Supreme Court Rules in Favor of Hobby Lobby, Conestoga Wood in 5-4 Decision

Legal experts are divided on the decision’s implications for HHS lawsuits brought by religious nonprofits.

(photo: Wikipedia)

WASHINGTON — Do business owners have free-exercise rights or should the workplace be viewed as a “secular” space that excludes faith-based practices and beliefs that may collide with powerful state interests?

On June 30, in a 5-4 decision, the U.S. Supreme Court rejected the Obama administration’s argument that businesses do not possess free-exercise rights and that the alleged public-health benefits of requiring health plans to provide co-pay-free contraception, abortion-inducing drugs and sterilization must take precedence over the faith-based objections of for-profit employers.

The majority found that closely held for-profit corporations should be treated as “persons” under the federal Religious Freedom Restoration Act (RFRA).

Further, writing for the majority, Justice Samuel Alito Jr. stated that the Health and Human Services' contraceptive mandate violated the religious freedom of two closely held family businesses owned by Christians — Hobby Lobby, an Oklahoma-based craft-store chain, and Conestoga Wood Specialties, a Pennsylvania cabinet maker — which argued that the law forced them to provide abortion-inducing drugs in their health plans, despite their strong moral objections.

The IRS defines “closely held corporations” as those with more than 50% of their stock held by five or fewer individuals. It is not yet clear how many of the 49 for-profit cases will benefit from the decision, but many are family businesses.

The Religious Freedom Restoration Act requires government to enact laws that do not “substantially burden” religious freedom without a compelling state interest. Once that threshold has been met, the state must choose the “least restrictive means” of advancing its interest.

The majority found that the federal law failed to meet that demanding test. It concluded that the government could choose a different means of providing access to contraception without requiring the family businesses to violate their beliefs.

“HHS has not shown that it lacks other means of achieving its desired goal without imposing a substantial burden on the exercise of religion,” stated Justice Alito.

“The most straightforward way of doing this would be for the government to assume the cost of providing for the four contraceptives at issue to any women who are unable to obtain them under their health-insurance policies due to their employer’s religious objections,” said Alito.

Legal experts and lawmakers who backed the HHS mandate had predicted that if the high court decided in favor of Hobby Lobby, it would open the floodgates for similar lawsuits by corporations seeking to avoid compliance with various federal laws. However, Justice Alito said it “seems unlikely” publicly held corporations would raise RFRA claims, and he set that issue aside.


Strong Endorsement of Religious Freedom

Catholic leaders and legal scholars marked the decision as a strong endorsement of religious freedom.

But they were cautious about reading the opinion as a sign that the court would likely rule in favor of legal challenges to the mandate brought by Church-affiliated nonprofits, such as diocesan social agencies, the Little Sisters of the Poor, The Catholic University of America and the Eternal Word Television Network (EWTN).

“The decision today is a great victory for the religious freedom of everyone, in particular, those who want to bring their religious convictions into the workplace,” said Archbishop William Lori of Baltimore, the U.S. bishops’ point man on religious liberty, who, in 2012, sparked criticism from some Catholics when he defended the right of business owners to oppose the HHS mandate on free-exercise grounds.

However, Archbishop Lori told the Register, “It is too soon to say how today’s decision will apply to nonprofit cases.”

“The chief reason why the case is huge is that the court rejected the government's attempt to map out our social world so that religion simply stops where the commercial world begins,” Gerard Bradley, a professor at University of Notre Dame's law school, told the Register.  

“As Justice Alito said near the end of his opinion for the majority, the Obama administration would exclude people like the families which own these companies ‘from full participation in the economic life of the nation.’ Alito said the Religious Freedom Restoration Act ‘was enacted to prevent such an outcome.’”

John Garvey, president of The Catholic University of America (CUA) and an expert on constitutional law, described the decision as “a good sign that the Supreme Court still believes religious liberty is an important constitutional and cultural value.”


Lack of Clarity on the HHS Accommodation

Asked to comment on whether the justices now appear more sympathetic to the merits of CUA’s own legal challenge to the mandate, Garvey replied that the majority’s opinion includes several passages that appear to support the claims of nonprofit plaintiffs, but the court’s treatment of the “accommodation,” which the administration provided for objecting religious nonprofits, is unclear and requires further study.

The White House “accommodation” permits qualified religious nonprofits to opt out of compliance with the mandate by signing a form that allows their health-insurance companies or third-party administrators to take up full responsibility for coverage of the mandate’s provisions.

