We the Corporations

by Adam Winkler

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  TODAY, ONE MIGHT ASSUME that the seemingly bizarre question that confronted the Virginia Supreme Court in the People’s Pleasure Park case of the Jim Crow era—whether corporations can have a racial identity—would have long ceased to be relevant. Unlike during the early twentieth century, when states were aggressively using race to segregate people in all areas of social life, race is no longer the focus of many laws. Nonetheless, the law today does allow corporations to claim a race or ethnicity.

  Although Justice Black wrote that corporations could not have a race, the law once again refused to embrace his views. Consider the case of Flying B, a trucking company owned by Sikhs, with Sikh drivers, that contracted with oil giant ARCO to haul fuel through Washington State. ARCO’s Seattle supervisor peppered Flying B’s drivers with racial epithets and made their lives miserable. He refused to sign delivery papers. He made them wait in the rain when other drivers were allowed inside. He forced them to clean up other drivers’ spills, one time directing a Sikh trucker to take the “rag from your head and clean it.” He also degraded Flying B’s non-Sikh drivers for working for Sikhs. When Flying B complained, ARCO terminated the contract.24

  Flying B sued, claiming ARCO discriminated against the company on the basis of race. Following Justice Black, ARCO argued that because Flying B was a corporation it had “no racial identity.” ARCO was willing to concede that Flying B could bring a lawsuit for breach of contract; corporations have always had the right to make and enforce contracts. But Flying B could not bring a lawsuit for racial discrimination under federal civil rights laws. The federal court disagreed. The ARCO supervisor treated the company and its employees in a discriminatory manner. And he did it because the company was owned and operated by Sikhs. As a result, the court said, “Flying B undoubtedly acquired an imputed racial identity.” Here, ascribing a racial identity to a corporation was necessary to give teeth to antidiscrimination law.

  Corporations today can also have a legally recognized racial identity under affirmative action policies. Federal law provides that companies with 51 percent minority control and ownership can be certified as “Minority Business Enterprises,” which qualifies them for a variety of contracting, banking, and training programs for economically and socially disadvantaged groups. States have similar programs, the result of which is effectively to classify particular companies as African American, Hispanic American, or Native American. In contrast to the People’s Pleasure Park case of a century ago, which treated the corporation as a person—its own independent legal entity, distinct from the people who owned it—the minority business enterprises policies represent a form of veil piercing. The courts look to the racial identity of the owners and graft that race onto the corporation.25

  The Flying B case and the affirmative action programs arise under statutes passed by Congress or the state legislatures, not the Constitution. If Congress or the states wanted to exclude corporations from these programs, they could pass new laws through the ordinary legislative process. Constitutional protections are more durable because they cannot be legislated away. While the Supreme Court has never explicitly held that the Constitution recognizes corporations to have racial identities, the justices have nevertheless come very close—effectively reaching the same result indirectly. Only the beneficiaries were not corporations run by socially disadvantaged minorities like Flying B; they were instead corporations run by whites.

  Since the late 1970s, the Supreme Court has often been criticized for reading the Constitution’s protections against racial discrimination more to the benefit of whites than to the benefit of historically subjugated minorities. Previously, during the Warren court of the 1950s and 1960s, the Supreme Court had read the Constitution to upend Jim Crow, fulfilling the promise of Justice Harlan Fiske Stone’s footnote in Carolene Products. Yet those decisions helped feed a backlash, and after the election of Richard Nixon in 1968, Republican presidents who ran against liberal judicial activism would appoint ten consecutive Supreme Court justices. The remade court curtailed busing to integrate schools and made it harder to sue for racial discrimination.26

  In one way, however, the justices made it easier to prove discrimination—against whites. Beginning with a 1978 case, University of California v. Bakke, the court began to insist that affirmative action policies, such as minority set-aside programs, satisfy constitutional law’s hardest test, “strict scrutiny.” Bakke suggested strict scrutiny was necessary because race-based affirmative action was another form of racial discrimination, raising the same concerns as Jim Crow laws. The effect of Bakke was to make it easier to challenge affirmative action polices as unconstitutional.27

  Although strict scrutiny for affirmative action grew out of Bakke, that case split the justices and, as a result, there was no controlling majority opinion. The first two Supreme Court cases to have a clear majority in favor of strict scrutiny for affirmative action involved business firms who claimed to be victims of racial discrimination: Adarand Constructors, Inc. and the J. A. Croson Company, the former a corporation and the latter a limited liability company. Both companies were owned by whites, and both sued to overturn minority set-asides, claiming that such race-conscious programs violated the Constitution’s guarantee of equal protection. The companies were, in a way, constitutional first movers whose fight to establish their own rights would later be exploited by individuals.

