Hobby Lobby, Mardel Win Latest HHS Mandate Appeal

Ruling Could Pave Way for Other Plaintiffs

DENVER — Do laws protecting religious freedom apply to businesses?

Faced with an explosion of lawsuits filed by companies that refused to comply with the federal contraception mandate on moral grounds, the Obama administration asserted in legal briefs that "secular" for-profit employers had no right to an exemption.

At the end of June, the administration’s argument suffered a stinging rebuttal when the Denver-based 10th Circuit issued a June 27 ruling on Hobby Lobby’s closely watched appeal. The 5-3 ruling said the craft-store chain was likely to succeed in its quest for relief from the federal mandate, and it ordered a lower court to revisit its decision to deny a preliminary injunction.

"Because the contraceptive-coverage requirement places substantial pressure on Hobby Lobby and Mardel [a Christian bookstore and educational supply company] to violate their sincere religious beliefs, their exercise of religion is substantially burdened," a majority of the judges concluded.

The day after the 10th Circuit ruling, the district court provided a temporary restraining order that shielded the Christian company from massive financial penalties that would have been imposed after Hobby Lobby’s new health plan began on July 1.

Hobby Lobby’s victory came at a critical juncture in the protracted dispute between the U.S. bishops and the Obama administration over the federal mandate, which requires companies to provide coverage of contraception and abortion-inducing drugs in their health plans, even if it violates the owners’ moral beliefs. On June 28, the U.S. Department of Health and Human Services issued the final version of its "accommodation" for religious employers that oppose the mandate on moral grounds.

Cardinal Timothy Dolan of New York, the president of the U.S. Conference of Catholic Bishops, issued a statement July 3 in which he said the conference will continue to analyze the final rule, but that, upon initial review, "Our study has not discovered any new change that eliminates the need to continue defending our rights in Congress and the courts."

Cardinal Dolan listed three areas of concern that were previously outlined by the U.S. bishops: "the narrow definition of ‘religious employers’ that are exempted; the ‘accommodation’ of religious ministries excluded from that definition; and the treatment of businesses run by people who seek to operate their companies according to their religious principles."

The Becket Fund for Religious Liberty, a public interest group that represents Hobby Lobby, quickly asserted that little had changed in the final iteration of the federal rules on the accommodation and that the legal challenges to the mandate would continue.

The Register is a service of the Eternal Word Television Network (EWTN), which is also represented by the Becket Fund in its legal challenge to the federal mandate.

For now, legal experts won’t speculate whether the 10th Circuit ruling would decisively affect the outcome of other HHS lawsuits. But Hobby Lobby is content to celebrate the 11th-hour reprieve that shielded the company from financial penalties totaling $1.3 million a day and additional annual fines of $2,000-$3,000 per employee.

"We are delighted that both the 10th Circuit and the district court have spared" Hobby Lobby and the Green Family "from this unjust burden on their religious freedom," said Kyle Duncan, general counsel with the Becket Fund.

David Green, the founder and CEO of Hobby Lobby, said he was "encouraged by today’s decision from the 10th Circuit." 

"My family and I believe very strongly in our conviction that life begins at conception, and the emergency contraceptives that we would be forced to provide in our employee health plan under this mandate are contrary to that conviction," said Green in a statement issued after the ruling.


Likely Supreme Court Case?

During a June 28 press call, Eric Rassbach, deputy general counsel at the Becket Fund, was asked if Hobby Lobby might be the first Health and Human Services’ mandate case to reach the U.S. Supreme Court.

Rassbach said he would "not speculate on what case the U.S. Supreme Court will find attractive" or whether it would select a legal challenge filed by a church-affiliated charity or college.

But he suggested that there was little difference between the two types of cases. "I don’t buy the government’s attempt to make a distinction between nonprofits and for-profits," he said. "All of us can engage in religious exercise whether we earn a living or not."

Judge Timothy Tymkovich of the 10th Circuit, in his summary of the ruling, stated that Hobby Lobby and Mardel "are entitled to bring claims under RFRA [Religious Freedom Restoration Act], have established a likelihood of success that their rights under this statute are substantially burdened by the contraceptive-coverage requirement and have established an irreparable harm."

Tymkovich said the court had remanded the case "to the district court for further proceedings on two of the remaining factors governing the grant or denial of a preliminary injunction."

The following day, the district court provided the temporary restraining order.

Legal challenges to the federal mandate filed by nonprofit and for-profit employers have argued that the federal law violates the constitutionally protected free exercise of religion, as well as the 1993 Religious Freedom Restoration Act.

RFRA states: "Government shall not substantially burden a person’s exercise of religion," unless the state has a compelling interest. In such case it will use the least restrictive means possible to advance that interest.


Notre Dame and EWTN

Gerard Bradley, a constitutional scholar at the University of Notre Dame Law School, told the Register that the part of the 10th Circuit ruling that references "substantial burden" could be pertinent to HHS lawsuits filed by Notre Dame or EWTN or the many other religious organizations that are plaintiffs.

"The judges say that courts should defer to — and not disregard — a complaining party’s own judgment that the mandate ‘substantially burdens’ the exercise of their religion. Because ‘substantial burden’ is a key phrase in the Religious Freedom Act, these declarations signal an important expansion in the reach of that act," Bradley said.

He cautioned, however, that the 10th Circuit justices, who provided "spirited dissents from this part of the majority’s ruling, indicate that this argument is going to continue."

"And other circuit courts are not bound by this one’s holding about ‘substantial burden,’" said Bradley.


Boost for For-Profits

Among the 60 lawsuits challenging the HHS mandate, 32 were filed by for-profit companies, according to the Becket Fund. It reported that "of the 28 for-profit plaintiffs that have obtained rulings touching on the merits of their claims against the mandate, 21 have secured injunctive relief against it, for a current score of 21-7."

The Obama administration and some legal scholars have argued in legal briefs filed in cases across the country that the Free Exercise Clause and RFRA were not intended to protect the conscience rights of business owners like Hobby Lobby.

However, the majority of judges on the 10th Circuit rejected the administration position, at least with regard to the merits of the Hobby Lobby case.

Douglas Laycock, an expert on religious-freedom issues at University of Virginia’s law school, told the Register that "Congress plainly understood RFRA to apply to for-profit businesses."

"This was very clear in the debates in 1998-99 over the identical language in the Religious Liberty Protection Act. The big fight was over an amendment to exclude all civil-rights claims, and everyone on both sides assumed that for-profit businesses would have claims," noted Laycock.

"Having said that, the size of the business surely matters to the government’s compelling interest and to whether religion is really being exercised through the business and really being substantially burdened. 

Publicly traded corporations will not have a claim, and maybe even privately owned businesses beyond some size will have trouble proving a claim," said the law professor.

Hobby Lobby operates 525 retail stores across the country, with an estimated 13,000 full-time employees.

The company filed suit against the federal government last September because its Christian owners said they could not provide abortion-inducing drugs in their employee health plan.

Said David Green at the time, "We simply cannot abandon our religious beliefs to comply with this mandate."