Saturday, January 30, 2010

President Obama's Off-Target Critique of Citizens United

Here are some thoughts on the President's State of the Union critique of the Citizens United decision, a critique that let to a simple and immediate rebuttal by Justice Alito.
1) The President began his criticism by expressing his respect for the Separation of Powers. It's not clear to me why the President felt it necessary to begin his remarks in this way. Presidents and members of Congress should feel perfectly free to criticize rulings of the Supreme Court, and doing so has no implications for the separation of powers. Andrew Jackson criticized McCulloch v. Maryland, Lincoln criticized Dred Scot, FDR criticized numerous decisions during the New Deal, and Reagan criticized Roe v. Wade. None of these criticisms alone or taken together in any way undermined the Separation of Powers. As Madison and Lincoln both explained, Presidents and individual citizens are perfectly free to disagree with decisions of the Supreme Court. Moreover, when acting in the sphere of their own authority, Presidents and members of Congress are perfectly free to take actions inconsistent with such decisions. So, for instance, Andrew Jackson was perfectly free to veto on constitutional grounds a bill to create a National Bank, even though the Supreme Court had unanimously held that Congress had the constitutional authority to create such a bank. In the same way, President Reagan was perfectly free to veto, on Constitutional grounds, Congress's effort to re-impose the so-called Fairness Doctrine, even though the Supreme Court had held that the doctrine is constitutional.

When Presidents and other political actors take issue with judicial rulings and/or act on their own views of the Constitution, they thereby facilitate a dialogue about the meaning of the constitution, a dialogue that can enhance both the quality and legitimacy of the resulting constitutional consensus.

2) Of course, if the President is going to criticize the Court in an effort to facilitate such a dialogue, he should characterize accurately the decision he is criticizing. President Obama's criticism's was factually inaccurate in a couple of ways.

First, the President claimed that the Court's decision would protect speech by "foreign companies." However, Citizens United, the actual party before the Court, was an American company, and the Court expressly declined to address whether Congress may place greater limits on foreign corporations (or, for that matter, foreign citizens) than it may impose on domestic companies. Hence, Citizens United in no way provides that foreign corporations or persons have the same free speech rights as American companies.

Second, the President claimed that the Citizens United decision "reversed a century of law." Again, this is demonstrably false. Congress did not attempt to regulate corporate speech until 1947, and the Supreme Court did not sustain such a ban until 1990, when, in Michigan Chamber of Commerce v. Austin, the Court upheld Michigan's ban on speech by the state's Chamber of Commerce. Before Austin, the Court struck down a Massachusetts ban on corporate political speech in connection with referenda campaigns. See First National Bank of Boston v. Bellotti, 435 U.S. 765 (1978). After First National Bank, the Court held that Congress could not ban speech by non-profit ideological corporations, even when such speech took place in connection with an election. See Massachusetts Citizens for Life v. Federal Election Commission, 479 U.S. 238 (1986). (The Court thus did not decide one way or the other whether Congress had the authority to ban speech in connection with elections by for profit corporations.) To reiterate, Austin, decided just less than 20 years ago, was the first decision by the Court sustaining a ban on corporate political speech.

In referring to "a century of law," the President is implicitly invoking the so-called "Tillman Act," which, in 1907, banned corporate contributions to candidates for Federal office. The Act did not purport to ban corporate speech, even speech that required large expenditures of money on, say, newspaper advertisements announcing a corporation's endorsement of a candidate. For decades now, the Supreme Court has repeatedly distinguished between the (weaker) constitutional protections afforded to contributions, on the one hand, and speech, on the other. (Thus, for instance, Congress may limit the size of individual contributions to political candidates.) Citizens United dealt only with a Congressional ban on speech itself, and not with a ban on contributions.

It is certainly true that, like contributions, speech can involve an expenditure of money. (Though, some corporate speech my be as simple as a statement of endorsement by the firm's Board of Directors.) It's also true, however, that outright bribery of a public official involves an expenditure of money. However, no one would claim that Citizens United somehow called into question federal anti-bribery laws.

3) Let's hope that the President's future critique of Citizens United focuses on the decision's actual holding and rationale.
Update (February 1):
One of President Obama's supporters has issued another imprecise description of the Citizens United decision. According to E.J. Dionne, the decision was a "ruling on corporate money." It was not, of course. It was, instead, a ruling on "corporate speech." The decision did not address the regulation of, say, corporate campaign contributions, as explained above. Here is a link to Mr. Dionne's Op-Ed.

