The constitutional standing of corporations.

• Author: Garrett, Brandon L.
• Position: III. Incorporation of Substantive Corporate Rights through Conclusion, with footnotes, p. 136-164

3. INCORPORATION OF SUBSTANTIVE CORPORATE RIGHTS

   When can an organization litigate an injury to the entity? The question should be viewed as a threshold question of Article III standing. The Supreme Court has not often articulated the question in standing terms--recall the very brief reference to standing by Chief Justice Roberts in Citizens United (221)--but many of its corporate constitutional rights rulings predate modern standing jurisprudence. I argue that an Article III standing framework provides a useful guide to understanding whether an organization can litigate constitutional rights.

   The Supreme Court has held that a plaintiff must be able to show a cognizable "injury in fact" to have a case or controversy that may be heard by an Article III court. (222) The Court recently summarized its Article III test as follows: an injury must be "concrete, particularized, and actual or imminent; fairly traceable to the challenged action; and redressable by a favorable ruling." (223) Moreover, the Court has emphasized that "[t]he party invoking federal jurisdiction bears the burden of establishing these elements." (224)

   Two lines of cases are particularly crucial to the question of constitutional litigation by organizations. First, one line of cases holds that organizations can raise constitutional rights by asserting a concrete injury to its own interests but not those of others. Second, and in contrast, the Supreme Court adopts a more flexible test for associations and membership organizations that permits standing to assert the potentially broader interests of individual members. Relatedly, in a line of prudential third-party non-Article III standing cases largely developed in the context of individual litigation, the Court has long held that a litigant typically does not have standing to vindicate the constitutional rights of a third party absent some special relationship and some special barrier to the non-party litigating the right. (225) There are complexities to that body of Article III and prudential standing doctrine, and there are resulting questions over what qualifies as an organization versus an association and how to treat nonprofit corporations or religious nonprofits. I will address those questions in turn.

   1. Associational Standing

      The Supreme Court's test for associational standing remains permissive and broad. The Court in NAACP v. Alabama ex rel. Patterson emphasized the common interests of members of an association and described how the association is "but the medium through which its individual members seek to make more effective the expression of their own views." (226) The Court directed the judge to focus on whether the relief sought would reasonably benefit the members of the organization, whether "the interests it seeks to protect are germane to the organization's purpose," (227) whether one or more members would have standing to sue individually, and whether there are issues of "individualized proof," permitting the claims to be "properly resolved in a group context." (228) Thus, the Court has emphasized that it can be preferable to have an association sue for consequentialist reasons. The Court in UAW v. Brock noted that "an association suing to vindicate the interests of its members can draw upon a pre-existing reservoir of expertise and capital." (229)

      The test for associational standing does not closely examine the governance of the group. The association need not even be a traditional membership organization. It may sue if "for all practical purposes" it serves the interests of others. (230) As the Court put it in Brock, "[t]he very forces that cause individuals to band together in an association will thus provide some guarantee that the association will work to promote their interests." (231)

      What Article III limit is there on the ability of an association to stand in for the constitutional rights of its members? The Court has merely noted that if there was evidence that an association did not "represent adequately the interests of all their injured members," then there would be a due process problem with permitting a judgment by the association to bind the members in subsequent litigation. (232) Further, the Court has held that if the underlying claim or relief requested requires individual participation, then associational standing is not proper. (233) As a result, there may be sound reasons to treat nonprofit organizations and other types of organizations as associations if they, like membership organizations, represent the viewpoints of individuals. However, as discussed next, a for-profit corporation cannot do so given its legal structure and lacks the ability to litigate injury to others.

      Some have criticized decisions like Citizens United for appearing to privilege associations and organizations. For example, Professor Wayne Batchis complains, "the freedom of association has become a freedom of the association." (234) However, there are policy reasons that support allowing an association to stand in for the interests of members. (235) The reasons are similar to the reasons why class action practice permits injured individuals to gather together and sue in the aggregate. (236) Aggregate litigation can provide more effective representation, attract better resources for the litigation, and make it feasible to litigate individual injuries that would not be economically feasible to litigate individually. (237)

   2. Organizational Standing

      Organizational standing analysis is quite different than associational standing analysis. When an organization sues to assert its own interests, which are necessarily distinct from those of its shareholders or owners, the Article III inquiry proceeds by asking whether the entity itself suffered a "concrete injury" to its own interests, apart from any separately identified injury to third parties, such as employees, officers, owners, or shareholders. (238) To be sure, more is required than an abstract "interest in a problem," in order to satisfy the first "concrete injury" element of the analysis. For example, the Court famously held in Sierra Club v. Morton that under the Administrative Procedure Act, "a mere 'interest in a problem,' no matter how longstanding the interest and no matter how qualified the organization is in evaluating the problem, is not sufficient by itself." (239) As a matter of Article III standing, the Court in Lujan v. Defenders of Wildlife held that a plaintiff organization must provide the court with "a factual showing of perceptible harm." (240)

      A second related principle has been less well developed in the case law. Not only must the organization claim an injury to the interests of the organization, but the particular harm that the corporation suffers must also implicate or be caused by the violation of the right being asserted by the entity. This is where, I argue, the Supreme Court's decision in Hobby Lobby began to get it wrong by ignoring such requirements and casting further doubt on whether prior rulings in cases like Sierra Club and Lujan were so principled after all.

      1. The Hobby Lobby Decision

         In Hobby Lobby, the Supreme Court ruled on the question whether the contraception mandate in the Patient Protection and Affordable Care Act burdens a corporation's right to religious exercise under the Religious Freedom Restoration Act of 1993.241 The status of corporate standing was prominent in the confusion in the pre-Hobby Lobby lower court rulings concerning challenges to the Affordable Care Act's contraception mandate. Some lower courts had held that free exercise claims, although only individuals can themselves exercise religious practices, can be asserted by organizations on a derivative or third-party theory of prudential standing, (242) while others disagreed and held that free exercise claims are purely personal or cannot be litigated by secular organizations. (243) Some opinions instead emphasized that if a regulation costs money for a corporation to comply with or creates financial penalties for noncompliance, then the company may challenge the regulation, even if the particular constitutional right is not one that relates to a financial interest. (244) Several lower courts had also addressed whether the ACA burdens a First Amendment religious exercise right: the Seventh and Tenth Circuits have entertained the claim, (245) while the D.C. Circuit has found "no basis for concluding a secular organization can exercise religion." (246) The Tenth Circuit in Hobby Lobby briefly stated that the companies had standing to litigate the First Amendment and statutory claims because they "face an imminent loss of money, traceable to the contraceptive-coverage requirement," but that court did not describe any harm to the plaintiff corporation's asserted right to free exercise. (247) That reasoning instead corresponded with the government's position in the Affordable Care Act litigation, which asserts that only the owners of companies can claim an injury to free exercise rights, on their own behalf, while the corporation must comply with the Act. (248)

         Writing for the majority in Hobby Lobby, Justice Alito rejected that reasoning initially by stating that "[t]he plain terms of RFRA make it perfectly clear that Congress did not discriminate in this way against men and women who wish to run their businesses as for-profit corporations in the manner required by their religious beliefs." (249) Others may debate, as Justice Ginsburg did in dissent, whether that is a correct reading of RFRA's text, which uses the term "persons" but does not detail which types of entities have standing to raise religious exercise objections to regulations. (250)

         However, what was a particularly stark departure was that the majority in Hobby Lobby acted as if answering the question of statutory standing (whether Congress intended to allow for-profit corporate persons to sue) was sufficient, without so much as addressing the question of...