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The Supreme Court Has Given All Corporations a Gift That They May Live To Regret

It is beyond refute that the conservatives on the nation’s High Court went on a rampage beginning in 2010 to serve the interests of corporations over those of the people. Whether it was giving personhood to corporations in Citizens United, disallowing class action lawsuits against corporate giant Walmart, or giving religious liberty to “closely-held” corporations in the Hobby Lobby case, the conservatives on the court have reliably given corporations anything their hearts’ desired. However, in their religious zeal to bestow another gift on corporations in the Hobby Lobby case, the Christian conservative males on the Court gave all corporations a gift they did not want and may live to regret.

The principle behind incorporating a business is to delineate the owner from the corporation so when a company makes a lot of money, the owners get rich and spirit the profits away in their personal accounts apart from the corporation. However, if the incorporated business falls into debt, declares bankruptcy, and fails, the owner(s) are not held accountable for any corporate debt or liability because they are completely separate from the “corporation.”

For businesses owners, legal separation is a safeguard according to most business scholars because it encourages entrepreneurialship with a guarantee that if a new, or old, business fails, the owner(s) will not lose their personal assets such as their home(s), savings, yachts, jets, or retirement accounts along with their business. Incorporation was devised to precisely “distinguish the corporation’s activities from those of the owners.” Until Hobby Lobby, a corporation was not its owners, and that separateness was the “foundational principle of corporate law.” The principle is known as “the corporate veil,” because regardless the personal fortune earned through the corporation, creditors have no legal recourse to recoup their losses, and federal regulators can never pursue a corporation’s owners for malfeasance; that all changed dramatically with one very ill-advised Supreme Court ruling.

When the Catholic conservatives on the High Court ruled that Hobby Lobby Incorporated and the Green family are one in the same due to “its” religion, they effectively tore away the corporate veil making owner(s), shareholders, employees and CEOs personably liable for anything the corporation does. In fact, the Hobby Lobby ruling contradicted a 2001 Supreme Court ruling that said, “Linguistically speaking, the employee and the corporation are different “persons,” even where the employee is the corporation’s sole owner. After all, incorporation’s basic purpose is to create a distinct legal entity, with legal rights, obligations, powers, and privileges different from those of the natural individuals who created it, who own it, or whom it employs.” That fundamental principle of different entities, or “corporate veil,” according to legal and business scholars, and affirmed by the Supreme Court in 2001, vanished when the Supreme Court allowed Hobby Lobby’s owners to assert their religious rights over the entire corporation. The ruling said a company is not truly separate from its owners, and because the conservatives ruled that all closely-held corporations are recipients of their religious largesse, it means that over 90% of all businesses in America lost the delineation between corporation and owner(s).

According to a law professor from New York University, Burt Neuborne, “If religious shareholders can do it, why can’t creditors and government regulators pierce the corporate veil in the other direction?” The same question was raised by 44 other law professors who filed a friends-of-the-court brief that implored the Court to reject Hobby Lobby’s argument and keep the corporate veil in place. They argued that, “Allowing a corporation, through either shareholder vote or board resolution, to take on and assert the religious beliefs of its shareholders in order to avoid having to comply with a generally-applicable law with a secular purpose is fundamentally at odds with the entire concept of incorporation. Creating such an unprecedented and idiosyncratic tear in the corporate veil would also carry with it unintended consequences.”

It is why, despite Republicans cheering the Hobby Lobby decision as a major victory for business over the federal government, the U.S. Chamber of Commerce and every Fortune 500 company stayed clear of siding with Hobby Lobby. The conservatives exposed why the largest corporations were concerned over a favorable decision for the Green-Hobby Lobby entity when they said, “The purpose of extending rights to corporations is to protect the rights of people associated with the corporation, including shareholders, officers, and employees. Protecting the free-exercise rights of closely held corporations thus protects the religious liberty of the humans who own and control them.”

That means then, that Hobby Lobby and the Greens, or any corporation and its owners, shareholders, and employees are indistinguishable legal entities that decimates the concept of incorporation and opens the door for future lawsuits against a corporation’s owners specifically. Writing for the dissenters, Justice Ginsburg gave a portent of future lawsuits against a corporation’s owner or shareholders where a plaintiff can argue that “the separation should not hold only when it serves the interests of those who control the corporation.” According to the conservative Justice’s ruling, it cannot hold after they rent the corporate veil in two and opened the floodgates for legal actions against any corporation’s owner(s), shareholders, or CEO.

