by Adam Winkler
From his seat on the Supreme Court, Powell thought it would be inappropriate of him to promote the memorandum even as it gained fame and influence. Yet when people wrote to Powell asking for a copy, he unfailingly directed them to the Chamber. And although a Supreme Court justice could not engage in the sort of advocacy proposed in the memorandum, Powell’s position gave him other unique opportunities to shape the law and to promote the memorandum’s goals. One case in particular, a dispute over the referendum process in Massachusetts, enabled him to write his vision of politically active business corporations into the First Amendment of the Constitution. And Ralph Nader and Alan Morrison’s victory in the Virginia Pharmacy case would help him do it.
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THE CONTROVERSY OVER MASSACHUSETTS’S referendum process had begun years earlier, in 1962, when reformers sought a statewide vote on an amendment to the commonwealth’s constitution to allow for a progressive income tax. At the time, Massachusetts’s constitution required a flat income tax, but liberal reform groups argued that a graduated tax that imposed higher rates on those who earned the most was more equitable. Richard Hill, the chairman of the First National Bank of Boston and “New England’s most influential banker,” was among the top earners in the region, and he was committed to stopping the graduated tax amendment.43
Hill sat on the boards of the region’s largest companies, including United Fruit Corporation, Boston Edison, NYNEX (later Verizon), Polaroid, Raytheon, and John Hancock Mutual Life. Politically active, Hill had earned top honors in Who Rules Boston?, a book that ranked the city’s power brokers. He was a graduate of Dartmouth College, like Daniel Webster, and he chaired the college’s Board of Trustees a century and a half after that board hired the Corporation’s Lawyer to bring one of the earliest lawsuits to establish constitutional rights for corporations in Dartmouth College v. Woodward. Following Webster’s footsteps, Hill, a member of the brand new Business Roundtable who shared Powell’s view of the necessity of corporate activism, would also lead a series of lawsuits to expand corporate rights.
RICHARD HILL (RIGHT), WHO FOUGHT TO ALLOW CORPORATIONS TO SPEND ON POLITICS, AT A GROUNDBREAKING FOR FIRST NATIONAL BANK OF BOSTON, 1968.
Under Massachusetts’s law, corporations like First National Bank were prohibited from making political expenditures. In 1907, Massachusetts was one of the many states that, like Congress, barred corporate spending on campaigns in the wake of Charles Evans Hughes’s discoveries in the Great Wall Street Scandal. Nonetheless, the Massachusetts law contained a loophole. It did not apply to companies that wished to spend on ballot measures “materially affecting any of the property, business or assets of the corporation.” Taking advantage of this exception, Hill and executives from several other Massachusetts corporations, including Digital Equipment Corporation and Gillette, forged a successful campaign to defeat the graduated tax amendment. Six years later, in 1968, the graduated tax proposal went before the voters a second time, only to lose once more in the face of significant corporate spending by Hill’s company and others.44
In 1972, lawmakers in Massachusetts decided to try a third time to pass the graduated tax amendment, even if it meant changing the rules of the political game. They revised the corporate political spending law to narrow the loophole Hill’s corporation had used to defeat the earlier referendums. Under the new law, corporations could still finance expenditures on ballot propositions that materially affected their businesses, with one exception: any measure “concerning the taxation of the income, property or transactions of individuals” was to be deemed automatically immaterial to business interests. In legalese, taxes on individuals were “conclusively presumed” to be irrelevant to any business.
At Hill’s direction, First National Bank filed suit to protect its rights, and Massachusetts’s highest court ruled in the bank’s favor. The court held that the graduated tax measure on the 1972 ballot would authorize lawmakers to impose graduated taxes on both individuals and corporations, and thus the measure was not immaterial to First National. The court did not say that First National had a First Amendment right to participate in ballot measure elections. It only held that the law, as written, permitted political expenditures in these circumstances. With financing from First National, opponents of the graduated tax outspent supporters 6–1 and the proposal was defeated once again.45
In 1975, Massachusetts lawmakers sought a fourth vote on a graduated tax and changed the rules again. Now corporations were prohibited from spending on any measure related “solely” to individual taxation—and, this time, the measure placed on the ballot was explicitly limited to individuals.
Hill remained undaunted. Like an increasing number of businesspeople in the years after publication of the Powell Memorandum, Hill was convinced of the need to defend the interests of business, and his resolve had only been fortified by the stagnating economy of the mid-1970s. Beginning in 1973, a deep two-year recession brought on by the international oil crisis was eating into corporate profits. Many business executives, who were already questioning the dominant philosophy of active government intervention to manage the economy, blamed the recent wave of Nader-inspired regulation. Their companies faced billions of dollars in new compliance costs and “the government,” a 1975 issue of Fortune complained, “is now present—either in person, or somewhat like Banquo’s ghost, in disturbing spirit—at every major business meeting.” The marketplace, in many businessmen’s view, needed an exorcism to get rid of burdenson regulation.46
Certain that a progressive income tax on individuals would further inhibit economic growth and make it harder to recruit top-notch talent to Massachusetts, Hill and other businessmen had first lobbied to stop the legislature from putting the measure on the ballot. When that failed, they outspent opponents and defeated the measure on Election Day—several times. When lawmakers threw up new hurdles, the businessmen went to court to protect their interests. It was precisely the type of relentless, assertive mobilization of business envisioned by the Powell Memorandum. And the final word on whether Massachusetts could prohibit corporations from spending money to influence ballot campaigns would rest with the court on which sat the memorandum’s author.
