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Washington and Lee Law Review - Print Edition

Article

by Sarah C. Haan

What does “corporate democracy” mean? How far does federal law go to guarantee public company investors a say in a firm’s policies on important social, environmental, or political issues? In 1972, the U.S. Supreme Court appeared ready to start sketching the contours of corporate democracy—and then, at the last minute, it pulled back. This Article tells the story of Securities and Exchange Commission v. Medical Committee for Human Rights, in which a national civil rights organization, best known for its work at civil rights marches and protests, fought to expand the limits of corporate democracy and nearly succeeded.

This Article proceeds in three parts. Following the introduction, Part II tells the story of how a civil rights organization advanced the cause of shareholder activism in the late 1960s. It begins with the group’s first, clumsy efforts to use shareholder tools and traces developments through the tumultuous 1970 proxy season, in which major companies’ annual meetings featured confrontations involving police, private security forces, guard dogs, and rock-throwing stockholders. Archival documents reveal that a Yale law student was the original donor of five shares of Dow Chemical Company stock to Medical Committee, and that he helped connect the civil rights organization to the prominent securities lawyers who litigated its case. An important victory came early: Dow stopped manufacturing napalm in May 1969, around the time of its annual shareholders meeting. However, Dow’s management never admitted any concession to the investor insurgency.

Part III describes the legal wrangling that took place in the D.C. Circuit Court of Appeals and ultimately the U.S. Supreme Court. This Part excavates primary documents from the case files of Supreme Court Justices involved in the case, including those of Justice Thurgood Marshall, who wrote the opinion that declared the controversy moot, and Justice William O. Douglas, the former New Deal SEC Chair, who departed from his longstanding practice of recusing himself from securities law cases to dissent. What these documents suggest is that, if it had been decided on the merits, SEC v. Medical Committee for Human Rights would have been a close case. This is especially noteworthy considering that two of the nine Justices who were members of the Court when it granted certiorari—Justices Hugo Black and John Marshall Harlan—had resigned for health reasons by the time the case was argued. In the end, Medical Committee saw its gains for corporate democracy dissolved as fierce maneuvering by Dow’s corporate management and the SEC won the upper hand.

Part IV considers the significance of SEC v. Medical Committee for Human Rights to history. It presents the case as civil rights history, as securities law history, and as corporate governance history, and offers some reflections on the case in light of the current debate about the right of shareholders to have a voice in a company’s manufacture or sale of controversial products.

This article builds upon the author’s remarks at the 2018-2019 Lara D. Gass Annual Symposium: Civil Rights and Shareholder Activism at Washington and Lee University School of Law, February 15, 2019.

Article

by Lisa M. Fairfax

In 1952, the SEC altered the shareholder proposal rule to exclude proposals made “primarily for the purpose of promoting general economic, political, racial, religious, social or similar causes.” The SEC did not reference civil rights activist James Peck or otherwise acknowledge that its actions were prompted by Peck’s 1951 shareholder proposal to Greyhound for desegregating seating. Instead, the SEC indicated that its change simply reflected a codification of a position the SEC staff had taken in 1945.

Today, the shareholder proposal rule has evolved, giving way to several amendments that now enable shareholders to submit proposals on the proxy statement that involve significant policy issues that transcend economic significance to the corporation. Nevertheless, we continue to grapple with the underlying corporate governance issues raised by Peck’s proposal. Those issues center around at least two questions: First, what constitutes proper subjects for corporate action? Second, what should be the shareholder’s role in advancing those subjects?

My talk today seeks to answer these two questions, particularly as they relate to the theme of this conference and the kind of activism engaged in by shareholders such as James Peck. Put a different way, those questions can be viewed as follows: First, can the pursuit of social justice be a proper subject of corporate action and behavior? My answer is yes. The for-profit company has proven that it can deploy resources to advance economic innovation and change. Art, music, technology, social media, the sharing economy, all of these innovations reached the public through the for-profit corporation. Why not use the vast resources and power of the for-profit corporation to be the engine for social innovation and change?

This article is based on the author’s keynote address at the 2018-2019 Lara D. Gass Annual Symposium: Civil Rights and Shareholder Activism at Washington and Lee University School of Law, February 15, 2019.

