The Supreme Court in the Citizens United Era:
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The Supreme Court in the Citizens United Era:
A Century After the Lochner Era, the Roberts Court Imposes a Startling New Corporatism on America
By Jamie Raskin1
“We see no reason the Supreme Court would recognize constitutional protection for a corporation’s political expression but not its religious expression.”
— Hobby Lobby Stores Inc. v. Sebelius, 723 F.3d 1114 (10th Cir., 2013), Judge Tymkovich, United States Circuit Court of Appeals for the Tenth Circuit for the majority
I
In the Lochner era, the Supreme Court invented a new constitutional "right": the due process right of individuals to exercise unbridled freedom of contract in the workplace. In Lochner v. New York, the decision that gave the period its name2, the Court struck down the New York Bakeshop Act3, a law setting a maximum 60-hour work week for employees of the state’s dangerously unhealthy bakery industry, which was centered in the tenements of New York City. The Court called the Act an interference with the right of the workers and employers to set their own contract terms.4
In the half-century between the 1880s and the 1930s, the Court in the same spirit, if sometimes on different legal grounds, invalidated more than 200 progressive federal and state laws, including minimum wage laws, child labor laws, occupational workplace safety and health laws, laws protecting coal mine workers, legislation protecting the right to organize unions, collective bargaining measures, and laws protecting workers and consumers against predatory practices by job placement companies.5 These laws were usually said either to impair the newly sacrosanct individual freedom of contract or to exceed Congress’ suddenly suspect powers under the Commerce Clause or the states’ police powers.6 In real-world terms, the Lochner-era Court privileged the private interests of people possessing wealth, capital, and superior bargaining power in the market over the democratic political and legislative will of people who depended for their survival in the economy on the labor of their own hands and bodies — and on a responsive representative government.
As a total offensive against economic and social legislation passed in the Progressive period and during the New Deal, the Lochner era became the paradigm case of conservative judicial activism. Nothing like it had been seen since the Dred Scott decision (1857),7 which invalidated the Missouri Compromise and created a due process shield around the institution of slavery and the property interests of the slave masters.8 But the Lochner-era Court was even more active in striking down workplace regulation than Chief Justice Taney had been in insulating slavery. Indeed, while Dred Scott helped lead the country into the Civil War, the Lochner-era Court waged a decades-long class war from the bench as the Justices gave the thumbs-down to social legislation whenever they thought legislators had gone too far in regulating business and labor contracts. The Court’s self-appointment as a super-legislature reviewing state and federal laws provoked the famous political clash with President Franklin Delano Roosevelt, who advanced a controversial and ill-advised plan to enlarge the membership of the Supreme Court. Although FDR did not succeed in changing the size of the Court, the Court changed its reactionary ways and, in West Coast Hotel Co. v. Parrish (1937),9 it upheld minimum wage laws,
effectively abandoning the doctrine that government is presumptively forbidden to regulate contracts and property to protect the interests of working people.10
Today, as a century ago, big business overwhelmingly has its way with the Court; the right to organize workers into a union is under great stress; surprising new doctrines emerge to clip Congress’ wings under the Commerce Clause; and the Supreme Court’s conservative majority shows no restraint in invalidating popularly enacted laws based on extrapolations from the most dubious constitutional theories and statutory interpretations.
But there are at least two important differences between the Lochner era and the Citizens United era. First, the doctrine has shifted: while the Lochner era read individualist free market ideology into the Constitution, the Citizens United era is reading corporatism into the Constitution, extending to mammoth business corporations the rights of the people, an endowment that translates, as we shall see, into corporate political and social power over the people. Second, the threat to political democracy is more comprehensive today than a century ago because the Citizens United ideology directly targets our democratic political infrastructure. Corporatist judicial ideology is thus not only regularly defeating democratically enacted laws in court but also relentlessly entrenching corporate power in the political process itself.
The doctrinal shift is striking. A century ago, the commanding impulse of conservative judicial activism was to protect the “free market” as an inviolable private domain where individuals could make contracts and exercise property rights free of state regulation. Today, the commanding impulse of conservative judicial activism is, more ambitiously, to zealously advance business corporations as the dominant social institution throughout our economic and political life by arming them with the primary constitutional rights of the people.
The social character of the new jurisprudence, therefore, is not the nostalgic 19th century market individualism of Lochner but a muscular 21st century political and social corporatism whose dramatic implications are just becoming clear. The critical doctrinal tool for empowering business corporations (and the class of wealthy Americans who own and run them) in this way is not the still-discredited Lochnerian concept of economic substantive due process, but rather the First Amendment, which has allowed the Court to promote this startling new corporatism in the name of free speech. Although the conceit of the age is that corporations are just winning “speech rights” that put them on an equal plane with individual citizens, the reality is that the new doctrine gives corporations essential powers and privileges over citizens in the political arena, the workplace, and the marketplace.
The development of unbridled corporatism in the Citizens United era has a schizophrenic quality. When it comes to defining new rights and powers for corporate management, the Court majority treats the traditional “corporate veil” in state law as an obsolete and dispensable formality, freely shuttling rights back and forth between human corporate owners and the corporate entity itself. Thus, in cases like Citizens United11 and Hobby Lobby,12 the Court enthusiastically attributes the personal free speech and religious rights of corporate owners and shareholders directly to the corporation. However, when employees, consumers, shareholders, and other citizens are injured by corporations and seek to hold the people who own them personally accountable for their injuries, the Court’s majority treats the “corporate veil” like a thick full body armor insulating from liability anyone who profits from the corporate form.
