Eden Foods, Inc. v. Kathleen Sebelius , 733 F.3d 626 ( 2013 )

RECOMMENDED FOR FULL-TEXT PUBLICATION
Pursuant to Sixth Circuit I.O.P. 32.1(b)
File Name: 13a0304p.06
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
_________________
X
-
EDEN FOODS, INC. and MICHAEL POTTER,
-
Chairman, President and Sole Shareholder of
Eden Foods, Inc., -
Plaintiffs-Appellants, -
No. 13-1677
,
>
-
-
v.
-
-
KATHLEEN SEBELIUS, Secretary, United
-
-
States Department of Health and Human
-
Services; THOMAS E. PEREZ, Secretary,
-
United States Department of Labor; JACK
-
LEW, Secretary, United States Department of
the Treasury, -
Defendants-Appellees. N
Appeal from the United States District Court
for the Eastern District of Michigan at Detroit.
No. 2:13-cv-11229—Denise Page Hood, District Judge.
Decided and Filed: October 24, 2013
Before: DAUGHTREY, COLE, and WHITE, Circuit Judges.
_________________
COUNSEL
ON BRIEF: Erin Elizabeth Mersino, THOMAS MORE LAW CENTER, Ann Arbor,
Michigan, for Appellants. Mark B. Stern, Alisa B. Klein, UNITED STATES
DEPARTMENT OF JUSTICE, Washington, D.C., for Appellees. Mailee R. Smith,
AMERICANS UNITED FOR LIFE, Washington, D.C., Kimberlee Wood Colby,
CENTER FOR LAW AND RELIGIOUS FREEDOM CHRISTIAN LEGAL SOCIETY,
Springfield, Virginia, Deborah J. Dewart, LIBERTY, LIFE, AND LAW
FOUNDATION, Swansboro, North Carolina, Thomas W. Ude, Jr., LAMBDA LEGAL
AND DEFENSE AND EDUCATION FUND, INC., New York, New York, Camilla B.
Taylor, LAMBDA LEGAL DEFENSE AND EDUCATION FUND, INC., Chicago,
Illinois, Jennifer C. Pizer, LAMBDA LEGAL DEFENSE AND EDUCATION FUND,
INC., Los Angeles, California, Charles E. Davidow, PAUL, WEISS, RIFKIND,
WHARTON & GARRISON LLP, Washington, D.C., Bruce H. Schneider, STROOCK
& STROOCK & LAVAN LLP, New York, New York, Daniel Mach, AMERICAN
CIVIL LIBERTIES UNION FOUNDATION, Washington, D.C., Ayesha N. Khan,
Gregory M. Lipper, Caitlin E. O’Connell, AMERICANS UNITED FOR SEPARATION
1
No. 13-1677 Eden Foods, Inc., et al. v. Sebelius, et al. Page 2
OF CHURCH AND STATE, Washington, D.C., Jessica Ellsworth, HOGAN LOVELLS
US LLP, Washington, D.C., for Amici Curiae.
_________________
OPINION
_________________
MARTHA CRAIG DAUGHTREY, Circuit Judge. To comply with the Patient
Protection and Affordable Care Act, Pub. L. No. 111-148, 124 Stat. 119 (2010), and the
Health Care and Education Reconciliation Act of 2010, Pub. L. No. 111-152, 124 Stat.
1029 (2010), collectively known as the Affordable Care Act (the Act), most businesses
employing 50 or more individuals must provide female employees with health-insurance
coverage that includes, at no cost to the employee, “such additional preventive care and
screenings . . . as provided for in comprehensive guidelines supported by the Health
Resources and Services Administration.” 42 U.S.C. § 300gg-13(a)(4). Those guidelines
require plans to cover “[a]ll Food and Drug Administration approved contraceptive
methods, sterilization procedures, and patient education and counseling for women with
reproductive capacity.” 77 Fed. Reg. 8725 (Feb. 15, 2012).
The plaintiffs, Eden Foods, Inc., and Michael Potter, appeal from a denial of their
request for a preliminary injunction that would forbid federal agencies from enforcing
that mandate against them. They contend that offering such contraceptive services to the
employees of Eden Foods would substantially burden the plaintiffs’ religious beliefs and
thus would contravene the protections afforded them under the Religious Freedom
Restoration Act, 42 U.S.C. §§ 2000bb–2000bb-4 (RFRA). However, the law of the
circuit, announced in the recent decision in Autocam Corp. v. Sebelius, __ F.3d ___,
2013 WL 5182544 (6th Cir. Sept. 17, 2013), convincingly establishes that the district
court did not abuse its discretion in denying the plaintiffs’ requests for injunctive relief.
