We the Corporations Read online

  Literacy, propelled by compulsory education laws, also boomed in the Gilded Age, and anyone who read the New-York Daily Tribune the day of Conkling’s appearance before the Supreme Court would have learned from an editorial that “constitutional questions of the gravest interest” were at issue in the case. On the surface, San Mateo County v. Southern Pacific Railroad Company was just a simple tax dispute. The railroad was challenging a California law that prohibited railroads, but not individuals, from deducting mortgages when calculating the value of their land for tax purposes. The title of the Daily Tribune editorial, however, told readers what the case was really about: “Civil Rights of Corporations.”5

  “CIVIL RIGHTS OF CORPORATIONS,” NEW-YORK DAILY TRIBUNE, DECEMBER 19, 1882.

  Conkling was claiming that California’s ban on railroads deducting mortgages, which did not apply to other landowners, including individuals and other businesses, was a violation of the Southern Pacific’s right to equal protection and due process under the Fourteenth Amendment. San Mateo County admitted that the law treated railroads differently but insisted there was good reason for the disparity. By necessity, the railroads owned enormous amounts of real estate, much of it mortgaged for more than the market value of the land itself. If the Southern Pacific and its sister line, the Central Pacific, were allowed to deduct their mortgages like other landowners, the companies—the state’s most high-profile and profitable big businesses—would pay no real estate taxes. Californians thought the special tax rule was necessary to avoid such profound unfairness. In the eyes of the Southern Pacific and Central Pacific railroads, however, the tax discriminated against railroad corporations.

  California’s two leading railroads were both founded by the robber barons Leland Stanford and Collis P. Huntington, who together with their partners dominated transportation in the West—and gained a stranglehold on politics in the West too, as the Southern Pacific’s nickname reminded. Yet even an Octopus loses its grip sometimes, and in 1879, with California temporarily in the hands of populist reformers—intellectual heirs of the Jeffersonian and Jacksonian opponents of concentrated corporate power—a new state constitution put the railroad tax in place. The companies’ tax bills soared.6

  To fight the tax increase, the Southern Pacific and the Central Pacific undertook a litigation campaign that could have served as a template for future civil rights movements. First, the railroads engaged in civil disobedience. They simply refused to pay the taxes and launched a public relations campaign in the newspapers against the law. The counties, which were responsible for collecting the tax, were forced to go to court seeking redress. The courts, however, were exactly where the railroads wanted the controversy to be decided. Judges, especially the ones in federal court, were not likely to share the anticorporate populism of California voters.

  The railroad corporations were constitutional first movers who employed innovative tactics to secure new rights. They envisioned the lawsuits as a form of strategic litigation, or what their lawyers called “test cases,” to determine whether corporations had the same rights as ordinary people to equal protection and due process under the Fourteenth Amendment. The railroads did not want merely to lower their tax bills in California. They wanted to establish broad new protections against burdensome regulations of all sorts. Their remarkable series of cases—more than sixty in all—would become “landmarks in American constitutional history,” wrote historian Howard Jay Graham, a leading expert on the Fourteenth Amendment, and “an important turning point in our social and economic development.” Graham was referring primarily to the outcome of these cases, which expanded corporate constitutional rights, but he also could have been describing the railroads’ strategy of civil disobedience backed by strategic test cases as a method for pursuing equal rights.7

  Conkling’s case, coming out of California’s San Mateo County, was the first of the test cases to reach the Supreme Court. Assisting Conkling was a team of well-known lawyers: S.W. Sanderson, former chief justice of the California Supreme Court; George Edmonds, a US senator from Vermont and former presidential candidate; and John Norton Pomeroy, one of the nation’s most influential law professors. The Southern Pacific, like so many corporations before and since, was willing and able to hire the best lawyers in the country, the kind that could implement a novel but potentially rewarding strategy of test cases to expand, as the Tribune said, the civil rights of corporations.8

