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I suspect that the government lawyers who successfully defended the HHS contraceptives mandate against RFRA and Free Exercise claims in Conestoga Wood Specialties Corp. v. HHS really would have preferred to win on different grounds. That is because the basis for the Third Circuit’s decision is legally insubstantial. On an issue that will be decided by the Supreme Court, it would be better for the government to have won on a more defensible basis than the conclusion that a “for-profit, secular corporation” cannot “exercise religion.”

The dissenting opinion by Judge Jordan convincingly demonstrates that the majority’s ultimate conclusion is wrong and that its supporting reasoning is defective. Will Baude at Volokh Conspiracy and Marc DeGirolami at Mirror of Justice have also raised questions about the panel majority’s analysis. Over the next couple of weeks, I aim to provide additional critical commentary that elaborates on criticisms previously raised and offers new angles of analysis and criticism. While some of these criticisms will be based on arguments advanced in the amicus brief that I co-authored in Conestoga, I aim to expand beyond the targeted set of arguments advanced there.

For now, I will begin with Marc DeGirolami’s argument about the short shrift given RFRA in the panel majority’s analysis. The majority opinion states: “Our conclusion that a for-profit, secular corporation cannot assert a claim under the Free Exercise Clause necessitates the conclusion that a for-profit, secular corporation cannot engage in the exercise of religion. Since Conestoga cannot exercise religion, it cannot assert a RFRA claim.” DeGirolami argues that the court should not have simply assumed “that a term as used in the Constitution must mean exactly the same thing as a term used in a statute.”

DeGirolami is right that there cannot be a one-to-one relationship between RFRA and the Free Exercise Clause as interpreted by the Supreme Court. The purpose of RFRA was to replace the legal standard for evaluating Free Exercise claims adopted in Employment Division v. Smith, 494 U.S. 872 (1990). But given the stated intention of RFRA, there should be a close correspondence between the pre-Smith reach of the Free Exercise Clause and the reach of RFRA. One of the purposes declared in the legislation is “to restore the compelling interest test as set forth in Sherbert v. Verner, 374 U.S. 398 (1963) and Wisconsin v. Yoder, 406 U.S. 205 (1972) and to guarantee its application in all cases where free exercise of religion is substantially burdened.” 42 U.S.C. § 2000bb(b)(1).

If the panel majority’s analysis had started with RFRA instead of the Free Exercise Clause, it is less likely that its analysis would have led to the wrong conclusion. To begin with, there is more textual guidance in the U.S. Code. As DeGirolami points out, Congress has declared that the protected “exercise of religion” “includes any exercise of religion, whether or not compelled by, or central to, a system of religious belief.” That language suggests an expansive understanding of “exercise of religion,” and it invites further inquiry into how “exercise of religion” should be understood.

As I have previously argued in connection with the Third Circuit’s earlier mistaken decision on the contraceptives mandate, “a religiously based refusal to do something otherwise required by law is an ‘exercise of religion.’” Consider the facts of Sherbert v. Verner, 374 U.S. 398 (1963), one of the two cases singled out in RFRA. The exercise of religion in that case was Adele Sherbert’s religion-based refusal to work on Saturday. See id. at 403 (describing the relevant conduct as “appellant’s conscientious objection to Saturday work”).

A corporation can engage in this kind of “exercise of religion” if a corporation can refuse, for religious reasons, to do something otherwise required by law. And it plainly can. Suppose a federal law requiring fast-food restaurants located near interstate highways to be open seven days a week. Chick-fil-A’s religion-based refusal to operate on Sundays in violation of this law would surely be an “exercise of religion” akin to Ms. Sherbert’s refusal to work on Saturdays.

The profit-making character of the corporation does not change the analysis of whether the corporation can make a religion-based decision. Chick-fil-A is a profit-making business. Yet it foregoes the profits it would otherwise make through Sunday operation because its religion-based corporate policy controls the manner in which it seeks to make a profit. Similarly, Ms. Sherbert was working for money (and later seeking unemployment benefits). Yet her religious obligation not to work on Saturday conditioned the manner in which she could go about earning money.

