Religion, Liberty

Burwell v. Hobby Lobby: Modest Progress Towards Justice

My view: Burwell v. Hobby Lobby brings US law closer to justice, legitimacy and liberty. I don’t agree with Jacob’s (seeming) argument to the contrary.

I. My Take in More Detail 

As regular readers of BHL know, I have repeatedly supported Hobby Lobby’s request for a religious exemption from aspects of the Obama Administration’s contraception mandate. I’ve argued both that the coercion involved in the contraception mandate cannot be justified to Hobby Lobby, and that Hobby Lobby in no way interferes with or coerces or limits the choices of its female employees, such that they are not using coercion that requires a justification. So on grounds of justice, legitimacy and liberty, there is no good justification for coercing Hobby Lobby in the way that Obama Administration supposes.

As a result, it is my view that Burwell v. Hobby Lobby protects liberty against the power of the federal government. Consequently, the ruling brings us closer to justice.

As for the legality of the ruling, I am not a legal expert, though I have researched religious accommodation law in the US for a few years now. My brief thought is that if you think the Religious Freedom Restoration Act is constitutional, as I think it is, then Hobby Lobby almost certainly has a good case. The contraception mandate places a substantial burden on their religious practice, and the government can secure its compelling interest in providing for women’s health in less restrictive ways. I know there are a number of complications here, but I’ll leave the issues to the Volokh Conspiracy, whose posts have been excellent. I agreed with Megan McArdle’s take on why the case should never have reached the Supreme Court, but should have been stopped ahead of time. I also really like Andrew Koppleman’s take on how the ruling balances religious liberty and reproductive liberty. Koppleman is no libertarian, and is a leading expert in US constitutional law, so it’s worth reading him to get another perspective. His major point is that it should be relatively easy for the administration to extend the same exemption offered to religious non-profits to Hobby Lobby, Conestoga Wood, etc., such that insurance companies will pay for the contraception women need directly, so they’ll get coverage from their insurance companies, but not by way of Hobby Lobby.

Koppleman doesn’t address this, but you might argue that Hobby Lobby, etc. will object to signing the relevant wavers, just as Little Sisters of the Poor have done. The decision speaks to this issue, albeit in a footnote. But note that the Supreme Court has already specified a way that the feds can get notification without authorization on the third party employers’ part when they issued the emergency injunction against the federal government with respect to the Little Sisters. So really, there just isn’t a restriction of women’s choices in this case. It’s not only false to claim otherwise, but unreasonable.

II. Jacob’s Worry 

However, my co-blogger Jacob Levy has a concern. His claim is that while corporations can have rights, it is problematic to hold that the Green family, who own Hobby Lobby as a closely-held corporation, can use Hobby Lobby as a proxy for their personal beliefs. Jacob writes:

But the entity that is Hobby Lobby, a for-profit corporation like IBM, can’t be described as itself having a religious belief. Making sense of that idea requires making the corporate person disappear from the description and talking about the Green family, treating the “closely held” corporation as if it were a partnership or sole proprietorship that doesn’t have a corporate-style separateness from the natural persons. Try as I might, I can’t persuade myself that that’s right. Corporations are persons, or corporations are made out of people– the two thoughts lead to very different conclusions, and I think protecting the former requires rejecting this kind of easy recourse to the latter.

So the reason that Hobby Lobby should not get an exemption is because Hobby Lobby, the corporation, has no religious beliefs. The only way to show that it has religious beliefs is to assume, problematically, that it is a mere proxy for the Greens, not the sort of distant proxy that corporate law says that it is. If Hobby Lobby were a partnership or sole proprietorship, then the legal fiction in question would be close enough to the Greens’ real-world agency to count as their legal proxy and so as having religious beliefs (the Greens’ beliefs). But an organization characterized as a closely held corporation is different by legal definition. At least that’s how I understand Jacob’s argument.

(Here is the IRS’s definition of a closely held corporation.)

Jacob also appears to have a supplemental argument, which is that if we adopt the reasoning he rejects that we will also have to worry about whether we can accept that corporations have legal rights. So to protect corporate liberties, we have to reject the “corporations are made of people” argument. Otherwise, we are committed to saying that corporations can only have rights when individuals that comprise or own them have those rights. And here I think Jacob’s general, scholarly concern with dissolving intermediate organizations’ liberties and cohesiveness is at work (see it in Jacob’s rejection of my worries about Vanderbilt’s religious speech codes).

