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.
And:
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.
“But Alito is, at least I suspect, the justice least respected for intellect.”
My vote goes to Thomas.
A lot of people think Thomas is smart. I’m not among them. But while Alito, unlike Thomas, isn’t on the radar screen of anyone who doesn’t follow the court closely, I can’t even imagine anyone who does follow the Court saying he’s much more than a robot. It’s actually shocking when he writes an opinion or dissent that shows even a hint of depth or deviation from program mode. It’s happened maybe three times in his eight years on the Court.
Bev:
Ditto.
The Constitutional position is pretty clear:
“Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof.”
You can write a 10,000 word justification for your position, but the Constitution is mercifully clear and concise. Congress shall make no law prohibiting the free exercise of religion.
What the Left refuses to accept is that corporations are just people–they’re individual humans who are in a legal ownership arrangement, not fundamentally different than a partnership, LP, or LLC. Our founding fathers would be rolling over in their graves if they knew Congress were passing laws mandating commerce, and then mandating commerce without even respect to the status of interstate commerce, let alone if the Congressional mandates forced business owners to violate their religious consciences.
What the Left is arguing is that corporations aren’t people and therefore are not entitled to full Constitutional protections. So I suppose Congress could regulate the speech of ExxonMobil, or it could strip executives of due process for alleged crimes, or Congress could confiscate corporate property without just compensation, or suspend habeas corpus while investigating alleged crimes. The argument is preposterous, of course. According to this argument, Congress cannot make mandates that violate the consciences of a sole proprietor but it could pass mandates that violate the consciences of a sole owner of an S-corp. It’s logically and constitutionally preposterous.
Definitely . . . did you know Jesus took an anti-minimum wage stance in the bible? Here is some testimony on it. Its a fact.
Jesus Opposed The Minimum Wage”
“Taxation and deficit spending amount to theft, a violation of the Ten Commandments. The estate tax is “absolutely condemned” by the Bible as the “most immoral” of taxes. Jesus had “teachings” condemning the capital gains tax and minimum wage.” ht: Digsby at Crooks and Liars http://digbysblog.blogspot.com/2014/03/the-hobby-lobby-slippery-slope-its-not.html
Lets understand something here, if we took the stance you are taking; I believe we would have to go back and change every law which was interpreted from the Constitution by Congress and judges since the darn thing was written.
If they rule as you suggest it will be just one more ruling in the string of ruling creating a disjointed, none congruent rule of law.
However, with that, they are getting real close to making it easy to claim that capital gains in a corp is a fallacy as all earnings after expense are personal income.
I am now of the confirmed (prior just suspected) that our court majority has no concept and thus no ability to reason out what their decisions will produce in society over all. That is, they look at the stream, decide they need it to do A and have not been taught to go the next step and see what it looks like traveling from B to Z.
But then, we’re at a time when we don’t get that our issue is not greed but selfishness as greed is only one manifestation of selfishness. This coming ruling will be another example.
Once again we are likely to be reminded that elections have consequences. This potential ruling would be one of them. Forget about logical analysis and the “rule of law”. We are dealing with ideology pure and simple. Recall the assertion that equal protection as applied in Bush v.Gore was not to be considered precedential as to any other issue? This is just more of the same and it will not be turned around, if at all, until the composition of the court changes. The “ad hoc” behavior of this court will not be stopped by traditional processes of legal argument and analysis.
Kevin,
Corporations as noted in all of Bev’s posts are not “just people”. They are exactly as the Supremes have ruled prior a creation by people for a specific purpose as defined by law.
You can argue all you want too that the corp is simply another one in a long line of vehicles that society uses to organize people, but in that long line the vehicles are well defined as to what purpose they will serve. The key being that they serve a purpose for us.
As was noted, those who want a corp that can be used as a vehicle to practice their religion and thus have the corp act as a surrogate or proxy can incorporate as a church.
There is nothing in forming a corporation that prevents one from practicing their religion.
Yes, the people via this government can regulate a corporations speech but no the government can not remove an executives due process. The executive’s identity as a citizen under the constitution is not dependent on the executive’s corporate connection. S corp or otherwise. But, good try there.
