Thursday, April 7, 2011

The Day Corporations Became Persons

A little over a year ago the Supreme Court, in its usual 5-4 mode, decided, in Citizens United v. Federal Election Commission, that corporations had First amendment rights that would allow them to participate more extensively in political campaigns than previously allowed. This case is part of a continuing expansion of the legal rights of corporations. They are accruing rights that were clearly specified for individuals under the guise of representation as a “collection of individuals.” One might think of this as a doctrine of “corporate personhood.”

There is a strange and disturbing tale involving one of the Supreme Court actions that is often quoted as the source of impetus for moving corporations on the path towards personhood. These events occurred in the case of Santa Clara County v. Southern Pacific Railroad Company in 1886. Southern Pacific wished to claim a tax deduction that was available to individuals and the County objected. Lower courts ruled with Santa Clara County and the case eventually made it to the Supreme Court. The question at issue was whether the company had the right of equal protection under the law provided by the Fourteenth Amendment.

Curiously, the Court never took up that issue, at least not formally. They disposed of the case on other grounds and provided no comment in a written opinion. Picking up the narrative from Wikipedia:
“The decisions reached by the Supreme Court are promulgated to the legal community by way of books called United States Reports. Preceding every case entry is a headnote, a short summary in which a court reporter summarizes the opinion as well as outlining the main facts and arguments. For example, in United States v. Detroit Timber Lumber Company (1906), headnotes are defined as ‘not the work of the Court, but are simply the work of the Reporter, giving his understanding of the decision, prepared for the convenience of the profession’.”

“The court reporter, former president of the Newburgh and New York Railway Company, J.C. Bancroft Davis, wrote the following as part of the headnote for the case:

‘The court does not wish to hear argument on the question whether the provision in the Fourteenth Amendment to the Constitution, which forbids a State to deny to any person within its jurisdiction the equal protection of the laws, applies to these corporations. We are all of the opinion that it does’."

“In other words, corporations enjoyed the same rights under the Fourteenth Amendment as did natural persons, However, this issue is absent from the court's opinion itself.”

“Before publication in United States Reports, Davis wrote a letter to Chief Justice Morrison Waite, dated May 26, 1886, to make sure his headnote was correct:

‘Dear Chief Justice, I have a memorandum in the California Cases Santa Clara County v. Southern Pacific &c As follows. In opening the Court stated that it did not wish to hear argument on the question whether the Fourteenth Amendment applies to such corporations as are parties in these suits. All the Judges were of the opinion that it does’.”

“Waite replied:

‘I think your mem. in the California Railroad Tax cases expresses with sufficient accuracy what was said before the argument began. I leave it with you to determine whether anything need be said about it in the report inasmuch as we avoided meeting the constitutional question in the decision’.”

So—the Chief Justice gave the court reporter freedom to decide what to say on this matter even though the justices themselves had not formally addressed the issue. A ruling decided by a former president of a railroad that would favor railroads and given the weight of the Supreme Court without the formal deliberation of the Supreme Court definitely has a tainted aroma about it.

Apparently little is known about motives here, but the court reporter certainly seemed determined to push the issue by putting it at the head of the headnote. And Chief Justice Waite must have understood the implications of what he was allowing to happen. The exchange between the court reporter and the Chief justice was not discovered until many years later. The most obvious interpretation is that they wanted to enter into the legal realm a contention that they personally favored, but that they could not justify legally.

Here are some opinions on the significance of this farce.
“In his dissent in the 1938 case of Connecticut General Life Insurance Company v. Johnson, Justice Hugo Black wrote ‘in 1886, this Court in the case of Santa Clara County v. Southern Pacific Railroad, decided for the first time that the word 'person' in the amendment did in some instances include corporations. [...] The history of the amendment proves that the people were told that its purpose was to protect weak and helpless human beings and were not told that it was intended to remove corporations in any fashion from the control of state governments. [...] The language of the amendment itself does not support the theory that it was passed for the benefit of corporations’."

“Justice William O. Douglas wrote in 1949, "the Santa Clara case becomes one of the most momentous of all our decisions. [...] Corporations were now armed with constitutional prerogatives."

It is often said that we possess a system of law, not a system of justice. What should we call our system now?

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