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.
Mespo: “Thanks, rafflaw for some sanity on a crazy topic opened up by Citizens United. People are like corporations as termites are like dunghills. We make ‘em; we aren’t them and sometimes they stink.”
This coming from the man who welcomed the ruling in Citizens United.
Jesus H. Christ.
It never ends with you; does it?
Excellent points Rafflaw.
This was my take on the Hobby Lobby case as I posted in Flowers for Socrates:
…
“The Hobby Lobby case was far less about women’s rights than it was a further distortion of the definition of a corporation.
A corporation is “An artificial person or legal entity created by or under the authority of the laws of a state or nation, composed, in some rare instances, of a single person and his successors, …but ordinarily consisting of an association of numerous individuals, who subsist as a body politic under a special denomination, which is regarded In law as having a personality and existence DISTINCT from that of its several members, and which is, by the same authority, vested with the capacity of continuous succession, irrespective of changes in its membership, either in perpetuity or for a limited term of years, and of acting as a unit or single individual in matters relating to the common purpose of the association, within the scope of the powers and authorities conferred upon such bodies by law.” – Black’s Law Dictionary
So, the Hobby Lobby corporation, i.e. an artificial legal entity, has a “right” to freely exercise its religion?
Let’s recall the order of operations at work here: Mankind is born into a state of nature with ALL God (or insert place holder here if you’re an atheist) given rights in his/her possession. Mankind thence enters into a compact forming a society whereby he/she confers several of those rights to the sovereign so as to better secure the “other rights retained.” (see Ninth Amendment).
Corporations are not born into a state of nature and therefore have no natural rights to freely exercise any “religious rights” much less recognize any God whatsoever. Furthermore, corporations, BY DEFINITION, have an existence DISTINCT FROM THAT OF THEIR MEMBERS. It also exists in perpetuity; thus negating yet again any argument for “saving its soul.”
The purpose of creating the legal fiction of corporate personhood is to ensure that the corporation has the same rights enabling it to carry on its business as an individual. Thus the NY Times corporation has free speech and free press rights because such rights are germane to the work of the entity. Evidence that the Court has gone too far to accommodate a corporation with personhood occurs when doing so CONTRADICTS the very definition of a corporation.
Does Hobby Lobby truly require Freedom of Religion to carry on its business of selling arts and crafts items?
Also consider that the majority limited the first amendment religious freedom to closely held corporations. Why?
Now think back to Citizens United.
Is the right to vote a personal right or a group right?
Does the Bill of Rights address the rights of a collective or the individual?
By granting corporations more and more of the rights historically reserved to the individual, e.g. the right to participate in the franchise, are we not moving from a government designed to protect individual rights to a government designed to protect the collective?
Well comrades?
Obama was a Constitutional ” law professor” and has proven to be ignorant of the Constitution. Maybe just contemptuous?
@Rafflaw
Are you kidding??? I couldn’t even get her to critique various Birther theses. I scanned the Amicus FWIW, and it read to me like they were trying to shoehorn a “free -floating ” “corporate separateness ” into a potential veil piercing tool. Naw, that ain ‘t gonna fly. Imagine :
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Ladies and gentleman of the jury. There is no dispute that Defendant Bob ran over Plaintiff Mary with his car while delivering a pepperoni pizza for his incorporated pizza parlor. And we done won all the pizza ovens and mozzerella cheese inventory in a separate action against Bob ‘s Gourmet Pizza, Inc.
Now, we ‘re asking you to pierce the corporate veil and give us Bob ‘s house ’cause his employee insurance plan didn ‘t pay for abortifacients!!!
——
See, it just don’ t make any sense. Look, you can always run this kind of stuff by me first before you post it, if you are unsure.
Squeeky Fromm
Girl Reporter
Gigi:
“OR, the corporations, can call their favorite president and get a bail out.”
**************************
I guess that’s Bush since he did it. BTW most people aren’t sue-happy. Most businesses are sue averse. If they companies did the right thing by the folks they harm I’d be out of business. But they never (almost) do, so I’m not.
While the hole in the notionof a corporate veil is very real (the well-considered opinion of Sweeky BFF notwithstanding), I find the best feature of the Hobby Lobby case to be showing Nino “The Fixer” Scalia for the legal relativist he clearly has become. In the famed Indian peyote case (Employment Division, Department of Human Resources of Oregon vs. Smith, 494 U.S. 872 (1990)), Justice Scalia writing for the majority reminded all concerned that religious freedom doesn’t mean violating the law of the land. The pious former UVA professor told us “We have never held that an individual’s beliefs excuse him from compliance with an otherwise valid law prohibiting conduct that the state is free to regulate.”
