First National Bank of Boston v. Bellotti – Oral Argument – November 09, 1977

Media for First National Bank of Boston v. Bellotti

Audio Transcription for Opinion Announcement – April 26, 1978 in First National Bank of Boston v. Bellotti


Warren E. Burger:

We will hear arguments next in first National Bank against Bellotti.

Mr. Fox, you may proceed whenever you are ready.

Francis H. Fox:

Mr. Chief Justice, may it please the Court.

This is an appeal from the Supreme Judicial Court of Massachusetts, a declaratory Judgment action in which the plaintiffs contest the validity of Chapter 55 Section Eight of the General Laws which forbids corporations from expending or contributing moneys in an attempt to influence the vote on any question, referendum question, other than a question which materially affects the assets of the corporation.

It is specifically provided that no question which relates solely to individual taxes shall be deemed materially to affect the corporate assets.

In November 1976, there was on a ballot, a question which related solely to individual taxes whether the constitution should be amended to provide for graduated income taxes.

The plaintiffs wished to expend or contribute moneys, propose that referendum question by means of media ads and the like.

They did not do so because of the severe criminal penalties attendant upon violation and the threat of prosecution.

The plaintiffs are five business corporations located in the State with deep and pervasive ties to the economy.

For example; the plaintiff banks have on loan to business corporations literally billions of dollars.

The plaintiffs among them employ between 20,000 and 25,000 people in the state.

The management of each of the plaintiff corporations believed that the interest of the corporation would be materially affected by the referendum question.

In various ways the record spells out.

For example, the plaintiff banks believed that if the graduated tax reviewed does one more anti-business law in the state that might detract from other businesses from locating in the State or staying in the State and thus diminish the business of the banks.

Two of the plaintiffs, for example; employ highly skilled and thus highly paid engineers, they must compete with other States to attract these engineers to the state, they felt that a graduated income tax might make it more difficult to attract these kinds of people.

In any event, the management of each of the plaintiffs did believe, the record finds, that the graduated tax would affect the business of the corporations.

The Supreme Judicial Court held however, it seems there was no finding that in fact, the graduated tax would affect the interests of the plaintiffs, and they were without First Amendment protection for their prospective speech here.

The Supreme Judicial Court upheld the statute.

Plaintiffs appeal, as today we appeal arguing First Amendment, Due Process and that the statute makes use of a presumption yet as a criminal statute.

Also the underlying standard itself is unconstitutionally vague, materially affecting the assets and Equal Protection and that a single ballot question is singled out for an absolute prohibition as to expenditures or contributions or as any other kind of a ballot question has a different standard applied, one of materially affecting the assets.

Also on Equal Protection, the fact that business corporations are the only entities that are regulated by Section Eight from top to bottom, Section Eight regulates only business corporations, not partnerships, charitable corporations or other entities similarly situated.

Today, I will address the mootness question.

The election is over, and the grad tax did — .

Thurgood Marshall:

Well you did not have to include charitable because if charitable corporation engage in politics, they are no longer charity.

What the Massachusetts laws are — overlap).

Francis H. Fox:

Well, the Massachusetts slot does not restrict charitable corporations in any kind of a ballot question at all your honor.

They can log on (Inaudible)?

Francis H. Fox:

They can.

On page 46 of the Jurisdictional statement appendix, there is listed a number of organizations which have advocated a graduated income tax in the past.

These are the Americans for democratic action, council of Churches, this kind of a listing and whether they would run into tax problems or not, I do not know.

(Inaudible) Under the state law —

Francis H. Fox:

No, it does not.

Are they necessarily corporations, I noticed they are all listed — are we to take it at least you believe those organizations list on Page 46 are in that corporation.

Francis H. Fox:

No, I do not believe that they all are.

I do not know, I think some of them maybe, some of them may not be.

My purpose in listing them or referring to them is just on the mootness question, your honor to indicate that it is likely to come back again.

I can say this.

Charitable corporations are not forbidden from contributing or expending as to referendum questions in Massachusetts, whether tax considerations would indicate they did not do it, I do not know.

I will address Mootness, First Amendment and Equal Protection arguments this morning or this afternoon and rely on my brief for the other points.

