Unequal Protection: Protecting Corporate Liars
How Corporations Became 'People' - and How You Can Fight Back"
Back in 2002, when I wrote this book, most Americans thought the Boston Tea Party was a revolt against “excess taxes” and that “corporate personhood” was something the Supreme Court conferred on companies back in 1886. This book blew up both myths, pointing out that the Boston Tea Party was a revolt against the British government giving the East India Company the largest corporate tax cut in history (so they could unfairly compete with small colonial tea merchants) — basically a revolt against the Wal-Mart-ization of the colonies — and that the Supreme Court did not rule that corporations are persons and thus entitled to rights under the Bill of Rights in 1886 (it was a corrupt scam by a bribed SCOTUS justice and Court Clerk). In the 20 years since Unequal Protection first came out, this “new” knowledge is now widespread. With permission from the publisher, Berrett-Koehler, I’ll be sharing most of the book (the most recent updated edition) with you, one chapter at a time (and not always in order), over the next dozen or so Sundays. If you find it useful, forward or use parts of it in normal “fair use” fashion with my enthusiastic assent.
The first direct shot across the bow of the doctrine of a corporation’s “right to lie” by using its “personhood” to claim First Amendment “free speech” rights came in April 1998, when Mark Kasky, a California political activist, noticed that Nike was engaged in what he considered to be a deceptive greenwashing campaign. Kasky had long been a runner and wore Nike shoes, so he was particularly distressed when he saw Nike’s communications director, Lee Weinstein, publish a letter in the San Francisco Examiner in December 1997 that said, in part, “Consider that Nike established the sporting goods industry’s first code of conduct to ensure our workers know and can exercise their rights.”2
This letter was just a small part, it turned out, of a national campaign by Nike to convince the American public that it was making sure that its contractors and subcontractors were treating their employees in Asia well. The year before, Steve Miller, Nike’s sports marketing director, pledged in a letter to athletic program directors and presidents of U.S. universities that Nike’s manufac turers complied with “government regulations regarding minimum wage and overtime as well as occupational health and safety, environmental regulations, workers’ insurance, and equal opportunity provisions.”3
What Nike wasn’t mentioning, but which was leaked to the press in 1997, was a 1996 audit of one of the company’s overseas factories (this one in Vietnam) by Ernst & Young. The audit, which Nike had commissioned but then tried to keep secret, documented how workers in the Vietnamese factory were exposed to cancer-causing solvents like acetone and toluene in ways that would have been flatly illegal in the United States and were not protected from deafening levels of noise; it also raised a series of questions on other workplace issues. As Mother Jones documented in a February 2001 article (“Greenwashing on Trial” by Josh Richman), “another Nike-funded study found evidence of physical and verbal abuse and sexual harassment at nine of its contract factories in Indonesia.”4
Kasky was outraged that Nike held itself out as the model corporate citizen. He told filmmaker Lori Cheatle (for her movie This Land Is Your Land, which also features Naomi Klein, Thomas Frank, Jim Hightower, and me, along with seven others): “The Nike code of conduct stated that they maintained the highest standards of health, worker safety, and compensation, and they used that to market their products. So I felt very upset when I realized that a lot of the representations they were making might not be true.”
He and a lot of people in California were buying Nike products under false assumptions or misrepresentations, so he called an attorney and decided to take the company to court.
Kasky went to attorney Alan Caplan (of the “Joe Camel” cigarette lawsuit fame), and together they invoked a rather unique California law that allowed individuals to behave as if they were the state’s attorney general and sue companies for fraudulent or other illegal practices, producing what would ultimately become the Supreme Court case Kasky v. Nike.
The Daily Take: Why Fox News has the Right to Lie to Us
In 1999 the case was dismissed by San Francisco Superior Court Judge David Garcia, who suggested that Nike’s right to lie—to “free speech”—was protected by the First Amendment of the U.S. Constitution. Kasky and Caplan appealed to the U.S. Court of Appeals, where, in March 2000, that court ruled against Kasky again, with Justice Douglas Swager arguing that Nike was only promoting its products, as any company would, could, and should be able to do in a world of corporate “persons” endowed with free-speech rights.
