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Thursday, July 03, 2014

Two Kinds of Federalism in Hobby Lobby: Does state corporate law define federal free exercise rights?

As Howard Wasserman and Michael Moreland both note, Hobby Lobby's limits on the ACA and similar legislation will not impede state legislatures from forcing employers to provide benefits to their employees, because Boerne insulates state employment and insurance regulation from RFRA challenges. Michael Moreland in particular notes that such a strategy of giving states more power than the feds to resolve questions of religious liberty might be consistent with an overarching vision of federalism under which the Constitution decentralizes "deeply contested moral questions" to reduce the animosity and gridlock that a national debate would inspire. In effect, Blue States and Red States are each invited to resolve the question of employers' religious autonomy in their own way, subject to some minimum outer constraints on state laws that either unreasonably burden or benefit religious practices.

As I have noted before on this blog, using federalism to decentralize the definition of liberty and equality is an under-appreciated way to give equal concern and respect to opposing sides in the Culture Wars, each of which have plausible views about the scope of constitutional liberty. The blogs and twitter feeds ring with indignation and exultation about Hobby Lobby, as if there were some plainly correct way to define the religious autonomy of private organizations. The truth, however, is that the relevant text of RFRA is semantically vacuous and canons of construction for filling these semantic gaps are contested and conflicting. The invective hurled by each side at the other is more a tribute to the intensity of their convictions than the persuasiveness of their logic: It is a patent fiction to pretend that Congress ever really reached any consensus about the proper scope of employers' religious liberty in RFRA. Absent such a congressional consensus, one might urge a narrow scope for contentious federal statutes like ACA by adopting a broad reading of RFRA and thereby giving each side a chance to test its vision of religious liberty at the state level. Hobby Lobby did not urge any such federalism-based argument for its narrow reading of ACA, but such a federalism canon strikes me as the strongest argument for the result that the majority reached.

But one might reasonably reply that it is easy for me to be gooey-eyed about Hobby Lobby's benefits for federalism, given that I am not nuts about the idea of using mandates on employers to deliver health insurance. Is there any theory of federalism more comforting to the friends of ACA's employer mandate? There might be -- in Hobby Lobby's reliance on states' law of corporations to define proper corporate purposes.

In response to Justice Ginsburg's dissent about the purpose of for-profit corporations, the majority noted that "the objectives that may properly be pursued by the companies in these cases are governed by the laws of the States in which they were incorporated." Later on in the opinion, the majority responded to the dissent's concern that the owners of corporations might disagree about whether and how to advance religious principles by again invoking state law, noting that "[s]tate corporate law provides a ready means for resolving any conflicts by, for example, dictating how a corporation can establish its governing structure."

Do these brief statements suggest that a state legislature could revise its law of corporations to limit the purposes that for-profit corporations can pursue? Could, for instance, state legislatures enact a new measure providing that, as a condition of getting the benefit of limited liability, individual businesses that adopt the corporate form cannot pursue religious purposes that require exemptions from generally applicable employment or insurance laws to which businesses are normally subject?

I certainly hope so. SCOTUS has, of course, a history -- an inglorious one, in my mind -- of using doctrinal devices like the doctrine of unconstitutional conditions to limit state power over corporations doing business within their borders. I suppose that a religiously oriented corporation might argue that an analogous doctrine of unconstitutional conditions would bar the revisions of corporate law described above.

If Justice Alito's invocation of state corporate law in Hobby Lobby is not mere window-dressing, however, then the SCOTUS ought to resist such efforts to limit states' power to define the proper purposes of corporations. There is a tendency to speak of "the law of corporations" as if it were one statute (in, for instance, this fine article by Alan Meese and Nathan Oman). But corporate law is not an "it" but a "they": If Hobby Lobby is serious that proper corporate purposes are defined subnationally, then SCOTUS ought to allow states to re-define those purposes to exclude behavior at odds with what state legislatures seek to promote through the corporate form.

Such state revisions of corporate law, of course, might be futile as a serious constraint on corporations that can easily re-incorporate under the laws of another jurisdiction more favorable the broad pursuit of extra-commercial purposes. Putting aside this practical question, however, the same reasons for allowing states to pursue a broader vision of religious liberty through their own state RFRAs also counsel in favor of allowing states to pursue a narrower vision, by waiving (through their corporate laws) the federal RFRA. In both cases, asking a single national government to answer every hotly contested dispute about the scope of religious liberty arising among an intensely polarized nation is just asking for trouble.

Posted by Rick Hills on July 3, 2014 at 05:50 PM | Permalink


Eric, I had in mind a state law making compliance with federal and state employment and insurance laws a condition for incorporation. Such a state law would not single out religious objections to ACA (or any other federal statute): It would simply bar organizations from incorporating unless they agreed to comply with some defined set of laws. Such a state law would not require corporations to ignore religious concerns (or other matters of social responsibility) across the board: It would rather require corporations not to pursue their view of social responsibility through non-compliance with the specified set of state and federal laws.

Barry, Dred Scott might be a good example of the perils of excessive centralization in the definition of rights. The Dred Scott majority's holding that the Missouri Compromise violated the Fifth Amendment because it deprived slave-owners of their property in slaves without due process of law precipitated a national crisis, because there was a deep division in popular opinion about the status of property in slaves and the enforcement of such property rights in the western territories.

Lincoln, by contrast, suggested a more decentralized approach to liberty -- his "non-extension" theory of slavery. Under Lincoln's approach, Southern states would continue to be permitted to protect property in slaves within their territory, while the Congress would be permitted to enforce a different regime (the ban on slavery contained in the Missouri Compromise) in federal territories. In his Springfield speech, Lincoln recognized that Dred Scott threatened to extend slavery everywhere through its centralized definition of slave property. He warned, in particular, that, if the Court's definition of "property" under the Fifth Amendment also defined the privileges and immunities protected by Article IV, section 2, then the Court's decision would bar state legislatures from excluding slavery from their territory: "We shall lie down pleasantly dreaming that the people of Missouri are on the verge of making their State free," Lincoln warned, "and we shall awake to the reality instead, that the Supreme Court has made Illinois a slave State."

In other words, the moral of the Dred Scott story might be: Beware national courts bearing the gift of a centralized definition of rights.

Posted by: Rick Hills | Jul 4, 2014 4:42:40 PM

You're right that corporate law is state law, but it would be a radical break from the law in all states to require corporations to maximize dollar profit rather than follow the consciences and desires of the shareholders. Also, the U.S. Constitution would block making religious purposes illegal unless the law also required corporations to ignore environmental concerns, conservation concerns, and other forms of "social responsibility" that sacrifice shareholder dollars for ideology.

Posted by: Eric Rasmusen | Jul 4, 2014 2:51:02 PM

"As I have noted before on this blog, using federalism to decentralize the definition of liberty and equality is an under-appreciated way to give equal concern and respect to opposing sides in the Culture Wars, each of which have plausible views about the scope of constitutional liberty. "

I seem to remember another situation back 160 years ago or more, and in particular a major SCOTUS decision which caused some turmoil.

Posted by: Barry | Jul 4, 2014 11:05:03 AM

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