The prognosticators have already declared that, during the Hobby Lobby v. Sebelius oral argument, the Supreme Court justiceslooked poised to extend religious liberty protections to for-profit corporations. Believe them if you want. But two important wrinkles in the oral argument that haven't excited comment might tell us a lot about both the court's potential holding and the tenor of the possible dissent.
The first and most interesting twist came in an aside by Chief Justice John Roberts. Solicitor General Donald Verrilli was arguing that if Hobby Lobby, a for-profit corporation controlled by a trust, could assert religious liberty rights under the Religious Freedom Restoration Act, then all sorts of for-profit corporations might begin claiming religious exemptions. Roberts responded that there was a solution: If the court restricted its Hobby Lobby decision to closely held Chapter S corporations, it would "avoid all the problems" of the parade of horribles advanced by Verrilli.
The suggestion that, at least for the moment, only closely held firms could claim they were exercising religious liberty has all the earmarks of classic Roberts jurisprudence: It would be cautious, restricting the decision to only the case before the court. It would minimize drastic headlines about the court repeating its errors in the Citizens United decision that gave corporations free-speech rights, because this rights extension would be narrower. And it would potentially open the door for significant extension by lower courts. By leaving the question of publicly traded corporations open, the court would not preclude the corporations' claiming the same rights exercised by closely held ones.
Apart from all these clever, lawyerly advantages, such a restrictive holding might also be legally plausible. My own view is that for-profit corporations should not be considered persons when it comes to fundamental liberties that we enjoy by virtue of our human autonomy. But as some of my religiously inclined students have strongly argued to me, there may be little difference between a sole proprietor acting in the sphere of his profession and an individual exercising his religious liberty in other spheres of life.
Classical Protestantism of the type associated with John Locke, the English father of modern American religious liberty, recognized a difference between actions that are inherently religious and those that are "indifferent" to salvation. I am confident that the founding fathers would have agreed with Locke and therefore with the distinction between doing business and doing religion. But times have changed. Many Catholics and Jews, not to mention some contemporary Protestants, may not recognize this distinction as meaningful, preferring every sphere of life to be treated as pervasively religious.
If my students are right, then the sole owner of a business -- or the employee -- perhaps ought to have religious liberty rights on the shop floor. But those rights certainly should not be extended to the shareholders of a publicly traded for-profit corporation. It may just have been possible to claim, as Justice Anthony Kennedy did in Citizens United, that people associate with each other in corporations to advance their speech interests. But people don't buy shares in for-profit firms to exercise their religion -- unless that religion is capitalism itself. If the Supreme Court is to create a religious liberty right for corporations, it would be logical to restrict it to closely held ones.
On the other side of the coin, Justice Sonia Sotomayor made a terrific point in oral argument that the parties had not raised -- and it deserves to be the centerpiece of a dissent if there is no majority for it. Sotomayor noted that both parties assumed that Hobby Lobby would be burdened by having to pay a penalty or fine if it chose not to extend contraceptive coverage to its employees.
As she observed, however, under the Supreme Court's holding in the case establishing the constitutionality of the individual mandate of the Affordable Care Act, the court characterized the mandate as a tax, not a penalty. (At this point in the oral argument, Roberts, the author of that controversial holding, drew laughs by interjecting, "She's right about that.")
Justice Elena Kagan then chimed in. If the result of noncoverage is a tax, rather than a penalty, she suggested, then Hobby Lobby faces a choice, not a "burden" as required by the religious freedom act. It can either choose to end health-care coverage for all its employees and pay the $2,000 per employee tax, or it can provide contraceptive coverage. This, Kagan said, amounted to the government saying, "You can do this thing or if this thing violates your religion you can do another thing."
Clement had no good answer to the Sotomayor-Kagan onslaught. Justice Antonin Scalia tried to help him out by saying that Hobby Lobby would have to pay its employees more if it did not offer health-care coverage. But as Kennedy immediately asked, "Why is that a problem?" If the $2,000 penalty approximated the cost of providing health-care coverage, Kennedy proposed, Hobby Lobby would not be substantially burdened. Pressed, Clement claimed that that Hobby Lobby as a matter of faith felt that it must provide health-care coverage to its employees. But this far-fetched argument was legally irrelevant insofar as you have no right to fulfill your religious duties without incurring private costs.
If Kennedy were to go with Sotomayor and Kagan on this point, the case would very likely come out 5-4 for the government. If he backs Roberts, the case is extremely likely to go for Hobby Lobby. Betting on which way Kennedy will turn in close cases is rarely a moneymaking proposition. But either way, the oral argument actually offered more light than heat. It's nice when the court does its job.
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(Noah Feldman, a law professor at Harvard University and the author of “Cool War: The Future of Global Competition,” is a Bloomberg View columnist. Follow him on Twitter at @NoahRFeldman.)
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