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Conestoga Wood Specialties Corporation, et al. v. Kathleen Sebelius

January 11, 2013

CONESTOGA WOOD SPECIALTIES CORPORATION, ET AL.
v.
KATHLEEN SEBELIUS, ET AL.



The opinion of the court was delivered by: Goldberg, J.

MEMORANDUM OPINION

This case presents issues of first impression as to whether the Women's Preventive Healthcare regulations under the recently enacted Patient Protection and Affordable Care Act pass muster under the First Amendment and the Religious Freedom Restoration Act of 1993. In resolving these questions we also decide whether the United States Supreme Court's decision in Citizens United v. Federal Election Commission, 130 S. Ct. 876 (2010), which granted political free speech rights to corporations, also extends to the First Amendment's Free Exercise of Religion Clause.

Plaintiffs, Conestoga Wood Specialties Corporation, and five of its owners, Norman Hahn, Elizabeth Hahn, Norman Lemar Hahn, Anthony H. Hahn and Kevin Hahn, brought suit against Kathleen Sebelius in her official capacity as Secretary of the United States Department of Health and Human Services, along with other United States government officials and agencies,*fn1 seeking declaratory and injunctive relief. Plaintiffs allege that various regulations and guidelines implemented in connection with the Patient Protection and Affordable Care Act of 2010, Pub. L. No. 111-148, violate the Religious Freedom Restoration Act, 42 U.S.C. § 2000bb, et seq., the First and Fifth Amendments to the United States Constitution and the Administrative Procedure Act, 5 U.S.C. § 701, et seq. Specifically, Plaintiffs object to regulations regarding Women's Preventive Healthcare-which Plaintiffs refer to as "the Mandate"- that allegedly "force [them] to pay for and otherwise facilitate the insurance coverage and use of contraception with an abortifacient effect and related education and counseling." Plaintiffs claim that these regulations conflict with their sincerely-held religious beliefs. (Am. Compl. ¶¶ 2, 4.)

Plaintiffs filed a motion for preliminary injunction on December 7, 2012, and the Court held an evidentiary hearing on January 4, 2013.*fn2 We have also accepted and considered an amicus brief from the American Civil Liberties Union Foundation and the American Civil Liberties Union of Pennsylvania.

For the reasons that follow, we find that Plaintiffs have not shown that they are entitled to a preliminary injunction, and, as such, the motion will be denied.

I. FACTUAL AND PROCEDURAL BACKGROUND*fn3

A. The Affordable Care Act

The Patient Protection and Affordable Care Act ("ACA"), which was signed into law on March 23, 2010, requires employers with fifty or more full-time employees to provide their employees with a minimum level of health insurance. One aspect of this minimum level of coverage is that employers and health insurance companies are required to cover women's "preventive health services," and are prohibited from imposing cost-sharing for plan beneficiaries. 42 U.S.C. § 300gg-13(a)(4).

The Health Resources and Services Administration ("HRSA") delegated the creation of guidelines on this issue to the Institute of Medicine ("IOM"). See 77 FR 8725-01 (Feb. 15, 2012). On August 1, 2011, the HRSA adopted the recommended guidelines published by the IOM, which included required coverage for "the full range of Food and Drug Administration-approved contraceptive methods, sterilization procedures, and patient education and counseling for women with reproductive capacity." INSTITUTE OF MEDICINE, CLINICAL PREVENTIVE SERVICES FOR WOMEN: CLOSING THE GAPS 109-10 (2011) (hereinafter "CLOSING THE GAPS"); see also 76 Fed. Reg. 46621-01 (Aug. 3, 2011).

Under the regulations adopted pursuant to Women's Preventive Healthcare, group health plans and health insurance issuers are required to provide coverage consistent with the HRSA guidelines in plan years beginning on or after August 1, 2012, unless the employer or plan is exempt. Women's Preventive Services: Required Health Plan Coverage Guidelines, U.S. DEPT. OF HEALTH AND HUMAN SVCS., http://www.hrsa.gov/womensguidelines/ (last visited Jan. 8, 2013) ("HRSA Guidelines"). The interim final regulations and guidelines were adopted without change on April 16, 2012. 77 FR 8725-01 (Feb. 15, 2012).

Congress required coverage of Women's Preventive Healthcare in order to address inequities in the current healthcare system, which leads "women of childbearing age [to] spend 68 percent more in out-of-pocket health care costs than men." 155 Cong. Rec. at S12027 (daily ed. Dec. 1, 2009) (statement of Sen. Gillibrand).Studies have found "more than half of women delay[ ] or avoid[ ] preventive care because of its cost," id. at S12028, and that unplanned pregnancies have a higher rate of health risks for both mother and child than planned pregnancies. CLOSING THE GAPS, supra, at 103.