Thus, corporations increasingly enjoy all the rights of the people, but the people increasingly have no rights against corporations. Indeed, as we shall see, the conservative majority on the Roberts Court not only interprets federal law in dubious ways to defeat corporate liability but often works its special wonders to preempt state laws that would hold corporations accountable for civil injuries they cause against patients and consumers.
But the second major difference between the Citizens United era and the Lochner era is the self-perpetuating nature of today’s conservative judicial activism. By endowing corporations with the political rights of the people, the Citizens United Court gives them the tools to advance their agenda in election campaigns, tilting our politics in an emphatically corporatist direction and decisively shaping the views of many elected officials. It is those elected officials who come to select and confirm our nation’s judges, including Supreme Court Justices, who are then in place to deliver more pro-corporate jurisprudence. Citizens United thus creates a vicious circle that will be harder to break even than Lochner, a decision that itself lasted more than three decades.
The Lochner doctrine on the Court was opposed and finally undone by a vibrant popular coalition of workers, unions, New Deal intellectuals and lawyers, and progressive politicians like President Roosevelt. Today, an overwhelming majority of the American people also oppose the Citizens United decision, a majority of the U.S. Senate last year voted in support of the Democracy For All constitutional amendment to restore public control over campaign finance,13 and citizens are bridling under the arrogant corporatism spreading throughout society courtesy of the Roberts Court.
Yet, because the Citizens United jurisprudence (unlike Lochner) is targeted like a laser beam on the political process itself, it creates political conditions for its own survival. The long-term corrective mechanisms in democracy that effectively worked to address Lochner have been undermined. The whole political system—legislators, chief executives, political parties, and judges—is in thrall to the influx of corporate money and plutocratic power. Today, therefore, the forces of democracy must work harder than ever to correct a massive theoretical mistake in the constitutional jurisprudence of the Court, and we need simultaneously to confront the practical reality of runaway corporatism in our politics, society, and economy.
II. Magic Wand: The First Amendment Erases Obstacles to Corporate Power
In the Lochner period, the constitutional magic wand was the Due Process Clause, which provides that people shall not “be deprived of life, liberty, or property, without due process of law.”14 The Lochner Court breathed into this handful of words the whole philosophy of economic “substantive due process,” under which it found that laws like the 60-hour work week for bakers in New York were an “unreasonable, unnecessary and arbitrary interference with the right and liberty of the individual to contract.”15 The Due Process clause became the source of an entire structure of thought that nullified progressive economic and social regulation.
The magic wand today is the First Amendment’s command that “Congress shall make no law . . . abridging the freedom of speech.”16 Forget the inconvenient fact that corporations are artificial business entities that states have chosen to create, that they were created for the purposes of advancing commerce and limiting the liability of shareholders, that they were designed to have super-human abilities such as eternal life and the ability to be in many places at once and that the real people who own them retain all their personal constitutional rights. The Roberts Court simply threw caution to the wind and declared that artificial corporate entities enjoy the same constitutional rights as people to spend money on elections. For the five conservative Justices on the Roberts Court, the First Amendment is the magic wand that can instantly remove any public regulation that is an obstacle to corporate power in our polity and economy.
A. Corporations United, Citizens Defeated: The Plutocratic Politics of Citizens United and McCutcheon v. FEC
The key decision emancipating business corporations to become strategic political actors was, of course, Citizens United (2010). Redirecting a straightforward statutory matter where the parties had not even brought the constitutional issue to the Court, the majority ordered the parties to re-brief and reargue the case17 and then voted 5-4 to strike down the electioneering provisions of the Bipartisan Campaign Reform Act (BCRA) and to give corporate managers a First Amendment right to take unlimited amounts of money out of their treasuries to spend on political campaigns.18
Justice Kennedy’s precedent-shattering opinion was built on the premise that corporations are merely associations of citizens and thus acquire the rights of political speech that their members bring into the corporation.19 As he put it, a corporation that is engaged in political activity is just “an association that has taken on the corporate form.”20 To uphold laws blocking corporate political expenditures, as the Supreme Court had done in cases as recent as Austin v. Michigan Chamber of Commerce (1990)21 and McConnell v. FEC (2003),22 is to censor the intrinsically valuable political speech offered by these associations of citizens based only on the “identity of the speaker.”23 Thus, for many decades, corporations had been the victims of speech discrimination and were not even aware of it!
This reasoning toppled two centuries of understanding of what a corporation is. Even the most conservative Justices had defined business corporations not as people or political membership groups but as “artificial entities,” economic instrumentalities chartered or registered by the states and endowed with significant legal benefits—limited liability of the shareholders, perpetual life of the company, favorable treatment and taxation of assets—in order to promote capital accumulation, investment, and growth. Corporations were always subordinate to public regulatory power, never equal participants in the process of forming the popular political will.