His comment specifically noted that Nike’s use of inaccurate letters to the editors in newspapers across America, letters telling untruths to university presidents, and other false statements to the press were “within the core area of expression protected by the First Amendment.”
Undeterred, Kasky carried his suit to the California Supreme Court, which ruled in May 2002 (by one vote, 4 to 3) that Nike had violated the California laws against unfair competition and false advertising. The Supreme Court justices didn’t, however, challenge the notion that First Amendment protections didn’t extend to commercial “speech” by corporations; instead they suggested that such rights should be limited to the commercial interests of the corporation and that the action of Nike in this case “bears only a tangential relation to commercial transactions.”
At that point Nike decided that, rather than pay the fine and change its business practices, it would take the case all the way to the U.S. Supreme Court, where a very curious thing happened.
The Supreme Court typically gets more than ten thousand requests every year to hear cases. It has a small army of clerks and lawyers (usually including clerks for the justices—Samuel Alito chooses not to have his clerks participate—known as the “cert pool”) who filter through them to find the ones that have reasonable merit and which the justices may be interested in hearing. The Court as a whole then considers the thousand or so that survive the culling process, further reducing the caseload for the year to a number typically around one hundred total cases (it takes the votes of four justices to grant certiorari, allowing the case to be argued before the Court).
After the Court has gone through all this work to whittle down its case-load, each case comes before the justices in two ways. First, both parties to the case file their own legal briefs or arguments in writing. Second, interested parties—“friends” of either side (by virtue of association or concern for the issue behind the case)—file Friend of the Court, or amicus curiae, briefs, adding their voices to the arguments. Then the justices hear oral arguments, which these days are limited to thirty minutes for each side, after which each justice and his or her staff retire to their offices to consider the arguments, more carefully look over the amicus briefs, and correspond with other justices about each case.
Eventually—typically over a period of a few months—a consensus emerges or a vote is taken, and on each case the Court decides who wins or loses. The justices then write agreements or dissents with or from the majority opinion, and when all is ready for the public they announce their decision.
Except in the Kasky case.
The Court did agree to hear the case, in the 2003 session. The justices heard the oral arguments on June 26. They accepted the amicus briefs—including filings from companies that included ABC, Inc.; the American Society of Newspaper Editors; the Associated Press; Forbes, Inc.; Fox Entertainment Group; Gannett Company; the Hearst Corporation; the McClatchy Company; the National Association of Broadcasters; the National Broadcasting Company (NBC); National Public Radio, Inc.; the New York Times Company; Newsweek, Inc.; PR Newswire; the Seattle Times Company; Time, Inc.; Tribune Company; U.S. News & World Report; and the Washington Post Company—all agreeing with Nike.
ExxonMobil, Bank of America, and Microsoft filed their own three-company brief on behalf of Nike, and similar separate filings came from the National Association of Manufacturers, Pfizer, and the U.S. Chamber of Commerce, among others.
Even the American Civil Liberties Union (ACLU) filed a brief defending Nike’s right to “free speech” as a “person” in America. The legal department of the AFL-CIO (American Federation of Labor and Congress of Industrial Organizations) filed a brief defending Nike’s “right to lie” (it is true that as persons we have a “right to lie” except in particular cases such as when under oath). Even the very liberal New York Times columnist Bob Herbert wrote an impassioned op-ed supporting Nike’s right to deceive the public. All three mistakenly believed that corporations had had First Amendment rights since 1886, and all three were strong advocates of the First Amendment. And the AFL-CIO, of course, was a corporation itself, albeit a unique nonprofit form of incorporation.
There was also a loud public debate on the issue. Citizen activist groups picketed the Supreme Court, decrying corporate personhood and the entire idea that constitutional protections like free speech should be granted to corporations instead of being the exclusive province of humans, while the New York Times, the Wall Street Journal, and the Washington Post (among others) ran shrill editorials warning of dire consequences for the future of capitalism and democracy if corporations weren’t finally and fully granted the constitutional right of free speech.