If an employer fails to comply with these regulations, it faces staunch penalties. Non-exempt employers who choose to exclude health coverage for abortifacient contraception face a penalty of $100 each day per offending employee. 26 U.S.C. § 4980D(b)(1). If an employer fails to provide health insurance altogether, it faces an annual penalty for each employee. See 26 U.S.C. § 4980H. Additionally, the Department of Labor and plan participants may bring suit against an employer that fails to comply with the regulations. 29 U.S.C. § 1132.

The Women's Preventive Healthcare regulations contain numerous exemptions for specific subsets of employers. One such exemption is for "grandfathered" plans-"coverage provided by a group health plan . . . in which an individual was enrolled as of March 23, 2010," the date on which the ACA was enacted. 45 C.F.R. § 147.140(a). An exemption with regard to women's contraception also exists for certain "religious employers." A religious employer is defined as an organization meeting all of the following requirements:

(1) The inculcation of religious values is the purpose of the organization.

(2)The organization primarily employs the religious tenets of the organization.

(3) The organization serves primarily persons who share the religious tenets of the organization.

(4) The organization is a nonprofit organization. . . . 45 C.F.R. § 147.130(a)(1)(iv)(B); 77 FR 8725-01 (Feb. 15, 2012). Finally, employers with fewer than fifty full-time employees are required to provide coverage for Women's Preventative Healthcare within any health plan provided to employees, but are permitted to entirely forego providing insurance without penalty. 26 U.S.C. § 4980H(c)(2)(A).

Upon receiving feedback from organizations that objected to contraception coverage on religious grounds but also did not fit under the definition of "religious employer," the Department of the Treasury, Department of Labor and Department of Health and Human Services released an advance notice of proposed amendments to the regulations. 77 FR 16501-01 (Mar. 21, 2012). The agencies gave notice of a safe harbor for certain non-profit organizations that object to the mandatory coverage of contraception. Under this safe harbor, a qualifying organization would not be subject to penalties for failing to comply with the regulations regarding Women's Preventive Healthcare until the first plan year on or after August 1, 2013. This respite would allow the agencies time to potentially amend the definition of religious employer. Id. The safe harbor applies to organizations meeting all of the following requirements:

(1) The organization is organized and operates as a non-profit entity.

(2) From February 10, 2012 onward, contraceptive coverage has not been provided at any point by the group health plan established or maintained by the organization, consistent with any applicable State law, because of the religious beliefs of the organization.

(3) . . . [T]he group health plan established or maintained by the organization . . . must provide to participants [a]n attached notice . . . which states that contraceptive coverage will not be provided. . . .

(4) The organization self-certifies that it satisfies criteria 1-3 above. . . .

Guidance on the Temporary Enforcement Safe Harbor for Certain Employers, CTR. FOR CONSUMER INFO. & INS. OVERSIGHT & CTRS. FOR MEDICARE & MEDICAID SVCS. (Feb. 10, 2012), http://cciio.cms.gov/resources/files/Files2/02102012/20120210-Preventive-Services-Bulletin.pdf.

B. The Plaintiffs

Plaintiff, Conestoga Wood Specialties Corporation ("Conestoga"), is a closely-held, for-profit Pennsylvania corporation that manufactures wood cabinets and wood specialty products. It is owned and operated by Plaintiffs Norman Hahn, Elizabeth Hahn, Norman Lemar Hahn, Anthony H. Hahn, and Kevin Hahn ("the Hahns"), the founder of Conestoga, his wife and their sons, respectively.*fn4 In addition to being shareholders, the Hahns maintain various positions on the board of directors, and Plaintiff Anthony H. Hahn serves as President and Chief Executive Officer of Conestoga. The corporation presently employs approximately 950 full-time employees. (Am. Compl. ¶¶ 11-16, 37.)

The Hahns are practicing Mennonite Christians whose faith requires them to operate Conestoga in accordance with their religious beliefs and moral principles. (Id. at ¶¶ 2, 27.) Conestoga's mission statement includes the following language: "We operate in a professional environment founded upon the highest ethical, moral, and Christian principles reflecting respect, support, and trust for our customers, our suppliers, our employees and their families." (Pls.' Br., Ex. 1.) Both Conestoga and the Hahns make annual contributions to various charities and community organizations in accordance with the Hahns' religious beliefs. (Am. Compl. ¶ 35.) Further, on October 31, 2012, the board of directors adopted "The Hahn Family Statement on the Sanctity of Human Life."*fn5 (Pls.' Br., Ex. 5.) Conestoga's Articles of Incorporation are silent as to any religious purpose or belief. (Defs.' Br., Ex. 1.)

