7th Circuit rules against government over challenge to Obamacare's contraception mandate

A split panel of the 7th Circuit Court of Appeals has ruled in favor of two companies that challenged Obamacare’s contraception mandate, finding that their religious claims against the provision of the 2010 law “were likely to succeed.”

The panel’s ruling, which was handed down Friday in a consolidated appeal, reversed the decisions of two federal courts and ordered them to block the Patient Protection and Affordable Care Act’s (ACA) mandate against the pair of companies.

After finding that the companies, as well as their Catholic owners, could challenge the mandate, the majority of the appeals panel determined that forcing these companies to provide contraception and sterilization coverage in their employee healthcare plans “substantially burdens their religious exercise rights.”

Writing for the majority, Judge Diane Sykes explained that the Religious Freedom Restoration Act of 1993 (RFRA) requires the government to “justify the burden under the standard of strict scrutiny.”

“So far it has not done so, and we doubt that it can,” Sykes wrote. “Because the RFRA claims are very likely to succeed and the balance of harms favors protecting the religious-liberty rights of the plaintiffs, we reverse and remand with instructions to enter preliminary injunctions barring enforcement of the mandate against them.”

Judge Joel Flaum joined Sykes' opinion to make up the majority while Judge Ilana Diamond Rovner dissented, saying she would have affirmed the lower court rulings that denied the plaintiffs’ request for preliminary injunctions.

Rovner wrote in her dissent, “My esteemed colleagues have made the best case possible for the notion that the contraception mandate interferes with the plaintiffs’ free exercise rights; but I believe the court’s holding and rationale represent an unprecedented and unwarranted re-conception of both what the free exercise of religion entails and what constitutes a substantial burden on that exercise.”

The split ruling, which spanned 154 pages, came to the court in a consolidated appeal from Cyril B. Korte, et al. v. Kathleen Sebelius, et al., a case from the Southern District of Illinois, and Grote Industries LLC et al. v. Sebelius, et al., a case from the Southern District of Indiana.

Cyril and Jane Korte and their Highland construction company Korte & Luitjohan Contractors (K&L), filed the Illinois suit and six members of the Grote family, as well as their Madison, Ind. companies Grote Industries LLC and Grote Industries Inc. filed the Indiana suit.

Both families pointed to their Catholic faith in arguing that the mandate, which requires employers to provide employees health benefits that include coverage for contraceptives and sterilization procedures, violates their rights under the RFRA.

They argued that the mandate basically makes them choose between complying with something that goes against their religious beliefs or paying fines they assert would devastate their businesses.

The monetary penalties for not complying with the mandate would cost K&L Contractors a total of $730,000 a year and Grote Industries nearly $17 million a year, according to the panel’s opinion.

Before the 7th Circuit panel in May, Edward White, senior counsel at the American Center for Law & Justice (ACLJ) in Michigan, presented arguments on behalf of the Kortes and Matthew S. Bowman, senior legal counsel for the Alliance Defending Freedom, represented the Grote family.

They focused their arguments on their clients’ religious rights, the impact the mandate’s non-compliance penalties would have on the companies and their contention that it would be illogical to distinguish between not-profit and for-profit corporations under the RFRA.

Alisa Klein, an attorney in the civil division of the U.S. Department of Justice, argued on behalf of the federal government in May, when she told the appeals panel that Congress could have included an exemption for corporations in the RFRA, but did not do so.

She also argued that granting the plaintiffs’ requests for exemptions from the mandate would “depart from bedrock principles” that corporations are distinguishable from their owners and that exempting for-profit corporations “would be an enormous step to take.”

The majority of the 7th Circuit rejected the government’s arguments in its lengthy opinion that went in favor of the plaintiff companies and their owners.

Sykes wrote that although “RFRA’s statement of purpose explicitly reaffirms our national commitment to the ‘free exercise of religion as an unalienable right,’” it does not define “person.”

Turning to the dictionary, Sykes wrote “person” includes corporations and as such, the plaintiff companies are “persons” whose religious rights are protected under the RFRA.

In her dissent, Rovner wrote that in exempting the two companies from the mandate, the majority “equates the business activities of these secular, for-profit firms with the religious exercise of its owners.”

“Realistically,” she later added, “the only religious interests at stake are those of the corporations’ owners—their faith is the source of the objection to contraception.”

Saying that “the Affordable Care Act in no way imposes on their beliefs, their worship activities, or the conduct of their personal lives,” Rovner wrote in her dissent that the owners of the plaintiff companies “remain free to speak out against the use of contraception whenever and wherever they wish.”

“[T]heir own exercise of religion is wholly undisturbed” Rovner wrote. “It is the corporations, as employers, which shoulder the obligations imposed by the ACA; and they need not say or do anything with respect to contraception beyond including it among the countless other medical goods and services covered by their employee health plans.”

Saying that the majority’s holding is “unprecedented,” Rovner wrote that her colleague’s ruling “establishes a precedent which invites free-exercise challenges to a host of federal laws by secular corporations which, in reality, have no religious beliefs of their own and cannot exercise religion.”

The 7th Circuit’s ruling in this case appears to create a further split over the religious rights issue.

According to the majority’s opinion, since it heard arguments in this consolidated case, four other circuits have issued decisions in similar cases.

The 10th Circuit, the opinion notes, held that two for-profit companies and their owners were likely to succeed on their religious arguments for an exemption from the mandate while the 6th and 3rd circuits determined that the owners, but not the companies, were likely to succeed on their RFRA challenges to the mandate.

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