For-profit corporations exist to make money. They’re legally obligated to maximize profit. It’s a basic, unassailable fact about our laws and our economy, but, as Chancellor Leo E. Strine, Jr., of the Delaware Court of Chancery (the primary business disputes court in the county) recently discussed in a law review article, there has been a “continued failure of our societies to be clear-eyed about the role of the for-profit corporation.” See Our Continuing Struggle With the Idea That For-Profit Corporations Seek Profit, 47 Wake Forest L. Rev. 135 (2012).
Although it was quite clear to the Framers of the Constitution that a corporation is “an artificial being, invisible, intangible, and existing only in contemplation of law,” Dartmouth Coll. v. Woodward, 17 U.S. (4 Wheat.) 518, 636, 4 L.Ed. 629 (1819), as Chancellor Strine notes in his article, these days we as a society somehow continue to have problems admitting it to ourselves. As a result, we have been headed down an absurd path in which our courts have manipulated the law to treat corporations like individuals independent of their owners when it comes to rights. See, e.g., Citizens United, which held that corporations have a special right to conceal the source of electioneering funds.
Which brings us to Conestoga Wood Specialties Corporation, a Pennsylvania for-profit corporation that manufactures wood cabinets. The company was founded and owned by a family that claims to be devout Mennonite Christians. The Bible says, “do not deny justice to your poor people in their lawsuits,” Exodus 23:6, but the folks behind Conestoga Wood Specialties formed a corporation — rather than, say, a general partnership — to limit their liability in lawsuits. That’s one of the special advantages we grant to corporations: shareholders are immune from liability for the harms and losses caused by the corporation. If one of those wood cabinets was built improperly, and it falls on a child, the corporation is responsible, but the owners of the corporation won’t have to pay a penny.
That’s their right: we write the laws that way to encourage investment into corporations. “The business of America is business,” and so on and so forth. Similarly, the owners of Conestoga have every right to take the money they earn from Conestoga and practice their religion however they want.
But the owners of Conestoga aren’t happy with that: they want Conestoga to have the special rights we grant to corporations to help the corporation make money (like the limitation on liability and preferential tax treatment) and they want the corporation to have the same rights as natural persons do.
As part of the Affordable Care Act, the Health Resources and Services Administration (“HRSA”), a subagency of the Department of Health and Human Services, required non-exempt group plans to cover “[a]ll Food and Drug Administration approved contraceptive methods, sterilization procedures, and patient education and counseling for women with reproductive capacity.” The owners of Conestoga Wood Specialties Corporation sued, claiming that the corporation itself is a devout Mennonite Christian, and that it violates the corporation’s religious beliefs to compel it to pay for health insurance.
The first question is a theological one: if it it is easier for a camel to go through the eye of a needle than for a rich man to get into Heaven, Matthew 19:23-26, then how easy is it for a for-profit corporation to get into Heaven?
The second question is a legal one: is Conestoga’s argument just a bunch of hooey?
In a ruling yesterday, the Third Circuit answered “Yes” to that second question:
After all, as the Supreme Court observed in Schempp, the purpose of the Free Exercise Clause “is to secure religious liberty in the individual by prohibiting any invasions thereof by civil authority.” Sch. Dist. of Abington Twp. v. Schempp, 374 U.S. 203, 223 (1963) (emphasis added). And as the District Court aptly noted in its opinion, “[r]eligious belief takes shape within the minds and hearts of individuals, and its protection is one of the more uniquely ‘human’ rights provided by the Constitution.” Conestoga, 2013 WL 140110, at *7. We do not see how a for-profit “artificial being, invisible, intangible, and existing only in contemplation of law,” Consol. Edison Co., 292 F.3d at 346 (quoting Dartmouth Coll., 17 U.S. at 636 (Marshall, C.J.)), that was created to make money could exercise such an inherently “human” right.
(Emphasis added.) Indeed.
Judge Jordan dissented, arguing:
That deeply disappointing ruling rests on a cramped and confused understanding of the religious rights preserved by Congressional action and the Constitution. The government takes us down a rabbit hole where religious rights are determined by the tax code, with non-profit corporations able to express religious sentiments while for-profit corporations and their owners are told that business is business and faith is irrelevant.
Judge Jordan is dismayed that the “faith” of a for-profit corporation is irrelevant, but that’s how our laws are written: for-profit corporations exist to make money. The whole point of our laws relating to for-profit corporations is to reiterate and reinforce that “business is business” and to encourage more business.
Put simply, you can’t get both the benefits of a for-profit corporation while ignoring their limitations. If you don’t want to conduct your organization like a for-profit corporation, then don’t create one; start a religious organization or a non-profit. Under Judge Jordan’s interpretation, we end up “down a rabbit hole” where corporations get special rights that protect shareholders (like limitation of liability and preferential tax treatment) because they exist only to make money, but then also preserve all the same rights the shareholders themselves hold.
To wit, “You cannot serve both God and money.” Matthew 6:24.
Next up is an interesting tactical question: does Conestoga file for an en banc hearing before the full Third Circuit, or do they go straight for the Supreme Court with a petition for certiorari? Given the presence of conflicting authority in the Tenth Circuit (Hobby Lobby Stores, Inc. v. Sebelius, No. 12-6294), the composition of the Third Circuit, and the Roberts Court’s penchant for judicial activism in certiorari grants, my money is on the petition for certiorari.