Religious zeal is a powerful motivator, and the conservatives on the Court let their religious objection to contraceptives overrule their devotion to corporations. Justice Alito may have thought writing that “the decision should be narrowly applied to the peculiarities of the case” instead of the decision IS narrowly applied to the peculiarities of the case would give religious corporations free reign to discriminate legally, but he did not think about the damage to corporate owners. The five conservatives on the Court, in their infinite wisdom, exposed wealthy corporate owners to a rash of unintended consequences, and unleashed a means to dismantled the protections inherent to corporations they are so devoted to.

As despicable, and dangerous, as the conservative justices’ ruling is, and it is extremely dangerous, the silver lining is the very premise of incorporation has been dismantled and corporate owners can no longer claim they are separate entities apart from their corporations. They have the conservatives on the Supreme Court to thank for the gift, and it is undeniably a gift they did not want.


View Comments

  • There are very good reasons this stunt never works.

    The founding fathers delighted in political discourse and intellectual reasoning. It was their life's passion.

    Dim-bulbs with inadequate education tend to think history is unimportant. Those in power stay in power because of a lack of education in the general populace.

    Reality is a hell of a tutor.

  • No matter. As corporations are now people, it's just a matter of time before a corporation runs for president or congressman.

  • I think the corporations and shareholders should be taxed at a personal rate just like any other citizen. If corporations are people then they belong in the top tax bracket. No more tax breaks.

    I can't wait until some of the imaginative attorneys out there challenge and twist their ruling. I am quite sure they are scheming their little heads off.

  • Not all corporations received this "gift", only that ill-defined group of "closely held" corporations, that make up 90% of small businesses. The legal ramifications of that may ultimately set the stage for the complete subsumation of small business by multi-nationals.

    • Remember, included in the 90% of "closely-held" corporations, besides every small-medium business including "Sole Proprietors" are significant corporate giants like Cargill, Dell, and Koch Industries among many, many others. Their corporate protections are as much in jeopardy as little guys and one hopes they lose them big time.

  • Interesting topic -- but I could barely get past the typo/misspelling in the first sentence, and it made me wonder how credible this article is. Does no-one proofread -- or do folks at PoliticusUSA really think plurals take an apostrophe?

    • "I could barely get past the typo/misspelling in the first sentence ..."

      LMAO. For real? This is what you took away from this article? A misplaced apostrophe?

      Oh, the drama!!! Could bareeeeeeeeely get past it!

      I am an editor by trade. Words are my living. I could not give one gnat's arse about that typo. What's that old saying .... forest .... trees ...

    • You're willing to negate an entire article based on what you think is a wrongly used apostrophe? Ridiculous! For the record, the apostrophe is used properly. It is showing the nation's posession of the High Court. Here are a couple of examples: Joe's toy--the toy belongs to Joe; nation's High Court--the High Court belongs to the nation; Sue's lemonade--the lemonade belongs to Sue. You see how this works?

  • Wonder how many lawsuits it will take, how many settlements it will need, how many "rich lifestyles" it must tank, before this ruling is reversed. The short-sightedness of the "religious right" and their political agenda is foolhardy at best.

  • So, the Robert's conservative, catholic, corporatist Court of 5 has ruled to replace democracy with theocracy. Time for impeachment proceedings!!!

    • there has been one impeachment and removal of a scotus judge, I think it was in the late 1800s

      Be nice to get rid of alito, Thomas and let Obama appoint real liberals.

      Since the racist assholes of the repubs want to impeach obama, maybe we can do the same

      lets face it, the racists would never get it thru the senate. So at this point its a fund raising stunt and a setupe if the gain control of the senate

      When the supreme court rules for gays re doma and Prop 8 the evangelical leader in effect said - we'll get even.

      thats primarily where all this crap is ocming from.

      From American fascists - the christian right and the war on america by chris hedges

      "25 years ago pat robertson & others spoke of America becoming a christian nation to built a global xtain empire (a la caliphate?), it was hard to take such rhetoric seriously. NOw its a very real threat to our freedom and way of life. Its core- a mass movement fueled by unbridled nationalism& hatred of...

  • So we will now be an audience for the fighting of the corporation behemoths. In Florida do they give Silver Springs water (killing it) to Agribusiness (practically a monopoly, few real farmers or ranchers anymore.) or Developers (the people who make the real money build nothing but-- to get approvals to make the land valuable, need to grab a water source.) I wonder if this is a way to have Wallstreet take over Hobby Lobby and Walmart? This is what worship of corporations will get ya. They are salivating at grabbing family owned corporations. Just sue them or threaten to sue them and they will have takeovers. With thousands of stockholders, wallstreet won't feel the heat as bad. Time for the hunt and take down to begin. Wallstreet all owns each other. It is then on big Monopoly.

  • This could be great news for the environment.Start suing the owners for the companies pollution.I looking at you Koch bros.

    • Unlikely if the Corporation is three layers deep. They would have to pierce all three layers to get at the owners.

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