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Mar 27 2014

Corporate Personhood and the Contraception Mandate

Adam Winkler, a law professor at UCLA who is writing a book corporate personhood and constitutional rights, has a very interesting column at Slate arguing that it is precisely because corporations are persons for some constitutional purposes that they should not be exempted from the contraception mandate. He begins by pointing out that corporations are the legal equivalent of a person in many important constitutional ways, but that there are limits on what that means:

Corporate personhood is easily ridiculed on late-night television, but as Eric Posner pointed out in Slate, the law often “treats various nonhuman, nonsentient entities as ‘persons’ for certain legal purposes.” Yet that doesn’t mean Hobby Lobby has all the rights you and I have. Indeed, the justices should hold that Hobby Lobby does not have religious rights precisely because the corporation is a legal person…

Corporate personhood has two essential features. As Posner notes, personhood is merely the law’s shorthand way of saying that certain entities have legal rights. As a legal person, the corporation has the right to own property. It has the right to form contracts. If either of those rights is interfered with, the corporation has the right to sue in court. The second feature is separation of the entity from the stockholders. The company’s property is held in its own name and belongs to it, not to the investors. If the corporation breaches a contract, it’s the company, not the individual stockholders, that is responsible. If the corporation is harmed in some way, the individual investors are not allowed to sue. The corporation has to do it.

This conception of corporate personhood has profound and beneficial economic consequences. It means that the obligations the law imposes on the corporation, such as liability for harms caused by the firm’s operations, are not generally extended to the shareholders. Limited liability protects the owners’ personal assets, which ordinarily can’t be taken to pay the debts of the corporation. This creates incentives for investment, promotes entrepreneurial activity, and encourages corporate managers to take the risks necessary for growth and innovation. That’s why the Supreme Court, in business cases, has held that “incorporation’s basic purpose is to create a legally distinct 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.”

This is an important point. It’s an issue that I think is often vastly oversimplified by both liberals and conservatives. The answer to the question of whether a corporation is a person when it comes to constitutional protections is not yes or not, it’s “sometimes.” Creating a corporation provides both benefits and protections to the owners, but it should be quite clear that the interests and rights of the corporation are not co-extensive with those of the owners.

In the Hobby Lobby case, the owners of the craft store chain make the same mistake. The owners claim that their personal religious beliefs would be offended if they have to provide certain forms of birth control coverage to employees. Yet Hobby Lobby’s owners aren’t required by the law to do anything. The legal duty falls on Hobby Lobby, the company, not its owners. If Hobby Lobby fails to provide the required insurance, the company, not the owners, is responsible.

What the owners want is for the Supreme Court to “pierce the corporate veil”—legalese for looking behind the corporation’s legal identity and basing a ruling on the interests and desires of the owners of the firm. But Hobby Lobby’s owners only want to pierce the veil for this one issue. They want the court to vindicate their personal beliefs on birth control, yet they still keep the protections of the corporate form for everything else, including limited liability.

Hobby Lobby should only have the rights of legal personhood that are essential for its operations. As legendary Supreme Court Chief Justice John Marshall wrote nearly 200 years ago, “Being the mere creature of law,” the corporation “possesses only those properties which the charter of its creation confers upon it either expressly or as incidental to its very existence.” Perhaps that includes some limited speech rights, as we ordinarily expect firms to advertise and communicate with employees and customers. Yet religious liberty is not one of those rights. Hobby Lobby is a for-profit corporation whose business doesn’t require it to have religious freedom…

Religious liberty is certainly appropriate for some not-for-profit corporations, like churches or nonprofits with a religious mission. If Hobby Lobby’s owners wanted to form such an organization, there was a convenient and readily available option: They could have incorporated as a nonprofit. They wouldn’t be able to make the same kind of money, but they’d have a corporation with an explicitly religious mission. And under the Affordable Care Act, they’d be exempted from the birth control requirement.

Hobby Lobby’s owners, however, formed a business corporation. By asking the Supreme Court to let them enjoy all the protections of this corporate form, but not all of its duties, Hobby Lobby’s owners want to have their corporate cake and eat it, too.

This is an elegant and compelling argument that avoids the simple political slogans we hear so often on this subject.

25 comments

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  1. 1
    Abdul Alhazred

    The “corporate personhood” here is a strawman.

    Here is the question: Do people give up their individual rights just because they are doing business as a corporation?

  2. 2
    Chiroptera

    This is a point that has been bothering me in this case.

    The owner’s of Hobby Lobby want the benefits of the separation of the obligations of the corporation from their obligations (like protection from liability), but they want to erase the separation of the rights of the corporation from their personal rights.

    They want to have the best of both worlds: they want to have all the benefits of personal ownership of a business but not the responsibilities.

