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Is Nike a Person?

By Sarah Stodola

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This is Part Two in a three-part series.  Click here to read Part One.

Corporate Personhood

A number of constitutional issues are invoked in Nike v. Kasky, among them the standards for determining commercial speech and the protection of commercial speech by the first amendment. However, it seems that the courts up to this point have overlooked one of the more vital concerns at hand in the case; that of corporate personhood and the rights granted to corporations through the Fourteenth Amendment.

There is a long history of corporate personhood in the United States, beginning in the late 19th century and continuing, stronger than ever, today. Because corporations are considered to be persons for purposes of interpreting the Constitution, they are afforded Bill of Rights protection. This protection includes the First Amendment, which assures freedom of speech. Because the Supreme Court has determined that the Bill of Rights applies to state regulation as well as federal regulation, there is a question of whether or not California’s Unfair Competition Law and False Advertising Law are valid.

In putting Nike v. Kasky into perspective, it is important to understand how the Supreme Court’s interpretation of the Constitution has led to a condition of common law in which corporations are assured Bill of Rights protection as if they were true persons.

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History of Corporate Personhood

In its beginning, the United States was a rigorously anti-corporate country, and it continued to be wary of corporations for the first hundred years of its existence. However, since the Civil War, legislation and common law have taken a decidedly sympathetic stance regarding the role of the corporation in U.S. society.

The word “corporation” is never mentioned in the Constitution. Therefore, all regulation regarding corporations, constitutionally speaking, is a result of the manner in which the Consitution has been interpreted by the Supreme Court. Such interpretation has traditionally been of a nature which today implies that corporations are granted certain rights under the Constitution.

The argument can be made that corporate freedoms have superceded individual freedoms in this country. As Carl J. Hastings stated in a 1990 Hastings Law Journal article on corporate personhood, “The corporation’s invocation of the first ten amendments (the Bill of Rights) symbolizes the transformation of our constitutional system from one of individual freedoms to one of organizational prerogatives.”

How did we arrive at this point? Historically speaking, corporate personhood began with the passing of Fourteenth Amendment in 1868, an act of Congress that was intended to provide protection of civil liberties to newly freed slaves, and its subsequent interpretation by the Supreme Court. For purposes of reference, the relevant section of it is reproduced below:

All persons born or naturalized in the United States, and subject to jurisdiction thereof, are citizens of the United States and of the State wherein they reside. No State shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States; nor shall any State deprive any person of life, liberty, or property, without due process of law; nor deny to any person within its jurisdiction the equal protection of the laws.

Although the amendment was meant to offer “privileges and immunities” and “equal protection” to blacks, it evolved into an amendment offering rights to not only all U.S. citizens, but also to corporations. In the first 28 years of the existence of the Fourteenth Amendment, the Supreme Court heard 15 cases involving blacks and the Fourteenth Amendment, and 135 involving business entities and the Fourteenth Amendment - a stark example of the direction which interpretation of the amendment would take.

As early as Trustees of Darmouth College v. Woodward, decided in 1819, the court referred to corporations as individuals. Chief Justice Marshall, in his decision, wrote that “a corporations 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 its creature confers upon it, either expressly, or as incidental to its very existence…Among the most important are immortality, and…individuality.”

In the Slaughterhouse Cases of 1873, the claim was first made that the Fourteenth Amendment protected the rights of companies. The case involved a number of slaughterhouses in New Orleans that were effectively put out of business when an act of the Louisiana State Legislature gave one company exclusive rights to the slaughtering business in the city. The plaintiffs argued, among other points, that the legislation, in depriving them of their business, deprived them of their property without “due process,” thus violating the Fourteenth Amendment. The Court ruled against this argument. However, the dissenting opinions in the case proved powerful, and would lead to future rulings in which Fourteenth Amendment protection would be extended to include corporations. While Justice Field’s dissent in this case claims equal protection only for individuals engaged in business (and also claiming monopolies to be unconstitutional), it provided the first step in arriving at equal protection for corporations.

In 1876, another Justice Field released another dissent that would prove vital to the shaping of corporate personhood. In Munn v. Illinois, the Court ruled that the state was allowed to set rates for grain elevators because such regulation contained a public interest. Therefore, private property could be subject to regulation if their was a wider public interest that such private property served. However, the dissent in the case claimed that upholding the law in question was a violation of due process according to the Fourteenth Amendment.

Thirteen years after the Slaughterhouse Cases were decided, the Supreme Court officially granted corporations the status of personhood under the Constitution. In Santa Clara County v. Southern Pacific Railroad, the Court stated that “(t)he court does not wish to hear argument on the question whether the provision in the Fourteenth Amendment to the Constitution, which forbids a State to deny any person within its jurisdiction the equal protection of the laws, applies to these corporations. We are all of the opinion that it does.” This is a blockbuster statement that solidifies the existence of Fourteenth Amendment protection for corporations. The case involved a tax by the State of California on a railroad company. Southern Pacific Railroad claimed that the tax had been imposed without due process for the company, and was therefore in violation of the company’s rights. When the Court ruled in favor of the railroad company, corporate personhood in effect came into being.

