We the Corporations

by Adam Winkler

  Nonetheless, the Brewers Association remained focused on keeping beer taxes low, more or less ignoring the growing push for alcohol restrictions—at least until 1913. That year Congress passed the Webb-Kenyon Act, making it illegal to ship alcohol into dry states and counties. The law spurred efforts for national prohibition and woke the brewers to the seriousness of the threat. The beer companies, operating on their own or through the auspices of the Brewers Association, committed to becoming more politically active in trying to defeat prohibition. They began to spend corporate money on campaigns, even though such expenditures were illegal under the Tillman Act and similar state laws.58

  The Lansing Brewing Company was one of the beer makers that made illegal corporate contributions. When Ingham County, Michigan, held a local option election in 1914, Jacob Gansley, an officer and director of the company, secretly gave $500 of the corporation’s money to the Personal Liberty League, the organization leading the opposition. Gansley was convicted of violating Michigan’s campaign finance laws and, in his appeal, asserted that the ban on corporate campaign spending was unconstitutional. Corporations, he argued, had the same free speech right as individuals “to make such lawful expenditures as may be necessary to protect their interests” in elections.59

  The Michigan Supreme Court in People v. Gansley ruled against the company. The court’s opinion in the 1916 case was authored by Chief Justice John W. Stone, a populist when it came to corporations and someone who happened to know quite a bit about political campaigns, having run for elective office no fewer than seven times. Although he understood the value of campaign spending to promote a political agenda, Stone emphasized the differences between natural persons and corporations when it came to elections. If “the stockholders and officers of the Lansing Brewing Company desire, as individuals, to contribute to the campaign fund, it was their privilege so to do.” They were entitled to “freely speak, write, and publish their views.” The company itself, however, had “no right to participate in the elective franchise.” Borrowing the distinction previously made by the Supreme Court, Stone explained that the law here did not interfere with property rights and that the constitutional guarantee in question, a liberty right, “relates to natural and not artificial persons.” “The Lansing Brewing Company was created under our statute,” Stone concluded succinctly, not for political purposes but “for the purpose of manufacturing beer.”60

  Beer makers also challenged the federal Tillman Act in another case arising out of the 1914 elections, United States v. United States Brewers Association. To support “wet” candidates, the Brewers Association and more than seventy beer companies made contributions to candidates for federal office—in clear violation of the Tillman Act. The brewers argued that the ban on corporate contributions “violated the first amendment of the constitution, in that it attempts to prohibit, make criminal, and punish, the freedom of speech and of the press in the discussion of candidates and of political questions involved in such elections.” The federal court disagreed. Although the court was not convinced that campaign finance laws burdened speech rights at all—modern free speech doctrine would only arise in the years to follow—it also emphasized the differences between corporations and individuals when it came to participating in elections. Echoing Roger Taney, the federal court said that corporations “are not citizens of the United States, and, so far as the franchise is concerned, must at all times be held subservient to the government and the citizenship of which it is composed.” Spending money to influence elections was, like the right to vote, one of the central “means of participation in the government,” and as such was limited to natural people. Individuals had a right to vote but the “time has not come,” the court noted wryly, “when the right of suffrage will be extended to the artificial beings known as corporations.”61

  ADVERTISEMENT FOR THE LANSING BREWING COMPANY, WHICH CHALLENGED A BAN ON CORPORATE MONEY IN ELECTIONS ALMOST A CENTURY BEFORE CITIZENS UNITED.

  Even though these early cases on political rights for corporations were brought during the Lochner era, the courts nonetheless ruled consistently against the corporations. The Great Wall Street Scandal of 1905 had prompted Congress and state legislatures to prohibit corporate money in elections to combat corruption, and the courts agreed that such laws were justifiable restrictions. In both the legislatures and the courts, corporations were viewed as fundamentally different from ordinary individuals when it came to questions of democratic participation. That understanding would remain the law of the land for almost a hundred years, until Citizens United.