Warren E. Burger:

In that discussion, would you be good enough to, if you know, tell us the status of the proposed amendments to the statute of ((Inaudible)

Francis H. Fox:

Yes, it is in the nature of a bill that is still pending in the legislature that combine 13 separate bills that were introduced and an advisory opinion was requested, the Supreme Judicial Court declined to answer the questions.

Warren E. Burger:

They have the power there –.

Francis H. Fox:

They have the power to but they declined to for the very reason that this case is pending and the bill is winding its way through the legislative process, I have no idea whether or pass or not.

I know it has not has yet passed.

Then what does it provide —

Francis H. Fox:

The bill would amend Chapter 55 Section Eight and other material respects too, it would not touch the graduated income tax prohibition or the materially affecting standard but it would put a thousand dollar limit on the amount that corporations could contribute to any question if they are materially affected.

It would require that committees not to take more than a thousand dollars, it would forbid outside of the state corporations for making any contributions.

So we would add and not eliminate these restrictions and would add others –.

Francis H. Fox:

That is correct your honor.

William H. Rehnquist:

Well but does that not make of the requirement materiality a little easier to fulfill the pending legislation, the two-thirds vote of the stockholders?

Francis H. Fox:

No, I look at that as an additional requirement, if it is material you must get two-thirds vote and you must meet the material affecting standard as well and you can only spend a thousand.

And with the public corporation, your honor, that might mean that to get two-thirds vote, they might have to spend five or six thousand dollars to get the privilege to expend $1,000.00 if it is materially affecting.

Those amendments are not before the Court except by way of perhaps relevance on the mootness question, I think they are not really relevant on that either.

The election is over but the case is not moot because it comes within the capable of repetition yet evading review principle which is enunciated for non-class actions and Weinstein versus Bradford requires, there would be a reasonable expectation that the same offending order will affect the same plaintiffs in the future and that the time within which to seek full review will be too limited to allow it.

In an analysis with respect to the facts in this case, it would require a reasonable expectation that there will be a grad tax on the ballot in the future, that the prohibitory legislation will remain intact.

That that prohibition will affect these plaintiffs in the future and that the timing will preclude review.

Looking at the first question, will there be a graduated tax on the ballot in the future?

I would point out that four times in the last 14 years of legislature has put this question on a ballot for the people.

Each time they have done so by overwhelming votes, votes in the order of 200:40, this kind of thing.

The statistics appear at the Footnote five of our brief.

Francis H. Fox:

The legislature obviously feels certain financial pressures.

This and every other state legislature, there seems to be no abatement in those financial pressures.

Thirty-six out of the fifty states do have graduated taxes.

There are public interest groups that advocate and have advocated a graduated income tax as being necessary.

While it is not mathematically certain what will happen in the future, I think there is a reason of expectation that would nothing to lose, the legislature will once again put this question on the ballot to enable itself to get a more efficient taxing vehicle.

Will the prohibitory statute remain intact?

The efforts of the legislature to put this question before the people have been matched in that 14 years span, by efforts to arrive at the right statutory formula that will completely preclude corporate spending in the campaign.

Earlier versions of the prohibition led to narrowing court constructions which allowed corporations to contribute, having now arrived at a complete and out of ban as to any corporate contributions or expenditures, it is unlikely in the extreme that the legislature will soften or eliminate that ban.

As I have indicated they may indeed expand the concept to make it more difficult as to other questions but the likelihood that they will change this absolute prohibition is remote.

Will these plaintiffs be affected in the future?

Well, the record of their opposition is a strong one, they contributed to oppose the grad tax in 1972.

Three of them brought the case that gave the corporations the right to do so.

They brought this case in 1976, they appeal the decision even after the election is over in order to be able to win the right to contribute or expend in the future.

They remain unalterably opposed to a graduated income tax and will oppose it whenever and wherever it comes up.

Thurgood Marshall:

And there is a good possibility that First National still is in business, for a few years.

Francis H. Fox:

I certainly hope so your honor, they owe me some money.

The opposition of the plaintiffs will not seize, I think.

As far as the timing is concerned, I rely primarily on my brief to point out and in the reply brief we point out some of the scheduling and so forth that would be encountered by any kind of a test case.

