Hobby Lobby, Corporate Law, and the Theory of the Firm: Why For-Profit Corporations are RFRA Persons

Harvard Law Review Forum, Vol. 127, p. 273, 2014

William & Mary Law School Research Paper No. 09-279

30 Pages Posted: 24 May 2014 Last revised: 9 Oct 2014

Alan J. Meese

William & Mary Law School

Nathan B. Oman

William & Mary Law School

Date Written: May 20, 2014

Abstract

In Sebelius v. Hobby Lobby Stores,Inc. the Obama Administration contends that for-profit corporations are not “persons” under the Religious Freedom Restoration Act (“RFRA”) and thus cannot avail themselves of RFRA’s protections. In a brief amicus curiae, 44 scholars of corporate and criminal law have elaborated on this contention. In particular, these scholars claim that fundamental features of corporate law prevent shareholder religion from “passing through” the corporate veil and thus dictating corporate policy. The scholars also claim that recognition of corporate religious exercise would encourage intra-corporate disputes about religious identity, thereby resulting in litigation and discouraging investment.

This essay argues that the scholars and the Administration are mistaken. We make three basic claims. First, corporate law does not discourage for-profit corporations from advancing religion. On the contrary, corporate law is enabling and largely contractual, as implied by the modern theory of the firm. Thus, several aspects of corporate law empower shareholders to induce firms to pursue religious objectives. This is particularly so in closely-held firms, which courts and scholars have dubbed “chartered partnerships,” “incorporated partnerships,” and “corporations de jure and partnerships de facto.” Second, such businesses are common in the real world, and their existence does not undermine the goals of corporate law. Indeed, the scholars’ brief does not identify a single instance in which a dispute over corporate religious identity led to corporate law adjudication. Nor would it undermine such goals to grant these firms religious exemptions from otherwise neutral laws in appropriate cases. Third, given the plausible reasons for protecting religious exercise by for-profit corporations, there is no reason to reject the most natural reading of RFRA’s text, illuminated by the Dictionary Act, namely that “person” includes private corporations of all kinds. This does not mean, of course, that every RFRA claim by a for-profit corporation should be successful. RFRA, however, does not assign the task of weeding out undesirable religious exemptions to the definition of “person.”

Keywords: Hobby Lobby, Religious Freedom Restoration Act, RFRA, Corporations, Corporate Law, Theory of the Firm, Closely Held Corporation, Patient Protection and Affordable Care Act, Contraception Mandate

JEL Classification: D21, D23, G30, K22, L21

Suggested Citation

Meese, Alan J. and Oman, Nathan B., Hobby Lobby, Corporate Law, and the Theory of the Firm: Why For-Profit Corporations are RFRA Persons (May 20, 2014). Harvard Law Review Forum, Vol. 127, p. 273, 2014; William & Mary Law School Research Paper No. 09-279. Available at SSRN: https://ssrn.com/abstract=2440874

Alan J. Meese (Contact Author)

William & Mary Law School ( email )

South Henry Street
P.O. Box 8795
Williamsburg, VA 23187-8795
United States
757-221-1609 (Phone)
757-221-3261 (Fax)

Nathan B. Oman

William & Mary Law School ( email )

South Henry Street
P.O. Box 8795
Williamsburg, VA 23187-8795
United States

HOME PAGE: http://nboman.people.wm.edu

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