Somewhat
counterintuitively, American corporations today enjoy many of the same rights
as American citizens. Both, for instance, are entitled to the freedom of speech
and the freedom of religion. How exactly did corporations come to be understood
as “people” bestowed with the most fundamental constitutional rights? The
answer can be found in a bizarre—even farcical—series of lawsuits more than 130
years ago involving a lawyer who lied to the Supreme Court, an ethically
challenged justice, and one of the most powerful corporations of the day.
That corporation was the
Southern Pacific Railroad, owned by the robber baron Leland Stanford. In 1881,
after California lawmakers imposed a special tax on railroad property, Southern
Pacific pushed back, making the bold argument that the law was an act of
unconstitutional discrimination under the Fourteenth Amendment. Adopted after
the Civil War to protect the rights of freed slaves, that amendment
guarantees every “person” the “equal protection of the laws.” Stanford’s
railroad argued that it was a person too, reasoning that just as the
Constitution prohibited discrimination on the basis of racial identity, so did
it bar discrimination against Southern Pacific on the basis of its corporate
identity.
The
head lawyer representing Southern Pacific was a man named Roscoe Conkling. A
leader of the Republican Party for more than a decade, Conkling had even been
nominated to the Supreme Court twice. He begged off both times, the second time
after the Senate had confirmed him. (He remains the last person to turn down a
Supreme Court seat after winning confirmation). More than most lawyers,
Conkling was seen by the justices as a peer.
It was a trust Conkling
would betray. As he spoke before the Court on Southern Pacific’s behalf,
Conkling recounted an astonishing tale. In the 1860s, when he was a young
congressman, Conkling had served on the drafting committee that was responsible
for writing the Fourteenth Amendment. Then the last member of the committee
still living, Conkling told the justices that the drafters had changed the
wording of the amendment, replacing “citizens” with “persons” in order to cover
corporations too. Laws referring to “persons,” he said, have “by long and
constant acceptance … been held to embrace artificial persons as well as
natural persons.” Conkling buttressed his account with a surprising piece of
evidence: a musty old journal he claimed was a previously unpublished record of
the deliberations of the drafting committee.
Years later, historians
would discover that Conkling’s journal was real but his story was a fraud. The
journal was in fact a record of the congressional committee’s deliberations,
but, upon close examination, it offered no evidence that the drafters intended
to protect corporations. It showed, in fact, that the language of the
equal-protection clause was never changed from “citizen” to “person.” So far as
anyone can tell, the rights of corporations were not raised in the public
debates over the ratification of the Fourteenth Amendment or in any of the
states’ ratifying conventions. And prior to Conkling’s appearance on behalf of
Southern Pacific, no member of the drafting committee had ever suggested that
corporations were covered.
There’s
reason to suspect that Conkling’s deception was uncovered back in his time too.
The justices held onto the case for three years without ever issuing a
decision, until Southern Pacific unexpectedly settled the case. Then, shortly
after, another case from Southern Pacific reached the Supreme Court, raising
the exact same legal question. The company had the same team of lawyers, with
the exception of Conkling. Tellingly, Southern Pacific’s lawyers omitted any
mention of Conkling’s drafting history or his journal. Had those lawyers
believed Conkling, it would have been malpractice to leave out his story.
When
the Court issued its decision on this second case, the justices expressly
declined to decide if corporations were people. The dispute could be, and was,
resolved on other grounds, prompting an angry rebuke from one justice, Stephen
J. Field, who castigated his colleagues for failing to address “the important
constitutional questions involved.” “At the present day, nearly all great
enterprises are conducted by corporations,” he wrote, and they deserved to know
if they had equal rights too.
Rumored to carry a gun
with him at all times, the colorful Field was the only sitting justice ever
arrested—and the charge was murder. He was innocent, but nonetheless guilty of
serious ethical violations in the Southern Pacific cases, at least by modern standards:
A confidant of Leland Stanford, Field had advised the company on which lawyers
to hire for this very series of cases and thus should have recused himself from
them. He refused to—and, worse, while the first case was pending, covertly
shared internal memoranda of the justices with Southern Pacific’s legal team.
The rules of judicial
ethics were not well developed in the Gilded Age, however, and the self-assured
Field, who feared the forces of socialism, did not hesitate to weigh in. Taxing
the property of railroads differently, he said, was like allowing deductions
for property “owned by white men or by old men, and not deducted if owned by
black men or young men.”
So,
with Field on the Court, still more twists were yet to come. The Supreme
Court’s opinions are officially published in volumes edited by an administrator
called the reporter of decisions. By tradition, the reporter writes up a
summary of the Court’s opinion and includes it at the beginning of the opinion.
The reporter in the 1880s was J. C. Bancroft Davis, whose wildly inaccurate
summary of the Southern Pacific case said that the Court had ruled that
“corporations are persons within … the Fourteenth Amendment.” Whether his
summary was an error or something more nefarious—Davis had once been the
president of the Newburgh and New York Railway company—will likely never be
known.
Field nonetheless saw
Davis’s erroneous summary as an opportunity. A few years later, in an opinion
in an unrelated case, Field wrote that “corporations are persons within the
meaning” of the Fourteenth Amendment. “It was so held in Santa
Clara County v. Southern Pacific Railroad,” explained Field, who
knew very well that the Court had done no such thing.
His gambit worked. In the
following years, the case would be cited over and over by courts across the
nation, including the Supreme Court, for deciding that corporations had rights
under the Fourteenth Amendment.
Indeed, the faux precedent in the Southern Pacific case would go
on to be used by a Supreme Court that in the early 20th century became famous
for striking down numerous economic regulations, including federal child-labor
laws, zoning laws, and wage-and-hour laws. Meanwhile, in cases like the
notorious Plessy
v. Ferguson (1896), those same justices refused to read the
Constitution as protecting the rights of African Americans, the real intended
beneficiaries of the Fourteenth Amendment. Between 1868, when the amendment was
ratified, and 1912, the Supreme Court would rule on 28 cases involving the
rights of African Americans and an astonishing 312 cases on the rights of
corporations.
The day back in 1882 when the Supreme Court first heard Roscoe
Conkling’s argument, the New-York Daily Tribune featured
a story on the case with a headline that would turn out to be prophetic: “Civil
Rights of Corporations.” Indeed, in a feat of deceitful legal alchemy, Southern
Pacific and its wily legal team had, with the help of an audacious Supreme
Court justice, set up the Fourteenth Amendment to be more of a bulwark for the
rights of businesses than the rights of minorities.
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