Chief Justice John Marshall framed the essential analysis in Dartmouth College v. Woodward (1819):24 “A corporation is an artificial being, invisible, intangible, and existing only in contemplation of law. Being the mere creature of law, it possesses only those properties which the charter of creation confers upon it, either expressly, or as incidental to its very existence.”25 Later, Justice Byron White, objecting to the first outbreak of a corporatist political jurisprudence on the Court in First National Bank of Boston v. Bellotti (1978),26 pointed out that, in modern corporate law, we endow private business corporations with extraordinary privileges in order to “strengthen the economy generally.”27 But, he argued, a business corporation has no constitutional right to convert its awesome state-enabled private wealth into the purchase of political power and influence. As he so cogently put it: “The state need not permit its own creation to consume it.”28 Chief Justice William Rehnquist agreed, arguing that business corporations, which are magnificent agents of capital accumulation and wealth maximization in the economic sphere, “pose special dangers in the political sphere.”29
But by a 5-4 vote in Bellotti, a majority led by Justice Lewis Powell, a former tobacco lawyer from Virginia and champion of corporate backlash against democratic political reform, found that corporations have a First Amendment right to spend to the heavens in referendum and initiative campaigns.30 This was the first toehold of the new political corporatism on the Supreme Court and the first time that the Court floated the metaphysical concept that the “corporate identity” of the speaker is not a statement of its exclusion from political rights under the Bill of Rights but rather the basis for its inclusion.
Now, in Citizens United, by waving the wand of the First Amendment, the Roberts Court—far to the right of any other Court in our history on the question of corporate power and privilege—has humanized, constitutionalized, and politicized the business corporation to an extent that would have dumbfounded and appalled the Founders. Indeed, the Roberts Court is the political antithesis of Thomas Jefferson, who perceived the corporate threat to political democracy and wrote (at a time when corporations had much less power than they do now): “I hope we shall crush in its birth the aristocracy of our monied corporations which dare already to challenge our government to a trial by strength, and bid defiance to the laws of our country.”31
The consequence for electoral politics of Citizens United and allied cases like Speechnow.org v. FEC32 — a 2010 D.C. Circuit Court of Appeals decision that struck down any limits on individual contributions to Super PACs — has been a dramatic upswing in spending by Super PACs and others groups outside of the political parties and candidates. In the 2012 federal election cycle, the first to follow the decision in Citizens United, over $7.1 billion was spent, making it the most expensive election in human history.33 Outside spending from groups not affiliated with a political party went over $1 billion and tripled the amount spent in 2008.34 Unleashed by Citizens United, CEOs took millions of dollars in profits out of corporate treasuries and dumped the cash into Super PACs. For example, in 2012, massive funder Las Vegas Sands gave $52,021,625 to conservative organizations. Three corporations—Specialty Group, Inc., Contran Corporation, and Oxbow Corporation—pumped $18 million into right-wing Super PACs.35 Meantime, we can only guess at the extent to which corporations are providing the dark money that funds the pro-corporate messages of 501(c)(4) and 501(c)(6) organizations (which do not have to report their donors but can also spend freely on campaigns). But we can guess: For instance, the Chamber of Commerce, which is funded by its corporate members, has poured $82.8 million into political ads since Citizens United was decided.36 And corporations increasingly began to flex their new financial muscle to target politicians who dare to defy their wishes. For example, after the Richmond, California, city council and mayor successfully pushed for better safety standards and pollution controls at a local Chevron refinery, Chevron’s management put $1.6 million of treasury funds into a Super PAC in the 2012 elections that worked successfully to defeat two of the pro-environmental council candidates.37
Furthermore, in McCutcheon v. FEC,38the Court’s majority invoked the First Amendment to wipe out the $123,200 aggregate cap on a single individual’s donations to federal candidates, PACs, and parties in an electoral cycle.39 Now, wealthy donors, drawn disproportionately from the corporate class, can contribute as much as $3.5 million in a single election cycle.40 Those separate donations can be transferred among, and coordinated by, political groups, allowing donors to circumvent limits on giving to a specific candidate or party. In the aggregate, McCutcheon could enable a group of fewer than 450 people, each maxing out with $3.5 million, to raise $1.5 billion for Congressional candidates, the total amount that was raised by Republican and Democratic congressional candidates from all donors in 2010. In other words, the judicial abolition of aggregate personal contribution limits could simplify federal fundraising to the point where several hundred Americans fund all of the congressional races in the country, enthroning a tiny class of millionaire and billionaire mega-donors like the Koch brothers whose personal money comes from the benefits of corporate ownership and power.
B. Baptizing the Corporation and Damning the Workers: Hobby Lobby, the Religious Conversion of Big Business, and the Nullification of Secular Law
After entrenching corporate wealth in our political campaigns in the name of free speech, the Roberts Court in Hobby Lobby 41 then, astoundingly, invoked the personal rights of religious worship and conscience to give corporate owners an all-purpose, Lochner-style excuse to nullify the operation of any federal regulation that they claim burdens their corporation’s theological beliefs. In Hobby Lobby, the 5-4 majority held that a large for-profit corporation with more than 500 arts-and-crafts chain stores across the country and 13,000 employees is a “person” engaged in the “exercise of religion” within the meaning of the federal Religious Freedom Restoration Act (RFRA).
The five conservative Justices also rewrote RFRA in a second way to make it far easier for commercial corporations to take full advantage of their new status as religious adherents. RFRA triggers strict scrutiny of government actions only when they “substantially burden” the exercise of religion. In this case, the Affordable Care Act requirement that Hobby Lobby offer its female employees coverage of certain kinds of contraceptives that the corporation’s owners consider sinful (but would not themselves have to use or endorse) counted as a substantial burden on religious exercise. The majority thus not only magically found that a corporation was a “person” practicing its (his? her?) religion, but in essence wrote “substantial burden” out of RFRA so that the corporation could more easily ignore a law protecting employee health by simply claiming that the requirement offended the religious sensibilities of the corporation’s owners.