This time, the maximum time that we could have had that test that was 18 months, every time it has been on the ballot, which is four times, there has been no time when more than 18 months was available.

There is no likelihood that there will be more than 18 months at anytime in the future.

Decisions of this Court have recognized that for instance two years is really short of time to enable a full proceeding below and a full review by this Court.

Southern Pacific Terminal, the case which first enunciated the capable of repetition yet evading review principle involved a two year order of the ICC.

Numerous election cases which this Court has decided after the election is over, involved biennial or quadrennial elections wherein probably two, three or four years would have been available, just two further points on mootness.

It is an election case, it is vital that these procedures be straightened out before the election.

It is a First Amendment case, there is a statute on the books that prohibits speech and does Nebraska Press versus Stuart and other case has indicate, it is also very important that these matters be straightened out.

Going on to the First Amendment portion of the argument here, there are numerous first amendment issues, I would say numerous First Amendment errors.

The very first issue is it not Mr. Fox, is whether a corporation is protected by the First Amendment?

I mean we all know that the New York Times company and the producer of a movie or those corporations are and there are many cases so holding but are there any cases holding explicitly that corporations like the Riggs Bank or General Motors are your client, the first National Bank?

Francis H. Fox:


Not a square holding —

Whether that corporation has a First Amendment right, at least to the same vigor as an individual human being does.

Francis H. Fox:

Well, not the square holding –.

The corporation can not have opinions, that is unanimous, its agents can but —

Francis H. Fox:

Right, I would rather say that whatever positions or opinions the corporation may have must really be those of some individuals who are acting in their representational capacity, yes.

I would say that the Linmark Associates case your honor, which did involve a corporate plaintiff and entailed a First Amendment holding is evidence in that regard.

The Virginia Pharmacy case I think could not possibly be applied to eliminate corporations from the ability to advertise drug prizes.

I was about to suggest that while the Court below said that is the first question we must decide, I think that that is not so.

The Court below construed Section Eight as creating two separate crimes. One is the crime of contributing or expending to influence the vote on a referendum question, other than one that materially affects the assets of the corporation.

The other is the crime of contributing or expending with respect to a referendum question pertaining solely to individual taxes without regard to whether that affects the corporate assets or not and the Court is very specific in that regard.

Under this so called second crime, what must be shown by the prosecution to convict is that a contribution is made in an attempt to influence the vote on a matter pertaining solely to individual taxes period.

It is no part of the prosecutions task to show non-materiality to corporate purpose.

The Court below construed the First Amendment, constitution not a statutory construction here but constitutional law has allowing a corporation to have first amendment right, if it proved the affirmative of a very complicated economic principle, namely that although the referendum question relates solely to individual taxes, it does in fact materially affect the corporation.

The Court held that if corporation wished to prove that then it would be afforded First Amendment protection for its speech.

We say that the analysis is inappropriate, we say that the analysis should be as follows: money is speech, and speech is protected unless and until it comes up against a compelling state purpose and carefully drafted legislation which serves that purpose in the least restrictive manner available.

In other words, the prohibition should be made to justify itself, the focus should be on the prohibition, the corporate speaker should not be made to justify his prospective speech.

If one shifts to focus from the corporation and the Court below went to an artificial, I think, analysis of the rights of corporations, their nature, whether consistent with their existence and so forth, if one takes the focus from that and scrutinizes the prohibition here, one will find that there is not compelling interest served by this prohibition and if there is any purpose served, it is not done in the least restrictive way.

Mr. Fox would it be constitutional for a State to provide that no corporation may publish a newspaper unless its articles have been corporation expressly granted that power.

Francis H. Fox:

I think not your honor.

I think if the State allows the creation and existence of an entity capable of communication it cannot squelch that communication without running into serious problems under the first amendment.

Ultra virus is a possible concern of the state but it is not served by this statute here which prohibits only expenditure as to one kind of a political question, question relating to individual taxes.

Every other kind of a question, the relation to the corporate purpose has a different standard applied to it but here you cannot contribute or expend whether it is in your articles of organization, whether it is absolutely necessary for your purpose at all if it relates to an individual tax.

