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Francis A. Gilardi and his brother Philip Gilardi are co-owners of Freshway Foods and Freshway Logistics, closely-held ‘S Corporations.’ Their businesses employ about 400 employees, and they have traditionally offered a self-insured health plan through a third-party administrator. As devout Catholics, the Gilardis oppose and wish to exclude coverage for contraception, sterilization and abortion under their health insurance policies.

The Affordable Care Act (informally known as “Obamacare”) directs all group health plans to provide “preventive care.” It has been determined that preventive care includes FDA approved “contraceptive methods, sterilization procedures, and patient education and counseling for all women with reproductive capacity.

While religious organizations and other select groups have been exempted from this provision, non-religious and secular corporations, such as the Freshway Companies, are not. The Gilardis brought this suit seeking to enjoin the government from enforcing the preventive care provision against the Freshway Companies and against themselves as individual owners. The lower Court denied both requests for a preliminary injunction.

On appeal, the Gilardis argue that they are left with two unacceptable choices: (1) provide the required insurance, which directly conflicts with their religious beliefs and teachings, or (2) pay a penalty of $14 million every year.

Among the legal questions that the United States Court of Appeals for the District of   Columbia had to decide is whether the First Amendment’s free exercise clause protects non-religious corporations. The free exercise clause provides that “Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof…” U.S. Const., AmendI. (Emphasis added).

To answer this question, the Appellate Court first looked to Supreme Court jurisprudence, and noted that this question has never been seriously considered by the High Court. The established precedents rely on the premise that people and religious organizations worship or engage in religious expression. “As for secular corporations, [however,] the [Supreme] Court has been all but silent.”

To this point, the Gilardi brothers argue that if a company is owned, operated and controlled by a few people who share the same religious values, and they choose to run the company consistent with those values, then the company may serve as the owners’ surrogate. Amici briefs (unsolicited briefs written by non-parties to assist the Court) argue that as Catholics, the Gilardis are morally responsible in the management of their companies, and if they are forced to provide contraceptive coverage, then they are deemed to be encouraging others to commit wrongful acts, which is a “grave moral wrong—i.e., ‘scandal’—under Catholic doctrine.” This, they argue, infringes on the Gilardis’ right to freely exercise their religion.

The Appellate Court ultimately concluded that a secular organization cannot exercise religion. However, the Court reversed and remanded the district court’s denial of a preliminary injunction for the Gilardis as individual owners. Now, the District Court will have to apply the factors necessary to determine whether to grant a preliminary injunction. Both parties could also seek to have the Appellate Court’s decision reviewed by the Supreme Court, although the Supreme Court would have to agree to hear this case.

The issues that have been raised could either begin a new line of free exercise clause cases where the Courts extend First Amendment protections to secular, non-religious corporations, or it can serve to show that corporations do not receive the same First Amendment protections as individuals.

For now, this case is ongoing, and has yet to reach the Supreme Court. It has the potential to redefine First Amendment free exercise jurisprudence, which will have profound consequences for years to come.

This post will be updated as this case proceeds forward.

** Addendum of March 27, 2014 **

On March 25, 2014, the United States Supreme Court heard oral arguments in the case of Sebelius v. Hobby Lobby Stores, Inc., et al., which addresses the issues raised by the Gilardis. The issue pending before the Supreme Court in Hobby Lobby Stores is whether the Affordable Care Act’s requirement that an employer’s healthcare insurance cover all forms of contraception is a violation of the corporation’s First Amendment rights under the United States Constitution.  Thomas J. Schetelich of our office has written a summary of the arguments before the Supreme Court, which is also posted in our blog.  We will update these posts once the Supreme Court has issued its opinion.

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