Does Hobby Lobby All But Require Companies to Find Religion?

Posted in: Business Law

The Supreme Court’s 5-4 decision in the Hobby Lobby case continues to reverberate in legal and political circles, with seemingly every angle of the majority’s bizarre decision being scrutinized, defended, and ridiculed. For example, over on Dorf on Law, Michael Dorf and I have now written a total of nine “post mortem” posts analyzing Hobby Lobby, and Professor Dorf’s Verdict column yesterday was also inspired by that case.

Certainly the most fascinating aspect of the case, from my perspective, is the Court majority’s holding that corporate “persons” can hold sincere religious beliefs. Although the specifics of the case involved “closely-held” corporations, the majority’s logic obviously opens up the possibility—indeed the likelihood—that other large, for-profit corporations could declare themselves to be motivated by religious convictions. The majority claims that corporate law might provide a brake on the ability of corporations to invoke religious beliefs; but if a company does decide, through its internal processes, that it is a sincere believer in any particular religion, then there is nothing in Hobby Lobby that would prevent the corporation from being covered by the Religious Freedom Restoration Act (RFRA).

In this column, I explore the possibility that companies will not only be able to invoke RFRA’s religious protections after Hobby Lobby, but that many companies will essentially be all but compelled to take religious positions that will increase the companies’ profits (by, for example, allowing the companies to be exempt from environmental laws). First, however, it is important to understand just how expansive the Hobby Lobby majority’s opinion could turn out to be.

The Basics of RFRA Challenges: Hobby Lobby Puts Pressure on the “Sincerity” Prong

The Hobby Lobby chain of stores, according to the Court’s majority, is a corporate person that shares its majority owners’ fundamentalist Christian beliefs. This “person” won its challenge to a part of the Affordable Care Act (ACA), which required companies either to provide health care coverage that includes a full range of contraceptive choices, or to pay fines to the government.

This corporate person believes that abortion is a sin, and that some of the contraceptive options required under the ACA cause abortions. As Professor Dorf noted in one of his essays on the case, that the corporation’s religious beliefs were scientifically false does not matter under RFRA, because what matters under that law is that the religious person believe that something is true, not that it actually be true.

The analysis under RFRA works as follows: If a person can establish that his/her/its “sincerely held” religious beliefs are being “substantially burdened” by a neutral law of general applicability, then the believer will be exempt from the law unless the law achieves a “compelling governmental interest” by the “least restrictive means” possible. In Hobby Lobby, the majority conceded (grudgingly) that there was a compelling governmental interest served by the ACA’s contraceptive requirement, but it then held that there was a less restrictive way to achieve that compelling interest.

The Dorf on Law series of posts explains in some detail how the RFRA requirements, together with the majority’s ruling in Hobby Lobby, will put enormous pressure on a threshold question that was not in dispute in that case. If a corporation’s religious beliefs are “sincerely held,” then the RFRA analysis proceeds. If not, then one need not even proceed with the formal prongs of the analysis.

Part of the reason that a litigant’s religious sincerity must become an important part of future cases is that there is no other point in the legal analysis to challenge the possibility that a religious belief might be invoked dishonestly or opportunistically. One might, for example, have imagined that an asserted religious belief could be scrutinized for its seriousness under the “substantial burden” prong of RFRA. However, after Hobby Lobby, that prong is unavailable. As Justice Ginsburg’s dissent points out, the majority essentially treats all religious burdens as substantial, removing a possible point at which a court could have said to a future litigant, “Yes, we understand that you have a religious belief that is being burdened by the law, but it is not substantial enough to quality under RFRA.”

It is also possible to read the majority’s opinion as saying that “substantial” under RFRA refers to the seriousness of the penalty that the company would pay for violating the ACA, not the seriousness of the religious belief that is being burdened. Although I find such a reading of Justice Alito’s words to be unpersuasive, it is a minimally plausible interpretation, at least if one focuses on some phrases to the exclusion of others. Even if that were the correct reading, however, then it would merely mean that the substantiality question was never available to challenge the seriousness of religious burdens or beliefs in the first place.

Either way, the only way for a future court to police claims of religious burdens would be to inquire into whether the “person” holding the asserted beliefs does so with sincerity. Otherwise, courts will find themselves proceeding to the analysis of “compelling governmental interests” and “least restrictive means” without any inquiry at all into whether the religious belief in question is in any way serious. This not only would defy logic, but it would also violate RFRA itself.

The Difficulty of Inquiring Into Religious Sincerity, and the Additional Complications When For-Profit Corporations Are Involved

Until now, courts have been understandably hesitant to question the sincerity of any litigants’ asserted religious beliefs. Questioning another person’s sincerity is a serious matter, and courts would prefer not to be forced to rule that a person really does not believe in the religious proposition that he has claimed—on public record, no less—to believe.