No. 13-1677 Eden Foods, Inc., et al. v. Sebelius, et al. Page 3
FACTUAL AND PROCEDURAL BACKGROUND
The Affordable Care Act
In March 2010, Congress passed, and President Obama signed, the Affordable
Care Act. The cornerstone of the Act is the requirement that all non-exempt, non-
grandfathered employers of 50 or more people ensure that their employees receive a
minimum level of health insurance. As part of that coverage, Congress mandated:
A group health plan and a health insurance issuer offering group or
individual health insurance coverage shall, at a minimum provide
coverage for and shall not impose any cost sharing requirements for –
***
(4) with respect to women, such additional preventive
care and screenings . . . as provided for in comprehensive
guidelines supported by the Health Resources and
Services Administration for purposes of this paragraph.
42 U.S.C. § 300gg-13(a)(4).
The Health Resources and Services Administration (HRSA) then delegated the
task of developing appropriate preventive-services guidelines to the Institute of Medicine
(IOM), an arm of the National Academy of Sciences funded by Congress to provide the
government with expert advice on matters of public health. The IOM reviewed “what
preventive services are necessary for women’s health and well-being and therefore
should be considered in the development of comprehensive guidelines for preventive
services for women.” HRSA, Women’s Preventive Services Guidelines, available at
http://www.hrsa.gov/womensguidelines/ (last visited Oct. 22, 2013). The Institute
recommended, and the HRSA supported the suggestions, that the following preventive
services be required to be provided to women employees at no cost to the
women themselves: well-woman visits; screening for gestational diabetes; human
papillomavirus testing; counseling for sexually transmitted infections; counseling and
screening for human immune-deficiency virus; contraceptive methods and counseling;
breast-feeding support, supplies, and counseling; and screening and counseling for
interpersonal and domestic violence. Id.
No. 13-1677 Eden Foods, Inc., et al. v. Sebelius, et al. Page 4
With respect to contraceptive methods and counseling, the guidelines require
non-exempt employers and insurance plans to provide “[a]ll Food and Drug
Administration approved contraceptive methods, sterilization procedures, and patient
education and counseling for all women with reproductive capacity.” Id. Nevertheless,
HRSA explained:
The guidelines concerning contraceptive methods and counseling . . . do
not apply to women who are participants or beneficiaries in group health
plans sponsored by religious employers. Effective August 1, 2013, a
religious employer is defined as an employer that is organized and
operates as a non-profit entity and is referred to in section
6033(a)(3)(A)(i) or (iii) of the Internal Revenue Code. HRSA notes that,
as of August 1, 2013, group health plans established or maintained by
religious employers (and group health insurance coverage provided in
connection with such plans) are exempt from the requirement to cover
contraceptive services under section 2713 of the Public Health Service
Act, as incorporated into the Employee Retirement Income Security Act
and the Internal Revenue Code. HRSA also notes that, as of January 1,
2014, accommodations are available to group health plans established or
maintained by certain eligible organizations (and group health insurance
coverage provided in connection with such plans), as well as student
health insurance coverage arranged by eligible organizations, with
respect to the contraceptive coverage requirement.
Id.
Pursuant to the Act, therefore, exemptions from the contraceptive-coverage
mandate are limited to certain sizes and types of employers. Specifically, the insurance
requirements are not applicable to companies with fewer than 50 employees,
see 26 U.S.C. §§ 4980H(a), (c)(2)(A); companies with health-insurance plans in
existence on March 23, 2010, and unchanged after that date, see 45 C.F.R. § 147.140;
and “religious employers,” see 45 C.F.R. § 147.130(a)(1)(iv)(B).1
1
The regulations define a “religious employer” as an organization that meets each of the following
criteria:
(1) The inculcation of religious values is the purpose of the organization.
(2) The organization primarily employs persons who share the religious tenets of the
organization.
(3) The organization serves primarily persons who share the religious tenets of the
organization.
(4) The organization is a nonprofit organization as described in section 6033(a)(1) and
section 6033(a)(3)(A)(i) or (iii) of the Internal Revenue Code of 1986, as amended.
No. 13-1677 Eden Foods, Inc., et al. v. Sebelius, et al. Page 5
Significant taxes are imposed upon a non-exempt employer who fails to provide
the required insurance coverage. For example, an employer who offers its employees
a health plan but omits items of required coverage shall be taxed “$100 for each day in
the noncompliance period with respect to each individual to whom such failure relates.”
