lifting the veil

Prologue

Pope John Roberts - Caricature by by DonkeyHoteyI am not an attorney. It is important to keep this fact in mind while reading this article since it deals with complex legal matters and notions about which I know only what I’ve read in the past few days. Many attorneys will tell you that laymen, such as myself have no business even writing or talking about the law because it is illegal to practice law without a license and anything I may write about it might be relied upon by some unsuspecting someone. So, let me be perfectly clear on this point, I AM NOT AN ATTORNEY AND NOTHING IN THIS ARTICLE IS LEGAL ADVICE.

Indeed, the entire contents of this article is to be considered nothing more than what it is, an observation and rant regarding the recent Supreme Court Hobby Lobby decision and a potential unintended consequence thereof. As a citizen, I am entitled to make observations about any damn thing I choose. This is just such an observation and not legal advice and, again, I AIN’T A LAWYER.

Rant

A trial lawyer friend of mine was thinking out loud the other day and mentioned that in order to pierce the corporate veil, that is bring suit for civil damages or criminal damages against the shareholders in a matter concerning the actions of a corporation one, has to establish that the corporation is merely the alter ego of the owners. This is an important matter. Corporations are established for a number of reasons. One of which is to shield the investors in the corporation from liability related to corporate acts, debts, etc.

I am told that, when bringing an action against the owners of a corporation the statutes of the state in which the corporation is domestic, as opposed to a state in which it operates as a foreign corporation, is controlling. That is, if a corporation is a domestic corporation in a state such as California, a state in which defense options against actions to pierce the corporate veil are considered to be less rigorous than in some other states, there is a two-stage test. As explained in a California Continuing Legal Education paper by Daniel T. McCloskey, of counsel to Greenberg Taurig, PA,

“To establish alter ego, a plaintiff must show that two conditions are met: First, there must be such a unity of interest and ownership between the corporation and its equitable owner that the separate personalities of the corporation and the shareholder (or other corporate entity) do not in reality exist. Second, there must be an inequitable result if the acts in question are treated as those of the corporation alone. (See F. Hoffman-La Roche v. Superior Court, 130 Cal. App. 4th 782, 796 (2005).)”

McCloskey’s paper goes into considerable detail about what constitutes unity of interest and how courts determine that. It also goes into detail as to what constitutes an inequitable outcome if the corporate veil cannot be pierced or lifted. Apparently all this varies from state to state.

It must be said, at this point, that the McCloskey article/paper does not mention the Hobby Lobby case or anticipate it. Never the less, my trial lawyer posed three questions. First, my friend asked me, how can the ability of the owners of a corporation to endow that entity with religious belief not establish the corporation as an alter ego of the owners? In law as well as in fact, there is no logical way the answer to that question can be anything other than yes.

Assume for the moment that logic and reason have meaning in the law (I know, a long shot with the Robert’s Court) and imbuing a corporation with your religious belief does mean it is your alter ego, at least for matters of conscious and religion. Then, two follow on questions raised by my trial lawyer friend seem to take on a significant legal meaning. These questions are: Second question, isn’t establishing that alter ego status a primary reason to lift the corporate veil and make shareholders personally liable? Third question, either way a closely held corporation’s majority owners decide, to offer birth control coverage or deny birth control coverage, after Hobby Lobby, isn’t that decision a projection of the owners’ religious beliefs upon the corporation and, therefore, prima facie evidence of alter ego status?

I don’t know how the courts in the various states will view these questions. However, they strike me as very good questions. If the answer to question one is yes, then the answer to question three becomes a real wall banger. If the answer to question one is yes and the answer to question three is no then corporations lining up to take “moral” stands on this or that issue will, no doubt, reconsider, if to do so exposes the shareholders to enhanced legal liability. If the answer to question three is yes then every corporation in the United States just got pierced. If any decision on contraception coverage, including a no decision, is, by definition, a projection of the moral beliefs of the owners then the status of alter ego is established.

In giving any corporation the right to make a religious decision on contraceptive coverage, isn’t the Supreme Court, whether it intended to or not, declaring that decision a strictly moral/religious decision whether it is intentionally made or not? How can the decision by the owners of Hobby Lobby to deny coverage for contraceptives be a moral one based upon sincere religious beliefs and another company’s decision to keep the coverage, as mandated in federal law, be less of a moral/religious belief. The lack of religious belief is as much a sincere religious belief as the presence of one. Agnosticism is a sincere religious belief, as is atheism. Both agnosticism and atheism are as sincere religious belief as is acceptance of Christ as Lord and Savior. To believe otherwise is to believe that the spaces of silence between the notes of a Mozart composition are less critical to the piece than the sound we hear. The absence of sound is every bit as important to the establishment of the beat, the tune and the orchestration as the sound. Likewise, the sincere belief that God does not exist or that this or that a given tenant of dogma may not be adhered to or that you are confused and uncertain is as sincere a religious conviction as any other. So, the decision not to make a decision on contraceptive coverage, now that the Robert’s Court has stupidly put that in play, is a sincere expression of the owners’ religious belief.

Of course, this line of thought is based upon logic and reason. These two elements of thought are not required, and rarely welcomed, in decisions from the Roberts Court. So, let’s assume the Supreme Court determines that only decisions to not offer coverage constitutes a moral/religious act. Then, as mentioned above, the Greene family may have reason to reconsider their “sincere religious” beliefs in light of the possible ability of John Edwards or some other trail lawyer coming after their personal assets in some slip and fall case. Who Knows? What about all the hyper patriotic, closely held corporations moving their headquarters overseas to avoid taxes? Since they will have no domestic state, will they find themselves prey to California law or the South Carolina plaintiff’s bar?

Keep in mind I know less about this than I have already offered, but how do you argue that a corporation that takes on the moral and religious beliefs of its owners is not the alter ego of its owners? Maybe the law sees this sort of thing differently, but corporations cannot think or believe, so whose ego does it have if not the one of the person or persons defining its religious beliefs?

I don’t know if the Supreme Court’s alter boys gave piercing the corporate veil any thought before they inflicted this abomination upon the nation, but it does not really matter. In the magical thinking of the Catholic boys of the Court, the Roman Catholic Church just became politically and legally relevant after two hundred years of trying to get them out of secular life. I doubt the frivolous five gave any thought to much of anything other than being good little boys and making the Bishop happy. But, they set off things they cannot control. Perhaps, no one can control these things.

Nothing the Supreme Court can do will effect how state courts interpret matters of strictly local, state law. Unless the Robert’s Court wants to involve itself in matters of civil and criminal litigation in every state for the next thirty to forty years, they will never even see any of these cases. If they do decide to review these cases, they will begin the nationalization of jurisprudence and litigation in unprecedented ways.

Of course, time and again, the Robert’s Court has shown it doesn’t care about precedent or the law. The primary concern of the Robert’s Court is to play ward healer, Republican enforcer and Papal emissary. Four of the choirboys are appointees of one Bush or the other. The fifth, Kennedy, is a Regan product. The Bush family defiles and degrades everything it touches. Now, I hear there is another one running for President. God help us.

###
Image: Pope John Roberts - Caricature by DonkeyHotey via his Flickr photo stream and used under Creative Commons license.
Mike Copeland

Mike Copeland

I am old enough to know better. I have a B. A. from Birmingham Southern College and a Master's in City Planning from Georgia Tech. I have worked in SC State government for over a decade leaving as the Deputy Executive Director of the State Budget and Control Board, the state's administrative agency. I have owned the Fontaine Company since 1984 and am the managing member of viscerality.com.llc a management, marketing and consulting company.

I am the author of several novels, some of which you may buy and read if you are of a mind to do so.