Even if a court were willing to so inquire, moreover, it is very difficult to figure out what kind of evidence one would need to “prove” that someone is being insincere. Even a signed affidavit saying, “I do not hold Religious Belief X,” might not be enough, because a person’s religious beliefs can change at any moment. Indeed, many religions teach that proselytizing about their faith to nonbelievers is essential, because nonbelievers simply need to be shown the error of their ways and be directed toward “truth.” The revelation of truth is thought to be a deeply personal event, where a person suddenly sees what he could not see until that glorious moment. This is why deathbed conversions are so often respected, and why being “born again” is a central part of the belief system of many Protestant denominations.

Moreover, in the “Hobby Lobby post mortem” series noted above, Professor Dorf added the additional nuance that it is possible to practice a religion without holding any particular set of beliefs about that religion. This makes it even more difficult to see how a court could inquire into the sincerity with which a litigant holds any given religious claim.

When for-profit corporations are involved, however, one would think that a court’s skepticism should rise, depending on the nature of the religious claim. If a company asserted that its religion prevents it from complying with a law, and that law just happens to increase the company’s costs and thus reduce its profits, the suspicion would be unavoidable that RFRA was merely a new vehicle by which the company was padding its bottom line. Sincerity would be the key, but there is no useful guidance about how to determine sincerity. Indeed, the majority’s opinion goes to great lengths to suggest that inquiries into religious beliefs are wholly unacceptable.

The Profit-Seeking Imperative: If a Law Can Be Challenged, Must a Company Challenge It?

In my contributions to the Hobby Lobby post mortem series on Dorf on Law, I have explained how a for-profit company could proceed through the relevant prongs of RFRA to challenge profit-reducing laws. The example that I discussed at the greatest length was the minimum wage, but certainly any law could be challenged on a religious basis. It is true that such companies could still lose on the other prongs, but they could also win, at least under some easily imaginable sets of facts.

Based on that analysis, I ended up predicting that there could soon be a “gold rush” atmosphere, in which Hobby Lobby opens the floodgates to companies that test the boundaries of the new religious doctrine, to challenge laws that they dislike. Although there are some forces pushing in the opposite direction, I could easily picture a legal landscape in which many companies challenge under RFRA all manner of laws for purportedly violating their sincerely held religious beliefs.

But what if I am wrong? What if companies for some reason find it unseemly to challenge secular laws on religious grounds, or have some other reason to leave well enough alone, no matter the open invitation that the Hobby Lobby majority sent out to corporate America? Arguably, such companies would be violating their duties to their shareholders.

To be clear, religious challenges by corporations will probably continue to “seem weird” to many people—even to people who sympathized with the owners of Hobby Lobby on that company’s particular claim. Other than on matters of reproduction, one might imagine that it would be difficult to find a religious reason to avoid providing a safe workplace, or to refuse to install pollution reduction devices, or to sell tainted food, or to challenge any of a number of other standard business-related laws.

As odd as it sounds, however, such claims could plausibly be supported by religious beliefs. There are plenty of people who hold what they claim to be religiously motivated beliefs, but whose beliefs would seem unsupported by the religion in question. American Protestant churches split over the question of slavery in the nineteenth century, for example. Some people read the Bible to require that believers provide charity to the poor, while others read the same Bible to say that we are required to allow poverty to continue. Does scripture require that heterosexuals love and accept homosexuals, or the opposite?

These difficult questions, moreover, arise even within established religions. RFRA, however, is not limited to those religions, and so long as someone sincerely believes in a religion, then even a brand-new religion is to be accorded respect. When people talk about “faith in the free market,” we generally take that to be a metaphor; but what if a person says that her faith in unregulated commerce is a matter of religious conviction?

All of this, however, still presumes that the post-Hobby Lobby “gold rush” that I predicted would involve only companies that are eager to pursue religious claims, whereas others would be free not to do so. But what if it would actually be a breach of the fiduciary duty to a company’s owners not to pursue such claims? In other words, what if companies would feel compelled to pursue religious claims—even to the point of inventing new religions that embody their sincere beliefs in unregulated markets—in order to fulfill their duty to their shareholders?

The renowned conservative economist Milton Friedman argued nearly a half-century ago that the managers of companies have no business “doing good,” that is, that the executives who run a corporation have an affirmative duty not to “give away the shareholders’ money” by being good corporate citizens. Companies, under this view, would violate their solemn duties if they were to do anything more than what the law absolutely requires.

There is plenty of controversy over Friedman’s views, of course. Even so, his logic suggests that companies are required not only to go to the edge of illegality in all of their dealings, but that they push the edge to see just how far it might go. Tax strategies that might later be found to be illegal, for example, are required business practice unless and until they lead to successful prosecutions. Similarly, spending company money to change the laws—to lobby—in a way that will pad the bottom line, even if doing so harms the political system and society at large, is merely a standard part of good business practices.

