Contraception Mandate Faces Justice Sotomayor and Seventh Circuit

It’s been a significant week for litigation over the contraception mandate. On December 20, a motions panel of the U.S. Court of Appeals for the Tenth Circuit denied employer Hobby Lobby’s motion for an injunction pending appeal. As a private employer, Hobby Lobby is not eligible for the safe harbor from enforcement, and will be subject to the mandate at the start of the new year. As a consequence, Hobby Lobby filed an emergency application for a stay with the Supreme Court, which Justice Sonia Sotomayor denied with a brief four-page opinion. According to Justice Sotomayor, Hobby Lobby could not meet the extraordinarily demanding standard for such an injunction. Lyle Denniston has a brief report on SCOTUSBlog, and Ed Whelan critiques the decision on Bench Memos (see also here). for what it’s worth, I am not as convinced as Whelan that Hobby Lobby’s rights under the Religious Freedom Restoration Act are “indisputably clear.” While I think religious institutions have a strong RFRA-based free exercise claim, and that religious institutions — and not the government — define the contours of what the exercise of a given religious faith requires — I am not sure that private, for-profit corporations can avail themselves of RFRA in the same way as avowedly religious institutions., even when privately held by religiously devout individuals, nor am I aware of any case law that would clearly establish this point (but see below).

Meanwhile, the U.S. Court of Appeals for the Seventh Circuit is looking more favorably on another private employer’s challenge to the contraception mandate. In what Lyle Denniston calls “the most significant federal appeals court ruling so far on the new federal health care law’s contraceptives mandate,” a divided panel of the Seventh Circuit granted a private employer’s emergency motion for an injunction against enforcement of the contraception mandate. Judges Flaum and Sykes voted in favor of the employer’s claim; Judge Rovner against. Here are some key excerpts:

The Kortes are Roman Catholic, and they seek to manage their company in a manner consistent with their Catholic faith, including its teachings regarding the sanctity of human life, abortion, contraception, and sterilization. In August 2012 they discovered that the company’s current health‐insurance plan includes coverage for contraception. The plan renewal date is January 1, 2013. The Kortes want to terminate this coverage and substitute a health plan (or a plan of self‐insurance) that conforms to the requirements of their faith. The ACA’s preventive‐care provision and implementing regulations prohibit them from doing so. . . .

The Kortes contend that the contraception mandate substantially burdens their exercise of religion by requiring them, on pain of substantial financial penalties, to provide and pay for an employee health plan that includes no‐cost‐sharing coverage for contraception, sterilization, and related medical services that their Catholic religion teaches are gravely immoral. They further contend that the mandate fails RFRA’s strict‐scrutiny requirement because the government’s interest in making contraception and sterilization accessible on a cost‐free basis is not sufficiently strong to qualify as compelling, and that coercing religious objectors to provide this coverage is not the least restrictive means of achieving that objective. They point out that some health plans are either grandfathered or exempt from the mandate, illustrating that the interest served by the mandate is far from compelling. And they argue that the government has other methods of furthering its interest in free access to contraception without imposing this burden on their religious liberty—for example, by offering tax deductions or credits for the purchase of contraception or incentives to pharmaceutical companies or medical providers to offer the services.

In response, the government’s primary argument is that because K & L Contractors is a secular, for‐profit enterprise, no rights under RFRA are implicated at all. This ignores that Cyril and Jane Korte are also plaintiffs. Together they own nearly 88% of K & L Contractors. It is a family‐run business, and they manage the company in accordance with their religious beliefs. This includes the health plan that the company sponsors and funds for the benefit of its nonunion workforce. That the Kortes operate their business in the corporate form is not dispositive of their claim. See generally Citizens United v. Fed. Election Comm’n, 130 S. Ct. 876 (2010). The contraception mandate applies to K & L Contractors as an employer of more than 50 employees, and the Kortes would have to violate their religious beliefs to operate their company in compliance with it.

The government also argues that any burden on religious exercise is minimal and attenuated, relying on a recent decision by the Tenth Circuit in Hobby Lobby Stores, Inc. v. Sebelius, No. 12‐6294 (10th Cir. Dec. 20, 2012). Hobby Lobby, like this case, involves a claim for injunctive and declaratory relief against the mandate brought by a secular, for‐profit employer. On an interlocutory appeal from the district court’s denial of a preliminary injunction, the Tenth Circuit denied an injunction pending appeal, noting that “the particular burden of which plaintiffs complain is that funds, which plaintiffs will contribute to a group health plan, might, after a series of independent decisions by health care providers and patients covered by [the corporate] plan, subsidize someone else’s participation in an activity condemned by plaintiff[s’] religion.” Id. at 7 (quoting Hobby Lobby Stores, Inc. v. Sebelius, 870 F. Supp. 2d 1278, 1294 (W.D. Okla. 2012)). With respect, we think this misunderstands the substance of the claim. The religious‐liberty violation at issue here inheres in the coerced coverage of contraception, abortifacients, sterilization, and related services, not—or perhaps more precisely, not only—in the later purchase or use of contraception or related services.

And from Judge Rovner’s dissent:

Although the Kortes contend that complying with the Patient Protection and Affordable Care Act’s insurance mandate violates their religious liberties, they are removed by multiple steps from the contraceptive services to which they object. First, it is the corporation rather than the Kortes individually which will pay for the insurance coverage. The corporate form may not be dispositive of the claims raised in this litigation, but neither is it meaningless: it does separate the Kortes, in some real measure, from the actions of their company. Second, the firm itself will not be paying directly for contraceptive services. Instead, their company will be required to purchase insurance which covers a wide range of health care services. It will be up to an employee and her physician whether she will avail herself of contraception, and if she does, it will be the insurer, rather than the Kortes, which will be funding those services. In the usual course of events, an employer is not involved in the delivery of medical care to its employee or even aware (by virtue of physician‐patient privilege and statutory privacy protections) of what medical choices the employee is making in consultation with her physician; only the employee, her physician, and the insurer have knowledge of what services are being provided. What the Kortes wish to do is to preemptively declare that their company need not pay for insurance which covers particular types of medical care to which they object, despite the fact that neither the company nor its owners are involved with the decision to use particular services, nor do they write the checks to pay the providers for those services. . . . If an employer has this right, it is not clear to me that limits there might be on the ability to limit the insurance coverage the employer provides to its employees, for any number of medical services (or decisions to use particular medical services in particular circumstances) might be inconsistent with an employer’s (or its individual owners’) individual religious beliefs. In short, the Kortes have not shown that complying with the insurance mandate substantially burdens the free exercise of their religious rights, in violation of the Religious Freedom Restoration Act.

As noted above, I think the Seventh Circuit’s approach is clearly correct as applied to religious institutions — universities, hospitals, and the like — as the creation and operation of such institutions is often part of the religious calling of those of particular faiths. Imposing a requirement to cover contraception (including abortifacients and sterilization procedures) is almost certainly a substantial burden on the free exercise of religion by such institutions under RFRA. I am less confident, however, that this argument can (or should) be extended to private, for-profit corporations. Although the owners of such companies have free exercise rights under RFRA, it’s not clear that the imposition of regulations governing the operation of the corporation constitutes a “substantial burden” as the creation and operation of the business is not part of their religious calling. To prevent the Catholic church from operating hospitals, schools and charities is to inhibit the church’s ability to fulfill its religious calling. But to prohibit or constrain a Catholic individual from operating a business with over 50 employees does not inhibit free exercise in the same way. I agree with the Seventh Circuit that the use of the corporate form is not dispositive, but I would place more weight on the nature of the “corporation” involved. To be continued.