The extraordinary nature of the decision becomes clear when we focus on the fact that Hobby Lobby is a regular, secular business corporation devoted to profit-making.42 It is neither a church nor a religious organization. It does not hire its workers based on religious preferences. Under the Affordable Care Act, if Hobby Lobby were a church or a nonprofit religious organization that had as its purpose the promotion of religious values, and if it primarily employed and served people along religious lines, it would be considered a “religious employer” and it would be completely exempted from the contraceptive-coverage requirement.43 Even if it did not meet those criteria, the company could still be exempt under the law if it were a religious nonprofit institution that objected to contraceptive coverage for religious reasons, like certain private institutions of higher education.
But Hobby Lobby is neither a “religious employer” nor a nonprofit institution. It is a standard for-profit business corporation. That is why the Hobby Lobby case is of such surpassing importance. The Court has not only engineered a political emancipation of corporations in Citizens United but also their mass religious conversion in Hobby Lobby, a kind of Great Awakening for the corporate sector.
Justice Alito’s majority opinion pretends to be limited by invoking the fact that Hobby Lobby is a “closely held” corporation where a single family owns and runs the business. However, this point is an irrelevant distraction from the Court’s sweeping statutory and implicit constitutional holding, whose logic extends to all corporate entities, public and private, large and small. Furthermore, closely held businesses themselves can be enormous, such as the Mars candy company, which has 72,000 employees. Indeed, as many as 90% of U.S. business corporations are closely held, and they hire more than half of all American workers.
The religious baptism of the business corporation in the Roberts Court has breathtaking implications for the rule of law. It now follows logically from the decision that corporations have a presumptive right to escape any federal law considered religiously objectionable, because RFRA provides that the government “shall not substantially burden a person’s exercise of religion” unless that burden is the least restrictive means to further a compelling governmental interest.44 As Justice Ruth Bader Ginsburg wrote in dissent:
In a decision of startling breadth, the Court holds that commercial enterprises, including corporations, along with partnerships and sole proprietorships, can opt out of any law (saving only tax laws) they judge incompatible with their sincerely held religious beliefs.45
Thus, under the logic of Hobby Lobby, a secular corporation owned by fundamentalist Christians can refuse to pay for any contraceptive services under Obamacare; corporate owners who are Christian Scientist can refuse to pay for any health insurance plan for employees involving doctors or medical care; a secular corporation owned by Scientologists can refuse to pay for any psychiatric services for employees; and a secular corporation owned by Jehovah’s Witnesses can refuse to pay for any insurance covering blood transfusions.
Nor is there anything in the decision that confines its logic to health care. Although Hobby Lobby is a case about contraception, the religious rights protected under RFRA are general rights and are not confined in any way to religious beliefs focused on sex, procreation, or health care.46 The ruling works for any corporation that seeks to invoke religious free exercise to obviate laws protecting American workers. As Right Wing Watch has reported, powerful forces on the religious and political right are preaching that Jesus and the Bible are opposed to minimum wage laws and collective bargaining.47 Presumably every business corporation in America can now refuse to hire or do business with people who do not belong to the right religion, which means that every corporation now has the same right to discriminate on a religious basis that churches have always enjoyed. (Justice Alito went to great pains to state that the holding in Hobby Lobby did not confer a right to discriminate against African Americans, but the logic of this instantaneous exemption is obscure and the fact that this disclaimer needed to be made only underscores the radicalism of the decision.)
Nor can a court question the depth of a corporation’s religious sincerity: If the management of a company says that the corporation is Christian, Muslim, Jewish, Branch Davidian, or Unification Church, and that its beliefs entail a certain practice, the government must accept it. For who has the right to question another person’s religion and who can be cross-examined as to the corporation’s religious history and commitments? The Supreme Court has determined that the rights of a religious convert are no less than those of a long-time practitioner,48 which means that the corporate board or management can decide to adopt a new religion by following the normal procedures of corporate decision-making within the broad powers of the Business Judgment Rule. Corporate boards can vote on the religious beliefs of the corporation!
The sudden mass baptism of corporations as religious beings thus threatens a wipeout of progressive secular law that would make the judicial architects of Lochner proud. Under Lochner (1905),49 bosses could not be forced to pay employees higher wages or give them a certain number of hours off. Similarly, in Plessy v. Ferguson (1896)50 — the Lochner era’s definitive statement on Jim Crow racism—the Court approved state laws imposing segregation in public accommodations as a reasonable codification of the “established usages, customs, and traditions of the people.”51 The Court reversed Lochner in West Coast Hotel Co. v. Parrish (1937)52 and it reversed Plessy in Brown v. Board of Education (1954)53 and its progeny. But Hobby Lobby restores to the corporate business sector the power to discriminate and impose contract terms, this time in the guise of religious free exercise by the corporation. We can anticipate accelerating efforts in the corporate sector to escape federal laws and regulations by invoking the religious preferences and rights of the corporation.