Sunday, January 24, 2010

Save Our SAABS!

The Chicago Tribune reports that SAAB owners are massing in Schaumburg, Illinois to take part in a "save our SAABs" convoy. The owners converged on an IKEA parking lot. How appropriate! Here is the story:

This Blogger is a former SAAB owner and agrees with the sentiments of one participant: "I don't want to drive a (Toyota) Camry. If I had one, I would probably drive it off of a cliff[.]"

Saturday, January 23, 2010

Citizens United/Good Riddance to Austin v. Michigan Chamber of Commerce

"Congress shall make no law. . . abdidging the Freedom of Speech, or of the Press . . ."

Last week the Supreme Court issued its long-anticipated decision in Citizens United v. Federal Election Commission. Thankfully, the Court "got it right." In particular, the Court overruled Austin v. Michigan Chamber of Commerce, a decision that had sustained, for the first time, a ban on core political speech simply because the speaking entity was a corporation, that is, a voluntary association of individuals.

In the fall, your not-so-humble blogger argued that Austin was incorrect, because the distinction it drew between corporations and other entities or, for that matter, natural persons, did not withstand analysis. Among other things this Blog said:

"Third, there is no good reason for treating corporations, large or small, any differently from Ross Perot or Bill Gates, both of whom earned most of their wealth from . . . corporations!Corporations are legal fictions, just like "partnerships," "sole proprietorships," "limited liability companies," "labor unions," "non profit corporations," etc. Behind these fictions are actual human beings who contribute labor, capital, know how, etc. to a joint enterprise. Corporations, like other forms of business organization, are best understood as a "nexus of contracts" between various categories of individuals that supply inputs to a joint enterprise. Where corporations are concerned, such suppliers include shareholders, debtholders, managers, employees, directors and others. Hopefully such enterprises earn enough to pay off lenders, pay handsome wages and salaries, and earn a profit. In the case of a corporation, some of the profits are paid out as dividends, some are reinvested in new projects, and some remain in the corporate treasury, for future use at the discretion of management."

The post also rejected the claim that corporations receive "special privileges from the state" that justify regulation not imposed on other actors, as well as the so-called "shareholder protection rationale" for banning corporate speech:

"Fifth, there are two counterarguments to the pro-speech approach that I have just sketched. First, that corporations receive "special privileges" from the state that justify additional state regulation, privileges such as perpetual life, entity status, and limited liability. Each such privilege, it is said, facilitates the creation of wealth in the economic marketplace that corporations might improperly transfer into the political arena, by spending resources on speech that exceeds the "actual public support" for the ideas expressed. Second, that shareholders need protection from managers who will use "their" (shareholders') money to speak about candidates the managers support, whether or not shareholders support them.

The Supreme Court bought the first argument in Austin v. Michigan Chamber of Commerce, 494 U.S. 652 (1991). Justice Brennan, in a concurrence, bought the second argument, analogizing corporate speech to a "theft" of shareholder assets to support viewpoints with which shareholders might disagree. Neither argument withstands scrutiny, in my view.

Many corporations, even large ones, are quite young. (Microsoft is ten years younger than I am.) Still, bans on corporate political speech apply "across the board," regardless of the age of the firm. Hence, the "perpetual life" attribute does not justify the current scope of speech regulation. Moreover, limited liability limits the liability of shareholders, not corporations (who are fully liable for their own torts or contract breaches despite limited liability), and it's a bit odd to invoke a benefit granted to individuals to justify disadvantaging corporations. (Moreover, corporations often "pay" for limited liability because they must pay higher interest rates to compensate voluntary creditors for the latter's inability to access shareholder assets if the corporation is judgment proof.)

To be sure, limited liability, perpetual life, entity status, etc. all facilitate the separation of ownership from control in large public corporations and thereby facilitate the creation and retention of wealth. (An investor is far more likely to purchase shares in a corporation if he or she knows that he or she can only lose the amount invested, without putting personal assets at risk.) Still, lots of background rules, whether contract law, tort law, partnership law, agency law, property law, trademark law, the law of secured transactions, etc., facilitate the creation and retention of wealth by individuals --- where would a franchise be without the state action necessary to enforce a trademark --- but we don't therefore conclude that individuals have received "special benefits from the state" that justify additional limits on their speech. Nor would we, for instance, allow the state to squelch speech by individuals to whom it had guaranteed a minimum income, even if the state argued that it was merely preventing the recipients of state largesse from using that largesse, or the leisure made possible by subsidies from others, to distort the political marketplace. Here again, there is no reason to distinguish individuals from corporations.

