Hobby Lobby – Having your cake and eating it too

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July 1, 2014 by Tamara Piety

Before the Hobby Lobby decision came down I mused on a comment on Prawfs Blog that the case posed something of a dilemma. On the one hand those who supported Hobby Lobby argued that the Religious Freedom Restoration Act (RFRA) spoke in terms of “persons,” corporations were persons, ergo it must include them, thereby leading to a balancing test which Hobby Lobby and the other companies argued that they should win. But this argument seemed to portend all sorts of troubling things from a corporate law perspective, as an amicus brief filed by some corporate and criminal law professors argued (disclosure: i was one of the signatories on that brief but not one of the draftsmen).

On the other, if the Court wanted to rule in favor of Hobby Lobby but avoid this outcome, there was another possibility: limit its application to closely-held, small, and/or family run corporations. Chief Justice Roberts signaled in oral argument that he might be thinking along these lines. And Steven Bainbridge, a prominent law professor at UCLA, had helpfully provided a road map for so doing in blog posts and articles, one in The Green Bag and one published in the Virginia Law Review.  His argument was that the doctrine of reverse veil piercing made a ruling for Hobby Lobby not only possible but appropriate without doing the violence to long standing corporate law principles suggested in the business and criminal law.

There are many objections which could be raised about Bainbridge’s argument on the merits since a lot of the differences seem to be qualitative judgments about what is and is not within the spirit of the law and quantitative claims about the frequencies of either approach (and Bainbridge has, as he admits, been a vocal critic of RVP). But the big problem with this argument as I mentioned on the Prawf Blob post was that it would seem to violate a fundamental tenet of the arguments offered in the speech cases that distinguishing between types of corporations for purposes of constitutional rights is inherently illegitimate, that it approaches a sort of equal protection violation.

I thought that this left open the possibility that the Court would rule against Hobby Lobby even the universal assumption seemed to be that a majority of its justices would be inclined to rule in Hobby Lobby’s favor. I speculated that perhaps we would see a replay of the surprising line up in the ACA.

I hadn’t counted on a fourth option. Pretend you are adopting the limiting rationale without actually doing so. And that is the option that Justice Alito’s majority opinion took. As a consequence, virtually all of the press coverage and most bloggers and commentators have gotten a really important aspect of the decision wrong. They say Hobby Lobby’s holding is limited to “close corporations.”

This is not exactly true. Yes, the opinion is liberally sprinkled with references to the fact that all 3 corporations are “closely held” and and “small business” and “family owned.” And it is true that at page 31 Justice Alito writes,”For all these reasons, we hold that a federal regulation’s restriction on the activities of a for-profit closely held corporation must comply with RFRA.” That is the “holding.”

But if you read the analysis in pp. 16-31 Alito does not depend on Bainbridge’s RVP framework, one in which the “closely held” status plays an important analytical role in accordance with the framework Bainbridge offers in The Green Bag piece (see p. 246 in the link above for the test).

To the contrary, the reasoning is virtually all couched in terms of corporations generally. For instance, on p. 20 there is this in reference to interpreting the word “person” in RFRA: “No known understanding of the term “person” includes some but not all corporations.”

I think this is what is called having your cake and eating it too. The opinion looks like it is limited in the manner reported. But it actually offers an analytical justification that in no way is limited to close corporations except by implication.

The Court has thrown gasoline on the Citizens United fire of the equal rights for corporation claims. I will have more to say about this in the next few days.



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