By Jeremiah W. Meyer-O’Day1
Same Issue, Different Entity, Different Result
Citizens United v. Federal Election Commission involved a challenge to section 441b of Title 2 of the United States Code as amended by the Bipartisan Campaign Reform Act of 2002,6 which prohibits any corporation from engaging in “electioneering communications” within thirty days of any federal primary election or sixty days of any federal general election.7 The suit concerned this provision’s application to a film that attacked Hillary Clinton, produced by a non-profit seeking to release the film during the prohibited time period.8In striking down section 441b as an unconstitutional infringement on corporate speakers’ First Amendment right to freedom of speech, the Court had two overriding concerns: (1) the law discriminated on the basis of the identity of the speaker,9 and (2) limiting corporate expenditures on electioneering communications would necessarily deprive the public of the corporate point of view.10
In rejecting the government’s position that a compelling interest supported section 441b the Court specifically rejected the idea that the need to protect dissenting shareholders from having their property used in a manner contrary to their political interests could justify the ban.11 The majority blithely assumed that there was “little evidence of abuse that cannot be corrected by shareholders ‘through the procedures of corporate democracy.’”12 The majority discussed why a prior case cited for this same issue in the context of union dues payments did not support the legitimacy of this shareholder-protection rationale.13 In Citizens United, there is only a conclusory statement that shareholders do not need protection from management’s political expenditure choices.
In Knox v. Service Employees International Union, Local 1000 the same members of the Court reveal a contrary attitude.14 The Knox majority’s primary concern was that unions could require workers it represents to pay dues that could be used for political advocacy against their will.15 The majority noted that one of the ballot initiatives the union opposed with non-member funds would have strengthened the ability of nonmembers to resist paying full dues.16 The majority states that the effect of the union’s “procedure was to force many nonmembers to subsidize a political effort designed to restrict their own rights.”17
The Knox majority emphasized that unions are creatures that only exist in contemplation of the law and do not possess a constitutional right to spend funds in contravention of agency-fee paying non-members’ desires, even on a temporary basis.18 Finally, the majority rejected the union’s contention that lobbying to support pro-worker initiatives were expenditures germane to the purposes of collective bargaining and therefore chargeable to nonmembers. The majority argued that accepting such a “definition of germaneness . . . would effectively eviscerate the limitation on the use of compulsory fees to support unions’ controversial political activities.”19
Why the Difference?
The Court's application of speech protection clearly appears to vary according to whether the speech is that of a corporation or a union. In stark contrast with the Court's concerns regarding agency-fee paying employees in Knox, any real concern for the First Amendment rights of dissenting shareholders was notably absent from the Citizens United majority’s perfunctory treatment of the shareholder-protection rationale for section 441b. Such an absence cannot be explained by arguing that corporations do not engage in political activities inimical to the rights of shareholders; the flurry of successful corporate lobbying in Delaware ably demonstrates that corporations in fact do engage in just such political activity.20
What must to be explained are the bases underlying the majority's different conclusions in Citizens United and Knox.21 The Citizens United majority seems to have tacitly accepted the proposition that corporate expenditures on political advocacy are at least ordinarily germane to the profit-making purposes of a corporation.22 This contrasts with the Court’s refusal to regard the political activities of unions as germane to collective bargaining’s stated goals of improving the wages, hours, and working conditions of workers.23
These distinctions cannot be founded on the fact that unions exist only as creatures of statute. Corporations are juridical creatures, and as such, derive their rights from legislative fiat just as unions do. The most plausible justification for such a difference in treatment was one not mentioned in either case: It is perhaps less of a hardship to exercise the option to exit a corporation by selling one’s shares than it is to leave one’s job. In the former case, one loses some investment funds, whereas in the latter one loses one’s livelihood, a primary source of one’s identity, and other important benefits that employment supplies.24
No such argument was advanced in either Citizens United or Knox, and this lack reflects the Justices’ assumptions regarding the political speech of unions as compared to that of business corporations. In the former case, the union has only mere interests which must be balanced carefully against the First Amendment rights of the individual natural persons who are the union’s constituents. In the latter case, the corporation has strong First Amendment rights against which the mere interests of dissenting constituents can be waived away with a few platitudes about shareholder democracy or shareholders’ ability to exit the offending corporation.25
To reiterate, neither Citizens United nor Knox considered whether there might be different considerations to take into account when evaluating the legitimacy of corporate versus union political expenditures. If there are legitimate and principled reasons for heavily discounting the legitimacy of the political advocacy of organized labor and for simultaneously exalting the legitimacy of the political advocacy of organized capital, neither Citizens United nor Knox tell us what those reasons might be. This is a rather glaring omission, particularly for the institution charged with the duty to “say what the law is.”26