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  THE SOCIETY WOMEN WHO sat in on the Supreme Court the morning of the Southern Pacific’s test case would have been impressed by the dashing Conkling. Standing six foot three, the handsome lawyer, who favored boxing for exercise, was described as “erect and muscular, with wavy sandy-blond hair, a full pointed beard, and, falling across his broad forehead, a golden Hyperion curl.” He was a well-known ladies’ man, and his confident dress, often an elegant vest worn with a black tailcoat and a brightly colored tie, attracted ample attention.9

  He was also, as one of his rivals was forced to concede, a “great master of language.” Conkling had begun the study of oratory at the age of thirteen under the tutelage of an English professor who himself had learned the art from the Corporation’s Lawyer himself, Daniel Webster. With a powerful, almost musical voice, Conkling peppered his speeches with precise quotations of Shakespeare, Edmund Burke, and the Bible, all from memory. Conkling, it was said, much like Webster, did not merely persuade juries, “he overpowered them and made his will theirs.” As a young lawyer, Conkling once won a startling $18,000 verdict against one of Cornelius Vanderbilt’s railroads; when the losing lawyer suggested an appeal, Vanderbilt scolded, “Pay it! If Conkling tries this case again, he may get fifty thousand!”10

  For most of his adult life, Conkling employed his oratorical skills on behalf of the Republican Party while serving in Congress, first as a congressman from Utica, New York, and then as a senator. He was, like Webster, an unabashed partisan at a time of truly unparalleled partisanship. Americans today consider the current partisan rancor in Washington unprecedented, but when Conkling arrived in the nation’s capital in 1858, on the eve of the Civil War, even the galleries in Congress were politically segregated. Northern spectators sat on one side and southern spectators sat on the other. And, of course, the divide back then led to a bloody armed conflict. After the Civil War, Conkling became a leader of his party, helping to usher in Reconstruction and securing civil rights legislation to aid the newly freed slaves. He was closely allied with the Union general turned president, Hiram Grant, who preferred to be called by his more heroic-sounding middle name, Ulysses. It was Grant who first nominated Conkling to the Supreme Court, to be chief justice no less. That was in 1873 and Conkling, at the height of his power in the Senate, declined the post. Later, Grant expressed hope that Conkling would succeed him in the White House.11

  Conkling remained in the Senate until 1881, when he returned to New York and the practice of law. He sought out wealthy clients, and his very first was Jay Gould, the notorious speculator who years later would be named by Fortune as one of the fifteen richest people of all time. Soon after, Conkling was hired by successful inventor and entrepreneur Thomas Edison, who had already gained fame for the phonograph and was then undertaking the first effort to illuminate lower Manhattan with electric lighting. Conkling charged clients like these more than four times the typical lawyer’s fee. Not too many lawyers could say they had once been nominated to be chief justice of the United States.12

  The Southern Pacific had no difficulty paying Conkling’s hefty retainer. The railroads were the largest and most politically powerful corporations of the day. They had to be. The capital required to lay tracks through the wilderness and across mountains like the Appalachians and Rockies was without precedent, as were the challenges of managing such dispersed operations. As we saw earlier, the railroads began to significantly change the American economy in the 1840s and 1850s, and along the way expanded the stock market. Railroad innovations in the Gilded Age would also
transform the corporation’s internal organization and size, giving rise to the first modern business corporations.

  With some exceptions, traditional business enterprises of early nineteenth-century America tended to be owned by an individual, a family, or a small number of partners. Businesses were specialized to focus on one aspect of commerce, such as production, sale, or distribution of particular types of goods, and they were largely local. They hired, sold to, and served primarily people in the vicinity, and the owners supervised a relatively small number of employees. The railroads created a new model. Employees were far more numerous and scattered along the lines. Business functions were separated into multiple divisions or units, and a hierarchical organizational structure was created to control them. Within each unit, managers managed not only laborers but also other managers. This was the beginning of what economic historian Alfred Chandler called “managerial capitalism.” Prior to 1840, no American corporation had these features. By 1920, this kind of corporation, with layers of hierarchical organization ruling over multiple divisions, had become the dominant type of business firm in major sectors of the American economy.13

