Corporate Law in the U.S.

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law cases (Corporate Law Issues cases)

Trustees of Dartmouth College v. Woodward, 17 U.S. 518 (Wheat) (1819)

The Court had to decide whether "the act of incorporation . . . creat[ed] a civil institution, to be employed in the administration of the government" or created a private charitable institution. What did it decide? What was its reasoning?

Dartmouth College was originally chartered as part of a contract between the King of England and the trustees of the College. The Court ruled that this contract was still valid even though the United States was no longer a British colony. The Court ruled that "the corporation in question is not a civil, although it is a lay corporation. It is an eleemosynary corporation. It is a private charity, originally founded and endowed by an individual, with a charter obtained for it at his request, for the better administration of his charity" (Dartmouth, 1819). Contracts refer to private property rights and the Constitution states "that no person shall be deprived of his property, immunities or privileges, put out of the protection of the law, or deprived of his life, liberty or estate, but by judgment of his peers, or the law of the land" (Dartmouth, 1819).

Q2. The Court also had to decide whether the charter amounted to a contract since the U.S. Constitution prohibits interference with contract. How did the Court address the argument that none of the parties to the contract -- the original donors of land and money and the original students -- were parties to the action?

The state's justification for its interference lay in the fact that the original parties of the contract effectively no longer existed. The Court ruled, however, that this did not automatically make the College a private charity. "A college is as much a private corporation as an hospital; especially, a college founded as this was, by private bounty. A college is a charity" (Dartmouth, 1819).

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Since the creation of the U.S., the charter and administration of the College had substantively changed, with new trustees and even a new number of trustees. Thus "in substance, a new corporation is created, including the old corporators, with new powers, and subject to a new control; or that the old corporation is newly organized and enlarged, and placed under an authority hitherto unknown to it" (Dartmouth, 1819). The life of the corporation outlasts the life of the persons who created it.

Q3. Characterize how the Supreme Court viewed a corporation, based on your reading of the decision. Don't just quote the decision -- was a corporation answerable to its founders, the beneficiaries of "the object for which it was created" (the students, in Dartmouth's case) or to other persons?

The corporation was answerable effectively to the object for which it was created: i.e., it was an independent entity. The corporation had an existence beyond the physical persons who originally contracted it.

Citizens United v. Federal Election Commission, 130 S. Ct. 876 (2010)

Q1. The Court ruled that "No sufficient governmental interest justifies limits on the political speech of nonprofit or for-profit corporations." Thus, Dartmouth College as a corporation can engage in political speech. So can The Procter & Gamble Company and JPMorgan Chase & Co. Is this a good thing or not? Think about it from the perspective of a member of senior management, a junior employee, an individual shareholder, a pension fund owning lots of shares, etc. Explain your reasoning.

Building upon the notion that corporations exist under the law as independent entities, corporations as entities may be viewed as engaging in political speech and those rights cannot be violated. This poses a problem, however, given that a corporation is really a fictional, not an actual person under the law and does not possess free will like an individual human being. It is very easy to.....

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