Hercules Industries, a Denver company that provides heating and air conditioning equipment recently won a preliminary injunction against the imposition of the preventive care requirement adopted pursuant to the Affordable Care Act. Predictably, conservatives lauded the decision as a victory for religious freedom, because, at least for the moment, this family-owned business that employs around 300 people has the religious freedom to tell their employees they’re on their own to pay for reproductive health services. Don’t expect it to last.
The opinion by federal district Judge John L. Kane, a Jimmy Carter appointee, fails in its application of the governing standards for granting a preliminary injunction, and completely elides the burden on the plaintiffs to show a burden on the free exercise of religion from a generally applicable law that may conflict with the religious tenets of the individuals controlling the corporate entity. Because this is a blog devoted to legal issues relating to civil rights and civil liberties, I will start with the religious freedom analysis, and briefly discuss the granting of the preliminary injunction in conclusion.
Under the Free Exercise Clause of the First Amendment of the Constitution, there is no requirement that the government provide a religious exemption to a facially neutral law that burdens the religious beliefs or practices of an individual or group. After the Supreme Court decided Employment Division v. Smith, which announced that rule, Congress passed and President Clinton signed the Religious Freedom Restoration Act, 42 U.S.C. § 2000bb through bb-4, attempting to “restore” the right to religious exemptions. Under RFRA (which only applies to the Federal Government), the government may only burden a person’s right to free exercise of their religion if the challenged law promotes a compelling government interest and is the least restrictive means of promoting that interest (i.e., strict scrutiny).
Judge Kane decided that the plaintiffs had made a sufficient showing of imminent harm from violation of their rights under RFRA to warrant the preliminary injunction, and therefore explicitly declined to analyze the plaintiffs’ constitutional claims. So anyone who says that the judge in any way ruled that Obamacare (or one its implementing regulations) was unconstitutional is mistaken. Because the decision granted a preliminary injunction, even if it had been a constitutional ruling, it would have only decided that the plaintiffs had demonstrated likelihood of success on their constitutional claim on the merits. The fact that the judge explicitly limited his analysis to RFRA further belies any claim that the preventive care mandate has been held unconstitutional.
The RFRA analysis begins with the burden on the party challenging the law to demonstrate a substantial burden on the free exercise of religion. The named plaintiffs in this case, in addition to Hercules Industries, are members of the Newland family who own and operate Hercules Industries. The government, rightfully in my opinion, points out that only Hercules Industries has any obligation under the ACA, and as a for-profit secular employer, Hercules cannot engage in the free exercise of religion.
Judge Kane’s analysis of the initial burden borne by the plaintiffs:
These arguments pose difficult questions of first impression. Can a corporation exercise religion? Should a closely-held subchapter-s corporation owned and operated by a small group of individuals professing adherence to uniform religious beliefs be treated differently than a publicly held corporation owned and operated by a group of stakeholders with diverse religious beliefs? Is it possible to “pierce the veil” and disregard the corporate form in this context? What is the significance of the pass-through taxation applicable to subchapter-s corporations as it pertains to this analysis? These questions merit more deliberate investigation.
Have the plaintiffs satisfied their initial burden? It certainly seems as if they haven’t, considering that the Judge offers no conclusion on whether the ACA is, in fact, a substantial burden on the free exercise of religion when imposed either on Hercules Industries or on the Newlands as individuals. The analysis should have stopped right there, but Judge Kane goes on as if he has concluded that the plaintiffs’ initial burden had been satisfied.
Instead, implicit in Judge Kane’s decision to grant the preliminary injunction is the conclusion that the plaintiffs had demonstrated likelihood of success on the merits, i.e. likelihood that a law which imposes burdens on the corporation as an employer burdens the free exercise of religion. We know that corporations have some rights under the First Amendment. As one Daily Kos analysis points out, Citizens United makes clear that corporations have free speech rights, because corporations have to speak. Corporations don’t, on the other hand, exercise religion. Corporations, generally, are legal entities that exist to promote the commercial interests of their owners. Corporations may be “persons,” but they aren’t people, and only people can have religion. Hercules Industries, as described by Judge Kane, “is a for-profit, secular employer.” Specifically, Hercules “is a Colorado s-corp engaged in the manufacture and distribution of heating, ventilation, and air conditioning (‘HVAC’) products and equipment.” The company, therefore has no right to free exercise of religion under either the First Amendment or RFRA.
Judge Kane gives weight to the fact that the Newlands claim ”they seek to run Hercules in a manner that reflects their sincerely held religious beliefs.”