The panel majority opinion simply does not address this line of argument. One way in which its failure to address RFRA independently may have contributed to this failure to analyze what counts as a protected “exercise of religion” emerges from a word search for that phrase. It does not appear until page 28, after the majority has already concluded its Free Exercise analysis. In the course of its Free Exercise analysis, the Third Circuit panel majority does not ask whether a corporation can engage in the “exercise of religion” (RFRA’s words), but rather whether corporations can “engage in religious exercise” [11] or whether corporations can “exercise religion” [15]. The wording shift is subtle and almost certainly unintentional, but it nevertheless tends to lead analysis in the wrong direction. For the panel majority’s rephrasing suggests asking whether a corporation can engage in religious exercises like prayer, worship, participation in sacraments, and so on. But that is not what the governing law requires.

One might try to distinguish the exercise of religion in Sherbert on the ground that the underlying basis of the refusal to work on Saturday was so that Ms. Sherbert could engage in the religious exercise of attending worship services. The problem with this distinction is that it is sufficient for the religion-based refusal to be sincere and religion-based. It does not need to be tied to some other “religious exercise.” Consider Thomas v. Review Board, 450 U.S. 707 (1981). The exercise of religion in that case was Mr. Thomas’s refusal to participate in the production of turrets for military tanks. This refusal was based on Mr. Thomas’s beliefs as a Jehovah’s Witness. It did not matter that this religion-based refusal conditioned Mr. Thomas’s pursuit of money. The Supreme Court found it sufficient that “Thomas terminated his employment for religious reasons.” Similarly, the Third Circuit should have found it sufficient that Conestoga objects to compliance with the mandate for religious reasons. That religion-based objection is an “exercise of religion” within the compass of both RFRA and the Free Exercise Clause.

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A split panel of the Third Circuit recently joined the minority of federal courts that have denied preliminary injunctive relief to for-profit corporations and their owners in RFRA and Free Exercise challenges to the HHS Mandate. Both judges in the majority (Judge Rendell and Judge Garth) endorse the district court’s conclusions that “a secular, for-profit corporation . . . has no free exercise rights under the First Amendment, and is not a “person” under RFRA.” Writing in dissent, Judge Jordan contends (powerfully) that these conclusions rest on erroneous premises and merit further consideration by the court. If anything, Judge Jordan’s dissent understates the problems with the majority’s adoption of these conclusions because the standard of review did not require him to reach definitive conclusions. There is no legal basis for a judicial carve-out of “secular, for profit corporations” from RFRA’s protections.

RFRA provides that “[g]overnment shall not substantially burden a person’s exercise of religion” unless the government satisfies strict scrutiny. 42 U.S.C. § 2000bb-1(a) (emphasis added). In the U.S. Code, “person” ordinarily encompasses “corporations, companies, associations, firms, partnerships, societies, and joint stock companies, as well as individuals.” 1 U.S.C. § 1. Nothing in RFRA excludes corporations generally. To the contrary, it is plain that corporations can assert claims under RFRA. The only Supreme Court case applying RFRA against the federal government involved a claim asserted by a corporation, O Centro Espírita Beneficente União do Vegetal.

Rather than adopt the obviously incorrect interpretation of “person” to exclude corporations, courts have carved up the category of corporations into “religious corporations” and “secular, for-profit corporations.” But there is no textual basis for this distinction in the statutory term “person.”

When one analyzes the claim, it turns out that the argument is not really about the meaning of the word “person” (even though the conclusion of the argument purports to be a claim about the meaning of this word). Rather, the argument pivots on “exercise of religion.” In the words of the district court opinion adopted by the Third Circuit, “a for-profit, secular corporation cannot exercise religion.”

