William D. Grote, III and other plaintiffs appeal the denial of their motion for a preliminary injunction against the enforcement of the Patient Protection and Affordable Care Act (ACA) provisions requiring their company, Grote Industries, to provide coverage for contraception and sterilization in their health-insurance plan. The Seventh Circuit received their motion for an injunction pending appeal on January 11, 2013, which was opposed by the defendants, led by Kathleen Sebelius, the Secretary of Health and Human Services. The Grote family, who own the privately held Grote Industries and adhere to Catholic teachings opposing contraception and sterilization, had previously not included such coverage in their self-insured health plan, which renews annually on January 1. The ACA mandates that nonexempt group health plans cover certain preventive services, including all FDA-approved contraceptives and sterilization procedures without cost-sharing, effective for plan years starting after August 1, 2012. Consequently, the mandate required Grote Industries to include coverage for these services in their plan effective January 1, 2013. The court finds the case similar to Korte v. Sebelius, in which an injunction was previously granted, and thus consolidates the cases and grants the injunction for the Grote family’s appeal.
Employers face significant financial penalties for non-compliance with the contraception mandate, including a daily fine of $100 per employee and an annual tax surcharge of $2,000 per employee. The Grote Family and Grote Industries filed a lawsuit on October 29, 2012, seeking to block this mandate, asserting constitutional claims under the First and Fifth Amendments, as well as violations of the Religious Freedom Restoration Act (RFRA) and the Administrative Procedure Act. Their motion for a preliminary injunction was denied on December 27, 2012. The following day, a related case, Korte, resulted in a granted injunction pending appeal, leading the Grotes to request reconsideration. On January 3, 2013, the district court denied this request, noting similarities to Korte but not recognizing it as a binding precedent. The Grotes subsequently appealed.
In their appeal, they sought an injunction pending appeal focused solely on their RFRA claim, paralleling the Korte case, where a secular, for-profit corporation owned by a Catholic family also sought exemption from the contraception mandate. The Korte family had faced similar challenges with their health insurance plan, which included contraception coverage, prompting their legal action. The appellate court had granted the Korte family's injunction, finding a reasonable likelihood of success on their RFRA claim and that the balance of harms favored protecting their religious liberties over the government's interests.
The court found that the Grote case closely mirrored Korte, with the added consideration that Grote Industries’ self-insured health plan had never provided contraception coverage. Without an injunction, the Grotes would be compelled to cover abortifacient drugs, contraception, and sterilization, thus strengthening their case for an injunction pending appeal.
The Grote Family and Grote Industries assert that the contraception mandate imposes legal obligations that conflict with their religious beliefs, making compliance impossible without violating their faith. They argue that the mandate forces them to participate in a serious moral wrong against their church's teachings and incurs severe financial penalties for non-compliance, thus substantially burdening their free exercise rights under the Religious Freedom Restoration Act (RFRA). The government counters with three main arguments: (1) a secular, for-profit corporation cannot claim rights under RFRA; (2) the individual plaintiffs’ free-exercise rights are not impacted since the corporation is a distinct legal entity; and (3) the burden on their religious rights is not substantial because decisions about contraception are made by employees and their healthcare providers. The court finds that the government has not met the strict scrutiny standard, which requires proof that the mandate is the least restrictive means of providing contraception access. The court concludes that the Grote Family and Grote Industries are likely to succeed on the merits of their RFRA claim and would suffer irreparable harm without an injunction, thus granting their request to prevent enforcement of the mandate pending appeal. The case is consolidated with Korte v. Sebelius for further proceedings. A dissenting opinion expresses skepticism about the likelihood of success on the merits of the Grote's claims, suggesting that preliminary relief may not be warranted despite some stronger arguments compared to Korte.
The Grote plaintiffs have advanced several theories of relief in this litigation, but only their claim under the Religious Freedom Restoration Act (RFRA) is relevant for seeking preliminary relief pending appeal. To succeed under RFRA, plaintiffs must demonstrate that the contraceptive coverage mandate from the Patient Protection and Affordable Care Act imposes a substantial burden on their religious exercise. A substantial burden is defined as one that makes religious practice effectively impracticable, as established in prior case law. The court notes that only the individual Grotes, not their secular corporation, can claim religious freedom rights. Grote Industries, a secular for-profit business that manufactures vehicle safety systems, has not articulated any religious goals, nor does it engage in practices based on employees' religious beliefs. While secular corporations possess certain First Amendment rights, they do not have independent religious interests unless organized specifically for religious purposes. The court emphasizes that Grote Industries does not qualify as a religious employer under existing regulations and operates primarily to generate profit, similar to other secular businesses.