1 Juris Doctor, 2013, Northeastern University School of Law.
2 “Agency fees,” also known as “fair share fees,” are dues imposed on non-member employees whose employers are party to a collective bargaining agreement with a union that is recognized as an “exclusive bargaining agent” for the employees as allowed by section 8(a)(3) of the National Labor Relations Act of 1935, codified as amended at 29 U.S.C. § 158(a)(3) (1974), so as to prevent such represented nonmembers from free-riding on the union’s collective bargaining efforts. See 48 Am. Jur. 2d Labor and Labor Relations § 832 (2012); see also 29 U.S.C. § 158(a)(3) (2012) (permitting employers to agree to require employees to “tender the periodic dues and the initiation fees uniformly required as a condition of acquiring or retaining membership” as a condition of employment after the thirtieth day of such employment); cf. 45 U.S.C. § 152, Eleventh (same with respect to unions covered by the Railway Labor Act of 1926 as amended).
3 See Knox v. Serv. Emps. Int’l Union, Local 1000, 132 S. Ct. 2277, 2293 (2012) (requiring unions to follow an opt-in mechanism for collecting a special assessment from non-member agency-fee paying employees for use in political advocacy, rejecting the union’s use of an opt-out procedure, and casting doubt on the opt-out practice for regular dues, all out of its concern that the dissenting non-members not be required even temporarily to subsidize political speech with which they disagree).
4 See Citizens United v. Fed. Election Comm’n, 558 U.S. 310, 361 (2010) (stating that mechanisms of shareholder democracy are sufficient to protect dissenting shareholders from compelled association, and as such, shareholder-protection rationale for law restricting corporate political expenditures during the sixty days prior to an election was insufficient to uphold the law, and disposing of this concern in just two relatively short paragraphs of discussion).
5 See id.
6 2 U.S.C. § 441b (2012), Pub. L. No. 107–155, Title II, §§ 203, 204, 214(d), 116 Stat. 91, 92, 95 (2002) (amended 2002).
7 2 U.S.C. § 441b(a) (2012). “Electioneering communication” in turn is defined as “any broadcast, cable, or satellite communication which . . . refers to a clearly identified candidate for Federal office” and “is targeted to the relevant electorate” that occurs within the thirty days preceding a primary election or the sixty days preceding a general election, 2 U.S.C. § 434(f)(3)(A)(i) (2012); 11 C.F.R. §§ 100.29(a)(2–3) (2012). Federal Election Commission (FEC) rules further provide that in order to meet the definition of an electioneering communication, the communication must be “publicly distributed,” which itself requires that the communication be distributed so as to be capable of reaching at least 50,000 members of the relevant electorate. 11 C.F.R. §§ 100.29(a)(2), (b)(3)(ii), (b)(5) (2012).
8 Citizens United, 558 U.S. 310, 319–23.
9 Id. at 340–42. (stating that the majority “f[ound] no basis for the proposition that, in the context of political speech, the Government may impose restrictions on certain disfavored speakers.”).
10 Id. at 355–57 (stating that “[w]hen Government seeks to use its full power, including the criminal law, to command where a person may get his or her information or what distrusted source he or she may not hear, it uses censorship to control thought. This is unlawful.”).
11 Id. at 361–62.
12 Id. (quoting First Nat’l Bank of Boston v. Bellotti, 435 U.S. 765, 794 (1978)).
13 See Bellotti, 435 U.S. at 794 n.34 (distinguishing the union due cases on the basis that dissenting shareholders voluntarily opted to buy a company’s shares and may just as easily sell them if they disagree with the political expenditures of the corporation, but neglecting to explain why the same “exit” option that is available to employees (i.e., they could quit and find a different job) does not vitiate the need to protect such employees from compelled association of the same kind).
14 The Citizens United majority which struck section 441b for the above-mentioned reasons consisted of Chief Justice Roberts and Justices Scalia, Thomas, Alito, and Kennedy, with Kennedy writing the majority opinion. 130 S. Ct. at 886. The Knox majority consisted, likewise, of Chief Justice Roberts and Justices Scalia, Thomas, Alito, and Kennedy, with Alito writing the majority opinion. Knox v. Serv. Emps. Int’l Union, Local, 132 S. Ct. 2277, 2284 (2012).
15 See, e.g., Knox, 123 S. Ct. at 2289 (stating that union’s “compulsory fees constitute a form of compelled speech and association that imposes a ‘significant impingement on First Amendment rights’”) (quoting Ellis v. Brotherhood of Railway, Airline & Steamship Clerks, 466 U.S. 435, 455 (1984)); see also id. at 2295 (asking which of either the dissenting non-member agency fee-payer or the union should be required to bear the risk of the non-member paying too much or too little for union’s representational activities, and holding that non-members’ constitutional rights compelled the conclusion that the union should bear such risk).