So here’s the libertarian argument against the ruling: we have an interest, as libertarians, in supporting legal regimes that buttress the authority of intermediary institutions between the individual and the state. But the reasoning behind Hobby Lobby seems to be rooted in an understanding of the corporate enterprise that reduces it to individuals, undermining the ability of corporations to stand as full civil-social bulwarks against state power.

Hopefully I have characterized Jacob’s view correctly. Otherwise, I welcome correction.

III. How Burwell v. Hobby Lobby Protects Religious Intermediary Institutions 

I don’t agree with Jacob, and I think with good reason. Here are a number of thoughts:

(1) Suppose we argue, as I have, that what morally matters in this case is that the religious liberty of the Greens will be restricted by the contraception mandate. They will be compelled, in operating their business, to violate their religious beliefs. I can’t see how Jacob’s argument rebuts this concern. If the contraception mandate applied to the Greens, their religious liberty would be burdened because they could not operate their property in accord with their deepest convictions.

The best reply I can think of on Jacob’s behalf is that what makes it the case that Hobby Lobby is their property is determined by the legal category in which they operate, and since that category is a closely held corporation, which cannot have religious beliefs, then forcing Hobby Lobby to comply with the contraception mandate won’t force them to use their property to violate their religious liberty.

But this can’t be right. The contingent legal categorization of property I own does not seem to have an effect on whether the law’s attempt to get me to dispose of that property is incompatible with my convictions. There are norms other than present U.S. law to determine what isn’t and is my property. As long as we have an agent (like the Green family) who legitimately owns a set of property (Hobby Lobby stores, products, etc.), then that agency can be burdened and contorted, legal category or no. The reason we should restrict religious exemptions to closely held corporations is just because there is a coherent notion of an agent that can be burdened, which is not so clear in the case of publicly-held corporations, whose ownership structure is vastly more complicated, such that the conditions of corporate agency are harder to meet.

(2) I am not as worried as Jacob is about SCOTUS-reasoning-creep. It is hard for me to imagine a way in which the reasoning in this case could be used to, say, undermine corporate rights in other contexts. Just because there is some tension (and I’m not sure there is) between Hobby Lobby reasoning and Citizens United reasoning doesn’t mean it will be resolved, or if it is resolved that it will be resolved in a way that limits the integrity of intermediary institutions. Could Jacob be imagining cases where corporate liberties are denied on the grounds that their owners do not endorse or wish to exercise those liberties? I’m not sure how the worry goes from here.

(3) Third, protecting religious liberty in this case seems to be just the sort of protection of intermediary institutions that Jacob should support. The Obama Administration attempted a striking power grab. Congress authorized the administration to make up ways of enforcing the law, and by a simple sway of a few key advisers (Sebelius and Jarrett vs. Biden and Axelrod), potentially millions of people are subject to powerful, possibly livelihood-destroying coercion. Just about any rebuff of this wild and awesome power seems like a victory in favor of classical liberal civil society. Liberty was preserved against just the sort of administrative-law power-grab that Hayek fans like Jacob should condemn and an intermediary institution’s integrity was preserved. There is no immediate prospect of this ruling leading to the dissolution or weakening of other intermediary institutions.

(4) Finally, and more broadly, the pattern of legal rulings like Hobby Lobby, if followed by additional protections for religious non-profits, will help to sustain a legal regime of broad religious liberty for many across the country. This will go a long way to helping to preserve the public presence of organizations of religious people, which serve as a bulwark against state power in many cases. Religious people won’t be forced to check their religious beliefs at the door when they enter public life, and, in this case, commercial life. This pattern of liberty helps to protect people of faith from attempts by progressives to force them to dirty their hands by supporting or at least not opposing the cultural norms that sustain what many people of faith regard as sinful, even wicked, such as the permission of abortion. A genuinely liberal order does not require this sharp form of privatizing religion. Privatization often cripples intermediary institutions from playing their crucial buttressing role by forcing religious commitments into the shadows. Even atheist libertarians deeply hostile to Christianity can support a public presence of religion in public life for this reason, so long as religious people are prepared to afford a similar liberty to others. And given recent losses in the culture war, my hope is that Christians in particular will increasingly take up this defensive strategy.

  • StephenMeansMe

    I agree with a lot of this. Although the biggest thing that bugged me about the case was the plaintiffs’ assertion that certain contraceptives cause abortions. As long as we’re using the common meaning of “abortion” here, they don’t. In fact none of the covered drugs do, as mandated by law. So the entire case should have been a nonstarter if those were the grounds it stood on.

    (That said, the double standard with respect to for-profit companies and not-for-profit religious organizations did seem dumb, and I’m not even religious!)

