Greasing the System: Why Corporate ‘Rights’ Matter

Thomas Linzey October 9, 2015

In March of 1989, a crew works to clean up the Exxon Valdez oil spill.

On March 24, 1989, the oil tanker Exxon Valdez struck a reef and spilled over 20 mil­lion gal­lons of crude oil into Alaska’s Prince William Sound. Con­sid­ered one of the worst envi­ron­men­tal dis­as­ters in U.S. his­to­ry, the spill dec­i­mat­ed wildlife pop­u­la­tions while destroy­ing local fish­ing and tourist economies. Even today, an esti­mat­ed 23,000 gal­lons of Valdez crude oil sits in Alaska’s sand and soil, and some sci­en­tists esti­mate that effects from the spill will be felt for more than 30 years. 

Fol­low­ing the dis­as­ter, a law­suit was filed by over 38,000 com­mer­cial fish­er­men and native Alaskans seek­ing com­pen­sa­tion for their loss­es. As part of their claims, they also sought to pun­ish Exxon for its neg­li­gence in caus­ing the spill, and asked the court to award puni­tive damages.

Almost five years after the orig­i­nal spill, in 1994, a jury award­ed the plain­tiffs $5 bil­lion in puni­tive damages.

Instead of pay­ing the award, Exxon appealed, first to the 9th Cir­cuit Court of Appeals and then to the U.S. Supreme Court. In both Courts, Exxon argued that the corporation’s due process con­sti­tu­tion­al rights, under the 5th and 14th Amend­ments to the U.S. Con­sti­tu­tion, were vio­lat­ed by the exces­sive” jury award of puni­tive dam­ages. Agree­ing with Exxon that its cor­po­rate rights were vio­lat­ed by the dam­age award, both courts reduced the award from $5 bil­lion to a lit­tle over $500 million.

The jour­ney was well worth Exxon’s time — not only did it delay the ulti­mate judg­ment for over a decade, the cor­po­ra­tion also man­aged to reduce its puni­tive dam­ages by $4.5 billion.

Exxon wasn’t the first cor­po­ra­tion, of course, to evade jury awards by shield­ing itself with its cor­po­rate con­sti­tu­tion­al rights.” Begin­ning in the 1950s, cor­po­ra­tions and their lawyers began advanc­ing the legal doc­trine that cor­po­rate due process rights could be used to defeat large puni­tive dam­age awards. Their quest cul­mi­nat­ed in 2003, when the U.S. Supreme Court adopt­ed their argu­ments and, in State Farm Mut. Auto. Ins. Co. v. Camp­bell, drew a line of con­sti­tu­tion­al impro­pri­ety,” which now pro­tects large cor­po­ra­tions from cer­tain puni­tive dam­age awards.

The prob­lem with this, of course, is not just that the courts gen­er­al­ly devise ways to pro­tect cor­po­rate assets, but that they have a legal doc­trine that they can read­i­ly pull off the shelves to do so. That legal doc­trine — of cor­po­rate per­son­hood” or cor­po­rate rights” — insu­lates cor­po­ra­tions with con­sti­tu­tion­al rights, rights that are sup­posed to belong to peo­ple, not corporations.

How cor­po­ra­tions wield their cor­po­rate rights

Rec­og­niz­ing cor­po­rate rights” comes with real cost — in the Exxon Valdez case, the people’s pun­ish­ment of Exxon turned out not to be a pun­ish­ment at all, leav­ing we the peo­ple” with­out the abil­i­ty to deter the same cor­po­rate behav­ior from occur­ring again.

Unfor­tu­nate­ly, Exxon’s use of the corporation’s due process con­sti­tu­tion­al rights to wrig­gle off the dam­ages hook is just the tip of the ice­berg. By using con­sti­tu­tion­al rights orig­i­nal­ly intend­ed to pro­tect peo­ple, com­pa­nies have been able to alter the basic fab­ric of how our gov­ern­ment, the mar­ket­place, and our pol­i­tics func­tion — to warp that fab­ric around the cor­po­rate form because of cor­po­rate rights.”

Whether it’s cor­po­rate 1st Amend­ment free speech” rights that are now used to mow down fed­er­al cam­paign finance laws in Cit­i­zens Unit­ed and oth­er deci­sions, or cor­po­rate reli­gious free­dom rights that are used to nul­li­fy laws requir­ing con­tra­cep­tive health­care cov­er­age in the Hob­by Lob­by deci­sion, the era of cor­po­rate rights” is now ful­ly upon us.

Today, cor­po­ra­tions use their con­sti­tu­tion­al rights” to:

  • force gov­ern­ments to pay them for their cost to com­ply with new envi­ron­men­tal regulations;
  • stop unan­nounced inspec­tions of meat­pack­ing and oth­er fac­to­ries, by assert­ing their cor­po­rate 4th Amend­ment rights against cer­tain search and seizures;”
  • strike down laws that pro­tect fam­i­ly farms, but not cor­po­rate ones, by wield­ing cor­po­rate 14th Amend­ment equal pro­tec­tion” rights; and
  • over­turn bans on frack­ing and the dump­ing of haz­ardous waste across state lines, using their cor­po­rate com­merce” rights under the Constitution’s Com­merce Clause.

