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The widening sense of crisis may have served as a catalyst for orthodox legal thinkers, as they defensively strove to systematize and tighten up the structure of Classical Legal Thought. At the same time, it induced other Americans to reexamine the fundamental premises of social thought. During the late nineteenth century, Dorothy Ross has shown, American social thinkers experienced a "crisis of exceptional ism" that brought into question the very foundations of a longstanding American faith that, through the guidance of Providence, the nation could manage to escape from the torments of Europe.
The conviction that only a decentralized political and economic system could increase wealth while maintaining freedom and avoiding the tyranny of European statism was a central tenet of American cxceptionalism. If increasing inequality challenged the premise that an impersonal and self-executing market system could produce, "as if by an invisible hand," a just distribution of wealth, the emergence of large, concentrated economic enterprises drew into question the very naturalness and necessity of decentralized economic institutions. The project of re-defining the market system to recognize a legitimate role for the new corporate giants represented a central theme in American social thought at the turn of the century. It expressed no less than a crisis of legitimacy, testing the intimate relationship between classical economic and social theories, on the one hand, and decentralized political and economic institutions, on the other. An old conservativism, rooted in an increasingly nostalgic vision of the naturalness and necessity of a decentralized, competitive market system, struggled with a new conservatism that proclaimed the inevitability and efficiency of large organizations that derived from economies of scale.
The struggle between old and new conservatism was one of the most important background conditions for the challenge to Classical Legal Thought. Rooted in an old conservative picture of the world, Classical Legal Thought was constantly criticized for its insistence on an anachronistic vision of social relations, a vision that expressed outmoded individualistic ideals that had been nurtured by decentralized institutions.
The Santa Clara Case and Corporate Theory
The 1886 decision of the U.S. Supreme Court in Santa Clara v. Southern Pacific Railroad' has always been puzzling and controversial. From the time Progressive constitutional historians began to mount their attack on the Supreme Court after the Lochner decision in 19o5,; the Santa Clara case became one of the prominent symbols of the subservience of the Supreme Court during the Gilded Age to the interests of big business.4
The Santa Clara case held that a corporation was a person under the Four teenth Amendment and thus was entitled to its protection. For such a momentous decision, the opinion in the Santa Clara case is disquietingly brief-just one short paragraph-and totally without reasons or precedent. Indeed, it was made without argument of counsel. It declared:
The court does not wish to hear argument on the question whether the provision in the Fourteenth Amendment to the Constitution, which forbids a State to deny to any person within its jurisdiction the equal protection of the laws, applies to these corporations. We are all of opinion that it does.'
Can it be that so casual a declaration as this did in fact represent a major controversial step in American constitutional history? Did the decision actually represent a significant departure from American constitutional jurisprudence? I think not. The Santa Clara decision was not thought of as an innovation but instead was regarded as following a line of cases going back almost seventy years to the Dartmouth College Case.6
My interest in the Santa Clara case extends far beyond the question of whether it was consistent with previous constitutional decisions. Whatever the Supreme Court justices had in mind, the case is usually thought to express a new theory of the corporation or, as it soon became fashionable to call it, of "corporate personality." The Santa Clara case is thus asserted to be a dramatic example of judicial personification of the corporation, which, it is argued, radically enhanced the position of the business corporation in American law.7
But the question remains whether the Santa Clara case did in fact proceed from a theory that the corporate entity was no different from the individual in its constitutional entitlements. To answer this question, I provide a long excursion into the history of the theories of the corporation that were prevalent when the Santa Clara case was decided. I hope to show, first, that a "natural entity" or "real entity" theory of the corporation that the Santa Clara case is supposed to have adopted was nowhere to be found in American legal thought when the case was decided; second, that those who argued for the corporation as well as Supreme Court Justice Stephen Field, who decided in favor of the corporation in two elaborate circuit court opinions presented below,8 clearly had no conception of a natural entity theory of the corporation; and, third, that when the natural entity theory emerged about a decade later, it was only then gradually absorbed into the Santa Clara precedent to establish dramatically new constitutional protections for corporations.
So initially, I show not only that the real meaning of the Santa Clara decision has not been understood, but also that it did not express the pro-big-business theory of the corporation that came to fruition shortly before the First World War.
This focus on the Santa Clara case and on the history of corporate theory is designed to explore a still more difficult question about the role of legal theory in legal decision. For almost forty years after 189o, American jurists, like their German, French, and English counterparts, were preoccupied with the theory of corporate personality. Then the issue suddenly vanished from controversy. The last great analysis of the question, which is sometimes thought' to have permanently put it to rest, appeared in a 1926 Yale Law journal article' by the philosopher John Dewey. Writing in sympathy with the powerful contemporaneous Legal Realist attack on "conceptualism," Dewey sought to show that theories of corporate personality were infinitely manipulable, and that at different times the same theories had been used both to expand and to limit not only corporate but also trade union powers. "Each theory" of group personality, he maintained, "has been used to serve . . . opposing ends."
