for-profit corporations have no standing to litigate what their shareholders believed.”
It’s important that Clement said it would be easy to avoid a constitutional issue by relying only on the federal statute, the Religious Freedom Restoration Act (RFRA). That would be true only if they ruled that that statute includes corporations, or at least closely-held corporations, within its meaning of “people.” And Scalia made clear that that is what he himself plans to do. It is, in fact, what Scalia has to do, in order to extricate himself from a 1990 opinion he wrote, in a case called Employment Division, Department of Human Resources of Oregon v. Smith, ruling against a Native American who had claimed a First Amendment religious-freedom exemption to smoke peyote during religious ceremonies–the Court ruling that provoked the RFRA.
Kennedy, though, badly wants to ignore the RFRA nonsense and cut to his chase. He really, really wants this to be a First Amendment ruling. Denniston writes:
As Verrilli’s situation worsened, Justice Kennedy moved in to wonder why it was that Congress would allow a government agency — the Health and Human Services Department — “the power to decide a First Amendment issue of this consequence…. That is for Congress, not for an agency.” Kennedy would repeat that criticism later in the argument.
Hmm. And to think I thought it was for Kennedy, not Congress, to decide a First Amendment issue of this consequence.
Based on Denniston’s recap, here’s what I expect that the outcome will be: A 5-4 ruling striking down the mandate by ruling that closely-held corporations are “people” within the definition of “people” in the RFRA, and not addressing the constitutional issue at all. This will remove the charge of hypocrisy and ends-based decisionmaking against Scalia by contrasting the ruling with his opinion in Smith. But it will not remove the charge of hypocrisy for casually deviating from his trademark pretension to textualism in statutory interpretation. Which actually is par for his course.
But it could, in theory anyway, invite a narrowing of Citizens United, even though the ruling would not be a First Amendment corporate-rights decision. The First Amendment prospects for an implicit narrowing of Citizens United was the main focus of my post yesterday. But the question of a narrowing depends not really on the constitutional nature of the right but instead on the derivative-or-not nature of the right at issue, whether or not the right is constitutional or is instead statutory. If the Court says the derivative nature a provision of law that provides a right to “persons” comes from the personal closeness of its shareholders to the corporation, then Citizens United should be limited to closely held corporations, too.
The First Amendment right Kennedy proclaimed for people unaffiliated with the corporation to hear the speech of the corporation was, of course, as I said yesterday really a proclaimed right of unaffiliated people to hear the corporation’s CEO’s speech, funded, though, by all the shareholders–or, as Kennedy out it, the association of citizens. The idea was that the political speech advanced the financial interests of all of the association’s citizen members, because they shared an interest in the financial success of the corporation and the political speech they were funding concerned financial matters. The premise was ridiculous; union members who owned shares of the company through their pension fund probably would not have supported anti-union candidates, for example. And if these two cases serve to remove that fig leaf from the corporations-have-their-owners’ derivative-constitutional-rights juggernaut, except for closely-held corporations, the outcome will have an important silver lining.
So we probably won’t have to fear Exxonmobil and Amazon marauding around with AK-47s, after all, since they’re publicly held corporations. And hopefully Hobby Lobby’s hobby isn’t hunting.