What to look for in tomorrow’s Supreme Court arguments in the Hobby Lobby/Conestoga Wood ACA-contraception-coverage cases
[The] conception of corporate personhood has profound and beneficial economic consequences. It means that the obligations the law imposes on the corporation, such as liability for harms caused by the firm’s operations, are not generally extended to the shareholders. Limited liability protects the owners’ personal assets, which ordinarily can’t be taken to pay the debts of the corporation. This creates incentives for investment, promotes entrepreneurial activity, and encourages corporate managers to take the risks necessary for growth and innovation. That’s why the Supreme Court, in business cases, has held that “incorporation’s basic purpose is to create a legally distinct entity, with legal rights, obligations, powers, and privileges different from those of the natural individuals who created it, who own it, or whom it employs.”
In recent constitutional law cases, however, the justices seem to have forgotten this basic principle of corporate law. In Citizens United, the court effectively held that corporations enjoyed the same free speech rights as ordinary individuals. Contrary to popular belief, however, the court did not base that holding on the idea that corporations are people. Instead, the justices said that corporations are “associations of citizens”—and those citizens who make up the corporation have constitutional rights.
— Yes, Corporations Are People. And that’s why Hobby Lobby should lose at the Supreme Court., Adam Winkler, Slate, Mar. 17
Among the inundation of articles about Sebelius v. Hobby Lobby Stores, Inc. and Conestoga Wood Specialties Corp. v. Sebelius in the months since the Supreme Court agreed to hear these cases–one, Hobby Lobby, in which the corporation won in the lower appellate court, the other, Conestoga Wood, in which the corporation lost–there are very among the ones I’ve read that make what I think is the critical point about these cases: the critical interplay between the Citizens United opinion and these two cases, and the reason why. It’s a point I made (or tried to) in a post on AB last fall, but Winkler is a constitutional law prof. at UCLA and, according to his mini-bio at the end of his slate article, he’s writing a book about the constitutional rights of corporations, so I was happy to read the paragraphs I quote above in an article published on a mainstream-media website.
For all the jokes about corporations attending church or being bar mitzvahed–yes, I plead guilty, but writing that post was so much fun!–the fact is that the corporations in those cases claim not that they are people but instead that they derive their First Amendment right to the free exercise of religion not from the state’s grant of corporate status but rather from the constitutional rights of its shareholders. This argument–that corporations’ constitutional rights are derivative of their shareholders’ constitutional rights and therefore are not limited to, say, protecting the property that the corporation itself owns or to the ability to enter into business contracts on behalf of itself–comes courtesy of Citizens United, pure and simple. Hobby Lobby and Conestoga Wood, unlike Citizens United, are for-profit corporations. They both also are closely held, rather than publicly traded, corporations, and in both cases, the shareholders (members of a single family, in each case) are parties to the lawsuit along with the corporations themselves.
Mitt Romney’s ill-fated pronouncement that corporations are people, my friend, was funny, but it actually was an inarticulate adoption of Citizens United’s actual declaration: that corporations are “associations of citizens” whose members, as human individuals, have the familiar panoply of constitutional rights. One obvious problem with this derivative-constitutional-rights thing, though–albeit a problem that the Citizens United majority didn’t acknowledge–is that the individual shareholders of at least publicly-traded corporations don’t all hold the same political views. Some shareholders are shareholders by virtue of participation in large mutual funds, and others by dint of ownership in pension funds. Some of them even in public-union pension funds!
Then again, at a recent oral argument at the Court in a case that, although it’s not an ACA or religion case, I believe has implications for these two cases, Samuel Alito suggested that public unions are unconstitutional as a violation of … something. (Of his political views, I think.) If he prevails on this when that case, Harris v. Quinn, is decided, that would eliminate the problem of Democrats who are contributors to public union pension funds having Republican CEOs of mega-corporations serve as proxies to derivatively exercise the pension-fund contributor’s First Amendment speech rights. But the fact will remain that Democrats–who, contrary to Fox News reports, are people, my friend–have been known to own stock in large corporations, directly or through mutual funds or pension funds or some such.*
A seminal part of Citizens United, in other words, is its conflation of the CEO’s constitutional rights with those of the corporation’s–er, association’s–other citizens. The corporation itself may not be a person, my friend, but it derives its First Amendment rights from one (only one) of its citizen members. Or, at least, only that one member serves as proxy on the derivative rights. (If the CEO is not a citizen, he or she can still serve as proxy for human members who are.) But what the plaintiffs are arguing in Hobby Lobby and Conestoga Wood is that these corporations derive their constitutional rights from all of these associations’ members: the family members who comprise the entire membership of this association of people.