Conestoga provides employees with a health insurance plan that covers a number of women's preventive health expenses, such as pregnancy-related care, routine gynecological care and testing for sexually transmitted diseases. (Am. Compl. ¶ 84.) However, Conestoga's health plan specifically excludes coverage for "contraceptive prescription drugs" and "[a]ny drugs used to abort a pregnancy." (Pls.' Br., Ex. 6.)

"The Mennonite Church teaches that taking of life which includes anything that terminates a fertilized embryo is an intrinsic evil and a sin against God." (Am. Compl. ¶ 30.) Therefore, the Hahns believe it would be sinful for them to pay for, or contribute in any way to, the use of abortifacient contraception, which they define as, any drug or device that may "terminate[ ] a fertilized embryo." (Id. at ¶¶ 30, 32.) The Hahns specifically object to prescription plan coverage of

"Plan B," commonly known as the "morning after pill," and "Ella," also known as the "week after pill."*fn6 (Id. at ¶¶ 45-46.)

As a for-profit corporation, Conestoga does not fit into an exemption for religious employers, nor does it fall under the safe harbor. Additionally, Conestoga's health plan does not qualify as a grandfathered plan under 26 C.F.R. § 54.9815-1251T. Therefore, Plaintiffs are currently left to choose between providing coverage to employees for abortifacient contraception, which they contend violates their right to religious freedom, or pay significant financial penalties. Confronted with this choice, Plaintiffs filed the instant motion for preliminary injunction.

II. STANDARD OF REVIEW

"Preliminary injunctive relief is 'an extraordinary remedy' and 'should be granted only in limited circumstances.'" Kos Pharm., Inc. v. Andrx Corp., 369 F.3d 700, 708 (3d Cir. 2004) (quoting American Tel. & Tel. Co. v. Winback & Conserve Program, Inc., 42 F.3d 1421, 1427 (3d Cir. 1994)). In order for a court to grant a motion for preliminary injunction, the moving party must demonstrate: "(1) a likelihood of success on the merits; (2) that it will suffer irreparable harm if the injunction is denied; (3) that granting preliminary relief will not result in even greater harm to the nonmoving party; and (4) that the public interest favors such relief." Id. at 708. "The injunction shall issue only if the plaintiff produces evidence sufficient to convince the district court that all four factors favor preliminary relief." N.J. Hosp. Ass'n v. Waldman, 73 F.3d 509, 512 (3d Cir. 1995) (citing American Tel & Tel Co., 42 F.3d at 1427).

In demonstrating the likelihood of success on the merits, a plaintiff need not show that it is more likely than not that he will succeed. Singer Mgmt. Consultants, Inc. v. Milgram, 650 F.3d 223, 229 (3d Cir. 2011). Instead, a plaintiff must "show[ ] a reasonable probability of success on the merits." American Express Travel Related Svcs., Inc. v. Sidamon-Eristoff, 669 F.3d 359, 366 (3d Cir. 2012).

We note that other courts that have decided cases with similar facts and ruled in favor of injunctive relief have generally applied a less rigorous standard. For example, in Tyndale House Publishers, Inc. v. Sebelius, 2012 WL 5817323 (D.D.C. Nov. 16, 2012), when evaluating the preliminary injunction factors, the district court applied a "sliding scale approach," whereby an unusually strong showing of one factor lessens a plaintiff's burden in demonstrating a different factor. Id. at *4; see also Korte v. Sebelius, 2012 WL 6757353, at *2 (7th Cir. Dec. 28, 2012) ("[w]e evaluate a motion for an injunction pending appeal using the . . . 'sliding scale' approach"); Sharpe Holdings, Inc. v. U.S. Dept. of Health & Human Svcs., 2012 WL 6738489, at *4 (E.D. Mo. Dec. 31, 2012) ("[i]n balancing the equities no single factor is determinative") (quoting Dataphase Sys., Inc. v. CL Sys. Inc., 640 F.2d 109, 113 (8th Cir. 1981)); Monaghan v. Sebelius, 2012 WL 6738476, at *3 (E.D. Mich. Dec. 30, 2012) (same); American Pulverizer Co. v. U.S. Dept. of Health & Human Svcs., No. 12-3459-CV-S-RED, slip op. at 4 (W.D. Mo. Dec. 20, 2012) (same); Legatus v. Sebelius, ...


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