Kevin, “What the Left refuses to accept is that corporations are just people–they’re individual humans who are in a legal ownership arrangement, not fundamentally different than a partnership, LP, or LLC.”
Two points in reply. First, the free exercise of religion does not include the right to impose one’s religious beliefs on others. That is what this case is about. An employer wants the employees to adjust their personal medical needs to that employer’s religious preferences. Second, no a corporation is not an individual and it is legally distinct from partnerships. A person, or group, forms a corporation in order to conduct a business enterprise and at the same time distance themselves from potential liabilities that may occur in the course of conducting that business. Limiting one’s liabilities through a corporate structure also means subjecting that corporation to legal requirements which may result during the course of carrying out that business.
Lordy, lordy, Kevin. You’d better sit down and have a talk with Antonin Scalia. Or maybe just read the opinion he wrote back in 1990 in a case called Employment Division, Department of Human Resources of Oregon vs. Smith–the case that prompted Congress to enact the statute on which the ACA-contraception cases will be decided: the Religious Freedom Restoration Act. Or you could just read the Wikipedia entry on the case, which includes this excerpt from the Scalia opinion:
“It is a permissible reading of the [free exercise clause]…to say that if prohibiting the exercise of religion is not the object of the [law] but merely the incidental effect of a generally applicable and otherwise valid provision, the First Amendment has not been offended….To make an individual’s obligation to obey such a law contingent upon the law’s coincidence with his religious beliefs, except where the State’s interest is ‘compelling’ – permitting him, by virtue of his beliefs, ‘to become a law unto himself,’ contradicts both constitutional tradition and common sense.’ To adopt a true ‘compelling interest’ requirement for laws that affect religious practice would lead towards anarchy.”
The Wikipedia entry is at http://en.wikipedia.org/wiki/Employment_Division_v._Smith. The opinion itself is at http://www.law.cornell.edu/supremecourt/text/494/872.
I object to your calling Justice Scalia’s statement logically and constitutionally preposterous–especially since Scalia communicates regularly with James Madison and reports to the public on those communications. And Scalia objects to your calling him a Lefty. He told me so, using the very same methodology he uses to communicate with Madison.
“…prohibiting the free exercise thereof.”
Imposing ones belief on another is not “the free excercise thereof”.
Ad hoc, indeed, JackD. I plan to post a follow-up to this post, hopefully tomorrow, that will get into more detail about it. Ad hoc is an absolute hallmark of the Conservative Legal Movement’s judges and justices.
PS: Kevin, please read an article published on Slate two days ago called “Getting the History Right: Tracking the real history of corporate rights in American constitutional thought.” It’s at http://www.slate.com/articles/news_and_politics/jurisprudence/2014/03/hobby_lobby_and_corporate_personhood_here_s_the_real_history_of_corporate.html.
The article includes this:
“Contrary to present efforts to depict corporations as simple and natural entities—like persons—entitled to constitutional rights, a different view prevailed for most of American history. Until the mid-20th century, the corporation was seen as a special and artificial creature of the government. It has never been seen as entitled to the same array of rights guaranteed to citizens.
“This view was held not only by lay people and legislators but by the justices of the court itself. Chief Justice John Marshall did not equivocate in Dartmouth College v. Woodward in 1819: “A corporation is an artificial being, invisible, intangible, and existing only in contemplation of law. Being the mere creature of law, it possesses only those properties which the charter of its creation confers upon it.” In 1839, Chief Justice Roger Taney agreed wholeheartedly in Bank of Augusta v. Earle: “A corporation can have no legal existence out of the boundaries of the sovereignty by which it is created. It exists only in contemplation of law and by force of the law. … It is indeed a mere artificial being.”
So now you know that Chief Justice John Marshall would beg to differ with you, as did Chief Justice Roger Taney–he of Dred Scott v. Sanford fame, and not someone I’m eager to cite, but, oh, well–about your walkin’-talkin’-prayin’ paper people who are taxed at a much lower rate than, say, people not named Mitt Romney and who aren’t hedge fund managers but who actually attend church.
So please stop.
Jack,
” First, the free exercise of religion does not include the right to impose one’s religious beliefs on others. That is what this case is about. An employer wants the employees to adjust their personal medical needs to that employer’s religious preferences. ”
Beg to differ. This case is about the government mandating a corporation to engage in commerce which the owners find religiously objectionable. And unwillingness to pay for a benefit is not “imposing one’s religious beliefs on others.” even if religion is the foundation for the unwillingness.