16 Id. at 2292.
17 Id.
18 Id. at 2295 (stating that “if unconsenting nonmembers pay less than their proportionate share, no constitutional right of the union is violated because the union has no constitutional right to receive any payment from these employees”).
19 Id.
20 See generally Sean J. Griffith, Good Faith Business Judgment: A Theory of Rhetoric in Corporate Law Jurisprudence, 55 Duke L.J. 1, 63 (2005) (noting that “[w]ith the adoption of § 102(b)(7) of the Delaware General Corporation Law, the management lobby won an amendment effectively overturning” a decision holding directors and officers liable to the corporation’s shareholders for gross negligence in conducting business).
21 Compare Citizens United v. Fed. Election Comm’n, 558 U.S. 301, 361–62 (2010) (referring to dissenting shareholders’ “interests” in not subsidizing speech to which they are opposed), with Knox, 132 S. Ct. at 2289 (referring to dissenting nonmember agency fee payers’ First Amendment rights).
22 I infer the Court's acceptance of this proposition from its blithe reliance on the “procedures of corporate democracy,” Citizens United, 558 U.S. 310, 360 (quoting Belloti, 435 U.S. At 794). Whether this proposition is true is open to serious doubt, given the facts that: (1) “under the basic rules of state law, shareholders do not have the right to vote directly on, or to enact bylaws addressing, the ordinary business decisions of the corporation,” Lucian A. Bebchuk & Robert J. Jackson, Jr., Corporate Political Speech: Who Decides?, 124 Harv. L. Rev. 83, 87 (2010); and (2) even under the recently reformed federal proxy rules for shareholder-initiated proposals, so long as political advocacy is conceived of as falling under the rubric of “ordinary business operations,” shareholder proposals to regulate a corporation's political activities may be excluded by the corporation from its form of proxy. 17 C.F.R. § 240.14a–8(h)(i)(7) (2012). See also CA, Inc. v. AFSCME Emps. Pension Plan, 953 A.2d 227, 234–35 (Del. 2008) (stating that “[i]t is well-established Delaware law that a proper function of bylaws is not to mandate how the board should decide specific substantive business decisions, but rather, to define the process and procedures by which those decisions are made.”).
23 Compare Citizens United, 558 U.S. at 361–62 (failing to address the propriety of such expenditures in light of corporate purposes), with Knox, 132 S. Ct. at 2295 (rejecting contention that political activity on behalf of workers’ interests can be germane to union’s statutory purpose).
24 See generally Richard E. Lucas et al., Unemployment Alters the Set Point for Life Satisfaction, 15 Psychol. Sci. 8, 10–11 (2004) (examining data from the German Socio-Economic Panel Study and finding that involuntary unemployment resulted in a precipitous drop in life satisfaction followed by a failure to return to the previous baseline level of life satisfaction; the effect was more pronounced with multiple bouts of unemployment during the 15-year period studied); Andrew E. Clark et. al., Scarring: The Psychological Impact of Past Unemployment, 68 Economica 221, 230 (2001) (finding also that long-term unemployment resulted in men (but not women) becoming indifferent to the prospect of reemployment); Marcus Gangl, Scar Effects of Unemployment: An Assessment of Institutional Complementarities, 71 Am. Soc. Rev. 986, 1000 (2006) (finding that unemployment reduced earnings on a persistent basis relative to similarly-situated but continuously employed workers in a panel study involving the U.S. and twelve Western European nations).
25 As Justice Stevens’ dissent in Citizens United points out, “[b]y ‘corporate democracy,’ presumably the [majority] means the rights of shareholders to vote and to bring derivative suits for breach of fiduciary duty. In practice, however, many corporate lawyers will tell you that ‘these rights are so limited as to be almost nonexistent,’ given the internal authority wielded by boards and managers and the expansive protections afforded by the business judgment rule.” 558 U.S. 310, 467–77 (Stevens, J., dissenting) (citing Margaret M. Blair & Lynn A. Stout, A Team Production Theory of Corporate Law, 85 Va. L. Rev. 247, 298–315, 320 (1999) (discussing the ineffectual nature of the so-called mechanisms of corporate democracy); Adam Winkler, Beyond Bellotti, 32 Loy. L.A. L. Rev. 133, 165–66 and 199–200 (1998) (same)); see also Daniel R. Fischel, Organized Exchanges and the Regulation of Dual Class Common Stock, 54 U. Chi. L. Rev. 119, 134–36 (1987) (reporting empirical studies documenting the inability of minority shareholders to influence corporate behavior).
26 Marbury v. Madison, 5 U.S. (1 Cranch) 137, 177 (1803).