Hobby Lobby: Obamacare Contraception Lawsuits Will Be Settled by Supreme Court

Last Friday, the Seventh Circuit Court of Appeals granted a preliminary injunction to K&L Contractors, an Illinois-based construction company, in Korte v. Sebelius. This is the first contraception rule lawsuit to receive a preliminary injunction from a Circuit Court of Appeals. It marks an official split between Circuit Court opinions on the law, a signal that the Supreme Court will ultimately decide its fate. 

Earlier in December, the Tenth Circuit Court of Appeals denied craft chain store Hobby Lobby’s motion for preliminary injunction. Supreme Court Justice Sonia Sotomayor refused to grant the company’s emergency application for injunctive relief pending appeal.  On Friday, the Sixth Circuit Court of Appeals denied Autocam Corporation’s motion for injunctive relief.

The Eighth Circuit Court of Appeals has also ordered a temporary halt on enforcement of the contraception rule in case involved a St. Louis based business, O’Brien v. Sebelius, but they issued their order without comments and in response to the DOJ’s motion to dismiss that was granted in the lower court.

A flurry of lawsuits (now up to 45) have been filed against the rule in the Affordable Care Act that requires employers of 50 or more full time employees to cover contraception, included emergency contraception, with no cost-sharing. While the DOJ announced that new rules would be released in the first three months of 2013 offering further exceptions to the rule for religiously affiliated organizations, they have made it clear in oral arguments that the government does not intend to allow for-profit business owners to deny their employee’s contraception coverage due to their personal religious objections. 

For these non-exempt businesses, the law went into effect on January 1, 2013. So far seven for-profit businesses have received injunctions against the rule in the district courts; five businesses have been denied (including Korte).

Interestingly, K&L Contractors previously covered contraception in their company’s health insurance plan. However, the Kortes, a Roman-Catholic couple that owns 88% of the company, would like to obtain a new plan for their 90 employees that would exclude such coverage.

In the 2-1 decision to grant the preliminary injunction, the Seventh Circuit found that the Kortes were likely to succeed on their claim that the contraception rule violates the Religious Freedom Restoration Act (RFRA). The majority (Circuit Judges Joel M. Flaum and Diane S. Sykes) found that the rule placed a substantial burden on the Kortes and that they “would have to violate their religious beliefs to operate their company in compliance with it.” The majority also found the government lacking a compelling interest to justify that burden.

Circuit Judge Ilana Diamon Rovner, a George H.W. Bush appointee, wrote a dissenting opinion in which she argued that the court should deny the preliminary injunction. The major disagreement between Rovner and her colleagues on the Seventh Circuit panel (as well as between the decision in Korte and the Tenth Circuit’s decision in Hobby Lobby) is whether paying for insurance that covers contraception is a direct obligation on the business owners, or if it is far enough removed to have no religious liberty implications for business owners. 

The government argues that the connection is too attenuated, with an employee’s independent decision to use contraception removing the causal link between the rule and business owner’s religious beliefs. While corporations do have to provide a health insurance plan that has no cost-sharing for contraception coverage, it is the insurance company who will directly pay the health care provider. And, attorneys for the DOJ have argued, there is nothing to stop business owners from advising their employees against using contraception.

Think about it this way: An employee could use her salary to purchase contraception.  Should a business owner have the right to disallow her from doing so because of his or her religious beliefs?

In a key passage of their decision, the majority cited the Supreme Court’s ruling in Citizen’s United as evidence that for-profit businesses have a right to make RFRA and First Amendment claims. In Citizen’s United, the Supreme Court held that corporations have full first amendment rights, at least in the context of campaign spending. The Department of Justice (DOJ) has argued that the secular nature of companies like K&L Contractors precludes them from making such claims. 

When Circuit Courts of Appeals split on constitutional questions, it is typically a sign that the Supreme Court will need to settle the matter. In her order denying Hobby Lobby’s emergency application for injunctive relief, Justice Sotomayor noted that this Supreme Court has not previously addressed religious First Amendment claims made by closely-held corporations and their majority shareholders. 

The legal theory presented in the opinion of Citizen’s United that corporations share some of the constitutional rights held by the people has been extremely controversial, with 80% of Americans opposing the Supreme Court’s decision. Will the court expand the artificial legal personality of corporations to include religious liberties, or will they take a step back from their bold stance in Citizen’s United? Either way, it is likely that the Supreme Court will have to settle the matter of contraception coverage for the lower courts.