Archive | Corporations and Corporate Law

Do Corporations Have a Right to Sell Kosher Meat?

I’ve seen some skeptical responses to my previous post about corporations and free exercise, of which Dahlia Lithwick’s and David Gans’s are emblematic. My point, recall, was that the Third Circuit’s logic led to the conclusion that churches don’t have free exercise rights, and that even though the Third Circuit said that that didn’t have to follow, it didn’t provide any good reason why not.

Lithwick and Gans both respond that business corporations are different from churches because churches are founded for religious purposes while business corporations are not. Even if so, that would still force the Third Circuit to abandon its “corporations have no consciences, no beliefs, no feelings,” theory. Perhaps a different argument can be made for why corporations founded for non-religious purposes can never ever ever have religious rights, but it’s not the argument the Third Circuit tried.

But the real point of this post is to highlight an example invoked by Rick Garnett at Mirror of Justice, which I think deserves to be emphasized. What about an anti-kosher law? Imagine that an antisemitic legislature passes a law forbidding any business corporation from possessing or selling any kosher meat, for no other reason than animus toward Jews. Many butchers, grocers, and restaurants operate through corporations. Does it follow that they would have no ability even to challenge the law on religious grounds? That strikes me as a strange result, and it is not compelled by any precedent. It would make far more sense to say that corporations or the real parties in interest behind them have the ability to make religious-freedom claims, whose sincerity and validity will be judged on the merits.

[I understand that one might well conclude, on the merits, that the rules for contraceptive coverage are very different than a law directly targeting kashrut. […]

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France’s Kiobel

I wrote yesterday about the French Court of Appeals decision holding that French train companies did not violate international law (and particularly the Fourth Geneva Convention) by building a light rail system in Jerusalem, including areas occupied by Jordan before 1967.

The case, PLO v. Alstom, is a perfect foreign coda to the Supreme Court’s decision in Kiobel, as it also deals with suits for extraterritorial conduct of multinational corporations (though without the universal jurisdiction twist of Kiobel). It illustrates how the efforts of some American courts to implement international law norms through civil damages remedies is in fact a rather parochial exercise detached from international practice.

1) Most significantly, the Court found that international law does not create liability for corporations. This accords with the view of the Second Circuit in Kiobel – corporate liability was the issue on which cert in Kiobel had been granted, though the case was ultimately decided on extraterritorially grounds. Many who favored corporate liability argued that on this issue, courts should apply not international law, but rather federal common law. In future ATS litigation against companies with some U.S. nexus, the PLO v. Alstom decision will not make plaintiffs’ work easier.

2) The Versailles court also seemed to take a narrow view of aiding-and-abetting liability. The issue is hard to separate from the corporate liability issue, but the Court basically found that even if Israel’s conduct violated international law, the corporation does not incur liability for its involvement.

3) Ironically, the best examples of corporate liability under international law came from ATS cases (where courts had upheld such liability after having been assured of its existence outside ATS cases). Yet the French court brushed off precedents under the ATS by noting that they were merely applications of a “domestic statute” and […]

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More on Morrison

In addition to John’s shrewd post about Morrison below – I suspect the post is right that it might turn out to be a “zombie” precedent – take a look at University of Georgia securities law expert Professor Margaret Sachs’ observations from a global securities law perspective at Opinio Juris today.

(Update:  Also take a look at the discussion at OJ from Professor Austen Parrish specifically focused on extraterritoriality.  And also Bill Dodge on extraterritoriality at OJ.  OJ has the best roundup of academic commentary on the decision, from a variety of disciplinary perspectives.)

An excerpt from Professor Sachs – and particularly note that much hinges from a securities law perspective on the bill just being reported out of conference:

A few observations about this remarkable opinion:

The opinion makes no mention of the loss of investor protection that will result from the switch to the transaction test. For example, it leaves unprotected US citizens who purchase or sell securities outside the United States. Likewise unprotected are foreign citizens trading abroad who are victims of domestic conduct perpetrated by Americans over whom the foreign forum lacks personal jurisdiction.

Why not allow these investors to sue in United States courts? One reason is the abandonment of the idea that all countries are of one mind about fraud. As Justice Scalia noted, “the regulation of other countries often differs from ours as to what constitutes fraud, what disclosures must be made, what damages are recoverable, what discovery is available in litigation, what individual actions may be joined in a single suit, what attorney’s fees are recoverable, and many other matters.” In making these observations, he drew on amicus briefs by foreign countries that wish to exert exclusive control over the prosecution of securities trades occurring within their own borders.

[…]

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On Corporate Personhood:

Daniel Henninger, over on WSJ.com, has some interesting observations on “the scrum inside the [Citizens United] decision between Justices Stevens and Scalia, over the status of corporations in America.” I think he’s on target in suggesting that the decision, and the debate swirling around the issues raised (both in the warring opinions and in the court of public opinion) do reveal a rather profound difference of opinion about the meaning, and status, of corporate persons.

“In the universe inhabited by Justice Stevens and President Obama, corporations—the private sector—are a suspect abstraction, ever tending toward “the worst urges” which have to be “comprehensively regulated.” The saints regulate the sinners. . . .”

On the other hand, in what Henninger calls Scalia’s “crack-back concurrence,” Scalia

. . . ridicules ‘the corporation-hating quotations the dissent has dredged up’ . . . and ends with a conservative belief: ‘To exclude or impede corporate speech is to muzzle the principal agents of the modern free economy.’”

It’s clearly (and of course Henninger is hardly the first to suggest it, as he candidly acknowledges) a substantial and possibly critical fault line in our politics and in our law. What are these things we call corporations? How should we think about them? Are they merely creatures created by the State (and subject to whatever conditions the State may wish to impose upon them)? Or are they simply reflections of the natural right (and propensity) of individuals to band together to accomplish some task? Or – horrors! — are they both simultaneously? What then?

I’ve written (somewhat tentatively) about this on the VC before, and I’m starting to think more and more about the question. In part, this is because my good friend and colleague David Johnson is (slowly) persuading me that the question of “corporate […]

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