26 U.S.C. § 4980D(b)(1). Complete failure to offer employees any health-insurance
coverage will result in the imposition upon the employer of “an assessable payment
equal to the product of the applicable payment amount and the number of individuals
employed by the employer as full-time employees during such month.” 26 U.S.C.
§ 4980H(a).2
The Plaintiffs
Plaintiff Michael Potter is the founder, chairperson, president, and sole
shareholder of Eden Foods, Inc., a for-profit, natural-foods corporation that employs
128 individuals, more than 50 of whom work full-time for the company. The complaint
in this matter alleges that Potter is a Roman Catholic, follows the teachings of the
Catholic Church, and has “deeply held religious beliefs” “that prevent him from
participating in, paying for, training others to engage in, or otherwise supporting
contraception, abortion, and abortifacients.” In fact, Potter claims that “these procedures
almost always involve immoral and unnatural practices.”3
45 C.F.R. § 147.130(a)(1)(iv)(B) (2012).
2
“The term ‘applicable payment amount’ means, with respect to any month, 1/12 of $2,000.”
U.S.C. § 4980H(c)(1).
3
Interestingly, in a conversation with salon.com’s Irin Carmon, Potter’s “deeply held religious
beliefs,” see Complaint ¶ 83, more resembled a laissez-faire, anti-government screed. Potter stated to
Carmon, “I’ve got more interest in good quality long underwear than I have in birth control pills.” Carmon
then asked the Eden Foods chairman why he didn’t seem to care about birth control when he had taken the
step to file a lawsuit over the contraceptive mandate. Potter responded, “Because I’m a man, number
one[,] and it’s really none of my business what women do.” The article continued:
So, then, why bother suing? “Because I don’t care if the federal government is telling
me to buy my employees Jack Daniel’s or birth control. What gives them the right to
tell me that I have to do that? That’s my issue, that’s what I object to, and that’s the
beginning and end of the story.” He added, “I’m not trying to get birth control out of
Rite Aid or Wal-Mart, but don’t tell me I gotta pay for it.”
Irin Carmon, Eden Foods doubles down in birth control flap, SALON.com (Apr. 15, 2013, 7:45 am),
http://www.salon.com/2013/04/15/eden_foods_ceo_digs_himself_deeper_in_birth_control_ourtrage.
No. 13-1677 Eden Foods, Inc., et al. v. Sebelius, et al. Page 6
In his capacity as chairman of Eden Foods, Potter has for years negotiated health-
insurance policies for his employees with Blue Cross Blue Shield of Michigan. Those
previous policies “specifically excluded contraception and abortifacients, and exempted
[Potter] from providing, paying, contributing, or supporting contraception or
abortifacients for others.” On March 15, 2013, however, Potter was informed that, in
compliance with the requirements of the Affordable Care Act, Blue Cross Blue Shield
of Michigan would no longer offer such limited medical coverage; consequently, the
corporation’s group plan “had been changed to include abortifacients and contraceptive
coverage.”
Potter concedes that Eden Foods “does not fall under any sort of exemption”
provided in the Affordable Care Act, and thus the corporation is subject to the Act’s
requirement that its health-insurance policy provide no-cost coverage for contraceptives
for women employees. He alleges, however, that adherence to his claimed religious
beliefs would necessitate him and his company violating the Act’s mandate, resulting
in the imposition of significant penalties. For example, were the corporation “to violate
the law by ceasing to offer employee health insurance altogether, [it would] be penalized
with fines of $2,000 per employee per year. The fines [would be] even more
insurmountable [were the corporation to] decide to offer insurance without the
objectionable coverage.” Faced with this prospect, Potter and Eden Foods filed a
complaint in federal district court, challenging the legality of the contraceptive mandate.
The plaintiffs also filed with the court a motion for issuance of a temporary restraining
order and a preliminary injunction.
District Court and Motions Panel Rulings
The district court denied the plaintiffs’ motion for injunctive relief. In doing so,
the court first noted that the plaintiffs failed to satisfy their RFRA burden of showing
that the contraceptive mandate substantially burdened their exercise of their religion.