Again, the claim is not that corporations cannot engage in exercise of religion. After all, corporations can, and do, exercise religion. Consider, for example, Church of Lukumi Babalu Aye, Inc. or Corporation of the Presiding Bishop of the Church of Jesus Christ of Latter-Day Saints. The claim, rather, is limited to “secular, for-profit corporations.” But the claim rests on a mistake about “exercise of religion” under federal law and a mistake about corporate action.

As to “exercise of religion,” it is plain that a religiously based refusal to do something otherwise required by law is an “exercise of religion.” Indeed, two of the leading cases on the meaning of the Free Exercise Clause involved individuals who refused, in the course of their employment (profit-seeking employment!) to do something. Because of their religious beliefs, Eddie Thomas refused to fabricate tank turrets and Adele Sherbert refused to work on Saturdays. These religion-based refusals were their protected exercises of religion.

A corporation’s religion-based refusal to engage in a particular action is also an “exercise of religion.” A corporation’s religion-based refusal to open its stores on Sundays, for example, is as much an exercise of religion as an individual’s refusal to  work on Saturdays. The involvement of a profit motive makes no difference. People work for money, and some choose not to work on certain days for religious reasons. Similarly, for-profit corporations operate for money, and some choose not to operate on certain days for religious reasons.

Some judges seem to think that a for-profit corporation can do nothing but seek profits. In the Third Circuit decision mentioned above, for example, Judge Garth insists that “the purpose–and only purpose–of the plaintiff Conestoga is to make money!” There is no reason to characterize corporate purpose so narrowly, and certainly no basis in corporate law to do so. Even a publicly traded corporation with an obligation to act in the best interests of shareholders can be “socially responsible” and incur various costs in pursuit of long-term value and goodwill.

Unfortunately, the misunderstandings involved run even deeper. Judge Garth approvingly adopts Judge Heaton’s reasoning in the Hobby Lobby case that “[g]eneral business corporations . . . do not pray, worship, observe sacraments or take other religiously-motivated actions separate and apart from the intention and direction of their individual actors.” But this reasoning applies as well, of course, to religious corporations. All corporations act through “the intention and direction of their individual actors.” When performed under certain circumstances, however, the actions of individuals count as the action of the corporation. We have no problem understanding this concept in the context of discrimination. If a for-profit corporation were to announce a policy to refuse to hire Muslims, or adherents of some other religion, there would be no difficulty in attributing that religion-based discrimination to the corporation. The law recognizes corporate intention and corporate motivation all over the place. If a for-profit corporation can discriminate on the basis of religion, why can’t a for-profit corporation perform some other act on the basis of religion? When Hobby Lobby Stores, Inc., for example, decides to honor the Sabbath by staying closed on Sundays (and thereby forgoing profits the corporation would otherwise earn), that is a corporate act on the basis of religion–a corporate “exercise of religion.” And just as a corporate refusal, for religious reasons, to operate on a particular day is a corporate “exercise of religion” under federal law, so too is a corporate refusal, for religious reasons, to include particular drugs and devices in the group health plan offered by the corporation to its employees.

Statutory law does sometimes distinguish between for-profit and not-for-profit corporations. Under Title VII, for example, for-profit corporations may not limit hiring to co-religionists, while some not-for-profit corporations can. But this only shows that Congress knows how to make that distinction when it wishes to do so. Congress made no such distinction in RFRA.

If people think that, as a matter of good public policy, there should be such a difference, then Congress can amend RFRA. Or Congress can amend the PPACA to explicitly exclude the application of RFRA’s protections from the statutory scheme. These exclusions might raise some constitutional questions, but we are not even close to that right now. Instead, some courts are incorrectly carving out certain corporations from RFRA’s blanket coverage. These judicial carve-outs are based on mistaken statutory interpretation, a mistaken understanding of the meaning of “exercise of religion,” and a mistaken understanding of corporate action.