C. Free Commercial Speech and Corporate Control of Data, Brought to You by the Roberts Court, No Democracy Added
The magic First Amendment wand also plays a key role on the Court today in striking down ordinary public health, safety, and consumer privacy regulations as inconsistent with the “commercial speech” and free data rights of corporations. In the alarming and telling case of Sorrell v. IMS Health Inc., 564 U.S. ___ (2011),54 the Court’s majority struck down Vermont’s Prescription Confidentiality Law,55 which provided that, unless the physicians consented, pharmacies and health insurance companies could not sell pharmaceutical corporations information about what drugs the physicians had been prescribing to their patients. This is information, as Justice Kennedy explained for the majority, that “pharmaceutical manufacturers” like to use to “promote their drugs to doctors through a process called ‘detailing.’”56 The detailing process, which corporations spend a jaw-dropping $80 billion on every year, involves direct visits to doctors’ offices to persuade the doctor of the virtues of a particular drug.57 According to Justice Kennedy,
Salespersons can be more effective when they know the background and purchasing preferences of their clientele . . . . Knowledge of a physician’s prescription practices—called “prescriber-identifying information”—enables a detailer better to ascertain which doctors are likely to be interested in a particular drug and how best to present a particular sales message.58
Does this corporate interest in targeting marketing of drugs to physicians actually rise to the level of a First Amendment right? Does the Vermont statute violate it? Amazingly, Justice Kennedy answered “yes” to both questions,59 bringing the Supreme Court to the aid of the marketing departments of Big Pharma. The Vermont law, which seeks to leave it up to physicians themselves to decide whether their prescription histories should be made available to corporate salespeople, is unconstitutional because it “disfavors marketing, that is, speech with a particular content” and “disfavors specific speakers, namely pharmaceutical manufacturers.”60
Just as the Court majority found in Citizens United that the ban on corporate independent expenditures in political campaigns discriminated against corporations on the basis of their identity, the majority in Sorrell found that the state’s attempt to protect “prescriber-identifying information” discriminated against pharmaceutical corporations based on their identity and censored speech whose content is “direct advertising.”61 In a major departure from practice, the Court thus treated commercial speech, which has always been given reduced First Amendment protection, more like a form of political speech.
In a brilliant opinion62 for the dissenting justices, Justice Stephen Breyer demolished these tawdry arguments. The effect of the Vermont law is not to forbid or require anyone to say anything or to endorse or disavow any view but only to “deprive pharmaceutical and data-mining companies of data, collected pursuant to the government’s regulatory mandate, that could help pharmaceutical companies create better sales messages.”63 But this effect “is inextricably related to a lawful governmental effort to regulate a commercial enterprise.”64 The Court majority’s unprecedented use of “heightened” First Amendment standards to examine such a data protection policy is simply “out of place.”65 At most, Justice Breyer argued, the Court should have used the “intermediate” test governing laws that affect commercial speech.66 Under the intermediate standard, the Court would ask whether a law is narrowly tailored to “directly advance” a “substantial government interest,” which this law clearly is, by virtue of protecting the public health, securing the privacy of prescribers and prescribing information, and controlling the costs of health care.67
Justice Breyer would not have even gone that far down the road of heightened scrutiny, explaining that the normal “rational basis” test for commercial regulation properly applies in this context where no speech is present and no speech is censored.68 He observed that the Roberts Court majority is rapidly eroding the distinction between political speech by citizens and commercial speech and conduct by corporations, wiping out well-developed First Amendment doctrine and threatening all kinds of essential government regulation of industry practices, from the food and drug sectors to electricity generation.69 He then made the crucial analogy, noting that the current Court is manipulating the First Amendment in the same way that the Lochner Court manipulated the Due Process clause: to invalidate ordinary public laws regulating economic life and business, shifting the locus of power from popularly elected legislatures to the judiciary. He wrote:
Since ordinary regulatory programs can affect speech, particularly commercial speech, in myriad ways, to apply a “heightened” First Amendment standard of review whenever such a program burdens speech would transfer from legislatures to judges the primary power to weigh ends and to choose means, threatening to distort or undermine legitimate legislative objectives.70
Justice Breyer warned that the Court’s corporate speech jurisprudence is breathing new life into century-old Lochnerian habits. In tough language, he admonished that the Court has opened a “Pandora’s Box”:
Given the sheer quantity of regulatory initiatives that touch upon commercial messages, the Court’s vision of its reviewing task threatens to return us to a happily bygone era when judges scrutinized legislation for its interference with economic liberty. History shows that the power was much abused and resulted in the constitutionalization of economic theories preferred by individual jurists. See Lochner v. New York, 198 U.S. 45, 75-76 (1905) (Holmes, J., dissenting). 71
The Smoking-Hot “Commercial Speech” Doctrine Protects Big Tobacco
But the rise of protective “commercial speech” doctrines to knock out public health and safety regulation is twisting our jurisprudence even when the courts do not assimilate commercial activity to the realm of political expression. We saw a notable example of this three years ago from one of George W. Bush’s most notorious circuit court judges. In R.J. Reynolds Tobacco Co. v. FDA (2012),72 a three-judge panel of the United States Circuit Court of Appeals for the D.C. Circuit invalidated the FDA’s rule, issued under the 2009 Family Smoking Prevention and Tobacco Control Act,73 requiring cigarette manufacturers to carry “graphic warnings,” in color and covering 50% of the front and back of each cigarette package sold here, warning people of the dangers of smoking.74 Ignoring the entire sordid history of deceptive cigarette advertising, the court, in an opinion written by Judge Janice Rogers Brown, found that “there is no justification” for the graphic warning labels under the standards for analyzing regulation of misleading commercial speech. The court then turned to the Central Hudson test for testing regulation of non-misleading commercial speech.