Now, of course, all that has changed in Hobby Lobby and now we must accord rights to corporations (and their fundamentalist Christian puppeteers) we wouldn’t think of giving to Native Americans. Five white, middle-aged, Catholic guys are the conscience of a nation and now we know those Catholic oxen have lots of protection.
Saints preserve us!
Corporations are formed, not only to protect the business in bankruptcy situations, but to protect them from Joe Public who is sue happy for the least little thing.
Bankruptcy–corporations are supposed to pay back the money owed to their debtors, but they can continue to operate their businesses (which helps them bring in money) so they can pay off their debtors. If they didn’t have this protection, then they would be forced to liquidate any left over assets to their debtors. In that case the debtors would lose a great deal more money and some wouldn’t see a penny from the corporation. This in turn can lead to the debtors bankruptcy; becoming a dominoes effect on the other businesses involved.
OR, the corporations, can call their favorite president and get a bail out.
Squeeky,
You may want to suggest that your BFF look at the amicus brief filed by 45 law professors.
Gigi,
If any corporation can opt in and out of legal rules, are they still entitled to the protection the corporate structure gives them? Hobby Lobby’s owners had the right to not become a corporation, but they made that choice. Shouldn’t they have to follow the same rules of corporations in their state?
Secondly,
You may want to re-read the Hobby Lobby decision. The court didn’t allow they to opt out of abortions. They allowed them to opt out of having to pay for contraception that they believe kills a fetus. Hobby Lobby’s science is not accurate, but the Supremes bought it.
“…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…”
Please stop putting into people’s head that Hobby Lobby blocked contraceptives from their female employees–THEY DID NOT!! There insurance policy pays for 4 of the 16 contraceptives on the market. The employees can still buy all the contraceptives they want. What the Supreme Court’s decision did was allow HL to opt out of abortions per to the corporations shareholders vote and personal beliefs. If the employees take their contraceptives, as directed by their doctor, they will never need an abortion.
Hmmm. Sooo, like all those corps that didn ‘t do business with South Africa, or with whale killers, or tobacco companies, . . . those companies could be pierced. And what about those corps who pay obscene silly amountd for speeches. Or $600,000 a year to kids of ex-presidrnts??
No, this possibililty exists only with those who don ‘t practice real law in this field. I checked with my BFF Fabia Sheen, Esq., a lawyer. When she finished giggling, she told me this was nonsense.
She also said “piercing the veil” had a lot more to do with corporate formalities and zippo to do with shareholder mindsets. Then, she laughed some more.
I am curious why the LEFT always pleads for corps to act more “human ” and then grouses when they do.
Squeeky Fromm
Girl Reporter
AL – oh woe is me. The players will lose money – tough!! The fans will lose entertainment? perhaps they will try reading and thinking huh?
Don King was sued. I’m shocked. At least I learned something from this polemic.
No one ever said that the Supremes were smart or they think about unintended consequences – look at the book MEN IN BLACK at the outrageous decisions coming from these supposed justices. Then consider that the two liberal women added to the court were politically correct choices and neither had much experience.
Kagan herself had NEVER been a judge! To say that respect for the court is gone – is true!
The Los Angelos basketball team owned by Sterling has a buyer who is devoutly Baptist and does not believe in working on Sunday. He wants to bar his team from playing games on Sunday. The players will lose money. The fans will lose their entertainment.
Thanks, rafflaw for some sanity on a crazy topic opened up by Citizens United. People are like corporations as termites are like dunghills. We make ’em; we aren’t them and sometimes they stink.
Ah, the law of unintended consequences.
” if a company is not truly separate from its owners, the owners could be made responsible for its debts and other burdens.”
I’m all for it.
Given that fraud has pretty much taken over America, the INDIVIDUALS responsible need to be held to account.
I’m sick and tired of people committing despicable acts and hiding behind their the “3rd party” liability afforded by the corporation.
Well, piercing the veil is usually a difficult task to begin with. The usual reasons to try are FINANCIAL, sooo I am not sure how an undifferentiated religious argument would ever impact that.If anything, the SCOTUS decision would protect a corp owner by placing such decisions squarely within the corporate purlieu (sp???).
Squeeky Fromm
Girl Reporter
The notion that corporations are people with civil rights seems to come from the fact that corporations are made up of individual people with civil rights. So each officer of a corporation then gets two opportunities to weigh in on every candidate or issue – once as an individual, and a second time as an officer of a corporation, whereas everyone else may only weigh in as himself.