by Adam Winkler
In 1889, with Fuller as chief justice, the court decided another Fourteenth Amendment case involving a corporation, Minneapolis & St. Louis Railway Company v. Beckwith, and Field seized the chance to promote corporate rights once again. A railroad corporation objected to an Iowa law that made railroads doubly liable for any damage caused to livestock. The law was designed to encourage railroads to fence in their tracks and to protect neighboring ranchers. When one of the railroad’s trains killed three hogs, the company was ordered to pay $24 in damages. Instead of paying the miniscule fine, the railroad spent tens of thousands of dollars litigating the case up to the Supreme Court. The money would be worth it if the corporation could gain stronger legal protections from future laws of this sort.
Field, in his opinion for the court, upheld the law—yet managed at the same time to transform J. C. Bancroft Davis’s misleading headnote into binding Supreme Court precedent. To Field, Iowa’s law was a justifiable regulation. Although it imposed a burden on the railroad, it served the interests of another group of businessmen: ranchers, who raised pigs, cattle, and other livestock for market. And although the railroad in this case would be disappointed with the immediate results, Field embedded in his majority opinion language that would go far to serve the interests of railroads and other corporations for generations to come. “It is contended by counsel as the basis of his argument, and we admit the soundness of his position, that corporations are persons within the meaning of the clause in question,” Field wrote. Then the fearless justice stated, “It was so held in Santa Clara County v. Southern Pacific Railroad.”67
Of course, that statement was patently false—but it could not have been inadvertent. Field, who three years earlier had written an opinion in the companion case to Santa Clara excoriating the other justices for failing to address the constitutional rights of corporations, surely had not forgotten. Field, like Roscoe Conkling, was willing to resort to deception when it came to the cause of corporate rights, and was able to get away with this sleight of hand in part because of the publication process of Supreme Court opinions back then. Today, all the justices see drafts of the opinions before they are released, but in the 1880s the justices typically did not. The justice authoring an opinion was given the latitude to write up the opinion as he felt best captured the justices’ decision, and the other justices often did not view the opinion until after it was published. Field was thus able to secure Fourteenth Amendment protections for corporations, possibly without any of the other justices knowing about it beforehand.68
Even though the other justices may not have known in advance about Field’s expansion of corporate rights in Minneapolis & St. Louis Railway Company v. Beckwith, Field nonetheless captured the tenor of a court that was entering the Lochner era. More surprising, however, is that the justices would follow Field’s lead and rely on Santa Clara as a binding precedent. Over the next two decades, Santa Clara would take on sweeping importance as the justices repeatedly cited and relied on that case for authoritatively deciding that corporations were entitled to the Fourteenth Amendment’s guarantees of equal protection and due process—legal principles never endorsed by the decision itself.69
By 1890, just as the nation was entering the era of the trusts, in which corporations would gain more political and economic power over the lives of ordinary Americans than ever before, corporations had secured new constitutional tools to use in their fight against unwanted regulation. Corporate rights under the Fourteenth Amendment were no longer just a headnote.
* * *
THE TRANSFORMATION OF THE Fourteenth Amendment from a guarantee of equal rights for racial minorities into a tool for corporations to strike down business regulation was the subject of one of the first quantitative studies of the Supreme Court, conducted in 1912. Charles Wallace Collins, a lawyer who also served for a time as the law librarian for Congress and the Supreme Court, collected and analyzed every Fourteenth Amendment case decided by the justices in the nearly half-century since the provision’s unorthodox ratification. The court, he found, had heard 604 Fourteenth Amendment cases between 1868 and 1912. A mere twenty-eight of those cases (less than 5 percent) involved African Americans, the group whose plight motivated the adoption of the amendment, and in nearly all of those cases the racial minorities lost. More than half of all the Fourteenth Amendment cases decided by the Supreme Court—312 in total—involved corporations, which succeeded in striking down numerous laws regulating business, including minimum wage laws, zoning laws, and child labor laws.70
Those results would likely have pleased Justice Field, even if Collins bemoaned them. Collins hailed from Alabama and later in life became the “most influential intellectual and strategist” of the Dixiecrat Revolt of 1948, when southern white Democrats bolted to form their own, pro-segregation party. (Collins’s 1947 book, Whither the Solid South? A Study in Politics and Race Relations, which presciently argued for a political realignment joining white southerners and economic conservatives to create a new, powerful, right-wing voting bloc, was heralded as “both a manifesto and blueprint for the states’ rights” movement.) Yet Collins, following in the footsteps of Roger Taney, was a populist critic of corporate power who believed in states’ rights—among them, the states’ right to regulate business. Echoing the economist Arthur Twining Hadley, who asked “whether a single one of the members of Congress who voted for [the Fourteenth Amendment] had any conception that it would touch the question of corporate regulation at all,” Collins, a loyal southerner, suggested the best thing to do was simply repeal the Fourteenth Amendment in its entirety.71
The Southern Pacific and the powerful corporations that would arise at the end of the nineteenth century, by contrast, would find much to celebrate in the new and, in their view, improved version of the Fourteenth Amendment. To be sure, corporations lost plenty of cases too—a fact often ignored in histories of the Lochner era. The guarantees of the Fourteenth Amendment did not prevent the court from upholding what the justices saw as minimal or necessary restrictions on business activity. Although corporations brought the overwhelming majority of Fourteenth Amendment cases to the Supreme Court in the years covered by Collins’s study, they lost many of them.