    -

    And it appears that the essential elements of this case are going to be submerged because Kennedy seems to be in a panic that somehow in the future some woman may not be forced to give birth to a child she doesn’t want.

  3. 3
    Gregory in Seattle

    @Abdul #1 – I believe that is a meaningless question, as individuals cannot do business as a corporation: only a corporation can do business as a corporation. That is the whole point of incorporating, to shield individuals from the risks and liabilities of doing business. The rights of a corporation, and the rights of the people running the corporation, are completely separated.

  4. 4
    theschwa

    Vinny Gambini: I object to this witness being called at this time. We’ve been given no prior notice he’d testify. No discovery of any tests he’s conducted or reports he’s prepared. And as the court is aware, the defense is entitled to advance notice of any witness who will testify, particularly to those who will give scientific evidence, so that we can properly prepare for cross-examination, as well as to give the defense an opportunity to have the witness’s reports reviewed by a defense expert, who might then be in a position to contradict the veracity of his conclusions.
    [there is a short pause as Judge Haller appears caught off-guard by Vinny's sudden compentence with knowledge of the law]
    Judge Chamberlain Haller: Mr. Gambini?
    Vinny Gambini: Yes, sir?
    Judge Chamberlain Haller: That is a lucid, intelligent, well thought-out objection.
    Vinny Gambini: Thank you, Your Honor.
    Judge Chamberlain Haller: [firm tone] Overruled.

  5. 5
    eric

    Very nice, but I still think the court is missing the point that it is the role of the health care provider corporation in all of this. Hobby Lobby isn’t providing anyone with contraception. Hobby Lobby is subcontracting to Kaiser or Blue Cross or Aetna, who then provides health services to HL’s employees.

    Look, let’s say I’m a Hindu company and I contract with McDonald’s to serve fish and chicken in my cafeteria. But then McDonald’s comes up with a promotion: “come to our restaurants, show us your HinduCorp ID, get a free hamburger,” Can I stop that promotion? No, I can’t. I have no right to decide what McDonald’s gives to my employees for free at their restaurants. IMO that’s analogous to what’s going on here. Hobby Lobby employees can show proof of employment to their health care provider, and that health care provider will then give them free contraception. HL has no right to stop that even if they have some legal right not to pay for contraception coverage.

  6. 6
    mck9

    Winkler’s argument, as excerpted here, suggests that a for-profit corporation (i.e. one not formed for specifically religious purposes) is not entitled to a religious exemption. That would be a welcome ruling.

    But what if I work for a sole proprietorship, owned by someone with a religious objection to certain medical treatments? There is no corporate veil to pierce. Is my religious boss entitled to a religious exemption?

    A ruling based on Winkler’s argument would offer no protection for employees of sole proprietorships. In fact, depending on how the ruling was worded and justified, it might make it more likely that a sole proprietor would be deemed entitled to a religious exception.

  7. 7
    Abdul Alhazred

    Of course it’s individuals doing business as a corporation. Do they stop being humans just because they are in business?

    The notion that a corporation can be treated as a single entity for purposes of liability and the like is corporate personhood. That alone and not your fashionable casuistry.

    The Supreme Court has said so, so suck it up.

  8. 8
    broken.cynic

    Ever since encountering the reasons (as presented in the OP) why there are major upsides to the concept of corporate personhood, there has been a solution that seems really obvious to me… and therefore likely has a glaring hole that I am missing. This seems like a good place to ask what that hole might be.

    Given that we do get serious value out of treating a corporation as a legal person in certain respects, but that it also seems to cause some unintended consequences that most of us find highly distasteful (corporate money-as-speech in politics, the potential decision that corporations can not only hold religious views, but impose the consequences of those beliefs on their employees,) would it not be possible to create a legal category that is equal to person in the ways that are necessary for a corporation to function the way we think they ought to (as an economic entity as opposed to a political/religious one) and no more? Sure, that may be difficult to quantify precisely, but if we find we left something out… add it.

    Call it anything, call it George, I don’t care… but calling it ‘personhood’ is becoming ever more fraught with absurdity.

  9. 9
    David C Brayton

    Winkler makes good points. But once you say that a corporation is not entitled to the same rights as a person under the Constitution, what rights should the corporation have? And is a court the best place to decide which rights a corporation has?

    A corporation is a figment of statutory law. As such, states can decide what rights and obligations extend to a corporation. And it should be the legislature that decides what these rights are. Courts are not in a position to decide on a piecemeal basis which rights should extend to a corporation.

