Citizens United as Bad Corporate Law

Abstract

In this Article we show that Citizens United v. FEC, arguably the most important First Amendment case of the new millennium, is as much about corporate law as it is about the First Amendment. Unfortunately, the reasoning in the opinion is predicated on a fundamental misconception about both the legal status and the fundamental nature of the corporation. Specifically, Citizens United, which prohibited the government from restricting independent expenditures for corporate communications, and held that corporations enjoy the same free speech rights to engage in political spending as human citizens, is grounded on the erroneous theory that corporations are "associations of citizens" rather than what they actually are: legally autonomous entities that are conceptually distinct from those who own their stock.

We reject the Citizens United majority's conception of the corporation as an "associations of citizens" and reaffirm its status as an artificial, metaphysical, and legal construct that exists separate and apart from its investors. In fact, the entire point of the incorporation process is to permit the creation of a legal entity that is not an association of individuals, but rather a discrete legal entity whose rights and obligations are distinct from those of its creators, investors, managers, and other constituents.

We observe the utter lack of any authority for the Citizens United majority's view that the corporation is an association of individuals. In light of pointing out that corporations are creatures of state law, not federal law, we argue that determinations about the nature of the corporation, such as whether the corporation is a distinct juridical entity or an association of individuals, should be made by reference to state law, not federal law. In Citizens United, the Court either ignored or misunderstood the traditional, universally-held state corporate law conception of the corporation and in so doing subjected American investors to suffer the involuntary use of their entrusted capital for speech that has no rational connection to their reason for investing. This is bad corporate law making bad constitutional law.