Even when the court ruled against corporations, however, the companies could often count their lawsuits as small victories. Their never-ending string of Fourteenth Amendment lawsuits delayed for years the implementation of countless laws that, like California’s railroad tax, threatened to reduce their profits. Corporate lawsuits also imposed huge costs on government. California’s counties spent untold hours and money fighting off the Southern Pacific’s groundbreaking series of test cases, which dragged on for years. Perhaps the most revealing thing about Collins’s study was that, regardless of the losses, corporations kept litigating case after case after case.72
Meanwhile, African Americans found little protection in the courts. The years just before and immediately after Santa Clara was decided saw a striking rise in racially discriminatory laws. In the South, slavery was replaced with a system of racial segregation and white supremacy, in which blacks were told where they could live, whom they could marry, which jobs they could have, and which schools they could attend. Despite the Fourteenth Amendment and its companions, the Thirteenth (outlawing slavery and involuntary servitude), and the Fifteenth (outlawing denials of the right to vote on the basis of race), blacks found themselves disenfranchised by literacy tests and poll taxes. These laws—named after “Jump Jim Crow,” a popular song and dance routine performed by T. D. Rice, a white comedian in blackface—were upheld in nearly every case.
The most notorious of the Supreme Court’s cases upholding Jim Crow laws was Plessy v. Ferguson, decided in 1896, which established that “separate but equal” government facilities were not prohibited by the Fourteenth Amendment. Justice Field joined the majority’s decision, and it would be one of his final votes as a Supreme Court justice. He retired the next year, battling senility but having served for longer than
any previous justice in American history. Certainly no other justice left as big a mark on the emerging jurisprudence of the Fourteenth Amendment. He led the charge for judicial recognition of unwritten rights of economic liberty under the due process clause, which would come to define the Supreme Court’s jurisprudence for half a century. Even after the court abandoned Field’s liberty of contract, the justices would continue his practice of reading unenumerated rights into the Fourteenth Amendment’s due process clause, including rights of privacy, abortion, and marriage. Field also spearheaded the recognition of corporate rights to equal protection and due process, although for him corporate personhood was merely a textual hook. Corporations were not really people in the sense of having rights of their own. They had rights merely as a way of protecting the property of the stockholders.
In upholding Louisiana’s “Separate Car Act,” the court in Plessy explained that the issue in the case “reduces itself to the question whether the statute of Louisiana is a reasonable regulation, and, with respect to this, there must necessarily be a large discretion on the part of the legislature.” The triumph of corporate rights under the Fourteenth Amendment meant that legislatures had considerably less discretion in regulating business. Stephen Field, Roscoe Conkling, J. C. Bancroft Davis, and the Southern Pacific Railroad had overhauled the Fourteenth Amendment to make it what Charles Wallace Collins called “the Magna Charta of accumulated and organized capital.”73
CHAPTER 5
The Corporate Criminal
ONE MORNING IN MAY OF 1905, EDWIN F. HALE, A MID-level executive at a company that imported licorice, arrived at the federal courthouse in lower Manhattan to testify before a grand jury. The youthful Kentuckian, who had only recently moved to New York in search of career opportunities, was accompanied by his attorney, DeLancey Nicoll. Called one of “the great lawyers of the city,” Nicoll was ranked by contemporaries alongside Clarence Darrow, the legendary defender of unpopular causes, as masters of the courtroom. Nicoll came from one of the oldest families in New York—Sir Richard Nicoll had arrived in the New World in 1664—and the esteemed lawyer counted among his clients railroad magnate Cornelius Vanderbilt and financier Thomas Ryan. He was, in other words, not the type of lawyer one would expect to represent a plebeian fellow like Edwin Hale. In fact, Nicoll was only at Hale’s side as a service to another, far more important client: the American Tobacco Company, the ringleader of the powerful Tobacco Trust.1
Hale, the secretary and treasurer of MacAndrews & Forbes Licorice Company, walked into the grand-jury room with trepidation. He knew why he had been called to testify. The subpoena he received required him to bring any and all correspondence, contracts, and other documents relating to the business dealings of his company and nearly a dozen other companies, all of which were involved in some way with the Tobacco Trust. The administration of President Theodore Roosevelt had recently launched a wide-ranging and high-profile investigation into potential violations of the Sherman Antitrust Act by the tobacco companies.2
Nicoll had given Hale a plan for making sure he did not reveal any secrets about his employer’s anticompetitive dealings. Nonetheless, this was a federal investigation conducted by the Department of Justice. The inquiry would surely be exhaustive, proverbially turning every stone. As a result, Hale had cause to be nervous. The investigation might well uncover Hale’s own personal crimes. And to make matters worse, he walked into the grand-jury room alone, without Nicoll to protect him. No lawyers but the prosecutors are allowed in the grand-jury room. Even though Nicoll was left out in the hallway, the illustrious lawyer had every intention of controlling what happened inside.
