Court Rejects Religious Rights for Companies

(CN) - A Mennonite-owned cabinet business is not exempt from health care reform's mandate to cover contraceptives, a divided 3rd Circuit ruled, because for-profit companies "cannot engage in religious exercise."

Tackling the contentious issue of whether corporations are entitled to First Amendment rights, the federal appeals court in Philadelphia refused to issue a preliminary injunction to Conestoga Wood Specialties Corp.

Conestoga sought an order that would block the government from enforcing the Women's Preventive Healthcare regulations of the Affordable Care Act of 2010, which requires employers to pay for contraception services for employees, among other things.

The carpentry business in central Pennsylvania is owned by the Hahn family and employs about 950 people. The Hahns' Mennonite faith teaches them that terminating a fertilized embryo "is intrinsic evil and a sin against God," according to their lawsuit against the Obama administration.

The Hahns argued that Obama's health care reform forces their company to pay for drugs and services that contradict their religious beliefs, including emergency contraceptives such as Plan B and ella, the so-called "morning-after" and "week-after" pills.

Conestoga and the Hahns said the mandate violates their First Amendment right to freely exercise their religion.

The 3rd Circuit declined to stay the case pending appeal, and a federal judge later ruled for the Obama administration.

The appeals court affirmed on Friday, contrasting this case with the Supreme Court's controversial ruling, in Citizens United v. FEC, that corporations are entitled to free speech.

"We are unable to determine that the 'nature, history, and purpose' of the Free Exercise Clause supports the conclusion that for-profit, secular corporations are protected under this particular constitutional provision," Circuit Judge Robert Cowen wrote. "Even if we were to disregard the lack of historical recognition of the right, we simply cannot understand how a for-profit, secular corporation-apart from its owners-can exercise religion."

The justices in Citizens United overturned a ruling that flew in the face of a "consistent line of cases in which corporations were found to have free speech rights," Cowen explained.

"Citizens United is thus grounded in the notion that the court has a long history of protecting corporations' rights to free speech."

That is simply not the case with corporate religious freedom, he said.

The panel also rejected the Hahns' claim that they, as owners, were entitled to an injunction even if their business was not -- an invocation of the 9th Circuit's "passed through" theory, which treats corporations as an extension of their owners.

"The 'passed through' doctrine fails to acknowledge that, by incorporating their business, the Hahns themselves created a distinct legal entity that has legally distinct rights and responsibilities from the Hahns, as the owners of the corporation," Cowen wrote.

"Since Conestoga is distinct from the Hahns, the mandate does not actually require the Hahns to do anything. All responsibility for complying with the mandate falls on Conestoga," he added. (Emphasis in original.)

Because Conestoga cannot exercise religion, the court also shot down its claims under the Religious Freedom Reformation Act.

Cowen emphasized that the panel's ruling "is in no way intended to marginalize the Hahns' commitment to the Mennonite faith."

"We simply conclude that the law has long recognized the distinction between the owners of a corporation and the corporation itself," he wrote. "A holding to the contrary -- that a for-profit corporation can engage in religious exercise -- would eviscerate the fundamental principle that a corporation is a legally distinct entity from its owners."

Dissenting Judge Kent Jordan -- who had earlier disagreed with his colleagues' refusal to issue a stay -- said the majority's "deeply disappointing" ruling "takes us down a rabbit hole where religious rights are determined by the tax code."

He said the decision allows nonprofits to express religious sentiment "while for-profit corporations and their owners are told that business is business and faith is irrelevant."

"Meanwhile, up on the surface, where people try to live lives of integrity and purpose, that kind of division sounds as hollow as it truly is," Jordan wrote.

He called the outcome "genuinely tragic," and said the Hahns must now "bury their religious scruples or watch while their business gets buried."

Cases recognizing a corporation's religious rights were "admittedly scanty," Jordan said, probably "because there has never before been a government policy that could be perceived as intruding on religious liberty as aggressively as the mandate."

The majority acknowledged that the ruling puts it at odds with an eight-judge panel of the 10th Circuit, which recently held that for-profit, secular corporations can assert free exercise claims in some circumstances.

"We respectfully disagree with that court's analysis," Cowen wrote, opening the door for possible Supreme Court intervention on the issue.

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