July 16, 2014

Religious Institutions Update: July 2014

Holland & Knight Update
Nathan A. Adams IV


  • The U.S. Supreme Court ruled in Burwell v. Hobby Lobby Stores, Inc. that an existing contraceptive coverage mandate violates the Religious Freedom Restoration Act statute that applies to for-profit closely held corporations and their owners.
  • In Pedreira v. Sunrise Children's Servs, Inc., the court entered an order incorporating a settlement agreement providing for the court's retention of jurisdiction to enforce the agreement and dismissing the second amended complaint, despite opposition.
  • A number of court decisions – including Michigan Catholic Conf. and Catholic Family Servs. v. Burwell and Colorado Christian Univ. v. Sebelius – reached different conclusions regarding the enjoinment of the Patient Protection and Affordable Care Act's certification requirement.

Timely Topics

Some for-profit companies have federally protected free exercise rights. This is the ruling of the United States Supreme Court in Burwell v. Hobby Lobby Stores, Inc. outlined below. While for-profit companies typically exist in part to make money, the court pointed out that they are far more complex. They also engage in important philanthropic activities, participate in the political process and act charitably. From the local restaurant that donates day-old bread to the municipal food bank to the corporate foundation that donates millions of dollars to improve education, corporations are more than simple profit maximizers. Still, the government disagreed with the notion that companies could also practice religion. Part of the disagreement is rooted in what constitutes the exercise of religion. If understood primarily or exclusively as religious worship and prayer, religious exercise has been truncated from its historic good works to include food banks, schools and universities, hospitals, and the like. Corporations and their officers have advanced religious causes understood in this light for many years. Church-state counsel can assist for-profit companies and management interested in expressing religion in new ways or bringing to light practices they previously treated as purely secular while avoiding practices that surely will continue to violate the law, such as illegal discrimination in hiring.

For-Profit Closely Held Companies Have Religious Liberties

In Burwell v. Hobby Lobby Stores, Inc., No. 13-354, 13-356, 2014 WL 2921709 (Mar. 25, 2014), the United States Supreme Court ruled 5-4 that the contraceptive coverage mandate contained within the Patient Protection and Affordable Care Act (PPACA) violates the Religious Freedom Restoration Act (RFRA) as applied to for-profit closely held corporations and their owners with sincerely held religious beliefs opposed to contraceptives that they consider abortifacients. Conestoga Wood Specialties is a for-profit wood-working business with roughly 950 employees. Its owners are Mennonite and believe they must run their business in accord with their religious beliefs including beliefs opposed to abortion. Hobby Lobby employs 13,000 and Mardel employs 400. Its owners are Roman Catholic and believe likewise.

The court squarely rejected the government's argument that the owners of the companies forfeited all RFRA protection when they organized their businesses as corporations. As RFRA protects "persons," the court turned to the Dictionary Act to confirm that this includes corporations as well as individuals.1 The court also disagreed with the government that defendants cannot "exercise religion." The court observed that even the government recognizes that the corporate form is no obstacle to nonprofits exercising religion. Additionally, the court disagreed that RFRA merely codified the then-existing Free Exercise Clause precedent and pointed out that, even if it had, the precedent included a case recognizing the free exercise rights of a for-profit Orthodox Jewish retailer impacted by Sunday closing laws.

Next, the court turned to the question of whether the contraceptive mandate substantially burdens the corporations' exercise of religion and found that it did. The government argued that it did not because of the attenuated relationship between what the objecting parties must do (provide contraceptive coverage) and the end that they find to be morally wrong (destruction of the embryo) as a result of employees' use of the coverage. The court ruled that this defense was, in reality, an impermissible challenge to the sincerity and reasonableness of the companies' beliefs and an attempt to arrogate public authority to provide a binding national answer to a deeply religious and philosophical question, which the court was not empowered to address under the Establishment Clause.

The court rejected the second reason articulated for why the mandate does not violate the companies' exercise of religion because it was not raised by the government (only amici) and because the court doubted that Congress "would have believed it a tolerable result to put family-run businesses to the choice of violating their sincerely held religious beliefs or making all of their employees lose their existing healthcare plans." Amici argued that the companies could simply drop coverage and force employees to obtain coverage on the government exchanges for less than the cost of the companies' insurance. The court was skeptical about this and concerned about the effect such an action would have on employee recruitment.

Finally, the court decided whether the substantial burden on the companies' religious exercise was nonetheless justified. Without deciding the question, the court assumed the government had a compelling governmental interest in enacting the contraceptive coverage mandate, but ruled that the mandate was certainly not the least restrictive means of furthering that interest. For example, the court pointed out that the most straightforward way of achieving it would be for the government to assume the cost of providing the four abortifacient contraceptives to women. Alternatively, the court observed that the government itself has adopted a less restrictive manner of achieving its purposes for certain religious employers opposed to the mandate, though the court declined to decide the lawfulness of this certification under RFRA.

