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.
Squeeky: “I am sorry for being snarky to the both of you. I did not realize that you were struggling so with these simple concepts. Have either of you taken a legal class as part of general curriculum???”
Thank you for educating me.
You have a nice day.
Squeeky: “That the HobbyLobby case will not provide a viable “veil piercing’ justification. Corporations typically take on “causes ” and there has been no “piercing” increase that I am aware of. It would be a hard sell to a jury, if the argument survived one of those limine thingies, or a relevancy objection.
Further, the “piercing” argument fails at the most theoretical level. The reason to pierce in the first place is because there is an “abnormality ” at the corporate level. For example, books are not kept or expenditures not recorded, or basic corporate formalities not met. Or yearly franchise fees not paid. However, SCOTUS has clearly placed HobbyLobbyish behavior within the gambit of acceptable corporate behavior. If anything, this makes piercing a more difficult endeavor.”
You’ve completely missed the alter ego problem.
With the Citizens United and Hobby Lobby rulings “the court has conceded that corporations are acting as alter egos for individuals.”
http://www.minnpost.com/community-voices/2014/07/how-hobby-lobby-ruling-transforms-and-weakens-american-corporation
Annie, Yep. One thing they all have in common is that they detest Obama and want him removed from office. The lawsuit might be bringing them in……
John:
“You’re confusing George Washington with Karl Marx.”
************************
And you’re confusing the American democracy with a third world banana republic. Washington and most every person of reason “gets” that businesses cannot be vested with unfettered rights to foul the planet, earn without paying taxes, or treating employees like dogs. Simply relying on the “market” to fix it doesn’t work as even Adam Smith (he founded the system, you know) knew and explained. Governments are established to prevent concentrations of economic and political power from overwhelming it’s people. That’s poly sci 101 and apparently not taught on Fox News. You should learn it though. It might keep you free or at least from looking so silly.
Mes,
“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.
@Bob
@messpoo
I am sorry for being snarky to the both of you. I did not realize that you were struggling so with these simple concepts. Have either of you taken a legal class as part of general curriculum???
Squeeky Fromm
Girl Reporter
mespo, Thanks. It seems hornbook law would be a cousin to “boilerplate” legal process?
Bob, Esq:
“The Spartan is not his shield.”
*********************
I think you’re saying what I’m saying the corporation is the arm of the individual or individuals. It’s not truly independent since it’s owners control it. It’s their legal extension. That’s why it should enjoy the rights of the individuals so long as it suffers the accountability for its actions. I have no problem with that concept.
Michael Murry:
“And so, once more, the courts have claimed
That dark of night must rule;
That tyranny’s enabler must
Protect the bungling ghoul
From Justice – License guaranteed
To make the despot drool”
*******************
You throw that “tyrant” term around a lot. Excatly what rights have you been denied that’s got you so peeved?
“but [you’re] suggesting that a corporation is not, at its core, an association of persons is misleading. C corporation is a legal entity but its basis is decidedly human.”
I agree with Mike Appleton’s response:
“That’s not how it works! That’s not how any of this works!”
The Spartan is not his shield.
“In Oceania, there is no law.” — George Orwell, 1984
In other words, from Bush v. Gore to Citizens [meaning, corporations] United to Hobby Lobby and whatever bizarre pseudo-animist mumbo jumbo that will come next from the Subordinate [to the “supreme being”] Court:
Boobie Jurisprudence
(from Fernando Po, U.S.A., America’s post-literate retreat to Plato’s Cave)
The Boobies had a Supine Court
That like a welcome mat
Lay down before an open door
So any crazy bat
Could fly into and then around
The room in which they sat
One Boobie set himself apart
With stripes upon his sleeve
Then like an ancient, ailing Pope
Refused to simply leave
Which guaranteed that when he did
The others would not grieve
The Boobies of the Supine Court
Conceived a thought ideal:
They’d make a law for just one man
And then rule out appeal
In this way they could cover up
What they wished to conceal
This concept of the “unique law”
Had implications plain:
It meant, for one thing, that two men
Could not enjoy the gain
And thus the quaint term “equal” went
Like sewage down the drain
This concept has a glaring flaw
As any fool can see
If you have one law for yourself
Then I want one for me
And if I do not get it then
Upon your law I pee
If your law doesn’t work for me
And mine does not for you
Then neither of us has a law
Or even the first clue
About just what a “law” might mean
In any larger view
The Boobie dullards on the bench
Compared two grains of sand
A minor interval which their
Attentions barely spanned
And then like tipsy Tevyas cried:
“There is no other hand!”
