I agree with much of what Mark writes, here. However . . . 1. This is incorrect: "The managers simply are refusing to take an action that the executive branch of the government demands they take." Sorry to keep riding my hobbyhorse, but there is no such demand, no matter how often the plaintiffs and their defenders say otherwise. The state may or may not impose "substantial pressure" upon the Greens to violate their purported religious obligations, but it does not demand that they do so.
2. *If *this were a case about shareholders' rights, then I think it would not be correct to say that "because the state makes the corporate form so easily and widely available to entrepreneurs, conditioning use of that form by entrepreneurs on the giving up of rights to religious freedom would seem an unconstitutional condition." That's standard-issue state corporate law: In exchange for protections from liability, corporate shareholders generally cannot sue to vindicate their personal rights -- constitutional, statutory and common-law -- if they are injured by virtue of something done to the corporation. That's hardly an unconstitutional condition, and the fact that the state makes the benefit easily available doesn't render its attendant, very reasonable bitter-with-the-sweet condition constitutionally problematic. But the case is not about the rights of shareholders . . . 3. And if the case *were *about shareholders rights, then I would respectfully disagree that "Steve Bainbridge at UCLA has made a strong case that [a reverse veil-piercing theory] is available" to the Greens here. Bainbridge's argument is very dubious, IMHO -- see http://balkin.blogspot.com/2014/03/hobby-lobby-part-xiii-shareholder.html. But, again, the case is not about the rights of shareholders . . . On Thu, Jun 12, 2014 at 3:29 AM, Scarberry, Mark < mark.scarbe...@pepperdine.edu> wrote: > Prof. Greenwood’s argument makes very little sense to me. He seems to > stress that someone at Hobby Lobby is illegally using corporate property, > but I don’t see what the property is that they are using. The managers > simply are refusing to take an action that the executive branch of the > government demands they take. Where is the supposed “theft”? The supposed > “fraud”? Why is the question of asset ownership so important? > > > > What about a corporation that embraces “corporate social responsibility” > principles – does that embrace involve “fraud” or “theft”? > > > > More generally: > > > > Although at one time it took a hard-to-obtain royal charter to form a > corporation, incorporators now can form corporations at will. Corporations > no longer have the close connection to the state that could cause them to > be subject to non-Establishment principles. > > > > Because the state makes the corporate form so easily and widely available > to entrepreneurs, conditioning use of that form by entrepreneurs on the > giving up of rights to religious freedom would seem an unconstitutional > condition. They would seem to have the right to have the corporation act > on their religious beliefs and to be protected in doing so by whatever > constitutional or statutory provisions may be available. I don’t see this > as requiring a kind of “reverse piercing of the corporate veil,” so that > corporations are clothed with the rights of shareholders, but Steve > Bainbridge at UCLA has made a strong case that some such concept is > available. > > > > It is settled doctrine that corporations do have constitutional rights. > They are protected under the Takings Clause, and they have First Amendment > rights to freedom of speech and freedom of the press. Citizens United is > only the latest of the cases that so hold. Consider NY Times v. Sullivan > (1964); First Nat’l Bank v. Bellotti (1978); PG&E v. PUC (1986). > > > > Religious corporations (the normal form of organization for churches, for > example) most certainly have free exercise rights and rights under RFRA. > Yet they have limited liability; their organizers don’t give up their right > to free exercise by taking advantage of a limited liability form of > organization. > > > > It isn’t clear why corporations in general would not be permitted to hold > religious positions. Corporations certainly can give to religious > charities. If the directors choose (as in Hobby Lobby) to follow religious > beliefs by not selling pornography and by closing on Sundays, is that > illegal under Prof. Greenwood’s views? Is a corporation owned by Jews or > Muslims prohibited from challenging a Sunday-closing law, either on > statutory or (likely-losing) constitutional grounds? If corporations have > no religious freedom rights, how could they bring such a challenge? > > > > Of course someone must choose what values a corporation embraces, what > views it will express, and what actions it will take. Under current law the > someone is the board of directors or the set of managers chosen by the > directors (unless a close-corporation statute allows shareholders qua > shareholders to manage the corporation’s affairs). The directors of course > have to consider the views of shareholders, who have ultimate control by > way of voting their shares to determine who the directors will be. > > > > If shareholders don’t object, why would it violate corporation law for a > corporation to act on the religious beliefs of its managers or its > shareholders? The ultra vires doctrine is extraordinarily limited. The > managers violate no corporation law duties to employees or