(a) The Court of Chancery shall have jurisdiction to revoke or forfeit the charter of any corporation for abuse, misuse or nonuse of its corporate powers, privileges or franchises. The Attorney General shall, upon the Attorney General’s own motion or upon the relation of a proper party, proceed for this purpose by complaint in the county in which the registered office of the corporation is located.
(b) The Court of Chancery shall have power, by appointment of receivers or otherwise, to administer and wind up the affairs of any corporation whose charter shall be revoked or forfeited by any court under any section of this title or otherwise, and to make such orders and decrees with respect thereto as shall be just and equitable respecting its affairs and assets and the rights of its stockholders and creditors.
In Young v. the National Association for the Advancement of White People, 35 Del.Ch. 10, 109 A.2d 29 (1954) the Chancery Court stated, “there is no question but that this Court will forfeit a corporate charter where the abuse of its privileges and franchises is clear.” 109 A.2d at 31. The Court added that such revocation of a corporate charter is appropriate in cases of “a sustained course of fraud, immorality or violations of statutory law….” Id. In a subsequent action brought by the Attorney General to revoke a corporate charter, the Chancery Court affirmed again that “continued serious criminal violations by corporate agents in the course of the discharge of their duties could very well constitute the misuse of a charter.” Craven v. Fifth Ward Republican Club, 37 Del.Ch. 524, 528, 146 A.2d 400, 402 (1958) (granting preliminary injunction).
II. “The Normalization of Deviance”—The Report of the Governor’s Independent Investigation Panel, May 19, 2011.
On April 5, 2010 an explosion in Massey’s Upper Big Branch Mine in southern West Virginia killed 29 men working in the mine. The Governor of West Virginia appointed an independent investigation panel to determine the cause of the explosion, and to impartially find facts that would help prevent similar disasters in the future. Numerous Massey executives refused to cooperate with the investigation. A Massey official was indicted in March 2011, charged with lying to the Federal Bureau of Investigation.2
The Report of the Governor’s Independent Investigation Panel (the “Report”) concerning the explosion and deaths describes in more than 100 pages how Massey repeatedly placed profits ahead of worker safety and compliance with the law, and has a long history of criminal and civil violations of law. Describing a shocking corporate culture of illegality, “enemies lists”, “codes of silence,” and a “too big to be regulated” attitude, the Report states, “Massey exhibited a corporate mentality that placed the drive to produce above worker safety.”3
The Report concludes that the fatal explosion at the Massey mine was caused by Massey’s systemic failure to comply with basic, existing standards, such as maintaining adequate ventilation systems, complying with standards for applying rock dust and water spraying. Massey did not record many safety hazards, and when recorded, did not correct them.
The Report identifies a longstanding “culture” at Massey that is “causing incalculable damage to mountains, streams, and air in the coalfields; creating health risks for coalfield residents by polluting streams, injecting slurry into the ground and failing to control coal waste dams and dust emissions from processing plants; using vast amounts of money to influence the political system; and battling government regulation regarding safety in the coalmines and environmental safeguards for communities.”4
As alarming as the corporate violations that caused the death of scores of men, the independent panel identified failures of the government agencies that should have been enforcing the law to protect the lives of the people working in Massey’s mines. As the report says, “merely having laws on the books has never been enough to ensure worker safety. The ability of the government to rigorously enforce those laws is a hard-earned right paid for with the blood of coalminers.”5
The West Virginia Independent Investigation Panel linked the failure of government’s law enforcement directly to the corruption of government caused by the campaign spending and political influence of Massey and its CEO. The Report describes how, after a West Virginia Court concluded that Massey had intentionally and wrongfully acted in disregard of the rights of another business and destroyed the business, the CEO, Don Blankenship, spent $3 million to fund a vicious judicial election campaign accusing the incumbent judge of being “soft on sex offenders.” That judge lost the election to “a virtually unknown lawyer” who was a “personal friend” of Blankenship and was “more sympathetic to Massey’s interests.”6
The Report provides “a graphic illustration of the intertwining of coal and government that works to the detriment of those dedicated to creating an atmosphere in which miners are assured safe working conditions.”7
Massey “relish[ed] the opportunity to challenge inspectors’ enforcement actions by disputing findings and arguing about what the law requires.” The Vice-President for safety at Massey openly said, “don’t worry, we’ll litigate it away” about a violation found by an inspector. Still, in 2009 alone, federal inspectors wrote 515 citations and orders for safety violations and 48 “withdrawal orders” for significant and substantial violations.8 Massey CEO’s message in the Annual Report for 2009 says, “we are proud of our safety record.” The CEO’s message goes on to label climate change science a “misinformation scandal” and to express “concern” with “environmental extremism” and “ill-considered regulations.”9
III. Other Violations of Law By Massey
According to the Report, in one ten-year period, Massey was cited for 62,923 federal violations including more than 25,000 considered “significant and substantial.” Fifty-nine men who worked in Massey’s mines were killed in accidents during that time.10
In January 2006, a fire at Massey’s Aracoma Alma mine killed two men. Federal investigators determined that the fatal fire was caused by Massey’s “reckless disregard” for safety rules at the Aracoma mine.11 On December 23, 2009, Massey’s subsidiary, the Aracoma Coal Company pleaded guilty to ten criminal violations of mine safety laws, including a felony conviction for a willful violation causing death, and agreed to pay a $2.5 million criminal fine. According to the Independent Investigation Report, Massey CEO Don Blankenship may have been aware of the violations before the fire occurred.