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Virginia’s FOIA allows “citizens of the Commonwealth” access to certain government records. A citizen of Rhode Island and a citizen of California tried to use the law to get records, but they were rebuffed because they were not Virginians. They sued, contending that Virginia’s FOIA violates the Privileges and Immunities Clause in Article IV and the dormant Commerce Clause. They lost.

Judge Agee wrote the opinion in McBurney v. Young, in which Judge Niemeyer and Judge Gregory joined.

The challenge relied heavily on a Third Circuit ruling, Lee v. Minner, 458 F.3d 194 (3d Cir. 2006), that held unconstitutional a similar Delaware law. Judge Agee wrote that the decision in Lee extended the Privileges and Immunities Clause beyond what the Supreme Court has staked out, and that, in any event, the right at issue in that case was different from the right at issue in the Fourth Circuit case.

(Note: This is the second time that the case has been to the Fourth Circuit. The first appeal centered on standing. See McBurney v. Cuccinelli, 616 F.3d 393 (4th Cir. 2010).)

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A couple of weeks ago, I criticized the Third Circuit’s decision in Sullivan v. DB Investments, Inc., which affirmed certification of a nationwide class of indirect purchasers and approved a class settlement that treated identically indirect purchasers who were entitled to pursue damages under state law and those who were not entitled to do so.

Dan Bushell at Florida Appellate Review offers a thoughtful commentary on the decision. Bushell contends that the “main take-away” of the decision is that “there is a real and significant difference between the standard that must be met to certify a settlement class from the standard for certifying a litigation class.”

I agree with Bushell that the best reading of the opinion is that its analysis of certification should be limited to settlement-only classes. Unfortunately, the Third Circuit could not say so explicitly because to do so would be inconsistent with Amchem, in which the Supreme Court stated that, apart from considerations of manageability, the requirements of Rule 23 “demand undiluted, even heightened, attention in the settlement context.”

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Federal law does not allow indirect purchasers to pursue damages under the antitrust laws. Many states follow this rule, and many do not. The Third Circuit’s en banc decision in Sullivan v. DB Investments affirms the certification of an indirect purchaser settlement class that treats indirect purchasers who can pursue damages claims under state antitrust law identically with indirect purchasers who cannot pursue damages claims under state antitrust law. Objectors to certification and settlement challenged certification based on commonality and predominance grounds, and challenged the pro rata distribution aspect of the settlement as unfair under Rule 23(e). I agree with the dissent that there are Rule 23 problems with the certification and the settlement. The best way to think about those problems, in my view, is as a failure of typicality.

Apart from the majority opinion by Judge Rendell and the dissent by Judge Jordan, there is also a concurring opinion by Judge Scirica, a leader among federal judges in analyzing class actions. Yet there is virtually no analysis of the typicality requirement in any of the opinions. This is an important omission from the analysis, because it is the typicality requirement that specifically calls for a claim to claim comparison. See Rule 23(a)(3) (requiring an assessment whether “the claims or defenses of the representative parties are typical of the claims or defenses of the class”).

Consider the following key paragraphs from the en banc majority’s opinion:

At bottom, we can find no persuasive authority for  deeming the certification of a class for settlement purposes improper based on differences in state law. The objectors and our dissenting colleagues nevertheless insist that, despite the prevalence of the shared issues of fact and law stemming from the defendant‘s conduct common as to all class members and each class member‘s resulting injury, states‘ inconsistent treatment of indirect purchaser damages claims overwhelms the commonalities. They advocate this because approximately twenty-five states have not extended antitrust standing to indirect purchasers through Illinois Brick repealer statutes or judicial edict; likewise, some uncertain number of states do not permit an end-run around antitrust standing through claims based on consumer protection and/or unjust enrichment statutes. (See Quinn Supp. Br. on Reh‘g En Banc 21-22.) It follows then, they argue, that a large proportion of the Indirect Purchaser Class lacks any valid claims under applicable state substantive law, and, therefore, cannot “predominantly” share common issues of law or fact with those Indirect Purchasers actually possessing valid claims.