    • Theresa Klein

      I think that’s completely irrelevant. If a person genuinely believes that a fertilized egg is a life, then using pills that prevent implantation is just as much an “abortion” as using a pill that causes a miscarriage. I would rather not have the government in the position of deciding whether someone’s religious views about when life begins are correct or not.

      • StephenMeansMe

        But there’s no evidence that those drugs prevent implantation. They work by delaying ovulation so sperm never meets egg. There’s only one FDA-approved abortifacient and it’s not covered by ANY part of Obamacare.

        Why HHS never called Hobby Lobby et al out on this, I dunno. Like, it’s not about whether “a fertilized egg is a life” is reasonable or not—it’s about whether the drugs they oppose ACTUALLY do what they object to. (And when they invest in companies that make all sorts of contraceptive and, yes, abortifacient drugs… that seems odd.)

        • Theresa Klein

          It’s not actually clear how those drugs work. The mechanism of action is not well understood. Plan B’s early advertizing also specifically stated that it prevented implantation. They now no longer say that, because they don’t really know how it works.

          Also, IUDs do prevent implantation, which is one of the forms of contraception in question.

          • StephenMeansMe

            “They don’t really know how it works.” So it might NOT prevent implantation, it might work exactly how I read it on the FDA’s website, and in other words it’s a completely baseless claim.

            Lots of things COULD prevent implantation or cause spontaneous abortion. I’m sure NaturalNews thinks GMOs do, for example. So the standard of evidence should be a bit higher before they come frothing at the mouth to SCOTUS.

      • Incredulus

        So, I could claim that my religious view is that all antibiotic use is unnecessary because bacteria doesn’t really hurt you, and bacteria are sacred, so I’m against paying for health insurance which covers penicillin- doesn’t matter if it’s true.

        So, just claim that something burdens your religion, and the Court is fine with you relying on blatantly false statements and doesn’t care if you rely on illogical leaps (an employee using an insurance card I gave them to purchase birth control affects my religious beliefs but an employee using the paycheck I gave them to purchase birth control does not) or attenuated connections (even if I never know whether an employee ever uses their health insurance to use this particular contraceptive, my religious beliefs are still burdened).

        It’s a bad decision, and the problem with this essay is that it begins with the faulty premise that Hobby Lobby’s owners religion was burdened in the first place.

        It was a political decision against the ACA, and wasn’t about religious freedom anyway. Corporations may have rights which are granted to persons, but they are not persons in terms of having religious beliefs. Hobby Lobby is a separate entity from the Green family- and they weren’t being persecuted by the ACA- hell, they didn’t even know their insurance plan covered Plan B or Ella until they decided to file this suit.

        I think facts do matter, and whatever you think of the ACA, SCOTUS pulled a fast one here- don’t overlook that it’s unlikely the 5 Roman Catholics would have judged differently if this case were about another religion… the very reason the RFRA exists is because of Education v. Smith- where SCOTUS denied the religious rights of Native Americans to use peyote- which affected no one but the imbibers themselves. This case affects other people’s access to healthcare- and now taxpayers will foot the bill for the billionaire Green family because they “believe” something which isn’t based on reality.

        • Theresa Klein

          So, I could claim that my religious view is that all antibiotic use is unnecessary because bacteria doesn’t really hurt you, and bacteria are sacred, so I’m against paying for health insurance which covers penicillin- doesn’t matter if it’s true.

          Actually, yes. No business should be compelled to purchase health insurance that covers something their don’t want it to cover.

          No business should be compelled to purchase health insurance, period, full stop.

          This whole issue would go away if we just stopped forcing people to do things against their will. Get rid of the employer mandate. Problem solved.

          I know, crazy talk.

          • Incredulus

            If businesses weren’t forced to do certain things like ensure their workers’ safety or limit pollution or pay fair wages or make safe products, then you’d find the country would be an intolerable place to live. So, not crazy, just utopic and oversimplified.

            Employers have been offering health insurance because they get a tax benefit. And since before the mandate, Hobby Lobby offered insurance to their employees. They don’t have to continue to do this- they could spend less by paying the tax- which would ensure that their employees could afford to buy their own insurance.

            But to be clear, employers don’t purchase medical care for employees; they purchase medical insurance, offered as one component of a total salary package. The majority in the case granted HL its religious exemption- but granted that the government has a compelling interest to have employers provide contraception coverage.

            The dissenting opinion is that HL is not a person and has no more right to tell its employees how to use their health insurance benefits than it does to tell them how to spend the money they earn, or where they should go on their vacation. Health insurance does not belong to the employer. It belongs to the employee.