In January 2008 Massey Energy Company, Inc. paid a $20 million fine for Clean Water Act violations in West Virginia and Kentucky. The United States Department of Justice and the Environmental Protection Agency described the fine as the largest civil penalty in the history of the EPA.12
Under the Delaware Constitution and revocation law, the “Court will forfeit a corporate charter where the abuse of its privileges and franchises is clear.” Young v. the National Association for the Advancement of White People, 35 Del.Ch. 10, 109 A.2d 29 (1954). We respectfully urge you to investigate whether, as seems clear, Massey Energy Company and its subsidiary corporations have forfeited the privilege of their corporate charters, and to initiate forfeiture proceedings using your authority under Title 8.
Thank you for your consideration. We are available to discuss this referral with you further at your convenience, and we look forward to hearing from you.
Sincerely,
Jeffrey D. Clements
Willa Coffey Mays
General Counsel
Executive Director
Free Speech For People
Appalachian Voices
9 Damonmill Square, Suite 4B
191 Howard Street
Concord, Massachusetts 01742
Boone, North Carolina 28607
Phone: (978) 287-4901
Phone: (828) 262-1500
Fax: (978) 287-4900
Fax: (828) 262-1540
[email protected]
[email protected]
Notes
Introduction: What’s at Stake
1. Bill Moyers, remarks at the fortieth anniversary of Co
mmon Cause, Oct. 6, 2010, http://www.economicpolicyresearch.org/the-financial-crisis/164-bill-moyers-jeff-madrick-and-lbj.html (accessed September 4, 2011).
Chapter One: American Democracy Works, and Corporations Fight Back
1. Bruce Frohnen, ed. The American Republic: Primary Sources (Indianapolis: Liberty Fund, 2002), http://oll.libertyfund.org/title/669/206314 (accessed April 6, 2011). This theory of how societies fail has been extended beyond free democratic societies. The great historian Arnold Toynbee is said to have maintained that “civilizations die by suicide, not murder,” perhaps drawing on his theme in From Civilization on Trial (Oxford, England: Oxford University Press, 1948) concerning the decline of the Greco-Roman world. Echoing Toynbee more recently, the American scientist Jared Diamond titled his classic inquiry into the connection between unbalanced ecological and resource exploitation and the fall of societies Collapse: How Societies Choose to Fail or Succeed (New York: Penguin, 2005).
2. According to the 2009 Statistical Abstract of the United States, after-tax corporate profits in 2005 were almost $1 trillion. During the 2008 election cycle, Fortune 100 companies—the hundred largest corporations—alone had combined revenues of $13.1 trillion and profits of $605 billion. In contrast, during the same 2008 cycle, all political parties combined spent $1.5 billion and all of the federal political action committees spent $1.2 billion.
3. Dale Robertson, quoted in “The SCOTUS ‘Corporate Cash for Candidates’ Decision: Left, Right, and Tea,” Reid Report, January 10, 2010, http://blog.reidreport.com/2010/01/supco-campaign-cash-decision-reactions/ (accessed July 21, 2011).
4. For a thorough examination of the creation and impact of the “corporate speech movement,” see Robert L. Kerr, The Corporate Free Speech Movement: Cognitive Feudalism and the Endangered Marketplace of Ideas (New York: LFB, 2008). Kerr documents the corporate-driven transition from democracy to what he calls cognitive feudalism and, picking up on the film It’s a Wonderful Life, “from Bedford Falls to Pottersville.”
5. James Madison, “To J. K. Paulding,” March 10, 1827, in Gaillard Hunt, ed., The Writings of James Madison (New York: Putnam, 1900), Vol. 9.
