With the 2016 election in full swing, I find myself looking back upon previous election cycles—no doubt in some dreamstate longing for some semblance of reason. One point of interest is Mitt Romney’s infamous statement that “corporations are people, my friend.” The context and outrage surrounding the line are fairly well-known. What’s less well-known, however, is the history and evolution of corporate rights within U.S. law. It’s also a welcome distraction from politics.
The simple fact often glossed over when parsing Mitt Romney’s words is this: he was right. “Corporations are people” is a legal idea more commonly referred to as corporate personhood. And while our own ideas of corporate personhood may invoke high-profile Supreme Court decisions or the recent “Panama Papers” leak, the concept itself is well over one hundred years old.
Over those decades, however, what rights corporations enjoyed has changed wildly from simple ability to maintain contracts to many protections of the Bill of Rights and the 14th Amendment. So how did we get here?
The Headnote Heard ‘Round the World
For the uninitiated, the U.S. legal system works on the principle of stare decisis (pronounced “stair-e”), a legal term meaning that judges place value on precedent. Practically, this means past decisions, especially by the Supreme Court of the United States, tend to carry weight for a long time—in fact, one of the most important and cited Court decisions of all time, Marbury v. Madison, was decided in 1803. In such a system, it’s easy to see how a single decision could reverberate across jurisprudential time and space. What’s surprising, however, is how it got started in the first place.
Santa Clara County v. Southern Pacific R. Co., 118 U.S. 394 (1886) is one of the landmark Supreme Court cases that first introduced the idea of corporate personhood as we know it today. The facts of the case are rather innocuous, a dispute over taxing railroad fencing between the local government and the railroad company; it’s the published decision that would prove much more influential. The headnote immediately preceding the opinion of the Court started with the following:
“The defendant Corporations are persons within the intent of the clause in section 1 of the Fourteenth Amendment to the Constitution of the United States, which forbids a state to deny to any person within its jurisdiction the equal protection of the laws.”
Uh-oh. It doesn’t take a legal scholar to realize that’s a big statement. But hold on, I thought this was about railroad fencing? Indeed, the case had nothing at all to do with corporate personhood. As it turns out, this legal headline was a synopsis of a statement made by Chief Justice Morrison Waite,
“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 opinion that it does. “
The Chief Justice reportedly said this before oral argument; however, this line of legal reasoning was seemingly meant only to limit the scope of argument and does not fully appear in the written decision. So exactly how did these lines make it so prominently into the case synopsis?
Headnotes are not necessarily written by the judges themselves. They are simply summaries of the case that can be written by clerks, editors, and reporters. This particular headnote was written by J.C. Bancroft Davis who was a court reporter, lawyer, and *drumroll* president of the Newburgh and New York Railway Company. Now there’s something that makes sense.
Even the out of context additions of Waite’s words aren’t too terrible at face value. Equal protection under the law, even for corporations, isn’t too controversial an issue. Afterall, most people would agree that a business should be able to form contracts and that similar businesses should be taxed consistently.
Aside from its benign nature, the words appear largely without context in a mere headnote, such scrawlings are not usually seen as fit to set precedent. No, the statement is only dangerous if used out of context to shape future decisions.
And misused it was.
Throught the years, subsequent Courts would turn to the Santa Clara County decision as a precedent for corporate rights. As Justice William O. Douglas would later write in the Columbia Law Review (1949), “the Santa Clara case becomes one of the most momentous of all our decisions . . . Corporations were now armed with constitutional prerogatives.” None of this was intended, of course, but the damage had already been done.
In fact, the damage didn’t even take that long to inflict. Shortly after the Santa Clara decision, the Court solidified the sentiments of the headnote in Smyth v. Ames, 171 U.S. 361 (1898). The case, ultimately over railroad tariffs, was eventually overturned, but the idea of corporate personhood survived and, indeed, thrived.
Small cases like these helped shape the political thinking around corporate personhood. However, the real red letter case came with First National Bank of Boston v. Bellotti, 435 U.S. 765 (1978). The Court held that a Massachusetts law preventing corporations from spending to promote their political views violated a corporation’s First Amendment rights. Finally, instead of tangentially related facts, the issue of corporate rights under the Fourteenth Amendment took center stage.
Justice Powell, writing for the majority, boiled the question down; “[t]he question in this case, simply put, is whether the corporate identity of the speaker deprives this proposed speech of what otherwise would be its clear entitlement to protection.” The Court ultimately held that the Massachusetts law did infringe on a corporation’s rights.
While the Court ruled in corporation’s favor, the decision was certainly debated. Then Justice Rehnquist wrote in his dissent,
“This Court decided at an early date, with neither argument nor discussion, that a business corporation is a “person” entitled to the protection of the Equal Protection Clause of the Fourteenth Amendment.”
By a five-to-four vote the decision was rendered, officially vindicating corporate personhood into our system of common law.
So Here We Are
As they say, the rest is history. Along with similar rulings from the Court’s, especially Buckley v. Valeo 424 U.S. 1 (1976), the groundwork for later decisions had been laid out. Buckley itself would be cited in numerous later decisions.
Corporations now not only enjoy freedom to maintain contracts but freedom of religion, freedom to make unrestricted campaign contributions, and seemingly freedom from taxation. That’s good work if you can get it.
What started as an off-the-record statement eventually snowballed into an entire legal theory. Egged on by biased participants and system of law that allows such incrementalism to slowly build. One thing’s for sure, there’s no use in shooting the messenger. Mitt Romney has enjoyed an air of prescience as of late, but “corporations are people” came with the benefit of hindsight.