The Corporations and the Twilight Zone
In doing some research on the 14th Amendment to the United States Constitution, I came across an old book outlining some of the author's perceptions of various causes and effects the amendment has had on the States and Federal Government over the years in regards to protecting the rights of the people, for which it was intended, from its inception throughout years up to the time of the book's publication. This article provides excerpts of this book in order to point out the relevancy of how our present worldwide economic crisis appears to have its roots embedded within the 14th amendment as originally noted by the author almost one hundred years ago.
During 1912, Charles Wallace Collins, M.A., a sometime fellow in the University of Chicago and a member of the Alabama Bar, noted a grey area that existed within the 14th Amendment. In his writings, “The Fourteenth Amendment and the States, A Study of the Operation of the restraint clauses of Section one of the Fourteenth Amendment to the Constitution of the United States", Collins noted the following while citing various case law to back up his claims.
“The great problems facing the nation when the Fourteenth Amendment was being adopted were social and political rather than economic in the narrower sense of the word. The debates in Congress, the discussions in the various State legislatures, and the political campaigns before the people in 1866 and 1868 clearly reveal the motives underlying the marking of that provision. It was a part of the great problem of reconstruction and had for its immediate purpose social and political readjustment in the South according to the theories of the party in power. It was a war amendment in that it attempted to conserve the results of the victory.
In so far as the strictly economic element was present, it was a matter of individual property rights - the protection of the weak and the oppressed. The object of protection was primarily the negro race. It was also intended to give protection to such of those from the North who had moved into the South immediately after the War. There was never any fear in the minds of the people of the North that their own States could not or would not protect their citizens in the common enjoyment of those rights and privileges which were the sacred heritages of all people of English stock. It never entered the public discussion, for instance, that the State of Massachusetts, or that the State of New York, would deprive persons within their bounds of life, liberty, or property without due process of law, or deny to them the equal protection of the laws.
There were no great corporation problems before the nation 140 years ago. There were, of course, corporations and great activity in railroad building, but these economic movements were then in their infancy as compared with their modern status. The motive of the people for adopting the Fourteenth Amendment as a part of the Constitution of the United States was unrelated to the corporations.("The Fourteenth Amendment was framed to protect the negroes from oppression by the whites, not to protect corporations from oppression by the legislature. It is doubtful whether a single one of the members of Congress who voted for it had any conception that it would touch the question of corporate regulation at all.") -Arthur T. Hadley in the Independent, Vol. LXIV, pp. 836-837.
In 1886 the Supreme Court declared a corporation to be a person within the meaning of the equal protection clause of the Amendment. This was in the case of Santa Clara County v. The Southern Pacific Railroad Co. The question of the violation of the Fourteenth Amendment was presented to the Court, but the decision was made upon other grounds. However, the following preliminary announcement was made by Mr. Chief Justice Waite: "The Court does not wish to hear argument on the question whether the provision in the Fourteenth Amendment to the Constitution, which forbids a State to deny to any person within its jurisdiction the equal protection of the laws, applies to these corporations. We are all of the opinion that it does."
In 1888, in Pembina Mining Co. v. Pennsylvania,' this announcement was affirmed as a part of the decision. In 1889, in Minneapolis & St. L. R. R. Co. v. Beckwith: the Supreme Court of the United States for the first time squarely and positively decided that a corporation was a person within the meaning of both the "due process of law" and the "equal protection of the laws" clauses of the Fourteenth Amendment. These cases, considered together as one opinion, mark one of the most important developments in our constitutional history. In an address in 1908 before the University of Berlin, President Hadley of Yale University declared them to rank with the Dartmouth College Case in their restraining effect upon the States in relation to the corporations. They opened the door for organized capital to contest whatever laws of the State it considered disadvantageous.
Out of six hundred and four opinions handed down under the Amendment during that time, three hundred and twelve involved a corporation as the principal party. Since 1889 litigation has greatly increased under the Amendment. Corporations as parties seeking relief increased in number until now the majority of all litigation under the Amendment is instituted in their behalf. On the other hand, questions involving the negro race, although never large, dwindled.
