Balkinization  

Sunday, March 30, 2014

Reply to McConnell on Hobby Lobby and the Establishment Clause

Guest Blogger



Nelson Tebbe, Richard Schragger, and Micah Schwartzman
On Thursday, Michael McConnell offered his current thoughts on the Hobby Lobby case. His post addresses a range of issues including the question that has been our focus, namely, whether accommodating the religious beliefs of Hobby Lobby’s officers would impermissibly shift burdens onto female employees in violation of Establishment Clause values. Though the burden-shifting argument started at the periphery of this case, it is now a central issue before the Supreme Court. The government emphasized this point in its briefs, and Solicitor General Verrilli raised it during oral argument, responding directly to a number of the Justices’ concerns about the effects that an exemption would have on employees. That Professor McConnell is also concerned with refuting the argument is some indication of how important it has become over the course of this litigation.  
As we have explained, a longstanding nonestablishment principle holds that the government may not lift a statutory burden on religious believers when doing so would shift that burden onto third parties who do not share those beliefs. In Estate of Thornton v. Caldor, the Court explained that “[t]he First Amendment . . . gives no one the right to insist that, in pursuit of their own interests, others must conform their conduct to his own religious necessities.” In that case, a statute gave employees an absolute right not to work on the Sabbath day of their choosing. Because the statute imposed significant costs on employers and other employees, the Court held that it “contravene[d] a fundamental principle of the Religion Clauses.” The Court reaffirmed that principle in Cutter v. Wilkinson, where a unanimous Court relied explicitly on Caldor to hold that courts applying a statute similar to RFRA “must take adequate account of the burdens a requested accommodation may impose on nonbeneficiaries.”
And in United States v. Lee, the Court refused to grant a free exercise exemption to an Amish employer who claimed a religious objection to social security taxes. The Court held that “[w]hen followers of a particular sect enter into commercial activity as a matter of choice” they accept limits on their activity that cannot be lifted where doing so would “impose the employer’s religious faith on the employees.” Congress later adopted a legislative accommodation for Amish employers, but only in cases where their employees shared their religious beliefs.
It is surprising that Professor McConnell does not address any of these authorities in his post. Instead, he rejects the principle that burden-shifting accommodations raise constitutional problems, arguing that religious accommodations frequently impose burdens on third parties. Yet the examples he gives to support this claim do not involve the sorts of burden-shifting that raise constitutional concerns.
Consider the exemption from the draft for people conscientiously opposed to war in all forms—what Professor McConnell calls “the most venerable of all religious accommodations.” McConnell argues that the exemption for conscientious objectors shifts burdens to other draftees. But that law does not involve a direct and identifiable substitution of a nonobjector for an objector, as in Hobby Lobby. And regardless, the exemption in the draft cases does not raise Establishment Clause concerns because it does not favor religion. In fact, as Marty Lederman has pointed out, the Supreme Court interpreted the draft exemption to cover all objectors precisely because limiting it to religious people would raise Establishment Clause concerns, according to the best and most common interpretation of its decision. So that example actually cuts against Professor McConnell’s argument, not in favor of it.