Quoting from the district court opinion in Hobby Lobby Stores, Inc. v. Sebelius, 870
F. Supp. 2d 1278, 1294 (W.D. Okla. 2012), rev’d 723 F.3d 1114 (10th Cir. 2013), the
district judge explained:
No. 13-1677 Eden Foods, Inc., et al. v. Sebelius, et al. Page 7
[T]he particular burden of which plaintiffs complain is that funds, which
plaintiffs will contribute to a group health plan, might, after a series of
independent decisions by health care providers and patients covered by
[the corporate] plan, subsidize someone else’s participation in an activity
that is condemned by plaintiff’s religion. Such an indirect and attenuated
relationship appears unlikely to establish the necessary “substantial
burden.”
(Internal quotation marks and citation omitted.)
The district court further concluded that the plaintiffs established no likelihood
of success on their First Amendment free-exercise claim, noting that free-exercise-of-
religion rights have never been extended to secular, for-profit corporations like Eden
Foods, which are “not the alter ego[s] of [their] owners for purposes of religious belief
and exercise.” Moreover, Potter’s First Amendment rights were not infringed by the
mandate because that regulation does not seek to burden religion, but rather to promote
public health and gender equality.
Both Eden Foods and Potter then appealed to this court, claiming as their sole
issue that “Plaintiffs Michael Potter and Eden Foods are Likely to Succeed on their
RFRA Claims.” Pending resolution of the appeal, the plaintiffs sought issuance of an
injunction restoring Eden Foods and Potter to the positions in which they found
themselves prior to the implementation of the challenged provisions of the Affordable
Care Act. A motions panel of this court unanimously denied that request, noting that the
three judges were “not persuaded, at this stage of the proceedings, that a for-profit
corporation has rights under the RFRA. Moreover, the burden Potter claims is too
attenuated. The contraceptive mandate is imposed on Eden Foods, not Potter.” Eden
Foods, Inc. v. Sebelius, No. 13-1677 (6th Cir. June 28, 2013) (order).
DISCUSSION
In reviewing whether the plaintiffs have demonstrated entitlement to injunctive
relief, we examine four factors: (1) the movants’ likelihood of success on the merits of
their claim; (2) whether the movants would suffer irreparable injury without the
injunction; (3) whether issuance of the injunction would cause substantial harm to
No. 13-1677 Eden Foods, Inc., et al. v. Sebelius, et al. Page 8
others; and (4) whether issuance of the injunction would serve the public interest. See,
e.g., Ne. Ohio Coal. for Homeless v. Husted, 696 F.3d 580, 590-91 (6th Cir. 2012). We
examine the district court’s decision on the likelihood of the movants’ success on the
merits de novo, but we will reverse the district court’s decision to grant or deny an
injunction only for an abuse of discretion. Id. at 591. “Although no one factor is
controlling, a finding that there is simply no likelihood of success on the merits is
usually fatal.” Gonzales v. Nat’l Bd. of Med. Exam’rs, 225 F.3d 620, 625 (6th Cir.
2000).
Given intervening events since the plaintiffs’ filing of this appeal, we conclude
that the plaintiffs in this matter have “simply no likelihood of success on the merits.”
On September 17, 2013, another panel of this court released its opinion in Autocam
Corp. v. Sebelius, __ F.3d ___, 2013 WL 5182544 (6th Cir. Sept. 17, 2013), a case that
resolved a similar challenge to the Affordable Care Act’s contraceptive mandate. Like
the case presently before us, Autocam involved claims by a for-profit, secular,
incorporated business and the owners of that closely-held corporation. Like Eden Foods
and Potter, the plaintiffs in Autocam alleged that the mandate forces practitioners of the
Roman Catholic faith to choose between incurring substantial financial penalties for
disobeying duly-promulgated regulations and ignoring sincerely held religious beliefs
concerning the use of artificial contraceptives. Id. at *1. As in this case, the plaintiffs
in Autocam argued that compliance with the dictates of the contraceptive mandate would
substantially burden their exercise of religion in contravention of the protections
afforded by RFRA. Id.
Claims Raised by Plaintiff Potter
Addressing those concerns and allegations, the Autocam opinion relied on basic,
well-established principles of corporate law to hold that the individual
owners/shareholders of Autocam had no standing to bring their claims against the
government “in their individual capacities under RFRA, nor [could] Autocam assert the
[individual plaintiffs’] claims on their behalf.” Id. at *5. According to the court,
“incorporation’s basic purpose is to create a distinct legal entity, with legal rights,
No. 13-1677 Eden Foods, Inc., et al. v. Sebelius, et al. Page 9
obligations, powers, and privileges different from those of the natural individuals who
created it, who own it, or whom it employs.” Id. (quoting Cedric Kushner Promotions,
Ltd. v. King, 533 U.S. 158, 163 (2001)).