  The Supreme Court sided with the companies generally, although without explicitly addressing whether corporations, as such, could have a racial identity. Yet the court’s reasoning unquestionably assumed that those companies did indeed have racial characteristics. To have standing to challenge an affirmative action policy, someone must show that the policy caused her an injury. Only if Adarand Constructors, Inc. and J. A. Croson Company were discriminated against on account of race could they claim to have suffered a unique harm from the racial preferences. As one federal court admitted, the Supreme Court in these cases “implicitly recognized that corporations can have racial characteristics by allowing white owned corporations to challenge contractor set asides.”28

  The business victories marked a retreat of sorts from Justice Harlan Fiske Stone’s footnote in Carolene Products. For a half-century after the 1937 decision in which Stone insisted that special judicial protection was necessary for “discrete and insular minorities,” the court had largely followed that advice. The court struck down speech restrictions targeting political dissenters, dismantled Jim Crow, and generally committed itself to preserving civil rights and civil liberties. Stone’s justification for stricter judicial review of laws burdening minorities was grounded in political power: minority groups were easily victimized by the majority. Yet in the affirmative action cases, the justices abandoned that rationale, giving special judicial protection to the white majority. It was another example of reform adopted to help the powerless that was exploited and transformed by corporations to benefit the powerful.

  The Supreme Court justice who first suggested that race-based affirmative action be subject to strict scrutiny was Lewis F. Powell Jr., a Nixon appointee who authored the Bakke opinion. Another area of constitutional law in which Powell would have a tremendous influence was corporate rights. For just as Daniel Webster was the Corporation’s Lawyer, Lewis Powell was the Corporation’s Justice.

  CHAPTER 9

  The Corporation’s Justice

  AT PHILIP MORRIS’S ANNUAL CHRISTMAS LUNCHEON IN December of 1971, Joe Cullman, the tobacco giant’s chief executive, gave a warm sendoff to a longtime member of the board of directors who was leaving to take a new job. Although the two men had been close friends since childhood, Cullman’s elaborate tribute proved he was not disappointed by the departure of Lewis F. Powell Jr., who after all was severing formal ties with the company to become a justice on the Supreme Court. Cullman had prepared a state-of-the-art multimedia production, complete with special effects, music, and film clips, to honor Powell. The tribute was a spoof on the popular 1950s t
elevision history show, You Are There, and featured the program’s actual host, legendary news anchor Walter Cronkite, who recounted the highlights of Powell’s life interspersed with humorous and touching reenactments. As Powell and his wife Jo looked on joyously, the tribute reimagined when a younger Powell was first pursuing Jo and asked her father for his blessing. “Yes,” the father replies, “she says you are a supreme courter!”1

  The festive mood belied the fact that Philip Morris and the tobacco industry—indeed, much of corporate America—had been the targets of withering attacks over the better part of the previous decade. Few people felt this as acutely as Cullman, Philip Morris’s CEO since 1957. During that time, he had seen his company’s products demonized as a health risk after waves of studies exposed the dangers of smoking. Strict new federal laws restricted cigarette advertising and required warning labels on cigarette packages. Those regulations were not far from Cullman’s mind during his tribute to Powell. About halfway through, Cullman paused to announce “this important message from our sponsor” and played an ad for Philip Morris cigarettes—one that the company was prohibited by recent reforms from airing on broadcast television.

