How Corporations Won Their Civil Rights

(Bloomberg Opinion) -- The seat on the Supreme Court that Brett Kavanaugh will inherit if the Senate confirms his nomination once belonged to Lewis F. Powell Jr., who carved out new First Amendment rights for corporations in the 1970s. Powell’s successor and Kavanaugh’s former boss, Anthony Kennedy, authored the 2010 Citizens United decision that expanded corporate political rights to a hugely controversial new extent. All of which means that University of California at Los Angeles law professor Adam Winkler picked a pretty good year in which to publish an illuminating and more-entertaining-than-you-might-think book called "We the Corporations: How American Businesses Won Their Civil Rights." I spoke with Winkler by telephone earlier this week. What follows is an edited and abridged transcript of our conversation.

Justin Fox: Your book tells how the Supreme Court has granted corporations a seemingly ever-expanding list of rights over the past couple of centuries. But before we get into that, I thought we should make something clear, which is that this isn't all about corporate personhood.

Adam Winkler: Corporate personhood is a part of that story, but it does not play the central role in the history of corporate constitutional rights that critics of Citizens United might imagine.

JF: The first big corporate-rights case that you talk about in the book is a good illustration of that. This is 1809, Bank of the United States v. Deveaux. What was at stake there?

AW: At stake in that case was whether corporations had the right to sue in federal court under a provision of the Constitution that guarantees that right to citizens, quote unquote. The Supreme Court held that the provision did protect corporations, but not because they were people. Rather, the court said that corporations were associations of ordinary individuals who do not lose their rights simply because they joined together in the corporate form.

JF: The attorney who was arguing against that decision used corporate personhood as the reason why they shouldn't get that right.

AW: One of the surprising things about the history of corporate constitutional rights is that corporate personhood has traditionally been invoked to limit or restrict the rights of corporations. Treating a corporation as its own unique legal entity has generally led courts to say that corporations have lesser and fewer rights than ordinary individuals.

JF: I remember reading through that account — the Bank of the United States was being sued in Georgia and was trying to have the case heard in federal court — and thinking that at one level the decision seemed sensible because otherwise states would be constantly trying to disadvantage out-of-state corporations. But at the same time, the reasoning the court used was not entirely clear or logical.

AW: Many, many constitutional rights have been extended to corporations because justices feel that the purposes of the Constitution will be furthered by such extension. If the Constitution protects property rights, those property rights will be better protected if corporations have them, too. After all, if the government can seize any corporation's property and assets without paying any compensation, that would be a severe limitation on the right to property under the Constitution.

JF: The really big expansions of corporate rights that you write about in the book involved mainly the 14th Amendment and the First. What was the 14th actually intended to do?

AW: The 14th Amendment was adopted after the Civil War to guarantee the rights of the newly freed slaves. Yet in the years to follow, the Supreme Court rarely read the 14th Amendment broadly to protect minorities and often read it broadly to protect business corporations.

JF: What was it trying to protect them from? Was it states regulating them, seizing their property?

AW: Corporations like the Southern Pacific Railroad tried to use the 14th Amendment to fight against taxes and other restrictions. To win these rights, Southern Pacific Railroad launched a remarkable series of 60 test cases, each one more remarkable and shocking than the other.

JF:  The most amazing, shocking story is the role that Roscoe Conkling plays. He's the lawyer for Southern Pacific. Was he still in the Senate then?

AW: No, he had left the Senate, although it was very traditional for senators and congressmen to maintain their legal practices.

JF: So Conkling makes the argument in 1886 that, "Hey, I was on the committee that drafted the 14th Amendment and we actually meant it to be about corporations all along."

AW: Conkling, an illustrious politician who had been nominated and confirmed to the Supreme Court himself,stood before the justices and lied about the purposes behind the 14th Amendment. Later historians discovered that Conkling simply misled the Supreme Court of the United States.

JF: It seemed like the court at the time was pretty dubious, but somehow that claim nonetheless worked its way into precedent.

AW: The justices became dubious of Conkling's argument about the history of the 14th Amendment but were sympathetic to his conclusion that corporations should have the same protections as the newly freed slaves, if not more. Indeed, in the years to come [through 1912], the Supreme Court would rule in only 28 cases on the 14th Amendment rights of African-Americans, but 312 cases on the rights of business corporations.