Four years later, in Chicago, Milw. & St. Paul Ry. Co. v. Minnesota, Justice Field’s dissents in the Slaughterhouse Cases and Munn v. Illinois finally triumphed, as the Court stated that question of setting rates for a railroad company required “due process for its determination.” If this process is not followed, then the court asserted that said company would be deprived of both due process and equal protection, which was unconstitutional because of the Fourteenth Amendment.

In Lochner v. New York, decided in 1905, the Court ruled that the State of New York could not limit the number of hours worked by an employee of a bakery, because “as part of the liberty guaranteed by the Fourteenth Amendment, no state could interfere with the right to make lawful contracts.” Although the decision in this case is generally considered to be one of the more notorious ever handed down by the Court, its affirmation of liberty of contract as a fundamental right still stands, for the most part, today.

In this case, perhaps for the first time, the rights of the company are being protected in favor of the rights of the individual employee, thus implying that corporations as well as individuals are protected by the words of the Constitution. After the Lochner decision, corporations were armed with substantive due process, and they used it to have numerous state laws declared unconstitutional, as the United States became an increasingly corporate-friendly country. From 1905 through the 1930s, the Supreme Court struck down roughly 200 economic regulations under the due process clause of the Fourteenth Amendment.

Throughout the Progressive Era, corporations continued to claim and win rights under the Fourteenth Amendment. However, by the time the country entered the New Deal Era, cases like Adair v. United States, Coppage v. Kansas, and Bunting v. Oregon - although not in so many words – overturned the Lochner decision, affirming the opinions rendered in that decisions dissents. With the New Deal, the so-called “Lochner Era” came to an end, and for a time corporations would be subject to more regulation than they had ever seen over the course of United States history.

Although corporations commonly and consistently employed the Fourteenth Amendment in advancing their causes through the early decades of the 20th century, they rarely claimed Bill of Rights protection. This can most easily be explained by the simple fact that they did not find such action necessary or even useful. Although corporations were first granted protection under the Bill of Rights in 1893, the claim for protection did not become widespread until well into the 20th century. When the rights of corporations evolved to become more “intangible,” Bill of Rights protection became increasingly important to them. Intangible rights include free speech, privacy, and ideas, and these clearly have become important to corporations over the course of the 20th century.

In Hale v. Henkel, decided in 1906, the Court extended the rights of corporations to the Fourth Amendment. The case involved a subpoena for documents from two tobacco corporations who were accused of antitrust under the Sherman Antitrust Act. While in this case, the Court refused to grant Fifth Amendment protection to the corporations, it did hold that it would be unreasonable to issue a subpoena to a corporation which was overly broad in intent. Fourth Amendment protection is a crucial step in the advancement of corporate rights under the Constitution. It protects corporations against being forced to foreclose private information on any sort of regular basis and allows them to maintain confidential information about its own actions and intentions. Several subsequent Supreme Court cases, notably Federal Trade Commission v. American Tobacco Company, solidified Fourth Amendment protection for corporations.

Beginning in the New Deal Era, federal regulation began to overpower state regulation. Regulation also shifted from being microeconomic in nature to macroeconomic. This means that instead of legislation being passed to regulate just one industry, such as railroads, measures were taken to regulate the economy as a whole. Such legislation included the Reconstruction Finance Corporation Act and the National Industrial Recovery Act, and the creation of such federal agencies as the Securities and Exchange Commission, the National Labor Relations Board, and the Federal Communications Commission (FCC). These agencies were entrusted with independent legislative authority on a federal level.

After the Stock Market Crash of 1929, corporations temporarily lost ground in the advance of their constitutional protections, as the Lochner decision became increasing and eventually totally obsolete. In United States v. Morton Salt Company, for example, the Court upheld a request by the FCC for a large amount of information from a large corporation. The Court posited that such a request was valid even if it “was caused by nothing more than official curiosity.” Such decision reflected the mood of the country at a time when corporations were at one of their low points.

However, after 1960, the Court, the economy, and Congress entered what is considered the Modern Era, when corporations would regain the ground lost during the New Deal era, and gain new protections under the Bill of Rights. According to Mayer, there are four distinguishing characteristics of Modern Regulation. First, most of it is socially oriented, meaning that it is concerned with health, the environment, minorities, etc. Second, it is predominantly federal. Third, it is “more intrusive, systematic, and routinized.” Fourth, Modern Regulation applies on a broad scale, and not just to one industry.

In addition, in the Modern Era ideas of what constitutes property have evolved. Ideas, knowledge, benefits, and resources are all now considered property. This is a vast stretch from the time when only tangible objects and land qualified as property.