McConnell’s other examples are equally unavailing. He says that Title VII’s requirement that employers accommodate their employees’ religious beliefs shifts burdens to the employer and to other employees. But he does not cite TWA v. Hardison, where the Court held exactly for that reason that the employer’s obligation to accommodate religious employees is limited to situations where doing so would impose no more than a “de minimis” cost on employers. The Court reasoned that “requir[ing] [the employer] to bear additional costs when no such costs are incurred to [benefit other employees] would involve unequal treatment of employees on the basis of their religion.”
Staying within the employment context, Professor McConnell invokes Hosanna-Tabor, where the Court exempted a religious school from employment discrimination law for a decision to terminate a minister. But that case concerned a core issue of church autonomy, namely the relation between a congregation and its spiritual leaders. As we have explained, that doctrine is specific to churches and some religious nonprofits. Although we have reservations about the rule of Hosanna-Tabor, it does not extend to employees other than ministers, nor does it apply to for-profit corporations like Hobby Lobby. Allowing religious associations to choose clergy free of certain antidiscrimination laws protects core associational values while imposing minimal burdens on people of other faiths, who are unlikely to seek employment as leaders of churches. An exemption that permitted a for-profit employer to discriminate against any employee on those grounds would not only be contrary to Title VII, but would raise serious Establishment Clause concerns. 
Professor McConnell also cites Lukumi and O Centro, concerning free exercise and RFRA, respectively. Lukumi is inapposite because it did not involve a religious accommodation at all. There, the town’s ordinance was unconstitutional because it impermissibly targeted practitioners of Santeria. After the Court’s decision, the statutory prohibitions on killing of animals were lifted for everyone, not just for religious actors. Therefore, the case raises no Establishment Clause concerns. O Centro does not help Professor McConnell either. In that case, involving the use of banned substances for religious rituals, the government failed to carry its burden of showing that the risk of diversion for recreational use amounted to a compelling interest. Moreover, the Court noted that an equivalent exception for ritual use of peyote had been in place for 35 years without Congress repealing it because of abuse or harm to third parties. Yoder, another case cited by Professor McConnnell, is distinguishable as well. The Yoder Court did not accept that exempting Amish families from compulsory schooling would burden their children. In fact, it expressly rejected that assertion. Although the government argued that children removed from public school would be “ill-equipped for life,” the Court called that contention “highly speculative.”
Probably Professor McConnell’s best argument is that employees are not burdened because they are not entitled to coverage for contraception in the first place. If the ACA is read together with RFRA, he suggests, employees of Hobby Lobby do not experience a burden when they lose coverage. This is the baseline question that we addressed at greater length elsewhere. Here we simply note that the Court has rejected Professor McConnell’s view. In Lee, the Court did not read the Social Security Act together with the Free Exercise Clause (pre-Smith), figuring that employees could not be burdened because they were not entitled to benefits in the first place. On the contrary, the Court held that the Social Security Act shifted the baseline of benefits by imposing statutory obligations on employers, and it therefore concluded that granting an exemption to the religious employer would impermissibly shift burdens to its employees. If RFRA deprives only Hobby Lobby employees of contraception coverage, they will lose an entitlement that continues to be enjoyed by virtually all other women, including those working for religiously-affiliated nonprofits. The most sensible understanding of that situation is that it would shift the burden of providing contraception coverage from employers with religious objections to their female employees in violation of a basic and longstanding nonestablishment value.
McConnell closes by saying that “[t]he political dynamics of this case have attracted extraordinary attention, but the Supreme Court is a court of law, not of politics.” Our argument has proceeded on the same assumption, and that is why it is important for the Court to consider all of the relevant legal principles, including those that protect the rights of employees not otherwise represented in this litigation.
Nelson Tebbe is Professor of Law at
Brooklyn Law School. You can reach him by e-mail at nelson.tebbe at brooklaw.edu

Richard C. Schragger is Perre Bowen Professor Barron F. Black Research Professor of Law at the University of Virginia School of Law. You can reach him by e-mail at schragger at virginia.edu

Micah J. Schwartzman is
Edward F. Howrey Professor of Law at
the University of Virginia School of Law. You can reach him by e-mail at schwartzman at virginia.edu

Saturday, March 29, 2014

Business Structures for Innovation

Guest Blogger


Dan L. Burk  

For the conference on Innovation Law Beyond IP at Yale Law School

Transaction cost analysis is a standard tool used across corporate, securities, bankruptcy, and related areas of business law to understand how firms respond to particular market conditions.  The fundamental premise of such analysis is that markets are costly mechanisms for organizing economic production.  In some instances managerial direction will be cheaper than market negotiation, in which case the business will develop an internal capacity to produce the necessary input.  The decision whether to make an input or buy it in the market will be determined by which option presents lower transaction costs.

This perspective implies that firms will integrate some activities, growing to a size dictated by market transaction costs, and assuming a structure that will lower their internal transaction costs.  Applicable legal regimes are an important factor determining both the transaction costs facing firms and the structures that they can adopt in response to such costs.  Laws governing the form of business association, and those governing employee relations may dictate or limit the strategies that firms can adopt in order to manage such costs.