Moreover, most industries are characterized by free entry, so there is no reason to believe that the special nature of the corporate form generally allows firms to earn above-average returns, because such returns would just attract additional competition from other corporations. Finally, unless I am mistaken, bans on corporate speech are not reserved for large corporations, but apply even to corporations that are much smaller than many partnerships, for instance. Thus, even taken on their own (unpersuasive) terms, such bans are not narrowly tailored to further their purported interest.

What, though, about the "shareholder protection rationale?" Proponents of this approach argue that, if shareholders want to support a candidate, they can contribute to special funds that then spend the money on speech as directed by the corporation. Under this approach, Justice Brennan said, speech reflects "actual support" for the views expressed. This is mere wordplay. Such speech reflects some actual support, yes, but not the full actual support. As Roberto Romano argued before Austin, reliance upon separate funds is beset by collective action problems. One shareholder's contribution benefits all shareholders, even those who don't contribute. The result will be free riding by some shareholders on the contributions made by others and thus suboptimal expenditures on speech. Such a burden is not justified by any effort to protect shareholders, who have voluntarily agreed to participate in an enterprise that uses retained earnings to speak. Perhaps states could adopt heightened scrutiny of speech to make sure such speech furthers a firm's interest, but an outright ban, relegating shareholders to suboptimal separate funds, sweeps too far and offends the First Amendment, in my view. For an elaboration of this rebuttal of the shareholder protection argument, see Alan J. Meese, Limitations on Corporate Speech: Protection of Shareholders or Abridgement of Expression, 2 W&M Bill of Rights Journal 305 (1993) (See here)."

The full post appears here:

Several scholars have agreed with the decision to overrule Austin, in some cases touching on themes similar to those invoked here in the fall.

For instance, over at the Volokh Conspiracy, Professor Ilya Somin rejects the argument that "people acting through corporations [should] be denied constitutional rights because corporations are 'state-created entities.'" Professor Somin's post makes very good reading.

Moreover, Professor Stephen Bainbridge, on his own blog, describes what he calls "[Justice] Stevens' pernicious view of the concession theory" that purports to justify regulation of corporations.

Also, Eugene Volokh rebuts those who claim that speech by a corporation is "money, not speech." As Volokh points out, exercising various constitutional rights costs money, and this common sense fact does not thereby undermine the importance of the right or somehow confer upon Congress or the states extra authority to ban core political speech. For instance, if the Constitution protects a right to abortion, and Congress banned spending money on abortions, pro-choice advocates would not stand idly by and say "no problem; the law merely bans spending."

More later, I'm sure . . . .

Saturday, January 9, 2010

Peeps Appearing Just In Time For Easter !!!!!

You were probably worried that they would not make it in time. However, believe it or not, "Peeps" have started appearing in local stores here in Williamsburg. Yes, on January 9. "Just in time for Easter" it seems. Above you will find irrefutable photographic evidence of the presence of these marshmallow delectables, gathered by your not-so-humble blogger on Saturday, January 9, 2010.
I wonder if they have just been sitting in the storeroom since last Easter! Given their ingredients, I have always assumed they are about as "perishable" as uranimum.
Start planning your peeps dioramas now! You might recall from an earlier post on this Blog that several leading newspapers hold Peeps Diorama contests each year. To refresh you recollection and find some inspiration, go here:

Monday, January 4, 2010

The Tribe is Virginia's Highest Ranked Men's Basketball Team!

The latest Associated Press poll is out. Inexplicably, William and Mary, with a ten game winning streak, including wins over Wake Forest and Maryland, is not among the top 25. Still, the Tribe received more votes (37) than any other Virginia team. (Virginia Tech received 20, and VCU received 5.) Wherefore art though "the" University of Virginia??

Here's a link to the poll.

Tonight the Tribe takes on the University of North Carolina at Wilmington.

Good luck and Go Tribe!