Religious Freedom Scores a Victory in the D.C. Circuit: Gilardi v. HHS and the Free Exercise of Religion

On November 1, the D.C. Circuit held that the Affordable Care Act’s [ACA] contraceptive mandate “trammels the right of free exercise – a right that lies at the core of our constitutional liberties . . .”  The case – Gilardi v. U.S. Dep’t of H.H.S. – was brought by two brothers from Ohio, Francis and Philip Gilardi, who own Freshway Foods and Freshway Logistics.  Combined, the companies employ roughly 400 people, to whom they provide insurance through a third-party plan.  Being devout Catholics, however, the Gilardis did not fund insurance policies that offered coverage of contraceptives, sterilization, or abortion.  “But along came the Affordable Care Act,” which mandated that the Gilardis – along with most other employers – provide coverage for those services..  “Finding themselves on the horns of an impossible dilemma,” wrote the Court, the Gilardis challenged the law on Religious Freedom Restoration Act [RFRA], First Amendment, and Administrative Procedure Act [APA] grounds.  The District Court found that the Freshway Companies were not people and thus, could not exercise religion, and that the Gilardis were only indirectly burdened by the ACA.

The Court’s first inquiry was into the question of whether a corporation had a cognizable Free Exercise Claim.  The Court found that, despite some advantages in recognizing a corporation’s ability to exercise religion, “for now, we have no basis for concluding a secular organization can exercise religion.”  While seemingly sympathetic to the argument that Citizens United offered a logical, coherent argument that a corporation can exercise religion – “[t]here is an appeal to this simple reasoning; after all, the free-exercise and free-speech rights are enshrined in the same constitutional provision, separated only by a semi-colon” – the Court fell back on precedent.  “[W]e must be mindful that Citizens United represents the culmination of decades of Supreme Court jurisprudence recognizing that all corporations speak.  When it comes to the free exercise of religion, however, the Court has only indicated that people and churches worship.”

Instead, the Court used the Gilardis’ individual rights to free exercise to justify the ruling, finding that “the Gilardis are burdened when they are pressured to choose between violating their religious beliefs in managing their selected plan or paying onerous penalties.”  Explaining further, the Court said:

The contraceptive mandate demands that owners like the Gilardis meaningfully approve and endorse the inclusion of contraceptive coverage in their companies’ employer-provided plans, over whatever objections they may have.  Such an endorsement . . . is a ‘compelled affirmation of a repugnant belief.’  That, standing alone, is a cognizable burden on free exercise.  And the burden becomes substantial because the government commands compliance by giving the Gilardis a Hobson’s choice.  They can either abide by the sacred tenets of their faith, pay a penalty of over $14 million, and cripple the companies they have spent a lifetime building, or they become complicit in a grave moral wrong.  If that is not substantial pressure on an adherent to modify his behavior and to violate his beliefs, we fail to see how the standard could be met.

                The Court held “the ramifications of the government’s argument” – that the contraceptive mandate was a compelling government interest narrowly tailored to accomplish that goal – would require the Court to believe that “Congress intended important statutory rights to turn on the manner in which an individual operates his business.”  After chiding the government’s argument – “the government [relies] on what is perhaps an incomplete understanding of corporate law” – the Court found that the generalized “public health” argument was significantly lacking in specifics.  “Perhaps the government thought it best to focus on justiciability,” the Court wrote.  “After all, if no one has standing to object, the state avoids the searching inquiry into its means.”

                In finding that the Gilardis had standing to challenge, and in its analysis of the Citizens United argument of corporate First Amendment rights, the Court opened the door to future challenges.  While rejecting the direct comparison between corporate free speech and corporate free exercise, the Court seemed receptive to other arguments: perhaps a Free Association argument.  (Before receiving comments to this effect, I note that the First Amendment actually grants a freedom to peaceably assemble, though the federal courts have interpreted this to mean a freedom to associate).

                A corporation is merely a form of association.  A group can incorporate, form a partnership, a company, etc.  Each form offers different methods of associating groups of people for a particular object.  Granted, the law provides benefits for the individuals within the associations (such as liability protection), but, at its core, the form of association does not defeat the purpose of the organization.  Thus, a group can form for any legal purpose – the form of the organization governs the group internally and dictates the methods of taxation, liability of members, etc.  But it does not dictate the purpose.

                The Court here indicated that it was sympathetic to the argument that a corporation could have a religious character without being formed for a purely religious purpose – such as a church or religious charity.  Perhaps an argument based on the combination of the Free Exercise, Free Speech, and Free Association clauses of the First Amendment could sway a sympathetic D.C. Circuit to allow for-profit, closely-held corporations the protections of freedom of conscience and religion that the individual owners and shareholders enjoy.

*All quotations are from Gilardi v. Sebelius, — F.3d —, 2013 WL 5854246 (D.C. Cir. 2013) unless otherwise noted.