Tuesday, July 08, 2014

Christmas in July--for lawyers

Mmmmm....cooked goose!

I don't mean to make a fetish of the "corporate veil" problem that I think Burwell sets up, but I've noted more and more references to that problem lately.

NTodd caught one, at dKos:

Because corporations exist in order to put up a barrier between a business and its owners, that means that the religious liberty of the owners cannot be violated by anything the corporation is compelled, by law, to do. Business owners want to benefit from the doctrine of corporate separateness when creditors want their money, and start acting like Paulie from "Goodfellas" (i.e., "$@*% you, pay me!"). When that happens, the owners want to be able to throw up their hands and say, "Sorry, that's not me, that's the business." Piercing that corporate veil is supposed to be difficult. But all of a sudden, the Roberts Five is agreeing with business owners who want to turn around and say—when it comes to their interpretation of religion—that the business  the owners. They can't have it both ways.
I'm not a legal genius or a constitutional scholar, and I'm certainly not the only person to make this argument, as you can see above. But it is such a Captain Obvious point that the only explanation that fits is that Roberts Five simply doesn't care. I used the word farce. I stand by it.
And I found another this morning, which indicates corporate lawyers are aware of the risk, too:

Hobby Lobby and Conestoga each asserts that the religious values of its present controlling shareholders should pass through to the corporation itself. This Court should reject any such “values pass-through” concept. To do otherwise would run contrary to established principles of corporate law.

The essence of a corporation is its “separateness” from its shareholders. It is a distinct legal entity, with its own rights and obligations, different from the rights and obligations of its shareholders. This Court has repeatedly recognized this separateness.
The outline of the argument in that brief is telling.  Sections include:

B)  The Corporation's separate existence protects its shareholders from liability for corporate debts, thereby investment, innovation, and job creation

C)  The Corporation's separate existence permits a business to operate notwithstanding the death of disability of its founders or changes in share ownership, thereby promoting stability and predictability in business operations

True, these read like GOP talking points, but they are also valid issues in corporate law.  My favorite, however, points to the very uncertain legal future created by Burwell, a future the Court can't hope to control:

D)  The separation between a corporation and its shareholders is a principle not only of corporate law, but also of agency law and of criminal law.

The law is a web; touch one strand, and you tremble them all.

It is, however, the penultimate section that sums up  the argument of this brief, and points to the problem the Court created:

E)  This Court should not allow Hobby Lobby and Conestoga to selectively disregard the corporate veil that separates them from their shareholders. 

The Court might argue that it precisely did allow a narrow, selective reverse piercing of the corporate veil to allow Hobby Lobby to have the religious beliefs of its owners; but as the brief clearly points out, sauce for the goose is sauce for the gander.

So now the question is:  in the case of the closely held corporation, is that corporate goose cooked?


  1. I comment with the caveat and apology that I actually haven't read any of the supreme court opinions. After 34 years of practicing law it's not one of those things I do for fun anymore.

    The question of whether corporations have first amendment rights seems to me the wrong approach to this thing. Obviously some must have religious rights. Many churches are organized as corporations. So are many of the institutions founded by churches--hospitals, schools, colleges, day care centers, counseling and unemployment centers, etc. And the "practice of religion" is certainly not monopolized by the institutions; a religion is sometimes actually practiced by its lay adherents.

    The better question is whether a command to a corporation necessarily "passes through" and necessarily amounts to a command to a person practicing a religion. This is where the "closeness" of the corporation matters. If the command binds "Mom and Pop, LLC," then mom and pop, who may object to the command on valid 1st amendment/RFRA grounds, ought to be able to raise the issue. On the other hand, "Megacorp, Inc.," owned by zillions of shareholders, is probably not going to have such an argument, because even if the command arguably burdens the conscience of some, they always have someone else who can do the job. So if, say, in an attempt to grow the economy, a law is passed commanding all businesses to open seven days a week, mom and pop, devout people that they are, are going to be burdened. Megacorp is going to have plenty of people with no compunction about violating the Lord's Day.

    Just a quick note, and partly because of a silly headline at Slate today: "THIS IS RELIGIOUS CIVIL WAR." I don't think it is. I think it's the difficulty of enacting universal healthcare when we lack a consensus on what healthcare entails. Of course we have conflict, and of course we have sent it to the Supreme Court because we can't handle it politically. But that's not religious civil war; it the American Way.

    And of course everyone presumes that everyone else is in bad faith. Some are, of course. But some aren't. " Quand nous ne pouvons excuser le péché, rendons-le au moins digne de compassion, l’attribuant à la cause la plus supportable qu’il puisse avoir, comme à l’ignorance ou à l’infirmité."

