7th Circuit Enjoins Enforcement of Contraceptive Coverage Mandate Against Catholic-Owned Small Business

Religion Clause, Thurs, January 31, 2013
In Grote v. Sebelius, (7th Cir., Jan. 30, 2013), the U.S. 7th Circuit Court of Appeals in a 2-1 decision issued an injunction pending appeal to prohibit enforcement of the Affordable Care Act contraceptive coverage mandate against a Catholic-owned for-profit small business and its owners. The company (formed as an LLC with a corporation as its managing member) manufactures vehicle safety systems and employs 1148 people at various locations. The majority largely relied on its earlier decision in Korte v. Sebelius (see prior posting) in finding that plaintiffs' free exercise rights are substantially burdened in violation of the Religious Freedom Restoration Act. The majority concluded that plaintiffs' case here is stronger than in Korte because this is a self-insured plan, and plaintiffs have never covered contraceptive services for their employees. The majority added:

the government’s minimalist characterization of the burden continues to obscure the substance of the religious‐liberty violation asserted here.

Judge Rovner dissented at length, saying in part:

the obligation to cover contraceptives falls not on the Grotes personally but on Grote Industries’ health care plan.... The owners of an LLC or corporation, even a closely‐held one, have an obligation to respect the corporate form, on pain of losing the benefits of that form should they fail to do so.... The Grotes are not at liberty to treat the company’s bank accounts as their own; co‐mingling personal and corporate funds is a classic sign that a company owner is disregarding the corporate form and treating the business as his alter ego. So long as the business’s liabilities are not the Grotes’ liabilities – which is the primary and “invaluable privilege” conferred by the corporate form, ... neither are the business’s expenditures the Grotes’ own expenditures. To suggest, for purposes of the RFRA, that monies used to fund the Grote Industries health plan – including, in particular any monies spent paying for employee contraceptive care – ought to be treated as monies from the Grotes’ own pockets would be to make an argument for piercing the corporate veil. I do not understand the Grotes to be making such an argument....

Medical decisions are made in private on an individual basis. Any given medical decision, depending on the nature of the patient’s condition, the available treatments, and the circumstances confronted by doctor and patient, might be inconsistent with the religious beliefs of one or more owners of the company that sponsors the patient’s workplace insurance. Holding that a company shareholder’s religious beliefs and practices are implicated by the autonomous health care decisions of company employees, such that the obligation to insure those decisions, when objected to by a shareholder, represents a substantial burden on that shareholder’s religious liberties, strikes me as an unusually expansive understanding of what acts in the commercial sphere meaningfully interfere with an individual’s religious beliefs and practices.

Posted by Howard Friedman