Respectfully submitted by Lawrence E. Rafferty (rafflaw)-Weekend Contributor
We have heard the phrase for quite some time now. “Corporations are people”. It sounds so simple, but what does it mean in practice? The corporate structure is designed to protect individual shareholder assets from creditors of the corporation. If you maintain your corporate structure requirements and corporate book, the individual’s assets cannot be attached or claimed by a creditor of the corporation.
Corporations are also afforded special tax breaks and tax rates that individual persons cannot take advantage of. How has the Hobby Lobby decision altered or not altered the corporate veil protection provided to corporations?
Mother Jones described very simply what the corporate veil does. “Here’s one more reason to worry about the Supreme Court’s Hobby Lobby decision, which allowed the arts and crafts chain to block insurance coverage of contraception for female employees because of the owners’ religious objections: It could screw up corporate law.
This gets complicated, but bear with us. Basically, what you need to know is that if you and some friends start a company that makes a lot of money, you’ll be rich, but if it incurs a lot of debt and fails, you won’t be left to pay its bills. The Supreme Court affirmed this arrangement in a 2001 case, Cedric Kushner Promotions vs. Don King:
linguistically speaking, the employee and the corporation are different “persons,” even where the employee is the corporation’s sole owner. After all, incorporation’s basic purpose is to create a distinct legal entity, with legal rights, obligations, powers, and privileges different from those of the natural individuals who created it, who own it, or whom it employs.” Mother Jones
While the Kushner case gave a very succinct definition of the protections provided by the corporate structure, it did not get in the way of the Hobby Lobby majority that further extended the concept that corporations are people. If corporations truly are people and can make decisions based on its owners religious beliefs, how can that corporation take advantage of the protections that the fictional entity was designed to provide?
Can corporations still take advantage of the corporate tax breaks in lieu of the Hobby Lobby decision? Will creditors be able to use the Hobby Lobby decision to attack any corporation that takes advantage of the Hobby Lobby decision to avoid what may be additional costs in including contraception in the health insurance plans for its employees?
Forty-five law professors signed an amicus brief for the Hobby Lobby court suggesting that allowing the piercing of the corporate veil for the religious claims of its owners could have unforeseen circumstances.
“By letting Hobby Lobby’s owners assert their personal religious rights over an entire corporation, the Supreme Court has poked a major hole in the veil. In other words, if a company is not truly separate from its owners, the owners could be made responsible for its debts and other burdens.
If religious shareholders can do it, why can’t creditors and government regulators pierce the corporate veil in the other direction?” Burt Neuborne, a law professor at New York University, asked in an email.
That’s a question raised by 44 other law professors, who filed a friends-of-the-court brief that implored the Court to reject Hobby Lobby’s argument and hold the veil in place. Here’s what they argued:
Allowing a corporation, through either shareholder vote or board resolution, to take on and assert the religious beliefs of its shareholders in order to avoid having to comply with a generally-applicable law with a secular purpose is fundamentally at odds with the entire concept of incorporation. Creating such an unprecedented and idiosyncratic tear in the corporate veil would also carry with it unintended consequences, many of which are not easily foreseen.” Mother Jones
Those unforeseen circumstances that the friend of the court briefed warned about have occurred in past decisions where the Supreme Court claimed their decision was one limited to specific narrow circumstances. One author gave examples of how the Supreme Court’s allegedly narrow decision in Bush v. Gore was used by later courts.
“As Alito no doubt knows, that’s not how Supreme Court jurisprudence works. The justices often try to limit their decisions to a narrow set of facts. But they’re still setting legal precedent, and their logic is certain to be used in future cases in lower courts—often in unintended ways. There are no take-backsies for Supreme Court decisions.
120 thoughts on “Corporate Veil and Hobby Lobby”
If corporations are people can they be put in prison for their crimes.
