Shown here, from left to right, are James Newland, Andrew Newland, Paul Newland and William Newland. William, Paul and James, plus their sister Christine, own Hercules. Andrew, William's son, is vice president of the family business

(CNSNews.com) - The Justice Department last week presented the Newland family of Colorado--who own Hercules Industries, a heating, ventilation and air-conditioning business--with what amounted to an ultimatum: Give up your religion or your business.

“Hercules Industries has ‘made no showing of a religious belief which requires that [it] engage in the [HVAC] business,” the Justice Department said in a formal filing in the U.S. District Court for the District of Colorado.

In response to the Justice Department’s argument that the Newlands can either give up practicing their religion or give up owning their business, the Alliance Defending Freedom, which is representing the family, said in a reply brief: "[T]o the extent the government is arguing that its mandate does not really burden the Newlands because they are free to abandon their jobs, their livelihoods, and their property so that others can take over Hercules and comply, this expulsion from business would be an extreme form of government burden.”

Now that the Supreme Court has upheld the Patient Protection and Affordable Care Act and its mandate that individuals must buy health insurance, this suit which seeks to protect a small business from being forced to take actions that violate the moral and religious beliefs of the family that owns it is likely to be the next major court battle over Obamacare.

At stake is whether businesses are protected by the First Amendment—the part of the Bill of Rights that guarantees not only the free exercise of religion but also freedom of speech and of the press.

The Justice Department’s filing was made in Newland v. Sebelius--a suit brought by William, Paul and James Newland, and their sister, Christine Ketterhagen, who are Roman Catholics, and who together own Colorado-based Hercules Industries.

The Newland family founded Hercules in 1962 and have maintained it as a family-owned business ever since—growing it to the point where they now employ 265 people.

Attorney General Eric Holder and Health and Human Services Secretary Kathleen Sebelius (AP Photo/Manuel Balce Ceneta)

The Newlands’ lawsuit challenges a regulation that Health and Human Services Secretary Kathleen Sebelius finalized earlier this year that requires virtually all health plans to cover--without cost-sharing--sterilizations and all Food-and-Drug Administration approved contraceptives, including those that induce abortions.



Under the Obamacare law, businesses that have more than 50 employees must provide health insurance to their employees or face a penalty. To satisfy the mandate, the insurance must include the cost-sharing-free sterilization-contraception-abortifacient benefit. The regulation takes effect on Aug. 1, which means that as soon as any business starts a new plan-year for its health-insurance program after that date it will need to comply with Sebelius's rule.

The Catholic Church, to which the Newlands belong, teaches that sterilization, contraception and abortion are intrinsically immoral. Last month, the Catholic bishops of the United States unanimously adopted a statement declaring Sebelius’s regulation an “unjust and illegal mandate” and a “violation of personal civil rights.”

While much of the media attention on Sebelius’ regulation has focused on the fact that it will apply to famous Catholic religious institutions such as Catholic University and the University of Notre Dame, the Catholic bishops have repeatedly pointed out that the regulation also violates the First Amendment-protected religious liberty of lay Catholic individuals. That includes employees who will be forced to pay insurance premiums on insurance plans that violate the teachings of their faith and business owners who will be forced to provide such plans.

In their unanimous statement, the Catholic bishops declared that Sebelius’s regulation created a class of Americans “with no conscience protection at all: individuals who, in their daily lives, strive constantly to act in accordance with their faith and moral values. They, too, face a government mandate to aid in providing ‘services’ contrary to those values—whether in their sponsoring of, and payment for, insurance as employers; their payment of insurance premiums as employees; or as insurers themselves—without even the semblance of an exemption.”

The Newlands currently run a self-insurance plan, providing their employees with generous health-care coverage that is consistent with the teachings of the Newlands' church in that it does not cover sterilizations, contraception and abortifacients. They are precisely among the class of people that the unanimous Catholic bishops said have “no conscience protection at all” under Sebelius's regulation.

In their complaint against the Obama administration, which was prepared by the Alliance Defending Freedom, the Newlands clearly explained why they could not comply with Sebelius’s regulation without violating their religious faith.