JF: Stephen Field, a justice in those days, was another remarkable figure. He seems to have been the first really activist Supreme Court justice.

AW: There are probably other justices before him who were activist. Maybe the way to think about it is that Stephen Field shows that judicial activism is not a modern invention. Well over 130 years ago, he was interpreting the Constitution to be a living document that would protect not just the rights of the newly freed slave as the framers of the 14th Amendment intended, but would also protect business corporations.

JF: And then, many decades later, people found some other protections under the 14th Amendment.

AW: One of the interesting things I found in my research is that corporations have often been innovators in constitutional law, first-movers who helped to establish broader protections that are subsequently enjoyed by individuals, too. Today the 14th Amendment's unenumerated rights include the right of same-sex couples to marry and the right of women to choose abortion.

JF: On to another amendment: the First. For a long time, the court aggressively protected corporations' property rights but had this distinction for "liberty rights."

AW: For many years, the Supreme Court said that corporations had property rights under the Constitution, but not liberty rights — those rights associated with personal conscience or bodily integrity or political freedom. For instance, well over 100 years ago, the courts held that corporations did not have the right to spend unlimited amounts of money on election campaigns, contrary to Citizens United.

JF: What changed to bring us to Citizens United, then?

AW: Well, strangely enough, it was the liberal New Deal and Warren courts of the mid-20th century that expanded liberty rights to corporations. In the 1930s, the court extended freedom-of-the-press protections to newspaper corporations who were fighting back against the censorship of [Louisiana Governor] Huey Long. In the 1950s, the Supreme Court held that the NAACP, a nonprofit membership association that took the corporate form, had the freedom of association. These precedents were subsequently used by the Supreme Court in decisions like Citizens United to justify extending additional rights to corporations.

JF: The next one was pharmaceutical advertising.

AW: In the 1970s, Ralph Nader, the consumer-rights advocate, won a landmark case at the Supreme Court giving consumers the right to access information that businesses might want to advertise. However, that decision has been used in the years since almost exclusively by business corporations to strike down laws that were designed originally to protect consumers.

JF: A wonderful irony here is that Lewis Powell Jr., right before he was confirmed to the court, had written this now-famous memo about business being under attack from people like Ralph Nader and needing to fight back, and he ends up writing the opinion that uses Ralph Nader's arguments in order to expand the First Amendment rights of business.

AW: In the book, I call Lewis Powell “the corporation's justice,” because no one did more to expand the political power and influence of business corporations under the Constitution. Before he joined the Supreme Court, Powell wrote an influential memo for the Chamber of Commerce that became an essential planning document for the business mobilization of the 1970s. Once he was on the Supreme Court, Powell used his position to essentially write his memorandum into the Constitution, by saying that corporations had a First Amendment right to spend their money on politics to fight back.

JF: Your take in the book seems to be that you could see why most of these steps were taken, and you could also see some of the inconsistencies that were driving certain justices crazy about what corporations and others could do in campaign spending. But you do end up with this sense that we've reached the point of missing the point in terms of why people wanted to restrict corporate political activity in the first place.

AW: Look, corporations have a tremendous amount of money. When corporations and people have an “equal” right to spend their money but Apple has billions of dollars more than the rest of us, it is a false equality. We've restricted corporate political activity for well over 100 years. There's a long-established history and tradition of doing so. But we have a new Supreme Court, which, as Justice [Elena] Kagan recently said in an opinion, seems committed to "weaponizing the First Amendment" to strike down laws that restrict business and help consumers.

JF: What should the senators be asking Brett Kavanaugh about all this?

AW: Unfortunately, it almost doesn't matter what the senators ask Brett Kavanaugh. He's got the votes, and the confirmation process has devolved into a performance that doesn't really lead to substantive answers. But the important questions to ask are, should corporations have the same liberty rights as individuals, and should there be any limits to those rights? Today we see corporations claiming an ability to discriminate against LGBT people because same-sex relationships offend the religious beliefs of some business owners. We see corporations using the First Amendment to strike down numerous laws regulating disclosure to consumers and investors. These are important questions that Judge Kavanaugh should answer. It seems unlikely that he will.

Justin Fox is a Bloomberg Opinion columnist covering business. He was the editorial director of Harvard Business Review and wrote for Time, Fortune and American Banker. He is the author of “The Myth of the Rational Market.”

©2018 Bloomberg L.P.