Stephen Bainbridge, William D. Warren Professor at UCLA Law School, published the opening remarks he delivered yesterday in a FedSoc teleforum on The Contraceptive Mandate in the Supreme Court: Sebelius v. Hobby Lobby Stores, Inc.:
My interest in the Hobby Lobby case was piqued by a telling colloquy between U.S. District Court Judge Reggie Walton and U.S. Department of Justice lawyer Benjamin Berwick in the Tyndale House Publishers, Inc. v. Sebelius case, which raised essentially the same issues as Hobby Lobby.
Berwick argued that employers who chose to incorporate their business are precluded from raising First Amendment free exercise of religion-based objections to regulations affecting their business. In response, Judge Walton posed the following hypothetical:
[M]y wife has a medical practice. She has a corporation, but she’s the sole owner and sole stock owner. If she had strongly-held religious belief and she made that known that she operated her medical practice from that perspective, could she be required to pay for these types of items if she felt that that was causing her to violate her religious beliefs?
Berwick replied that the corporation and its shareholders are separate legal persons. The judge thereupon summarized his understanding of the government’s position as being that his wife would “have to go as an individual proprietor with no corporation protection in order to assert her religious right.” Berwick did not contest that characterization.
In effect, Berwick wanted the judge to elevate form over substance. The problem is that he failed to explain why form ought to prevail over substance in this case, where allowing it do so would defeat basic rights to freely exercise one's religious beliefs.
In my article, Using Reverse Veil Piercing to Vindicate the Free Exercise Rights of Incorporated Employers, which appeared in The Green Bag journal and is available on line, I proposed that the Supreme Court use reverse veil piercing to avoid putting form over substance.
Reverse veil piercing is a corporate law doctrine pursuant to which a court disregards the corporation’s separate legal personality, allowing the shareholder to claim benefits otherwise available only to individuals.
Invoking reverse veil piercing in the mandate cases would not be outcome determinative. Instead, it would simply provide a coherent doctrinal framework for determining whether the corporation is so intertwined with the religious beliefs of its shareholders that the corporation should be allowed standing to bring the case.
Specifically, I propose that the Supreme Court adopt a three-pronged test for deciding whether the shareholders of Hobby Lobby and Conestoga Wood be allowed to bring their claims:
1. Is there such substantial identity of the shareholder(s)’s religious beliefs and the manner in which the corporation is operated and the purposes to which it is devoted that the corporation is effectively the shareholder’s alter ego?
2. How strong is the government’s interest in ensuring that the corporation’s employees get the mandated insurance coverage?
3. Would reverse piercing this corporation’s veil advance significant public policies?
In my view, all three prongs are satisfied here. . . .