Wednesday, October 22, 2014

Corporate Law Professors Comment on Proposed HHS Definition of "Eligible Organization" for Hobby Lobby Accommodation

In response to the Department of Health and Human Services' Proposed Regulation and Request for Comments regarding the definition of "eligible organization" (see earlier post here) at least two groups of law professors have weighed in on the issue.

The first comment letter, available here, was submitted by the U.C. Berkeley corporate law professors and encourages the Department to adopt a definition based upon the veil piercing theory.  "We ... propose that for purposes of defining an “[W]e ... suggest that shareholders of a corporation should have to certify that they and the corporation have a unity in identity and interests, and therefore the corporation should be viewed as the shareholders’ alter ego."  The comments argue that utilizing the veil-piercing theory avoids the consequences of a setting an arbitrary number of shareholders thus creating a rule that would be "seriously under-and-over-inclusive, capturing corporations that meet the numerical test but for which shareholders are not the alter egos of the corporation, as well as failing to capture corporations with a relatively large number of shareholders that are all united in their interests and are alter egos of one another."

The second comment letter on which I worked and was joined by some editors of this blog as signatories, is available here.  This comment letter, signed by 43 corporate law professors, was produced through the coordinating efforts of the The Public Rights / Private Conscience Project at Columbia Law School headed by  Katherine Franke, and the project's executive director,  Kara Loewentheil.   This letter too encourages the HHS to adopt an approach that requires an "identity of interests."  These comments suggest a blueprint for establishing an identity of interest, namely a focus on "entities (1) with a limited number of equity holders/owners, (2) that demonstrate religious commitment, and (3) submit evidence of unanimous consent of equity holders to seek an accommodation on an annual basis."  The comments provide additional criteria under each of these three elements to operationalize the holding in Hobby Lobby.

-Anne Tucker

https://lawprofessors.typepad.com/business_law/2014/10/corporate-law-professors-comment-on-proposed-hhs-definition-of-eligible-organization-for-hobby-lobby.html

Anne Tucker, Constitutional Law, Corporate Governance, Current Affairs | Permalink

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