6. Thomas Jefferson, “To George Logan,” November 12, 1816, in The Works of Thomas Jefferson, (New York: Putnam, 1904-05), Vol. 12, http://oll.libertyfund.org/title/808/88352 (accessed July 21, 2011).
7. Andrew Jackson, “Fifth Annual Message to Congress (December 3, 1833),” Miller Center, http://millercenter.org/scripps/archive/speeches/detail/3640 (accessed July 21, 2011).
8. Martin Van Buren, “First Annual Message to Congress (December 5, 1837),” Miller Center, http://millercenter.org/scripps/archive/speeches/detail/3589 (accessed July 21, 2011).
9. The background and text of the Powell memorandum, titled “Attack on American Free Enterprise System” and dated August 23, 1971, can be found at http://www.reclaimdemocracy.org/corporate_accountability/powell_memo_lewis.html (accessed June 22, 2011). The Powell memo and its contribution to the “conservative” movement have been widely described. One of the most thorough and thoughtful examinations of the memorandum and its implications is that of Jerry Landay in “The Powell Manifesto: How a Prominent Lawyer’s Attack Memo Changed America,” August 20, 2002, Media Transparency, http://old.mediatransparency.org/story.php?storyID=21 (accessed June 8, 2011). William K. Black, associate professor of law and economics at the University of Missouri-Kansas City, has examined the Powell memo and Powell’s roots in the tobacco industry. See “My Class, Right or Wrong: The Powell Memorandum’s 40th Anniversary,” New Economic Perspectives, April 25, 2011, http://neweconomicperspectives.blogspot.com/2011/04/my-class-right-or-wrong-powell.html (accessed June 8, 2011).
10. See, for example, Linda Greenhouse, “The Legacy of Lewis F. Powell, Jr.,” New York Times, December 4, 2002, http://www.nytimes.com/2002/12/04/politics/04SCOT.html (accessed June 22, 2011); Gerald Gunther, “Lewis F. Powell, Jr.: A Fine Judge, a Remarkable Human Being,” Columbia Law Review, April 1999; and Gerald Gunther, “A Tribute to Justice Lewis F. Powell, Jr.,” Harvard Law Review, December 1987.
11. Sandra Day O’Connor, The Majesty of the Law: Reflections of a Supreme Court Justice (New York: Random House, 2003), p. 150.
12. A possible exception came from John Conyers, Jr., and the Congressional Black Caucus, as well as from the Old Dominion Bar Association in Virginia. At Powell’s confirmation hearings in November 1971, the president of the Old Dominion Bar Association asserted that Powell “for much of his life waged war on the Constitution,” referring to his role as a member of the Richmond, Virginia school board during the years of the state’s resistance to the Brown v. Board of Education decision. Conyers testified against Powell’s nomination, citing Powell’s professional and personal associations with racism. These included alleged discrimination at his law firm, at Philip Morris, and in Powell’s private clubs, which banned African Americans (one allowed members to bring “colored servants with them to the club only if they are dressed in appropriate attire”). Presciently, Conyers expressed concern about Powell’s “close association with a variety of corporate giants.” U.S. Senate, Committee on the Judiciary, “Hearings on the Nominations of William H. Rehnquist, of Arizona, and Lewis F. Powell, Jr., of Virginia, to be Associate Justices of the Supreme Court of the United States,” November 3–10, 1971, http://www.gpoaccess.gov/congress/senate/judiciary/sh92-69-267/browse.html (accessed June 21, 2011).
13. See notes 10 and 11.
14. Judge Gladys Kessler, the federal judge who oversaw the 2006 racketeering trial of the cigarette corporations, thoroughly documented the role of each corporate participant, including the Tobacco Institute, in the decades-long illegal cigarette corporation RICO conspiracy. Her conclusions, affirmed by the United States Court of Appeals for the District of Columbia, are set out in her final opinion of more than sixteen hundred pages in United States v. Philip Morris USA, Inc., et. al., Civil Action 99-2496 (GK), August 17, 2006, http://www.justice.gov/civil/cases/tobacco2/amended%20opinion.pdf (accessed June 22, 2011).
