Citizens United in Affordable Care Act Litigation, Part III

After my first two posts about the link between the Supreme Court's decision in Citizens United  and litigation under the Affordable Care Act, we have a third opinion from a federal circuit court.  The Sixth Circuit, in Autocam Corp. v. Sebelius (PDF), has rejected a First Amendment religious liberty challenge from manufacturing companies. It includes little discussion about Citizens United, but it does mention it.

Autocam’s attempt to fill this void by relying on freedom of speech cases, most notably Citizens United v. Federal Election Commission, is unavailing.  In Citizens United, the Court “recognized that First Amendment protection extends to corporations” and collected a significant number of cases recognizing this rule.  But these cases all arose under the Free Speech Clause. [citing the Third Circuit's opinion on this.] No analogous body of precedent exists with regard to the rights of secular, for-profit corporations under the Free Exercise Clause prior to the enactment of RFRA.  The Free Exercise Clause and Free Speech Clause of the First Amendment have historically been interpreted in very different ways. Id. (tracing the differences in the Court’s treatment of these clauses). Therefore, the Court’s recognition of rights for corporations like Autocam under the Free Speech Clause nearly twenty years after RFRA’s enactment does not require the conclusion that Autocam is a “person” that can exercise religion for purposes of RFRA.

 (some citations omitted)

It's curious that the Sixth Circuit includes the discussion of Citizens United , the First Amendment, and Free Exercise in its interpretation of whether a company is a "person" for purposes of the Religious Freedom Restoration Act. The statutory interpretation question is a fairly different matter than the scope of constitutional protection. I suppose, reading through a bit of the court's awkward analysis, one could argue that because there had been no precedent contemplating the kind of Free Exercise right anticipated in this case prior to Employment Division v. Smith, Congress did not contemplate that kind of right when it enacted RFRA.

Perhaps part of the court's awkward analysis arose because of a decision by the litigants.  Plaintiffs apparently only appealed a preliminary injunction denial on the RFRA claim and did not include a First Amendment claim in the appellate brief.

If that's the case, then the usefulness of Citizens United as analogy drops dramatically, which explains why the court's discussion is brief.

Citizens United in Affordable Care Act litigation, Part II

Following up on my earlier coverage of the 10th Circuit's opinion citing Citizens United v. Federal Election Commission, the 3d Circuit has concluded that Citizens United  does not compel a finding that a for-profit corporation can exercise religion. Here are excerpts from the majority's opinion (at Part IV.A):

Citizens United is thus grounded in the notion that the Court has a long history of protecting corporations' rights to free speech. 

... 

We must consider the history of the Free Exercise Clause and determine whether there is a similar history of courts providing free exercise protection to corporations. We conclude that there is not. In fact, we are not aware of any case preceding the commencement of litigation about the Mandate, in which a for-profit, secular corporation was itself found to have free exercise rights. Such a total absence of caselaw takes on even greater significance when compared to the extensive list of Supreme Court cases addressing the free speech rights of corporations.

(I interject here to remark that this line of reasoning does not strike me as terribly persuasive. First, there are numerous instances in which the absence of judicial precedent is not a justification for rejecting the argument of the parties. This distinction strikes me as too narrow a reading of Citizens United . It may be that the two are distinguishable, but absence of precedent is not among them. Second, by asserting that the corporation is "secular," it's hard to get around the conclusion that the majority opinion has, in circular fashion, presumed the conclusion.)

We are unable to determine that the "nature, history, and purpose" of the Free Exercise Clause supports the conclusion that for-profit, secular corporations are protected under this particular constitutional provision. 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. . . .

In urging us to hold that for-profit, secular corporations can exercise religion, Appellants, as well as the dissent, cite to cases in which courts have ruled in favor of free exercise claims advanced by religious organizations. See, e.g. , Gonzalez v. O Centro Espirita Beneficente Uniao Do Vegetal ; Church of the Lukumi Babalu Aye, Inc. v. Hialeah . None of the cases relied on by the dissent involve secular, for-profit corporations. We will not draw the conclusion that, just because courts have recognized the free exercise rights of churches and other religious entities, it necessarily follows that for-profit secular corporations can exercise religion. As the Supreme Court recently noted, "the text of the First Amendment . . . givees special solicitude to the rights of religious organizations." Hosanna-Tabor Evangelical Lutheran Church & Sch. v. EEOC . That churches--as means by which individuals practice religion--have long enjoyed the protections of the Free Exercise Clause is not determinative of the question of whether for-profit, secular corporations should be granted these same protections.

(some citations omitted) 

(I interject again with two problematic point in this reasoning. First, the majority concludes that even though courts have recognized X, "[w]e will not draw the conclusion" that "it necessarily follows" that the courts will recognize Y. That may be true, but that does not explain why the two should be treated differently--except, as noted earlier, courts haven't done so previously, which is just restating a fact and is not a justification. Second, the majority does not claim that "churches" exercise religion, but that "churches" are a "means by which individuals practice religion"; but, in the paragraph before that, it claims that it "cannot understand how a for-profit, secular corporation--apart from its owners--can exercise religion." The distinction between whether members of a corporate form, whether a church or a for-profit corporation, can exercise religion within that corporate form is not readily explained in the majority's opinion, except that the church is the more common form for the exercise of religion.)

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." "The fact that one person owns all of the stock does not make him and the corporation one and the same person, nor does he thereby become the owner of all the property of the corporation." The Hahn family chose to incorporate and conduct business through Conestoga, thereby obtaining both the advantages and disadvantages of the corporate form. We simply cannot ignore the distinction between Conestoga and the Hahns. We hold . . . that the free exercise claims of a company‘s owners cannot "pass through" to the corporation.