I understand that about this statute but your submission is that the state may not limit a corporation to business other than news paper publishing.

Any corporation once incorporated has the right to publish a news paper.

Francis H. Fox:

I would say so yes your honor.

I would say the state could go to that corporation or a stockholder could go to the corporation.

Warren E. Burger:

They do not publish a news paper, they might publish annual reports and would you think they would have First Amendment rights in their annual reports for their stockholders?

Francis H. Fox:

Yes sir.

Warren E. Burger:

Do you think the corporation could be required to get the consent of two-thirds of its stockholders before it engages in a publishing activity?

Francis H. Fox:

You mean a statute saying that any corporation wishing to communicate or publish should first get the vote of 2/3s.

Warren E. Burger:

Take that as a separate requirement, take it as a requirement that a corporation it before does anything as to get to vote of two-thirds of its stockholders.

Francis H. Fox:

I would have less difficulty with the statute that says a corporation before it does anything must get to two-thirds approval.

When the state comes in and says if you are going to do some communicating, some publishing you must get two-thirds approval.

I think there must be a compelling purpose found behind that and whatever it is you must examine it to see if there is a less restrictive way of serving that purpose.

Warren E. Burger:

Would you have any difficulty at all whether requirement or corporation before it engaged in any corporate act obtained that it is consent of two-thirds of its shareholders, any constitutional difficulty?

Francis H. Fox:

I would have difficulty with it and that it seems to me the primary emphasis on the First Amendment is in the right of the hear it to listen, the right of the public to hear and if you are going to restrict that, it should only be to serve a very compelling purpose and this would restrict it in some way because getting two-thirds vote may be a very difficult —

Warren E. Burger:

Well but surely you have no question about a statute that said in Massachusetts there will be no corporations.

Francis H. Fox:

No, I would not have any problem with that.

If they said publishers may not incorporate, I would have problems with them.

Well, do you have any — I take it you disagree that a corporation may be prevented from communicating about a political issue that does not affect its interest?

Francis H. Fox:

Well ultra vires as a civil remedy is available your honor.

Why not —

Francis H. Fox:

For shareholders to keep their corporations on the track What I had trouble with —

Well, so you do say that it is a contrary to First Amendment to limit the communications in that manner?

Francis H. Fox:

Well for the criminal law to prohibit a communication, I think it is possible for the criminal law to do so.

I am just saying there must be one whole of a public purpose served that before this Court would allow that to occur.

In this case you say that it was unconstitutional for Massachusetts to say that you have to have the interest that corporation have to be involved before you may communicate about an election issue?

Francis H. Fox:

Of course we are attacking the second sentence primarily which says you cannot contribute or expend as to a referendum question relating to taxes.

What if we were to accept it?

What if we were to accept the legislative declaration that individual income taxes do not affect your interest at all?

Francis H. Fox:

Well, I think that that is, if the purpose is ultra vires or to protect the corporate shareholder, it is an irrational device to serve that because it is not logical to assume that the only way in which corporate management could commit ways or commit acts of ultra vires is with respect to a referendum question —

I know that is your opinion but what if we assume, what if we agreed with the legislative declaration that individual income taxes do not involve the corporate interest and therefore the corporation may not communicate.

Francis H. Fox:

I think that if Your Honor please, we would have to identify the purpose served if it is an Ultra vires purpose, the purpose of protecting the shareholders that it is assumed that a communication on individual taxes is corporate waste.

I guess I would say that that would violate Equal Protection under the Moseley principle where the state of Illinois cannot presume that non-labor picketing is more violent than labor picketing and so forth.

Do you think your position would have any bearing on the constitutionality of the Federal Corrupt Practices Act?

Which forbids the corporations from contributing in Federal elections?

Francis H. Fox:

No, it is not part of my purpose to attack that.

As a personal opinion, I think perhaps, it would be difficult.

But as a principle, — you do not think that principle that you are furthering here would undermine the Federal Statute.

Francis H. Fox:

No, here is why.

The purpose served by the Federal Statute is to avoid the fact or appearance of corruption.

Francis H. Fox:

A candidate repaying his heavy contributives, out of the public trust after he is elected is as this Court held in Buckley and Valeo, a very high purpose.