Thank you. By greedy, do you mean the MAKERS or the TAKERS? The people, and their posterity, who worked, sacrificed and generated valuable estates or the parasites who received part of those efforts and estates as redistributed wealth? Did you mean the people who operated the businesses or the “affirmative action” hires that were forced on the businesses by unconstitutional legislation? Did you mean the poor, poor abused workers, the likes of which exist, as we speak, in Eastern countries; workers who take the jobs because they want the jobs and are happy to have jobs, any job. By the way, other than the foreign slaves brought over from Africa and European indentured servants, were there any American workers that were not free to terminate employment at a time of their choosing? Were those very workers not free to start their own businesses?
Please answer the question of which taxes, for which purposes did Washington impose on the aforementioned “greedy” capitalists. I suspect that Washington was taxing for governmental operations (i.e. security and infrastructure), not laws, regulations and programs that control businesses down to the very medical benefits they provide as compensation, and not redistribution in which private property (i.e. money) is taken from one man and given to another. Is that even possible, to have a right to private property and have a government that confiscates it, making it public property? That dudn’t make any sense.
Seriously? The Founders did not UNDERSTAND that, of course, the Congress shall make no law respecting the establishment of religion and, of course, business, or prohibiting the free exercise thereof? Of course, they did. When we know the Founders limited government to security and infrastructure in the Preamble, we can know they provided the same freedom to business that they provided to religion.
Let’s play a game. Substitute the word “business” for the word “religion” in the section below, then tell us what the source is and who wrote it and why. Do you imagine the Founders comprehensively understood that businesses would not be burdened or encumbered by government and considered they would be as free or more free than religions? They just thought you were smart enough to know that, especially since they lived it in their own lives for your complete perusal and inspection.
“Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press; or the right of the people peaceably to assemble, and to petition the Government for a redress of grievances.”
Would you be so kind as to admit you know what the Founders intended and wrote but you just don’t care; those old “white” guys just aren’t your cup of tea? You’ve abandoned the definition of words, the meaning conveyed by sentences and any measure of objectivity. The Founders knew almost nothing of your concept of legislation and regulation of business. And, as with the Ten Commandments, nothing has changed. There is nothing new under the sun.
“…businesses cannot be vested with unfettered rights to foul the planet, earn without paying taxes, or treating employees like dogs.”
1. The Founders covered clean air and water in “General welfare” (i.e. infrastructure).
2. It is impossible for a business to pay tax. The top line of a business is revenue which taxes are paid from. Revenue comes from customers.
3. Employees don’t take jobs for “treatment,” they take jobs for the compensation package. The Founders provided the “blessings of liberty” that employees enjoy when they terminate their service to a business for a multitude of reasons including “treatment.”
You’ve got a big job ahead – taking care of all the poor and abused people in the world. Don’t miss a one now. Have you ever thought of starting-up a charity in the free markets of the private sector? That’s one of the “blessings of liberty.” You’d be good at it. Or are you simply looking for “Jesus” status; Gandhi, perhaps? It you’re so good at saving the world, why do you need other peoples’ money?
P.S. What was the highest tax bracket in 1789? Were insolvent banks, criminal bankers and auto manufacturers “too big to fail” back then or were they self-reliant? Did the treasury back the currency with gold, as a “utility” (i.e. infrastructure), or did bankers print as much as they could to play with? Were there HHS, HUD, Medicare, social services, affirmative action, Labor and Education with striking teachers in every city and all other governmental employees obtaining “comparable pay” in 1790? Did direct welfare payments, food stamps, utility subsidies go out in the mail in 1791? If it was unimaginable then, why is it fact today?
“Congress shall make no law….. respecting an establishment of religion, or prohibiting the free exercise thereof;
Congress shall make no law respecting an establishment of business, or prohibiting the free exercise thereof.
That’s what they knew.
As to your “question” please recall it was you who asserted it was a long road from the founders view of raw capitalism to the sad state of affairs you claim describes the modern world. I was just pointing out — without rebuttal apparently — that the founders didn’t share your near child-like worship of unfettered capitalism. Washington sent troops to put down a rebellion of anti-government anarchists who believed that they were being unfairly taxed on their capitalistic efforts. Sound familiar? They were ultimately routed or fled.That’s the fate of the greedy — then and now,
“For your edification, capitalism started when the first trade of crops and meat took place at the crossroads eons ago.”
