Court Rejects Claim that AIG’s Use of Sharia-Compliant Financing Violates the Establishment Clause

The opinion is Murray v. Geithner (E.D. Mich., decided today). I think the result is quite right, for reasons I mentioned when the lawsuit was first filed, and when the court rejected the government’s motion to dismiss. Here’s my reasoning from the latter of those posts (though it’s not quite the reasoning given by the court):

[T]he [plaintiff’s] theory is apparently that the government may not invest in any company that, in part of its operations, provides products that are tailored to a particular religious faith, and that may be accompanied by donations to religious charities. But lots of companies do this, for the simple reason that religious consumers have their religious tastes such as consumers have other ethical or esthetic tastes.

For instance, a food processing company might have a division that produces kosher products and donates some money to Jewish-specific charities (as a way of better wooing Jewish buyers). An investment company might seek to attract conservative Christian investors by offering a fund that doesn’t invest in (say) hospital chains that perform abortions, and by donating some share of its profits to religious causes. Other companies might provide funds that don’t invest in munitions manufacturers, to satisfy the desires of Quaker investors. A store might sell, among other products, religiously significant garments or religious symbols. A bookstore might sell religious books alongside other books.

Under the plaintiff[‘s] theory, either Islam is subject to special constitutional constraints, or — once that constitutionally forbidden legal rule is rejected — all of these companies would somehow be forbidden as targets of government investments. The government couldn’t bail them out. It presumably couldn’t invest public employee retirement funds in them. It couldn’t sell religious books alongside other books in public university bookstores, or serve kosher food alongside other food in public university cafeterias.

Likewise, a state-run liquor store wouldn’t be able to stock kosher wine. (Visit this site, search for “kosher,” and you’ll see how much kosher wine the apparently Establishment-Clause-violating New Hampshire State Liquor Commission does indeed sell.) That’s plainly wrong, under any sound theory of the Establishment Clause, or even under the broadest theories suggested by Justice Brennan and other Establishment Clause maximalists. (UPDATE: A state-run liquor store might be more restricted than a state-bailed-out company; for instance, it might not be able to make donations to religious causes, even to attract Jewish customers. But it would at the least be able to buy kosher wines, even from companies that themselves donate part of the proceeds to religious causes. And I think the state should be free to invest pension funds — or bailout funds — in a privately-owned liquor store that donates to religious causes as a means of attracting religious customers.)

The government investment decisions don’t have a “primary religious purpose,” because the obvious purpose is to prop up important companies — and have them continue making as much money as possible — and not to advance Islam. The government no more cares about advancing Sharia through the AIG bailout than my local Ralphs supermarket (or the New Hampshire State Liquor Commission) cares about advancing kosher laws by selling products that are certified kosher. The “primary religious effect” inquiry has always been extremely vague, but none of the precedents applying that inquiry would treat the continued provision by AIG of products that some religious customers like as a “primary religious effect.”

The “endorsement” argument doesn’t make sense here, because reasonable observers wouldn’t treat the government’s decision to bail out AIG, including its subdivision that sells financial products that Muslims prefer for religious reasons, as an endorsement of Islam. Again, the “endorsement” test is quite vague, but this is a pretty clear example: Making money by satisfying some customers’ religious preferences (and lots of other customers’ nonreligious preferences) isn’t an endorsement of religion. Nor does the allegation that some of the money that is raised is donated to Muslim charities affect the analysis. That donating money to religious charities is good business for AIG doesn’t make it impermissible for the government — which after all wants AIG to make as much money as possible, so the government isn’t left paying the bill — to invest in AIG.

The only even theoretically plausible objection in such cases, I think, arises if the government becomes too entangled in the religious decisions of the company, for instance if government officials end up supervising the programs and deciding what Sharia law truly requires, or what really is or isn’t kosher. But on the facts this just doesn’t seem to be so: The operational decisions related to these religiously themed products and programs are made by the company (or perhaps even by the company’s subcontractors), not by government officials. There seems to be no danger that some government officer would have to engage in quintessentially religious activities. And it is government decisionmaking, not government stock ownership, that triggers the Establishment Clause, which is one reason that government employee retirement plans can invest in companies without making them state actors governed by the Free Speech Clause, the Establishment Clause, the Due Process Clause, and so on. (This distinguishes the hypothetical of a government-chartered school, which remains a government actor, engaging in religious education.)

Thanks to Prof. Howard Friedman (Religion Clause) for the pointer.