Kent Greenfield, “Hobby Lobby, “unconstitutional conditions,” and corporate law mistakes””

As a number of corporate law scholars and I argued in an amicus brief in the case, the very purpose of the corporate form is to separate the shareholders from the corporate entity. A distinction between shareholders and the company lies at the very foundation of corporate law. The condition that there be such a distinction is not an add-on; it goes to the definitional nature of the government benefit itself. Hobby Lobby’s presumption that shareholders can be seen as distinct from the company for purposes of, say, limited liability, but identified with the company for purposes of religious freedom changes the nature of the government benefit itself.

In other words, the Court has changed, definitionally, what it means to be a corporation under the state laws in question.

The existential condition of separateness is true even with closely held companies. The largest such companies – Cargill, Koch Industries, Dell, Bechtel, and Aramark, to name just a handful – have tens of thousands of employees and billions of dollars of revenue. (In 2008, Forbes reported that the 441 largest closely held companies employed more than 6 million people and enjoyed $1.8 trillion in revenue.) They are created under the same understanding of a wall existing between shareholders and the company. They could indeed not exist otherwise – the potential liability to individual investors would simply be too great.

So in evaluating whether Congress intended the word “person” in RFRA to cover corporations, the most reasonable assumption is that the states creating such entities intended such separateness and that corporations should not carry the rights of their shareholders. To assume otherwise flies in the face of decades, indeed centuries, of corporate law assumptions.