Actually John, most original human societies were based on communal ownership of resources like land and animals and not capitalism. It’s an anthropological fact. Private ownership of land came about much later as an individual right, but why let a little undisputed history get in the way of your ideological rant?
What you are describing is not capitalism but simply trade which can occur under communal or capitalist systems. Capitalism as an economic system originated in the 13th Century with the rise of primitive banking and as a revolt against the feudalism of the Middle Ages. It was described and explained in a systematic way by Smith and others during the 18th Century as the mercantilism took hold in England. Even then it was not pure capitalism as the state subsidized and directed the economic activity for its benefit and a chosen few.
Smith is rightly regarded as the “Father of Modern Economics” due to his analysis but he was in reality a moral philosopher who would have found your brand of robber baron capitalism every bit as repugnant from a moral perspective as I do.
Money does not confer immunity from social responsibility on its worshipers. They just think it does.
Do conservatives know any subject except Fox News?
Well said Mike A.
Thank you for that brilliance.
For your edification, capitalism started when the first trade of crops and meat took place at the crossroads eons ago. Adam Smith didn’t found what people do naturally. That’s like saying someone founded sexual intercourse.
Are you going to answer the question posed?
Here’s the post with the questions you evaded:
“You might recall George Washington himself sent troops to western Pennsylvania to rein in a group of lassez fair absolutists like yourself.”
Seriously? Did Washington send troops in to restrict campaign contributions in any way, to redistribute wealth, to dictate and micromanage doctors, to force students into horse-drawn wagons to take them to racially “balanced” schools, to control rents charged by landowners, to fund “poor” kids’ and foreign students’ educations in public schools/colleges K-Post Grad, to impose affirmative action – force businesses to hire based on governmental criteria, geez, Mes, this could go on all day?
Is that what George Washington did, Mes?
What was George Washington’s federal and state tax rate?
Which campaign contribution restrictions did he suffer?
You’re not talking about regulation, that is non-invasive with minor effect. You’re talking about dictating and controlling. You’re talking about imposing your religion of “fixing the whole world” because you have a “bleeding heart” and placing the burden on taxpayers and other peoples’ money because you can rig the vote away from freedom and self-reliance.
Freedom and self-reliance. I’ll bet George Washington did that.
The right to private property, freedom and self-reliance.
You’re confusing George Washington with Karl Marx.
Is squeaky Fromm ALL HAT AND NO COWGIRL?
The Supreme Court has told us that Hobby Lobby is a Southern Baptist, and entitled to practice that religion. I believe my late Golden Retriever belonged to the Society of Friends. I have yet to hear a coherent argument in support of this silly experiment in anthropomorphic jurisprudence, and do not expect one. But no matter. At bottom, the Hobby Lobby decision is not really about the corporate exercise of religion. It is instead about the corporate exercise of economic power to impose selective religious doctrine.
Thanks, Mike. I’ll take that speech as no one from the government has ever infringed your rights and your injury is thus vicarious. To set your mind at ease, you need not tilt at windmills for me. I’m not oppressed and neither are you. You’re just one of those cranks with all kinds of charges and no facts. It’s put up or shut up time and you’ve proven only that you’re eligible for the latter.
A modern John Donne, I see. And I’m the fatuous one!
As an American citizen who lives abroad, I have seen my government kill, torture, and incarcerate indefinitely without charge or trial many of my fellow citizens. Now, my government has not seen fit at this time to kill, torture, or incarcerate me indefinitely without charge or trial, but once it has done so, it would seem a bit late for me to depend upon the likes of you to free, heal, or resurrect me. So as long as I live and breathe, I’ll proactively consider tyranny against any of my fellow citizens as tyranny against me.
You fatuous dunce.
mespo, thank you for “hornbook.” I consider myself a modestly erudite chap but never heard of that term. I will use it in the future. Before looking it up I thought it might be porn.