 (citations omitted)

(This holding is expressly contrary to the logic--but, admittedly, not the holding--articulated in Citizens United , where the majority concluded that the regulation, if allowed, "would permit Government to ban political speech simply because the speaker is an association that has taken on the corporate form.") 

There are other excerpts, and a dissenting opinion addressing the matter, if you're interested in reading the whole 96-page opinion.

New proposed corporate disclosure rules, 501(c)(4) limits

Right on the heels of my analysis of how attorneys at major law firms contributed to political candidates comes a new proposal on disclosure.

InsidePoliticalLaw notes that twenty Democrats in the House have introduced legislation to amend campaign finance laws. Two of the provisions are significant.

The first would require corporate disclosure:

A corporation which submits regular, periodic reports to its shareholders and a labor organization which submits regular, periodic reports to its members shall include in each such report, in a clear and conspicuous manner . . . the disbursements made by the corporation or labor organization for covered political activity during the period covered by the report . . . . 

Shareholders have pursued corporate disclosure of political activity with increasing frequency.  This legislation would essentially usurp those now-localized events at the individual corporate or labor union level and mandate disclosure of corporate spending.

But as Kevin Shortill notes, ambiguity in the proposed legislation (e.g., labor unions are not required to submit "regular, periodic reports") suggests that the scope of disclosure may actually be "illusory."

The second would limit 501(c)(4) spending on political activity to a 10% threshold. 501(c)(4)s are currently subject to a 50% threshold. The moves comes shortly after the IRS scandal in which the IRS began examining the legitimacy of 501(c)(4) organizations because it believed that many (particularly conservative) organizations may not actually be "social welfare" organizations for purposes of the tax code. And it comes after an increase in the number of such organizations taking advantage of exemption from disclosure after the Supreme Court's decision in Citizens United. A dramatic decrease in the percentage of 501(c)(4) spending that could be used on political activity would likely shift political resources elsewhere.

The fate of such proposals, even if relatively modest (or even "illusory"), remains uncertain in a contentious political chamber. But unlike wrong approaches, this one, at least, has the hallmarks of the type of legislation we may expect to see in the future--and, perhaps, achieve success.

Citizens United in Affordable Care Act litigation

At PrawfsBlawg in January, I blogged about the Citizens United link to the Affordable Care Act litigation. I won't rehash that discussion, but I'll include the conclusion:

When it comes to for-profit corporations, however, there are hints (and this is my modest prediction) that the Court’s refusal to inquire into the purpose or form of the corporation in the election law context may very well apply to the religious liberties context. The burdens placed upon corporations are likely to face the same scrutiny, regardless of the purpose or the form of the corporation. And that means, businesses like Hobby Lobby, under the Court’s precedent in Citizens United, would be treated as any other individual, church, or non-profit organization making a Free Exercise claim. 

Today, the Tenth Circuit handed down an en banc opinion in Hobby Lobby Stores, Inc. v. Sebelius  (PDF). Here's the majority's discussion of "Corporate and For-Profit Free Exercise Rights" (V.A.2.b of the opinion), which ties Citizens United  and some other campaign finance cases in the Free Speech context into the Free Exercise context:

It is beyond question that associations—not just individuals—have Free Exercise rights: “An individual’s freedom to speak, to worship, and to petition the government for the redress of grievances could not be vigorously protected from interference by the State unless a correlative freedom to engage in group effort toward those ends were not also guaranteed.” Roberts v. U.S. Jaycees, 468 U.S. 609, 622 (1984) (emphasis added). Therefore, courts have “recognized a right to associate for the purpose of engaging in those activities protected by the First Amendment—speech, assembly, petition for the redress of grievances, and the exercise of religion. The Constitution guarantees freedom of association of this kind as an indispensable means of preserving other individual liberties.” Id. at 618 (emphasis added); see also Citizens United v. FEC, 558 U.S. 310, 342–43 (2010) (“First Amendment protection extends to corporations . . . [, and the Court] has thus rejected the argument that . . . corporations or other associations should be treated differently under the First Amendment simply because such associations are not natural persons.” (internal quotation marks omitted)).

Accordingly, the Free Exercise Clause is not a “‘purely personal’ guarantee[] . . . unavailable to corporations and other organizations because the ‘historic function’ of the particular [constitutional] guarantee has been limited to the protection of individuals.” First Nat’l Bank of Boston v. Bellotti, 435 U.S. 765, 778 n.14 (1978). As should be obvious, the Free Exercise Clause at least extends to associations like churches—including those that incorporate. See, e.g., Church of Lukumi Babalu Aye, Inc. v. City of Hialeah, 508 U.S. 520, 525 (1993) (holding that a “not-for-profit corporation organized under Florida law” prevailed on its Free Exercise claim); see also Terrett v. Taylor, 13 U.S. (9 Cranch) 43, 49 (1815) (Story, J.) (“[The] legislature may . . . enable all sects to accomplish the great objects of religion by giving them corporate rights for the manag[e]ment of their property, and the regulation of their temporal as well as spiritual concerns.”). 

Because Hobby Lobby and Mardel express themselves for religious purposes, the First Amendment logic of Citizens United, 558 U.S. at 342–55, where the Supreme Court has recognized a First Amendment right of for-profit corporations to express themselves for political purposes, applies as well. We see no reason the Supreme Court would recognize constitutional protection for a corporation’s political expression but not its religious expression.

There are more citations in other opinions of other judges, if you're interested in reading.