  Railroads, which had already experienced explosive growth before the Civil War, built more than 100,000 miles of additional tracks in the two decades following it. As before the war, graft remained popular with politicans and the railroads seeking to persuade them for rights of way, eminent domain power, and other privileges. When Congress was deciding whether to subsidize the building of the first transcontinental railroad in 1861, Leland Stanford sent one of his men to Washington with a suitcase full of Central Pacific stock certificates to dole out liberally to lawmakers. According to the best estimates, the Central Pacific Railroad alone distributed to lawmakers and lobbyists $500,000 annually—equal to roughly $13 million today. As congressional leader James G. Blaine explained the political reality in postbellum America, “to make the wheels revolve we must have grease.”14

  When bribes were not enough to prevent unfavorable legislation, railroads like the Southern Pacific hired the nation’s top lawyers—men like Roscoe Conkling—and mounted their attack in the courts.

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  IN THE SAN MATEO CASE, Conkling’s argument on behalf of the Southern Pacific focused on the Fourteenth Amendment, which from the beginning had been controversial. For decades after ratification, southerners insisted that the amendment had never been properly ratified. This may have been mostly proverbial sour grapes, but that is not the entire story. In fact, the ratification of the Fourteenth Amendment, one of the Constitution’s most important and influential provisions, has always been a little bit suspect.

  Article V provides two ways of amending the Constitution. The first, never yet used, is through a constitutional convention, which Congress is obligated to call upon the application of two-thirds of the state legislatures. The second way is for Congress to propose an amendment for the states to approve. This latter method, which has been used for all twenty-seven amendments, requires a favorable vote by two-thirds of each house and then ratification by three-fourths of the states. It was this last requirement that raised questions about the Fourteenth Amendment.

  In 1866, after Congress approved the proposed amendment Conkling had helped to write, many state legislatures acted quickly. Connecticut and New Hampshire voted in favor, followed shortly after by New Jersey, Oregon, Vermont, and Ohio. Ten southern states, including North Carolina, South Carolina, and Louisiana, predictably voted against it; Tennessee was the sole Confederate state to approve the amendment—and only then because opponents miscalculated and boycotted the vote in a vain attempt to prevent the legislature from having a quorum. The amendment, which was controversial, stalled in several Union states, including California, Maryland, and Delaware. By March of 1867, it was clear that the amendment would not obtain the three-fourths of the states necessary.

  The Republicans who controlled Congress, including Conkling, responded by passing the Reconstruction Acts, which effectively disbanded the governments of all the former Confederate states, save Tennessee. The Reconstruction Acts created new, multiracial Reconstruction governments for these recalcitrant states and required the exclusion from office of anyone who served in the Confederacy. Congress also warned the southern states that they would not be fully admitted back into the Union until they ratified the Fourteenth Amendment.15

  This bit of congressional hardball only made the proposed amendment more dubious in the eyes of some. In the next elections, the amendment was a major issue, and Democrats opposed to ratification won control of several statehouses in the North. With the amendment still short of the necessary three-fourths of the states, legislators in New Jersey and Ohio voted again, this time rescinding their earlier approval. Nevertheless, in July of 1868, after new Reconstruction governments in North Carolina, South Carolina, and Louisiana voted to approve the amendment, Congress passed a resolution declaring the Fourteenth Amendment ratified. The three-fourths threshold was only met with the inclusion of the two states that had rescinded their earlier endorsements, New Jersey and Ohio. Defenders of Congress’s actions insisted that states like New Jersey and Ohio could not change their minds about ratification, even though the larger ratification process was still under way. There was certainly merit to that view, although there were questions about whether the principle had been applied evenhandedly. Congress had eagerly recognized the second, subsequent votes of North Carolina, South Carolina, and Louisiana, southern states that had originally voted against the amendment.

