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VOL. 129 | NO. 130 | Friday, July 04, 2014

Corporations are People? It's a Real Legal Concept

NANCY BENAC | Associated Press

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WASHINGTON (AP) – There may be more to that "we the people" notion than you thought.

These are boom times for the concept of "corporate personhood."

Corporations are people?

Mitt Romney got mocked during the 2012 presidential campaign for the very idea.

But it turns out the principle has been lurking in U.S. law for more than a century, and the Supreme Court, in a 5-4 ruling, gave it more oomph this week when it ruled that certain businesses are entitled to exercise religious rights, just as do people.

Justice Samuel Alito, writing for the court's majority, said protecting the religious rights of closely held corporations, which are often small, family-run businesses, "protects the religious liberty of the humans who own and control them."

In its ruling, the court said closely held corporations with religious objections cannot be forced to pay for their employees' insurance coverage for contraception, as required under President Barack Obama's health care law.

Four years earlier, the corporations-as-people idea got another big boost when the court voted 5-4 to expand the free speech rights of businesses and labor unions by striking down limits on their political spending. That unleashed a massive flood of private money into political campaigns.

The rulings have triggered renewed debate over the idea of corporations as people, which surfaces in legal cases stretching back to the 1880s.

There are wonky legal discussions about the differences between "artificial persons" (corporations) and "natural persons" (the kind with flesh and blood).

TV comics riff on the notion that fake people have more rights than real people.

There's a petition drive to amend the Constitution to ensure that "inalienable rights belong to human beings only."

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All of this calls for a brief reality check: Corporations really aren't people.

Everyone knows this.

Even Romney, who was criticized for being out of touch when he famously told a protester that "corporations are people, my friend."

The point the GOP presidential candidate was trying to make was that raising taxes on corporations would affect real people because "everything corporations earn ultimately goes back to people."

The Supreme Court was reasoning in a similar vein when it ruled that the real people who run closely held corporations should be able to exercise religious rights just as do individuals.

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Alito, in his ruling, described the concept of corporate personhood as "a familiar legal fiction" that retains its usefulness.

"It is important to keep in mind that the purpose of this fiction is to provide protection for human beings," he wrote.

But Justice Ruth Bader Ginsburg, in her dissent, zinged Alito and the majority for "an expansive notion of corporate personhood."

She said the "startling breadth" of the court's ruling could clear the way for corporations to opt out of all sorts of other legal requirements if they can cite a religious objection.

Hillary Rodham Clinton, a potential Democratic candidate for president in 2016, voiced similar concerns.

"Just think about this for a minute," she said. "It's the first time that our court has said that a closely held corporation has the rights of a person when it comes to religious freedom."

Some opponents of the ruling see the expanding view of corporate personhood as a legal fiction run amok.

They say the latest court ruling could encourage corporations to try to claim greater rights in other areas as well – arguing against cruel and unusual punishment if they think a fine is too big, for example, or even seeking a corporate right to bear arms. The courts already have extended to corporations Fourth Amendment rights against unreasonable searches but have declined to provide them Fifth Amendment protection from self-incrimination.

After the Supreme Court's 2010 campaign finance ruling, attorney Burt Neuborne lamented: "At the rate the court is going, soon we will be able to be adopted by a corporation. Maybe even marry one."

Now, Neuborne calls the latest court ruling "an immense perversion of the Constitution. Robots don't have rights, trees don't have rights, and neither do corporations."

He warned that the ruling could backfire against corporations if the court goes too far in extending individual rights to businesses. Breaching the wall between corporations and their shareholders, he said, could ultimately make corporations liable for the actions of their shareholders and vice versa.

For example, if Hobby Lobby, one of the companies that sued against covering some forms of contraception, owed someone money, its creditors might try to go after the shareholders, he said.

"I suspect there's going to be trouble in paradise down the road," said Neuborne, who wrote a brief for the Brennan Center for Justice at New York University's School of Law arguing against extending religious rights to businesses.

Attorney John Bursch, a former Michigan solicitor general, said it makes sense that corporations have some of the same rights as individuals. After the court extended free-speech rights to corporations, "it's not a big leap to say that a First Amendment protection with respect to religious liberty would also apply to a corporation," he said.

Whether more rights should be extended, Bursch said, "is a little harder, and we'd all need to think about that."

Follow Nancy Benac on Twitter at twitter.com/nbenac

Copyright 2014 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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