Under Central Hudson, the government must show that its asserted interest is “substantial.” If so, the Court must determine “whether the regulation directly advances the governmental interest asserted, and whether it is not more extensive than is necessary to serve that interest.”75
The majority “assumed” that the government’s goal of reducing smoking—which causes 480,000 deaths a year in the United States or 1300 deaths a day, including many from second-hand exposure—may be “a substantial interest,” but it held that the rule was nonetheless unconstitutional because the FDA failed to show that the graphic warning rule would directly advance its interest. Rejecting as irrelevant or insufficient all evidence from Canada, Australia, and other countries that have used graphic color warnings with great effect to reduce smoking,76 the D.C. Circuit majority concluded that the FDA did not provide “a shred of evidence” that the graphic warnings would actually lower smoking rates in the United States.77 On this impossibly stringent standard, which forces government to document the direct effectiveness of a policy that has never been used before by our government, the court ruled that the FDA had not shown “substantial evidence” that the graphic warnings would “directly” reduce smoking rates by a “material degree.” Amazingly, it struck down the FDA rule seeking to protect public health as a violation of the tobacco companies’ freedom of speech.78
It appears that the D.C. Circuit panel’s decision to use the heightened scrutiny of Central Hudson in this case has been overruled by the logic of American Meat Institute v. U.S. Dept. of Agriculture (D.C. Cir. July 29, 2014), an en banc ruling from the entire court. If a federal regulation requiring graphic warnings on cigarette packages should again be adopted, the Supreme Court will likely have to address the issue. In any event, corporations seeking to thwart ordinary public regulation now have a clear strategic pathway in the Citizens United era: (1) identify a heretofore unarticulated speech interest that is somehow touched by the regulation, (2) claim that the speech is being (a) suppressed based on its content and (b) the speaker censored because of his or her commercial identity under Sorrell, and if that doesn’t work, (3) simply assert that, as a commercial speech regulation, the law does not directly advance the asserted social interest because there is no proof yet that it works. As in the Lochner era, all of the Court’s doctrinal analysis is skewed against democratic regulation.
D. Giving Corporations the Political and Religious Rights of the People Means Giving Corporations Political and Religious Power over the People
The Court’s First Amendment campaign to treat corporations like “persons” for constitutional purposes actually gives corporations the power to dominate the political and private lives of citizens.
Citizens United79 was decided in the name of free speech, but no person’s right to spend his or her own personal money on political ads for or against candidates was enlarged by it in any way. That right was already unlimited. Moreover, the rare private nonprofit corporations actually organized for purposes of electoral activity and political spending had already secured their First Amendment rights to engage in political spending and activity under the Supreme Court’s decision in FEC v. Massachusetts Citizens for Life (1986).80
The only effect of Citizens United was to give CEOs of business corporations the power to take unlimited amounts of money from corporate treasuries and spend it advancing or defeating political candidates of their choosing. Its real-world consequence was thus not to expand the political freedom of citizens but to reduce the political power of citizens vis-à-vis huge corporations with vast fortunes. These corporations, endowed with limited shareholder liability, perpetual life, and other privileges, may now freely engage in motivated political spending to enrich themselves and their executives, leaving workers and other citizens behind.
Similarly, with comic solemnity, the Supreme Court decided Hobby Lobby81 in the name of religious liberty, but the decision makes a mockery of religion because no one’s right to exercise their religion was substantially augmented in any way by it. This is because the Affordable Care Act’s contraceptive provisions82 made no person worship or not worship, have faith or no faith, or practice or refrain from exercising their religion in any way. Moreover, for-profit business corporations themselves cannot exercise religion. The concept is meaningless and absurd, and deeply impious to boot. As Justice Stevens observed in dissent in Citizens United, “corporations have no consciences, no beliefs, no feelings, no thoughts, no desires.”83 Inanimate for-profit corporations cannot believe in God, pray for forgiveness, experience transcendence, or have faith in an afterlife. They are inanimate, intangible, and artificial entities set up for the purposes of facilitating economic activity.
Justice Ruth Bader Ginsburg, dissenting in Hobby Lobby,84 showed how no one’s religious rights were violated by the Obamacare contraceptive insurance provisions. Contrary to the majority’s argument, those provisions do not “substantially burden” the corporate owners in the exercise of their own personal religious beliefs. Cheerfully conceding the sincerity of the Hobby Lobby owners’ objections to certain kinds of contraceptives, Ginsburg shows that nothing in the ACA makes them use such contraception or alter their religious practices in any way.85
The owners are thus in the same position as the Native American father in Bowen v. Roy (1986),86 who lost his case challenging the government’s use of his child’s Social Security number, which he said offended his sincere religious belief that a person’s sacred spirit is profaned by being reduced to a number and entered into a bureaucracy.87 In that case, Ginsburg points out in her Hobby Lobby dissent, the sincere religious adherent lost because the government’s administrative mandate “placed no restriction on what the father may believe or what he may do.”88 Similarly, Hobby Lobby’s owners can believe and do whatever they want, but they may not have their company opt out of a federal law that does nothing to impair their own religious practice even though they disagree with it. Hobby Lobby employees who share the religious views of the owners are under no obligation to use the sinful contraceptive devices, and their use by other employees does not affect the religious exercise of the owners and managers.
