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Media Alerts - Hobby Lobby Stores, Inc. v. Sebelius - 10th Circuit
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July 7, 2013
  Hobby Lobby Stores, Inc. v. Sebelius - 10th Circuit
Case Name: Hobby Lobby Stores, Inc. v. Sebelius

Headline: Tenth Circuit extends religious exercise rights to for-profit corporations, indicates that contraceptive coverage requirements of the Patient Protection and Affordable Care Act have the potential to violate religious exercise rights under the Religious Freedom Restoration Act

Area(s) of Law: Constitutional Law

Issue(s) Presented:
1. Can for-profit corporations be "persons exercising religion" under the Religious Freedom Restoration Act (RFRA) or the Free Exercise Clause?
2. Do the contraceptive coverage requirements of the Affordable Care Act (ACA) impose a "substantial burden" under RFRA when a non-profit employer objects to the requirements on free exercise grounds?

Brief Summary:

Two for-profit corporations, privately owned by a Christian family, moved for a preliminary injunction to exempt the corporations from parts of the ACA's contraceptive coverage requirements. The corporations claimed that forcing them to cover abortifacients in their employee health plans substantially burdened their sincerely held religious beliefs under RFRA. The motion for a preliminary injunction was denied by the district court for failure to show a likelihood of success on the merits.

The key issue on appeal was whether or not a for-profit corporation may be considered a "person exercising religion" under RFRA. A five-member majority of the court concluded that for-profit corporations could be considered "persons exercising religion" under RFRA, and that the Appellant corporations had in fact demonstrated a likelihood of success on the merits. The majority reversed the district court's holding with regard to likelihood of success on the merits, but could not muster the votes to grant the preliminary injunction outright. The case was remanded to district court for reconsideration of the balance of equities and the public interest in a preliminary injunction.

The case produced a number of dissenting opinions. In the most comprehensive dissent, Chief Judge Briscoe argued that the majority's holding was completely unprecedented and "nothing short of a radical revision of First Amendment law, as well as the law of corporations." Chief Judge Briscoe stated that the majority had "opened the floodgates to RFRA litigation challenging any number of federal statutes that govern corporate affairs."

In a separate partial dissent, Judge Matheson cautioned judicial restraint on both sides of a question that would "profoundly affect potentially millions of businesses in our society in ways we can only begin to anticipate." While Judge Matheson was unwilling to extend RFRA protections to for-profit corporations on the record presented, he was similarly unwilling to categorically state that for-profit corporations could never benefit from RFRA protections. Citing the judicial canon that constitutional questions should not be addressed unnecessarily, and noting that the case could be resolved with regard to the private owners of the corporations rather than the corporations themselves, Judge Matheson urged the court to leave the difficult question of protecting for-profit corporations under RFRA unanswered for the time being.


Extended Summary:

Appellants are two for-profit corporations, Hobby Lobby Stores, Inc. and Mardel, Inc. Both corporations are privately owned by the Green family, which runs the businesses in a manner designed to reflect the family's Christian religious beliefs. These beliefs include an opposition to abortifacients.

The ACA requires that employment-based group health plans - such as those offered by Appellants to employees - include coverage of FDA-approved contraceptives. A number of these contraceptives are possible or actual abortifacients. While there are a number of broad exceptions to the ACA's contraceptive coverage requirements (e.g., religious employers, non-profits with religious objectives, etc.), Appellants did not fit into one of these exceptions. Because they were not exempt from the requirements, they faced regulatory penalties for non-compliance ranging from twenty-six million dollars a year to four hundred and seventy-five million dollars a year.

After having requests for a preliminary injunction denied by an Oklahoma District Court, a two-judge panel of the Tenth Circuit, and the Supreme Court, Appellants moved for an en banc consideration by the Tenth Circuit. Due to the "exceptional importance of the questions presented," and recognizing that Appellants would begin to accrue regulatory penalties for noncompliance beginning on July 1, 2013, the Tenth Circuit granted that motion.