Autocam’s resolution of that standing issue now constitutes the law of this
circuit. Consequently, we may not ignore that published circuit precedent, absent an
intervening Supreme Court decision or an overruling of the prior decision by this court
sitting en banc. See Salmi v. Sec’y of Health & Human Servs., 774 F.2d 685, 689 (6th
Cir. 1985). Moreover, even if the Autocam decision had not been issued, we would not
have ruled differently on Potter’s claims.
As the Supreme Court held in United States v. Lee, 455 U.S. 252 (1982):
When followers of a particular sect enter into commercial activity as a
matter of choice, the limits they accept on their own conduct as a matter
of conscience and faith are not to be superimposed on the statutory
schemes which are binding on others in that activity. Granting an
exemption from [statutory schemes] to an employer operates to impose
the employer’s religious faith on the employees.
Id. at 261 (declining to grant a Social Security tax exemption under the Free Exercise
Clause to Amish employers). The Affordable Care Act’s contraceptive mandate imposes
duties and potential penalties upon Eden Foods only, not upon Potter, despite his status
as the sole shareholder of the corporation. By incorporating his business, Potter
voluntarily forfeited his rights to bring individual actions for alleged corporate injuries
in exchange for the liability and financial protections otherwise afforded him by
utilization of the corporate form. Adoption of Potter’s argument that he should not be
liable individually for corporate debts and wrongs, but still should be allowed to
challenge, as an individual, duties and restrictions placed upon the corporation would
undermine completely the principles upon which our nation’s corporate laws and
structures are based. We are not inclined to so ignore law, precedent, and reason.
As this court held in Autocam, individual shareholders/owners of a corporation
have no standing to challenge provisions of laws that the corporation must obey under
No. 13-1677 Eden Foods, Inc., et al. v. Sebelius, et al. Page 10
risk of legal penalty. It follows that Potter’s claims must be dismissed for lack of
jurisdiction.
Claims Raised by Eden Foods
In pertinent part, RFRA provides that the “[g]overnment shall not substantially
burden a person’s exercise of religion even if the burden results from a rule of general
applicability.” 42 U.S.C. § 2000bb-1(a). Relying on this statutory prohibition, Eden
Foods claims that the Affordable Care Act’s contraceptive mandate does indeed burden
the corporation’s exercise of religion. Such an assertion necessarily raises a threshold
issue: “whether a for-profit, secular corporation is able to engage in religious exercise
under the Free Exercise Clause of the First Amendment and the RFRA.” Conestoga
Wood Specialties Corp. v. Sec’y of U.S. Dep’t of Health & Human Servs., 724 F.3d 377,
381 (3d Cir. 2013), petition for cert. filed, (U.S. Sept. 19, 2013) (No. 13-356).
We need not engage in an extensive discussion of the pros and cons of the query
because this court, in Autocam, already has resolved the issue for this circuit. Relying
in large part on the Third Circuit’s analysis in Conestoga Wood Specialties, Autocam
held that a for-profit corporation “is not a ‘person’ capable of ‘religious exercise’ as
intended by RFRA.” Autocam, __ F.3d at ___, 2013 WL 5182544, at *7. Such a
holding necessarily guides our analysis of the identical issue in this case. Thus, as in
Autocam, the corporate plaintiff here has failed to carry its burden of demonstrating that
it has a strong likelihood of succeeding on the merits of its RFRA claims. Because Eden
Foods cannot establish this first and most critical of the four criteria for justifying
issuance of a preliminary injunction, see Gonzales, 225 F.3d at 625, the district court’s
denial of the relief sought by Eden Foods was proper and not an abuse of discretion.
CONCLUSION
Plaintiffs Eden Foods and Michael Potter have attempted to distinguish their
challenges to the applicability of the Affordable Care Act’s contraceptive mandate from
those raised by the plaintiffs in Autocam. They have failed to do so. Thus, in
accordance with the law of the circuit announced in Autocam, we hold that Eden Foods,
No. 13-1677 Eden Foods, Inc., et al. v. Sebelius, et al. Page 11
a secular, for-profit corporation, cannot establish that it can exercise religion, and that
Potter cannot establish his standing to challenge obligations placed only upon the
corporation, not upon him as an individual. Consequently, we AFFIRM the district
court’s denial of Eden Foods’s motion for a preliminary injunction and REMAND the
case to the district court with instructions to DISMISS Potter’s claims for lack of
jurisdiction.