Chapter 5: The Seventy-Year Legal War

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Chapter 5: The Seventy-Year Legal War

The story of the battles both for and against corporate constitutional rights didn’t begin in 1886. For seventy years before the Santa Clara non-decision, corporations fought a relentless legal war to gain access to the same constitutional rights the Founders and Framers intended exclusively for humans. They lost battle after battle until, with Davis and Field, the railroad oligarchs finally found a way to win by fraud.

Once we understand this, it’s easy to see that corporate constitutional rights were never an accident or a misunderstanding: the doctrine was, instead, the result of a sustained, deliberate campaign by morbidly rich interests to acquire constitutional weapons they could use against the “mob rule” of democratic governance. The railroad and other American oligarchs tried honest arguments for seven decades, but, when that failed, they turned to fraud.

This history also shows exactly what the oligarchs were fighting against: virtually every reform that would later build—and today sustains—the American Dream and the social democracy that made it possible.

The Early Republic and Corporate Charters

Queen Elizabeth I created the first modern limited liability corporation—the British East India Company—in 1601, but by the time America was founded, corporations were still rare and tightly controlled. The Founders had fought a revolution against the British East India Company’s economic and legal tyranny, and they weren’t about to allow that kind of corporate power in their new republic.

In the early 1800s, corporations were only created by special acts of state legislatures. Each charter was a custom document specifying exactly what the corporation could do, how long it could exist, and what restrictions on its behavior applied.

A corporation chartered to build a toll bridge, for example, couldn’t just suddenly decide to buy or open a bank. A textile mill corporation couldn’t invest in railroads. Charters specified purpose, duration, capitalization, and governance. They could be revoked if the corporation “violated the public interest,” an event called “the corporate death penalty,” and frequently were dissolved this way.

That wasn’t capitalism being stifled: it was democracy controlling its own creations for the benefit of the nation and its citizens.

As Thomas Jefferson warned in 1816: “I hope we shall crush in its birth the aristocracy of our moneyed corporations, which dare already to challenge our government to a trial of strength and bid defiance to the laws of our country.”

The Founders understood what we seem to have forgotten: corporations are not natural beings like you and me. Instead, they’re legal fictions created by government to serve public purposes. By the standards of the Declaration of Independence (“Life, liberty, and the pursuit of happiness”) and the Constitution, they have no inherent rights, only privileges granted them by We the People via the state governments that chartered them.

The First Corporate Rights Claims

As corporations grew larger and more powerful in the 1830s and 1840s, they began testing the boundaries of state regulation. Could they claim constitutional protections? Could they escape state oversight?

The answer, initially, was “no” to both questions.

In The Trustees of Dartmouth College v. Woodward (1819), the Supreme Court ruled that a corporate charter was a contract that states couldn’t just arbitrarily revoke; there had to be cause. This gave corporations “artificial personhood” capabilities and some stability, but it didn’t make them persons with constitutional rights.

Chief Justice John Marshall, writing for the Court in that case, emphasized that corporations are merely “artificial beings, invisible, intangible, and existing only in contemplation of law.” They possessed only those properties that their charter granted them by the state in which they were incorporated.

That early decision protected contract rights, not corporate constitutional rights.

Through the 1830s and 1840s, corporations (mostly railroads, but also banks and trading companies) brought case after case claiming they deserved the same constitutional protections as human beings. They lost consistently. Courts understood the difference between natural persons and artificial legal entities.

The Civil War Changes Everything

The Civil War transformed America’s economy. Prior to 1860, most corporations were small, local, and tightly regulated. After 1865, massive national corporations emerged in part because of federal subsidies, especially the railroads to which Lincoln had given tens of millions of acres of federal lands.

These new national railroads weren’t like earlier corporations. They operated across state lines, employed thousands, and controlled vast wealth. And they had every incentive to escape state regulation as a way of jacking up their profits.

The Fourteenth Amendment, ratified in 1868, gave them the opening they’d been searching for.

The Amendment’s framers never mentioned corporations. The congressional debates around it focused exclusively on protecting the recently freed slaves. Every speech, every argument, every explanation we can find on the record concerned racial equality and civil rights for Black Americans.

But the amendment used the word “person” rather than “natural person” or “citizen.” And that got the corporate lawyers’ attention.

The Fourteenth Amendment Campaign

Starting in 1868, corporations launched a systematic campaign to claim Fourteenth Amendment rights as railroad after railroad brought cases arguing that state regulation violated their rights as “persons” under the amendment.

In The Railroad Tax Cases (1872), which Stephen Field had brought to the Court from the 9th Circuit, the railroad corporations argued that “discriminatory taxation” violated their Fourteenth Amendment rights. They (and Field) lost.

In Munn v. Illinois (1877), grain warehouse companies (with Field’s agreement) argued that state regulation of their rates violated their Fourteenth Amendment rights to the sanctity of property. They also lost.

