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From Health Law Daily, July 29, 2013

Contraceptive coverage mandate binding on commercial corporation

By Michelle L. Oxman, JD, LLM

A secular, for-profit corporation was properly denied an injunction against application of the requirement for employer-sponsored insurance to cover contraceptives because it had no rights to free exercise of religion under either the First Amendment to the United States Constitution or the Religious Freedom Restoration Act (Conestoga Wood Specialties Corp. v Secretary of HHS, July 26, 2013, Cowen, R). The purpose of the First Amendment Free Exercise Clause is to protect individual religious liberty from government intrusion. Secular, for-profit corporations do not have religious beliefs, and as separate, distinct legal entities, they cannot exercise the rights of the owners. Because the plaintiffs did not establish a likelihood of success on the merits, the court did not consider the extent of irreparable harm.

The corporation. Conestoga Wood Specialties Corp. (Conestoga) was a secular corporation engaged in a profit-making business; all of its shares were owned by members of the Hahn family. The family’s Mennonite beliefs treat human life as beginning at fertilization and prohibit its destruction from that point forward. After the Patient Protection and Affordable Care Act (PPACA) (P.L. 111-148) was enacted, the board of directors adopted the Hahn Family Statement on the Sanctity of Human Life, which articulates those views.

The family objected to covering two forms of emergency contraception on the ground that they may destroy an embryo after fertilization. Plan B, the “morning after pill,” is taken within 24 to 72 hours after unprotected sex, and ella, the “week after pill,” is taken within seven days.

Prior proceedings. After an evidentiary hearing, the district court denied the preliminary injunction on the ground that Conestoga did not engage in the exercise of religion, and therefore, was not likely to succeed on the merits. Conestoga did not qualify for an exemption as a religious employer under 45 CFR sec. 147.130(a) because it was a for-profit entity whose purpose was profit, not the inculcation of religious values. Similarly, although HHS had announced a safe harbor for certain nonprofit entities while it considered changes to the exemption, Conestoga did not qualify.

Application of Citizens United decision. Conestoga argued that the 2010 Supreme Court decision in Citizens United v Federal Election Commission, which granted broad protection to corporations’ exercise of freedom of speech under the First Amendment, applied with equal force to the First Amendment Free Exercise Clause. However, both the district court and the appeals court rejected that argument. Some constitutional rights, for example, the right to privacy and the Fifth Amendment privilege against self-incrimination, have been held to be “purely personal,” and available only to natural persons, i.e., individuals, based on their history, nature, and purpose.

The court found no support in cases decided before the enactment of PPACA for the idea that the Free Exercise Clause protects secular corporations formed to make money. The purpose of the Free Exercise was to protect the religious freedom of individuals from interference by the government. Secular, commercial corporations did not pray, worship, observe sacraments, or engage in other religious activity.

The “pass-through” argument. Conestoga also argued that it was an extension of the Hahn family, so that the family’s rights “passed through” to the corporation through which they acted, and it was asserting their rights, not its own. The court rejected that argument as well because it failed to account for the nature and purpose of incorporation. By creating a distinct legal entity to own their business, the Hahns avoided personal liability for the actions of that entity. PPACA did not impose any obligation on the Hahns, only on the separate, distinct legal entity that they had created.

The Religious Freedom Restoration Act. Following the same reasoning as it did with the First Amendment claims, the Court of Appeals ruled that Conestoga had no rights to enforce under the Religious Freedom Restoration Act (RFRA) (42 USC sec. 2000bb et seq.) because secular, profit-making corporations do not practice religion.

In dissent, Judge Jordan reasoned that the majority placed too much emphasis on the likelihood of success on the merits. In his view, the court should have given more weight to the other factors, particularly the extent of irreparable harm.

The case number is 13-1144.

Attorneys: Charles W. Proctor, III, Esq. (Law Offices of Proctor, Lindsay & Dixon) for Conestoga Wood Specialties Corporation. Michelle Renee Bennett, Esq., U.S. Department of Justice, Civil Division, Federal Programs Branch, for the Departments of Health and Human Services, Labor and the Treasury, and their Secretaries.

Companies: Conestoga Wood Specialties Corporation; U.S. Department of Health and Human Services; U.S. Department of Labor; U.S. Department of the Treasury

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