Children's Placement Agency Forbidden from Contesting Settlement Agreement Implicating Its Operations

In Pedreira v. Sunrise Children's Servs, Inc., No. 3:00cv210-S, 2014 WL 2946417 (W.D. Ky. June 30, 2014), the court entered an order incorporating a settlement agreement providing for the court's retention of jurisdiction to enforce the agreement and dismissing the second amended complaint, despite the opposition of Sunrise Children's Services, Inc. The settlement agreement requires changes to the procedures for providing care to children through private child care facilities and child placement agencies such as Sunrise. For example, the agreement requires the Commonwealth (1) to consider a child's religious affiliation and objections when making placement decisions; and (2) to regularly release religious preference documentation concerning children in placement agencies to the plaintiff. The agreement also requires placement agencies to respect and accommodate religious affiliations and not discriminate against any children based on religion. The initial complaint was filed against Sunrise and the Commonwealth, claiming discrimination in employment on the basis of religion and violation of the Establishment Clause. Sunrise succeeded at having the employment discrimination claims dismissed and the dismissal affirmed on appeal, leaving after remand exclusively the Establishment Clause claim against the Commonwealth defendants and no claims against Sunrise. Thus, the court ruled that Sunrise had no standing to contest the settlement agreement between the plaintiff and the Commonwealth, notwithstanding Sunrise's argument that the agreement would prevent it from continuing to serve as a state placement agency and singled out Sunrise for scrutiny through documentation review. The court also ruled that the agreement is not tantamount to a consent decree.

Court Upholds Athletic Association Rule Preventing Home School Student from Participating in Private School's Sports Program

In Chapman v. Penn. Interscholastic Athletic Ass'n, No. 1:14-cv-0019, 2014 WL 2770699 (M.D. Pa. June 18, 2014), the court dismissed a home school mother's Free Exercise and Equal Protection claim, and claim to be able to direct the education of her child against an athletic association that refused to let her child play for the Christian school she was enrolled in for two classes, instead of in the public school district where she resides. The court applied rational basis review to her first two constitutional challenges on the grounds that the attendance rule at issue is facially neutral and of general applicability. The court declined to find that "any law distinguishing between public and private schools targets religiously motivated conduct on its face." Furthermore, the court ruled that the statute is generally applicable because it applies to all home-schooled children equally, regardless of religious beliefs.

The court determined that the rule only minimally burdened the plaintiff's religious exercise. She remains free to enroll her child in Christian school full-time and, if she does so, the child can play for the school. Turning to her right to direct her child's education, the court once again applied rational basis review on the grounds that "[t]here is no constitutionally protected right to play sports." The rational basis upheld by the court and offered by the athletic association is that the Attendance Rule prevents an unfair concentration of athletes at a particular school as a result of students "cherry picking" schools and athletic programs. The court declined to exercise its supplemental jurisdiction over the remaining claims.

Court Dismisses Constitutional Challenge to PPACA's Religious Exemption

Jeffrey Cutler is a recently elected municipal official whose health insurance was canceled due to the changes specified by regulations implementing PPACA. Although Cutler admitted that he could afford alternative health insurance, he objects to being "mandated to be covered," and, as a result, faces penalties for failing to maintain "minimum essential coverage." In Cutler v. United States Dep't of Health and Human Servs., 2014 WL 2879824 (D.D.C. June 25, 2014), the court rejected Cutler's challenge to PPACA on the grounds that it exceeds the authority of Congress under the Commerce Clause, violates the First Amendment and has been impermissibly altered since its enactment.

The court ruled that Cutler lacks standing to file the lawsuit on his own behalf – as well as on behalf of his constituents – for lack of establishing a particularized injury to himself or his constituents distinguishable from that suffered by all nonexempt persons. Nor is it adequate, according to the court, for Cutler to complain that there is an exemption for certain religious groups of which he is not a member and cannot claim. Even if he had standing, the court ruled that the religious exemption satisfies the Establishment Clause because it has the secular purpose of ensuring that all persons have health insurance either through PPACA or their church. It also has the primary effect of ensuring that all individuals are covered – rather than of advancing or inhibiting religion – and does not involve excessive entanglement with religion.

Courts Reach Different Conclusions about Enjoining PPACA's Certification Requirement

In Michigan Catholic Conf. and Catholic Family Servs. v. Burwell, Case No. 13-2723, 13-6640, 2014 WL 2596753 (6th Cir. June 11, 2014), the Sixth Circuit Court of Appeals ruled against various religious employers associated with the Michigan Catholic Conference and Catholic Diocese of Nashville, which sought an injunction against PPACA's contraceptive coverage mandate that requires religious organizations to complete "EBSA Form 700 - Certification" and submit a copy to its health insurance issuer or third-party administrator (TPA) to seek an accommodation. Affirming the District Court, the court ruled that certain appellants, including the Michigan Catholic Conference, Catholic Diocese of Nashville and Dominican Sisters of St. Cecilia Congregation, had not demonstrated a strong likelihood of success on the merits because they are entirely exempt without filing the certification.

