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January 3, 2013

Business owners granted injunction pending appeal prohibiting the government from enforcing the PPACA contraception mandate

By Susan L. Smith, JD, MA

Cyril and Jane Korte (Kortes) and their construction company, Korte & Luitjohan Contractors, Inc. (company) successfully appealed the district court's denial of their request for a preliminary injunction prohibiting the government from enforcing the statutory mandate requiring their company to purchase an employee health insurance plan that includes no cost-sharing coverage for contraception and sterilization procedures (Korte v Sebelius, December 28, 2012, Flaum, J., Rovner, I., Sykes, D). The court concluded that the Kortes established: (1) a reasonable likelihood of success on the merits of their Religious Freedom Restoration Act (RFRA) (see 42 U.S.C. § 2000bb-1) claim, (2) irreparable harm, and (3) that the balance of harms tips in their favor. Therefore, the court granted their emergency motion for injunction pending appeal.

Background. Under the Patient Protection and Affordable Care Act (PPACA)(P.L. 111-148) and related regulations, employers must provide an employee health insurance plan that includes no cost-sharing coverage for contraception and sterilization procedures (contraception coverage mandate) (see 42 U.S.C. sec. 300ggg-13(a)(4) and Final rule, 77 FR 8725, Feb. 15, 2012). The contraception mandate takes effect starting the first plan year after August 1, 2012, which is January 1, 2013, for the Kortes. Employers who do not comply are subject to enforcement actions and substantial penalties. For the Kortes' company, the penalties could be as much as $730,000 per year, which they claim would be financially ruinous to the company and them personally.

The Kortes seek to manage their company in a manner consistent with their Catholic faith, including its teachings regarding abortion, contraception, and sterilization. Their current health insurance plan, which is up for renewal January 1, 2013, includes coverage for contraception. The Kortes, however, want to terminate this coverage and substitute a health plan that conforms to the requirements of their faith. The PPACA contraception mandate and implementing regulations prohibit them from doing so. The Kortes filed suit against HHS Secretary seeking declaratory and injunctive relief against the enforcement of the contraception mandate, alleging that it violates their rights under the RFRA; the First Amendment's Free Exercise, Establishment, and Speech Clauses; the Fifth Amendment's Due Process Clause; and the Administrative Procedure Act, 5 U.S.C. §§ 553(b)-(c), 706(2)(A), (D) and immediately moved for a preliminary injunction. The district court denied their motion. The Kortes have appealed and filed an emergency motion for an injunction pending appeal relying solely on their RFRA claim.

Establishing a "substantial burden" and compelling interest. The RFRA prohibits the federal government from imposing a substantial burden on a person's exercise of religion even if the burden results from a rule of general applicability unless the government demonstrates that the burden is in furtherance of a compelling interest and is the least restrictive means of furthering that compelling interest. Although the government argued that the company is a secular, for profit enterprise and had no rights under the RFRA, the court determined that the Kortes would have to violate their religious beliefs to operate their company in compliance with the RFRA and that the main issue is coerced coverage of contraception and related services not in the later purchase of use of contraception or related services. The court concluded that the Kortes established: (1) a reasonable likelihood of success on their RFRA claim that the contraception mandate imposes a substantial burden on their religious exercise, and (2) irreparable harm by being forced to choose between violating their religious beliefs or subjecting their company to substantial financial penalties. In addition, the court said that whether the interests laid out by the government qualify as compelling will be determined later in the appeal and the government has not advanced an argument that the contraception mandate is the least restrictive means of furthering the interest it invoked. Moreover, the court found that the "balance of harms tips strongly in the Kortes' favor." While an injunction pending appeal temporarily interferes with the government's interests, that interest is outweighed by the harm to religious liberty interests, the court said.

The case number is 12-3841.

Edward Lawrence White (American Center for Law and Justice) for Cyril B. Korte, Jane Korte, owners, and Korte & Luitjohan Contractors, construction company. Bradley Phillip Humphreys Alisa B. Klein (Department of Justice) for Kathleen Sebelius, Secretary of the United States Department of Health and Human Services; the United States Department of Health and Human Services, Hilda L. Solis, Secretary of the United States United States Department of Labor, the Department of Labor, Timothy Geithner, Secretary of the United States Department of the Treasury, the United States Department of the Treasury.

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