    First Amendment protection of free speech? Should an corporation that is a creature of statutory law be able to advocate something that is harmful, such as tobacco use? Legislatures could, after all, ban the use and possession of tobacco. Why shouldn’t a state legislature be allowed to say corporations can sell tobacco but corporations can’t advertise it? Could a legislature go further and not even allow a corporation to petition the legislature for a change in this law?

    Should a corporation have any, all or just some, Fourth Amendment protections against unreasonable searches and seizures? What if the corporation is in an industry that is very sensitive, like defense or health care?

    What about the right to legal counsel? Should communications with counsel be protected by attorney-client (attorney-corporation) privilege?

    Protections against the taking of property without just compensation? The right to petition Congress for redress of grievances?

    The list goes on and on.

  10. 10
    doublereed

    The issue of corporate personhood is whether they have constitutional rights that cannot be interfered with by laws and the majoritarian public. That’s the problem. Not just the legal scope of having contracts and properties.

    Corporations should not have any constitutional rights. They should be completely at the whim of public discourse, precisely because they are not people. They don’t get such protections.

    When we talk about the 1st Amendment, or the 4th Amendment, or the 5th Amendment, or the 14th Amendment, we aren’t talking about corporations. Yet, throughout case law these are the arguments being made constantly. Verizon claims it has 1st Amendment rights to look at everything you do and throttle everything on the internet.

    These are not strawman claims. The idea that real rights can be applied to legal fictions is precisely what allows such ridiculous doublespeak about “freedom,” where the freedom of corporations gets to the trump the freedom of real, living people.

    Corporate Personhood should be destroyed. And by that I don’t mean destroying the legal fiction or protecting shareholders or whatever. I’m talking specifically about constitutional rights. They should not get constitutional rights, because they aren’t people. I am not scared of corporations being sent to the gas chambers. That’s not on my ‘scary fears’ list.

  11. 11
    laurentweppe

    By asking the Supreme Court to let them enjoy all the protections of this corporate form, but not all of its duties, Hobby Lobby’s owners want to have their corporate cake and eat it, too.

    What Hobby Lobby’s owner want is to become feudal lords, to be the sole masters of their estates and serfs.

  12. 12
    gshelley

    Are individuals who object to contraception allowed to purchase special plans where it isn’t covered?

  13. 13
    Pierce R. Butler

    This conception of corporate personhood has profound and beneficial economic consequences. … This creates incentives for investment, promotes entrepreneurial activity, and encourages corporate managers to take the risks necessary for growth and innovation.

    Or so the current corporate-dominated zeitgeist says.

    Historically, the privileges conferred by incorporation were bestowed by national governments for specific purposes considered beneficial by said governments – conducting trade with specific parts of the world, constructing and operating canals or railroads, etc. Those privileges and rights depended on the project in question working out in the state/public interest and could be revoked whenever the net consequences developed otherwise, or at royal whim.

    The idea of incorporation as a right of whoever could amass some capital, for no goal other than increasing that capital, came along much later, as part of the trend of private capital taking control of both state and public institutions (as was direly predicted during its earliest phases before industrialism). The Hobby Lobby and Conestoga cases, according to reports of Tuesday’s oral arguments, seem likely to continue that trend (which some call class warfare), but society might do much better if we could find ways to restrict the creation and behavior of corporate entities to those which actually provide widespread benefits.

  14. 14
    eric

    @6:

    But what if I work for a sole proprietorship, owned by someone with a religious objection to certain medical treatments?

    One of the quotes from the oral arguments (I believe it was Roberts, but don’t quote me on that) seems to indicate that some of the judges are thinking of splitting the hair on exactly these grounds. I.e., if the corporation is “strongly held” by one individual, yes that person’s religious beliefs matter…but not otherwise.

    @7;

    Of course it’s individuals doing business as a corporation. Do they stop being humans just because they are in business?

    They give up some of their first amendment rights when acting as a corporate officer, yes. A CEO acting in their capacity as CEO does not have complete free speech. They don’t have complete freedom of the press i.e., to publish corporate secrets). Acting in capacity of CEO, they don’t have complete freedom to petition the government – the corporate lawyers will decide if, when, and how that happens. It is perfectly consistent with our laws to say that, acting in capacity as CEO, they don’t have complete freedom of religious expression either.

  15. 15
    Melvosh

    @#1:

    Here is the question: Do people give up their individual rights just because they are doing business as a corporation?

    As a matter of fact, yes. As an individual, I can choose not to associate with anyone based on any reason I deem fit, including gender, race, religion, sexual orientation, color of hair, etc. As a business owner in the United States, whether the business is publicly traded or privately owned, I am not allowed to discriminate in hiring practices or who I do business with based on any of those reasons. As an individual, I can choose to pay a male more money than a female for cutting my grass or shoveling my walk. As a business owner, I am legally prohibited from doing that. As an individual, I can prohibit whoever I want from entering my home, or even coming onto my property. As a business owner, that’s typically grounds for a lawsuit against the business.