Nearly all the important cases under the Amendment are in some way concerned with the question of State regulation of the corporations. During the life of the Amendment there have been numerous cases decided adversely to the States. Federal intervention have been in favor of a corporation; that is to say, about seventy-eight per cent. These include attempted regulation, by the several States involved, of telephone and gas rates; certain phases of the insurance business ; railroad improvements, railroad profits, and freight and passenger rates ; taxation and charter fees for public service companies; anti-trust laws; and the conservation of natural resources. It is thus seen that the Amendment has taken on a new vitality. It has become a part of the great question of the day…What shall we do with the corporations?
The public service and corporations have so increased in power and in the territorial extent of their operations that they have become impatient of the restraints of State laws. What may be urged by the people of a State as a measure of social reform, to them takes on the appearance of an attack on vested interests. These great organizations, having in their service well-trained lawyers, have been quick to seize upon every opportunity to check the activity of the States when their own interests are affected. Their method is one of persistent opposition. Having great financial resources, they enter the field of politics to prevent the enactment of any statute that may operate to their immediate disadvantage. If they fail to stem the tide of public opinion, and laws are made which will reduce their profits, they immediately set to work to prevent the enforcement of such laws. In other words, they now start on the long and winding road of litigation. They appeal to the State courts and to the constitution of the State. If they fail to obtain the relief sought, they seek shelter under the Federal Constitution, invoking protection under the contract clause, the commerce clause, and the Fourteenth Amendment. The two former can only be invoked under certain definite conditions. The latter can nearly always be used as a means of appeal from the action of a State to the Supreme Court of the United States. Witness the attack of the Pacific States Telephone and Telegraph Company on the Oregon initiative and referendum laws in the Supreme Court of the United States, one of the grounds being that they operated to deprive the company of the equal protection of the laws in contravention of the Fourteenth Amendment!
The corporations do not always resort to the State courts. If the law in question is of great and immediate consequence, they frequently obtain temporary injunctions in the Federal district courts restraining the State from enforcing the law until such a time as the Federal courts can pass on its constitutionality under the Amendment.
This discussion is closely allied with other questions of national interest, such as the regulation of interstate commerce and the reform of the Federal judiciary, but it is stated here to emphasize the point that the whole situation is aggravated by this unforeseen operation of the Fourteenth Amendment. To the corporations, which can easily undergo the strain of months and years of litigation, it has become a sure measure of delay. If a law is claimed to be unreasonable or discriminatory, it can be taken to the Supreme Court of the United States for final decision. This usually takes years. If the case has also been fought through all the courts of the State, it may require a much longer time. Nine times out of ten the decision of the Supreme Court of the United States will be adverse to the corporation seeking relief and in favor of the validity of the State law in question. Nevertheless, the corporation has had the advantage of several years of delay. During this period of delay it operates along the old lines. Sometimes the opposition becomes weary and a compromise is effected. Sometimes the opposing party in interest is a private citizen who, being unable to continue the litigation, abandons the case in despair.
This may be illustrated by reference to a Texas case which came up for decision. A statute of Texas regulated the collection of certain claims against railroads. A citizen of Texas had a colt killed by a train, for which he obtained judgment before a justice of the peace for damages plus an attorney's fee as provided by the law. The controversy was over the attorney fee and the principle involved in its relation to the Fourteenth Amendment. The case was fought through all of the courts of the State and was then taken to the Supreme Court of the United States, where after the additional delay a decision was rendered. In the mean-time, the man in Texas had naturally enough abandoned the case.
This phase of the operation of the Amendment works almost wholly to the benefit of the corporations and individuals of considerable wealth. A poor man cannot afford to claim protection under the Amendment. It is too expensive a process. This situation exists to the embarrassment - often to the humiliation of the State. It is one of the discordant notes of our times to hear of a judge of an inferior Federal court tying up the governmental machinery of a great and historic State at the instance of a powerful corporation because he does not agree with the State legislature as to what reforms should be instituted.
