Written by Don Byrd
The latest development in the court battles over the contraception mandate is an important one. The Third Circuit, affirming the trial court’s refusal to bar enforcement of the mandate against Conestoga Wood Specialties Corporation, has ruled that a for-profit, secular corporation like Conestoga cannot exercise religion, and thus is not covered by the Religious Freedom Restoration Act.
Conestoga argued that because the corporation is closely held by a religious family (the Hahns) that objects to providing contraception coverage as required by the Affordable Care Act, the business itself is an appropriate vehicle for religious expression. Today, the Third Circuit disagreed, setting up a significant disagreement between Circuits that most likely will be settled by the U.S. Supreme Court.
Here are some highlights from the opinion:
[A]s the District Court aptly noted in its opinion, ―[r]eligious belief takes shape within the minds and hearts of individuals, and its protection is one of the more uniquely ̳human‘ rights provided by the Constitution. We do not see how a for-profit ―artificial being, invisible, intangible, and existing only in contemplation of law, that was created to make money could exercise such an inherently ―human right.
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Even if we were to disregard the lack of historical recognition of the right, we simply cannot understand how a for-profit, secular corporation—apart from its owners—can exercise religion.
The Court rejected the approach adopted by the 9th Circuit allowing family owners of closely-held corporations to exercise their religion through the vehicle of the corporation.
[B]y incorporating their business, the Hahns themselves created a distinct legal entity that has legally distinct rights and responsibilities from the Hahns, as the owners of the corporation. The corporate form offers several advantages ―not the least of which was limitation of liability,‖ but in return, the shareholder must give up some prerogatives, ―including that of direct legal action to redress an injury to him as primary stockholder in the business.
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Since Conestoga is distinct from the Hahns, the Mandate does not actually require the Hahns to do anything. All responsibility for complying with the Mandate falls on Conestoga. Conestoga ―is a closely-held, family-owned firm, and [we] suspect there is a natural inclination for the owners of such companies to elide the distinction between themselves and the companies they own. But, it is Conestoga that must provide the funds to comply with the Mandate—not the Hahns. We recognize that, as the sole shareholders of Conestoga, ultimately the corporation‘s profits will flow to the Hahns. But, ―[t]he owners of an LLC or corporation, even a closely-held one, have an obligation to respect the corporate form, on pain of losing the benefits of that form should they fail to do so.
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We hold…that the free exercise claims of a company‘s owners cannot “pass through” to the corporation.
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Our conclusion that a for-profit, secular corporation cannot assert a claim under the Free Exercise Clause necessitates the conclusion that a for-profit, secular corporation cannot engage in the exercise of religion. Since Conestoga cannot exercise religion, it cannot assert a RFRA claim.
The Court emphasized that corporate owners cannot simultaneously avail themselves of the protections afforded them by the corporate form and also claim there is no distance between them and the corporation for Free Exercise purposes. While for-profit corporations may be able to speak for First Amendment purposes, that does not mean they can exercise religion. According to the ruling today, those are different protections that have differing histories and purposes.
In dissent, Judge Jordan called the ruling “deeply disappointing.” The dissent emphasized that the stark distinction between for-profit and non-profit corporations for purposes of Free Exercise analysis does not reflect the reality of business ownership, “where people try to live lives of integrity and purpose.”