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Thursday, March 27, 2014

Do The Rights of Employees Count?: The Supreme Court Hears Oral Argument in Hobby Lobby

David Gans


Hobby Lobby is shaping up to be the most important free exercise of religion case the Supreme Court has heard in a very long time.    It’s also emerging as a key test for Justice Anthony Kennedy and his vision of individual liberty.  Will Justice Kennedy recognize that Hobby Lobby’s employees, who seek to protect their health and control their reproductive lives, are entitled to enjoy federal guarantees that safeguard women’s liberty and personal dignity by ensuring access to the full range of contraceptives?

The fundamental question at the heart of the case is whether the Court will extend free exercise rights to secular businesses and allow them to extinguish the rights of their employees.  That would be a radical break from both the Constitution’s text and history and everything the Court has said in the past about the meaning of the constitutional guarantee of the free exercise of religion. 

Never before in our Nation’s history has a commercial enterprise been granted a religious exemption from a neutral law when that exemption would allow business owners to impose their religious beliefs on their employees.  And, indeed, this is hardly surprising, as the Court has rarely granted religious exemptions at all.   Nevertheless, in a bitterly divided oral argument in Hobby Lobby, a number of the Court’s conservative Justices seemed inclined to read the Religious Freedom Restoration Act (RFRA) to revolutionize free exercise law and create religious exemptions for secular businesses never recognized by any other court in our Nation’s history before this case.  Justice Kennedy – alone among the Court’s conservative Justices – asked hard questions to both sides.   As virtually all Court watchers seemed to agree, Justice Kennedy’s vote appeared to be the one that will determine the outcome.  

The oral argument in Hobby Lobby was billed as a critical test of whether the Court’s conservative wing would double down on the decision in Citizens United and extend religious free exercise rights to secular for-profit corporations – businesses that cannot pray and lack a religious conscience in any meaningful sense of those words.  Surprisingly, that debate never materialized.   While Justice Sonia Sotomayor made the point that “we’ve never considered a for-profit corporation as exercising religion,” and Justice Ruth Bader Ginsburg stressed that the Court’s Free Exercise Clause jurisprudence protected only individuals and religious bodies, these arguments were quickly brushed aside. 

It is disturbing to think that the Court’s conservative majority would be willing to extend to secular, for-profit corporations the basic rights of conscience and human dignity – rights they have never possessed in more than two centuries – with hardly any serious debate at all.  Instead, the critical question during oral argument seemed to be whether the rights of employees count at all when a secular business seeks a religious exemption from a neutral, generally-applicable law protecting the rights of employees.  Solicitor General Don Verrilli put the rights of Hobby Lobby’s employees front and center, while Hobby Lobby’s lawyer, conservative superstar Paul Clement, tried to sweep them under the rug.  

The Court’s pre-RFRA case law interpreting the Free Exercise Clause recognized that the rights of employees do matter.  That was the lesson of United State v. Lee – a case discussed at length during the Hobby Lobby argument – in which the Supreme Court unanimously rejected an Amish business owner’s claim that he was entitled to a religious exemption from having to make Social Security payments on behalf of his employees.  The Court in that case could have said that, to accommodate Mr. Lee’s religious beliefs, the government should pay for Social Security benefits for Lee’s workers or should create a new exemption to protect his ability to run a business consistent with his religious beliefs.  But it did not.  Rather, the Court held that Lee was not entitled to a religious exemption that would “impose the employer’s religious faith on the employees.”  That’s exactly what Hobby Lobby is seeking to do here.