In the Oklahoma District Court and on appeal, Appellants sought a preliminary injunction against the enforcement of the regulatory penalties of the ACA, arguing that those penalties violated their right to religious exercise under RFRA. Appellants pointed out that they were willing to provide coverage for all FDA-approved non-abortifacient contraceptives, but that they should not be penalized for declining to provide coverage for abortifacients when such coverage was at odds with their sincerely held religious beliefs.

In order to assess the likelihood of Appellants' success on the merits - the first and most important element of preliminary injunction analysis - the Tenth Circuit began with a substantive assessment of RFRA protections. This required the court to answer three questions: 1) whether Appellants were "persons" exercising religion for RFRA purposes, 2) whether any religious exercise by Appellants was substantially burdened, and 3) whether the government had any narrowly tailored and compelling interest in enforcing the contraceptive coverage penalties against Appellants.

On the first question, a five-member majority of the court held that Appellants, as for-profit corporations, were "persons exercising religion" for the purposes of RFRA. While the government argued that only non-profit religious organizations had ever held such rights under RFRA, and that "the for-profit/non-profit distinction was well-established in Congress's mind long before it enacted RFRA," the majority pointed out that the Supreme Court had been careful not to exclude for-profit corporations from RFRA protection (citing Corporation of Presiding Bishop v. Amos, 483 U.S. 327 (1987)). Analyzing the statutory language of RFRA itself, and the lack of a stipulated definition of "person" therein, the majority wrote that "the government has given us no reason to think that Congress meant 'person' in RFRA to mean anything other than its default meaning in the Dictionary Act" - a meaning encompassing for-profit corporations.

The government argued that the presence of narrow definitions of "person" in other statutes supported the application of a similarly narrow definition of "person" in the context of RFRA. The majority drew the opposite conclusion, finding the absence of such a narrowing definition to indicate that a broader definition was intended by Congress. Finally, analogizing to the recent decision in Citizen's United, the majority stated that "we see no reason why the Supreme Court would recognize protection for a corporation's political expression but not its religious expression."

On the second question, the same five-member majority of the court held that the severity of potential fines facing the Appellants constituted a substantial burden on sincerely held religious beliefs. The court pointed out that the contraceptive coverage requirements of the ACA forced the Appellants into a Hobson's choice - adherence to religious beliefs at the cost of massive penalties, or avoidance of penalties at the cost of religious beliefs. The majority noted that the Supreme Court had often found such dilemmas to constitute a substantial burden for the purposes of RFRA. The majority also went out of its way to clarify that the "substantial burden" inquiry only focuses on the intensity of state coercion, not on the theological merit of particular beliefs ("it is not within the judicial competence to inquire whether the petitioner... correctly perceived the commands of his faith.").

On the third question, the court held that the government's stated interests in public health and gender equality were not sufficiently compelling to justify the substantial burdens imposed on Appellants by the ACA. Reiterating that thousands of employers were exempt from the contraceptive coverage requirements of the ACA under the Act's various exceptions, the majority stated that "a law cannot be regarded as protecting an interest of the highest order when it leaves appreciable damage to that supposedly vital interest." Since the government offered no explanation of how its stated interests would be undermined by exempting Appellants from the contraceptive coverage requirements of the ACA, the court also held that those requirements were not narrowly tailored with respect to Appellants.

The majority thus held that Appellants satisfied the "likelihood of success" element of preliminary injunction analysis. The same majority also held that Appellants satisfied the "irreparable injury" element, noting that violations of constitutional rights always constituted irreparable harm and that RFRA claims were designed to protect constitutional religious rights. However, only four judges agreed that the "balance of equities element" and the "public interest" element of the preliminary injunction analysis were satisfied. Judge Bacharach, who joined the majority with regard to the "likelihood of success" and "irreparable injury" holdings, felt that the interest balancing required of the other two preliminary injunction elements was more suited to a trial court than an appellate tribunal. Judge Bacharach also disagreed that RFRA rights should take on constitutional gloss in a manner allowing quick judgment on the question of public interest. Thus, the majority reversed the District Court with regard to the "likelihood of success" and "irreparable injury" elements of the analysis, and remanded the case to the District Court for further consideration of the "balance of equities" and "public interest" elements.

