Appeals Court Rules Corporations Can’t Exercise Religion Like People

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image of classic birth control pill packThe U.S. Court of Appeals for the Sixth Circuit ruled today in the case Autocam Corporation v. Kathleen Sebelius, that since for profit corporations can’t exercise religion like individuals, they can’t deny insurance coverage for contraceptives for their employees just because the owners are religious.

The owners of Autocam Corporation filed a lawsuit against the coming government mandate that insurance plans cover contraceptives. The company, located in Michigan, is owned and controlled by members of the Kennedy family, all of whom are practicing Roman Catholics.

The court ruled:

We are not persuaded that the dilemma the Kennedys pose can be separated from the alleged harm to Autocam. “[I]ncorporation’s basic purpose is to create a distinct legal entity, with legal rights, obligations, powers, and privileges different from those of the natural individuals who created it, who own it, or whom it employs.” Cedric Kushner Promotions, Ltd. v. King, 533 U.S. 158, 163 (2001). The Kennedys’ actions with respect to Autocam are not actions taken in an individual capacity, but as officers and directors of the corporation. As such, the Kennedys are “entrust[ed] . . . with the management of [Autocam’s] affairs,” and the law “impose[s] upon them fiduciary duties requiring the utmost good faith whenever they deal with the corporation they serve.” Thomas v. Satfield Co., 108 N.W.2d 907, 911 (Mich. 1961). “[T]he [Kennedys’] injury stems derivatively from their fiduciary duties under [Michigan] law to advance the conflicting financial and religious interests of [Autocam],” and cannot fairly be classifiedas a harm distinct from the one suffered by Autocam. See Hobby Lobby, 2013 WL 3216103, at *41 (Bacharach, J., concurring).

For much the same reasons, we reject the Kennedys’ argument that Autocam can assert the Kennedys’ RFRA claims on their behalf on a “pass through” theory. The Ninth Circuit has recognized on two prior occasions that for-profit corporations can assert claims under the Free Exercise Clause on behalf of their owners when the corporations behave as “an extension of the beliefs” of the natural persons who own and direct it. Stormans, Inc. v. Selecky, 586 F.3d 1109, 1120 (9th Cir. 2009); EEOC v. Townley Eng’g & Mfg. Co., 859 F.2d 610, 619–20 (9th Cir. 1988). But this approach seems to abandon corporate law doctrine at the point it matters most. “The corporate No. 12-2673 Autocam Corp., et al.v. Sebelius, et al. Page 9 form offers several advantages ‘not the least of which was limitation of liability,’ but in return, the shareholder must give up some prerogatives, ‘including that of direct legal action to redress an injury to him as primary stockholder in the business.'” Conestoga Wood Specialties Corp. v. Sec’y of U.S. Dep’t of Health & Human Servs., — F.3d —-, 2013 WL 3845365, at *6 (3d Cir. 2013) (quoting Kush v. Am. States Ins. Co., 853 F.2d 1380, 1384 (7th Cir. 1988)). We are without authority to ignore the choice the Kennedys made to create a separate legal entity to operate their business.

Autocam Corporation v. Kathleen Sebelius (09/17/2013)

The court said that Congress didn’t intend to cover for-profit corporations under the Religious Freedom Restoration Act (RFRA) and because a corporation is set up to limit the liability of the individual owners, they can’t assert an individual right for the corporation.

The court ruled against the plaintiffs on standing for the argument under the RFRA and also rejected an argument under Citizen United since that case dealt with free speech and not the religious clause of the 1st amendment.

This issue is far from settled since the 6th circuit also noted other courts have ruled differently. Sometimes, different rulings can lead to a case being sent to the US Supreme Court. But this is good news for religious freedom today.


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