As noted elsewhere in this rhyme
The Boobie mind rebelled
At any thought more complex than
A tiny timer knelled
To notify the Boobies that
Their Jello had not jelled
So on the Boobie bench there sat
Nine addled, rattled nuts
Who tied the law in knots through which
No logic ever cuts
Which came from sitting on their heads
And thinking with their butts
They made unnecessary grief
From something truly bland
When they commenced to cogitate
On an injunction grand
To demonstrate the part of “no”
They did not understand
The Congress – one – shall make no law
About divinity
The Congress – two – shall make no law
Respecting deity
The Congress – three – shall make no law
Concerning piety
The Congress, thus, can do no thing;
Not one damn thing at all;
To authorize one single line
Of legislative scrawl
Which might in any way produce
The deadly Church-State maul
But Boobie judges, we should note,
Have simply not the stuff
For parsing single syllables
If litigants play rough
And thus “no” law means “any” if
You want it bad enough
The yellow urine in their blood
Made them a gruesome sight
They talked of freedom loud
But gave it up without a fight
Their pitiful surrender made
A darkness out of light
So Boobie George got his own law
Which no one else could share;
Or, as the Supine Boobies warned,
No one should even dare
(The word “supreme” in legal terms
Means judges need not care)
But then some parents of a wife
No longer much alive
Decided they would have a law
In two-thousand-and-five
The Congress went along, of course,
And now the law means “jive.”
A skull with spinal fluid where
A brain once used to live;
A husband with no wife to love
And nothing more to give
Have now for the Republicans
Become a switchblade shiv
A knife to slice the Democrats
Is all these people are
Where petty politicians prowl
Their victims won’t get far
As Presidents and Congressmen
Enjoy their fake bazaar
Of course, the people will not see
The maimed and dead GIs
Those brain dead soldiers and their kin
Who’ve suffered for some lies
Concocted by Republicans
And their appointed spies
The useful symbol cannot speak
Or say what it intends
Its usefulness comes only from
The passive way it bends
Before the needs of others whose
Collusion never ends
But now we have the Democrats
In power for their turn
With their own president to shred
The laws that they, too, spurn
The people had a “choice,” you see:
To fry or else to burn
And so, once more, the courts have claimed
That dark of night must rule;
That tyranny’s enabler must
Protect the bungling ghoul
From Justice – License guaranteed
To make the despot drool
Michael Murry, “The Misfortune Teller,” Copyright © 2005, 2010
Don’t feel bad she doesn’t know either.
Truth be told, I’m still at a loss as to what Squeeky was talking about.
Bob, Esq:
We agree on that second phrase (that’s why I included it) but your suggesting that a corporation is not, at its core, an association of persons is misleading. C corporation is a legal entity but its basis is decidedly human.
nick:
I don’t mind explaining that to you. Lawyers were taught from hornbooks in the good old days. Black’s defines it as: “a term given to a book that is for the purpose of teaching a subject’s fundamentals.” Many non-legal subjects (like reading) were also taught this way in many different schools in England.
The books originally were made of thin sheets of animal horn held by a wooden frame and consisted on one paper page protected by the horn sheets. A handle was attached for the kids to hold it.
Lawyers refer to it “hornbook law” when discussing basic, unchallenged principles of law or when discussing the stuff every lawyer should know. Usually a law school class is taught using an abbreviated treatise which is called the hornbook.
Mespo: “Do I really have to go over this hornbook stuff with you?”
Don’t misrepresent what I said.
A corporation “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,”
Piercing the corporate veil means piercing that distinct identity shielding the shareholders from personal liability.
Claiming the corporation is essentially an association of people contradicts the very logic by which corporations are created.
It’s tantamount to claiming the skin of a Spartan is the same as his shield.
Thus the comparison to partnerships.
Bob, Esq:
“Not all states permit the pleading of piercing the corporate veil as a separate cause of action.”
*********************
True enough but the point at issue was that all states allow a claim against the negligent actor for his personal assets regardless of his relationship with the corporation. That’s what Squeeky was fumbling around with. She seems to think that you must pierce the veil to reach him which of course is silly since he’s afforded no protection in the first place since he did the negligent act. Of course, the procedure to pierce the veil varies by state but the substantive law allowing a negligent actor to be sued (and his personal assets put in jeopardy) does not.
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.
Bob, Esq:
“You know damn well, as Rafflaw discusses, that a corporation is not an association of people– especially when we’re talking about piercing the veil. ”
******************
Black’s Law Dictionary:
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, being the incumbents of a particular oltice, 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.
“Piercing the corporate veil” involves reaching those people or as Black’s says: “When shareholders must pay losses from their personal assets.”
Do I really have to go over this hornbook stuff with you?
@NickS
It says my comment is in moderation which I assume is spammish. No big deal. They just brought me lunch and I am going home this week. Sooo, life is kewl!
Squeeky Fromm
Girl Reporter