March 3, 2011
Should the liberal wing of the Supreme Court change its tune on corporate theory?
[DISCLAIMER: This is a rant-in-progress working draft. I reserve the right to claim someone else hijacked my BLPB account to post this.]
Writing in dissent in Citizens United, Justice Stevens asserted:
“Nothing in this analysis turns on whether the corporation is conceptualized as a grantee of a state concession, a nexus of explicit and implicit contracts, a mediated hierarchy of stakeholders, or any other recognized model.”
In other words, corporate theory didn’t matter to the resolution of the case. The majority, meanwhile, was apparently so convinced of that point that it didn’t even bother to address the issue.
Fast-forward to this week’s FCC v. AT&T decision, wherein the Court unanimously concluded that corporations do not have personal privacy rights under FOIA. Again, while there was speculation that the Court would need to answer the question, “What is a corporation?” in order to decide whether that entity had personal privacy rights, there was no mention of the competing theories of the corporation.
So, we have two cases where the issue of the nature of the corporation seems to be teed up for the Court, yet is ignored and/or disavowed. The conservative wing is 2-0 in these cases; the liberal wing 1-1. Maybe it’s time for the liberal wing to reconsider its strategy. Here are some arguments in support of the change:
1. Corporate theory was in fact very much on the table in Citizens United, as I have argued here, and by going along with the majority in ignoring the issue the dissenting justices missed an opportunity to force the majority to adopt expressly what I believe they adopted implicitly—that is, a nexus-of-contracts view of the firm. I think forcing this issue would have been a good play for the dissent, given that nexus-of-contracts theory (and its emphasis on the social benefits of deregulation—which is a great position if the “social benefits” include the worst financial crisis since the Great Depression) has never been more on its heels in the past 30 years than it arguably is right now (for more on that, see my recent SSRN posting: The Dodd-Frank Corporation: More than a Nexus of Contracts).
2. Sooner or later the Court is going to have to take this issue on. Cases involving the rights of corporations aren’t going away any time soon, and ignoring the issue seems almost disingenuous. For example, in Citizens United the majority told us that there was nothing about corporations qua corporations that justified restricting their political speech solely on the basis of their corporate status—corporations, after all, are merely associations of citizens. But in FCC v. AT&T, corporations are effectively deemed to be so obviously different from individuals as to make it almost laughable that they should be understood to have personal privacy rights. Wrote Justice Roberts:
“’Personal’ in the phrase ‘personal privacy’ conveys more than just ‘of a person.’ It suggests a type of privacy evocative of human concerns—not the sort usually associated with an entity like, say, AT&T.”
Well, before you said it was so in Citizens United, many would not have usually associated a constitutional right to unbridled political speech with corporations, as evidenced by the seemingly common response to the opinion: “Who knew that corporations were entitled to the same right to free speech that individual citizens are?”
[INSERT COMPELLING CONCLUSORY REMARKS HERE]