7th Circuit In 2-1 Decision Grants Preliminary Injunction To For-Profit Corporations and Their Owners In Contraceptive Mandate Challenge

In Korte v. Sebelius, (7th Cir., Nov. 8, 2013), the U.S. 7th Circuit Court of Appeals, in a 2-1 decision in a consolidated appeal of suits by two unrelated small businesses and their Catholic owners, held that a preliminary injunction should be granted barring enforcement of the Affordable Care Act contraceptive coverage mandate on religious freedom grounds.  The companies involved are Korte & Luitjohan Contractors, Inc., an Illinois construction company, and Grote Industries, Inc., an Indiana manufacturer of vehicle safety systems.

The majority, in a 64-page opinion, held that for-profit corporations are "persons" whose religious exercise is protected by the Religious Freedom Restoration Act, saying:

It’s common ground that nonprofit religious corporations exercise religion in the sense that their activities are religiously motivated. So unless there is something disabling about mixing profit-seeking and religious practice, it follows that a faith-based, for-profit corporation can claim free-exercise protection to the extent that an aspect of its conduct is religiously motivated.

The majority then concluded that the mandate imposes a substantial burden on the religious exercise of both the corporations and their individual owners and managers that is not justified by a compelling governmental interest and is not achieved by the least restrictive means.

Judge Rovner wrote a very interesting 89-page dissent. Early in her opinion, she sets out several hypotheticals that follow from the majority's decision, involving employers who object on religious grounds to paying for coverage for other kinds of medical treatment for their employees.  Later in her opinion, she discusses at length what she describes as "significant logical difficulties posed by attributing religious rights to secular corporations."  She says in part:

First, to the extent that a corporation’s religious principles and identity derive from its owners, what if the owners have diverse beliefs, diverse degrees of devotion, and diverse notions as to whether and how the corporation ought to reflect their religious beliefs?...

Second, suppose that the company’s ownership changes. What happens then to the beliefs we have attributed to the corporation based on its ownership?....

Third, are the religious beliefs of corporate owners solely determinative of the corporation’s religious principles? Suppose ... that a corporation’s owners have entirely entrusted the management of the corporation to its longtime CEO.... Are her beliefs attributable to the corporation?  Or suppose ... the focus of the corporation is on serving members of a particular religion-- selling kosher or halal food products, for example....  Can the corporation be said to hold the religious beliefs of its target market, even if its owners and managers do not?....

[I]f a corporation has free exercise rights because the Dictionary Act suggests it is among the "persons" to which RFRA grants the right to make such a claim... then why does a corporation of large, diverse, or even public ownership not have free exercise rights also? And how would the beliefs of a public corporation be determined—by a vote at the annual shareholders’ meeting, for example?

The 7th Circuit had previously granted an injunction pending appeal in the case. (See prior posting.)