Penn Law Review Online Essay Explores the Prudential Third-Party Standing of Family-Owned Corporations

A new essay by Matthew I. Hall and Benjamin Means, published by the University of Pennsylvania Law Review Online explores the prudential third-party standing of family-owned corporations.

On November 26, 2013, the Supreme Court agreed to decide whether for-profit corporations or their shareholders have standing to challenge federal regulations that implement the Patient Protection and Affordable Care Act (ACA). At issue in the two cases consolidated for appeal, Hobby Lobby andConestoga Wood Specialties, are regulations mandating that employers with fifty or more employees offer health insurance that includes coverage for all contraceptives approved by the Food and Drug Administration (FDA). The plaintiffs assert that providing certain types of contraceptive care would be contrary to their religious beliefs and allege, therefore, that the mandate violates the Religious Freedom Restoration Act of 1993 (RFRA) as well as the First Amendment’s Free Exercise Clause.

The government does not dispute that the family owners of Hobby Lobby and Conestoga Wood Specialties are sincere in their religious objections. However, the mandate applies only to employers and imposes no direct duties upon corporate shareholders. Thus, a threshold issue in these cases and dozens of other pending cases involving for-profit corporations is whether any plaintiff has standing to challenge the mandate. Some courts have concluded that religious objections to the mandate are simply nonjusticiable. Other courts have found standing, either by endorsing the novel proposition that a for-profit business corporation is, itself, a person capable of religious exercise, or by allowing individual owners who have no personal obligations or liability under the ACA’s mandate to nevertheless interpose a religious objection.

We offer the Court a way to resolve the cases before it that, unlike the approaches advocated by the parties, avoids the need to decide questions of first impression regarding the free exercise rights of for-profit corporations. Under well-established exceptions to the prudential rule against third-party standing, one party can sometimes assert the interests of a third party. Allowing Hobby Lobby and Conestoga Wood Specialties to litigate religious objections to the mandate on behalf of their shareholders obviates the need for the Court to venture into uncharted territory. The crucial insight is that the corporation’s injury need not be religious in nature for the religious objections to the ACA regulations to be adjudicated. So long as the corporate plaintiff is injured economically by the regulations, it has standing under Article III to challenge them. At that point, the corporation’s assertion of the constitutional or statutory rights of absent third parties is properly analyzed under the rubric of third-party standing.

As always, please visit pennlawreview.com to read published Essays, Responses, and Debates, or to check out pdfs of the Penn Law Review‘s print edition articles.

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