The real-world effect of giving corporations religious rights under RFRA or the First Amendment is not to deepen their personal relationship with God or to enable them to commune with nature or achieve spiritual harmony, because these things are impossible for an artificial entity. Rather, the effect is to give corporate owners and managers the power to impose their own religious and political beliefs on their employees who have different religious beliefs—in this case, to deny female employees complete and free individual choices in reproductive and contraceptive care.89 This decision is not a victory for religious free exercise and individual moral choice in any sense, but a victory for corporate control over employees’ personal choices in reproductive decision-making.
III. The Schizophrenic Jurisprudence of the New Corporatism
The Supreme Court’s promotion of unbridled corporatism in the Citizens United era depends on a schizophrenic jurisprudence and an awful double standard. When it comes to defining new corporate rights and powers, the Court’s majority treats the traditional “corporate veil” in state law as an obsolete and wholly dispensable formality, freely shuttling rights back and forth between human corporate owners and their corporate entities. Thus, in cases like Citizens United and Hobby Lobby, the Court enthusiastically ascribes the personal free speech and religious rights of corporate owners and shareholders directly to their corporation. However, when employees, consumers, shareholders, and other citizens are injured by corporations and seek to hold the people who own and run them accountable for their injuries, the Court’s majority treats the formalities of the “corporate veil” like an impermeable and imperishable full body armor insulating from liability anyone who takes clever advantage of the corporate form.
Thus, corporations increasingly enjoy all the rights of the people but the people increasingly have no rights against the corporation. Indeed, the Roberts Court, often but not always in 5-4 votes, not only frequently interprets federal law to defer to the corporate form and defeat corporate liability, but often works its special wonders to find federal preemption of any state laws and doctrines that actually hold corporations accountable for torts, fraud, and wrongful conduct involving shareholders, workers, and customers.
A. Now You See it, Now You Don’t:
In the Roberts Court, a Legally Responsible Corporation Is Hard to Find
The same 5-4 majority that tears down the corporate veil to declare that corporations exercise the political and religious rights of the people puts all the formalities back up when shareholders bring actions against corporations for securities fraud. In Janus Capital Group, Inc. v. First Derivative Traders,90 decided the year after Citizens United, the conservative justices found that Janus Capital Management LLC (JCM), a mutual fund investment adviser, could not be found civilly liable in a private action under SEC Rule 24010b-5 (“10b-5”)91 for making various false statements to investors in its client mutual funds’ prospectuses.92 Justice Thomas spoke for the five conservative justices in finding not that JCM’s statements—which allegedly suppressed the truth about Janus Capital Group’s involvement with “market timing” operations—were actually true, but rather that it makes no difference because the JCM was only the investment adviser, and not the corporation itself releasing a prospectus.93 Justice Thomas found that, because Janus Capital Group created Janus Investment Fund and JCM provided Janus Investment Fund with separate investment advisory services, all the various Janus entities along the way “maintain legal independence.”94 By participating in an inscrutable family of corporations cloaked in “individual” corporate veils, the advising corporation can make false statements that are quoted or cited by the company releasing the prospectus, and everyone along the chain remains free of 10b-5 liability until you reach the very end—the mutual fund itself, which gave investors the allegedly fraudulent material provided by the fund adviser. But the mutual fund as an entity has no assets other than the investments it holds for shareholders, which is why investors had sued the fund adviser in the first place. No one is responsible! The fact of interlocking coordination among the people and corporate entities involved is deemed irrelevant to assigning responsibility.
Writing for the four dissenting justices, Justice Breyer95 pierced through this fog of obfuscation and pretense, identifying the clearly interlocking and closely coordinating nature of the two key companies:
Janus Management and the Janus Fund are closely related. Each of the Fund’s officers is a Janus Management employee. Janus Management . . . manages the purchase, sale, redemption, and distribution of the Fund’s investments. Janus Management prepares, modifies, and implements the Janus Fund’s long-term strategies,
and so on.96 He then pointed out that Rule 10b-5 provides that it is unlawful for “any person, directly or indirectly . . . to make any untrue statement of material fact” in connection with the purchase or sale of securities.97 Justice Thomas “incorrectly interpreted the Rule’s word ‘make.’ Neither common English nor this Court’s earlier cases limit the scope of that word to those with ‘ultimate authority’ over a statement’s content.”98 Many prior cases established that management companies, boards of trustees, individual officers, investment advisers, lawyers, and accountants could also “make” false statements within the meaning of 10b-5.99
The Court’s 5-4 endorsement of this three-card monte in the corporate securities market effectively guts the rule of 10b-5 going forward.99 Corporations dealing in securities can now get away with making false statements to their investors by outsourcing the job to other affiliated corporate entities who serve an “investment advisory” function. As one circuit court put it before Janus in rejecting the test requiring a company to have legal “control” over prevaricating third parties for the rule to operate against them, such a reading offers “company officials too much leeway to commit fraud on the market by using analysts as their mouthpieces.”101 But this situation is now the law. Invoking a ludicrously pinched interpretation of the statutory “person” forbidden to make false statements, the majority authorizes corporations to multiply and divide themselves under the cloaks of many corporate veils so as to thwart 10b-5 liability and permit misleading statements that deceive and cheat investors.