M.jed,
I guess that’s why they’re in court making their arguments. The law requires that health insurance include certain areas of benefits to the insured. If the corporation is going to offer health care, as is also required by the law for corporations of a certain size, then it can’t pick and choose the benefits to be proffered. To limit the benefits based on a third party’s religious preferences is to require that the beneficiaries yield to those preferences. The owners of the corporation are the third party. It is the corporation that provides the health care insurance, not the owners of the corporation. Again, that’s why they’re arguing in court.
“So Alito wondered if there was something wrong with the corporate form that it would not be accorded religion freedom rights.”
There was a time when intelligent lawyers and judges recognized that a corporation was an artificial legal entity. It’s something that is chartered by a government, not given a birth certificate. It doesn’t have parents. It has stock holders, many or just a few. It’s purpose, which the owners need to be reminded of, is to separate the owners from the financial liabilities of the corporation’s activities. The question is, itself, a sign of ignorance of the law, at least the historically accepted concept of a corporation as a legal entity.
“According to this argument, Congress cannot make mandates that violate the consciences of a sole proprietor but it could pass mandates that violate the consciences of a sole owner of an S-corp”
Jack,
I do not think any of the defenders of ACA here accept your premise. In other words they do not believe that Congress is not empowered to pass mandates on sole proprietors. Heck they do not even believe that Congress is not empowered to pass mandates on potential customers!
But yes, it is absurd. Though to those who have already accepted the notion that Congress can regulate our decisions -a violation of that thing we used to call free will -nothing the glorious State does is absurd, or even unconstitutional.
oops, last comment was of course directed to Kevin, not jack.
Is there an edit feature?
Beverly,
In your March 26, 2014 6:56 pm response to Kevin, you are hung up on the question of the rights of corporations, but pay no mind to the supposed power of Congress.
Does Congress have the power to mandate that sole proprietors pay for abortions for their employees? Can you honestly say there is no question of conscience involved, or does than not matter? Is being forced to pay for an abortion the same as being forced to pay for dental care?
In your OP, 2nd and 3rd paragraphs from the bottom, again you seem concerned only with the rights of persons as contrasted with corporations, but not at all interested in whether Congress has authority to make laws which interfere with the free exercise of religion, rights of conscience, etc.
Some flaws of logic/fact and a lack of quality in this article:
First, the threshold question is not whether the “proverbial corporate veil … can be “pierced” but whether a for-profit corporation qualifies as a “person” under the Religious Freedom Restoration Act (RFRA). Since the congress in passing RFRA stated its requirements apply to “all Federal law, and the implementation of that law, whether statutory or otherwise, and whether adopted before or after November 16, 1993” the only logically consistent conclusion is, “Yes”, whether One likes it or not.
I believe the “He’s conflating the Securities Exchange Act, which regulates publicly traded corporations, with state-law corporate structure” claim is the actual ignorant piece in this conversation and not Justice Alito’s statement because the Securities Exchange Act is a law governing the secondary trading of securities in the United States of America. Since a corporation is not inherently one with securities publicly traded, the concern over Justice Alito’s question is unfounded.
Curiously, after mentioning the fact the Securities Exchange Act, which is inapplicable anyway, does not require for-profit corporations to try to maximize profit “to the exclusion of all else”, the Author then proceeds to argue as if the Act /does/ require such exclusivity of purpose. Additionally, the Author appears to be not well versed in corporate law and, if otherwise, would have recognized reasons beyond profit making and liability protection exist and often are motivating factors when choosing to incorporate. For example, One may wish to allow for a easier transition of ownership from one party to another and incorporation helps to optimize that ease; depending upon One’s tax situation, One’s total tax bill after incorporating may be lower than operating as a partnership of sole proprietorship; acquiring needed funding is often easier if done by a corporation than by a non-incorporated entity. Even then, removing “shareholders from financial liabilities” or any liability of any kind does not translate into Shareholders relinquishing other legally/constitutionally protected rights.
