Bank of the United States v. Deveaux and the Birth of Constitutional Rights for Corporations

Abstract

Bank of the United States v. Deveaux and the Birth of Constitutional Rights for Corporations ADAM WINKLER Introduction Recent decisions by the Supreme Court of the United States in Citizens United v. Federal Election Commission, holding that corporations have a First Amendment right to spend money to influence elections, and Burwell v. Hobby Lobby Stores, Inc., permit­ ting corporations to assert religious liberty rights under a federal law, have brought the issue of rights for corporations into the public consciousness. The rise of corporate constitutional rights is usually traced to an 1886 case, Santa Clara County v. Southern Pacific Railroad, which is often cited for establishing that corporations are “persons” under the Constitution. While the story ofthe Southern Pacific’s case is highly entertaining —involving an illustrious lawyer who deceived the Justices and a misleading headnote that claimed the Court had decided issues it had not—Santa Clara County was hardly the first Supreme Court case to address the constitutional rights of corporations. That honor belongs to another case decided almost eighty years earlier, Bankofthe UnitedStates v. Deveaux, and corporate personhood played little role.1 Although still cited from time to time for other issues, Bank of the United States v. Deveaux is one ofthe neglected landmarks of American constitutional law. The explicit question addressed in the case was whether business corporations had constitutional protections—namely, the right to sue in federal court on grounds of diversity under Article III. While there is little evidence the Framers ever intended the Constitution to apply to business entities, Chief Justice John Marshall’s opinion for the Court broadly construed the text to cover corporations. Marshall did not say that corporations were 238 JOURNAL OF SUPREME COURT HISTORY people; in fact, his reasoning rejected the core tenets of corporate personhood. Instead, Marshall based his decision on a very different conception of the corporation—as an association of people—that would prove far more influential than corporate personhood injustifying the expansion ofindividual rights to corporations over the next two centuries. The Bank of the United States The corporation behind the first corpo­ rate rights case was the Bank of the United States, arguably the first great corporation in the new nation. The brainchild of Alexander Hamilton, George Washington’s Secretary of the Treasury, the Bank of the United States was chartered by the first Congress in 1791 and carried the country’s name. Yet it was what Americans today would think of as a private business. It was a for-profit corpora­ tion with publicly traded stock, managed by executives who were accountable to stock­ holders. The federal government had seats on the board and a considerable number of shares, but otherwise the investors were private individuals. At a time when the handful of existing American corporations were local concerns—operating, say, a toll bridge across the Charles River—the Bank was a national enterprise, with headquarters in Philadelphia and branches stretching from Boston to New Orleans.2 The mission of the Bank of the United States was to secure America’s credit and stabilize the nascent nation’s precarious economy. There were already a number of state-created banks but their notes were unreliable. A federal bank, backed by Congress, would have the resources to guarantee its notes and offer a more secure place to hold the federal government’s deposits. Hamilton had been inspired by the success of an earlier bank, the Bank ofNorth America, founded during the Revolutionary War. When Washington’s army was short on rations and pay, with soldiers on the verge of mutiny and American currency nearly worthless, the Bank of North America was established to print more dependable notes and insure liquidity. The plan worked to the benefit of both the nation and investors, who received annual dividends of thirteen-tofourteen percent. The Bank ofNorth America was transformed into a private state bank in 1786, and today, after more than two centuries of mergers and reorganizations, remains a tiny part of Wells Fargo.3 Despite the success of the Bank of the North America, Hamilton faced significant hurdles in setting up his bank. One of them was the text ofthe Constitution. Did Congress have the power to...