JURIST Guest Columnist Katharine Suominen of St. John’s University School of Law, Class of 2016, is the eleventh author in a twelve-part series from the staffers of the Journal of Civil Rights and Economic Development. Suominen discusses the dangers of the court’s decision in Burwell v. Hobby Lobby…Imagine Occupy Wall Street protests break out again, but this time, the mayor directs the NYPD to let the protesters stay in various private public spaces, like the lobby of a corporate office building. Barclays decides that it does not want to risk bloody confrontations between its own security guards and the occupiers. Instead, it releases a specially programmed fleet of drones to direct air or sound at the occupiers until they leave the premises. New York’s city council then proposes legislation to ban the corporate use of drones. Barclays decides to challenge the ordinance as an unconstitutional restriction on its corporate right of self-defense. The Supreme Court agrees with the corporation and extends Second Amendment rights to all corporations.
This hypothetical may seem dramatic and highly unlikely, but it is actually not that farfetched. In recent years, the Supreme Court has vastly expanded the constitutional rights of corporations. In a mere four years (2010-2014), the Supreme Court has given corporations unrestricted political speech rights and then, in Burwell v. Hobby Lobby, First Amendment religious freedom rights. And there is no indication that the court intends to stop, or even slow, the expansion of corporate personhood.
In Burwell v. Hobby Lobby, a 5-member family, deeply wedded to their Christian beliefs and values, owned and operated an arts and crafts chain throughout the US. Hobby Lobby argued that President Obama’s Affordable Care Act contraceptive mandate violated its Free Exercise rights under the First Amendment and sought protection under the Religious Freedom Restoration Act (RFRA), which prevents the passage of laws that substantially burden a person’s right to free exercise of religion. The Supreme Court concluded that “person” under the RFRA included corporations. The US Department of Health and Human Services conceded that “person” includes non-profit corporations, so the court reasoned that there was no “conceivable definition of ‘person’ that includes natural persons and nonprofit companies, but not for profit corporations, [like Hobby Lobby].” Thus, Hobby Lobby and other “closely-held corporations” were permitted to seek the protections of the RFRA. In other words, “closely-held corporations,” a vaguely defined term, have free exercise rights under the First Amendment.
Since the majority opinion did not distinguish corporations from other business forms, such as sole proprietorships, the reach of the court’s opinion becomes much greater. Thus, the extension of the RFRA to for profit corporations is bound to have, as Justice Ginsburg argued, “untoward effects.”
In issuing its decision, the court in Burwell v. Hobby Lobby clearly missed a few key unintended consequences for corporate law. The first unintended consequence is that this expansion of corporate personhood enhances the ability of creditors to pierce the corporate veil. The second unintended consequence is that the court’s reasoning could be extended to grant corporations other constitutional rights, thereby allowing corporations to morph into “super corporations.”
“Veil piercing” is a legal decision in which the court treats the rights and duties of a corporation as the rights and duties of the shareholders or owners. This usually happens when the court determines that the corporation is no longer separate and distinct from its owners and forfeits the limited liability protection. If a corporation goes bankrupt and the veil is pierced, creditors can go after the homes, bank accounts, investments and other personal assets of the corporation’s owners, shareholders or members in order to satisfy the corporate debt. Thus, there is, arguably, no other business tool more powerful than incorporation because it protects shareholders from personal financial ruin.
Burwell v. Hobby Lobby has potentially diminished the importance of this once essential and powerful business tool. These closely held corporations, which seek to invoke the RFRA protections, might be opening themselves up to veil piercing as they are extending their own personal religious beliefs to the corporate entity. While the Supreme Court may not pierce the corporate veil under these circumstances, lower courts might use the Burwell v. Hobby Lobby decision as precedent to do so.
As for the second unintended consequence, religious rights and the free exercise thereof were once considered “purely personal,” meaning the Free Exercise clause was reserved for individuals and could not be extended to corporations. However, in Burwell v. Hobby Lobby the Supreme Court did not address this distinction between “purely personal” constitutional rights and those rights that may be granted to corporations. This departure sets the stage for future courts to disregard this distinction and continue the expansion of corporate personhood.
Prior to Burwell v. Hobby Lobby, most people would have scoffed, if not laughed, at the thought of corporations having religious rights; and yet, now they do. Thus, it may not be as improbable as people think for corporations to have Second Amendment rights. The court ascribes similar purposes to both the First and Second Amendments–self-actualization and government deterrence. Therefore, the logic used to extend First Amendment rights to corporations could be used to extend Second Amendment rights to corporations as well.
With both First and Second Amendment rights, corporations become “super corporations” with all the essential constitutional rights of the natural person, but with even greater protections than natural persons. Under this hypothetical the US would shift from “We the People” to “We the Corporations.” It is therefore essential for the court to return to the artificial entity theory of corporate personhood and limit its expansion of this legal concept. Unfortunately, given Burwell v. Hobby Lobby it seems unlikely that this is the path the Supreme Court is on.
Katharine Suominen is a third-year law student at St. John’s University School of Law. After serving as an Executive Notes and Comments Editor for the St. John’s Journal of Civil Rights and Economic Development, Katharine will be a litigation associate at a global firm in New York. She currently serves as a legal writing Teaching Assistant at St. John’s University School of Law.
Suggested Citation: Katharine Suominen, Burwell v. Hobby Lobby: The Dangers of Protecting First Amendment Rights of Corporations and the Rapid Expansion of “Corporate Personhood”, JURIST – Student Commentary, February 17, 2016, http://jurist.org/dateline/2016/02/katharine-suominen-religious-freedom.php.
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