In turn, they insist that a district court must undertake a thorough review of applicable substantive law to assure itself that each class member has “at least some colorable legal claim” (Dissenting Op. at 10) or “has a valid claim” (Quinn  Supp. Br. at 16) before certifying a settlement. But this focus is misdirected. The question is not what valid claims can plaintiffs assert; rather, it is simply whether common issues of fact or law predominate. See Fed. R. Civ. P. 23(b)(3). Contrary to what the dissent and objectors principally contend, there is no “claims” or “merits” litmus test incorporated into the predominance inquiry beyond what is necessary to determine preliminarily whether certain elements will necessitate individual or common proof. Such a view misreads Rule 23 and our jurisprudence as to the inquiry a district court must conduct at the class certification stage. An analysis into the legal viability of asserted claims is properly considered through a motion to dismiss under Rule 12(b) or summary judgment pursuant to Rule 56, not as part of a Rule 23 certification process.

The problem with the majority’s analysis would have been evident if the clear divergence among the claims possessed by class members who have antitrust standing to seek damages and the claims possessed by class members who do not have antitrust standing to seek damages had been viewed through the lens of the typicality requirement.

By comparison, consider the following discussion of typicality in a Fourth Circuit opinion about a putative antitrust class action, Dieter v. Microsoft, 436 F.3d 461 (4th Cir. 2006):

The class action device, which is “designed as an exception to the usual rule that litigation is conducted by and on behalf of the individual named parties only,” Gen. Tel. Co. of Southwest v. Falcon, 457 U.S. 147, 155, 102 S.Ct. 2364, 72 L.Ed.2d 740 (1982) (internal quotation marks omitted), allows named parties to represent absent class members when, inter alia, the representative parties’ claims are typical of the claims of every class member. To be given the trust responsibility imposed by Rule 23, “a class representative must be part of the class and possess the same interest and suffer the same injury as the class members.” Id. at 156, 102 S.Ct. 2364 (internal quotation marks omitted). That is, “the named plaintiff’s claim and the class claims [must be] so interrelated that the interests of the class members will be fairly and adequately protected in their absence.” Id. at 157 n. 13, 102 S.Ct. 2364. The essence of the typicality requirement is captured by the notion that “as goes the claim of the named plaintiff, so go the claims of the class.” Broussard v. Meineke Discount Muffler Shops, Inc., 155 F.3d 331, 340 (4th Cir.1998) (quoting Sprague v. Gen. Motors Corp., 133 F.3d 388, 399 (6th Cir.1998) (internal quotation marks omitted)).

The typicality requirement goes to the heart of a representative parties’ ability to represent a class, particularly as it tends to merge with the commonality and adequacy-of-representation requirements. See Amchem, 521 U.S. at 626 n. 20, 117 S.Ct. 2231Gen. Tel., 457 U.S. at 157 n. 13, 102 S.Ct. 2364. The representative party’s interest in prosecuting his own case must simultaneously tend to advance the interests of the absent class members. For that essential reason, plaintiff’s claim cannot be so different from the claims of 467*467 absent class members that their claims will not be advanced by plaintiff’s proof of his own individual claim. That is not to say that typicality requires that the plaintiff’s claim and the claims of class members be perfectly identical or perfectly aligned. But when the variation in claims strikes at the heart of the respective causes of actions, we have readily denied class certification. See, e.g.,Broussard, 155 F.3d at 340-44 (holding that plaintiffs could not sustain a class action based on a theory of collective breach of contract because variations in the claims undermined typicality); Boley v. Brown, 10 F.3d 218, 223 (4th Cir.1993) (affirming the district court’s denial of class certification when the resulting harm was dependent on considerations of each class member’s unique circumstances). In the language of the Rule, therefore, the representative party may proceed to represent the class only if the plaintiff establishes that his claims or defenses are “typical of the claims or defenses of the class.” Fed.R.Civ.P. 23(a)(3) (emphasis added).