Chief Justice Morrison Waite, writing for the majority in Munn, firmly rejected corporate constitutional rights: “When private property is devoted to a public use, it is subject to public regulation.”

The Court consistently ruled that the Fourteenth Amendment was meant to protect the recently freed enslaved people, not big corporations. Regulation of corporate activity for the public good was entirely constitutional.

But the corporations kept trying. They had, after all, virtually unlimited legal budgets so they could afford to lose ninety-nine cases if they won the hundredth. And they knew that the composition of the Court changed over time and may one day become more amenable to their arguments.

What the Oligarchs Were Fighting Against

To understand why corporations fought so hard for constitutional rights, you first have to realize what they were frantically fighting against: the First Progressive Era and everything it promised to working-class people.

By the 1870s and 1880s, democratic grass-roots movements were challenging corporate power across America. States were responding with laws that would have seemed impossibly radical just a generation earlier, limiting both corporate activity and money in politics.

The income tax was being debated repeatedly during that era, and would eventually become the Sixteenth Amendment in 1913, giving the federal government the ability to tax corporations as well as individuals and fund public infrastructure and benefits. (Prior to that, most federal funding came from tariffs.) Corporate lawyers fought the income tax relentlessly, arguing that it violated corporate property rights.

Direct election of senators was also being demanded back then; they used to be appointed by the states. State legislatures, however, had been notoriously corrupt, with corporate money buying Senate seats, leading to multiple bribery scandals (the most notorious was in Montana in 1899). The Seventeenth Amendment in 1913 would give that power to voters instead. Corporate interests fought it right to the bitter end, because they’d largely perfected the dark art of bribing state legislators.

Labor protections were also spreading nationwide. States were limiting working hours, requiring safety standards, and prohibiting child labor. Corporate lawyers fought every one of these laws, unsuccessfully claiming they constituted unconstitutional interference with property rights and freedom of contract.

In response to national outrage about the growing concentrations of wealth at the top of the corporate world, antitrust laws were being proposed. The Sherman Antitrust Act would pass in 1890, giving the federal government the power to break up monopolies. Corporate lawyers spent the next century trying to gut it before five corrupt Republicans on the Supreme Court helped them out in the twentieth century.

In short, corporations were battling virtually everything that would later build the American Dream: every protection for workers, every tax on wealth, and every regulation of corporate behavior. They opposed, in other words, pretty much any and all democratic reforms that threatened their oligarchic power.

But they needed constitutional weapons to fight back if they wanted to be able to rise above state laws and regulations; and corporate constitutional rights, turning on the Fourteenth Amendment, would give them exactly that.

Roscoe Conkling’s Conspiracy Theory

In 1882, a curious event occurred that would later fuel claims about the Fourteenth Amendment’s “true” purpose that last to this day.

Roscoe Conkling, a former US senator who’d served on the joint committee that drafted the Fourteenth Amendment, appeared as a witness on behalf of the railroads before the Supreme Court in the 1885 San Mateo County v. Southern Pacific Railroad Company case, another Stephen Field decision in the 9th Circuit that came before the Supreme Court with an “equal protection” argument. Conkling was now a high-priced corporate lawyer, and the railroad paid him handsomely to testify.

Conkling presented what he claimed was a “secret journal” from the joint committee’s congressional deliberations. This supposed journal, Conkling argued, proved that the committee had intentionally used the word “person” instead of “citizen” or “natural person” to specifically include corporations.

It was a lie.

No such secret journal existed. Conkling had manipulated a handful of notes from the deliberations to make it appear the committee had discussed corporate rights. But later historians found the committee’s actual debates, thoroughly documented in the public record, and those discussions focused exclusively on protecting freed slaves.

Conkling’s “conspiracy theory” brazenly further claimed that the Fourteenth Amendment’s framers had secretly intended to protect corporations but pretended it was about racial equality just to get it passed.

This was also nonsense. The framers of the amendment discussed their intentions publicly and repeatedly; there was no secret corporate protection agenda.

But Conkling’s argument gave that era’s corporate lawyers the talking point they needed. Even though the Supreme Court didn’t decide San Mateo on constitutional grounds, Conkling’s conspiracy theory persisted. Some corporate attorneys still argue it today.

The Pattern of Defeat

Through the 1870s and into the early 1880s, corporations fought and lost case after case claiming Fourteenth Amendment rights:

Munn v. Illinois (1877): Lost. States can regulate businesses affected with a public interest.

Railroad Commission Cases (1886, decided just before Santa Clara): Lost. States can regulate railroad rates.

Stone v. Farmers’ Loan & Trust Co. (1886): Lost on the constitutional question, though they won on other grounds.

