Archive for March, 2011

Homo Erectus Corporatus: Evolution of the Corporate Corpus

March 28, 2011 1 comment

Much was and continues to be made of the U.S. Supreme Court’s ruling in Citizens United v. Federal Election Commission, 588 U.S. 50 (2010) that the First Amendment prevents the government from limiting the political speech of corporations and unions as it had under the Bipartisan Campaign Reform Act of 2002 (the McCain-Feingold Act). See generally here and here.

Randy Travis: "A pretty natural kinda person."

The decision sparked a discussion about corporate personhood. Cf. here (discussing corporate responsibility). For those who agreed with the outcome, the notion that corporations had civil rights akin to those of natural persons was obvious: after all, corporate entities can sue and be sued, pay income tax, and even can be members of other legal business entities, just like ordinary people. For those who did not, the concept that an organizational creation of the law would have First Amendment rights was plainly absurd. Despite the protests of those opposed to the ruling, such as the American Constitution Society, however, the ruling stands, and no immediate challenge is on the horizon. It wasn’t always so obvious, however, that the law should treat corporations like humans.

In 1809, when the Supreme Court still had February Terms, Chief Justice John Marshall for a six-member majority in Bank of the United States v. Deveaux, 9 U.S. (5 Cranch) 61 (1809) held that, for purposes of federal diversity jurisdiction, corporations were citizens of a sort. Marshall recognized the apparent conceptual conflict that remains today, and, after citing a series of British legal authorities, stated his conclusion:

As our ideas of a corporation, its privileges and its disabilities, are derived entirely from the English books, we resort to them for aid, in ascertaining its character. It is defined as a mere creature of the law, invisible, intangible, and incorporeal. Yet, when we examine the subject further, we find that corporations have been included within terms of description appropriated to real persons.

Id. at 88. Despite this language, the Court’s view was that the corporation was not really independent of its shareholders, and its state citizenship was to be determined based on their state citizenship.

By 1844, the Court believed its Deveaux decision had been “carried too far, and that consequences and inferences have been argumentatively drawn from the reasoning employed in [that case] which ought not to be followed.” Louisville C. & C.R. Co. v. Letson, 43 U.S. (2 How.) 497, 555 (1844). In overruling Deveaux, the Letson Court held that a corporation is a citizen of the state in which it was incorporated, independent of the locations of its human shareholders. Id. at 557-58.

A corporation created by and doing business in a particular state, is to be deemed to all intents and purposes as a person, although an artificial person, an inhabitant of the same state, for the purposes of its incorporation, capable of being treated as a citizen of that state, as much as a natural person. Like a citizen it makes contracts, and though in regard to what it may do in some particulars it differs from a natural person, and in this especially, the manner in which it can sue and be sued, it is substantially, within the meaning of the law, a citizen of the state which created it, and where its business is done, for all the purposes of suing and being sued.

Id. at 558. The Letson Court, by severing the link between the corporate person and the human person, thus created a more independent form of corporate personhood.

In 1958, Congress enacted 28 U.S.C. § 1332(c)(1), which provides that “a corporation shall be deemed to be a citizen of any State by which it has been incorporated and of the State where it has its principal place of business,” with no mention of the citizenship of shareholders, directors, or other representatives.

Board of Directors and CEO of Murder, Inc.

In some ways, then, the Citizens United decision is not surprising when viewed in the context of the progression described above. If a corporation may sue and be sued of its own accord, independent of the humans who own and operate it, it already has the due process rights afforded all civil litigants. If the entity uncontroversially possesses some set of rights, how controversial is it that it should possess a broader set of civil rights beyond those attendant to the processes of civil litigation? Alternatively, because the basis for even those uncontroversial rights is a legal fiction, does it make sense to extend the scope of privileges beyond that which is absolutely necessary?

Categories: Corporations, Legal, Politics