Thus, it follows that the appropriate analysis of typicality must involve a comparison of the plaintiffs’ claims or defenses with those of the absent class members. To conduct that analysis, we begin with a review of the elements of plaintiffs’ prima facie case and the facts on which the plaintiff would necessarily rely to prove it. We then determine the extent to which those facts would also prove the claims of the absent class members.

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In Sullivan v. DB Investments, Inc., the en banc Third Circuit has affirmed the approval of a nationwide class settlement that includes people with no viable claim.

De Beers allegedly broke federal and state antitrust laws in its marketing of diamonds. After a long period of ignoring litigation in the United States, De Beers orchestrated a nationwide class settlement of the claims against it. After receiving district court approval, that settlement was thrown out by the Third Circuit. But now the Third Circuit, sitting en banc, has decided that the class and the class settlement comport with Rule 23.

I need to sit down with the opinions and examine them more closely, but my initial reaction is that the Third Circuit has erred significantly–and not simply by rejecting arguments advanced by Howard Bashman (which is a mark, but not a criterion, of infirmity).

The federal judiciary has no business overseeing conduct that does not involve a claim upon which relief can be granted. And it is hard to see how a federal court could have evaluated the fairness of a settlement that involved parties with no colorable claim to settle. But these are just initial reactions.

My overriding impression in going over the en banc opinion was that it was a throwback to an earlier era (not too long ago) when federal courts were much less careful than they should have been about Rule 23.

(The sense of a throwback was heightened when I saw the appellate court approvingly cite the district court opinion in McCoy v. Health Net, Inc., 569 F. Supp. 2d 448 (D.N.J. 2008), which approved the settlement of a class action previously vacated by the Third Circuit in Wachtel v. Guardian Life Ins. Co. of Am., 453 F.3d 179 (3rd Cir. 2006). While the two cases are different in many respects, it is worth noting that Judge Smith opposed class treatment in both the De Beers case and the Health Net case. Although the Third Circuit’s decision in Wachtel sounded in Rule 23(c), that may have reflected a compromise among the panelists, as there were serious predominance questions in the underlying class as well.)

[UPDATE: Welcome, readers of "How Appealing." See here for another post on the DeBeers case, contending that a class that contains indirect purchasers with damages claims and indirect purchasers without damages claims fails under the typicality requirement of Rule 23(a)(3).)]

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That is one of the questions that came to mind in reading today’s Third Circuit decision in Doe v. Indian River School District. The Third Circuit holds unconstitutional the Indian River School District’s policy of allowing Board members to open Board meetings (often attended by students) with a prayer. In practice, this policy resulted in almost exclusively Christian prayers.

The decision has some important factual differences, but it is closely related to a circuit split between the Fourth and Eleventh Circuits that I previously mentioned.

Constitutional analysis aside for the moment, a question raised by these cases is what is meant by “sectarian” and “non-sectarian.” The opinions all seem to use “sectarian” to denote a broad religious tradition, such as Christianity, as compared with another broad religious tradition such as Islam, Judaism, and so on. To invoke Jesus’ name is to render the prayer “sectarian.” Outside of the law, “sectarian” often has a narrower meaning. When used in this narrower sense, it denotes a particular group within a broad religious tradition as compared to another group within that tradition (such as the Old Order Amish within Christianity or the Wahabi within Islam). The broader usage in the caselaw appears to follow from the idea of “nonsectarian” as referring to some sort of ceremonial deist approach to prayer, or prayer that (as Chief Justice Burger put it in Marsh v. Chambers) is in “the Judeo-Christian tradition.” With “nonsectarian” thus understood, “sectarian” is shorthand for “not nonsectarian.”

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