Turning to the remainder of the appellants, the court ruled that their religious exercise is not substantially burdened because they may obtain the accommodation from the mandate without providing, paying for and/or facilitating access to contraception. The court concluded that they do not facilitate access to contraception under the authority of Univ. of Notre Dame v. Sebelius, 743 F. 3d 547 (7th Cir. 2014), which held that federal law – not the plaintiff's certification – requires health insurers to offer contraceptive coverage. Thus, the court found no RFRA violation, and went on to find no constitutional or other violations either.

Finding no violation of the Free Speech clause, the court concluded that religious organizations are not required to undertake or facilitate mandatory contraceptive counseling, as required by the law of TPAs. The court further ruled that the self-certification form does not compel speech with which the religious organizations disagree, but triggers disassociation with objectionable coverage, and the rules distinguish between impermissible efforts to interfere with a TPA's provision of contraceptive coverage and permissible expression in opposition to contraceptives. The court also found no free exercise violation because PPACA is a neutral law of general applicability, notwithstanding numerous exemptions. According to the court, "a law is generally applicable if it does not make distinctions based on religion."

The court concluded that the exemption and accommodation provisions related to the contraceptive coverage mandate also do not prefer a denomination or excessively entangle government in religious practice. Last, the court rejected the religious employers' claim that the contraceptive coverage requirements violate the Administrative Procedure Act (APA), inter alia, by violating the Weldon Amendment, an appropriation rider that withholds funding from government agencies that subject any institutional or individual healthcare entity to discrimination on the basis that it does not provide, pay for, provide coverage of, or refer for abortions.

The District Court in Wheaton College v. Burwell, No. 1:13-cv-08910, 2014 WL 2826336 (N.D. Ill. June 23, 2014), reached a similar conclusion in part when denying Wheaton College's (located in Wheaton, Illinois) motion for preliminary injunction in most respects against PPACA's requirement that a religious organization must complete a self-certification to avoid offering contraceptive coverage. The college argued that completing and furnishing the form would "make it morally complicit in the wrongful destruction of human life" and substantially burdens its religious exercise in violation of RFRA and the First Amendment. However, the court disagreed also on the authority of Notre Dame and ruled that PPACA does not violate the Establishment Clause by distinguishing between different types of religious organizations by awarding some waivers and others accommodations.

The court also rejected the college's APA challenge to the adoption of the accommodation. Departing from the Sixth Circuit ruling, the court did offer, however, to consider entering an injunction exclusively as it relates to the so-called "gag rule" aspect of the accommodation regulations in violation of the college's free speech rights. Wheaton College did not stop here but applied to the U.S. Supreme Court for an emergency injunction and received it in Wheaton College v. Burwell, Case No. 13A1284 (July 3, 2014). The Supreme Court ruled that the college "has already notified the Government without using EBSA Form 700 – that it meets the requirements for exemption from the contraceptive coverage requirement on religious grounds. Nothing in this order precludes the Government from relying on this notice, to the extent it considers it necessary, to facilitate the provision of full contraceptive coverage under the Act."

In Colorado Christian Univ. v. Sebelius, No. 13-cv-02105-REB-MJW, 2014 WL 2804038 (D. Colo. June 20, 2014), the court granted Colorado Christian University's motion for preliminary injunction to enjoin PPACA's certification requirement under RFRA. While recognizing contrary authority such as Notre Dame, the court ruled, "Any myopic focus on the brevity of the Exemption Form and its ease of completion misses the mark. It is the de facto forced facilitation of the objectionable coverage that is religiously repugnant … Further, it is of no moment that ultimately the decision by an employee to elected the objectionable coverage is optional. It is the offer that is morally offensive regardless of the extent of its acceptance." The court ruled that there is a substantial likelihood that the university can show that the certification requirement constitutes a substantial burden on its religious exercise, whereas the government has failed to show that the substantial burden is permissible as in furtherance of a compelling governmental interest in light of the tens of millions of people to whom the contraceptive coverage mandate does not apply.