  * * *

  TODAY, THE SCANDAL TOUCHED off by Charles Evans Hughes’s interrogation of George Perkins has been largely lost to popular memory. Although the discovery of corporate campaign contributions to Theodore Roosevelt threatened to undermine the trustbuster’s legacy, the controversy is mentioned only in passing, if at all, in many of his biographies. Roosevelt saved his image, in part by proposing groundbreaking legislation to ban corporate money in federal elections. His success in that effort was highlighted by the very fact that, despite his reelection campaign’s reliance on sizeable corporate gifts, he is still remembered today as a crusader against big business and the trusts.62

  Like Roosevelt, Perkins too was only set back temporarily by the scandal—although it seemed much more calamitous for him at first. Held up as the embodiment of political corruption, Perkins, who was forced to quit his job at New York Life, was attacked from the pulpit in Sunday sermons and from columns in the daily papers. He was also brought up on criminal charges by New York District Attorney William Travers Jerome, who had previously prosecuted Edwin Hale for stealing money from MacAndrews & Forbes. Perkins was also charged with stealing company money, and using it to further the personal interests of New York Life’s executives rather than the business interests of the company.63

  Perkins escaped jail, however, when the New York Court of Appeals threw out Jerome’s charges. The court said Perkins had not had the requisite criminal intent, given that the expenditures had been authorized by the company’s board. Moreover, the contributions took place before such donations were explicitly banned by laws like the Tillman Act, so Perkins could not be prosecuted for violating campaign finance rules. Instead, the court said that policyholders would have to find recourse in corporate law for what the judges readily termed a “misappropriation” of company funds. What the judges left unstated, however, was that late nineteenth-century reforms in corporate law had only further separated ownership from control, making it harder than ever to hold management accountable for such wrongdoing.64

  Perkins’s friends, including Roosevelt, stuck by him through the difficult years. He remained a Morgan partner until 1910, when he decided to focus his energies away from business and toward electoral politics. He went from being Morgan’s right-hand man to Roosevelt’s, and became the strategist behind the former president’s bolt from the Republican Party to form the Bull Moose Party in 1912. Even though their quixotic effort divided the Republican vote and helped lead to Woodrow Wilson’s victory—only the second Democrat elected president in half a century—Perkins was nonetheless welcomed back into the GOP. Few others could match his shrewdness and connections. In the election of 1916, Perkins even mustered the courage to endorse and campaign for the GOP presidential nominee of that year, the man who had disregarded Perkins’s warning and brought him years of public humiliation, Charles Evans Hughes.65

  Hughes had to resign from the Supreme Court to run. For all his intellectual and prosecutorial gifts, however, Hughes was a poor campaigner and, in an upset, lost by only a few thousand votes to the incumbent Wilson. The lesson of his failed candidacy—that the judicial temperament is ill-suited to the rigors of the type of modern, commercial-style campaign first envisioned by Mark Hanna—would discourage future Supreme Court justices from running for national executive office. (William O. Douglas came closest in 1940 and 1944 when he was considered for vice president by Franklin Roosevelt.) Lo
sing the presidency and a lifetime seat on the Supreme Court within months of each other, however, did not seem to faze the gifted Hughes. Like a cat with nine lives, he would go on to serve as secretary of state to two presidents and, in 1930, would be appointed again to the Supreme Court of the United States, this time as chief justice.

  When Hughes was confirmed the second time, the leading voice of anticorporate populism on the high court was Louis Brandeis. Nominated by Wilson in 1916, Brandeis owed his nomination to Perkins and Roosevelt’s foolhardy third-party campaign in 1912. Brandeis and Hughes, the two men who together had helped inspire the restrictions on corporate power of the early twentieth century, served together for nine years. Like so many of their predecessors, they too would confront the perennial question of constitutional rights for corporations. Given their backgrounds, the two might have been expected to vote without hesitation to limit corporate rights. Yet the same progressive impulses that led them to push for new limits on corporations around the time of the Great Wall Street Scandal would lead them to do precisely the opposite in the 1930s. As we will see, they would ultimately vote to expand corporate rights, including the right to free speech. Paradoxically, Brandeis and Hughes would help break down the Lochner court’s distinction between property rights and liberty rights, and further set the course of the Constitution toward Citizens United.