The case produced a number of concurrences and dissents (in addition to the partial concurrence of Judge Bacharach):

Judge Hartz filed a concurrence where he discussed additional rationales for extending RFRA and Free Exercise rights to for-profit corporations, and agreed with the majority that those rights should be so extended.

Judge Gorsuch (joined by Judges Kelly and Tymkovich) concurred with the majority that Appellants were entitled to a preliminary injunction, but wrote separately to argue that members of the Green family were also entitled to preliminary injunctions in their individual capacities.

Chief Judge Briscoe (joined by Judge Lucero) concurred as to a small piece of the majority's analysis and dissented as to the bulk of it. Chief Judge Briscoe noted that there was no evidence on the record as to how Appellants (as corporations) "exercised religion" on a day-to-day basis. More fundamentally, Chief Judge Briscoe argued that there was a complete lack of precedent for the extension of RFRA rights to for-profit corporations - and that this lack of precedent indicated a Congressional intent to limit corporate religious exercise to non-profit religious organizations.

Chief Judge Briscoe also balked at the degree to which individuals and corporations became interchangeable under the majority's RFRA analysis. Discussing the law of corporations, Chief Judge Briscoe stated that "it is simply unreasonable to allow the individual plaintiffs in this case to benefit, in terms of tax and personal liability, from the corporate/individual distinction, but to ignore that distinction when it comes to asserting claims under RFRA." All in all, Chief Judge Briscoe found the majority's holding "nothing short of a radical revision of First Amendment law, as well as the law of corporations," and stated that the majority had "opened the floodgates to RFRA litigation challenging any number of federal statutes that govern corporate affairs."

Judge Matheson concurred in part and dissented in part. On the question of extending RFRA rights to for-profit corporations, Judge Matheson dissented, arguing that Appellants "did not meet their burden to show that RFRA applies to them" and stating that "[Appellants'] briefs lack[ed] adequate supporting precedent." Noting that the answer to this question would "profoundly affect potentially millions of businesses in our society in ways we can only begin to anticipate," Judge Matheson emphasized the importance of judicial restraint. Although he thought that the majority's extension of RFRA rights to for-profit corporations was unwarranted on the record presented, he thought that Chief Judge Briscoe's willingness to permanently deny RFRA rights to for-profit corporations was unwarranted as well. Judge Matheson agreed with Judge Gorsuch that the Greens likely had claims in the individual capacities, and he concurred with the majority in reversing the District Court's holding that the Green family's RFRA claims were not likely to succeed on the merits.

To read the full opinion, please visit: http://www.ca10.uscourts.gov/o.../12/12-6294.pdf


Panel: Chief Judge Briscoe and Circuit Judges Kelly, Lucero, Hartz, Tymkovich, Gorsuch, Matheson, and Bacharach

Date of Issued Opinion: June 27, 2013

Docket Number: 12-6294

Decided: Denial of Appellants motion for preliminary injunction reversed; "likelihood of success" and "irreparable harm" established; case remanded to District Court for reconsideration of "balance of equities" and "public interest" elements of the motion for preliminary injunction.

Counsel:
S. Kyle Duncan (Luke W. Goodrich, Mark L. Rienzi, Eric S. Baxter, Lori H.
Windham, and Adèle Auxier Keim with him on the brief) The Becket Fund for
Religious Liberty, Washington, D.C., for Appellants.

Alisa B. Klein, Appellate Staff Attorney (Stuart F. Delery, Principal Deputy
Assistant Attorney General, Sanford C. Coats, United States Attorney, Beth S.
Brinkmann, Deputy Assistant Attorney General, and Mark B. Stern, Appellate
Staff Attorney, with her on the brief) Civil Division, United States Department of
Justice,Washington, D.C., for Appellees.

Author: Tymkovich

Case Alert Author: Levi Monagle, UNM School of Law, Class of 2014

Case Alert Circuit Supervisor: Professor Barbara Bergman, UNM School of Law

    Posted By: Dawinder Sidhu @ 07/07/2013 02:23 PM     10th Circuit  

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