[I]t has been employed both to make the state the supreme and culminating personality in a hierarchy, to make it but primus inter pares, and to reduce it to merely one among many. . . . Corporate groups less than the state have had real personality ascribed to them, both in order to make them more amenable to liability, as in the case of trade-unions, and to exalt their dignity and vital power, against external control. . . . The group personality theory has been asserted both as a check upon what was regarded as anarchic and dissolving individualism, to set up something more abiding and worthful than a single human being, and to increase the power and dignity of the single being as over against the state."
There are very few discussions of corporate personality after Dewey. The Legal Realists, in general, succeeded in persuading legal thinkers that highly abstract and general legal conceptions were simply part of what Felix Cohen, quoting Von Jchring, derisively called "the heaven of legal concepts."" Only more concrete statements of functional relations, Cohen argued, were useful in deciding legal questions.
I wish to dispute Dewey's conclusion that particular conceptions of corporate personality were used just as easily to limit as to enhance corporate power. I hope to show that, for example, the rise of a natural entity theory of the corporation was a major factor in legitimating big business and that none of the other theoretical alternatives could provide as much sustenance to newly organized, concentrated enterprise.
The central thrust of the Realist legacy ultimately derives from Holmes's famous statement, "General propositions do not decide concrete cases." 13 Holmes, as well as John Dewey and Felix Cohen after him,14 was attacking the formalist claim that one could reason deductively and without discretion from a general concept to a particular application. As a matter of legal logic, their attack on formalism continues to be as powerful today as it was fifty years ago. But their attempt to discredit the the
n orthodox claim to a non-political, non-discretionary mode of legal reasoning led them to ignore the obvious fact that when abstract conceptions are used in specific historical contexts, they do acquire more limited meanings and more specific argumentative functions. In particular contexts, the choice of one theory over another may not be random or accidental because history and usage have limited their deepest meanings and applications.
The Santa Clara Case in Context: The Real Meaning of the Santa Clara Decision
The Santa Clara case, along with several companion cases, came to the U. S. Supreme Court from California." They presented the question whether the equal protection clause of the Fourteenth Amendment barred California from taxing corporate property-in this case, railroad property-differently from individual property.
These California tax cases were clearly regarded as important and momentous events in giving meaning to the newly enacted Fourteenth Amendment. Above all, they represented another effort mounted by business interests after their narrow failure to get the Supreme Court to construe the Fourteenth Amendment broadly in the Slaughterhouse Cases.16 In that decision, Justice Samuel Miller, speaking for a five-man majority, not only offered an extremely narrow construction of the privileges and immunities clause but also construed the equal protection clause as limited to protecting the status of recently freed slaves. In dissent, Justice Stephen Field, who argued for a much more expansive definition of each of the provisions of the Fourteenth Amendment, sought, in effect, to create a general federal charter of constitutional rights. 17
The central issue in the Slaughterhouse Cases was whether the Fourteenth Amendment had radically altered the constitutional relationship between the states and the federal government. Justice Miller's "race theory" interpretation of the Fourteenth Amendment, drawing upon traditional fears of centralized power, was meant to produce as little change in the federal balance of power as possible. By contrast, Justice Field interpreted the Fourteenth Amendment as ratifying a dramatic alteration in the federal system as a consequence of the Civil War. 18
So when the California tax cases came before Justice Field, sitting on circuit, the most basic and controversial question before him was whether it was possible, after the Slaughterhouse decision, to construe the equal protection clause as extending to questions not related to race. The central thrust of his decision was to continue his battle, which was eventually successful, to expand the meaning of the amendment beyond the boundaries of race relations. Indeed, the real significance of the Supreme Court's decision in Santa Clara may be precisely that it did go beyond justice Miller's Slaughterhouse effort to confine the scope of the equal protection clause.
How (lid Justice Field justify applying the equal protection clause to corporations when the language of the amendment was written to protect persons?
