Tuesday, March 25, 2014

Last Minute Hobby Lobby Thoughts & Why Reverse Veil Piercing Isn’t the Answer

With oral arguments today in the Hobby Lobby case, I thought I’d pile on a few last thoughts:

(1) As I explained here, entities should be able to take on a racial, religious, or gender identity in discrimination claims.  I would add that I feel similarly about sexual orientation, but (though I think it should be) that is still not generally federally protected. To the extent the law otherwise provides a remedy, I’d extend it to the entity. 

(2) It is reasonable to inquire, why is discrimination different than religious practice?  For me, I just don’t think religious exercise by an entity is the same as extending discrimination protection to an entity.  There is something about the affirmative exercise of religion that I don’t think extends well to an entity.   That is, discrimination happens to a person or an entity. Religious practice is an affirmative act that is different.  Basically, reification of the entity to the point of religious practice crosses a line that I think is unnecessary and improper because discrimination protection should be sufficient.

As a follow up to that, I also think it's a reasonable question to ask: Why is religion different than speech? To me it is different because entities must speak, but entities don’t have to practice religion.  The entity needs speech to conduct business. A public entity speaks in its public filings.  Speech is not just something an entity could do. It is something it must do.  Religion, at the entity level is not necessary. 

(3) Reverse piercing is not as good a solution as it might appear.  Professor Bainbridge suggests that reverse veil piercing is one way in which the religion of the shareholders could be used to justify extending a religious identity to the Hobby Lobby entity, thus allowing the entity to object to certain provisions of the federal healthcare mandate.  His argument is, as usual, reasonable and plausible. Still, as explained above, I don't think this is necessary. 

More important, though, I don’t like expanding the use of any form of veil piercing. Veil piercing is supposed to be used (at least in my view) solely as a heightened level of fraud protection.  It is already used too often and too haphazardly, and further degradation of the line between the entity and others is a dangerous proposition, regardless of the purpose.  That is, as people (and courts) get more comfortable with disregarding the entity, they are more likely to disregard the entity.  As a general proposition, I think that’s a bad outcome. That alone is reason enough for me to hope the Court will pass on reverse veil piercing as a potential remedy. 

http://lawprofessors.typepad.com/business_law/2014/03/last-minute-hobby-lobby-thoughts-why-reverse-veil-piercing-isnt-the-answer.html

Business Associations, Agency, Joshua P. Fershee, LLCs, Religion, Unincorporated Entities | Permalink

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