            A more effective system is to get rid of employer-based insurance and replace it with Medicare for all- a single payer system is cheaper, and believe it or not, Medicare has been proven to run smoother and provide better care than the free market system. You’re still paying for insurance- but a lot of the b.s. is removed.

          • Les Kyle Nearhood

            Well you lost all credibility with your statement about medicare. I also do not agree that we would descend into a Hobbesian abyss if the government stopped burdening companies with regulations. You obviously are not well versed in the numerous libertarian ideas for dealing with those issues.

          • Incredulus

            “You obviously are not well versed in the numerous libertarian ideas for dealing with those issues.”

            Because I’m not a libertarian – which is hard to define- though I don’t hold it against you. 😉

            I don’t think big business is victim to state intervention. All libertarian positions, it seems to me, have the same fundamental problem in common: they do not take human nature seriously. Ask the people in West Virginia how they like their coal ash and then look up who’s cleaning it up and who’s not.

            You can look up how successful Medicare has been.

          • Theresa Klein

            Employers have been offering health insurance because they get a tax benefit. And since before the mandate, Hobby Lobby offered insurance to their employees. They don’t have to continue to do this- they could spend less by paying the tax- which would ensure that their employees could afford to buy their own insurance.

            The employer mandate is not enforced by a tax. It is written as a civil fine. it is supposed to be coercive, unlike the individual mandate which was allowed as a “tax” under the presumption that the tax was not sufficient to coerce compliance.

            If businesses weren’t forced to do certain things like ensure their workers’ safety or limit pollution or pay fair wages or make safe products, then you’d find the country would be an intolerable place to live.

            Worker safety, product safety and pollution are covered by liability, which is conditional upon doing harm to someone.
            Not paying someone in health insurance doesn’t harm them.

            Nobody is saying you can’t coerce someone to pay damages for harms done. What I object to is coercing someone , or some group such as a business, just for existing, just because you feel like that’s a convenient way to accomplish your social agenda.

        • Farstrider

          “It was a political decision against the ACA, and wasn’t about religious freedom anyway.”

          True, but don’t forget the slut shaming. (Theresa Klein aneurysm in 3…2…1….)

  • My gut sides with Vallier and against Levy, but Levy has the more persuasive argument.

    • Sean II

      Really. You’re not troubled or puzzled or just insulted by this:

      “But the entity that is Hobby Lobby, a for-profit corporation like IBM, can’t be described as itself having a religious belief.”

      Why does for-profit status matter? Why does being for-profit mean not having beliefs? Why are the words “for-profit” even relevant in this discussion.

      I’m not being cute, of course. I know why Levy needed to throw those words in. If he didn’t, his argument would obviously apply to every church or religious organization as well.

      So he attempts a bit of magic, using “for profit” as a little red herring.

      Unless…he want to argue that the profit motive is inherently dirty, and thus inconsistent with any kind of principled stand, and thus a fair pretext for abrogating otherwise protected rights.

      • What I meant is that Vallier is on the right side of the issue, but his argument wasn’t as effective as Levy’s. Part of the reason I commented was to read your comments since I knew they’d be more to my liking. 😉

        • Sean II

          Well, since you ask…I think Levy’s argument was weak, not just because I dislike the result, but because he left a hole gaping right in the middle of it. As he has it, the rules are:

          Legal Fiction + Non-Profit = Keep Rights

          Legal Fiction + Profit = Forfeit Rights

          He never explains why. And it’s such a strange position for a libertarian to take. It’s just begging to be explained.

          I can’t call an argument good if it leaves that kind of gap open.

    • adrianratnapala

      Perhaps I didn’t read Levy carefully enough, but I think Vallier’s argument is clearer. KV: The gov’t is making people decide to use their property in a certain way or not hold that kind of property at all. JL: The gov’t is only forcing the property to do stuff, this has nothing to do with the owners.

      Imagine a law that demanded every poodle in the country must participate in a bear-baiting once a month.

  • M Lister

    This is a careful and useful analysis that I’d have to think more about to have a fully worked out view. But, here’s one part where I have a worry. There’s nothing natural about the corporate form as a way to hold property. It’s a relatively recent development in human history. In general, it’s a pretty good thing- it makes a lot of economic activity plausible that wouldn’t be otherwise. But, it doesn’t at all seem unreasonable to say that, if people want to use a corporate form to hold property, they must meet certain requirements, including various sorts of separations of personal and corporate property. (Failure to do this can lead the the “piercing” of the corporate veil, something that probably should happen more often in the case of closely held corporations.)

