“The advantage of being a 'person' - The Star-Ledger - NJ.com (blog)”

The advantage of being a 'person' - The Star-Ledger - NJ.com (blog)

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Published: Thursday, March 03, 2011, 5:43 AM

By John Farmer Jr.

The decision Tuesday of a unanimous Supreme Court that corporations do not enjoy an exemption for "personal privacy" under the Freedom of Information Act is a triumph of close reasoning and common sense.

Chief Justice John Roberts' rejection of the lower court's conclusion that corporations, like other persons, "are capable of being embarrassed, harassed, or stigmatized," could not have been more to the point: "Personal is often used to mean precisely the opposite of business-related."
In a broader sense, however, the court's disposition does little to change the misguided approach of deciding the legal status of corporations based on whether, in the judges' or lawmakers' views, they are more or less like natural "persons," or to reverse the trend elevating the status of corporations above that of regular folks.

The most prominent example, of course, is last term's decision of a sharply divided Supreme Court that corporations are indistinguishable from natural persons for purposes of the First Amendment's protection of political spending. But the Citizens United case is hardly the sole example; developments in its wake have continued the trend.

The Second Circuit Court of Appeals, for instance, held in Kiobel v. Royal Dutch Petroleum that corporations cannot be held liable under the Alien Tort Claims Act for supporting human rights abuses abroad. For purposes of that act, which relies on international law, the court reasoned, corporations are not considered "persons." The court concluded that because corporations such as I.G. Farben were not held liable as "persons," despite running the Auschwitz labor camp and supplying the poison gas used to asphyxiate millions, Royal Dutch Petroleum cannot be sued for its alleged role in abetting human rights violations in Nigeria.

Tuesday's decision in FCC v. ATT left undisturbed, moreover, the court's prior recognition of corporate privacy and personhood interests in the search and seizure, and double jeopardy contexts.

Nor is the elevation of corporate rights limited to the most recent judicial decisions. In investigations and prosecutions under the Foreign Corrupt Practices Act, the federal government has announced a shift in policy away from prosecuting corporate entities, choosing instead to focus on officers and employees, while in securities and other investigations corporations frequently act, in effect, as agents of the government.

Read together, these developments raise a potentially frightening prospect: an entity with enormous concentrated wealth that can spend with impunity on domestic political issues, act with limited liability abroad and readily avoid prosecution. This is an ironic culmination indeed of a decade marked by scandal and near collapse, from the dot-com bubble to Enron to mortgage bundling to Madoff.

Isn't it time to take a step back and look at the totality of this legal fiction? How useful or just is it, really, to base legal decisions defining corporate rights and liabilities on arguable propositions about how much they are, or are not, like "persons"?

Let's begin by acknowledging that there is a sound basis for limiting the exposure of corporations in many instances. The corporate form has been an invaluable engine of economic growth, and the corporate death penalty meted out to Arthur Andersen, for instance, seemed to penalize shareholders and innocent employees disproportionately.

But if corporations are not to be prosecuted like natural persons and if corporations are to be held immune, unlike natural persons, under statutes relying on international law, shouldn't those distinctions matter in other contexts?

If corporations are to enjoy a kind of legal insulation from prosecution and liability not available to other legal persons, doesn't it make sense that the price of such advantages should be some regulation of corporate political speech, if only to limit their ability to use the political process to expand their unique privileges?

Legal fictions are as old as the common law tradition itself. But the court's decision last year in Citizens United employed one legal fiction — that corporations are indistinguishable from other legal people — to expand vastly the scope of another legal fiction: that we speak when we spend.

If our courts continue to define corporate rights based on ultimately arbitrary judgments about whether they are, nor are not, like people, they will surely run afoul of Charles Dickens' Mr. Bumble, who was speaking about another legal fiction in "Oliver Twist," but had it right nonetheless: "If the law supposes that, then the law is a ass."

John Farmer Jr. is dean of Rutgers School of Law-Newark.

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Minggu, 06 Maret 2011