The Fourteenth Amendment in its practical operation gives to the Federal Government no power of control. Congress is powerless under it to make any laws by way of regulating the internal affairs of the States. It does, however, give the Federal Government through the Supreme Court almost unlimited power of intervention. That this power has been sparingly exercised is due to the conservative interpretation of that instrument by the members of the Supreme Court. This intervention under the Amendment has a very remarkable effect. The State is checked or restrained along a certain line of activity. The Federal Government is powerless to go any further. Having restrained the State from acting, its authority ceases absolutely. Within the particular sphere in controversy, the State is also rendered powerless. Thus there is created a field in which business operations may be carried on over which neither the Federal Government nor the State can take any affirmative action. This has been fittingly called the Twilight Zone. Intervention under the Amendment has this inevitable result. Beyond the pale of the law there is seen a shadowy realm in which the powers of wealth may move to and fro, unhampered by the will of the people.
Let's illustrate this by some striking examples. In the case of Smyth v. Ames the Federal Supreme Court restrained, by virtue of the Fourteenth Amendment, the enforcement of the Nebraska freight rate law, on the ground that the rates were too low and discriminatory. Since this did not involve the question of interstate commerce, the Federal Government was powerless to come in and fix the proper rate or to advise the people of the State as to what would be considered a reasonable rate. Granting that the existing rates were too high, allowed the railroads too much profit, and consequently worked to the detriment of the welfare of the State, there was left no remedy to the people who were thus directly affected. The Federal Government was helpless. The hands of the State were tied. The freight trains moved on in the Twilight Zone.
In the case of Buck v. Beach, a man in New York owned certain notes which were payable in Ohio. The amount involved was $750,000. The notes were sent to an agent in Indiana. The State of Indiana placed a tax on them of $36,357.71. This was declared void by the Supreme Court of the United States under the Amendment, on the ground that the State of Indiana had no jurisdiction over them. They could not be taxed in Ohio or in New York, because they were located in Indiana. The Court has several times declared State taxes void which were assessed against a citizen on personal property which was situated in another State. The Federal Government could not tax these notes. In other words, they could not be taxed at all. They were sheltered in the shadows of the Twilight Zone.
Every instance of Federal intervention under the Amendment creates a situation similar to the above and widens that shadowy sphere where business operations may go on unmolested either by the Federal Government or by the State. Every appeal to the Supreme Court of the United States under the Amendment, even though the sought-for intervention is denied, is conducive for a period of two or three years to the same result. Such delay is, in effect, temporary Federal intervention. It gives an air of uncertainty to the State law involved. The people of the State must in each case wait until the Federal Supreme Court has rendered its decision.
There is another phase of the Twilight Zone which may not here be discussed at length. It is wider in its reach than that created by the Fourteenth Amendment, but its shadows are not so dark. It is caused by Federal intervention in the affairs of the State under the Interstate Commerce Clause of the Constitution. There is a well-defined theoretical difference between the two. Under the Amendment the Federal Government can only intervene; under the commerce clause the Federal Government can both intervene and correct. For example, if the Supreme Court restrains the enforcement of a State law on the ground that it places a burden on interstate commerce, other branches of the Federal Government have the power to remedy the situation by affirmative action. Congress has the power to dispel the shadows of the Twilight Zone under the commerce clause by reducing the matter to a state of certainty by remedial legislation. Practically, however, the state of affairs remains today almost as hopeless as under the Fourteenth Amendment.
Thus we see that the Fourteenth Amendment, although a humanitarian measure in origin and purpose, has been practically appropriated - by the corporations. It was aimed at restraining and checking the powers of wealth and privilege. It was to be a charter of liberty for human rights against property rights. The transformation has been rapid and complete. It operates to-day to protect the rights of property to the detriment of the rights of man. It has become the Magna Charta of accumulated and organized capital.”