Article

by Wynter K. Miller & Benjamin E. Berkman

Under the First Amendment, state intervention in conversations between physicians and prospective parents about prenatal whole genome sequencing (PWGS) should trigger at least heightened scrutiny. Part I of this Article provides an overview of the most recent advances in genetic testing. It assesses the ongoing impact of non-invasive prenatal testing (NIPT) for providers and patients and charts the course from NIPT to PWGS. Part II establishes a foundational background for evaluating First Amendment claims. Part II.A describes the development of First Amendment jurisprudence, focusing on the doctrinal distinctions between levels of judicial scrutiny. Part II.B explores historical Supreme Court case law addressing professional speech. Part III surveys the current legal landscape. Using a handful of recent Circuit cases, Part III.A demonstrates that the legal frameworks for assessing physician speech qua professional speech are shambolic. Part III.B provides an overview of the most recent Supreme Court ruling on professional speech in the 2018 case National Institute of Family and Life Advocates v. Becerra. Part IV uses the material in Parts I–III to predict how legislative efforts to limit reproductive decision-making are likely to manifest in the PWGS context. Based on the case analyses in Part III, Part IV identifies the Fourth and Eleventh Circuit approaches as the most defensible for future judicial interventions. This Article concludes that state-based restrictions on PWGS-related speech would be vulnerable to First Amendment challenges and unlikely to survive heightened judicial scrutiny.

Note

by Spence M. Howden

Courts do not treat text messages as intangible personal property. Authors and recipients of text messages have limited recourse against cell phone manufacturers or service providers when they “accidentally” delete their users’ text messages. This Note proceeds as follows: Part II offers a brief overview of what text messages are and what they are not. Part III covers the history of intangible personal property law and reviews the evolution of “cybertrespass” claims. Part IV explores the judiciary and the Fourth Amendment’s failure to protect text messages. Finally, Part V evaluates whether text messages constitute property and the practical implications of this finding.

Note

by Kiersten E. Holms

This Note argues that the recent court decisions rejecting the government’s bare legal title defense are consistent with CERCLA. Courts should not treat the federal government any differently than a private entity and, therefore, courts should hold the federal government liable as an owner under CERCLA for its role as legal titleholder to public lands. Part II of this Note begins by providing a brief overview of the background and goals of CERCLA. Part II also provides an examination of the issue of ownership liability under CERCLA and recounts the federal courts’ difficulty in applying ownership liability. Part II then describes how the federal government’s “bare legal title” argument arose out of the confusion surrounding ownership liability in CERCLA litigation. Part III moves on to examine the recent trend in CERCLA litigation rejecting the federal government’s bare legal title argument, thus holding the federal government liable as an owner based on its possession of legal title to contaminated public lands. Part IV analyzes whether the bare legal title defense is consistent with CERCLA, taking the position that the defense is not. Finally, Part V contends that federal government liability for its role as titleholder of public lands should extend beyond the context of contaminated mining lands.

Article

by Mark Strasser

In Masterpiece Cakeshop, Ltd. v. Colorado Civil Rights Commission, the United States Supreme Court issued an opinion, along with the accompanying concurrences and dissent, that may well destabilize various settled areas of constitutional law and likely represents shots across the bow with respect to a number of issues that will make their way before the Court. In Masterpiece, the Court overruled a finding that a religious baker had violated a state antidiscrimination law when refusing to create a wedding cake for a same-sex couple. The decision might seem to have been a masterful resolution of an extremely difficult case because the Court issued a narrow opinion that seemed to affirm free exercise rights while at the same time affirming the right of same-sex couples to marry. Part II of this Article discusses Masterpiece Cakeshop, explaining some of the contradictory signals contained within it and why this opinion may prove to be much more significant than many commentators seem to appreciate. Part III discusses some of the ways that the decision may modify First Amendment law and may undermine antidiscrimination protections as a general matter. The Article concludes that the Masterpiece Cakeshop holding permitted the Court to put off for another day resolution of some of the very thorny issues that may arise when sincere religious convictions are in conflict with antidiscrimination laws. Many of the implicit views and approaches contained within Masterpiece Cakeshop suggest that future opinions will be at best quite contentious and at worst insupportable as a matter of reason or precedent.

Article

by Malinda L. Seymore

The Trump Administration’s new immigration policy of family separation at the U.S./Mexico border rocked the summer of 2018. Yet family separation is the prerequisite to every legal adoption. The circumstances are different, of course. In legal adoption, the biological parents are provided with all the constitutional protections required in involuntary termination of parental rights, or they have voluntarily consented to family separation. But what happens when that family separation is wrongful, when the birth mother’s consent is not voluntary, or when the birth father’s wishes to parent are ignored? In theory, the child can be returned to the birth parents when consent is invalid because of fraud, coercion, or deceit. In actuality, courts are very reluctant to undo an adoption. How, then, to deter adoption agencies and workers from wrongfully separating birth parents and their children?

Adoption agencies are not just social welfare institutions, but also businesses motivated by money. Lawsuits, as a cost of doing business, can affect their bottom line. The adoption industry has been responsive in the past to lawsuits from adoptive parents seeking money damages, which suggests that lawsuits from birth parents that affect the bottom line could incentivize better behavior from adoption agencies. This Article explores possible tort causes of action available to birth parents, including a proposed new tort of wrongful family separation, with the long-term objective of changing adoption agency behavior, potentially transforming adoption practice.