The appeal addresses the religious freedoms of the Grotes, the owners of Grote Industries, rather than the corporations themselves. General business corporations do not independently exercise religion; their religious activities are tied to the beliefs of their owners and employees. Thus, religious exercise is inherently personal and does not extend to corporate entities. In this case, the obligation to provide contraceptive coverage under the Affordable Care Act lies with Grote Industries, not the Grotes personally. While the Grotes may have a close association with their company, it is essential to recognize the legal distinction between the individuals and the corporation, which has its own rights and responsibilities. Grote Industries, as a separate legal entity, employs over 1,100 people and sponsors a health care plan that is required to provide contraceptive coverage. The health plan itself is a distinct legal entity, capable of being sued. The separation of the corporate structure limits the liability of the Grotes and maintains the confidentiality of employees' health care decisions. Although the health plan is self-funded, the obligation to provide coverage falls on the corporate entity, with the funding originating from the company rather than the Grotes personally.
Owners of an LLC or corporation must adhere to the corporate structure to retain its benefits, including the separation of personal and corporate finances. The Grotes cannot treat the company's bank accounts as their own; commingling funds signals a disregard for the corporate form. The liabilities and expenditures of the business are distinct from the Grotes' personal finances, and any argument suggesting otherwise would imply piercing the corporate veil, which the Grotes do not assert. Consequently, their individual burdens related to the contraception mandate are considered too indirect to be substantial under the Religious Freedom Restoration Act (RFRA).
While the Grotes express concern that their closely-held corporation is required to fund a health plan covering contraceptive services contrary to their Catholic beliefs, they must comply with statutory mandates that may conflict with their personal convictions. Their choice to operate a secular, for-profit business subjects them to legal obligations that do not allow them to impose their religious beliefs on the statutory framework governing their business. This principle is supported by the Supreme Court's ruling in United States v. Lee, which emphasized that individuals engaged in commercial activities cannot exempt themselves from legal responsibilities based on personal religious beliefs.
The Supreme Court case Braunfeld v. Brown determined that a Sunday sales prohibition did not violate the free exercise rights of Jewish shopkeepers, despite imposing additional costs due to their observance of Sabbath. The statute regulates a secular activity rather than religious practices, making religious adherence more costly for these shopkeepers. This principle extends to various scenarios where state nondiscrimination statutes compel actions contrary to individual religious beliefs, such as requiring landlords to rent to unmarried couples or mandating a church-affiliated school to retain a teacher after childbirth. It also applies to for-profit businesses, which may be required to hire or provide services to individuals whose status or conduct conflicts with the owners' religious beliefs, as seen in cases involving photography for same-sex ceremonies and fertility services for same-sex couples. The distinction is made between an owner's commercial conduct and their religious beliefs; generally, compliance with secular laws does not necessitate abandoning those beliefs. The burden imposed by such laws typically affects conduct rather than beliefs, aligning with the state's interest in preventing discrimination. The business in question is identified as a secular entity, not a religious corporation.
Appellants have crossed the threshold of absolute religious freedom by engaging in a secular endeavor. The contraception mandate applicable to Grote Industries does not require the Grotes to personally use or endorse contraception; rather, it permits employees to choose FDA-approved contraceptives with their physicians. While the Grotes acknowledge that their health plan covers contraception, which they morally oppose, the burden on their religious beliefs is debated in terms of its nature. The concern is compared to the scenario where an employee uses their paycheck for contraception, suggesting that once compensation is given, the employee has autonomy over its use, severing the employer's connection.
Health insurance is viewed as part of employee compensation, and how an employee utilizes it may not differ significantly from spending their salary. The distinction between employer-funded health plans and those purchased from insurers raises questions about the materiality of the employer's financial involvement. Regardless, employees make independent choices regarding their healthcare, and the employer does not control or endorse these decisions, even when aware of covered services that conflict with their beliefs. The Grotes have not demonstrated that the mandate imposes a significant burden on their religious exercise, leading to a dissenting opinion.
The Supreme Court case Harris v. McRae establishes a framework for assessing the relationship between employer-funded health plans and employee healthcare decisions, particularly in the context of religious implications. The case references Zelman v. Simmons-Harris, which addressed an Establishment Clause challenge to Ohio's school voucher program. The program allowed significant private choice, with 96% of students opting for religious-affiliated schools. Critics argued that the program effectively advanced religion and created a perception of state endorsement of religious practices. However, the Court upheld the program, noting that when government aid is neutral and provided to a broad class of citizens who independently choose to direct that aid to religious institutions, it does not violate the Establishment Clause. The Court emphasized that any incidental advancement of religion is attributable to the individual choices of recipients rather than the government.
