Archive for the ‘Corporate law’ Category

California court: corporations aren’t passengers

January 15, 2013

Called it: when you ride with a corporation, you ride alone. Or, corporations are people, but a briefcase full of papers isn’t a person. Or, a briefcase full of papers is a person, but not for the purposes of California’s high-occupancy vehicle laws. Or, corporations are people, and could be passengers, but California’s high-occupancy vehicle laws merely requires a bigger briefcase or more papers.

The analogy between corporations and people is imprecise, and of course it isn’t the whole picture. Corporations aren’t people, but they don’t have to be in order to fall under the ambit of some of the Constitution’s most important protections. What the California court did here was little more than to invite the accused to appeal his insignificant conviction, to play out his legal theory in the appeals courts. I give it very little chance of success, but it’s possible. What’s really important is that my prediction as to the outcome of this case was right.


Corporations aren’t passengers!: Citizens United and corporate ontology

January 7, 2013

Cute story out of California: getting his wish at last, a California man is pulled over with “corporation papers” in his passengers’ seat in the carpool lane. Insisting to the arresting officer that, on the logic of the infamous Citizens’ United case, the corporation is a person and a passenger, he offers himself as a (doomed) test case for the opposition to Citizens.

I say doomed for a few reasons:

  • The Supreme Court has not changed in any relevant way since Citizens was decided (one Democratic appointee, Stevens, has since been replaced by Kagan),
  • Citizens has been upheld against significantly more plausible challenges than this, and so is thoroughly embedded in the fabric of American jurisprdence,
  • Citizens itself follows a long line of Supreme Court decisions chipping away at the power of the government to regulate political speech by corporate entities, unions, and interest groups, and so is not itself even the original problem-case anyway.

I think that we have to accept the fact that Citizens is here to stay. The Supreme Court has decided that it is impermissible, on constitutional grounds, for the government to limit the ability of private interest groups to use money to influence elections.

You should read the text of Citizens. It’s a fascinating case, decently argued. And you’ll notice that phrases like “corporations are people” are entirely absent from the opinion. That’s because Citizens does not rely on the assertion that corporations are people, or on any pseudonym thereof. Rather, the case asserts that it is not only human persons that are eligible for constitutional protections, that corporations, unions, and interest groups are some of the non-human persons eligible for those protections, that those protections ought to include participation in political discourse, and that unlimited cash contributions from undisclosed sources is an essential component of such entities’ participation in political discourse.

Each element of the logical progression seems reasonable up until the last one. Certainly, it is not only humans that are protected by the Constitution – churches, political parties, protest marches, two people co-signing a letter to the president, none of which is a human person, are all obviously protected by the Constitution. That corporations are among those entities protected by the Constitution is an ancient component of Constitutional jurisprudence: while the Supreme Court has sometime drawn a very marginal distinction between “personal speech” and “commercial speech,” the latter of which might be something like advertising, both are said to flow from the First Amendment, and the difference between them is merely a matter of degree (for example, the state can almost never punish you for lying unless your lie hurts someone, but it can  punish advertisers who lie before anyone is actually hurt by the law). And I am certain that, if any rights at all are to be protected by the Constitution, speech is way up there, and political speech is the most important kind of speech – it is the kind of speech the Framers had most clearly in mind when drafting the protection.

But it is the final element that befuddled commentators and academics the most. Rather than forbid the government from regulating the content of political advertising, the Supreme Court essentially forbade the government from regulating the dollar amount of political advertising. They even created an amazingly thick wall of privacy for private interest groups, PACs, and “Super-PACs:” they don’t have to disclose the sources or the specific outflows of their income… but you and I sure have to! You and I are forbidden from omitting our revenue sources from our tax returns (unless you assert your 5th Amendment right not to disclose as such, but hey, good luck with the audit afterwards), but a PAC is not. A PAC isn’t a person – according to the Supreme Court, it deserves more privacy than a person does! Outrageous!

But it kind of makes sense when you think about it.