B. Denying Personal Jurisdiction over Foreign Corporations:
The Global Reach of the New Corporatism
If the Roberts Court majority offers little help to investors trying to navigate the maze of corporate veils in securities law, it is downright hostile to injured workers trying to get their cases heard against corporations in the first place. In J. McIntyre Machinery, Ltd. v. Nicastro (2011),102 an industrial worker named Robert Nicastro brought a lawsuit in New Jersey state court against the British manufacturer of a three-ton metal shearing machine that neatly severed four fingers from his right hand while he was working.103 The defendant corporation, headquartered in Nottingham, England, had hired another company to distribute its equipment throughout the United States rather than make the sales directly. It moved to dismiss the negligence lawsuit on the grounds that the court lacked “personal jurisdiction” over it,104 the kind of jurisdiction required by the Constitution that gives a court the power to issue a ruling affecting a party to litigation. Under due process, a state court cannot hear a case if the parties have no relevant contact or relationship with the state.
The New Jersey Supreme Court found that personal jurisdiction clearly existed in Nicastro105 because the corporation aggressively put its equipment into the market in all 50 states, which is how the finger-destroying machine ended up in New Jersey.106 According to the New Jersey court, due process was in no way offended by a state court asserting jurisdiction over a foreign manufacturer who knew that its products were being promoted and distributed through a nationwide marketing system.107
However, a majority of the Court voted to reverse the New Jersey Supreme Court on this question. Justice Kennedy wrote for a four-justice plurality (including Chief Justice Roberts, Justice Scalia, and Justice Thomas), while Justices Breyer and Alito concurred. They found there was no personal jurisdiction to bring the case since the English company (as opposed to the distributor it contracted with) had not made an effort to make sales specifically in New Jersey, “no more than four machines . . . ended up in New Jersey” and other ties between the foreign corporation and New Jersey were too tenuous to fairly invoke jurisdiction against the company,108 which is definitely treated by the majority like a sterile and “artificial entity,” not a group of people doing business together to make money around the world.
Writing for herself and Justices Sotomayor and Kagan, Justice Ginsburg chastised the other Justices for this appalling decision, which marked a total break from precedent and the traditional understandings of “personal jurisdiction” in the states.109 She reviewed how McIntyre Machinery advertised and sent representatives to attend all the major conventions and trade shows to put its product into the stream of U.S. commerce.110 She explained how it engaged a U.S. distributor to hustle and ship its machines within all the 50 states.111 She emphasized that this case is not anomalous but “illustrative of marketing arrangements for sales in the United States common in today’s commercial world.”112
Invoking the well-established “reason and fairness” standard derived from the 1945 International Shoe case,113 Justice Ginsburg asked the key question: “Is it not fair and reasonable, given the mode of trading of which this case is an example, to require the international seller to defend at the place its products cause injury?”114 She showed how more than a dozen federal and state courts all over America had come to precisely this conclusion in analogous personal injury cases.115 As the New Jersey Supreme Court observed in the opinion that the Roberts Court reversed: “With the privilege of distributing products to consumers in our State comes the responsibility of answering in a New Jersey court if one of those consumers is injured by a defective product.”116 Most strikingly, she showed that under European Union law, a New Jersey corporation selling machinery in Europe would have to face injured workers “in matters relating to tort . . . in the courts for the place where the harmful event occurred.”117
Thus, our corporate Court majority is so one-sided and extreme in its sympathies that it extends rights of jurisdictional immunity to foreign corporations that their own countries would never extend to U.S. corporations.
C. Federal Preemption and Corporate Immunity:
Rewriting Federal Laws to Nullify State Consumer Laws
The Roberts Court is also infamous for finding rules of “federal preemption” to save corporations from tort and accident liability here in the United States, based on the Constitution’s Supremacy Clause, which states that the U.S. Constitution and federal laws trump inconsistent state laws. In several recent decisions, the majority has sided with some of the most powerful corporations in America against consumers and medical patients and the state laws designed to protect them. This ferocious judicial attack on state law represents an interesting twist on the Lochner age, when state common law tort rules, like contributory negligence and assumption of risk, often defeated the claims of injured people and the Supreme Court just went along for the ride. Today, state laws tend to favor the possibility of individual recovery in personal injury cases but the conservative Roberts Court majority is stealing away jury verdicts by rewriting federal laws to find “preemption” of pro-consumer state laws and doctrines.
When Big Pharma argues that federal laws should preempt state laws designed to protect consumers and the public health, it usually finds a receptive audience among the conservatives on the Court. Consider PLIVA, Inc. v. Mensing (2011),118 in which Justice Thomas delivered the opinion for a 5-4 majority invalidating state law tort claims brought by two women who ended up with a severe neurological disorder called tardive dyskinesia after taking metoclopramide, the generic equivalent of Reglan, a drug designed to aid digestion.119 Justice Thomas found that federal law requiring generics to have the same labels as brand-name drugs preempted the company’s obligation under state “failure to warn” tort law to inform consumers that the label significantly understated the drug’s risks.120 According to the majority’s tortured opinion, it would have been “impossible” for the generic drug makers to comply with both the federal and state laws.121
Writing for the dissenters, Justice Sotomayor122 eviscerated Justice Thomas’ reasoning, pointing out first that it was not “impossible” for the pharmaceutical manufacturers to meet both their federal and state law responsibilities because the compan