  Tobacco regulation was just one small swell in a tidal wave of populist reforms enacted in the 1960s and early 1970s that curtailed traditional business practices in the interests of consumers, workers, and the environment. In a remarkably productive six-year stretch, Congress passed the Clean Air Act, the Clean Water Act, the National Environmental Policy Act, and the Consumer Product Safety Act, along with new regulations establishing safety standards for automobiles, prohibiting dangerous chemicals in children’s products, and strengthening food safety. The laws reflected Americans’ loss of faith in industry. In 1966–1967, over half of Americans reported having “a great deal of confidence” in corporate leaders, but by 1974–1976, that number had dropped precipitously to 20 percent.2

  The unquestioned leader of the reform movement was Ralph Nader, a tireless populist advocate for curbing corporate power whom Newsweek magazine featured on its cover dressed as a knight in shining armor. Time magazine called Nader the “nation’s No. 1 consumer guardian,” who had prompted “much U.S. industry to reappraise its responsibilities and, against considerable odds, created a new climate of concern for the consumer among politicians and businessmen.” Nader carried on the spirit of the Muckrakers and, like Upton Sinclair exposing the slaughterhouses or Henry Demarest Lloyd warning of Standard Oil’s monopoly, he unmasked how corporations harmed consumers in the unyielding pursuit of profit. Nader, Time wrote, was “almost solely responsible” for the wave of “major federal laws” regulating business.3

  The year 1971, when Philip Morris had its luncheon send-off for Lewis Powell, was a critical one in the battle between populist reformers and big business. Earlier that year, Nader had founded Public Citizen to advocate for consumers with the motto, “Corporations have their lobbyists in Washington, D.C. The people need advocates too.” Using sophisticated methods to mobilize grassroots pressure on lawmakers, Public Citizen quickly became a leading voice for curbing corporate power. Yet 1971 was also the year the seeds of a comeback for corporate America were planted—by none other than Powell. In August, two months before he was nominated to the Supreme Court, Powell wrote a lengthy memorandum for the Chamber of Commerce outlining the threats posed by the likes of Nader to the free enterprise system and detailing how business should fight back. Although the memorandum was not discovered until a year after Powell’s confirmation, once revealed it became a rallying cry for business leaders across the country. Indeed, the Powell Memorandum became an influential strategic planning document of the emerging New Right—a coalition of free market advocates and religious conservatives that swept Ronald Reagan into the White House in 1980, pushed for deregulation of industry, and reasserted the influence of business in American politics.4

  At the luncheon, Joe Cullman teased Lewis F. Powell for his strong ties to one corporation in particular. An early skit featured Powell’s elementary school teacher asking him, “What does the ‘F’ stand for in your name?” to which Powell replied, “Philip Morris, ma’am.” Powell’s ties to tobacco went back a remarkably long way; his ancestor Nathaniel Powell arrived with the Virginia Company’s first ships in 1607 and survived to see the development of tobacco as the colony’s first profitable crop. Indeed, the future Supreme Court justice was born less than sixty miles from Nathaniel Powell’s plantation, located off a tiny tributary of the James River still known after four hundred years as Powell’s Creek.5

  Cullman’s tribute surveyed Powell’s impressive resume: a decorated army intelligence officer during World War II, a leading lawyer in Richmond, and president of the American Bar Association. “However,” Cullman continued, “his career reached a new high, when Mr. Joseph F. Cullman said to him, ‘Congratulations, Lewis, you have just been elected to the board of directors of Philip Morris Incorporated!’ ”6

  Yet only after Lewis Powell left the Philip Morris board and joined the Supreme Court would he come to be called “the most powerful man in America.” He was one of four justices named by President Richard Nixon, who set out to dismantle the liberal Warren court of the 1950s and 1960s. Under the chief justiceship of Earl Warren, the court had issued a reliable stream of liberal rulings desegregating schools, expanding the rights of criminal defendants, guaranteeing sexual privacy, and giving private citizens wide leeway to bring antitrust suits against business. Nixon’s court, by contrast, would end busing, limit the scope of civil rights laws, and curtail securities fraud and antitrust suits. Powell became the Supreme Court’s swing vote, and while he occasionally sided with the liberal Warren court holdouts on social issues, the author of the Powell Memorandum was a corporationalist who voted more consistently to expand the rights of corporations and protect industry from burdensome regulation and lawsuits.7