    Given this, it doesn’t seem obvious to me that the government can’t say, if you want to only use your property in ways that won’t conflict with your religious beliefs, you may do so, but then you may not use the corporate form- the property has to be held as a partnership or sole proprietorship, or in some other form like that. In that way, the Greens could still do what they want with their property, they just wouldn’t get the benefit of the legal separation between corporate and personal property.

    I’m not at all sure that the government _should_ do this. I’d have to think about it, and I mostly think the answer should turn on what would produce the best consequences in a fairly straight-forward consequentialist way, since I don’t think there’s any particular right to hold property via a corporate form. In some ways, this is similar to Jacob’s critique, I think, but shows where I worry about the analysis as given.

    • This is exactly what I have argued here:

      Corporations are a legal fiction that can only exist thanks to government-funded enforcement and intervention in the market. If you want to accept the government’s gift of a magical exemption from the personal responsibility you would normally/naturally have for your business’s stuff and dealings with people, it’s reasonable for the government to set special requirements for how you run that corporation.

      • M Lister

        One exception I’d take to this way of putting it is that I don’t think that the government ought to be able to attach so-called “unconstitutional conditions” to benefits, even when it has no obligation to offer those benefits.* So, to take a clear example, it shouldn’t (and probably couldn’t) say that the corporate form is only available to people who will have only white males on their board of directors, or who will promise to vote for the Democrats. One part of where I expect I disagree with Kevin is whether the “mandate” is an unconstitutional condition or not. I don’t think it is, though this case wasn’t, itself, decided on that issue, but on the broader Religious Freedom Restoration Act.

        (It’s worth noting that, if the mandate isn’t an unconstitutional condition, then it would be open to congress to pass the “mandate” as a normal statute, and it would then trump the RFRA under the normal “last in time” rule for statutes. Why that didn’t happen here is that the “mandate” is an administrative regulation and not a statute, and regulations don’t trump statutes, even if they come later in time.)

        (*) It’s worth noting that not everyone agrees with this. Justice Rehnquist, for example, was famous for saying that people accepting a benefit from the government (as the corporate form clearly is) must be willing to accept “the bitter with the sweet”, and that therefore the government could put almost any condition on it wanted. Of course, he found certain sorts of conditions, burdening certain sorts of people, more acceptable than others.


        Corporations are legal fictions, but this does not imply that they would vanish in the absence of the government or authorizing statutes. If the state ceased to exist tomorrow, those wishing to do business as a “corporation” would simply announce that they will only do business with those who recognize that their entity enjoys limited liability and the other advantages of the corporate form. Problem solved. Since people are now more than willing to do business with corporations, why wouldn’t they be willing to do so if the state vanished?

        • Joshua Holmes

          This doesn’t work. The corporate form limits liability not just in contract but in tort.

          • MARK_D_FRIEDMAN

            Correct, but beside the point. The law of torts simply recognizes the correct moral result. Under what ethical principle should a passive investor in a corporation be liable for a tort? The investor (as such) has, by definition, no role in the day-to-day management of the enterprise, and thus no moral responsibility for negligent conduct by employees, officers, etc. So, the state is not doing corporations any special favor by this rule, and thus has no right by virtue of this law to mandate contraceptive coverage, etc.

          • murali284

            Pretty much for the same reason that the financial backers of Al- Qaeda are to some significant extent responsible for the lives its members take.
            Same reason why we think people who contribute stock to a corporation are morally entitled to the fraction of profits which their contribution is responsible for.

          • MARK_D_FRIEDMAN

            Why you suppose that a typical “corporation” in a libertarian polity would resemble Al-Queda is beyond me. Corporations are not by nature terrorist organizations, and we are talking about TORTS here, not terrorism. So, you have badly misfired.

          • murali284

            You are missing my point. We ordinarily think that people who deliberately contribute capital to an organisation are at least somewhat responsible for the things done with that capital. We don’t just attribute responsibility to financial backers when the organisation happens to be a terrorist one.
            In the understanding that tort law is aimed at achieving the correct moral result, there seems to be no moral reason to indemnify contributors of capital from the risks of contributing capital to particular ventures.
            Limited liability is corporate welfare. It may be the case that in a libertarian society some people might sign away their right to hold the members of a given organisation fully liable, but not everyone such an organisation interacts with need sign away their rights, especially third parties.
            Suppose I’m a farmer in a libertarian society and an organisation buys land upstream and pollutes the land or water in such a way that it affects my land too, thus blighting my crops. Unless I waive away my right to full compensation, I see no reason why I can’t sue the owners and their descendants for however much money would be required to compensate me for the damages they inflicted.
            Limited liability socialises losses and privatises gains

          • MARK_D_FRIEDMAN

            I don’t think so. When I invest $1000 in Apple corp. I am not in a position to supervise or control their latest gadget, which might conceivaby harm consumers. It would therefore be manifestly unjust to make me personally liable, for my entire net worth, as a consequence of buying this stock. If it were otherwise, no one would invest. Therefore, the law on personal liability is exactly as it should be. The state does not gain the moral authority to coerce by virtue of this rule–that is the point. You have a problem with the limited liability in general, which irrelevant to this debate.