Let us turn to the major argument in the brief on behalf of the corporation before the U.S. Supreme Court. Written by the eminent California lawyer John Norton Pomeroy, the central argument was that the Fourteenth Amendment protects the property rights not of some abstract corporate entity but rather of the individual shareholders. As Pomeroy declared in his brief, provisions of state and federal constitutions "apply . . . to private corporations, not alone because such corporations are `persons' within the meaning of that word, but because statutes violating their prohibitions in dealing with corporations must necessarily infringe upon the rights of natural persons. In applying and enforcing these constitutional guaranties [sic] corporations cannot be separated from the natural persons who compose them." 19 Pomeroy argued:
That this conclusion must be true, appears from the following principle: Whatever be the legal nature of a corporation as an artificial, metaphysical being, separate and distinct from the individual members, and whatever distinctions the common law makes, in carrying out the technical legal conception, between property of the corporation and that of the individual members, still in applying the fundamental guaranties of the constitution, and in thus protecting rights of property, these metaphysical and technical notions must give way to the reality. The truth cannot be evaded that, for the purpose of protecting rights, the property of all business and trading corporations is the property of the individual corpora tors. A State act depriving a business corporation of its property without due process of law, does in fact deprive the individual corpora tors of their property. In this sense, and within the scope of these grand safeguards of private rights, there is no real distinction between artificial persons or corporations, and natural persons.20
Justice Field made exactly the same point in his circuit court opinion in the companion San Mateo case:
Private corporations are, it is true, artificial persons, but . . . they consist of aggregations of individuals united for some legitimate business. . . . It would be a most singular result if a constitutional provision intended for the protection of every person against partial and discriminating legislation by the states, should cease to exert such protection the moment the person becomes a member of a corporation. . . . On the contrary, we think that it is well established by numerous adjudications of the supreme court of the United States . . . that whenever a provision of the constitution, or of a law, guaranties to persons the enjoyment of property . . . the benefits of the provision extend to corporations, and that the courts will always look beyond the name of the artificial being to the individuals whom it represents. 21
The arguments of Pomeroy and Field are very different from a real entity or natural entity theory of corporate personality that is often ascribed to the Santa Clara case but that in fact emerged some time after Santa Clara was decided. Only this later theory can truly be said to personify the corporation and treat it just like individuals.
Corporate Theory in the Late Nineteenth and Early Twentieth Centuries
The theory of corporate personality attributed to the Santa Clara case-the natural entity theory-was not available at the time the case was decided. This becomes clear after reviewing the American legal struggle to re-conceptualize the corporation and the philosophical debates that arose in the late nineteenth and early twentieth centuries on the nature of corporate personality.
THE PHILOSOPHICAL DEBATES. There was a flood of writing on the subject of corporate personality in Germany, France, England, and America near the turn of the century. Why should so metaphysical a subject, even if it attracted the speculative instincts of German and French jurists, have appealed to the practical, earth-bound sensibilities of English and American legal thinkers?
The intellectual history of the subject is quite clear. It was introduced into Western thought by the publication in 1881 of the third volume of the German legal theorist Otto Gierke's great work on the history of associations in German legal theory.22 By 1900, dozens of books had been published in French and German on "group personality," "corporate personality," or, as the French liked to call it, "moral personality."23 It became accessible to English and American thinkers after 1900 when Frederic Maitland, the great English legal historian, published a portion of Gierke's work under the title Political Theories of the Middle Age,24 to which Maitland contributed an introduction. Between 1900 and 1904 Maitland published four other articles on the early history of corporations, culminating in his paper "Moral Personality and Legal Personality,"25 which sought to advance Gierke's idea that corporations were "real" or "natural" entities that possessed legal personalities deserving of recognition. In America, Gierke's work was first noticed by the German-trained University of Chicago Professor Ernst Freund, who in 1897 published The Legal Nature of Corporations. 26
If the intellectual history of the subject is relatively clear, the question remains of why so abstruse an inquiry should have engaged the attention of AngloAmerican lawyers. Maitland-wrongly, it turns out-lamented the fact that the English could not have cared less. He wondered "[w]hy we English people are not interested in a problem that is being seriously discussed in many other lands,"27 and his article "Trust and Corporation"28 sough
t to explain how the trust "enabled us to construct bodies which were not technically corporations and which yet would be sufficiently protected from the assaults of individualistic theory."29
Americans, in fact, were especially receptive to questions involving group theory. Even before Gierke was known or Maitland's writings had crossed the Atlantic, American legal thinkers had begun to wrestle with the problem of conceptualizing group personality and, in particular, the corporation. Beginning in the 189os, they too sought to develop a picture of the corporation as a real or natural entity, as well as to explain or justify the inscrutable holding of the U. S. Supreme Court in the Santa Clara case.
What united all of these inquiries, whether German, French, English, or American, was the spectacular rise to prominence during the late nineteenth century of the business corporation as the dominant form of economic enterprise. In 18go, justice Stephen Field estimated that three-quarters of the wealth of the United States was controlled by corporations. 30 This growth in the corporate form of economic enterprise presented essentially two fundamental challenges to tradi tional Western legal theory. First, in all of these countries, the corporation was treated as a legal fiction or an artificial entity created by the state. Gierke and his successors devoted themselves to showing that the corporation-indeed, group activity generally-was real and natural, not artificial or fictional. The proponents of Realism ranged all the way from overt apologists for big business, whose primary objective was to free the corporation from a theory that justified special state regulation, to those who for a variety of reasons wished to attack nineteenthcentury liberal individualism.