  While the Supreme Court’s conservative turn in the 1970s has been well documented, one aspect of that transformation warrants closer examination: how the remade court dealt with the constitutional rights of corporations. Both Ralph Nader and Lewis Powell would play starring roles in that drama. Nader and his advocacy group Public Citizen spearheaded a landmark case on behalf of consumers that relied on an innovative “listeners’ rights” theory of the First Amendment—one that, ironically, would result in broader speech rights for businesses. Then, in another case soon after, Powell would use Nader’s listeners’ rights theory to justify extending to corporations the First Amendment right to engage in political speech about elections. Together, these two cases would speed along the political revitalization of corporate America. And they would set in place the final foundation stones in constitutional doctrine for Citizens United.

  As Joe Cullman finished up his lavish tribute to Powell, the voice of Walter Cronkite once again filled the room. “The elevation of Lewis Powell to the highest court in the land . . . adds to the lustre, the stature and the nobility of our Supreme Court,” the news anchor declared. “And you were there!” Cullman then called Jo Powell up to receive a farewell gift before presenting one to her husband. “It is customary for friends and associates to present a newly appointed Supreme Court justice with his robes of office,” Cullman announced. “It is therefore a great honor and privilege for me to present you with this robe on behalf of your friends as you enter the exalted chambers of the court, and leave the crass world of commercialism.” Powell being robed by the chief executive of one of America’s most powerful corporations was a sign of the future direction of corporate rights.

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  TALL, AFFABLE, AND A BIT GAUNT, the bespectacled Lewis Powell was said to resemble a “kindly country pharmacist.” His genteel southern manners—he never swore and was unfailingly polite—enhanced the perception. While known for his “qualities of temperament” and willingness to compromise as a justice, Powell could also be strident and immoderate on certain issues. It was his harsh views of criminal justice that first attracted Nixo
n’s attention. When Powell was the president of the American Bar Association in the mid-1960s, he gave a series of speeches on criminal justice in which he bashed liberals who blamed rising crime on structural racism or the lack of economic opportunity in minority communities. Instead, Powell said, the “root cause of the crime crisis which grips our country” was “excessive tolerance” of “substandard, marginal, and even immoral and unlawful conduct.” As he told the Senate during his confirmation hearings, “The need is for greater protection—not of criminals but of law-abiding citizens.”8

  Another issue about which Powell had very rigid views was Ralph Nader’s progressive reform movement. Like Sinclair Lewis’s Babbitt, Powell still believed in the promise and potential of business, even as it faced new regulations of unprecedented number and scope. His position was laid out in the memorandum he wrote for the Chamber of Commerce in the summer of 1971.

  The memorandum was the product of a series of conversations between Powell and his friend Eugene Sydnor Jr., a prominent Richmond businessman who ran the Southern Department Stores chain and served on the board of the national Chamber of Commerce. Sydnor was a proponent of the view that businessmen needed to be more active politically. He first learned that lesson as a state senator in Virginia in the mid-1950s, when the state was roiled by debates over school integration. Sydnor opposed the policy of “massive resistance” because he feared the pitched battles over racial segregation were bad for Virginia’s economy. His pro-business voice was nonetheless easily drowned out by the sirens of racism, and Virginia became a leader in the southern revolt against Brown.9

  JUSTICE LEWIS POWELL ADVOCATED FOR BUSINESS TO BECOME MORE POLITICALLY ACTIVE AND WROTE A SUPREME COURT OPINION PROTECTING CORPORATE POLITICAL SPEECH.

  The need for business interests to become better organized politically became the subject of Sydnor and Powell’s colloquy in 1971. The topic fascinated Powell, who clipped and saved articles from popular magazines like Fortune and Barron’s about the faltering political position of business, the growing opposition to concentrated wealth, and the rise of socialism on college campuses. Sydnor encouraged Powell to write up his memorandum and sent him helpful editorials about the political position of business from the Wall Street Journal. One editorial Sydnor sent focused on perhaps the most publicized conflict of the era between a reformer and big business—the battle between Ralph Nader and General Motors.