There is no equivalent purpose in a candidate or a campaign relating to referendum questions.

The prospect of corruption is non-existent, no one gets elected, there are no political debts created.

Every Court that has construed this kind of questions since Buckley and there are four of them and they are on page 41 of our brief has so held your honor, so that I would say that the Federal Corrupt Practices Act serves the compelling purpose.

Whether it is necessary to restrict corporations to an absolute prohibition is a different question, even whether that Federal Statute is serving in it —

Thurgood Marshall:

I have a little problem Mr. Fox with this corruption point and the election of individuals.

You have a campaign to get a graduated individual income tax and candidate Jones for Governor, candidate for Governor is a great exponent to that.

Would you not be helping him?

Francis H. Fox:

I think there could be circumstances where a particular —

Thurgood Marshall:

That would be an indirect —

Francis H. Fox:

But see the portions of the statutes dealing with candidates and this is a highly regulated area at least in Massachusetts, could get indirect methods as well as direct.

But in this record there is absolutely no connection with a candidate or many part of some political issue.

As far as compelling purposes, corruption cannot be one because there is no any likelihood of corruption.

Avoiding undue influence of wealth is a purpose laid to rest by this Court and Buckley versus Valeo where the Court said that the concept, that one element of society may have its speech restricted in order to enhance the relative voice of another element of society’s contrary alien to the First Amendment.

The purpose of serving the shareholders interest who does not want to see his corporation take a political position.

It has been recognized by Cort v. Ash in this Court to be a secondary purpose at best as far as corporate shareholders are concerned as distinguished from Labor unions, where you might have compulsory union membership, you might have compulsory dues and union membership may be a precondition to employment.

Here, Labor unions are not regulated in the least, but as far as a corporate shareholder is concerned, this purpose is definitely secondary and it is ill served by a statute which expresses that concern only as to one and one only of the infinite number of referendum questions that may come up.

I would like to go on to the Equal Protection portion of it, before I do go on to that, if this Court is satisfied that the second sentence of the statute which prohibits expenditures as to a particular question is unconstitutional, I do not think the Court need draw a line around what is ultimately going to be First Amendment corporation free speech.

If the Court would look at the facts set forth between pages 15 and 27 of our appendix here and rule that on these facts, a corporation may not constitutionally be squelched from whatever communication it wishes to make regardless of the statute.

You are beginning with the second step, are you not?

As my brother Rehnquist suggested his question, and you agreed with him and your answer Massachusetts or any other state can say that individuals in this state, you cannot carry on business at all in corporate form.

Francis H. Fox:

I think they could your honor, yes.

And the corporation was generally of each state set out the conditions under which individuals can associate together in order to carry out their joint endeavors in corporate form.

Francis H. Fox:


And maybe they can say to individuals all of them of course have individually are protected and have their rights guaranteed by the First Amendment.

You can in corporate form only carry out your individual rights subject to these, those are the other conditions and is that not sort of like a time, place or manner restriction on how and where and individual can exercise his First Amendment rights?

Francis H. Fox:

The state cannot attach on constitutional conditions to the grant of any privilege and if the state wished to serve the purpose of keeping corporations close to the track of their own business, perhaps a purpose could —

Must they say, in this state you can only incorporate for purposes of carrying on the grocery business and for no other?

Francis H. Fox:

Well I think there would be Equal Protection problems.

If the incorporated form is a valuable form and is very meritorious to restrict it to one kind of business or one element of society probably would be an Equal Protection violation, not maybe a First Amendment.

Francis H. Fox:

What I would say is the state could come in and say “Mr. Corporation, you should not be running newspapers, you should be selling shoes”, and maybe get them in trouble as far as the selling shoes is concerned but they could not shut down the process.

Once you are going to communicate, the First Amendment is going to protect that communication. If the shareholders want to bring the proceedings civilly to assure that this is something has changed may be so criminal law should not do it.

Warren E. Burger:

Well, are you saying that the shareholders could not impose an advance obligations that, you are not to go into certain activities or you are not go beyond specific activities described in the charter without getting a two-thirds vote.

Francis H. Fox:

I think that the shareholders could do that your honor.

