Is Hobby Lobby a tool for limiting corporate constitutional rights?

• Author: Taub, Jennifer S.
• Position: Symposium: Money, Politics, Corporations and the Constitution

Critics lament that with Burwell v. Hobby Lobby Stores, Inc., (1) the Supreme Court further expanded corporate personhood powers. This Article offers an alternative reading. It suggests that Hobby Lobby might actually provide a tool for limiting previously recognized corporate constitutional rights. To those who oppose the decision, this assertion might seem unduly optimistic. After all, the Court did determine that three family-owned business corporations were "persons" with sincere religious beliefs entitled to use the Religious Freedom Restoration Act ("RFRA") (2) to deprive employees of federally mandated healthcare insurance coverage. Given that the Court determined that certain "closely held" (3) business corporations possessed statutory rights previously thought reserved to real human beings, it would not seem to presage the future restriction of corporate constitutional rights. However, by designating (thus far) just closely-held corporations as persons with free-exercise rights under RFRA the Court invites us to question whether other corporations (that lack similar attributes) would be denied such personhood. And, if so, whether a distinction between closely-held corporations and others could be applied to curtail corporate constitutional rights.

Determining how Hobby Lobby restricts corporate personhood rights is not a mere thought experiment. It has become immediately necessary as a practical matter. Because the Court held that the contraceptive mandate (4) under the Patient Protection and Affordable Care Act ("ACA") (5) as applied to the three corporate litigants violated RFRA, the Department of Health and Human Services ("HHS") was obligated to fashion an exemption for them and similar organizations. Yet, notwithstanding the apparent importance of the term to its central holding, the Court majority failed to define what it meant by a "closely-held corporation." (6) Moreover, there is no uniform state (7) or federal law defining this now critical category. Further, the decision seemed to discourage "discriminating" between classes of corporate entities. (8) Wrestling with this apparent indefiniteness, HHS sought through a proposed rulemaking to create a diagnostic test (what I will refer to as a type of "Hobby Lobby Tool") to identify the circumstances when business corporations could become eligible for the exemption from the contraceptive mandate.

The Hobby Lobby majority opinion does provide some guidance. (9) The Court's threshold determination that the three corporations were persons under RFRA appears to have depended upon the existence of three conditions. First, upon looking through the corporate entity, (10) the Court was able to see human owners that were co-extensive with the corporation. This move ignored the "separateness" that state corporate law recognizes between a corporation and its owners. (11) Second, it appears that only because the identified human owners held (or agreed to share) the same sincere religious beliefs, and third, openly ran the corporation in accordance with those beliefs, did the Court conclude the beliefs of these human beings could be attributed to the corporate entity. (12) Arguably, only with these three factors present, did the Court determine that the contraceptive mandate substantially burdened the sincere religious beliefs of each corporation. The majority opinion, written by Justice Samuel Alito, suggests that to be deemed a person under RFRA, a corporation would not need to be closely held. Thus, so long as each of these three conditions was met a corporation could be considered a person under RFRA. Conversely, not all closely held corporations could meet the test. (13)

Evidence of the first condition can be found in Justice Alito's explanation that rights arising from the designation of a corporation as a fictional person were designed to protect the rights of real human beings associated with the entity. Depending upon the nature of the statutory or constitutional right, his opinion acknowledged that some, but not all, such rights derived from looking through the entity (14) to the owners to find such human beings deserving of protection. For other rights, he indicated that the Court might look around to protect a wider group of stakeholders. (15) Justice Alito noted that corporate free exercise rights were designed to protect "the religious liberty of the humans who own and control those companies." (16) Given this framework, it seems that looking through to the owners (17) to find an identity of interest with the corporate entity is a necessary, but insufficient condition. Further evidence from the opinion also suggests that the aforementioned second and third conditions--that the owners shared the same, or agreed to share the same religious beliefs, and agreed to run the corporation openly according to those beliefs--would also need to be present in order to treat a corporation as a person under RFRA. (18)

Based upon this understanding of Hobby Lobby, this Article contemplates whether the three putative preconditions to finding corporate statutory free exercise rights could be adapted for a constitutional rights context. Given that the Court has not yet found that corporations have free exercise rights under the First Amendment, we would need to look for another illustration. A suitable example would be a Supreme Court decision in which corporate constitutional rights were recognized based upon looking through the entity to the owners. The reasoning in such an opinion should be reexamined to determine whether the Court did, should have, or might in the future apply a Hobby Lobby Tool. In other words, we could inquire whether recognition of the look through right should depend upon the existence of the second and third conditions (relating to consent, control, and public notice). If so, then that corporate personhood right might also be limited to entities with identifiable human owners that share (or agree to share) the same perspectives related to the exercise of that right and to openly disclose those views.

An ideal case to revisit--that recognized a look-through-to-owners-derived constitutional right--is Citizens United v. FEC. (19) In Citizens, the Court greatly expanded corporations' rights to engage in political spending (20) when it struck down provisions of the Bipartisan Campaign Reform Act (21) ("BCRA") that were designed to limit corporate influence on federal elections. Justice Anthony Kennedy reasoned that corporations were associations of individuals, (22) and therefore those individual human beings should not lose their constitutional rights simply because they joined together as owners to form a corporation. Perhaps, the Hobby Lobby decision (which came down four years later) marked a shift in the Court's reasoning concerning conditions necessary for corporations to gain look-through derived personhood rights. If so, a future federal or state law limiting corporate political spending to those entities that meet conditions similar to the three from Hobby Lobby might be upheld. Successful use of a Hobby Lobby Tool to craft new campaign finance laws might allow citizens through our representative government to once again place meaningful limits on the power of large publicly held business corporations to influence elections.

Toward examining whether Hobby Lobby could be used to restrict corporate political spending rights, this Article will cover the following territory. First, it will review the Hobby Lobby decision. Next, it will show how we can identify the three conditions that were instrumental in the majority's finding that business corporations could exercise religion as persons under RFRA. The Article will also examine the proposed post-Hobby Lobby rulemaking by HHS. In particular, it will review three comment letters submitted by separate groups of law professors that recommend how HHS could decide when business corporations should (and should not) be treated as persons entitled to the exemption from the contraceptive mandate. (23)

Thirdly, this piece will revisit Citizens United to apply a Hobby Lobby Tool by proposing the conditions that should be present for a corporation's political spending to be protected under the First Amendment. This could include (1) look through to identify human owners; (2) notice and consent (24) of the owners to engage in particular political spending; and (3) public disclosure of the spending. A new statute that made such elements preconditions to engaging in corporate political spending or in receiving an exemption from a general prohibition on corporate political spending could be upheld. In addition to aligning with Hobby Lobby, such a law could be viewed as acceptable under Citizens United. The preconditions could be seen as appropriate "procedures of corporate democracy" that the Court in Citizens sanctioned, designed to mitigate the agency problem that arises from the separation of ownership from control. (25)

Finally, this Article will identify problems that would stem from reliance on a Hobby Lobby Tool to curtail corporate constitutional rights. To begin, it leaves in tact the questionable conclusion from Hobby Lobby that a business corporation is a person with sincere religious beliefs with statutory (and potential constitutional) free exercise rights. In addition, the described analysis would not apply to those corporate constitutional rights that are not dependent upon look through. Also, treating shareholders as "owners" and conflating owners with the corporation is contestable as a legal and policy matter. (26) We should be concerned that the First Amendment could be used to undermine or evade regulation (27) and to intrude upon workers' autonomy and freedom. (28) Such actions impacting the public should not be acceptable simply because of shareholder consent. Thus, cutting back to a slight degree corporate political spending would not address broader and more...