Thus, for the past year and a half the Newlands have implemented within Hercules a program designed to build their corporate culture based on Catholic principles. Hercules recently made two amendments to its articles of incorporation, which reflect the role of religion in its corporate governance: (1) it added a provision specifying that its primary purposes are to be achieved by “following appropriate religious, ethical or moral standards,” and (2) it added a provision allowing members of its board of directors to prioritize those “religious, ethical or moral standards” at the expense of profitability.
Notice that Hercules has been engaged in this religious conversion for the past year and a half. What happened a year and a half ago? The ACA was passed! So this for-profit, secular employer recognized an upcoming regulatory mandate, and suddenly decided it was important to include their religious principles in their articles of incorporation. Judge Kane provides no insight into why the court should give weight to religious principles that the corporation suddenly discovered when faced with a looming change in the law.
The fact that these religious principles are a newly introduced aspect of Hercules’s corporate culture becomes even more important when Judge Kane proceeds to the next part of the analysis, whether the government is pursuing a compelling interest. Judge Kane admits that the promotion of public health is a compelling government interest. He then cites a recent RFRA case, Gonzalez v. O Centro Espirita Beneficenteuniao Do Vegetal, for the proposition that the government’s burden is to show that the application of the law to the particular plaintiff promotes that interest. Judge Kane concludes that because the preventive care mandate includes other exemptions, such as grandfathered plans and smaller employers, the creation of one more exception for Hercules cannot possibly undermine the pursued interest.
But how many employers may now choose to reincorporate with the inclusion of a religion clause? The only way we know that Hercules as a company supposedly has religious principles is because it says so in the articles of incorporation. Judge Kane doesn’t seem to consider how widespread this exemption could become given the large number of Americans who can claim religious principles that oppose various aspects of reproductive health coverage. When companies like Papa John’s Pizza are already lamenting that smaller employers may have a competitive advantage, a religious loophole may be too tempting to pass up. In fact the Supreme Court has previously concerned itself with the potential for competitive advantage that a business could gain when rejecting a request for a religious exemption under the Free Exercise Clause.
Despite the fact that Judge Kane failed to determine whether there appeared to be a substantial burden on free exercise and apparently thought the government’s interest wasn’t particularly compelling, he still goes on to consider whether the government had employed the least restrictive means of pursing its goals. In doing so, he used as his baseline the plaintiffs’ suggested alternative: “government provision of free birth control.” Judge Kane at this point suddenly remembers the burden-shifting analysis, and concludes that the government failed to carry its burden to refute the plaintiffs’ suggested alternative. This in spite of the government’s arguments that government provision of birth control “would impose considerable new costs and other burdens on the Government” and would not “ensur[e] that women will face minimal logistical and administrative obstacles to receiving coverage of their care.” The burden on the government at this late stage of the analysis that should never have been reached is apparently much higher than the plaintiffs’ initial burden that Judge Kane decided he could assume arguendo had been met.
If all of that doesn’t convince you that Judge Kane is exercising a fairly extreme form of motivated reasoning, consider the standard he chooses to apply for the granting of the preliminary injunction. Judge Kane asserts that the plaintiffs are entitled to a lowered burden of proof on the need for the preliminary injunction because “the equities tip strongly in their favor.” Judge Kane then states without discussion that violation of the plaintiffs’ RFRA rights (which he later says is an open question) is unquestionably a threat of irreperable harm. The potential harm to the government is only viewed as the inability to enforce its regulations, ignoring the potential for an explosion of litigation asking for similar injunctions before the law has taken effect.
Judge Kane concludes there is no public interest effected first, because the government has already created too many exceptions (which I suppose means the law fails to support a public interest at all?) and because there is “a strong public interest in the free exercise of religion.” No consideration is given to the public interest that employees, who may not share their bosses religious principles, have access to preventive health coverage. Nor does Judge Kane consider the potential business advantage that Hercules could gain over its competitors by not having to provide the same level of health insurance.
Finally, Judge Kane recognizes that “the less rigorous standard for preliminary injunctions is not applied when a preliminary injunction seeks to stay governmental action taken in the public interest pursuant to a statutory or regulatory scheme,” he again reiterates his choice to apply the lowered standard, citing the numerous exceptions to the mandate. No discussion is provided as to how those exceptions change the fact the plaintiffs are asking for an injunction staying a government regulatory scheme.
All of these flaws in Judge Kane’s analysis lead me to believe that the Tenth Circuit will make quick work of overturning this injunction. Judge Kane is right that there are interesting questions to be answered about the religious freedom rights of corporations and employers, and I anxiously await a trial (and more importantly an appeal if this is how Judge Kane will continue to handle the issues) to answer those open questions. For right now, Hercules Industries should be subject to the same requirements as every other similarly-situated, for-profit, secular employer under the ACA, Judge Kane’s sympathies notwithstanding.