This reasoning supports the position that an employee's independent decisions, made in consultation with their physician, disconnect the employer’s funding of a health plan from the eventual use of that funding for contraceptives. The discussion further draws a parallel with Zobrest v. Catalina Foothills School District, which affirmed that government benefits can reach religious institutions through private choice without violating the Establishment Clause. Thus, the essence of both cases highlights the importance of individual decision-making in evaluating the intersection of government aid and religious institutions.
The IDEA does not incentivize parents to select sectarian schools, indicating that an interpreter's presence cannot be linked to state decision-making. The case of Zelman illustrates that the financial source for a purchase does not necessarily attribute decision-making to the supplier if the decision rests with another party. A minimal burden arises from complying with a neutral mandate regarding contraception, as asserted by the Grotes, who argue that their self-funded health plan directly finances contraceptive care rather than offering vouchers to employees. The choice to self-fund, made by employers often for economic reasons, brings them closer to employees' healthcare decisions. This self-funding aspect should not be viewed as a government imposition on religious liberties. The precedent set in Board of Regents of the University of Wisconsin System v. Southworth involved mandatory student fees supporting various organizations, some of which engaged in political expression. Students contested this funding system, claiming it infringed on their First Amendment rights by compelling them to support ideologies against their beliefs. The court agreed, referencing similar compelled-speech cases, affirming that individuals cannot be forced to fund political expression unrelated to their representation.
A lawyer can be compelled to join a state bar association and support activities related to the association's regulatory mission but cannot be required to fund the association's political expression. This aligns with the precedent set in Abood, where individuals have a First Amendment interest in not being forced to contribute to organizations whose expressive activities conflict with their beliefs. In contrast to Glickman, mandating students to pay activity fees creates a crisis of conscience, as it undermines their right to freedom of belief by forcing them to support views they oppose.
The Supreme Court recognized that students are obligated to pay fees that subsidize speech they find objectionable, but it stopped short of requiring universities to allow students to opt out of funding such organizations. While the Court affirmed the university's duty to protect students' First Amendment interests, it maintained that this obligation does not equate to relieving students of the fee obligation. The Court concluded that the essential protection for students lies in ensuring viewpoint neutrality in funding allocation, which promotes open discussion and ensures that minority views are respected alongside majority views, preserving the integrity of student activities and preventing misrepresentation of student organizations as representing the university's views.
The Court determined that the University of Wisconsin's student funding system was compliant with the First Amendment, as it was based on a viewpoint neutral review of funding requests from student organizations. Although the case at hand involves a religious objection to funding contraception, it draws relevance from the Southworth case, which established that being compelled to fund speech one finds objectionable does not necessarily violate free speech rights, provided that the funding supports a range of viewpoints neutrally. The Grotes' objection centers on contraception funding, but they are required to support a health insurance plan that encompasses various medical services, not solely contraception. The requirement for employers to provide comprehensive health plans is neutral and generally applicable, with choices regarding specific medical services left to employees and their healthcare providers. The Grotes do not directly control individual healthcare decisions made by employees, and funding a health plan does not equate to endorsing particular medical decisions. Additionally, employers typically do not gain rights over employees' medical decisions or hold liability for the outcomes of such care, as long as they are not directly providing the medical services.
Litigation challenges the notion that employers are not parties to health care decisions for their employees, particularly regarding contraceptive coverage, positing that company owners have a legitimate religious interest in the services provided. The federal contraception mandate, introduced recently, has led to approximately forty lawsuits contesting its requirements, highlighting a significant legal conflict. Historically, many states have had similar mandates, with twenty-eight states requiring insurers to cover prescription contraceptives since Maryland's law in 1998. The discussion extends beyond contraceptives to other health care services that may conflict with religious beliefs, including reproductive technologies, genetic screenings, treatments for sexually-transmitted diseases, and end-of-life care. If the Religious Freedom Restoration Act (RFRA) allows shareholders to exclude contraceptive coverage based on their beliefs, it raises the possibility of excluding various medical services for similar reasons. This underlines a critical RFRA consideration regarding the availability of reasonable alternatives to mandated coverage and the least restrictive means of providing access to necessary health care. The nature of medical decisions, made individually and privately, can often conflict with the religious beliefs of company owners, further complicating the issue.
A shareholder's religious beliefs and practices are considered impacted by the autonomous healthcare decisions of company employees, suggesting that the obligation to insure those decisions, when objected to by a shareholder, constitutes a substantial burden on the shareholder's religious liberties. This interpretation is viewed as an expansive understanding of how commercial acts can interfere with individual religious beliefs. The merits of this appeal will be further explored in the upcoming briefs. However, the Grotes have not sufficiently demonstrated that the contraception mandate imposes a substantial burden on their religious freedom that directly affects their Catholic faith. Consequently, they are not entitled to preliminary injunctive relief while awaiting the appeal's resolution. The author expresses dissent regarding this conclusion.