Led by Chief Justice John Roberts, a number of the Court’s conservatives suggested during oral argument that RFRA had changed the fundamental principles that govern religious exemptions.  RFRA was enacted in 1993 to restore the Court’s free exercise case law as it existed before the Court’s decision in Employment Division v. Smith, a body of case law that mainly rejected claims for religious exemptions from neutral laws.  But Chief Justice Roberts seemed to read RFRA as having created a broad right to religious exemptions.   When Solicitor General Verrilli began his argument by quoting Justice Jackson’s 1944 statement that limitations on religious freedom kick in when they “collide with the liberty of others,” Chief Justice Roberts snapped back, “[t]hat’s a statement that’s inconsistent with RFRA, isn’t it?”  Justice Scalia, too, appeared to take the view that the rights of employees were entitled to no weight, emphasizing that the text of RFRA did not require a court to consider the rights of third parties.  He even fought the language of the Court’s opinion in Lee, suggesting the rights of employees did not figure in the analysis.  Only Justice Kennedy appeared to recognize that the rights of employees do matter. 

As the oral argument demonstrated, the Supreme Court’s ruling in Hobby Lobby could have dramatic and harmful ramifications that go way beyond the specific question before the Court in this case.  If Hobby Lobby prevails, secular businesses could try to avoid paying for medical treatments like vaccinations and blood transfusions, and to seek exemptions from important legal protections given to employees for family leave and against discrimination.  Justices Sotomayor, Ginsburg, and Kagan all pressed Paul Clement to explain how courts should handle such claims.  Disturbingly, he offered no limiting principle that might confine the reach of a ruling in favor of Hobby Lobby.  Conservative Justices, who had so worried about government mandates to eat broccoli and other far-fetched hypotheticals in the first challenge to the Affordable Care Act, seemed uninterested in testing the limits of the argument that Clement was making.    

Hobby Lobby has been billed as a clash between the religious beliefs of the company’s owners and the power of the government, but that is a too narrow a frame.  As the Justices reflect on the oral argument, they should recognize that the rights of Hobby Lobby’s thousands of employees – who have deeply held beliefs and convictions of their own – are at stake here, too.   The big question at the heart of the case is whether Hobby Lobby’s owners will be entitled to impose their religious beliefs on Hobby Lobby’s employees and deny them federal rights critical to women’s health and reproductive freedom.  A ruling that would give business owners the power to extinguish their employees’ rights would be a grave setback for hard-working Americans.  And as Justice Kagan recognized, it would also open the floodgates to numerous other claims challenging other important federal laws and threatening other employee protections.  Employees should not have to check their personal liberty and human dignity at the workplace door. 

David H. Gans is the Director of the Human Rights, Civil Rights & Citizenship Program at the Constitutional Accountability Center, the author of Can Corporations Pray?, and a co-author of CAC's brief in Sebelius v. Hobby Lobby Stores, Inc. and Conestoga Wood Specialties Corp. v. Sebelius.  This post is cross-posted at Text and History.  

IP in a World Without Scarcity

Guest Blogger

Mark A. Lemley 

For the conference on Innovation Law Beyond IP at Yale Law School

Things are valuable because they are scarce. The more abundant they become, they cheaper they become. But a series of technological changes is underway that promises to end scarcity as we know it for a wide variety of goods. The Internet is the most obvious example, because the change there is furthest along. The Internet has reduced the cost of production and distribution of informational content effectively to zero. In many cases it has also dramatically reduced the cost of producing that content. And it has changed the way in which information is distributed, separating the creators of content from the distributors.

More recently, new technologies promise to do for a variety of physical goods and even services what the Internet has already done for information. 3D printers can manufacture physical goods based on any digital design. Synthetic biology has automated the manufacture not just of copies of existing genetic sequences but any custom-made gene sequence, allowing anyone who want to create a gene sequence of their own to upload the sequence to a company that will “print” it using the basic building blocks of genetics. And advances in robotics offer the prospect that many of the services humans now provide can be provided free of charge by general-purpose machines that can be programmed to perform a variety of complex functions. While none of these technologies are nearly as far along as the Internet, they share two essential characteristics with the Internet: they radically reduce the cost of production and distribution of things, and they separate the informational content of those things (the design) from their manufacture. Combine these four developments – the Internet, 3D printing, robotics, and synthetic biology – and it is entirely plausible to envision a not-too-distant world in which most things that people want can be downloaded and created on site for very little money.



