Courtesy of Nicholas Eckhart
Courtesy of Nicholas Eckhart

By: Nor Powanda

The Supreme Court issued 144 opinions this term and the Justices ruled unanimously in 65% of the 72 cases, the highest such percentage since the 1940s. But one case, Burwell v. Hobby Lobby, decided 5 – 4, reversed the impression of a united Supreme Court and startled the nation. Among the reasons Hobby Lobby received so much attention was the Court’s recognition that a corporation can have religious beliefs. This recognition once again sparked a debate over corporations’ personhood and whether corporate entities have the same rights as natural persons. So what is corporate personhood and what does the Hobby Lobby decision mean for corporations?

Corporations are associations of individuals or other organizations and associations that form a legal entity. The corporate entity is separate and distinct from people who create and own them. The individuals or associations that form the corporate entity are the shareholders of the corporation. The basic and principal advantage of a corporation is that, because the corporation is considered a separate entity, the owners and individuals who run it have limited personal liability for the entity’s dealings or debts. This means that individuals who own and run the corporation cannot usually be held responsible for the liabilities of the business.

The law defines corporations as artificial persons. For legal purposes, they are treated as singular acting bodies—i.e., a plaintiff suing a corporation will be suing the corporation and not the natural persons individually who make up the corporation. Another example is when iTunes users agree to the terms and conditions of Apple, they are contracting with Apple Corporation and not with the Apple’s shareholders or managers. The corporate persons are a fiction, but the law personifies them.

This personification found its basis in the 14th Amendment in the Supreme Court’s Santa Clara County v. Southern Pacific Rail Road decision over a century ago. In prior cases the Court had been urged to extend the equal protection of the 14th Amendment, which states in part that, “no state shall…deprive any person of life, liberty, or property without due process of law, nor deny to any person…the equal protection of the laws” to corporations. Although the question in Santa Clara did not require the Court to decide whether the term “person” is limited to natural breathing persons, the Court noted in a headnote that the Constitution does in fact forbid the government from denying the equal protection of the law to all persons, including corporations. The substance of Santa Clara involved Southern Pacific Railroad’s challenge to taxes imposed by California and counties throughout the state.

This jurisprudence took hold in subsequent cases and the Court forced state and federal legislatures to treat corporations the same as natural persons for the purposes of contracting and property rights. In the latter part of the 20th century, the Court applied Santa Clara to justify corporations’ First Amendment right to free speech. For example, in First Nat’l Bank of Boston v. Bellotti the Court relied on Santa Clara to allow corporations to spend unlimited money on ballot initiatives. Even though the Court’s landmark 2010 Citizens United v. Federal Election Commission decision did not involve the specific question of corporate personhood, it relied on Bellotti in holding that political speech is “indispensable to decision making in a democracy, and this is no less true because the speech comes from a corporation.”

Hobby Lobby involved the Affordable Care Act requirement that corporations, including closely held corporations (which are mainly family owned and operated, such as Hobby Lobby), pay for insurance coverage for contraceptives. Hobby Lobby’s owners argued this requirement of the healthcare law violated their exercise of religion under the 1993 Religious Freedom Restoration Act since they run their business according to Christian principles. (It is worth noting that Hobby Lobby objected to paying for specific types of contraceptives and not across the board contraceptives. Still, the objection was based on religious principles).

While the majority maintained Hobby Lobby is a narrow decision and only applies to closely held corporations, the dissenters warned of far reaching consequences, calling the Court’s holding “a decision of startling breadth.” Critics see Hobby Lobby as an extension of the Court’s Citizens United decision, expanding corporations’ rights and making big businesses ever more powerful.

Whether Hobby Lobby would have received as much attention as it did if the case did not involve a gender issue is not entirely clear. The healthcare law and gender equality are bitterly contested political issues. Nonetheless, it remains a fact that in Hobby Lobby the Court for the first time recognized a right that is generally exercised by a natural person and not an artificial entity, which, as Justice Stevens put it in his Citizens United dissent, “[h]as no conscience, no beliefs, no feelings, no thoughts, no desires.”

While corporate personhood has generated new interest in recent years, the debate is not a new one. The exercise of corporate power has been a concern and a matter of debate for as long as corporations have been around. In the1930’s Justice Louise Brandeis famously argued that large corporations caused economic dislocation, distorted democracy and, at times, hurt the general welfare of the public. Brandeis called for the state regulation of corporations by limiting their size, life span and to dictate their purposes.

A corporation’s right to property, contract and free speech (with certain limitations) has long been established. Allowing corporations to exercise a religious right is a case of new impression by any measure. It is too soon to know the true effect of Hobby Lobby on corporate personhood. What rights corporations seek next or want to expand on will show Hobby Lobby’s reach and true effect.