If the shareholders were to hold the corporation to its purpose, it would seem to me that if the purpose gets off into communication, then there must be constitutionally, a discretionary factor in management, as to whatever it is reasonably related to that purpose of the shareholders have set forth in the articles of organization.

Otherwise, you would have management avoiding communications and there would be a chilling effect.

The two-thirds approval, if it applied across the board to all corporate activities, I would have no particular problem with it, applying it to communication activities only, I would have problems applying it to one question of a number of political questions; I have even greater problems, thank you.

William H. Rehnquist:

Mr. Fox, supposing if Massachusetts had these two statutes on the books, one, a prohibition, a Criminal Prohibition against the Director who violated a resolution passed by a majority of the stockholders at the last meeting and spent corporate funds in violation to that resolution.

And then supposing that one of the corporations in this suit, at its last stockholders maybe passed a resolution saying, “We are sick and tired of having a first National Bank of Boston’s spend money opposing this income tax” and we adapt a resolution saying that “No more money like that shall be spent”.

Now, could the President of the bank be prosecuted criminally under that statute?

Francis H. Fox:

No your Honor.

William H. Rehnquist:

Why not?

Francis H. Fox:

As I understood your hypothesis, the source was a resolution of the corporation not a criminal statute.

William H. Rehnquist:

Well, the criminal statute says that any officer of a corporation who spends money contrary to a valid resolution of the stockholders may be a criminally prosecuted.

Francis H. Fox:

Yes and if the form in which the expenditure took place was communicative form that would — I see a problem with the first amendment.

William H. Rehnquist:

In other words, you think that the President of the bank is simply on his own so to speak with respect to the stockholders, if he figures he wants to communicate something, all 99% of the stockholders can tell him “No” and he still got a First Amendment right to do it.

Francis H. Fox:


William H. Rehnquist:

Massachusetts cannot punish him criminally for doing otherwise.

Francis H. Fox:

The corporation — it is clear that the President of the corporation can speak his own mind and that is not even an issue here.

Whether he can take out an ad in the paper using corporate funds, it seems to me that the legitimate interest of the shareholders would go no further than finding whether that is necessary, reasonably necessary to make a profit.

If to make a profit, the Corporate Managers determine that it is necessary to think a political stand and they take it, then it would seem to me, the individual shareholder would have no particular cause for concern.

William H. Rehnquist:

And the State of Massachusetts cannot adjust that balance between shareholders and directors and managers.

Francis H. Fox:

I think that the State of Massachusetts could but my point would be this, if they are going to back whatever the shareholders right might be with the criminal process, I think they would have to have an element of discretion vested in management to make the judgment call as to whether the particular expenditure is related to the business purpose or not because otherwise, you would have corporate managers fearful of making any communicative act, whatsoever less they go to jail.

Now, this case here does not involve any shareholder rights.

The Massachusetts Court in Lustwerk indicated that ultra vires is available in this kind of a situation.

That is a 1962 case but it held, I think the holding is that the decision on corporate managements part must be a reasonable one, and if it is you cannot nudge it.

If the state wanted to come in and be beef that up with criminal penalties, I think the only way they could it would be to give a wide area within which management could make a decision that somebody might second guess later, but the first amendment would not allow a jury, the second guess management’s decision and put him in jail if it is arguably close to the corporate purpose.

Warren E. Burger:

What you are saying in effect is that the State of Massachusetts could not by statute place this hypothetical law as a condition for using the corporate form or bank in this case?

Francis H. Fox:

I think that is true your Honor.

That if it is —

Warren E. Burger:

Even though they could abolish the user corporations totally.

Francis H. Fox:

I would think so.

To disallow corporate form to be used where it communicates ideas would be unconstitutional under Equal Protection in its intersection with the First Amendment and I would have no doubt on this.

Warren E. Burger:

Mr. Kiley.

Thomas R. Kiley:

Mr. Chief Justice, may it please the Court.

The appellant has served an absolute constitutional right to expend money to influence the outcome on a ballot question, which was presented to the rulers in 1976 and which would have authorized the imposition of a graduated personal income tax in the State of Massachusetts.

And may they have that their desires relate to a question which they would have had no power to influence directly by voting.