  2. Quick correction: Headline was at Salon, not Slate.

  3. Salon is immensely silly in its headlines.

    As for the opinion, it rests not on the 1st Amendment but on RFRA, and somehow conjures a religious protection for closely-held corporations out of the term "Person" in that statute, where the interests of a person in their religious beliefs is protected by law under a "substantial burden" test.

    I don't blame you for not reading the opinion. At best, I glance through them; getting bogged down in the details, footnotes, etc., is not for me.

    Again, I generally agree with your argument, but I don't think that's the one the Supreme Court addressed in Burwell. What the opinion did was find that closely-held corporations are a "person" for purposes of RFRA, and therefore the religious opinions of the owners can be the opinions of the corporation.

    Yes, churches and eleemosynary institutions generally get that status under the Constitution, but I still don't see how it reaches to a closely-held corporation, especially without completely destroying the status of the corporation as an entity separate from its shareholders.

    And if you say it does, I think you've undone the corporate status for such entities. I certainly don't see how you get to preach it round and square, and have the benefits of corporate status when it suits you, yet set them aside when that is more convenient to your interests.

    There really isn't a theological position that allows Mom & Pop, LLC. that kind of legal status, much less requires it.

    There's a further factual problem: the Greens don't object to all contraceptives (the Roman Catholic position, at least per the US Bishops), only to four. They consider those four to be abortifacients, even though they aren't. The Court specifically addressed this issue, finding it was a "religious belief" of the Greens, and therefore beyond the Court's purview.

    Nice work if you can get it. Now I just have to say "King's X, that's my religious belief," and the Court has to allow me to carry on.

    Not to mention there's the interesting issue of who gets to decide what is religiously offensive and how that is handled: the five owners of Hobby Lobby, or the 3000 employees who are purchasing that insurance policy with their labor? If they don't want to buy contraceptives, they don't have to. But requiring Hobby Lobby to make such coverage available through an insurance policy that is compensation for the workers seems a most insubstantial burden indeed.

    Unless, of course, the Court next says Hobby Lobby can determine its employees can't use their paychecks to buy beer, or go dancing on Saturday night.....

  4. So now the question is: in the case of the closely held corporation, is that corporate goose cooked?

    IANAL, but my reading of the Hobby Law opinion is that it is just begging to be applied inconsistently and even unfairly. A court seeking to allow for this or that religious exemption, so long as the corporation/business claims it (its owners really of course) has a sincere religious belief and that government can easily provide a work-aroundl can always apply the Hobby Law ruling as precedent. OTOH, if the court does not want to grant an exemption, the court can always respond to an argument citing Hobby Lobby with "but Alito and Kennedy clearly indicated that ruling was a narrow ruling not to be used as a precedent".

    I betcha it'll be the same way with piercing the corporate veil: if a court wants to do that, it can cite Hobby Lobby. If a court doesn't want to pierce that veil, it can point to the "narrow nature" of the Hobby Lobby ruling.

    Now any guesses as to which kinds of religious beliefs will be considered favorably in granting exemptions and which won't? Any guesses as to which corporations will have their veils kept intact for liability purposes and which corporations won't?

    The possible unfairness in applying Hobby Lobby cannot be a bug. Call me paranoid, but I betcha it's a "feature" of the ruling at least partially intended by Alito, et al.

  5. Oh, I think you are right. No court is going to apply Burwell to any attack on a corporation and consider it the only and final word on the matter.

    But if enough do, it will lead to screaming the likes of which no Tea Party or religious group has EVER been able to generate. Never forget that, theists these clowns on the Court may be, but $$$$ talks.

    And they love nothing more than they love corporations, of that I am quite sure.

    The real problem is, as they try to untangle and walk back this ridiculously badly reasoned opinion, they create more and more problems along the lines condemned by that now infamous federal judge: because they will either create a web of ludicrous exceptions to their own ruling, based purely on whim and the desired outcome, or they will leave chaos in their wake and try to rise above it all as they look for the next chance to declare the year of Jubilee.

    It won't be the end of the republic, or the Court, or even our legal system; but as that old Chinese (supposedly) curse says: "May you live in interesting times."

  6. The court will take the easy way out and refer back to the RFRA when viewing the issue of piercing the corporate veil. For religious rights, they pierce the veil for the owners to act out their beliefs through the corporation. For liability, the RFRA is silent and therefor the corporate veil will stand. It still leaves the mess of of this case. The logic of the decision is not limited to just contraceptives, and already entities are attempting to use this decision to attack anti-discrimination laws that protect gays. The courts incredibly low definition of "substantial" means that almost any burden of neutral law against a belief is subject to the RFRA.