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WHEN POWELL WAS A STUDENT at Harvard Law School in the 1930s, one of his professors was Felix Frankfurter, the brilliant, Austrian-born cofounder of the American Civil Liberties Union who also served as one of President Franklin Roosevelt’s closest advisors during the New Deal. After Roosevelt appointed Frankfurter to the Supreme Court in 1939, the liberal academic became a conservative judge, consistently arguing for judicial restraint at a time when the court’s liberal majority was growing increasingly bold. In a 1946 case, Frankfurter warned the court to stay out of election cases in particular. Things like the drawing of congressional districts were inherently partisan, and judges lacked the requisite expertise and understanding of how elections work to make sound decisions. Election cases were, Frankfurter said, a “political thicket” that would ensnare unsuspecting judges.47
In the mid-1970s, as the battle in Massachusetts between lawmakers and Richard Hill raged, the Supreme Court disregarded Frankfurter’s advice and issued some of the most important, controversial, and, in the eyes of some, wrongheaded decisions in recent memory. One case stood out above the others, Buckley v. Valeo, decided in 1976. In Buckley, the court held that campaign finance laws could restrict the size of contributions to candidates but not the amount of spending by candidates and others. Buckley’s split-the-baby compromise, which had the unfortunate effect of forcing candidates to engage in an endless cycle of fund-raising, has been roundly criticized by Democrats, Republicans, federal and state regulators, politicians, contributors, and political fund-raisers—in short, nearly everyone involved in the financing of elections.48
One reason Buckley was so problematic was the court’s rejection of equality as a guiding principle in campaign finance law. The court said that lawmakers could seek to prevent bribery or the appearance o
f corruption, but they could not try to enhance the equality of voices in the political community. The court applied this principle to strike down limits on “independent expenditures”—money spent to support candidates but without prior coordination with the campaigns. As a result, individuals could spend unlimited sums on advertisements promoting their favored candidates, so long as they did so “independently.” Citizens United would extend to corporations the same right to make unlimited independent expenditures, and cite Buckley for support.
Although the court in Buckley insisted that equality was “wholly foreign to the First Amendment,” in fact that principle ran throughout the institutional design of American politics. Every citizen had one vote, political debates gave each candidate equal time, and legislative districts were required to be drawn evenly to ensure equal representation. After Buckley, however, equality was something campaign finance law was uniquely prohibited from promoting. And that was good news for Richard Hill and First National Bank, whose strategy was to outspend their opponents.
When the Supreme Court heard arguments in First National’s case in November of 1977, the lawyers were afforded the benefit of the equality principle the justices had rejected in Buckley: each side was given exactly thirty minutes to argue at the lectern. Francis H. Fox, the attorney for First National, who would go on to become one of the antiabortion movement’s leading lawyers, admitted there were no previous Supreme Court cases clearly holding that corporations had the same First Amendment rights as individuals. Nonetheless, he argued, Virginia Pharmacy implicitly recognized the free speech rights of businesses to advertise drug prices. Moreover, Massachusetts’s corporate spending law was designed to reduce the “undue influence of wealth,” which was just another way of equalizing voices.49
Massachusetts, whose legal team was led by Francis X. Bellotti, the commonwealth’s popular attorney general, argued that the law was not designed to promote political equality but was about “preserving the integrity of the referendum.” Besides, “business corporations are simply quite different from natural persons.” Massachusetts emphasized the line drawn by the Supreme Court at the turn of the twentieth century between property rights and liberty rights. Business corporations “do not have First Amendment rights per se” nor do they “exercise other purely personal rights such as the privilege against self-incrimination.” The only exception was for a media corporation, such as the Louisiana newspaper companies or the New York Times, for whom it was “in its charter or it is part of its business” to engage in speech.
Although Massachusetts harkened back to the corporate rights jurisprudence of the early twentieth century, it was now a new era—one in which business interests were more determined than ever to have their voices heard, both in politics and in court. One sign of that new activism was the half-dozen friend-of-the-court (or “amicus”) briefs filed in First National Bank’s case, including ones by pro-business groups like the Associated Industries of Massachusetts, the New England Council, the Pacific Legal Foundation, and the Chamber of Commerce. Amicus briefs, which provide the justices with additional information and arguments besides those presented by the parties to a case, were once rare. In the 1950s, for example, only about fifty such briefs were filed per year, often by liberal groups like the American Civil Liberties Union. Today, the justices receive about eight hundred amicus briefs a year, despite taking about half as many cases as they did in the 1950s. The most frequent friends of the court are now commercial interests and business trade groups that followed Powell’s advice, like the Chamber.50
Powell was a predictable vote in favor of Hill and First National Bank. The question remained whether the arguments made at hearing and in the amicus briefs filed by business interests would be enough to secure a majority in favor of corporate political speech rights.