We state that there is no such right and not only the taxpayers of the Commonwealth and their duly elected representatives ought to be able to decide how they have taxed.

And despite the arguments that Mr. Fox has just earnestly advanced, we think there are real differences between corporations and individuals between elections of officials and elections on referendum issues and the expression of voters’ sentiment contained in referendum votes.

And between the graduated income tax amendment, which appeared on the 1976 ballot and other kinds of questions and I think that before we reach those specific differences and I address my self to those, I would like to reiterate a little bit about the way the Massachusetts statutory framework works.

In Massachusetts, we have approximately 70 years of experience for the ban on corporate political contributions and roughly an equivalent amount of experience with questions appearing on the ballot.

Throughout the history of the Massachusetts statute, the prohibition against corporate contributions has been applied to questions presented to the voter under the initiative in Referendum Amendment and under Article 48 of our state constitution that includes constitutional amendments like to grant tax.

Under the Massachusetts statutory framework, the popular initiative in referendum reserved to the people that is to the voters, the right to submit questions and laws to the voters for acceptance or rejection when the normal political processes do not work.

And it is this process, this narrow process that Massachusetts seeks to eliminate the corporate influence from.

Throughout the 70 year period as I say we have had a history of interaction between the questions which appear on the ballot and the ban on corporate contributions but it has not been a static history.

Throughout history, we have evolved a statute and the statute now we think at least complies with constitutional standards.

For the last 14 years, there has been dialog between our State Supreme Judicial Court and between the legislature as to what it is that the legislature can prescribe by way of corporate contributions.

We have carved out a process for the people to within which they can interact and at the same time strive to protect the rights of businesses to contribute to questions, which in some way might materially affect them.

Under the Massachusetts statutory framework, individual citizens can contribute up to $1,000.00 to a candidate, to a community organized on behalf of the candidate, to a political party or to committees organized on behalf of the questions, which appear on the ballot.

Business corporations and any kind of business entity which carries on certain kinds of enumerated businesses, generally regulated industries like banks, canals, railroads, cannot contribute to candidates, cannot contribute to committees organized on their behalf, cannot contribute to political parties.

There is a narrow range of participation open to them under the Massachusetts framework and it permits them to contribute to questions which materially affect their businesses and only on those instances.

And I might add that when that narrow range of participation is open to them, unlike individual citizens, they can contribute without limit and they may expend that money without limit in order to protect the business interests.

Corporations are not totally excluded from the referendum process, the amendment of the constitution process, they have a number of roles that they can play in the process.

In order for a constitutional amendment like the graduated income tax to appear on the Massachusetts ballot, it has to first be a affirmatively voted on by two consecutive legislatures and that is not two legislative years, that is two separately elected legislators.

Thurgood Marshall:

Well, the banks did not contribute to any of those legislators can they?

Thomas R. Kiley:

Banks cannot contribute to the legislature or in their quest for elective office.

What they can do and what any business, any artificial or natural entity in Massachusetts can do, is contribute and expend money on a law being effort while the matter is being considered in the legislature.

During the months of immediately —

Thurgood Marshall:

Bank here can contribute unlimited money to lobby and the legislature against the graduated tax.

Thomas R. Kiley:

I think that is correct your Honor.

Thurgood Marshall:

Do you know of any other state that allows that?

Thomas R. Kiley:

I am not familiar with the law being statutes of the several states.

I am familiar with the election statute of the several states I can say that Massachusetts has a fairly unique statute in that regard, the best one is my position.

William H. Rehnquist:

And you say you can contribute to you mean, to pay lobbies.

Thomas R. Kiley:

Pay lobby, yes sir.

We do have a comprehensive legislative agent kind of statute, which does restrict the forms, which of communication on matters before the legislature.

And require I suppose to registration identification.

Thomas R. Kiley:

It is a standard kind of stature.

Thurgood Marshall:

My question was on unlimited money.

Thomas R. Kiley:

Unlimited expenditure for legislative agents, yes.

Kindly, is that only true if the graduated income tax materially affects the business and corporation?

Thomas R. Kiley:

That is not.

On that, on any issue they can lobby without limit.

Thomas R. Kiley:

That is correct.