The Court then heard the oral arguments, in which Kasky’s lawyers, Alan Caplan and Philip Neumark, revisited the series of very specific lies that they asserted Nike had told the American public in their original lawsuit. They said that Nike:
In order to maintain and/or increase its sales, made misrepresentations by the use of false statements and/or material omissions of fact, including but not limited to the following:
(a) claims that workers who make NIKE products are protected from and not subjected to corporal punishment and/or sexual abuse;
(b) claims that NIKE products are made in accordance with applicable governmental laws and regulations governing wages and hours;
(c) claims that NIKE products are made in accordance with applicable laws and regulations governing health and safety conditions;
(d) claims that NIKE pays average line-workers double-the-minimum wage in Southeast Asia;
(e) claims that workers who produce NIKE products receive free meals and health care;
(f) claims that the GoodWorks International (Andrew Young) report proves that NIKE is doing a good job and “operating morally”; and
(g) claims that NIKE guarantees a “living wage” for all workers who make NIKE products.5
Nike, for its part, argued that when it hired former UN ambassador and Atlanta mayor Andrew Young to check them out, he found that everything was hunky dory: “Although some news organizations concluded that some allegations against Nike had merit, former United Nations Ambassador Andrew Young concluded in an independent review commissioned by Nike that the charges were largely false.”6
Further, Nike’s lawyers said that when the California Supreme Court concluded that it was okay for Marc Kasky to use the consumer protection laws to hold Nike accountable for what it said to the public, it was way too broad a use of the laws against fraud or deception in commerce. Nike’s lawyers wrote: “The California court’s conclusion that government may regulate all statements of fact by commercial entities that could influence consumers sweeps far too broadly…”
Nike’s lawyers also didn’t like the law in California that let an individual act as if he were the attorney general: “The private attorney general provisions of the UCL and FAL thus violate the First Amendment because they omit not only any requirement that the plaintiff have suffered harm, but also any other meaningful constraint on the ability of private plaintiffs to bring lawsuits…” which could impose a “crushing burden” on a multibillion-dollar corporation like Nike.
And, finally, calling implicitly on the doctrine that a corporation is a person protected by the Bill of Rights, Nike argued: “Even if petitioner’s [Nike’s] statements could be characterized as ‘commercial speech,’ the legal regime approved by the California Supreme Court violates the First Amendment.” In other words, “We’re a company, which is the same as a person, and so we have the First Amendment right to say whatever we want, just like anybody else. To say that we have to only say things that are accurate violates our First Amendment right of free speech.”
All of this was laid before the Court. There were multiple dimensions to the case, but at its heart was the issue of whether a corporate “person” had the same “right to lie,” guaranteed by the First Amendment to the U.S. Constitu tion, as you and me. If I can tell my wife that she looks great in a dress that I really think is ugly (but know she loves), Nike had the right to tell Americans that it was treating its workers well (even though it wasn’t and knew it).
But something caught in the Court’s throat. Chief Justice William Rehnquist, with six of his colleagues, decided that the Court had made a big mistake when it granted a writ of certiorari, the declaration that the case was legitimate and appropriate for the Court to hear.
Remember that it was Rehnquist who, in the earlier First National Bank of Boston v. Bellotti case (mentioned in chapter 1), had said that he disagreed with what he believed was the decision of the Supreme Court in 1886, that corporations were persons. And, interestingly, the attorneys who crafted the amicus brief on behalf of Marc Kasky took special pains to point out—with the hope that Rhenquist would read it and have a “EUREKA!” moment—that the Court had actually never created corporate personhood in 1886.