I’ve already acknowledged both that the entities included under protections for political speech do not include just human persons and that some of the protected entities are interest groups. The point of attachment is between the Constitution and the entity’s speech – not between the Constitution and the entity, and it’s a whole additional degree of separation between the Constitution and contributors to PACs qua contributors to PACs. If the Constitution’s protections attach to the speech itself, that may also include a certain privacy right (and the Supreme Court has spent a century building on the Constitution’s implicit rights to privacy granted to entities under its ambit, including businesses). Just as individuals do not have a right to total anonymity, neither do PACs, which is why Citizens preserved the government’s right to compel PACs to disclose their responsibility for political advertisements, but not the sources that made the advertising possible – exactly as individuals, even though they have no total anonymity rights, are certainly not required to disclose the sources of their political speech. When you make political speech, you aren’t required to disclose what books, what media or culture, what political parties or advertisements influence your speech. You’re only required to attach your name to your vote at the ballot box, not your political influences. And so it is with PACs.

So it makes sense. But is it correct?

PACs aren’t people. I know that, you know that, and the Supreme Court doesn’t disagree. PACs are created on paper and operate on paper – but a PAC is not just paper, and neither is a corporation. The gentleman mentioned in the news article that opened this post says he has “corporate papers” in his front seat. Lets assume he has every piece of paper associated with some corporation – every filing document, every ’33 Act disclosure, every piece of stock, every minute from every board meeting, everything, and assume there’s no office, no product, no cash, no bank account, nothing but a CEO (the gentleman in question) in the driver’s seat and a stack of papers in the passenger’s. Are there two entities in that car sufficiently similar to each other to require them to have roughly similar rights, with a tilt towards greater privacy rights for the other?

The human person is a physically contiguous entity. It is a brain supported by various fleshy bits. It undergoes physical and physiological change. It turns 18, it dies, it gets sick. Corporations (or interest groups, unions, PACs, etc.), however, are not physically contiguous entities. A corporation is not its offices, it is not its paperwork. Corporate filing documents are descriptions of an abstraction. An incorporation statement is a recognition of the corporate entity, not the entity itself. There is no corporate entity anywhere in time or space, there is only an aggregate of mutually-interacting pieces of paper. Sometimes corporations have offices and employees, but no office is a corporation, nor is any employee or any person at all. The corporation is a conduit of market activity.

Like persons, corporations have tax liabilities, tort liabilities, reputations, places of birth, profits and losses, parents and children, and, as expressed by their boards or officers, they have political agendas. But they do not have bodies. They cannot be passengers in cars. They are ontologically radically distinct from humans – which is completely irrelevant to the question of their participation in political speech per the analysis above.

So no, when a man and his corporate papers go for a ride, there are not two similar entities sharing a car. There is only one entity, the human person driving it, because the corporate papers in his passenger seat are not themselves an entity. The corporation is much more than its paperwork. That is why the California court in this case, consistent with the rules laid down in Citizens, could reasonably say that a person riding with his corporate papers rides alone in a carpool-only lane even though corporations are “people” insofar as “person” in that specific context means nothing more than “an entity eligible for certain limited Constitutional protections.”

Is Citizens United decided rightfully? Four members of the Supreme Court, each of whom is significantly smarter than I am, think not. The majority of Americans think not. Frankly, I think not. I think that the Supreme Court exaggerated the similarity between human persons and corporate entities in a way that has proven detrimental to the very core of the democratic process. But not because PACs shouldn’t have speech rights. It is their privacy rights that bother me.

Returning to the analysis above, humans do not need to disclose the influences on their political speech, and neither do PACs. But to infer the latter’s privacy rights by analogy to the former falls prey to the very same analytic flaw that I am trying to combat, which is the popular misunderstanding that Citizens requires that “corporations are people.” Corporations are not people and that is beyond serious dispute. That is why I worry about selectively analogizing them to persons. The privacy right created by Citizens is created by analogy to human persons’ privacy rights, but the entire strength of Citizens rests completely on a discontinuity between humans and corporations, that the Constitution does not treat corporations as human persons, only that the Constitution’s ambit is broader than human persons in the first place.

Citizens makes I think a perfectly acceptable case that non-human person entities should be protected where political speech is concerned. The case that it does not make nearly as effectively, as is reflected in the considerably more vigorous dissent on this point than on the “personhood” or “person-like” point, is that non-human person entities should be protected where privacy is concerned. Sensible Constitutional jurisprudence should begin not by trying to throw as many human protections onto corporations as possible, but by completely separating humans from corporations and seeing which Constitutional protections attach to humans (certainly all of them) and which attach to corporations (only the most essential ones, and political speech is essential).