U.S. District Court Enjoins Contraceptive Coverage Mandate Applied to For-Profit Religious Publishing Company

by Holland & Knight LLP
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On November 16, 2102, in Tyndale House Publishers, Inc. v. Sebelius, No. 12-1635 (D. D.C. Nov. 16, 2012), the U.S. District Court for the District of Columbia granted a preliminary injunction to a closely held, for-profit religious publishing company and its president and CEO against enforcement of Department of Health and Human Services regulations interpreting the Affordable Care Act (ACA) to require all health insurance plans and policies, unless grandfathered or otherwise exempt, to comply with the contraceptive coverage mandate starting with the plan years beginning on or after August 1, 2012. 76 Fed. Reg. 46621-01 (Aug. 3, 2011).

Background

Tyndale House Publishers, Inc. is a for-profit Christian publishing company with 260 full-time employees. It provides them with health insurance through a self-insured health plan that omits coverage of abortions and of drugs (e.g., Plan B or ella) or devices (e.g.,intrauterine devices) that can cause the demise of an already conceived or fertilized human embryo. Tyndale is 96.5 percent owned by the Tyndale House Foundation: a nonprofit religious entity that distributes profits to various charities; the Tyndale Trust, which holds 84 percent of the voting shares; and two trusts benefiting the founder's widow and children. All adopted identical statements of faith and agreed to the same health plan limitations. The Tyndale plaintiffs alleged that the contraceptive coverage mandate violated their beliefs and rights under the Religious Freedom Restoration Act (RFRA) and First and Fifth Amendments of the U.S. Constitution.

Standing Established

Tyndale's first challenge was to establish standing. Without deciding whether for-profit corporations can exercise religion within the meaning of RFRA and the Free Exercise Clause, the court determined that, because Tyndale as a closely-held corporation that "'does not present any free exercise rights of its own different from or greater than its owner's rights,'" it has "'standing to assert the free exercise rights of its owners'" including a nonprofit religious entity. Accord Legatus v. Sebelius, 2012 WL 5359630 (E.D. Mich. 2012). In addition, the court determined that Tyndale has standing to assert its owners' free exercise rights under third-party standing doctrine.

Religious Exercise Rights Substantially Burdened

Next, the court ruled that the plaintiffs demonstrated that the regulations substantially burdened Tyndale's exercise of religion because it is subject to suit and financial penalties, and could ultimately be required to close if it refuses to observe the contraceptive coverage mandate. The court observed that government action can substantially burden a plaintiff's religious exercise even if the law only results in the plaintiff being forced to forego a government benefit. Because Tyndale is self-insured, the court distinguished O'Brien v. HHS, No. 4:12-CV-476, 2012 WL 4481208 (E.D. Mo. Sept. 28, 2012), where the court dismissed a for-profit company's RFRA claim challenging the contraceptive coverage mandate. O'Brien Industrial Holdings, LLC provides health insurance through a group health insurance policy. In addition, the court disagreed with any broader implication of O'Brien that a plaintiff cannot establish a substantial burden by a law that forces it to pay for services to which it objects that are chosen and used by third persons.

The court also distinguished Mead v. Holder, 766 F. Supp. 2d 16 (D.D.C. 2011), aff'd, Seven-Sky v. Holder, 661 F. 3d 1 (D.C. Cir. 2011), in which the court ruled that the individual coverage mandate of the ACA does not substantially burden the religious exercise of the plaintiffs because they have the option of making a shared responsibility payment in lieu of obtaining health insurance and because their contributions to other public forms of insurance such as Medicare, Social Security and unemployment taxes also conflict with their religious belief that God will provide for their well-being.

Government Lacks a Compelling Governmental Interest

If a plaintiff demonstrates a substantial burden on its religious exercise, RFRA requires the government to demonstrate that it has a compelling governmental interest justifying the burden. The court rejected both interests the government claimed for lack of any evidence that mandatory insurance coverage for the specific contraceptives to which the plaintiffs object furthered them, or that granting the plaintiffs' requested exemption would impede them. The interests the government claims are: (1) an interest in promoting public health and (2) an interest in providing employed women with access to health care on par with employed men. The court observed that it is required to "look[] beyond broad formulated interests justifying the general applicability of government mandates" at the "harm of granting specific exemptions to particular religious claimants." The court observed that the harm of granting the exemption to the plaintiffs could not be material inasmuch as the defendant had already excluded 191 million employees from the contraceptive coverage mandate through grandfathering and various exemptions.

Publisher Qualifies for Preliminary Injunction

The court concluded by ruling that the plaintiffs demonstrated that they would suffer irreparable harm absent a preliminary injunction, the balance of equities favored preserving the status quo and the public interest requires vindicating First Amendment rights.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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