Waiting inside for Hale was Henry Waters Taft, the special prosecutor who was heading the Department of Justice’s investigation into the American Tobacco Company and the Tobacco Trust. Taft was the younger brother of William Howard Taft, who was then secretary of state and would go on to serve as president of the United States and chief justice of the Supreme Court. Like his older brother and Nicoll, Henry Taft was well respected in legal circles. He was a partner in the Cadwalader law firm of New York, which was founded in 1792 and remains an elite firm more than two centuries later. Taft, an antitrust specialist who typically defended businesses fighting against regulation, took a leave of absence from the firm to serve as a special prosecutor for the Roosevelt administration with the specific purpose of bringing down the Tobacco Trust.3
TOBACCO TRUST LAWYER DELANCEY NICOLL ARGUED THAT CORPORATIONS HAD THE FOURTH AMENDMENT RIGHT AGAINST UNREASONABLE SEARCHES AND THE FIFTH AMENDMENT RIGHT AGAINST SELF-INCRIMINATION.
No development impacted the economy of the United States at the turn of the twentieth century more than the rise of the trusts. The trusts were big business on steroids, monopolistic entities that controlled all of the major firms within an industry in order to reduce competition and dictate prices, output, and profits. These were not the same type of monopolies earlier opposed by Roger Taney and Andrew Jackson, who criticized exclusive privileges granted by the state legislatures. These modern monopolies were national enterprises that controlled whole industries, often winning that influence through market manipulation rather than legislative grace. Yet the trusts had still been made possible by lawmakers, who at the end of the nineteenth century adopted extensive reforms of corporate law that enabled the formation of the trusts. Corporations rushed to take advantage of the law’s new permissiveness to form huge companies through reorganizations and acquisitions in what historians have called the “Great Merger Movement.”4
Breaking up the trusts was a priority for Roosevelt, who assumed the presidency in 1901 after the assassination of the decidedly pro-business Republican William McKinley. Attuned to the prevailing political winds, Roosevelt recast himself as a populist corporate reformer in the mold of Jefferson and Jackson. In his first State of the Union speech, Roosevelt recognized the “widespread conviction” that “the great corporations known as trusts are in certain of their features and tendencies hurtful to the general welfare.” He said that “artificial bodies, such as corporations” ought to be “subject to proper governmental supervision.” Yet unlike Jefferson and Jackson, Roosevelt was not burdened by the baggage of states’ rights and slavery. In fact, Roosevelt believed the way to curtail excessive corporate growth and power was to expand the power of the federal government. National corporations of such size and power as the trusts needed national regulation. To that end, Roosevelt called for a host of new federal regulations on business: maximum-hour laws, workplace safety laws, railroad laws—and, for the first time, vigorous enforcement of the federal antitrust law.5
Many of these laws, including the antitrust law with which Henry Taft was concerned, included an important legal innovation: they held corporations criminally liable for wrongdoing. Writing a century and a half earlier, Blackstone in his Commentaries had recognized the long-standing notion that “a corporation cannot commit treason, or felony, or other crime, in its corporate capacity.” The corporation itself was deemed to have no authority to break the law, so any criminal act by the company was attributed to the officers of the company personally. The Progressive era push to regulate the trusts led not only to a wave of new federal laws but also to the imposition for the first time of widespread criminal liability on corporations. That, in turn, led to new questions about the scope of corporate rights under the Constitution.6
It is easy to forget how much of the Bill of Rights was designed to protect criminals and people suspected of crime. While Americans today might first associate the Constitution with rights of personal conscience, such as freedom of speech and religious liberty, the Founding Fathers were largely focused on the investigation, prosecution, and punishment of criminals. The Fourth Amendment protects against unreasonable searches and seizures in investigations. The Fifth Amendment provides that a person cannot be compelled to incriminate himself. The Sixth Amendment promises a “speedy and public” trial, the right to confront witnesses, and the right to counsel
for accused criminals, while the Eighth Amendment outlaws cruel and unusual punishment for those convicted. The new wave of turn-of-the-century regulation that imposed criminal penalties on corporations would force the Supreme Court to decide whether corporations, like individuals, enjoyed those same constitutional protections.
The issue would be first brought to the Supreme Court as a result of the battle between DeLancey Nicoll and Henry Taft over Edwin Hale’s testimony in the grand-jury room that May morning. Their fight, of course, was just a skirmish in a larger struggle between the populist Roosevelt and the huge corporations, like American Tobacco, that dominated the economy. The Supreme Court at the time was in the early years of the Lochner era, yet its decisions on corporate criminal rights were not nearly as expansive as one might expect given the court’s notoriously pro-business reputation. The justices would say that, when it comes to the Constitution’s protection of the rights of criminals, corporations were fundamentally different from individuals. Although corporations had some criminal rights protections, they were not the exact same as those enjoyed by individuals. The Lochner court drew a new boundary on the scope of corporate rights, ruling that corporations were entitled to rights of property but not rights of liberty.