to the broader > society by doing so, and even if their actions would otherwise be improper > under corporate waste theories or some other corporate law theories with > respect to shareholders, the shareholders can authorize and ratify their > actions, and can simply choose not to object. > > > > There is nothing in corporation law that requires corporations to provide > particular benefits to employees. Government regulation may require > provision of benefits, but in this case one of the questions is whether > government regulation in fact has done so, because RFRA may limit the ACA > regulation. Corporation law says nothing about the applicability of RFRA, > Prof. Greenwood’s protestations to the contrary. > > > > Note also that a corporation’s shareholders may have reasons for choosing > particular directors, and its directors have reasons for choosing > particular managers, even if (or because of) their knowledge that there are > certain actions that the persons they choose will not, as a matter of > conscience, take. If those persons would be required to take such actions, > they would refuse to serve. To the extent that the law effectively would > prevent such persons from taking positions as directors or managers, > wouldn’t it burden their exercise of religious freedom? > > > > Let’s go along the spectrum of business organizations and see where Prof. > Greenwood thinks the enterprise or its managers cease to have rights under > the Constitution or RFRA. > > > > He admits that a sole proprietorship – which has no identity apart from > the individual proprietor – may take religious actions without violating > the laws governing business organizations, and that the proprietor has > constitutional and statutory RFRA rights, whatever those might be. > > > > What about general partnerships? The partners take part in management as > owners of partnership interests, though not, at least under the most common > partnership law, as owners of the partnership property. General partners do > not have limited liability, and again, their management role stems from > their ownership interest (in the absence of agreement otherwise). > > > > What about limited liability partnerships? The partners manage as owners > of the enterprise, but they have limited liability; do they forfeit > religious freedom rights. What about LLCs? Owners – members – manage the > LLC, but they have the protection of limited liability. What about close > corporations (which, under the laws of some states, may be managed directly > by shareholders)? > > > > Does a corporation’s status as for-profit or not-for-profit matter? If so, > why? > > > > Again, Prof. Greenwood’s position, especially his strident use of terms > like theft and fraud, is hard to fathom. > > > > Mark > > > > Mark S. Scarberry > > Professor of Law > > Pepperdine Univ. School of Law > > > > > > > > *From:* Scarberry, Mark > *Sent:* Wednesday, June 11, 2014 3:03 PM > > *To:* Law & Religion issues for Law Academics > *Subject:* Re: Simple Hobby Lobby question > > > > Prof. Greenwood overstates the protection corporation law gives to > officers and directors from civil liability, whether or not they are > shareholders. Apart from cases in which the law makes them directly > responsible for the corporation's obligations (e.g., responsible person > liability for unpaid withholding taxes), officers and directors generally > are, as I understand the matter, liable for their own tortious actions even > if performed as agents of the corporation. That is true for shareholders > who actively participate in the corporation's activities and who use the > corporate form in part for the benefit of limited liability. The principle > of limited liability protects shareholders and officers and directors from > liability for the acts of other agents of the corporation, but not for > their own. The major protection is from liability for torts committed by > other agents (e.g., the truck driver who negligently runs over a > pedestrian) and from liability on contracts (though often the other party > will insist on a personal guaranty of performance, as with many loan > agreements). For a simple discussion of this from a California point of > view, see > http://www.centurycitybar.com/newslettertemplate/April11/article3.htm. > > > > Of course, the issue here is moral responsibility, not legal > responsibility. But it's still important to see that the use of the > corporate form is not the get out of jail free card that it is being > portrayed as. > > > > Prof. Greenwood's use of terms like "theft" and "fraud" is not helpful in > moving our discussion forward, nor is his invocation of that boogeyman of > the law -- Lochner. And the business judgment rule has nothing to do with > obligations to third parties, as opposed to potential liability to the > corporation itself and to its shareholders > > > > Mark > > > > Mark S. Scarberry > > Pepperdine University School of Law > > _______________________________________________ > To post, send message to Religionlaw@lists.ucla.edu > To subscribe, unsubscribe, change options, or get password, see > http://lists.ucla.edu/cgi-bin/mailman/listinfo/religionlaw > > Please note that messages sent to this large list cannot be viewed as > private. Anyone can subscribe to the list and read messages that are > posted; people can read the Web archives; and list members can (rightly or > wrongly) forward the messages to others. >
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