A Metaphor Will Take You Only so Far

From In re MF Global Holdings Ltd. (Bankr. S.D.N.Y. 2012):

Furgatch requests that these chapter 11 cases be administered for the benefit of the commodity customers of MFGI. Namely, Furgatch seeks an order from this Court that MFGH immediately pay “child support” payments. Such payments, in the case of individual debtors, are excepted from discharge pursuant to section 523(a)(5) of the Bankruptcy Code and given a first priority right of payment pursuant to section 507(a)(1)(A) of the Bankruptcy Code.

According to Furgatch’s counsel, “over the past fifty years, U.S. courts have consistently and aggressively broadened the scope of corporate personage and have afforded corporations more and more rights and obligations once reserved solely for individuals.” Movant cites 1 U.S.C. § 1, which defines “person” to include “corporations, companies, associations, firms, partnerships …, as well as individuals.” Additionally, the Motion draws language from a United States Supreme Court decision that conferred upon corporations the constitutional right to free speech. See Citizens United v. Federal Election Commission, 130 S.Ct. 867 (2010). The Motion also discusses the definition of the word “parent” as found in Merriam–Webster Dictionary Online and posits the derivation of the meaning of “parent company” in furtherance of the argument. The Motion concludes that corporations “must necessarily have a parent-childlike relationship,” and “[t]he parent company, which brings into existence and exerts control over the child subsidiary, should be subject to the same obligations for on-going support and welfare to which the parent-child relationship of natural persons is subject.”

The Motion quotes the language of sections 523(a)(5) and 507(a)(1)(A) of the Bankruptcy Code and asserts that these sections dictate that MFGH should “provide (i) immediate and full recovery” of customer funds, “or, in the alternative, (ii) first-ranking priority status in the recovery of [the Chapter 11 Debtors’] debt owed to commodities customers to the extent of their segregated accounts at MFGI.”

Furgatch’s Motion is procedurally improper and substantively meritless to the point of bordering on frivolous. Therefore, the Court denies the Motion in its entirety with prejudice and cautions Furgatch’s counsel that the Court has the power to impose sanctions for frivolous arguments….

Corporations are often treated by the law as “persons,” and for perfectly good reasons: For instance, it makes sense that corporations should be able to enter into contracts, sue and be sued, and even have protection under constitutional provisions such as the Free Speech Clause, the Free Exercise Clause, the Due Process Clause, and the Takings Clause. This is both practically useful for our legal and economic system to function effectively, and necessary to fully protect the constitutional rights of individuals. If you deprive a corporation of property without due process, you are wrong the corporation’s owners. (The court, incidentally, is mistaken in saying Citizens United “conferred upon corporations the constitutional right to free speech”; the Supreme Court has recognized that corporations have free speech rights at least since NLRB v. Virginia Electric & Power Co. (1941), only 10 years after the Court first struck down a law on free speech grounds. Citizens United simply involved the question whether those rights extend to speech about candidates the same way that they extend to speech about a vast range of other matters.)

But, as I’ve noted in the past, that the corporation-as-person metaphor makes sense in many situations doesn’t follow that the Cruel and Unusual Punishment Clause has any meaning as to corporations, which I don’t think can be punished in a way that we would see as “cruel” (unless someone persuades me that the Unusual Punishments component has some meaning as to corporations). An order dissolving a corporation should not require a jury to decide on the punishment using all the procedures the Court has developed in death penalty cases.

Neither does it follow that the Self-Incrimination Clause has any direct meaning as to corporations, which can’t actually be witnesses. Similarly, restrictions on corporate ownership of firearms should be constitutional or not depending on your views about whether the individual right to bear arms includes the right to associate with others in certain ways to do so. They shouldn’t turn on the neat but unsound syllogism that a corporation is a person, persons have the right to bear arms, and corporations therefore have the right to bear arms.

What is true of the metaphor of the “corporation” is even more true of the metaphor of the “parent corporation”: That the parent-child analogy might be illuminating in some ways doesn’t mean that we should have corporate “child support,” corporate custody disputes, or prosecutions for corporate incest. Never fall into the trap of actually believing that our legal fictions and our metaphors are real.