In the case of Sylvia Burwell, Secretary of Health and Human Services v. Hobby Lobby Stores, Inc., the Tenth District Court decided in favor Hobby Lobby Stores Inc. on June 30th. The court held that the documented burden of the Health and Human Services was far too illustrious of a constraint on the Hobby Lobby’s religious belief. As a result, the corporation was able to hold a claim under the District Court by asserting that under the Religious Freedom Restoration Act of 1993 (RFRA). i The case presented manifold challenges to the Court. One of these challenges dealt with determining whether a for-profit corporation was to be considered a person, which is only vaguely phrased under the Religious Freedom Restoration Act of 1993.ii If so, the next challenge to be considered was whether these corporations, which are considered persons, may hold religious values as well as exercise them. The case concluded that Hobby Lobby was in fact a “person”, under RFRA, and could exercise its First Amendment right of freedom of religion. iii Under the RFRA, the court held that the government had compelled substantial religious burden on Hobby Lobby and as a result, granted exemption from the contraceptive mandate of the Health and Human Service. iv By deciding that for-profit entities have rights under RFRA, the Court inadequately considered the doctrines of corporation law, misapplied free exercise jurisprudence, and misapprehended RFRA. Lastly, the Tenth Circuit’s result that for-profit entities can implement religion generates the capability for doubt in the field of corporate litigation by putting derivative actions on a conflict course with the church autonomy doctrine. v
I hold that the Tenth Circuit Court misinterpreted the rights of the corporation by granting the immunity of the government mandate of contraceptive coverage by the corporation’s legal duty to provide proper health care coverage. In order to provide evidence on my statement, I find it necessary to discuss the corporate form and properly define what a corporation entails. Next, I find it important to discuss the term “person”, when applying the term to a corporation and determining whether a “legal person” holds the same rights as a “natural person”. Lastly, this paper will address the act of “piercing the corporate veil” as well as the notion of “reversing the corporate veil” in respect to the Hobby Lobby case.
II. SEPERATION AMONG SHAREHOLDERS AND CORPORATIONS
It is important to apprehend that corporations are separate and distinct from their shareholders, where the key word is “separate”. The Principle of Strict Separation is very much acknowledged and accepted in the Court of Law. Since the 18th century, this legal separateness between corporation and shareholders has been the foundation of corporate law. vi The notion of separating a corporation from its shareholders was enacted in order to impose limited liability among shareholders and to encourage investments and innovation of all corporations.vii Due to the long-established corporate entity theory, legal systems generally adhere to the approach of legal separateness and judge a corporation and its shareholders to be separate legal entities for all purposes. viii Overall, the most important aspect of this is to comprehend that a corporation is distinct from its shareholders regardless of how many shares a shareholder has acquired.ix Hence, if a single individual is to own all of the stock of a corporation it may not be implied that the corporation and this individual are the same person, nor share the same privileges and liabilities.x
III. BENEFITS OF INCORPORATING
Over the course of time, the Court has highlighted that the main purpose for a company to incorporate is in order to create a distinct legal person, which may enjoy legal rights, powers, and privileges separate from those legal rights, powers, and privileges of the natural individuals who own the corporation. xi By