Monday, December 31, 2012

Seventh Circuit Issues Preliminary Injunction in Contraception Mandate Case, and Signing Off

The Seventh Circuit issued a preliminary injunction in Korte v. Sebelius, a Religious Freedom Restoration Act challenge to the Affordable Care Act’s requirement that employers cover contraception and sterilization services.  The case was filed by K&L Contractors, as well as Cyril and Jane Korte, who collectively own 88% of K&L.  K&L employs about 90 employees, but 70 of them receive health insurance through a plan sponsored by their union.  Thus, the issue is whether K&L must provide contraception coverage to their non-union employees, despite the religious convictions of the Kortes. 

In a short 2-1 decision, the Court reasoned that the plaintiffs were likely to succeed on the merits, and that they faced irreparable harm.  The most interesting part of the opinion comes on page 4, where the Court explains its reasoning on the probable merits of the case.  Specifically, the Court rejects the government’s argument that K&L is a secular corporation that accordingly lacks interests that could be protected under RFRA by pivoting to the Kortes’ religious beliefs: 

[K&L] is a family-run business, and [the Kortes] manage the company in accordance with their religious beliefs. This includes the health plan that the company sponsors and funds for the benefit of its nonunion workforce. That the Kortes operate their business in the corporate form is not dispositive of their claim. See generally Citizens United v. Fed. Election Comm’n, 130 S. Ct. 876 (2010).  The contraception mandate applies to K&L Contractors as an employer of more than 50 employees, and the Kortes would have to violate their religious beliefs to operate their company in compliance with it.

This analysis raises an interesting question about the interplay among the rights of majority shareholders, managers, and corporations after Citizens United.  The Seventh Circuit seems to treat them as essentially overlapping, so that government regulation of corporations would be unlawful if it violates the rights of one, two, or all three of the above.

But it seems to me that Citizens United could also support the contrary result.  For example, if the funds of dissenting shareholders can be used for political speech without violating the First Amendment, then why can’t the Kortes’ funds be used for K&L’s contraception coverage without violating their RFRA rights?  The Seventh Circuit doesn’t answer this question, though it seems its answer would have to turn on whether or not the shareholders in question were in the majority—a result that seems both counterintuitive and at odds with the Supreme Court’s approach to dissenters’ rights in other context, including the union dues context.  And, as Matt Bodie has pointed out, employees and managers got no consideration at all in Citizens United, even though their work helps employers generate the funds that they go on to spend on political speech.  

Given these questions, I hope the Seventh Circuit explains its analysis in more detail as the case continues. In any event, this issue seems likely to reach the Supreme Court in the relatively near future, particularly given the divide among the Circuit Courts at the preliminary injunction stage.   

And with that, I’m signing off.  Thanks to Rick, Jeff, Marcia, Paul, and Charlie for inviting me to guest-blog this month – it’s been interesting and enjoyable.  And happy new year!

-- CG

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