The title of the Winkler article says that corporations are people. By which he means, they are indeed associations of citizens. Associations of citizens (and, probably, non-citizens) that, for purposes of healthcare insurance coverage, include the corporation’s employees. What Citizens United means in saying that corporations are associations of citizens is that the shareholders comprise an association of citizens whose proxy, for constitutional-rights purposes, is (apparently) its CEO. But Citizens United did not address whether this association of citizens is necessarily limited to shareholders. If corporations have constitutional rights derived from its individual members because they are associations of citizens, and if the association of citizens includes, by definition, employees as well as shareholders (no green-card holders or foreign shareholders allowed!)–and under Citizens United, there is no reason why it shouldn’t–then the act of incorporation itself confers derivatively to the corporation the constitutional rights of its employees. Who have the constitutional right to have the same benefits of the ACA as similarly situated employees of other corporations.
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.
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*Paragraph edited after publication to correct a cut-and-paste error and to add the name of the referenced Supreme Court case, Harris v. Quinn.
I hope you are right 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”
Amazing how corporations get their rights from certain citizens but those citizens are not responsible for the acts of the corporations.
Are you saying that in ruling for Hobby et al they would be removing: Limited liability protects the owners’ personal assets, which ordinarily can’t be taken to pay the debts of the corporation.?
If they did rule that the corp reflects it’s make up of people, then I would think the next challenge (even if unions are ruled unconstitutional?) is for groups of people who own or are employed by the corp to start suing for lack of “effective” means for the corporation to have come to a consensus regarding it’s position on anything related to law.
An article at C&L noted the following: Employment Division v. Smith, concluding that the First Amendment “does not require” the government to grant “religious exemptions” from generally applicable laws or civic obligations. “[T]he right of free exercise does not relieve an individual of the obligation to comply with a valid and neutral law of general applicability,” “The rule respondents favor would open the prospect of constitutionally required religious exemptions from civic obligations of almost every conceivable kind,” he wrote, “ranging from compulsory military service, to the payment of taxes, to health and safety regulation such as manslaughter and child neglect laws, compulsory vaccination laws, drug laws, and traffic laws; to social welfare legislation such as minimum wage laws, child labor laws, animal cruelty laws, environmental protection laws, and laws providing for equality of opportunity for the races.”
Any thoughts?
I read Winker’s article (the link does not work) and found this interesting: Writing in the 1700s, the British jurist William Blackstone explained that “it has been found necessary, when it is for the advantage of the public” to “constitute artificial persons, who may maintain a perpetual succession, and enjoy a kind of legal immortality.
Which seem to lead to this: Supreme Court Chief Justice John Marshall wrote nearly 200 years ago, “Being the mere creature of law,” the corporation “possesses only those properties which the charter of its creation confers upon it either expressly or as incidental to its very existence.”
But Citizens broke the “limited” part of rights which were clearly originally given for specific and purposeful reasons related to what the corporation was going to do. With Citizens they have removed that tie of purpose (which every corp has to note in it’s yearly filings) for the sake of making money with limited rights by allowing the corp to go beyond the boundaries of the market and expanding into the outer bounds of an relationship reserved for society: politics.
It is this allowance into the realm of “society” that I think people rightly consider Citizens as having been based on corps are people in the full sense.
This is what happens when society falls for the idea that the true valid model for society and thus the source for it’s mode of operation is business. That is the “government should run more like a business” concept.
If the supremes are on board with the model of social structure inherent in the TTP and like law then I can see them finding a way to rule for Hobby et al as a means to grease the slide toward a society organized fully as business.
Their favoring of corporations so much now is to the point that hiding the agenda of favoring corps over people vs people over corps is no longer possible.
Which all is simple a means of resulting in a “legal” structure of society where the aristocrats have permanent rule.