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AFTER THE HEARING IN First National Bank of Boston v. Bellotti, the justices met in their private conference to discuss and vote on the case. The conference is a closed-door meeting of the justices and no one else, not even law clerks or secretaries, is allowed in the room. The chief justice is the first to speak about a given case and then each justice, in order of seniority, states his or her own view. No justice is allowed to talk a second time until every justice has had the opportunity to speak once. The conference, in other words, just like oral argument in the Supreme Court, nods to a principle of equality when it comes to speech similar to the one rejected in Buckley v. Valeo.
In the typical case, the justices meet, vote, and assign someone to write the majority opinion. Although the justices are permitted to change their minds up until the day the final, written opinion is released to the public months after the private conference, the votes usually do not change. One justice will write the opinion for the court and the justices who supported that position in the conference will sign on, perhaps making a few suggestions about wording or emphasis. Every once in a while, however, the tidy decision-making process turns tumultuous, and a case is completely transformed once the writing begins. That is precisely what happened in the First National Bank case, making what would be a minor decision written by the court’s most liberal justice, William Brennan, into a groundbreaking one written by Lewis Powell.
Although the conference and the justices’ deliberations are all conducted in secret, the story of the First National Bank case can be pieced together by examining the papers of the justices who have since retired or passed. Powell’s notes from the conference reveal initially that most of the justices, whether liberal or conservative, agreed that Massachusetts had gone too far. Brennan argued that the court did not need to rule broadly that corporations had free speech rights. Instead, the court could rule narrowly, striking down only the “conclusive presumption” that individual tax measures were immaterial to any corporation’s business. Massachusetts had already decided to allow corporations to spend on ballot measures that were material to their businesses. There was no valid reason for denying them the opportunity to show that individual taxes were material too. The problem with Massachusetts’s law, in Brennan’s view, was not that it restricted corporate spending on politics but that it was a bald-faced effort to manipulate the outcome of a particular election.51
As the justices went around the table discussing the Massachusetts law, nearly all of them concurred with Brennan that a narrow ruling would suffice to decide this case. Two justices disagreed, White and Powell. White was the only justice who believed that Massachusetts’s law should be upheld in its entirety. He argued that this case was simply about whether corporations had political speech rights, and in White’s view, corporations had no such rights whatsoever. They were, he argued, artificial entities that enjoyed special privileges like limited liability, and Massachusetts was free to impose whatever limits it wanted, broad or narrow, on their political advocacy.52
The corporationalist Powell also disagreed with Brennan, but in the other direction: he thought the court should rule broadly that corporations had the same freedom of speech as individuals. The problem in Powell’s view was not just the “conclusive presumption” that individual taxes were immaterial to any business; Massachusetts had no authority to restrict corporate spending at all, whether the issue was material to a company’s business or not. Like individuals, corporations should be free to determine for themselves when to speak about politics. As he wrote on the margins of a document in his case file, the Massachusetts law had to be struck down “unless the court is willing to say that corporations have inferior 1st A[mendment] rights.”53
THE JUSTICES OF THE SUPREME COURT WHO DECIDED FIRST NATIONAL BANK OF BOSTON. STANDING, LEFT TO RIGHT: WILLIAM REHNQUIST, HARRY BLACKMUN, LEWIS POWELL, JOHN PAUL STEVENS. SITTING, LEFT TO RIGHT: BYRON WHITE, WILLIAM BRENNAN, WARREN BURGER, POTTER STEWART, THURGOOD MARSHALL.
None of the other justices, however, thought it necessary to make such a broad declaration of equal speech rights for corporations. This case could be decided on the narrower grounds suggested by Br
ennan, and each side could claim a small victory. First National would be the nominal victor, and Massachusetts’s legal decree that individual tax measures were immaterial would be invalidated. Yet Massachusetts could still require the bank to prove in court that a graduated tax on individuals was material to its business. If First National failed to make such a showing, it could still be prohibited from making political expenditures to defeat the referendum.
The chief justice assigned the opinion to Brennan. It appeared as if Powell had lost the opportunity to issue an expansive ruling giving business the political speech rights he thought necessary to fight back against reformers. Yet the case was about to take an unexpected turn.
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WILLIAM BRENNAN WAS ONE of the most influential justices ever to sit on the Supreme Court. Appointed in 1956 by President Dwight Eisenhower, a Republican, Brennan became the intellectual leader of the Warren court—so much so that some people thought it should be called the Brennan court. By the time the Massachusetts law on corporate political spending came before Brennan and the other justices, however, the brash liberalism of the 1960s was being overtaken by a rising conservative tide that followed the channel suggested by the Powell Memorandum. Brennan still achieved some notable liberal victories after President Nixon transformed the court—including Furman v. Georgia, temporarily outlawing the death penalty; Roe v. Wade (1973), guaranteeing women the right to abortion; and Craig v. Boren (1976), prohibiting sex discrimination. Nonetheless, by the time he retired in 1990, Brennan had gone from being the potent instigator of the Warren court to the great dissenter of the Rehnquist court. The Massachusetts case involving First National Bank was one of the key turning points.54