In Catholic Benefits Ass'n LCA v. Sebelius, No. CIV-14-240-R, 2014 WL 2522357 (W.D. Okla. June 4, 2014), the court also awarded injunctive relief to particular groups of plaintiffs against PPACA's self-certification requirements. In this case, Group 1 Plaintiffs include the Archdiocese of Oklahoma City and the Archdiocese of Baltimore. They are wholly exempt from the contraceptive coverage requirement and, thus, their RFRA and Establishment Clause claims were dismissed and not awarded injunctive relief. The plaintiffs argued that they are burdened because they must sponsor health plans that include contraceptive coverage, expel the Group 2 plaintiffs from their plans or drop health insurance altogether. Group 2 plaintiffs qualify for the accommodation as nonprofit religious organizations that object to providing contraceptive coverage, including Catholic Charities of the Archdiocese of Oklahoma City and All Saints Catholic School.

The court ruled that the Group 2 plaintiffs showed a likelihood of success on the merits as follows: "Plaintiffs sincerely believe that in executing the form and providing it to their issuers or TPAs, they play a central role in the provision of contraceptive services to their employees – something Plaintiffs find morally repugnant. This is where the Court's inquiry ends, as it is not the Court's role to say Plaintiffs' religious beliefs are mistaken." The representative Group III plaintiff is a for-profit corporation that does not qualify for an exemption or waiver. Based on the authority of Hobby Lobby Stores, Inc. v. Sebelius, 723 F. 3d 1114, 1126 (10th Cir. 2013), the court ruled that Group III plaintiffs also are entitled to injunctive relief. Furthermore, upon a motion for class certification, the court agreed to extend preliminary relief to all present members of the Catholic Benefits Association LCA (CBA) that fit within Groups II and III. The court dismissed the Catholic Insurance Company as a plaintiff for lack of standing on the grounds that the challenged regulations do not specifically apply to it, as opposed to the entities with which it contracts.

The court in Catholic Charities of the Archdiocese of Philadelphia v. Burwell, No. 14-3096, 2014 WL 2892502 (E.D. Pa. June 26, 2014), ruled in the same manner as in Michigan Catholic Conf. and Catholic Family Servs. v. Burwell, except that the court expressed doubt that a religious organization with a "church plan" had standing to bring a challenge to the certification requirement. The contraceptive mandate may not be enforceable against plaintiffs or their TPA without ERISA applying, and the court added this as a basis to doubt that the self-certification requirement substantially burdens the plaintiffs' exercise of religion because the provision of contraceptives by a TPA may be purely voluntary. On the other hand, the court in Brandt v. Burwell, No. 14cv0681, 2014 WL 2808910 (W.D. Pa. June 20, 2014) ruled consistent with Colorado Christian Univ. v. Sebelius. In the last hour, the government tried to make the church plan argument, but the court declined to entertain it.

In Eternal World Television Network v. Burwell, No. 13-0521-CG-C, 2014 WL 2738546 (S.D. Ala. June 17, 2014), the court granted in part the government's motion to dismiss and denied a cross motions for summary judgment. The court dismissed the plaintiff's claims of intentional religious suppression and discrimination; unlawful interference with matters of internal religious governance; violation of free association rights; violation of the "right not to be subjected to a system of unbridled discretion when engaging in speech or when engaging in religious exercise;" and certain APA claims, including one related to the Weldon Amendment. The court did not dismiss the plaintiff's APA claim based on the government's admitted noncompliance with the notice-and-comment procedure in 2011, notwithstanding the government's later compliance with the amendments.

Intrachurch Dispute Remanded to City Eviction Court and Parallel Federal Action Stayed

In African Methodist Episcopal Church v. Lucien, No. 13-30617, 2014 WL 2937009 (5th Cir. June 30, 2014), the court vacated and remanded in part the District Court's ruling denying a motion to remand the church's eviction action to city court which arose out of an intrachurch dispute. The church filed an action in city court to evict several officeholders associated with the denomination that had changed the church's locks and taken over the premises after the church disaffiliated from the denomination. The denomination countered by filing its own parallel action in federal court several weeks later seeking a declaration that the majority in the church had relinquished ownership of and any right to control the church property, then removing the church's eviction proceeding to the same federal court. The Fifth Circuit Court of Appeal ruled that the denomination's federal action should be stayed pending the prosecution of the eviction proceeding under federal abstention rules and the city eviction action must be remanded back to city court for lack of diversity jurisdiction.

Religious Institutions in the News

Enrollment in Catholic schools has been on a steady decline since the 1960s. http://www.washingtonpost.com/national/religion/catholic-schools-fight-to-keep-doors-open-as-future-dims/2014/07/08/a729db04-06cc-11e4-9a71-264773a2ffc8_story.html

A slight downturn in giving to religious organizations continues against an improving philanthropic landscape. https://www.baptiststandard.com/news/faith-culture/16601-faith-digest-religious-giving-down-as-philanthropy-improves


1 1 U.S.C. § 1

Information contained in this alert is for the general education and knowledge of our readers. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a legal problem. Moreover, the laws of each jurisdiction are different and are constantly changing. If you have specific questions regarding a particular fact situation, we urge you to consult competent legal counsel.

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