Daniel, you’re right when you say that if they did rule that the corp reflects it’s make up of people, then the next challenge is for groups of people who own or are employed by the corp to start suing for lack of “effective” means for the corporation to have come to a consensus regarding it’s position on anything related to law. And that’s EXACTLY what the Court what the situation already is regarding labor union members, and that’s what they may well be about to do in Harris v. Quinn regarding workers in a union shop who opt out of union membership but who still are required to pay a fee to the union for the union’s representation of them as workers in that shop in negotiating contracts that apply to all the workers there who can be union members, whether or not the worker chooses to be. That’s what’s at issue in Harris v. Quinn, which happens to be a public-employee-union case. Alito’s comment was that public-employee-unions may be illegal, because, he said, since these unions negotiate with government entities this implicates the size of government and therefore is a political issue and therefore, in turn, implicates First Amendment speech rights. The statement was absurd–my suggestion, in my post about it, was that the employees are free to ask that their own wages and benefits be reduced or that their job be eliminated–but it would apply only to public, not private-sector, unions.
Two really good articles on the points you make are at Slate, 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 and at the WSJ, at http://online.wsj.com/news/article_email/SB10001424052702303949704579459770814017940-lMyQjAxMTA0MDIwNDEyNDQyWj.
A few issues with this article:
First, “I was happy to read the paragraphs I quote above in an article published on a mainstream-media website.” Wouldn’t it make more sense to be happy a /correct/ argument was being made, period? Does its venue of dissemination really matter that much?
The argument the Author cites as coming “courtesy of Citizens United, pure and simple” actually comes from Dartmouth College v. Woodward, a case decided in 1819.
The concern about “individual shareholders … don’t all hold the same political views” is a classic example of the “Red Herring” fallacy. One could easily view married Individuals as “shareholders” in Their relationship; yet, We would not describe as an “obvious problem” cases where Spouses differ politically while donating to diametrically opposed campaigns. Even if this analogy were shown to be flawed, the ultimate decision as far as what constitutes the “view of a corporation” are easily determined by whichever set of Shareholders possesses ownership and control of the organization, requiring no stretch of the imagination.
In the public union case the Author cites, Justice Alito said nothing of the kind about public unions being unconstitutional in any way shape or form. The transcript is publicly available for All to see, including the Author. The only explanation I have for the error is the Author of this article is incompetent, lazy, or dishonest. If a fourth interpretation exists, I ask the Author state it because I do not see it.
I am also not sure where claim Fox News reports Democrats are not People originates. A quick web search reveals no such citation or claim and, after having read and critiqued a number of posts on this blog, I am quickly coming to the realization the Author has the intellectual development not worthy of being taken with any degree of sincerity: no valid citations, citations which are easily disproven, mischaracterized quotes, speculation, vitriolic hyperbole, etc. These characteristics are not those of Anyone with an opinion to which it is worth listening.
At no point did the Supreme Court state in Citizens United only the rights/views of a corporation’s CEO are the source of the corporations rights/views. Meanwhile, in Hobby Lobby et al., the argument raised is not a derivation from the rights of All Stockholders; while They may be in agreement, that fact is incidental. Please, point to the claim in any brief raised by the Objectors showing otherwise.
The attempt to portray corporations as xenophobic Nationalists with the line “no green-card holders or foreign shareholders allowed” would be nauseating if it were not so pathetic. Nothing in the legal arguments of Citizens United, Hobby Lobby, Conestoga Woods, Mardel, or Autocam, suggests any view point of the kind and this transparent effort smacks of desperation to make a nice sounding argument.
The logic of that paragraph, however, goes beyond absurd. Employees are not necessarily Shareholders. Employees are not analogous to Members in a church, for example. Employees are much more accurately thought of in terms of a Contractor hired to perform certain services. To apply the Author’s logic would be to say, if Someone paints My Neighbor’s house, the Painter has a legal right to access My Neighbor’s bank account beyond the negotiated payment.
The claim “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” is false. Please cite the portions of all of the amicus briefs by “the business community at large” in full context articulating a “scared to death” position and please show, using sound logic and not the over-the-top buffoonery which seems to occur so often on this blog, how the exercise of constitutionally and statutorily protected rights eviscerates liability protections. I am quite certain current law is structured in such a way as to prevent this scenario.