          • murali284

            I don’t think no one would invest. I do think that fewer people will. But that is true of any activity. If the state stops subsidising a given activity, there is likely to be less of it. Nevertheless, state subsidy of said activity distorts it and in the absence of un-internalised positive externalities, state subsidies will tend to create an over-supply of said activity. I don’t see why that isn’t true of investment as well.

          • MARK_D_FRIEDMAN

            With respect, I think you need to go back and re-read this thread. The issue is whether limited liability, including the existing law with respect to tort actions, somehow justifies state coercion of corporations. Corporations now enjoy limited liability, and shareholders now are not liable for corporate torts. This would also be true in libertopia, so nothing in your last comment is relevant to this discussion, as far as I can tell.

          • murali284

            Two points:
            1. Admittedly I was only making a narrow point about whether corporations would enjoy limited liability in libertopia. I was not addressing whether limited liability justifies state coercion. I don’t think it does. I also don’t think that whether limited liability justifies state coercion of corporations hinges on whether limited liability would be found in anywhere close to its current state in libertopia. Perhaps some people will be willing to waive their rights to full redress, but not everyone who is going to bring a suit against a corporation is going to be a person who explicitly made a contract with the corporation. While, strictly speaking there may be some limitation of liability in libertopia, that would not be anywhere near the same extent as LLCs enjoy now.
            2. My point was a narrow one to say that limited liability would not be found in libertopia because it is 1) inefficient, 2) a prima facie violation of my property rights if imposed on me without my consent and 3) has dubious contribution to the wellbeing of the worst off.

          • MARK_D_FRIEDMAN

            Okay, you are certainly entitled to your own predictions about what corporate life would be like in libertopia, but mine are different. In this world corporations have limited liability and Wal-Mart has no shortage of customers. I can’t see why things would be much different in the absence of a state.

          • murali284

            Because if people are explicitly required to waive their right to hold the owners fully liable, there would be at least some reluctance to do so. Companies would therefore have to sweeten the deal in terms of offering a discount. Since this cuts into the profit margins, fewer companies are going to be able to operate with limited liability. In fact, if the standard regulatory barriers to entry are absent, margins are going to be a lot slimmer and the ability of companies to further cut into margins in order to operate even partially on a limited liability basis is going to be reduced. I expect that fewer companies will be able to limit their liability even just with respect to its customers and almost no company will be able to limit its liability with respect to all third parties.

          • MARK_D_FRIEDMAN

            There are compelling business reasons why corporations and other limited liability entities (LLCs, limited partnerships) dominate the commercial landscape. These same business reasons would exist in libertopia. Believe what you want, but be warned that life can get a little lonely on fantasy island.

          • murali284

            Then, help me out here and spell out for me exactly where my reasoning goes wrong.

          • MARK_D_FRIEDMAN

            It should be obvious. Two corporations wish to raise money and hire professional managers. One says to investors, we will sell you stock, and says to managers, we will pay you well, BUT if something goes wrong your entire net worth will potentially be lost (no protection by the business judgment rule for managers/directors). The other corporation says, the only thing you have at risk is your investment. Which entity will have the lower cost of capital, and be able to hire the better managers?

          • murali284

            But, if everything else is equal, the corporation which does not limit the liability can offer larger returns.
            A given corporation can realistically protect the investment only if one of three conditions hold.
            1. It has funds independent of its investors and profits (which sounds like nonsense to me)
            2. It purchases insurance to cover any remaining liability in the event of liability exceeding investment.
            3. It pays off all customers and potential third parties in order to prevent them from pressing their claims fully.
            It seems that for some non-trivial fraction of corporations, the risk of liability exceeding investment is so low that investors are going to prefer the greater returns from foregoing 2 and 3

          • Farstrider

            “The investor (as such) has, by definition, no role in the day-to-day management of the enterprise, and thus no moral responsibility for negligent conduct by employees, officers, etc. So, the state is not doing corporations any special favor by this rule, and thus has no right by virtue of it to mandate contraceptive coverage, etc.”