Of course, corporate law in the United States gives management a great deal of leeway in deciding what is the best path toward maximizing profits. If a company could challenge an environmental regulation but chooses not to do so, the default assumption is that this was a judgment call by management that deserves to be respected. Maybe the managers thought that the suit would lose, or that the increased profits from winning were too small to matter, or any of a number of other reasons not to do something that could have increased the company’s profits.

That default presumption, however, is still to be weighed against something like Friedman’s view of fiduciary duty. If a corporate executive is handed a profit-making opportunity by the Supreme Court, and the company can avail itself of that opportunity simply by declaring its sincere fealty to religious beliefs that happen to increase the company’s profits, then failing to pursue that avenue is potentially problematic.

Moreover, even if companies’ managers cannot be sued in a derivative lawsuit for failing to pursue RFRA claims, they will certainly now feel pressure to explore and pursue such claims. Internal debates over pursuing Hobby Lobby-like claims will surely arise, and it would be foolish to simply assume that only a tiny number of those debates will be won by those who wish to take an aggressive religious position.

If it turns out that there is merely a trickle of such litigation in the aftermath of Hobby Lobby, therefore, the most interesting question will not be to explain the cases that we see, but to understand why the trickle is not a flood. Or, to mix metaphors, if this dog does not bark, then sleuths will want to know why more companies are not following this new and promising path to free market salvation.

3 responses to “Does Hobby Lobby All But Require Companies to Find Religion?”

  1. Ignacio says:

    The Friedman quote does not substantiate the claim that his logic requires corporate managers “go to the edge of legality.” Friedman apparently believed non-business uses of capital fell outside a manager’s scope of authority and constituted a breach of the fiduciary duty to shareholders. Friedman’s logic does not dictate that managers must take every act within their scope of authority. Managers obviously don’t have to lie about their religious beliefs merely because doing so might be profitable.

    In any case, the overarching point about fiduciary duties seems off-topic given that the Hobby Lobby decision only applied to closely held companies. Family members and friends won’t be filing derivative lawsuits over another’s failure to lie about his or her religious beliefs resulting in lost profits. There’s no conceivable cause, anyway.

    As with most broad categorizations of people, most business people (i.e. the owners of closely held companies) are generally decent and prefer to avoid courtrooms and their associated costs. That’s the simple reason why, as you expect, there won’t be more than a trickle of Hobby Lobby-based lawsuits.

  2. shanen says:

    Why don’t you start a Church of Money to worship the green? Based on the Hobby Lobby decision, any “corporate person” that becomes a sincere “believer” in your church will be able to file a religious objection to ANY law that interferes with the church’s sincere religious conviction that the company needs more money. Can you imagine a better “business” model?

    P.S. Of course the church will charge very moderate fees for membership, presumably based on the tax savings of membership, but that isn’t the best part of it. The Church of Money will be able to sue any corporation that refuses to join the church on the grounds that failure to join the church is hurting the poor shareholders. Thank you Hobby Lobby.

  3. David Ricardo says:

    There may already be a rush to litigate in this area, one report says that there are over 50 cases already in the pipeline in this area. But there are reasons why a self-serving, profit maximizing corporation might not pursue claims as a result of Hobby Lobby.

    Monetary Cost: Some potential litigants may determine that the cost of a successful claim is greater than the benefits.

    Public Relations Cost: Consumer backlash may discourage a corporation from claiming ‘religion’. There is evidence of negative consumer with
    respect to Eden Foods. Chik fil A had to back down in its anti-gay positions.

    Fear of Losing: While most people think the narrow decision in Hobby Lobby will be expanded in future cases, it is possible that Alito and Company actually believe what they said about the decision being narrow. Potential
    corporate plaintiffs may back off for fear of losing and casting the
    narrow decision into solid concrete.

    Legislative Backlash: Potential litigants may be concerned that too aggressive action in this area will motivate a future Congress to legislatively narrow the scope of RFRA and religious accommodation.

    What may happen is that there are a very large number of small cases with a very narrow focus, cases brought by small corporations whose legal actions are financed by the owner’s wealth or by conservative organizations. The goal will be to broaden Hobby Lobby incrementally. Their model may be Romer and Lawrence and Windsor which culminates (one hopes) in legalization of SSM.

    Remember, the objective here of those challenging the accessibility of contraception is not just to allow businesses to keep contraception products and services out of their health care plans. The ultimate goal is to overturn Griswold and empower state governments with the right to restrict or even ban access to
    contraception products and services. That goal may be impossible, it may be decades into the future but achieving that goal may be only two Supreme Court appointments replacing Justices Ginsburg and Breyer by a conservative Republican President away.