Court Issues Preliminary Injunction In Corporation's Challenge To ACA Contraceptive Coverage Mandate

Today in Newland v. Sebelius,(D CO, July 27, 2012), a Colorado federal district judge relied on the Religious Freedom Restoration Act in issuing a preliminary injunction against enforcing the contraceptive coverage mandate issued under the Affordable Care Act against a small private company. The lawsuit was brought by Hercules Industries, Inc., a small manufacturing company, and its Catholic officers and directors. Plaintiffs allege that the company maintains a self-insured group health plan for its employees "[a]s part of fulfilling their organizational mission and Catholic beliefs and commitments." To further strengthen its position, the company recently added provisions to its articles of incorporation specifying that its primary purposes are to be achieved by "following appropriate religious, ethical or moral standards," and allowing its board to prioritize "religious, ethical or moral standards" over profitability.

The court held that:

Because this case presents "questions going to the merits . . . so serious, substantial, difficult, and doubtful as to make the issue ripe for litigation and deserving of more deliberate investigation," I find it appropriate to enjoin the implementation of the preventive care coverage mandate as applied to Plaintiffs.

The court pointed out that among the questions of first impression posed by the case are:

Can a corporation exercise religion? Should a closely-held subchapter-s corporation owned and operated by a small group of individuals professing adherence to uniform religious beliefs be treated differently than a publicly held corporation owned and operated by a group of stakeholders with diverse religious beliefs? Is it possible to “pierce the veil” and disregard the corporate form in this context? What is the significance of the pass-through taxation applicable to subchapter-s corporations as it pertains to this analysis?

Nevertheless, the court concluded that it was unlikely that the government could show, as required by RFRA, that its interest in uniform application of the Affordable Care Act was a compelling interest or that it had used the least restrictive means to achieve that interest in this case.  The Becket Fund issued a press release announcing the decision, as did Alliance Defending Freedom.