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Wednesday, March 26, 2014

Religious Accommodations Cost More Than Money

Guest Blogger


Kara Loewentheil

Yesterday the Supreme Court heard arguments in the consolidated cases of Hobby Lobby and Conestoga Wood. With the publication of the full argument transcript online, it became clear that even the experienced lawyers arguing these cases – along with the Supreme Court Justices themselves – were struggling to understand how to think about the relationship between religious accommodations and third party rights. In this context, that means the impacts that accommodations granted to religious employers would have on their female employees who would otherwise have access to contraception without cost-sharing under the Affordable Care Act’s contraceptive coverage requirement (and indirectly on their partners and children).

This came as no surprise to me. In When Free Exercise Is A Burden: Protecting “Third Parties” In Religious Accommodation Law, a paper I authored that is shortly forthcoming in the Drake Law Review, I argue that neither scholars nor courts have thus far provided a satisfying account of how to balance free exercise rights against the impact of those rights on “third parties.” In the paper I provide a thorough analysis of the existing case law on this issue and propose both a novel framework for balancing such rights as well as insight into how to better utilize the existing constitutional and statutory doctrine toward this end.

In this short post, however, I simply want to draw attention to one particularly overlooked element of the contraceptive coverage requirement that can only be understood in relation to the “third parties” (female employees) in this case. The arguments yesterday focused entirely on the practical benefit of the contraceptive coverage requirement, and analyzed everything – from the compelling interest the government advanced to the effect of already-existing exemptions – in terms of the tangible access or lack of access to contraception for the women affected. But law has more than practical impacts – it has important expressive impacts that are explicitly meant to, and do, shape social norms and priorities. In my paper I argue that the contraceptive coverage requirement has an enormously important expressive element – it signifies a social and political commitment to women’s social and economic equality, and symbolizes an acceptance of social and shared responsibility for gender equality. The importance of contraception to women’s equality has been recognized by the Supreme Court, and is featured prominently in the Government’s briefing on its compelling interest in the law. That equality is impossible to achieve without access to contraception. In that light, allowing religious accommodations without ensuring seamless and no-cost contraceptive access for the employees of objectors would be inflicting a serious expressive and dignitary harm.

Now compare that understanding to this exchange on pages 37-38 of the transcript. It comes in the midst of a dialogue between Clement, arguing for the objecting plaintiffs, and Justice Kagan during yesterday’s argument, in which Clement distinguishes between the effect of race discrimination on a prospective employee and the effect of religious exemptions on women seeking contraception:

Now, each of those has a burden on third parties, but I would respectfully suggest they’re different.  In the case of the employee who's been subject to racial discrimination, even if they can get another job, that racial discrimination is a unique injury to them that you can’t remedy unless you tell the employer, don’t discriminate on the basis of race. . . . Here . . . all we’re really talking about is who's going to pay for a subsidy that the government prefers. This is not about access to the contraception.  It's about who’s going to pay for the government's preferred subsidy.

Clement’s description of what’s at stake is as minimal as can be: it’s just who is going to pay for contraception. It’s just a matter of money, with no expressive or dignitary implications. What is fascinating about this set-up is that Clement specifically contrasts this case to a race discrimination case, in which he happily admits that an employee discriminated against on the basis of race would have a recognizable harm apart from not getting the job. What kind of harm could that be? Obviously it’s a dignitary harm, a “unique injury” that exists “even if they can get another job.” Contraception, on the other hand, is positioned as simply a consumer good in the market, with absolutely no greater purpose or significance. (Which is ironic, of course, since part of his argument is that his clients view it as a sin.)

This focus on expressive norms and purposes is not just theory-talk. It has direct implications for the way we understand the details of the doctrinal standards as well. In the second half of the argument the conservative justices hammered General Verrilli, arguing for the Government, on how the Government’s interest in the contraception coverage requirement could be compelling when there were allegedly various other exemptions in the law, including for companies with fewer than 50 employees, religious organizations, and grandfathered plans. Verrilli did his best to defend the exemptions, noting that (1) companies with fewer than 50 employees are exempted from providing all health insurance but must cover contraception if they choose to offer health insurance, (2) religious organizations are exempted if they are houses of worship but are only offered an accommodation that ensures access if they are religiously-affiliated nonprofits, and (3) that the grandfathered plans will decrease over the next several years until very few, if any, remain. 