There are history hornbooks too (Wikipedia, “Hornbook”, see also History of the Hornbook).
That explains some of your pornbook positions on history I suppose.
Especially the ones on racism.
My religion forbids X, for any X.
All the members of the corporation are of that same religion. It is against our religion to pay for abortificants,
… or support Cancer Cures (as they are against God’s will), … or Circumcision being covered (how barbaric), …. or …
How slippery is the slope? If only certain religions’ views are allowed that is establishment of favored religions. If any religion’s views are allowed how slippery is the slope?
On Mon, Jul 14, 2014 at 7:47 PM, JONATHAN TURLEY wrote:
> Dredd commented: “Nick Spinelli mespo, thank you for “hornbook.” I > consider myself a modestly erudite chap but never heard of that term. I > will use it in the future. Before looking it up I thought it might be porn. > ======================== There are history hornbo” >
My religion forbids X, for some X.
All the members of the corporation are of that same religion. It is against our religion to pay for abortificants, (HL)
… or support Cancer Cures (as they are against God’s will),
… or Circumcision being covered (how barbaric),
…. or …
How slippery is the slope?
If only certain religions’ views are allowed that is establishment of favored religions.
If any religion’s views are allowed how slippery is the slope?
As we know it pretty easy to break the corporate veil, because so few people, especially smaller companies, operate them property. Any thoughts or commentary, is appreciated.
One cause of action that will twerk the mind is the notion of a plaintiff suing an officer of a corporation for interfering with that plaintiffs relationship with the corporation (e.g. a contract relationship).
That a corporation is distinct from its controllers / officers does not mean it is a person for religious reasons, or that the controllers are the corporation.
Justice Alito did not really grasp the hornbook law, so he resorted to imagination, which is historic:
See Olympic Fish Prods. v. Lloyd, 93 Wn.2d 596, 611 P.2d 737(1980) and note that it depends on the state.
The behavior of a corporation, even though done only through agents such as its officers, is not the same as the behavior of those officers.
In that case a plaintiff had a contract with a corporation.
An officer of the corporation stopped the corporation’s performance of the contract.
The third party sued the officer personally for the tort of interference in economic relationships.
The corporation was also sued as a separate party.
The Justice Alito imagination on steroids that the religion of agents of a corporation is the same as the religion of the corporation is pure fantasy IMO.
“It ‘s hard writing legal stuff on a kindle …”
The Kindle’s not the problem.
My friend wants me to write an article on the difference between a corporation, a government granted franchise, created and regulated by political means and a trust, which is a contractual agreement between individuals, supposedly absent of government intervention, at least theoretically.
It is possible to relinquish the liability of the shareholders contractually, at least for minority shareholders. I don’t personally believe the management, nor majority shareholders should have limited liability. I believe the idea was to limit risks, so that shareholders, who have no decision making powers or authority, individually in a company could invest in a company without any further liability then his investment. Additionally, for the management and majority shareholders, it affords them the ability to raise additional funds.
As we know it pretty easy to break the corporate veil, because so few people, especially smaller companies, operate them property. Any thoughts or commentary, is appreciated.
It ‘s hard writing legal stuff on a kindle, but here goes. “Alter ego ” is NOT a cosmic free – floating concept like the professors and your latest link seem to think. It is grounded in tangible questions of fact which have basically zippo to do with mindset and nearly everything to do with behavior. Try this link. I tried to get some pattern jury instructions on alter ego so you could better understand but I couldn’t cut and paste.
Notice how the CONCLUSION or finding of alter ego is based on the very items I already provided. In the cosmic sense, any corporation is the alter ego of the stockholders, particularly smaller or closely held ones. Therefore, the kind of things a Plaintiff looks for are the corporate abnormalities.
As such, a SCOTUS stamp of approval as permissible corporate behavior dooms a finding of alter ego on the abortifacient basis. I would appreciate it you could cut and paste the relevant part of the jury instruction here since I can not.
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