  PART FOUR

  THE RISE OF LIBERTY RIGHTS FOR CORPORATIONS

  IN THE TWENTIETH CENTURY, CORPORATIONS WON LIBERTY RIGHTS, SUCH AS FREEDOM OF SPEECH AND RELIGION, WITH THE HELP OF ORGANIZATIONS LIKE THE CHAMBER OF COMMERCE.

  CHAPTER 7

  Discrete and Insular Corporations

  THE SUPREME COURT HAS DECIDED OVER 32,500 CASES AND published more than 25,500 majority opinions, filling up nearly 600 hefty volumes of the United States Reports. Yet arguably the most important words ever written by the court can be found in a single footnote. That footnote, which came in a 1938 case little known outside of law schools, led to Brown v. Board of Education, invalidating racial segregation; Reynolds v. Sims, establishing one person, one vote; and Obergefell v. Hodges, guaranteeing same-sex couples the right to marry. Lawyers and judges know footnote number four in United States v. Carolene Products Company to be the germinal seed of modern constitutional law. The footnote marks the end of the Lochner era, when the court devoted itself mainly to protecting economic and property rights, and the beginning of the Brown era, when the court’s primary role became protecting civil rights and civil liberties.1

  The footnote in question was written by Justice Harlan Fiske Stone, a former corporate lawyer and dean of Columbia Law School, who was nominated to the court in 1925 by his college roommate, President Calvin Coolidge. Their long friendship was not the sole reason Coolidge chose Stone; the president fully expected his old friend to share his pro-business leanings. Indeed, one senator opposed Stone’s confirmation precisely because the nominee had “spent all his life in an atmosphere of big business, of corporations, of monopolies, and of trusts.” Yet, once confirmed, Stone disagreed with most of his Lochner court colleagues about the need to strike down regulations on business. “Courts are not the only agency of government that must be assumed to have the capacity to govern,” Stone argued. Elected officials too should be allowed room to experiment with economic policy. Endorsing “self-restraint,” Stone insisted that for “unwise laws . . . appeal lies, not to the courts, but to the ballot and to the processes of democratic government.”2

  Stone’s view was reflected in footnote four, which suggested that when it came to economic matters, the “political processes . . . can ordinarily be expected to bring about repeal of undesirable legislation.” If lawmakers enact bad laws, the people and interest groups adversely affected by them will have incentive to lobby, advocate, and vote for change. Because we can usually rely on the democratic process in those circumstances, there is little need for the courts to second-guess lawmakers. In another set of cases, however, Stone’s footnote proposed a more active role for the court. Where, for example, a law restricts the normal operation of the political processes, such as by restricting the free discussion of ideas, the court should exercise very careful scrutiny and strike down the law if necessary to reopen the pathways of democracy. The court ought to play a similarly aggressive role, the footnote offered, when reviewing laws targeting “discrete and insular minorities,” who are too often and too easily subject to persecution by the majority.3

  When Stone wrote about political persecution, he was not just referring to racial minorities; he also meant political minorities, like those Stone had witnessed being silenced in the 1910s. After the Russian Revolution of 1917, a red scare swept the nation; socialists, labor activists, anarchists, and immigrants were targeted for prosecution and deportation, usually for little more than speaking out against World War I. At Columbia, Stone fought attempts by Nicholas M. Butler, the university’s domineering president, to purge the faculty of socialists; Stone later said that Butler believed “true academic freedom is identical with that of a citizen in the German Reich—the freedom to do what he is told by his Fuehrer and entourage.” In 1920, Stone drafted a resolution on behalf of the New York City Bar Association criticizing the New York Assembly for suspending five duly elected members because of their socialist views. He also served on the War Department’s Board of Inquiry, which adjudicated claims of conscientious objectors, and came to appreciate the war dissenters’ sincerity even if he disagreed with their tactics. The lesson Stone learned was that while lawmakers could reliably make economic policy, they could not be trusted to preserve the rights of political outcasts and minorities.4

  JUSTICE HARLAN FISKE STONE WROTE THE LANDMARK FOOTNOTE THAT RESHAPED AMERICAN LAW AND HELPED JUSTIFY THE GRADUAL EXTENSION OF LIBERTY RIGHTS TO CORPORATIONS.