  While other southerners sought to undermine the legitimacy of the Fourteenth Amendment, John Archibald Campbell decided the wiser strategy was to use the amendment to serve southern ends instead. An ardent segregationist, Campbell was also a former Supreme Court justice. He had been one of the three Taney court justices who voted to overturn Bank of the United States v. Deveaux because he feared an expansive definition of “Citizens” might include slaves. Campbell had resigned from the court in 1861, two weeks after South Carolina militiamen attacked Fort Sumter. He became a leader in the Confederate government, and, after the war, returned to private practice as a lawyer. Campbell understood how Washington worked, especially the Supreme Court, and knew the Fourteenth Amendment was not about to be declared invalid. Instead of trying to overturn the amendment, Campbell would seek to exploit it in an attempt to defang Reconstruction.

  By all accounts brilliant, Campbell graduated from the University of Georgia at the precocious age of 14 and, thanks to a special act of the state legislature, was admitted to the bar at 18. He moved to Alabama and made such a quick impression there that by the age of 25 he had been twice offered appointment to that state’s supreme court. Campbell, who loved the practice of law, declined both times. In 1851, after the 40-year-old Campbell argued six cases in the Supreme Court of the United States in one term, the impressed justices lobbied President Franklin Pierce to appoint him to the high court when the next vacancy arose. Campbell served as an associate justice from 1853 until the outbreak of the Civil War. Although he thought secession a mistake, he was forever loyal to the South.16

  AFTER RESIGNING FROM THE SUPREME COURT TO JOIN THE CONFEDERACY, JOHN CAMPBELL SOUGHT TO USE THE FOURTEENTH AMENDMENT TO PROTECT ECONOMIC RIGHTS IN HIS FIGHT AGAINST RECONSTRUCTION.

  After the Civil War, Campbell became a leader of the movement to fight Reconstruction and reassert white supremacy. In Louisiana, where Campbell then resided, a popular saying among reactionaries was, “Leave it to God and Mr. Campbell.” In a series of cases in the early 1870s, he represented a group of New Orleans butchers who sought to overturn a law enacted by Louisiana’s Reconstruction government requiring the city’s butchers to slaughter their meat in a centralized facility. Previously, local butchers carved up livestock anywhere they liked and dumped the entrails and waste from more than 300,000 animals slaughtered annually into the Mississippi River, which was also the city’s main source of drinking water. The result was repeated epidemics of yel
low fever and cholera. An outbreak in 1853 took the lives of 40,000 residents—twenty times more than were lost in the devastation of Hurricane Katrina in 2005. The new law gave a monopoly to a single slaughterhouse downriver, on the outskirts of the town, and mandated that it provide equal access to all butchers at a reasonable rate. Given the public health hazards of the old slaughtering practice, one might have expected the new law to win broad popular support among New Orleans residents. Instead, the law was seen through the filters of race and Reconstruction, and public opinion sided with the butchers.17

  Campbell challenged the Louisiana law as an infringement of the butchers’ constitutional right under the Fourteenth Amendment to the “unrestricted exercise of the business of butchering.” Although the Massachusetts Bay Company’s charter included the right to fish, the right to be a butcher was nowhere mentioned in the Fourteenth Amendment. Instead, Campbell relied on a provision of the amendment that required states to respect the “privileges or immunities” of citizens. One of those privileges, Campbell claimed, was the right to ply one’s trade, free from undue government interference.

  Campbell’s suits came before the Supreme Court in what were together called the Slaughter-House Cases of 1873. The court ruled against Campbell and the butchers in an opinion by Justice Samuel Miller. In many ways the dominant figure on the court in the years immediately after the Civil War, Miller, an associate justice, was called in some circles “the real chief.” Over the course of his twenty-eight-year tenure, he wrote 616 majority opinions, more than any other previous justice. (For comparison, the influential Antonin Scalia, who served for thirty years before he passed away in 2016, wrote 270 majority opinions.) A common thread in Miller’s best-known rulings was a narrow view of the Fourteenth Amendment—and he certainly was not going to read it broadly to help Campbell. As much as Roger Taney had disliked Daniel Webster, Samuel Miller loathed John Campbell. Miller, a Lincoln appointee, said of Campbell, “I think no man that has survived the rebellion is more saturated today with its spirit.” He “deserves all the punishment he . . . can receive, not so much for joining the rebellion as for the persistency with which he continues the fight.”18