The pattern was clear. The Supreme Court justices (other than Field) weren’t buying the corporate lawyers’ constitutional rights arguments. The Fourteenth Amendment meant what its framers said it meant: protection for freed slaves, not protection for soulless corporations that were mere creations of state law.

Corporate lawyers determined they needed a different strategy, as they couldn’t win by honest argument. So, they stopped trying to win that way and went straight to the Court’s reporter, J.C. Bancroft Davis.

The Santa Clara End Run

The genius of the Santa Clara headnote strategy, if you can call fraud genius, was its indirection.

The railroad didn’t need to win on the constitutional question: they just needed to get inserted into the official record that the chief justice claimed the Court had already decided the question.

J.C. Bancroft Davis’s headnote accomplished this perfectly. Future courts would cite Santa Clara’s headnote without ever reading the actual decision. They’d rely on Davis’s summary, which fraudulently claimed the Court had ruled on corporate constitutional rights.

The seventy-year legal war for corporate rights ended not with a victory in court but a sleight of hand in the court reporter’s office.

After 1886, the record shows, corporations stopped losing Fourteenth Amendment cases because courts now cited the Santa Clara headnote as establishing that corporations were persons. The precedent was manufactured by Davis, of course, but it became precedent nonetheless the first time another decision cited it.

That first happened in 1889, in Minneapolis & St. Louis Railway Company v. Beckwith, when the Supreme Court itself cited the Santa Clara headnote in ruling for corporate constitutional rights without questioning whether the earlier case had actually decided that issue.

The lie had become the law. The seventy-year war was over. The corporations had won.

Not through honest argument. Not through democratic process. Through fraud.

The Progressive Era Fights Back

Corporate constitutional rights didn’t stop the First Progressive Era: it just made the fight a hell of a lot harder.

Between 1890 and 1920, reformers won remarkable victories despite these repeated corporate constitutional claims. The Sherman Antitrust Act passed in 1890. The income tax became constitutional through the Sixteenth Amendment in 1913. Direct election of senators came through the Seventeenth Amendment in 1913. Women won the right to vote through the Nineteenth Amendment in 1920.

Over shrieks of outrage from corporate lawyers, states passed worker protections, food safety laws, and regulations on corporate behavior, particularly with regard to their participation in politics.

Muckraking journalists gleefully exposed corporate abuses, outraging working people. Teddy Roosevelt busted trusts (monopolies) to the delight of small businesses. Woodrow Wilson created the Federal Reserve and the Federal Trade Commission to take control of the economy away from private banks and corporations and give it both stability and credibility.

But at every step, corporate lawyers used their new constitutional rights defined in the Santa Clara headnote to fight back. They challenged the income tax as a taking of property. They challenged hundreds of labor laws as violations of freedom of contract. They challenged antitrust enforcement as interference with corporate due process rights.

Sometimes they even won. In Lochner v. New York (1905), the Supreme Court struck down a state law limiting bakers to working sixty hours per week, ruling that the law violated the “liberty of contract” protected by the Fourteenth Amendment.

The Lochner Era, as it came to be called, saw both state and federal courts successfully and repeatedly striking down progressive legislation for decades—minimum wage laws, maximum hour laws, child labor restrictions, worker safety requirements. All were challenged as violations of the corporate Fourteenth Amendment constitutional rights allegedly granted by Santa Clara, and the Court went along with the corporate lawyers in nearly every case.

The fraudulent headnote of 1886 had given corporations a weapon they would use against every democratic reform for generations, including right up to this very day.

The Seeds of the Second Progressive Era

The First Progressive Era, however, laid the groundwork for something even bigger. Despite corporate resistance, it established a set of core principles that would again flower in the 1930s with President Franklin D. Roosevelt’s New Deal.

The income tax created a mechanism to fund public goods and redistribute wealth. The direct election of senators made the federal government more accountable to voters. Antitrust laws established the principle that corporate power could be constrained by government. And labor protections, though often struck down by courts (including to this day), established the principle that workers had at least some rights.

When the Republican Great Depression hit in 1929 and FDR was elected to solve the problem in 1932, these foundations were ready. Franklin Roosevelt built on them to create the New Deal, launching a Second Progressive Era that would finally make the American Dream real for a majority of Americans, at least until Reagan and the GOP took a meat axe to it.

But corporate constitutional rights remained, as the fraudulent pre-cedent of Santa Clara was never overturned or, frankly, even carefully examined. It sat in constitutional law like a dormant virus, waiting for the right conditions to reactivate.

Those conditions came in 1981, when Ronald Reagan took office and began the systematic dismantling of almost everything the Progressive Eras had built.

To clearly see how we got from 1886 to today, we first must know what the Founders actually believed about corporations. Their vision, it turns out, was the polar opposite of corporate constitutional rights. And recovering that vision is essential to undoing Davis’s and Field’s crime.