The U.S. bishops have rejected this plan as “unacceptable,” in part because the signed form triggers the coverage and thus makes Catholic employers complicit in the provision of these services. They have also dismissed the accommodation as an “accounting gimmick,” and they note that many Church employers are self-insured and would still be directly responsible for coverage.

Still, Garvey expressed relief that the court accepted the plaintiffs’ belief that the mandate constitutes a substantial burden on their free-exercise rights. This finding, he said, will help CUA’s case, which is now before an appellate court.

EWTN also welcomed the high-court ruling, which was issued hours before the Catholic media network obtained an injunction from the 11th Circuit Court of Appeals in Atlanta that will protect it from financial penalties triggered by its refusal to comply with the mandate by a July 1 deadline.

“The Supreme Court decision in the Hobby Lobby case was a great affirmation of the constitutional right to freedom of religious expression,” said Michael Warsaw, chairman and CEO of EWTN, in a statement.

“While the Hobby Lobby decision did not directly resolve EWTN’s case, this afternoon’s injunction from the appellate court allows us to press forward without facing the government’s crushing fines.”

In an interview with the Register, John Manos, general counsel for EWTN, noted that the 11th Circuit opinion cited the Supreme Court’s decision regarding Hobby Lobby. 

“Judge [William] Pryor’s opinion points out that Hobby Lobby affirms religious freedom: Government cannot substantially burden a person to act contrary to undisputed and sincerely held religious beliefs,” said Manos.


Religious Nonprofits Decision Expected in 2015

In the coming weeks, legal experts will debate the likely impact of this ruling on religious nonprofits, which are expected to have their own case before the high court in June 2015.

Luke Goodrich, deputy general counsel of the Becket Fund for Religious Liberty, a public interest group that represents Hobby Lobby and EWTN, told the Register that the ruling “strongly signals the mandate is trouble in the nonprofit cases.”

Among other key issues, said Goodrich, the court rejected the government’s suggestion that Hobby Lobby and Conestoga were sincere but misguided in their belief that the mandate forced them to facilitate provisions they opposed on moral grounds.

“If the Green family [which owns Hobby Lobby] or the Little Sisters of the Poor believe the mandate makes them complicit in the taking of life, the government can’t substitute its own theory of what constitutes moral complicity,” said Goodrich.

Douglas Laycock, a leading expert on religious freedom at the University of Virginia Law School, said the most important point about the ruling is that the court “has now considered RFRA twice, and each time, they took it seriously, enforced it according to its terms and protected religious liberty. ... That has important precedential value.”

But, turning to the court’s treatment of the accommodation, Laycock suggested that it could be tough for EWTN or The Catholic University of America to convince a divided court that the government’s proposal fell short of addressing their concerns.

In Laycock’s view, the accommodation effectively insulates religious nonprofits “from dealing with contraception.”

To go further, granting nonprofits a full exemption from any provision of contraceptives in their health-insurance plans, “would deprive their employees of contraception. And it would undo the court’s solution to today’s case. I would not be optimistic for the nonprofit claims,” he said.

Notre Dame’s Bradley underscored the complexity of issuing any prediction about the court’s likely treatment of CUA or EWTN’s claims.

“There are a few short passages in the majority opinion which indicate that these justices believe that the legal accommodation which the government has offered to EWTN and the like are sufficient to satisfy the demands of religious liberty. This is most assuredly not the outcome to be desired,” said Bradley.

“But there are other passages in the opinion where the majority states plainly enough that it is not offering an advance look at how the court would resolve” such cases, making predictions difficult.

Further, Bradley suggested that the justices may not yet understand that many Catholic plaintiffs in HHS cases are self-insured, thus strengthening their claim that the federal law requires them to violate their religious beliefs by directly subsidizing provisions they believe to be immoral.


‘More Work to Do’

Will religious nonprofits prevail next June when EWTN, the Little Sisters of the Poor or another Catholic nonprofit gets its day before the high court? Archbishop Lori holds that hope.

“When any group of people is engaged in a struggle across several generations, there will be ups and downs. Today is a great source of encouragement, but we should all recognize there is more work to do,” said Archbishop Lori.

“We want to defend religious liberty, the first and most fundamental right for each individual, and we want to defend freedom of churches to serve. That is the next struggle we will focus on after this decision.”

Joan Frawley Desmond is the Register’s senior editor.