Business and the Supreme Court

Larry Ribstein —  1 July 2010

David Zaring has noted

that courts have formed an unimportant part of the financial crisis interventions by the government, and that the end of the Supreme Court’s most recent term suggests that it gets to matters years, if not decades, after they have become settled law one way or the other.

Steve Bainbridge responds:

The very nature of their social role precludes judges from being proactive regulators. They can make law, of course, but they can’t do so without an actual case or controversy to use as a vehicle for doing so. Finding a case that has the right facts and the right procedural posture to make new law can take quite a while. This is especially true for the SCOTUS, of course, since it can take years for cases to find their way through the lower court system.* * * And, of course, the judiciary is the least accountable branch. If you’re going to be in a position to plunge the entire world economy into a depression, you ought to be democratically accountable.

I agree with Steve. Indeed, I find the view that the Supreme Court is “unimportant” because it doesn’t keep up with the news rather surprising. The Court lays general ground rules. It is not for many reasons the appropriate institution for setting social policy in reaction to current events.

But this doesn’t end the discussion, because the Court could still be unimportant if it does not serve its ground-rule-making role well – that is, if it shies away from making hard decisions for political reasons.

However, in my column this week for I argue that the Court has been important this term precisely because it has bucked anti-business political winds in making or reinforcing Constitutional rules that serve business’s long-term interests. After discussing the regulatory excesses that have followed the financial busts at the beginning and end of this decade, I summarize the Court’s actions this term, concluding:

In a single term, despite widespread popular support for punishing and restricting corporations and their agents, the Court admonished Congress that it had to respect the structure of government and draft criminal statutes clearly, noted the dangers of court interference in business decisions, restricted the international reach of the securities laws and, perhaps most importantly, ensured that business’s voice would be heard in future lawmaking. The Court demonstrated that it can be a good friend to business in bad times.

These decisions accord with my prediction last February in the course of a Federalist Society debate on Citizens United. Barry Friedman noted that the decision’s timing was “inauspicious as a public relations move,” coming just as “the public generally is up in arms about financial matters, corporations, money in politics, and the like.” I responded that “Justices Scalia and Kennedy are both approaching 74 and might not survive eight Obama years. Perhaps the time to correct Austin is now or never.” I continued:

[T]he very thing that makes the political moment wrong arguably makes the judicial moment right: corporations are under political siege and need the Constitution more than ever. This returns to my theme that this case is at least as much about corporations and business as it is about the First Amendment. It will be interesting to apply this political theory to decisions due later this term on mutual fund executive compensation (Jones v. Harris) and Sarbanes-Oxley (FEF v. PCAOB). The Citizens United majority might be inclined to ensure in the PCAOB case that separation of powers protects business from unwise regulation in a hostile political environment. On the other hand, the Court may go with the political environment on executive compensation in Jones where no strong Constitutional principle is at stake.

This is, of course, precisely what happened, not only in these cases but in the others I summarize in my Forbes post. At the same time, the Court did not ignore political considerations: Its decisions went no further than absolutely necessary to make the important structural points. The Court, for example, refused to completely throw out the “honest services” rule and preserved Sarbanes-Oxley. Although I complained about the latter decision at the time it came out, here I want to emphasize that the Chief Justice compensated rhetorically for the case’s modest result:

Our Constitution was adopted to enable the people to govern themselves, through their elected leaders. The growth of the Executive Branch, which now wields vast power and touches almost every aspect of daily life, heightens the concern that it may slip from the Executive’s control, and thus from that of the people.

This is precisely the sort of concern with general ground rules I predicted in the Federalist Society debate.

In short, in business cases at least, the Court has gotten its role exactly right, and this role has been far from unimportant.

Update: David Zaring thinks my post “is an interesting way to characterize what has been going on.”

Larry Ribstein


Professor of Law, University of Illinois College of Law

5 responses to Business and the Supreme Court


    Professor Ribstein,

    While I agree with you that corporations don’t have rights and that people do, the language of your post is spoken from the perspective of the corporation and not the individuals. Moreover, it also operates on the (very false) assumption that but for the corporation, the people would not have have a voice.

    Larry Ribstein 5 July 2010 at 7:19 pm

    Corporations don’t have rights — people do, including those acting through and listening to corporations.


    2 things come to mind when reading this post:

    1) Why do corporations, as fictional creatures of the State, get/need Constitutional rights. As a person, I get/have certain rights because I am a human being and such rights are “natural.” Seems to me that if a corporation is created by a State, much like my parents set the rules and guidelines for me growing up, the State can have similar limiting power on corporations.

    2) The irony in Chief Justice Roberts’s quote above is that the “conservative” members of the bench have been the ones upholding/supporting the expansion of executive power through deference to ALJ’s and agency created law (read: regulation).


    Bill — Good quote. And good luck on the bar.


    The situation reminds me of the Douglas concurrence in the Steel Seizure Cases. Were I not in the midst of studying for the bar, I might be more eloquent and comparative than a mere copy and paste of the text but c’est la vie:

    “Legislative power, by contrast, is slower to exercise. There must be delay while the ponderous machinery of committees, hearings, and debates is put into motion. That takes time, and, while the Congress slowly moves into action, the emergency may take its toll in wages, consumer goods, war production, the standard of living of the people, and perhaps even lives. Legislative action may indeed often be cumbersome, time-consuming, and apparently inefficient. But, as Mr. Justice Brandeis stated in his dissent in Myers v. United States:

    ‘The doctrine of the separation of powers was adopted by the Convention of 1787 not to promote efficiency, but to preclude the exercise of arbitrary power. The purpose was not to avoid friction, but, by means of the inevitable friction incident to the distribution of the governmental powers among three departments, to save the people from autocracy.’ “