Hobby Lobby and Alter Egos

In the wake of the Hobby Lobby decision, there has been a discussion about how the decision comports with our understanding of corporate personhood and especially corporate limited liability (Brian Beutler, Matt Yglesias, Jacob Levy). The upshot of this discussion is that owners of corporations like Hobby Lobby appear to want it both ways. When it comes to religious beliefs, the owners want to be one in the same as the Hobby Lobby corporate entity. But when it comes to legal liability, they want to be separate from the corporate entity, such that lawsuits seeking relief are limited only to the corporation's assets.

Indeed, there is a contradiction between the Supreme Court's decision and the corporate law regarding limited liability.

One way to summarize the Supreme Court's decision is that: closely-held corporations are not separate from their owners, possessing their own separate legal persona, but are actually the alter egos of their owners. The problem is that in the realm of corporate law, the rule is that: closely-held corporations are afforded limited liability so long as they are treated as separate from their owners and not treated as the alter egos of their owners. In corporate law, when a closely-held corporation is treated as an alter ego by its owners, those owners typically lose limited liability protection and risk their own assets in a lawsuit against the corporation.

So, here, Hobby Lobby is simultaneously the alter ego of its owners (when it comes to religion) but not the alter ego of its owners (when it comes to liability). The Hobby Lobby corporate entity is simultaneously coincidental with its ownership (when it comes to religion) and totally separate from its ownership (when it comes to liability). Sometimes the Hobby Lobby corporation is a fully separate person; other times it is not. There is an obvious tension here.

Although this tension is fun to remark on, it doesn't really amount to much in practice. This is not a contradiction of laws in the sense that two different bodies of law are demanding X and not-X at the same time. It is a contradiction of the underlying rationale and rhetoric of different bodies of law. It reveals that legal rationales are post-hoc backfill rationalizing that are often inconsistent with each other, but it doesn't create an unworkable set of legal rules.

The Supreme Court wanted to reach the conclusion that it did, so it was happy to discard the long-standing doctrine of the separateness of corporate persons to get there. That's troubling for those who want the court to be a neutral interpretor of laws and applicator of legal precedent, but it's how courts always act. Courts are legislators with robes, always have been and always will be.

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