Quoting from the first edition of this very book, Kasky’s attorneys wrote directly to Rehnquist in their brief:
Indeed, the initial grant of “personhood” under the Fourteenth Amendment to corporations was, to a certain extent, a judicial mistake. Corporate person-hood is generally attributed to the Court’s decision in Santa Clara County v. Southern Pacific Railroad Co., 118 U.S. 394 (1886), although the Court in that case specifically declined to address the issue. In Santa Clara County, Santa Clara County sued the Southern Pacific Railroad Company for failure to pay taxes, and the railroad presented the Court with six defenses, including the argument that corporations were persons under the Equal Protection Clause of the Fourteenth Amendment. Because one of the other five defenses was successful, the Court had no occasion to decide the question of corporate personhood and specifically declined to do so:
If these [other] positions are tenable, there will be no occasion to consider the grave questions of constitutional law upon which the case was determined below; for, in that event, the judgment can be affirmed upon the ground that the assessment cannot properly be the basis of a judgment against the defendant.
As the judgment can be sustained upon this [other] ground, it is not necessary to consider any other questions raised by the pleadings and the facts found by the court.
Id. at 411, 416. Indeed, in a companion case, Justice Field in a concurring opinion lamented that the “tax cases from California” did not “decide the important constitutional questions involved.” County of San Bernardino v. Southern Pac. R. Co., 118 U.S. 417, 422 (1886) (Field, J., concurring).
Nevertheless, it appears that the court reporter, J.C. Bancroft Davis, included a headnote stating, “The defendant Corporations are persons within the intent of the clause in section 1 of the Fourteenth Amendment to the Constitution of the United States, which forbids a State to deny to any person within its jurisdiction the equal protection of the laws.” See Thom Hartmann, Unequal Protection: The Rise of Corporate Dominance and the Theft of Human Rights 107 (2002) (quoting J.C. Bancroft Davis, 118 United States Reports: Cases Adjudged in the Supreme Court at October Term 1885 and October Term 1886 394 (Banks & Brothers Publishers).7
In other places in the brief, its authors took special pains to point out how Santa Clara had been misinterpreted over the years. (One sentence, for example, begins, “Notwithstanding the mistaken ‘personification’ of corporations in Santa Clara, the Court’s subsequent rulings reveal that this Court has not consistently applied the implications…”)
Every step along the way helped telegraph to Rehnquist that his dislike of what he thought had been decided in 1886 in Santa Clara was a good gut instinct because he was right. Corporations aren’t persons, and the Court had not said they were in 1886!
Nobody knows what happened when this bombshell hit Rehnquist’s desk, as the Court is notoriously secretive. But something big happened because Rehnquist leapt into action—and that action was to decide not to decide the Kasky case. Inexplicably, astoundingly, and virtually without precedent, Rehnquist and most of his colleagues issued a very, very terse statement.
The single sentence the Court issued said only: “The writ of certiorari is dismissed as improvidently granted.”
In other words, “When we decided to listen to these arguments and look over this case, granting it legal certification before us, we screwed up. Therefore we’re tossing out the certification and going to pretend we never even heard this case or read its briefs.”
While this dismissal represented the thinking of the majority of the Court, Justices Sandra Day O’Connor and Stephen Breyer were incensed. Breyer wrote: “In my view…the questions presented directly concern the freedom of Americans to speak about public matters in public debate, no jurisdictional rule prevents us from deciding those questions now, and delay itself may inhibit the exercise of constitutionally protected rights of free speech without making the issue significantly easier to decide later on.”
But regardless of Breyer’s or O’Connor’s concern that the Court was kicking the can down the road, the case came to a halt, and Kasky and Nike settled out of court almost immediately when the California courts granted Kasky the legal right to access Nike’s internal files (known as a grant of discovery). The amount of money Nike paid Kasky’s lawyers to stop at that point and not pursue discovery, rather than legally riffle through Nike’s internal papers, was never disclosed, and Kasky, for his part, agreed with the decision to stop discovery when Nike made a seven-figure gift to an organization that worked to help sweatshop workers around the world.
The world was safe for corporate liars (although California’s citizens were still free to go after them in a limited fashion). Corporate personhood hadn’t been challenged. And the weird coalition of liberals (Bob Herbert and the ACLU) and conservatives (NBC, ABC, the Chamber of Commerce, and others) who worried that ending a corporation’s right to call on the First Amendment would be a disaster for America all breathed a sigh of relief.