    Corporations have distinctly different rights and must obey distinctly different laws than individuals, and rightly so.

  16. 16
    abb3w

    In theory, it’s a good line of argument.

    In practice, it looks like Kennedy is going to balk, because were the federal legislature to reverse its stance on the Hyde Amendment and related laws, this line of reasoning might similarly be used to argue for employers having to cover abortion.

  17. 17
    eric

    @16 – Hyde amendment is about Medicaid and federal funds. It has never had text related to what private companies can or must do. If Congress stops using Hyde amendment-like riders tomorrow, the impact on what services the ACA requires employers to cover will be completely unaffected.

    But yeah, Kennedy may be thinking the way you say in broad terms. “If I reject this religious exemption, then further down the road a religious exemption I support might be eliminated.”

  18. 18
    abb3w

    @17, eric

    Hyde amendment is about Medicaid and federal funds. It has never had text related to what private companies can or must do.

    Thus, “and related laws”; see also “reverse”. Essentially, Kennedy seemed to be fielding a hypothetical about the advocated principles asking if Congress made the politically implausible decision not only to repeal such laws, but to pass a law requiring that employers provide insurance coverage for abortion on demand as part of the minimum package for (non-ministerial) employment compensation. Would that be a constitutional exercise of the Commerce powers, or would it infringe on the First Amendment’s assurance of Free Exercise?

    The answer Kennedy seemed to be hearing was “yes”; and rejecting the hypothetical’s conclusion, rejecting the legal principle.

  19. 19
    Michael Heath

    Abdul Alhazred writes:

    The “corporate personhood” here is a strawman.

    Here is the question: Do people give up their individual rights just because they are doing business as a corporation?

    If you read what you wrote carefully, you’ll see a massive non sequitur Ed’s blog post already pointed out. That is, the owner/investors are not, “doing business”, as you falsely claim. Instead these owner/investors, in their role as owners/investors, invest in the corporation; where it’s the corporation doing business.

    I emphasized the above phrase to point out that in some cases, some owner/investors are also employees of the corporation. But in that case, they’re acting as managers, it’s still the corporation conducting business.

  20. 20
    leni

    Do people give up their individual rights just because they are doing business as a corporation?

    Do people give up their individual rights just because they are government employees?

    Yes, they kinda do, at least while they are on the clock.

    I don’t know how far this analogy should go, but every taxpayer pays for things they object to. We don’t get to just not pay a portion of our taxes because we don’t agree with what the government spends it on.

  21. 21
    David Hart

    Abdul Alhazred @1:

    The “corporate personhood” here is a strawman.

    Here is the question: Do people give up their individual rights just because they are doing business as a corporation?

    Even if we are to talk on those terms, you would have to agree that people give up some of their individual responsibilities when they do business as a corporation. Why should they not also give up some of their individual rights? The government in effect grants them a licence to get out of some of the obligations they would have as unincorporated traders, but in response, imposes some other obligations on them. If they don’t want those other obligations, no one is obliging them to continue trading as a corporation. I don’t see why this is in principle unfair.

  22. 22
    David Hart

    Sorry, html fail. Only the word ‘responsibilities’ was meant to be italicised.

  23. 23
    dingojack

    Leni – Public employees (it seems) are not permitted to unionise.
    Dingo
    ——-
    I saw an interesting piece on PBS NewsHour about a case involving College Football Players gaining the right to unionise (but only in private colleges and universities) as they are regarded as principally ‘employees’ of the college (who gains money through merchandising, selling the rights to televise games and so on).

  24. 24
    steve84

    @broken.cynic
    Of course it’s possible. Other legal systems make a clear distinction between “natural persons” (that is people) and “legal persons” (e.g. corporations, clubs, foundations).

  25. 25
    leni

    @ Dingo, sure they are. Teachers, police and fire personnel, and prison guards (for example) all have unions. Very large ones, in fact. Rules vary from state to state but there are definitely unions for public employees. Both my parents were members at some point in their careers.

    The college football players are arguing that they are essentially (unpaid or maybe underpaid) university employees and therefore have the right to unionize. Others are arguing that they aren’t employees- just students with very time consuming hobbies, who coincidentally make a lot of money for universities and spend less time in classrooms than they do on the field- and therefore have no right to unionize.

    Anyway, I just don’t see a big difference in not having the same rights when you are acting in an official capacity for either your corporation or your job in government. Judges don’t get to proselytize from the bench (in theory) for a reason. That doesn’t mean they “stop having rights” while they are on the clock.

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