Citizens United v. Federal Election Commission

[INRM]

Parky 76,

No, I meant exactly what I said that some companies are controlled by foreign interests. CITGO for example...

 

[Brown]

I completely disagree. The shareholders would not be an indispensible party to that suit, any more than the shareholders are an indispensible party to any other lawsuit that their corporation files. I don't see where you're getting that idea from.

I got this idea from my own hypothetical. I posited a situation in which the shareholders had rights to pass upon the speech. Their rights could be affected if challenged in court. If the corporation wins, they lose. In such a case, they would be have to be parties for their rights to be adjudicated.

As a practical matter, it is unlikely that the shareholders would be drawn into such a suit involuntarily. There are law firms out there that do almost nothing but file lawsuits ostensibly on shareholders' behalfs. As a practical matter, one of these firms would step up and the interests the shareholders would be part of such a suit.

One potentially interesting issue in such a case would be the issue of "fiduciary duty," as hinted by Justice Stevens. Might it be a violation of the fiduciary duty to file such a suit in the first place?

 

[Brown]

The thing that's really dangerous about this is that some companies are controlled by foreign interests...

Dunstan and I have been discussing a hypothetical which could arise under purely domestic ownership. The issue of foreign ownership is, I suspect, more likely to be legislated or litigated first.

 

[Dunstan]

I got this idea from my own hypothetical. I posited a situation in which the shareholders had rights to pass upon the speech. Their rights could be affected if challenged in court. If the corporation wins, they lose. In such a case, they would be have to be parties for their rights to be adjudicated.

Ok, I see. You are supposing a scenario where state law prohibited corporate political speech without shareholder approval, a corporation ignored the law, and one or more shareholders sued to enforce their rights? I can see that. I was assuming we were talking about a corporation suing to challenge the constitutionality of such a statute, in which case I don't see why the shareholders need to be parties. There's a big gap between "person whose rights may be affected by a decision" and "indispensible party." My rights are affected by a lot of Supreme Court rulings, but fortunately I don't have to be brought in as a party to each one -- that's what the government is for.

As a practical matter, it is unlikely that the shareholders would be drawn into such a suit involuntarily. There are law firms out there that do almost nothing but file lawsuits ostensibly on shareholders' behalfs. As a practical matter, one of these firms would step up and the interests the shareholders would be part of such a suit.

That would pose some tricky issues of whether such a claim was a derivative lawsuit or a direct shareholder lawsuit, but I don't suppose we need to delve into that here.

One potentially interesting issue in such a case would be the issue of "fiduciary duty," as hinted by Justice Stevens. Might it be a violation of the fiduciary duty to file such a suit in the first place?

Now I'm confused again. To file what suit? Are we back to the corporation filing a lawsuit to challenge the statute?

It might be, under certain circumstances. But that's a lot like the speech itself. If a for-profit business with $1 million in annual revenues that isn't tightly regulated by the government spends a couple of million to litigate such a case, that would seem like a waste of corporate assets. But if a multi-billion dollar corporation that already rationally spends hundreds of millions on advertising and lobbying wants to spend a few million to assert its right to political speech, it's hard to see how you'd ever get past the "business judgment rule."

 

[Brown]

Ok, I see. You are supposing a scenario where state law prohibited corporate political speech without shareholder approval, a corporation ignored the law, and one or more shareholders sued to enforce their rights? I can see that. I was assuming we were talking about a corporation suing to challenge the constitutionality of such a statute, in which case I don't see why the shareholders need to be parties. There's a big gap between "person whose rights may be affected by a decision" and "indispensible party." My rights are affected by a lot of Supreme Court rulings, but fortunately I don't have to be brought in as a party to each one -- that's what the government is for.

I can't tell if these remarks are offered in seriousness. I take it you don't have a lot of experience in litigation involving issues like this. The issues are direct affect to rights, not affect by precedent or even by issue or claim preclusion.

As I said, as a practical matter, the issue of indispensible parties (see, e.g., Fed. R. Civ. P. 19(1)) is unlikely to come up, as this issue is typically raised when parties who should be present in a suit are not, and the non-parties have to be dragged into the suit involuntarily. In a case in which the issue is corporate control and shareholder rights, the shareholders would not have to be dragged into the suit; they would go to court voluntarily to have their interests represented.

We could, if we wished, start going on about derivative lawsuits, acting ultra vires, "piercing the corporate veil," class actions, the intricacies of fiduciary duties, methods of proof (as distinct from rules of evidence).... but that would not be suitable for this forum. And besides, it wouldn't do very much except confuse the folks who might be trying to understand the issues.

Now I'm confused again. To file what suit? Are we back to the corporation filing a lawsuit to challenge the statute?

"Are we back?" Did we ever leave? You seem to be confused for no reason.

 

[The Central Scrutinizer]

The concern that some folks are expressing is not whether corporate speech is protected or not, but who "speaks" for the corporation or how that speech is attributed to the corporation.

On a day-to-day basis, it would be the CEO. But ultimately the board speaks for the corporation.

 

[Brown]

On a day-to-day basis, it would be the CEO. But ultimately the board speaks for the corporation.

Yes, basically, this is true for ordinary business matters. It's even tru fopr some extraordinary business matters: We're seeing this sort of thing right now where the company president of Toyota is speaking--ostensibly--on behalf of the company.

Whether a multi-million dollar enterprise to support or defeat a political candidate is a day-to-day decision is not quite so clear. Apart from the notion that there may be a question as to whether an officer has the authority to speak for the company on a political matter, there may also be the question about whether the officer wants this authority (at least in the current legal climate). The conventional wisdom seems to be to distribute the power to decide upon a political message over a group of people. It's less risky. So it may be that the board of directors would decide upon whether to devote its resources to a message and what the message would be. (And it would not be surprising if the vote of the board is less than unanimous. Boards of directors often are not in lock-step about what is in the best interest of the corporation.)

Some of the proposals being bandied about propose to recognize that the shareholders have a say in whether there should be a message or what that message should be. As far as I know, none of these proposals has gotten off the ground.

 

[Dunstan]

If allowed to proceed, such a lawsuit would, of course, involve the shareholders as an indispensible party and would result in the rather uncomfortable (but not unheard-of) situation in which is corporation is involved in a lawsuit against its own owners.

In such a case, they would be have to be parties for their rights to be adjudicated.

I can't tell if these remarks are offered in seriousness. I take it you don't have a lot of experience in litigation involving issues like this. The issues are direct affect to rights, not affect by precedent or even by issue or claim preclusion.

First of all, you're wrong about my experience.

Second, you brought up "indispensible parties" and claimed the shareholders would "have" to be parties to any litigation. Don't blame me for your imprecise terminology.

As I said, as a practical matter, the issue of indispensible parties (see, e.g., Fed. R. Civ. P. 19(1)) is unlikely to come up, as this issue is typically raised when parties who should be present in a suit are not, and the non-parties have to be dragged into the suit involuntarily. In a case in which the issue is corporate control and shareholder rights, the shareholders would not have to be dragged into the suit; they would go to court voluntarily to have their interests represented.

Well, if we're being realistic: most shareholders would not even be paying attention. One or two professional plaintiffs might file an action, purportedly on behalf of all shareholders. If that's what you mean by shareholders "going to court voluntarily to have their interests represented," ok. But that's no different from any other corporate dispute, and such lawsuits could have been brought before Citizens United; it's not like anything has changed on that front.

And to get back to your original point, I still don't see what Hertz has to do with any of this.