As ear­ly as 1819, cor­po­ra­tions were using their con­sti­tu­tion­al rights” to pre­vent state leg­is­la­tures from inter­fer­ing with their oper­a­tions. Thus, while it’s not a new phe­nom­e­non, this lat­est rush of cor­po­rate rights” has arrived fast and furi­ous. That’s pre­cise­ly because the ground­work laid by pri­or cor­po­rate law firms — as with the engi­neer­ing of cor­po­rate rights” chal­lenges to puni­tive dam­age awards — is now begin­ning to pay off, and pay off big.

Pro­gres­sive activism val­i­dates, rather than elim­i­nates, cor­po­rate rights”

While calls to get big mon­ey out of pol­i­tics” and to make cor­po­ra­tions account­able” are ram­pant nowa­days, very few pro­gres­sive orga­ni­za­tions talk about the need to get rid of cor­po­rate rights.” That’s for sev­er­al rea­sons, includ­ing the fact that many feed direct­ly from the char­i­ta­ble trough pro­vid­ed by cor­po­rate mon­ey. Indeed, some groups — includ­ing the Amer­i­can Civ­il Lib­er­ties Union (ACLU)— actu­al­ly sup­port cor­po­rate rights,” refus­ing to see cor­po­rate rights” as any dif­fer­ent than indi­vid­ual rights.

The pri­ma­ry rea­son though that most pro­gres­sive groups are not advo­cat­ing to elim­i­nate cor­po­rate rights” is sim­ple: they aren’t will­ing to shoul­der the long-term com­mit­ment nec­es­sary to dri­ve a mul­ti-gen­er­a­tional effort to kick cor­po­ra­tions out of our constitutions.

Tak­ing on this kind of work means col­or­ing out­side the lines of tra­di­tion­al, con­ven­tion­al activism, which means chal­leng­ing the basic struc­ture under which cur­rent pro­gres­sive activism oper­ates. Rather than work to change the rules, most pro­gres­sive groups focus instead on engi­neer­ing small vic­to­ries with­in the sys­tem that cur­rent­ly exists.

Iron­i­cal­ly, by not chal­leng­ing cor­po­rate rights” as a doc­trine, activist groups auto­mat­i­cal­ly val­i­date its exis­tence. Dar­ing to move the cray­on out­side of those bor­ders scares them silly.

And so, the pro­gres­sive com­mu­ni­ty lurch­es onward, decry­ing each new cor­po­rate rights” out­rage as, well, a new out­rage around which they can assert their impor­tance and pad their cof­fers. That will inevitably con­tin­ue until so many lib­er­al sacred cows are slaugh­tered (like cam­paign finance reform), that it shakes some groups away from this oth­er­wise mori­bund pack.

The move­ment to elim­i­nate cor­po­rate rights”

Luck­i­ly, many peo­ple out­side of the pack are not wait­ing for that ship to slow­ly change course. They under­stand that mov­ing beyond fos­sil fuels, tak­ing con­trol of their pol­i­tics, and cre­at­ing a gov­ern­ment with actu­al con­trol and over­sight of cor­po­ra­tions, requires the elim­i­na­tion of the doc­trine of cor­po­rate rights.” They also under­stand that such change will not come from the top down, but that most of it must come from the bot­tom up.

Town by town, vil­lage by vil­lage, city by city, they are tak­ing action. They’re ban­ning oil and gas extrac­tion by strip­ping oil and gas cor­po­ra­tions of their rights” in each of their com­mu­ni­ties; they’re stop­ping cor­po­ra­tions from tak­ing their water for bot­tling oper­a­tions by ele­vat­ing the community’s right to water above cor­po­rate rights” to take it; and they’re adopt­ing com­mu­ni­ty bills of rights that ban oil and gas pipelines by declar­ing that the cor­po­rate right” to build them sim­ply does not exist with­in their community.

These peo­ple — orga­niz­ing in their own com­mu­ni­ties and states for this change— under­stand that they’re putting them­selves in the line of fire. They under­stand that law­suits will be brought, dam­ages will be award­ed, and com­mu­ni­ties will be pun­ished for dar­ing to stand up to the biggest bul­lies of our age. They under­stand that change — real, struc­tur­al change that this coun­try is now hun­gry for — doesn’t come eas­i­ly or fast.

They are bor­row­ing the crit­i­cal lessons of past people’s move­ments — such as the civ­il rights move­ment — which had to break the law on a mas­sive scale for need­ed social change to occur. And they’re faced with the same ques­tions those move­ments — such as the abo­li­tion­ists and suf­frag­ists — were forced to ask: If not us, then who? And if not now, then when?”

Today, peo­ple on the front­lines of this work under­stand that com­mu­ni­ty law­mak­ing is just the first stage in build­ing the largest social move­ment of our time. It is that move­ment which will even­tu­al­ly kick cor­po­ra­tions out of our state and fed­er­al con­sti­tu­tions once and for all. 

Thomas Linzey, a con­tribut­ing writer to Rur­al Amer­i­ca In These Times, is the exec­u­tive direc­tor and co-founder of the Com­mu­ni­ty Envi­ron­men­tal Legal Defense Fund (CELDF) and serves as the organization’s chief legal counsel.
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