Such changes in our perception of property and the economy have led to equally vast changes in the way corporations are protected by the Constitution, and how they pursue legislation. However, there has been much less concern over the effect of Modern Property on corporate rights and freedom. As a result, corporations have been able to use the modern conception of property to their advantage, finally invoking Bill of Rights protection on a large scale. The First, Fourth, and Fifth Amendments, in particular, have been central to corporate battles for rights of personhood. Since most economic regulation now occurs on the federal level, the Fourteenth Amendment no longer offers the protection to corporations that it once did. However, the assumption of corporate personhood established with the Fourteenth Amendment has continued.

Modern Property has arguably threatened the rights of individuals, an issue over which there has been much debate. This new advantage for corporations has the potential of over powering the rights of individuals, in part because corporations have at their disposal infinitely more resources with which to defend and claim their rights.

See v. City of Seattle represents the first time that the Supreme Court considered Modern Regulation of corporations. In this case it was determined that, under the Fourth Amendment, a warrant is necessary in order to inspect commercial properties. This provided crucial protection to corporations in the sense that as a result of the decision they were not subjected to random inspections of their property or information.

With the exception of the liquor and firearms industries, which in the 1960s and 1970s were denied Fourth Amendment protections, the Supreme Court would subsequently hand down several rulings ensuring that corporations receive Fourth Amendment rights. In Marshall v. Barlow’s Inc., for example, the Court handed down a decision which would have profound implications for corporate rights. It again assured that corporations would not be subject to inspections without warrants, rejecting a provision created by the Occupation Safety and Health Act.

During this time, corporations also began to claim rights under the First Amendment. In 1975, Bigelow v. Virginia provided corporations with the right to advertise content containing material of public interest. The case involved a company that advertised out-of-state abortions in a state where the procedure was illegal, and the Court ruled that the company was well within its rights in doing so. In 1976, the Supreme Court granted corporations protection of commercial speech in Virginia Pharmacy Board v. Virginia Citizens Consumer Council, Inc. In the case, the Court held that commercial speech receives first amendment protection, ostensibly in order to provide consumers with the knowledge they need to make informed decisions.

Two years later, the Court granted corporations protection of political speech in First National Bank of Boston v. Bellotti. This case allowed the National Bank of Boston to expend funds to criticize a proposed tax referendum in the state of Massachusetts. The right to spend funds on political causes gives corporations the power to sway public opinion on issues that will benefit them – some may say it gives them the right to control much of the political process.

In 1980, the Court considered Central Hudson Gas & Electric Corp. v. Public Service Commission of New York, a case in which it overturned state regulation forbidding corporations to advertise the use of electricity. It did so under the claim that commercial speech is protected by both the First and Fourteenth Amendments. With this case, the Court determined that communication is a form of property. The Central Hudson decision was called by Justice Rehnquist a “Lochner-like invalidation of Modern Regulation” and by others a “modern version of substantive due process.” Indeed, with this case, corporations once again became armed with the protection of the Fourteenth Amendment. It is important to note, however, that the Central Hudson decision did claim that commercial speech must not be misleading. This will be relevant in the upcoming Nike decision.

In 1996, the Court cited Central Hudson and Virginia Board of Pharmacy v. Va. Citizens Consumer Council in its decision in 44 Liquormart v. Rhode Island, which dealt with the advertising of liquor prices in the state of Rhode Island. The Court held that regulation banning such advertising was invalid under the First and Fourteenth Amendments. Just last year, in Thompson v. Western States Medical Center, the Court again used the wording of the Central Hudson and Virginia Board of Pharmacy decisions to hold regulation prohibiting certain advertising of prescription drugs to be unconstitutional.

Since the late 1800s, then, corporate personhood has become solidified as a legitimate element of constitutional regulation. The Supreme Court has ruled that under the due process, privileges and immunities, and equal protection clauses of the Fourteenth Amendment, corporations are to be considered persons and therefore protected by the amendment. Over time, economic regulation fell increasingly to the federal government, and it became more “social” in nature than economic.

With the Modern Era, corporations found that the best way to combat Modern Regulation was by claiming Bill of Rights protections. While the Fourteenth Amendment became less important to corporations because they no longer needed it to combat state regulations, the qualification of personhood that the Court had granted them under the Fourteenth Amendment was extended to the Bill of Rights, and specifically to the Fifth Amendment, Fourth Amendment, and First Amendment.

Today, while corporations continue to invoke Bill of Rights protection, since 1980 they have also once again been granted rights under the Fourteenth Amendment.

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Part Three of this series will appear on Wednesday, June 11.

Click here for a source list.

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Sarah Stodola is the Managing Editor of Me Three.  She can be contacted at sstodola@methree.net.

© 2003 Me Three