Text, History, and Corporations

On Wednesday, July 23, the Senate Judiciary Committee will conduct a hearing entitled “Courting Big Business: The Supreme Court’s Recent Decisions on Corporate Misconduct and Laws Regulating Corporations.” As fleshed out in more detail in this CAC letter (pdf) to the Committee, there is a striking contrast between the words of the Constitution and the recent Court decisions favoring corporate interests over individual rights.

Someone reading the Supreme Court’s recent jurisprudence in cases involving big business could be excused for briefly forgetting that the word ”corporation” appears nowhere in our Constitution. That person might wonder what became of Dartmouth College v. Woodward, the case in which John Marshall confidently proclaimed that “[a] corporation is an artificial being, invisible, intangible, and existing only in contemplation of law.” He might ask why the Supreme Court’s opinions in Exxon v. Baker and Preston v. Ferrer gave short shrift to the jury, an institution explicitly protected in the Fifth, Sixth, and Seventh amendments and implicitly essential to the Framers’ vision of the Fourth.

The Supreme Court’s recent business decisions have been both pro-corporate and anti-originalist. In Exxon, the Court announced that a jury was wrong to punish Exxon as harshly as it did for the worst oil spill in American history. The 5-3 majority based this decision not on the text and history of the Constitution, but instead on anecdotal evidence about runaway juries, “eccentric” punitive damage awards, and a 1:1 ratio between compensatory damages and punitive damages that former Solicitor General Paul Clement called “the most pro-defendant, anti-plaintiff” test adopted by any court in the country. The Exxon jury fulfilled its constitutional purpose, holding Exxon responsible for its blatant disregard of environmental and individual welfare—until, of course, the Supreme Court demonstrated a preference for its own notions of “fairness” over the jury’s textually specified role.

The majority opinion in Preston v. Ferrer similarly pays insufficient respect to the federalist system established in the Constitution as a whole and specifically enshrined (vis-à-vis juries) in the Seventh Amendment. Preston is the most recent in a long line of Court decisions holding that contracts containing arbitration clauses trump a State’s interest in and an individual’s right to a trial by jury—even in cases where the contract’s legal validity is at issue. Put bluntly, the Court has taken a right specifically reserved by the Constitution to states and individuals and given substantial control of it to corporations, which generally favor arbitrators over juries. There is no textual or historical basis for such a decision.

Media coverage on the Supreme Court tends to focus on hot-button issues, such as guns, the death penalty and reproductive choice. The Court’s rulings on corporate and business law topics often get ignored, even though these rulings can have a big impact on the pocketbooks of ordinary Americans. Hopefully, the Senate Judiciary Committee’s hearing on the topic will help focus the media, politicians and the public on this important aspect of the Court’s docket.

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