May 22 (Bloomberg) -- Two companies whose owners claim to operate in accord with Catholic doctrine asked a U.S. appeals court to exempt them from a law requiring businesses to offer birth control coverage as part of employer health plans.
Lawyers for the family-owned companies told the three-judge panel in Chicago today that the mandate, part of the Obama administration’s health care overhaul, violates the U.S. Constitution’s guarantee of freedom of religion and the federal Religious Freedom Restoration Act of 1993.
The businesses, a construction firm from southwestern Illinois and an auto-parts maker in southeastern Indiana, should be relieved from having to comply with the measure while they contest its constitutionality, their lawyers argued.
“The company is an extension of their beliefs,” said Edward L. White III, lawyer for Highland, Illinois-based Korte & Luitjohan Contractors Inc. and its principals, Cyril and Jane Korte.
The contraception mandate stems from President Barack Obama’s 2010 Patient Protection and Affordable Care Act, which is intended to create almost-universal health insurance coverage in the U.S.
The act requires most people to obtain coverage starting next year. It also expands the availability of the federal-state Medicaid program and compels businesses with more than 50 full-time workers to offer coverage or pay a penalty.
That insurance must include at no extra cost to the employee all forms of Federal Drug Administration-approved contraception as prescribed by a health-care provider.
The provision sparked lawsuits from the Roman Catholic Archdioceses of New York and Washington, the Catholic University of America, Notre Dame University and for-profit businesses in Michigan, Missouri and elsewhere.
In January, a U.S. judge in Washington threw out a challenge by the city’s archdiocese, concluding it was premature, a month after a federal judge in Brooklyn, New York, said a case there could go forward.
A St. Louis federal judge threw out one Catholic businessman’s challenge in October, while in March a U.S. judge in Detroit granted a reprieve from the law to Domino’s Pizza chain founder Tom Monaghan and his property management company, Domino’s Farms Corp., until his lawsuit is resolved.
A Denver-based federal appeals court will hear argument on another contraception mandate challenge tomorrow.
The arguments today were heard by U.S. Circuit Judge Joel M. Flaum, a 1983 appointee of President Ronald Reagan, flanked by Judge Ilana Diamond Rovner, named by President George H.W. Bush in 1992 and Judge Diane S. Sykes, appointed by President George W. Bush in 2004.
“The mandate requires plaintiffs to take actions that violate their religious faith in order to avoid ruinous penalties for non-compliance,” White and his co-counsel said in their appellate brief.
White told the judges today his clients own 88 percent of their 50-year-old business and set its policies. Most of their decisions are made at the kitchen table, he said.
“The company is them,” he said.
Justice Department lawyer Alisa Klein challenged that assertion, telling the panel that the Religion Freedom Restoration Act didn’t alter the basic legal principle that corporations are distinct from their owners, a distinction she said the plaintiffs seeking to blur.
“I understand the temptation to do it, but it’s wrong,” Klein said.
Sykes asked her why a company can’t have a moral creed if it can be criminally responsible for moral wrongdoing.
“The whole purpose of RFRA was to expand free exercise rights, not contract them,” the judge said, telling Klein later, “Your argument doesn’t hold up.”
Congress “has long distinguished between religious organizations and for-profit secular corporations,” the Justice Department said in a March 1 filing. “No court has ever found a for-profit company to be a religious organization for the purposes of federal law.”
Matthew Bowman, a lawyer for Madison, Indiana-based Grote Industries Inc. and its family owners, told the panel that “separation between corporations and their owners for some purposes doesn’t mean separation for all purposes.”
Lower-court judges in each company’s case rejected requests for orders to exempt them from the law during the litigation, ruling they weren’t likely to prevail on their religious-rights arguments. The arguments today were an appeal of those denials.
The appeals court granted the exemption until it rules on the issue.
The Kortes told the lower court their company would face “ruinous” penalties of about $730,000 a year for failing to obey the mandate. The Grotes, too, said they faced irreparable harm in the form of fines and penalties for abiding by their religious beliefs and defying the law.
Neither the Kortes nor the Grotes hire their workers based on their religions, and those employees aren’t required to share their beliefs, the government said in its filings.
The cases are Korte v. Sebelius, 12-3841 and Grote v. Sebelius, 13-1077, U.S. Court of Appeals for the Seventh Circuit (Chicago).
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