Additionally curious: the Author, while providing legal commentary, readily points out the fact the Securities Exchange Act is not the Author’s “area of expertise”. I would have thought, before relying upon this particular law, Someone seeking to give legal analysis at least would have verified the legal applicability of said law.
The Author then states, “Alito wondered if there was something wrong with the corporate form that it would not be accorded religion freedom rights”, which is incorrect. From the transcript, We readily see at no point in oral arguments for this case is the word “wrong” used. Justice Alito does ask, “[I]s it your position that there’s something about the corporate form per se that is inconsistent with the free exercise claim?” and “[I]s it your argument that there’s something about engaging in a for-profit activity that is inconsistent with a free exercise claim?” and “[W]ere the merchants in the Braunfeld case engaged in for-profit activity?” and “So there isn’t anything inherent in — in participating in a for-profit activity that’s inconsistent with corporate form, is there? I’m sorry, with a free exercise claim,” and “Well, what is it about — a for-profit corporation that is inconsistent with a free exercise claim? Do you agree with the proposition that was endorsed by one of the lower courts in this case, that for-profit corporations must do nothing but maximize profits, they cannot have other aims — including religious aims?” None of these question suggest “something wrong with the corporate form that it would not be accorded religion freedom rights”. Nor does the issue rest with “lobby[ing] state legislators to amend the state’s incorporation laws” because all state laws are required to comply with the Privileges or Immunities Clause of the 14th amendment, a fact which appears lost on the Author of this article. Another fact which appears lost on the Author is RFRA already applies to corporations by means of both the Dictionary Act and the plain text of RFRA itself: the Dictionary Act includes corporations in the legal definition of “persons” and RFRA itself states its protection apply “to all Federal law, and the implementation of that law, whether statutory or otherwise, and whether adopted before or after November 16, 1993,” the key word being “all”, and, therefore, includes laws respecting for-profit corporations.
I also fail to see how Justice Scalia needs “to extricate himself from” the opinion in Smith because relying on the combination of the Dictionary Act, the law which defines corporations to be “persons”, and RFRA removes the need to address the constitutional issue at all. However, even if the constitutional question did need to be answered, a simple examination of the regulation’s structure shows it to not be a “law of general applicability which is neutral towards religion”: what qualifies as religion exercise has always been defined by the Adherent and the sincerity of belief has always been determined by the courts, laws exempting/accommodating one class of organizations because of religious burdens and not another class because of comparable religious burdens clearly favors one religion over another and, consequently, fails to meet the constitutional requirement of neutrality towards religion.
The quote of Justice Kennedy with respect to “Congress-v-Agency” leaves out relevant information which, upon consideration, shows the Author’s characterization to be grossly erroneous. The actual quote from the transcript reads, “Now, what — what kind of constitutional structure do we have if the Congress can give an agency the power to grant or not grant a religious exemption based on what the agency determined? I recognize delegation of powers rules are somewhat more abundant insofar as their enforcement in this Court. But when we have a First Amendment issue of of this consequence, shouldn’t we indicate that it’s for the Congress, not the agency to determine that this corporation gets the exemption on that one, and not even for RFRA purposes, for other purposes.” The interpretation given by the Author suggests to Me either incompetence, laziness, or deceit. Note: if a fourth interpretation exists, please let Me know because I don’t see one.
There can be no “charge of hypocrisy for casually deviating from his trademark pretension to textualism in statutory interpretation” if Justice Scalia rule Hobby Lobby et al. are “persons” under RFRA because of such an interpretation is consistent with the text of that law, as defined by the Dictionary Act. Given the repeated claims without evidence or logic in this post and others on this site, I am starting to wonder if the Author has not some deep hatred for anything associated with Justice Scalia.
From towards the end, “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.” If such an opinion were to occur, maybe; however, this situation does not appear to be under consideration. If anything, as suggested by the Chief Justice, a decision would be limited to closely held corporations, with a decision about other corporations left for another day.
The penultimate paragraph seems self-contradictory. If the right in question is “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”, that right is independent of “the financial interests of all of the association’s citizen members”. Therefore, the example of “union members who owned shares of the company through their pension fund” is wholly irrelevant.
In short, this article reads as if it were written by a grade school Student of below average academic skill. I really do expect better from a site reference by SCOTUSblog.