  Although Stone may have had racial minorities and socialist radicals in mind, corporations too would claim to be the victims of political persecution. The most important early illustration of this came in the 1930s, and the corporations involved were political dissenters—newspaper companies that Huey Long, the infamous “Kingfish” of Louisiana, tried to silence for opposing him. The newspapers challenged Long’s efforts by asserting a constitutional right to freedom of speech and of the press. Although this right had been held to be a “liberty” right, the newspapers’ case arrived at the Supreme Court at an advantageous time. For the first time, the justices were reading the First Amendment vibrantly and calling into question laws designed to silence political radicals. The newspapers’ case became wrapped up in the court’s larger commitment to fighting government censorship, and the court abandoned the distinction made in the Lochner years between property rights and liberty rights. Nearly seventy-five years before Citizens United, the Supreme Court held that newspaper corporations had First Amendment rights.

  * * *

  IT TOOK AN IRREPRESSIBLE DEMAGOGUE like Huey Long to make Louisiana’s major newspaper companies look like victims of political repression. Like Jefferson, Jackson, and Bryan before him, Long, the fiery, outspoken, 34-year-old governor of Louisiana, was a populist who denounced big corporations and a political system skewed against the common man. Elected in 1928 by the largest margin of victory in the state’s history, Long pursued an impressive array of reforms to serve a population mired in abject poverty: new schools, free textbooks, paved roads, bridges, university expansion, and old-age pensions. Yet Long was also an autocrat who exercised near complete control over all aspects of state government and harbored no tolerance for dissent. He was the Kingfish, and when Louisiana’s big city newspapers refused to support his policies, Long determined to silence them.5

  When Long was elected, Louisiana had a large number of newspapers, 163 in all. Most were weeklies with small circulations in the state’s predominantly rural parishes; these papers supported Long throughout his tenure. Yet a rift opened up almost immediately between Long and the major urban dailies, such as the New Orleans Times-Picayune, the Baton Rouge Mo
rning Advocate, and the Shreveport Times, largely over how to tax the state’s biggest corporation and largest employer, Standard Oil. The once legendary monopoly was no longer the national political powerhouse it had been before being broken up, but it remained Louisiana’s largest employer and one of the few businesses not devastated by the economic crisis of 1929. To finance his expensive education reforms, Long proposed to raise taxes on oil. The urban papers, especially those in Baton Rouge, where Standard Oil had its biggest refinery, came out against Long’s proposal, warning it would lead to a spike in unemployment at a time of serious economic instability. Long was outraged.6

  LOUISIANA GOVERNOR HUEY LONG SOUGHT TO PERSECUTE HIS OPPONENTS, INCLUDING MEDIA CORPORATIONS.

  Long fought dirty, and after Capital City Press, the publisher of the Baton Rouge Morning Advocate, came out against the tax, Long tried to blackmail the company’s owner and editor, Charles Manship. “Cut out those spite editorials,” Long warned Manship, whose brother was in a state-run psychiatric asylum, “or I’ll get out a statement that will hurt you.” Manship refused to back down and Long—if nothing else, true to his word—leaked to friendly reporters that syphilis had driven the newspaper man’s brother mad.7

  Long’s outrageous attempt to blackmail Capital City was said to have “aroused the indignation of every newspaper man in the state.” The major dailies turned against the governor and began portraying him as a tyrant. The Morning Advocate called Long a “conscienceless” and “dangerous” official who relied on “graft, corruption and debauchery”; the Times-Picayune wrote that he was an “unbalanced dictator” eager “to set up a personal despotism as irresponsible and oppressive” as those emerging in post–World War I Europe. The New Orleans States went so far as to label Long a “liar, crook, petty larceny thief and scoundrel.” Only a year into Long’s governorship, the urban papers began calling for his impeachment.8