            Incorrect. Even shareholders who manage the company day-to-day are not liable for the corporation’s torts.

          • MARK_D_FRIEDMAN

            This in no way contradicts my point, and is completely irrelevant to the topic at hand.

          • Farstrider

            Sorry, I thought you said that limited shareholder liability is a “correct moral result” because shareholders are “passive investors” and have “no role in the day-to-day management of the enterprise, and thus no moral responsibility for negligent conduct by employees, officers, etc.” Because obviously, that is wrong. Limited shareholder liability is a legal, not moral, creation, and it applies whether the shareholder is a manager of the company or not. Sorry, I misunderstood.

          • good_in_theory

            Regardless of whether or not it’s wrong, it is 100% question begging.

        • M Lister

          The world _could be_ or _could have been_ this way, I suppose, but our actual world isn’t, and it’s very unlikely that courts would enforce such contracts. Without that, such claims would be worthless. That’s why it took deliberate government action to create corporations in the first place. It’s better to not pretend that they are anything other than government inventions, unless you really do favor a mafia sort of world of private “contract enforcement”.

          • MARK_D_FRIEDMAN

            The question at hand is whether by virtue of corporate statutes the state gains the moral authority to coerce corporations to do various things. Therefore, that corporations could arise by the means I describe is all I need show. You fail to give any reason why courts would not, under ordinary principle of justice, enforce the sort of contract I describe, as indeed they do today in a variety of other contexts. As for “mafia contract enforcement,” you mean as done by the AAA or other private arbitration agencies? You last sentence really just begs the question against those who favor private justice.

          • M Lister

            I don’t think you’ve shown that “corporations” could arise by the means you suggest at all. Rather, you suggest that a much more limited type of limited liability could, in theory, develop via contract. That’s conceivable, but not plausible, I think. (It would lack lots of the aspects of corporations as well- the tax structure is one of the main reasons for having the corporate form, but you couldn’t get that via contracts, as you suggest.) So, you’ve not done nearly enough here. (Of course, you can’t do it in a blog comment, but even if you had a worked-out view of how this would work, it wouldn’t give you what you need, I think.)

            As for arbitration, two points are necessary:
            1) Many arbitration clauses are already extremely close to the archetype of an “offer you can’t refuse”, and should, in any reasonable system, but unenforceable. Worse than contracts of adhesion generally, they are also often unconsionable.

            2) When arbitration is reasonable and does work, it does so only because it’s backed up by government enforcement. Without that, it’s worthless. This is why the New York Convention is so important, among other things. Arbitration represents a sort of out-sourcing of enforcement of contracts, but still depends on governments for enforcement. It’s misleading, at least, to call it “private justice”, even when it works well.

          • MARK_D_FRIEDMAN

            We are on a libertarian website, so I hope you will forgive me for starting from libertarian premises, i.e. the coercion of the innocent is an evil in need of powerful justification. You seem to suggest that this is provided by the mere fact that corporations are creatures of law. I don’t see how. If they are creatures of law, can the state mandate that they not serve blacks?
            Similarly, by virtue of providing the enforcement of the criminal and civil law, can the state require judges to discriminate against blacks? I don’t understand what point you think you are making here about the supposed inferiority of justice without the state.
            You are entitled to your opinion about what “corporations” would look like without the state, but it is only that. As I said at the very start of this thread, those wishing to do business in libertopia as a “corporation” would simply announce the terms under which they would do business, and others could take it or leave it. You have yet to identify anything unjust about such a proposition.

          • Farstrider

            “When arbitration is reasonable and does work, it does so only because it’s backed up by government enforcement.”

            In fact this is true of all contracts. No government means no (enforceable) contracts.

        • Farstrider

          “If the state ceased to exist tomorrow, those wishing to do business as a “corporation” would simply announce that they will only do business with those who recognize that their entity enjoys limited liability and the other advantages of the corporate form.”

          This may work for contracts. It would not work for torts.

          • MARK_D_FRIEDMAN

            Gosh, could you at least read my several previous comments on this.

          • Farstrider

            Yeah, I commented before finishing the entire string. Joshua Holmes and others made the point too. Sorry to retread the old ground.

      • Les Kyle Nearhood

        I agree that government may set the rules regarding corporations but you miss the entire point of this ruling. Government DID set the rule, the rule was a law which granted wide immunity from actions which went against religious conscious, it was an agency of the government which tried to go around this rule.

    • Farstrider

      “I’m not at all sure that the government _should_ do this. ”
      As I’ve been arguing, until Monday morning, the government *had always* done this.

