Let’s not “reify the corporation”? Really?

July 11

Sasha Volokh has, I think, put his finger on an issue at the heart of the debate that several hundred commenters, Ilya, and I have been having (starting here, then here, then here, then here) about the Hobby Lobby decision.

“Reify:  To treat an abstraction as substantially existing . . .”  Webster’s Universal Dictionary, 2d Ed

Sasha writes:

[T]he corporation shouldn’t be reified. A corporation is fictitious, just a convenient shorthand we use for people doing business together. Yes, the corporation has extra rights like limited liability, but that’s also just another way of saying that the state, in order to promote business activity, has given particular people special rights when they do business together, rights that they can exercise by filing a special form and observing particular formalities. People are always front and center.

Ilya’s position, too, I now realize, relies on the same kind of reasoning:

 [I]mposing a mandate on the corporation necessarily imposes one on its owners as well. Like any other organization, a corporation has no purposes of its own separate from those of the people who own and control it. . . . A nonprofit firm as such cannot have beliefs any more than Hobby Lobby can. Belief requires consciousness, and no inanimate entity has that. But the owners of both nonprofit and for-profit corporations do have beliefs, and do exercise them. And one of the ways in which they do so is by honoring religious constraints on the ways in which they use their property. Similarly, a restaurant does not and cannot have religious beliefs. But if the owner happens to be an Orthodox Jew, a law requiring him to serve nonkosher food in that restaurant would burden his free exercise of religion. The government could not get around that by claiming that it was merely imposing a mandate on a building that has no beliefs of its own. Just as people can speak through corporations that they control even though the corporations have no beliefs of their own to express, so too they can use a corporation to adhere to religious beliefs.

So the corporation, as a legal entity separate and distinct from its shareholders, has simply vanished.

Let me suggest, to begin with, that the law has been “reifying the corporation” for well on these last 200 years or so – treating them as separate and distinct legal persons apart from their shareholders and employees and officers, “treating the abstraction  as substantially existing” – and that to stop now would involve a rather profound transformation of a very wide swath of American law.  It is difficult for me to believe that Congress intended that transformation when it inserted the word “person” in RFRA, and if that is at the foundation of the majority’s opinion in Hobby Lobby it strikes me as a rather thin reed.

Second, I take it that the “no reification” position applies equally to public corporations – imposing an obligation on McDonalds, Inc. is just imposing it on each of its owners.  So McDonalds, Inc. too, is a “person” who can claim that its “exercise of religion” has been “substantially burdened” under RFRA, and – to use Ilya’s example above – McDonalds, Inc. can bring a RFRA claim (because it has Orthodox Jews among its shareholders).

Finally, the “it’s just people, and all rights and obligations flow to them and from them” position ignores, in my view, not only 200 years of corporation law but also the fact that aggregations of things have characteristics and attributes that the individual things themselves do not have, and vice versa.  One doesn’t have to “reify” anything to acknowledge that a flock of starlings, say, doesn’t have a “blood pressure,” while each of individuals making up the flock does; and that the individuals don’t have a “median” blood pressure, though the flock does.  Conversely, the flock has a “proportion of males” – the individuals don’t.

The law, in constructing the fictitious person of the corporation, recognizes this in a million different ways.  We regulate protections for minority shareholders, voting procedures, proxy rules, cross-ownership arrangements, . . . none of which has any meaning whatsoever if applied to the individual owners one at a time.  And conversely we sensibly recognize that some rules that make sense for individuals — requiring that they be vaccinated, say, or that they not drive drunk – don’t apply to the aggregation.

The same for constitutional or statutory rights; some make sense when applied to the aggregation, and others don’t.  Context is everything.  To my mind, “the freedom of speech” falls into the first category; speech is an inherently public act, corporations can speak (indeed, they cannot help but “speak” if they are to have any contact with the public), and including them within the category of persons protected by the First Amendment makes a great deal of sense to me.  For the reasons I’ve already stated and won’t repeat here, the freedom to exercise religion strikes me as falling into the latter category.

David Post is currently Professor of Law at the Beasley School of Law at Temple University, where he teaches intellectual property law and the law of cyberspace. He is also a Fellow at the Center for Democracy and Technology, an Adjunct Scholar at the Cato Institute, and a member of the Board of Trustees of the Nexa Center for Internet and Society.
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Will Baude | July 11