"For-profit, secular corporations cannot engage in religious exercise." With this sentence, the US Court of Appeals for the Third Circuit panel in Conestoga Wood Specialties Corp. v. Sebelius voted 2-1 to uphold the denial of a preliminary injunction that would have spared Pennsylvania cabinet-maker Conestoga Wood from complying with the women's preventative care provisions of the Patient Protection and Affordable Care Act of 2010 (ACA). All of Conestoga's voting shares are owned by the Hahn family, Mennonites who firmly object to the use of certain post-fertilization contraceptives. The Hahns argued that portions of the ACA requiring group health insurance plans to cover these contraceptives violated Conestoga's rights under the Religious Freedom Restoration Act (RFRA) and the First Amendment's free exercise clause.
The Third Circuit, however, reasoned that corporations cannot practice religion in the same way that natural persons can, making further inquiry into the merits of the Hahns' claim unnecessary. By denying Conestoga relief under the RFRA and the free exercise clause, the Third Circuit split directly with the US Court of Appeals for the Tenth Circuit's opinion in Hobby Lobby Stores, Inc. v. Sebelius and sustained a contentious debate one likely headed to the US Supreme Court over which constitutional rights may legitimately be attributed to corporations.
The Hahns presented two theories under which the court could find corporations like Conestoga capable of exercising religion and, thus, able to escape the preventative care mandate. First, the Hahns attempted to analogize to the recent US Supreme Court decision in Citizens United v. Federal Election Commission, which held that government restrictions on corporate political expenditures violated the First Amendment's free speech clause by effectively suppressing political speech. Second, the Hanhs suggested that their personal religious beliefs could indirectly "pass through" to Conestoga. The Third Circuit rightly rejected both of these contentions.
The Hahns' first argument hinged on a tenuous connection between freedom of speech and freedom of religion. In Citizens United, the US Supreme Court voided federal restrictions on corporate independent campaign expenditures, reasoning that the government cannot suppress political speech solely because the speaker is a corporation. The Court relied primarily on existing precedence protecting corporate speech, especially First National Bank of Boston v. Bellotti. In Bellotti, the Court found that certain types of corporate speech like natural speech facilitate "discussion, debate, and ... dissemination of information and ideas" and are thus protected by the First Amendment.
Yet, Bellotti provided an analytical framework for distinguishing between constitutional rights that corporations can exercise and those that are "purely personal." The Bellotti court wrote that this distinction should flow from the "nature, history, and purpose" of the particular right at issue. For instance, the Supreme Court has held that only natural persons may invoke the privilege against compulsory incrimination or enjoy the right to privacy.
Applying the Bellotti framework, the Third Circuit adequately distinguished corporate free exercise from corporate political speech. Whereas the Supreme Court in Citizens United cited more than twenty cases extending free speech rights to corporations, the Third Circuit could not locate a single case preceding current ACA challenges that granted for-profit corporations free exercise rights. Further, in response to a contention by the Hahns that the First Amendment's free speech and free exercise clauses should be interpreted jointly, the Third Circuit cited case law demonstrating that courts have historically treated the two differently.
Moreover, the Third Circuit's discussion of the free exercise clause's nature and purpose was equally convincing. It looked skeptically on the notion that for-profit, secular corporations apart from their owners could ever be said to practice religion. Citing the district court's decision in Hobby Lobby Stores, Inc. v. Sebelius, the court emphasized:
[Corporations] do not pray, worship, observe sacraments or take other religiously-motivated actions separate and apart from the intention and direction of their individual actors.The Third Circuit drew a strong factual distinction here, as recognizing corporate speech is much less unreasonable than recognizing corporate religion. Sending a message into the marketplace of ideas is something directors often accomplish under the corporate name, but praying, worshiping and believing those are inherently personal capabilities that may only be exercised by the living.
Still, some may argue that the court's reasoning does not sufficiently distinguish for-profit, secular corporations from religious organizations, the latter of which the Supreme Court has recognized may bring free exercise claims. Yet, the Third Circuit pointed to Hosanna-Tabor Evangelical Lutheran Church & School v. EEOC, a recent Supreme Court decision which emphasized that "the text of the First Amendment ... gives special solicitude to the rights of religious organizations." Further, the Third Circuit observed that a non-profit religious organization's sole purpose is to provide a means by which congregation members can practice their faith. In fact, section 501(c)(3) of the Internal Revenue Code restricts the types of business activities in which religious entities seeking tax-exempt status may engage. Such organizations are restrained from: passing any net earnings onto private individuals or shareholders, attempting to influence litigation, or intervening in political campaigns. For-profit, secular corporations are, of course, not so bound.
Alternatively, the Hahns argued that corporations like Conestoga can vicariously assert their owners' free exercise claims. The theory that a shareholder's constitutional claims can "pass through" to a corporation originated in EEOC v. Townley Engineering & Manufacturing Co. and Stormans, Inc. v. Selecky. In those cases, the US Court of Appeals for the Ninth Circuit specifically sanctioned advancement of the ownership group's free exercise claims by closely held corporations. Importantly, the Ninth Circuit found not that a closely held corporation has "rights of its own different from or greater than its owners' rights," but that it merely may function as "the instrument through and by which [its owners] express their religious beliefs."
The Third Circuit refused to adopt the Ninth Circuit's reasoning and held that the Hahns' claims could not "pass through" to Conestoga. Unlike the Ninth Circuit, the Third Circuit emphasized the basic legal distinction between a corporation and its shareholders. As the Supreme Court explained in Cedric Kushner Promotions, Ltd. v. King, "incorporation's basic purpose is to create a distinct legal entity, with legal rights, obligations, powers, and privileges" different from the natural persons who own it. The corporate owner is thus distinct from the corporation itself, even if ownership shares are highly concentrated. As the Third Circuit reasoned, just because a single investor owns all of a corporation's stock, he and the corporation are not legally the same person. Critically, the Hahns' decision to incorporate also granted them limited liability, a benefit deriving from this legal distinction between the corporation and its individual shareholders. The law does not permit the Hahns to embrace the distinction when convenient but to otherwise disregard it. By incorporating, the Hahns accepted "both the advantages and disadvantages of the corporate form."
Ultimately, the Third Circuit's reasoning in Conestoga Wood recalls Chief Justice Marshall's contention in Dartmouth College v. Woodward that "a corporation is an artificial being, invisible, intangible and existing only in contemplation of law." Allowing the owners of a closely held corporation to impose their religious beliefs through the guise of the corporate form marks an unreasonable and unprecedented extension of corporate personhood. Such a holding could potentially permit business decisions motivated by a discriminatory animus to escape unpunished under the cloak of religious freedom. Corporate free exercise claims like that brought by the Hahns in Conestoga Wood are rightly denied.
Nicholas Caselli is a member of the University of Chicago Law Review and served as a law clerk for the US Attorney's Office for the District of Maryland. He earned his Bachelor of Science in Economics and Finance from the University of Scranton.
Suggested citation: Nicholas Caselli, Can Corporations Believe in God? Religious Exemptions to Preventive Care Provisions of the Affordable Care Act , JURIST - Dateline, Sep. 3, 2013, http://jurist.org/dateline/2013/09/nicholas-caselli-conestoga-aca.php
This article was prepared for publication by Endia Vereen, an associate editor for JURIST's student commentary service. Please direct any questions or comments to her at firstname.lastname@example.org