  • Theresa Klein

    I wonder what some of the supporters of the mandate would say if there was a law that required Whole Foods to sell vegetables grown with conventional pesticides.

    • Les Kyle Nearhood

      Like my Ben and Jerrys example in the previous discussion. The government ought not be in the business of dictating people’s opinions, or how they must act on any subject. And particularly if it is an unpopular view. It is precisely the unpopular view that need the most protection.

    • M Lister

      I’d think that would be a pretty dumb law, but obviously not unconstitutional and not in conflict with any other laws. (Note that the only reason why the RFRA trumps the “mandate” here is that the “mandate” is a regulatory move and not a statute.) (It’s also far from obvious what the public good argument for the pro-pesticide law would be, while laws making access to birth control easier have obvious public-good rationales, but if there were a pro-public good rationale for banning the sale of organic produce, I’d be willing to listen to it. It still wouldn’t really be equivalent, but it would be worth listening to. Note that this is irrelevant for the legal argument, though.)

      • Theresa Klein

        It’s also far from obvious what the public good argument for the pro-pesticide law would be, while laws making access to birth control easier have obvious public-good rationales

        Depends on your perspective.
        Pesticides increase crop yields. Cheaper food, less acreage used.

        Birth control reduces the birth rate, which screws up up your demographic mix for supporting older retirees. See the concern in Japan and Europe over falling birth rates.
        From a religious perspective, most religions have always promoted healthy fertility rates too. It’s not hard to imagine a Christian government deciding that high birth rates are a public good.

        But IMO, you cannot justify forcing people to do things they find morally wrong by saying that it’s a public good. You know what I consider a public good? A general right to be free to act according to your moral beliefs. That’s my kind of public good.

      • adrianratnapala

        A statutory mandate could trump the RFRA, though it would need to be explicit about it. That would have made it even harder for Obamacare to have passed. Also I think serious anti-pesticide folks should also have rights under tha RFRA, not because their belief is religion, but it is close enough to count, and Congress is not allowed to be picky.

        The public interest argument (actually they need to demonstrate a “government interest”) might be that conventional farming uses less land and other resources. I personally think Congress shouldn’t be making that kind of determination, it does so all the time. Certainly the Courts should (and probably would) defer to the legislature on that.

  • Les Kyle Nearhood

    I have no problem with accepting that a corporation may have rights. Unlike most libertarians I never bought into the doctrine that there is no such thing as rights held by individuals collectively. It seems intuitive to me that the residents of a city have a right as individuals not (for instance) not be polluted, and collectively as a city to not be polluted by an outside agency. Therefore individuals do not have to (although they may) pursue legal action as individuals, they can rely on their city government to do it.

    • adrianratnapala

      I don’t disagree that there are rights for collective organisations, but when does the US Constitution protect them? Arguably it does so for free speech “shall make no law” is pretty strong language. For religious freedom the case is trickier. A Church pretty clearly has religious freedom in its own right, but that is not at all clear for other organisations.

  • Alex

    It is a bit unclear to me that the stockholders of Hobby Lobby are owners of the company or its assets – though they do own stock in the company. Are the Greens really owners of the company – is its property their property?

    • M Lister

      What makes Hobby Lobby a “closely held corporation” is that a small group of people (here, the family- that’s often the case, but not necessarily so) owns _all_ of the stock, and so all of the assets (excluding, probably, some security interests that banks or others who have loaned them money might have.) Also, they make up all of the members of the board of directors, or at least a large controlling share of them. The property of the company is not their _personal_ property, and using it as such should lead to the possibility of “veil piercing”- i.e., making their personal property available for creditors or tortfeasors to go after- but there’s often a mere fiction in these cases, and this case makes the fiction more transparent (as Jacob nicely showed, I think.)

    • adrianratnapala

      Of course they don’t really own their company. As half the characters will Atlas Shrugged will tell you!

    • Farstrider

      The Greens own shares. Hobby Lobby Stores, Inc. owns the stores, profits, etc.

  • adrianratnapala

    Could Jacob be imagining cases where corporate liberties are denied on
    the grounds that their owners do not endorse or wish to exercise those
    liberties? I’m not sure how the worry goes from here.

    Imagine a version of Citizens United where the organization in question was not a small non-profit with a purely political agenda, but BigCorp, a publicly owned company trying to discredit a policy it that is bad for its profits. Its possible to argue that while Citizens United deserves 1st Amendment protection, BigCorp does not. Not because BigCorp is peddling self-serving propaganda (that’s fine), but because it doesn’t directly represent the views of its shareholders.

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