15. Ibid.
16. Laurus & Brother Company v. Federal Communications Commission, 447 F.2d 876 (1971).
17. The columnist Jack Anderson reported on the Powell memo in September 1972; see Landay, “Powell Manifesto.” In a 1979 amicus brief filed in connection with the case of Central Hudson Gas & Electric Corp. v. Public Service Commission of New York, 447 U.S. 557 (1980), the National Chamber Litigation Center, a corporate litigation project launched in response to the Powell memo, slyly quoted a brief section of Powell’s memo to suggest that corporations recognized a larger public responsibility. The brief stated:
Indeed, one member of this Court has stated the obligation of management thusly:
The day is long past when the chief executive officer of a major corporation discharges his responsibility by maintaining a satisfactory growth of profits, with due regard to the corporation’s public and social responsibilities. If our system is to survive, top management must be equally concerned with protecting and preserving the [private enterprise] system itself. This involves far more than an increased emphasis on “public relations” or “governmental affairs”—two areas in which corporations long have invested substantial sums. [Powell, “Attack,” p. 3]
18. See First National Bank of Boston v. Bellotti, 435 U.S. 765 (1978); FEC v. Wisconsin Right to Life, 551 U.S. 449 (2007) (issue advocacy advertisements of the nonprofit corporation BCRA held to violate First Amendment); Thompson v. Western States Medical Center, 535 U.S. 357 (2002) (federal restriction on advertising of compounded drugs invalidated); Lorillard v. Reilly, 533 U.S. 525 (2001) (Massachusetts regulations of tobacco advertising targeting children invalidated); Greater New Orleans Broadcasting Association v. United States, 527 U.S. 173 (1999) (federal restriction on advertising of gambling and casinos held unconstitutional); 44 LiquorMart v. Rhode Island, 517 U.S. 484 (1996) (Rhode Island law restricting alcohol price advertising invalidated); Rubin v. Coors Brewing Co., 514 U.S. 476 (1995) (federal
restriction on advertising alcohol level in beer invalidated); City of Cincinnati v. Discovery Network, 507 U.S. 410 (1993) (municipal application of handbill restriction to ban news racks for advertising circulars on public property held unconstitutional); Pacific Gas & Electric Co. v. Public Utilities Commission of California, 475 U.S. 1 (1986) (invalidating California rule that utility corporations must make bill envelopes, which are property of ratepayers, available for other points of view besides that of the corporation); Central Hudson Gas & Electric Corp. v. Public Service Commission of New York, 447 U.S. 557 (1980) (New York rule restricting advertising that promotes energy consumption invalidated); Bellsouth Telecomm. v. Farris, 542 F.3d 499 (6th Cir. 2008) (Kentucky may not prohibit corporations from misleadingly including a “tax” on customer bills where consumers paid no tax because Kentucky law required that the corporation pay a fee from what would otherwise be shareholder profits); Allstate Insurance Co. v. Abbott, 495 F.3d 151 (5th Cir. 2007) (Texas law regulating advertising of auto body shops tied to auto insurers invalidated); This That & the Other Gift & Tobacco v. Cobb County, Georgia, 439 F.3d 1275 (11th Cir. 2006) (Georgia ban on advertisements of sexual devices invalidated); Passions Video v. Nixon, 458 F.3d 887 (8th Cir. 2006) (Missouri statute restricting advertisements of sexually explicit businesses invalidated); Bad Frog Brewery v. New York State Liquor Authority, 134 F.3d 87 (2d Cir. 1998) (New York regulation barring beer bottle label with gesture described by the Court as “acknowledged by Bad Frog to convey, among other things, the message ‘f#;! you’” held unconstitutional); International Dairy Foods Association v. Amestoy, 92 F.3d 67 (2d Cir. 1996) (Vermont law requiring disclosure on label of dairy products containing milk from cows treated with bovine growth hormones invalidated); New York State Association of Realtors v. Shaffer, 27 F.3d 834 (2d Cir. 1994) (invalidating New York law authorizing the secretary of state to declare “nonsolicitation” zones for real estate brokers); Sambo’s Restaurants v. City of Ann Arbor, 663 F.2d 686 (6th Cir. 1981) (First Amendment allows corporation to break agreement with city and use name found to be deeply offensive and carry prejudicial meaning to African Americans); John Donnelly & Sons v. Campbell, 639 F.2d 6 (1st Cir. 1980) (invalidating Maine law restricting billboard pollution, even though law allowed—and paid for—commercial signs put up by state of uniform size at exits and visitor centers); Washington Legal Foundation v. Friedman, 13 F. Supp. 2d 51 (D.D.C. 1998) (invalidating federal law regulating drug manufacturers’ use of journal reprints and drug corporation-sponsored educational seminars to promote off-label uses for prescription drugs); and Equifax Services v. Cohen, 420 A.2d. 189 (Me. 1980) (invalidating portions of Maine credit reporting statute as First Amendment violation). Many more such cases may be found in the state and federal reports.
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