Article

by Michael L. Rustad & Elif Kavusturan

Software licensing and software-as-a-service contracts are innovative in their streamlining of products, as well as in their contracting practices, done in both a legislative and common law void. The dearth of case law and the legislative void leaves both software providers and customers with no guidance on contract law issues on software licensing and cloud computing. Since the 1980s, software is at the core of most modern organizations, most products and most services. Part II of this Article examines how the U.C.C. evolved as the primary source of law for the first generation of computer contracts during the mainframe computer era. Part III examines how courts have overextended U.C.C. Article 2, as the main source of law for software licensing, to the limits. Part IV argues that the ALI and the NCCUSL should propose a new Article 2B for software licensing. Part V recommends a new Article 2C for “software as a service.”

Article

by Todd Peterson

This Article posits that two significant problems in the Supreme Court’s personal jurisdiction case law have led to incoherent and irreconcilable results in cases involving individual and corporate defendants. First, the Court has imposed substantive due process limitations on a state’s assertion of personal jurisdiction without ever explaining why such limitations are constitutionally required. Second, in the absence of clearly enunciated principles of substantive due process, the Supreme Court has relied on poorly defined categories of the types of contacts that would satisfy the substantive due process requirement. In Part I, the Article discusses the history of the U.S. Supreme Court’s substantive due process limitations on personal jurisdiction and, in particular, the standards for corporate-activities-based jurisdiction before the Court’s recent cases on that issue. Part II discusses the Court’s failure to provide a convincing theoretical justification for imposing substantive due process limitations on personal jurisdiction. It also discusses the consequences of that failure in three doctrinal areas of personal jurisdiction law, the traditional basis of service on an individual in the forum state, specific jurisdiction and corporate-activities-based jurisdiction. Part III then analyzes in detail the four recent Supreme Court cases on personal jurisdiction, and discusses the mistaken assumptions underlying those decisions. Part IV explains how the Court’s personal jurisdiction rules, as a whole, suffer from theoretical bareness, the ambiguity of the substantive due process categories of jurisdiction, and the rigidity of the Court’s substantive due process analysis. Finally, in Part V, the Article offers some ideas for how the Court could begin to remedy the many problems with personal jurisdiction law.

Article

by William W. Berry

In light of the dehumanizing effects of a felony conviction, the Eighth Amendment sentencing principle requiring individualized sentencing determination in capital sentences and juvenile life-without-parole sentences should be extended to all felony cases. In Woodson v. North Carolina, the Supreme Court proscribed the use of mandatory death sentences. One year later, in Lockett v. Ohio, the Court expanded this principle to hold that defendants in capital cases were entitled to “individualized sentencing determinations.” The Court’s reasoning in both cases centered on the seriousness of the death penalty. Because the death penalty is “different” in its seriousness and irrevocability, the Court required the sentencing court, whether judge or jury, to assess the individualized characteristics of the offender and the offense before imposing a sentence. In 2012, the Court expanded this Eighth Amendment concept to juvenile life-without-parole sentences in Miller v. Alabama. Specifically, the Court held that juvenile offenders also were unique—in their capacity for rehabilitation and their diminished culpability—such that they too deserved individualized sentencing determinations. The seriousness of the sentence in question, life without parole, also factored into the Court’s decision to extend the individualized sentencing requirement to juvenile life without parole cases. Felony convictions, however, are serious too. The current consequences for a felony conviction in most states result in dehumanizing effects that extend far beyond release including loss of right to vote, state surveillance, and loss of the right to own a firearm, not to mention social stigma. As such, this Article argues for an extension of the Court’s Eighth Amendment individualized sentencing principle to all felony cases. Doing so would require the Court to overrule its prior decisions, including Harmelin v.Michigan, but the Court’s opinion in Miller hints at a willingness to do just that. While initially valuable in ensuring that capital cases received heightened scrutiny, the unintentional consequence of the Court’s differentness principle is that non-capital cases have received almost no constitutional scrutiny. The individualized sentencing determination requirement provides one simple way to begin to remedy this shortcoming. Adopting this doctrinal extension would have three major consequences: (1) it would provide each defendant his day in court in the face of serious, lifelong deprivations; (2) it would eliminate draconian mandatory sentencing practices; and (3) it would shift the sentencing determination away from prosecutors back to judges. Part I of the Article describes the evolution of the individualized sentencing doctrine. Part II exposes the unintended consequences of the differentness concept, and unearths the theoretical principles behind individualized sentencing. In Part III, the Article argues for the expansion of the current doctrine and explains why the current roadblocks are not insurmountable. Part IV then explores the consequences of broadening the application of the individualized sentencing doctrine for defendants, legislators, and judges alike.

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