“The Newlands sincerely believe that the Catholic faith does not allow them to violate Catholic religious and moral teachings in their decisions operating Hercules Industries,” says the complaint. “They believe that according to the Catholic faith their operation of Hercules must be guided by ethical social principles and Catholic religious and moral teachings, that the adherence of their business practice according to such Catholic ethics and religious and moral teachings is a genuine calling from God, that their Catholic faith prohibits them to sever their religious beliefs from their daily business practice, and that their Catholic faith requires them to integrate the gifts of the spiritual life, the virtues, morals, and ethical social principles of Catholic teaching into their life and work."

“The Catholic Church teaches that abortifacient drugs, contraception and sterilization are intrinsic evils,” says the complaint. “As a matter of religious faith the Newlands believe that those Catholic teachings are among the religious ethical teachings they must follow throughout their lives including in their business practice.”

The Justice Department responded by arguing that if the Newlands’ Roman Catholic faith prevented them from following the Obama administration’s command that they provide their employees with cost-sharing-free coverage for sterilizations, contraception and abortion-inducing drugs, the Newlands could simply give up their business entirely.

The Justice Department further argued that people owning for-profit secular businesses do not have a First Amendment right to the free exercise religion in the way they conduct their businesses—particularly if their business is incorporated.

“Here, plaintiffs have not sufficiently alleged that the preventive services coverage regulations substantially burden their religious exercise,” the Justice Department told the court. “Hercules Industries, Inc., is not a religious employer; it is ‘an HVAC manufacturer.'”

“The First Amendment Complaint does not allege that the company is affiliated with a formally religious entity such as a church,” the Justice Department told the federal court. “Nor does it allege that the company employs persons of a particular faith. In short, Hercules Industries is plainly a for-profit, secular employer.”

“By definition,” the Justice Department claimed, “a secular employer does not engage in any ‘exercise of religion.’”

“Hercules Industries has ‘made no showing of a religious belief which requires that [it] engage in the [HVAC] business,” DOJ told the court. “Any burden is therefore caused by the company’s choice to enter into a commercial activity.”

In its brief responding to the Justice Department on behalf of the Newland family, the Alliance Defending Freedom forcefully rebutted the claim that the First Amendment does not apply to corporations let alone to family-owned businesses.

“The government argues that the Newlands forfeited their right to religious liberty as soon as they endeavored to earn their living by running a corporation,” said the Newlands’ brief.

“Nothing in the Constitution, the Supreme Court’s decisions, or federal law requires—or even suggests—that families forfeit their religious liberty protection when they try to earn a living, such as by operating a corporate business,” they argued.

If the Obama administration’s understanding of the First Amendment were accepted, argued the Alliance Defending Freedom’s brief, the media would have no rights either.

“The government’s exclusionary attitude would push religion out of every sphere of life except the four wall of a church,” they said in their brief. “If for-profit corporations have no First Amendment ‘purpose,’ newspapers and other media would have no rights.”

If they refuse to sell their businesses, families like the Newlands are trapped by the Sebelius regulation. They can stop providing health insurance to themselves and their employees through the business, but then they and their employees would still be required, under Obamacare's individual mandate, to buy health insurance, and under the Sebelius regulation all the health insurance plans they would be able to buy would still be required to cover sterilizations, contraception and abortion-inducing drugs. Their premiums would then contribute to those "services," and the business owners would still be required to pay a penalty to the government of about $2,000 per year for each employee they did not insure.

If businesses like the Newlands' try to simply flout the Sebelius regulation and continue providing insurance to their workers that does not cover the sterilization-contraception-abortifacient benefits that the Obama administration demands, they will be hit with confiscatory financial penalties.

“PPACA also imposes monetary penalties if Hercules were to continue to offer its self-insured plan but continued omitting abortifacients, contraceptive and sterilizations,” said the Newlands' complaint. “The exact magnitude of these penalties may vary according to the complicated provisions of PPACA, but the fine is approximately $100 per day per employee, with minimum amounts applying in different circumstances.

With 265 employees, a business like the Newlands' would need to pay the government $26,500 per day if they decided not to comply with Sebelius’s regulation and insured their employees anyway. Over 365 days that would amount to $9,672,500.