The conservative justices were particularly obsessed with the grandfathered plans, and Verrilli had a bit of a difficult time explaining why the practical impact of leaving millions of women without contraceptive access during the intervening years did not undermine the Government’s compelling interest. Embracing the expressive import of the contraception coverage requirement, however, would have cast the exemptions in an entirely different light. The expressive message of exempting small businesses from health care coverage requirements generally is far different than if contraceptive coverage was singled out from those policies. Similarly, the exception for grandfathered plans reads, expressively-speaking, as an administrative transition matter affecting all preventative health care coverage, along with other of the law’s requirements, not as a judgment about the importance of contraception. The religiously-affiliated organizations, meanwhile, are subject to an accommodation that ensures seamless coverage for women in their employ; it is true that the lack of an adequate enforcement mechanism sends a troubling expressive message about the importance of this right, but the core signal of the accommodation is to affirm the Government’s commitment to contraceptive access, not to undermine it.

In other words, understanding the expressive impact of the law reframes the question of the baseline, helping us understand the compelling interest and narrow tailoring tests in a deeper, more coherent way. Such a perspective also has implications for the First Amendment analysis when it comes to whether a law is neutral or generally applicable, but like the Court I leave those questions for another day. 

Kara Loewentheil is a Postdoctoral Associate-in-Law and Fellow in the Program for the Study of Reproductive Justice at the Information Society Project at Yale Law School. In May she will begin as a Research Fellow and Director of the Public Rights / Private Conscience Project in the Center for Gender & Sexuality Law at Columbia Law School. Kara can be reached at kara.loewentheil at yale.edu. 

What the Affordable Care Act Subsidy Case Tells Us

Gerard N. Magliocca

While most of the media's attention yesterday was focused on Hobby Lobby, the D.C. Circuit was hearing argument in a case that poses a mortal threat to the Affordable Care Act.  As readers of this blog know, the subsidies to those participating in the federal exchange are being challenged on the ground that the statute authorizes subsidies only for exchanges run by states.  Since only fourteen states have set up their own exchanges, that would leave most of the country out in the cold and (I gather) throw insurance premiums out of whack.

I must say that, as I matter of statutory construction, I am not persuaded by the arguments made in favor of reading the Affordable Care Act to authorize subsidies to the federal exchange.  I think this interpretation is not much more than a statement that the consequences of reading the law as written would be terrible, thus it should not be done.  Granted, statutes should not be read in a literal way to produce absurd results.  In this case, though, I think Congress just assumed that most, if not all, states would not set up their own exchanges.  I don't see why courts are obligated to correct this design flaw.

This case (unlike Hobby Lobby) reflects the fact that the President has not carried the country on the merits of the Affordable Care Act.  You can see this in how the Act polls, in how the enrollments are going, and how Democratic candidates in contested seats are running from the statute.  If Democrats controlled Congress, they would have fixed the text of the statute in about five seconds.  The fact that they cannot do so is a symptom of a larger political problem.
   

Tuesday, March 25, 2014

Annual Tulsa Book Review Issue Now Available

Ken Kersch



Back in December of 2012, Linda McClain and I announced that we would be assuming the co-editorship of the annual Tulsa Law Review book review issue, building on the strong foundation laid by Sandy Levinson and Mark Graber in launching the series and publishing three superb issues. We are happy to announce that our first co-edited issue (Tulsa’s fourth book review issue) is now in print and available online at the Tulsa Law Review’s website.  It includes twenty-five essays by law professors, political scientists, historians, and sociologists reviewing forty-nine significant law-related books.  The issue carries forward the interdisciplinary conversation that Sandy and Mark initiated and we believe demonstrates the special value of the book review essay as a uniquely informative form of scholarship.



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