Any artificial entity, any natural person in the Commonwealth is free to expend that limited amounts of money while a the matter is before the legislature.

Thurgood Marshall:

Just one small question, why is it that the bank is allowed to expend unlimited money in the legislature to lobby for or against an Act but cannot do it to the Referendum?

Thomas R. Kiley:

My answer Mr. Justice Marshall is that in Article 48 of our state constitution, we have carved out for the people a certain process by which they can respond in the next statutes and amend their constitution when the normal political processes are not available to them.

When untoward results are being produced by the legislature.

The initiative and referendum procedure, which is at the heart of the issue in this case was born of the populous movement around the turn of the century and was designed to return to the people the reigns of government and to eliminate the big business influence in that narrow range of our governmental interest.

William H. Rehnquist:

There is an ironic twist here is it not?

And that the legislature overwhelmingly passed the income tax and then the people rejected it.

Thomas R. Kiley:

In the last two elections, you have in the record, the votes of the legislatures, they are overwhelming, and you have the fact that they were defeated.

You also know that the amount of money that was expended by the corporations primarily in selling the particular position to the legislature was $120,000.00 to 7,000.00 or $15,000.00 depending upon the way you —

Into the legislature or to the voters?

Thomas R. Kiley:

No, that is to the voters.

That is in advertising.

That is in contributions to committees which favor or pose the question in 1972 that was presented to the voters in 1972.

But this is not an absolute ban on corporate participation even while the people’s process, the referendum process is going on, the view of corporate management is the lower Court opinion makes clear can be disseminated to the public in a wide variety of ways.

The banks may publish articles in in-house publications.

They may hold press conferences.

Thomas R. Kiley:

They may hire, they may use the economist that they have hired to make public statements.

There is a whole host of methods for that corporate view to be disseminated to the public.

The only restriction that is operative during these months immediately preceding the election is a prohibition against the expenditure of corporate funds to influence a vote, which in this case may have affected the corporate management and their taxation but which could not have affected the taxation of the corporations.

After the amendment passes, this is not a self executing amendment.

In order for a tax to be imposed, it would again have to go back to the legislature and the legislature would have had to enact a graduated personal income tax.

And the —

Warren E. Burger:

Any bar that you know of, the officers to give interviews to newspaperman and to broadcasting stations about the problem?

Thomas R. Kiley:

The lower Court opinion I think in a narrowing construction on the statute makes perfectly clear that there is no prohibition.

It is the contribution, expenditure, or funds not in the natural course of business that is interdicted by the Massachusetts statute.

And again, after the amendment has passed, when it is before the legislature, the appellant’s business corporations and regulated industries have a free hand in seeking to protect their interest when a specific tax is proposed.

So, the prescription operates only in a very narrow time frame during what I have characterized as the people’s process and in a really significant respect, the rights of corporations, when they cannot participate in that process or even greater than those of individual citizens because they can expend their expenditure —

Is it not true that if your position is correct, as a matter of constitutional law, Massachusetts could withdraw the privilege of trying to influence the legislature by spending money?

Thomas R. Kiley:

I think that if my position on the constitutional aspects of the case is correct, that Massachusetts can clearly eliminate the right of corporations to lobby except where their business interests are affected.

And as a matter of law, they can say that their business interests are not affected by an individual income tax?

Thomas R. Kiley:

I do not know whether the judgment in a particular statute would be as defensible as it is in the matter that is before this Court.

Well how would that be different, I do not understand how that could matter whether it is a constitutional amendment of the statute.

Thomas R. Kiley:

In this particular question that was presented to the voters, we have a non-self executing statement of authorization to the legislature which deals only with personal income as opposed to corporate income taxes.

Passing the question of whether or not a personal income tax can have an impact on the business property or assets of corporation will still face with the fact that in order for it to have, for there to be any conceivable impact on the business itself, the legislature at some point would have to take an additional affirmative step and impose a tax.

But the votes in the record does not have much doubt about that, but can happen when it get that stages there?

Thomas R. Kiley:

I think there may be grave questions as to the form of the particular tax, the levels of taxation, the degrees of gradation.

Warren E. Burger:

General Kiley, why does your constitutional position limit you so that you have to allow a corporation to spend money when its own business interests are materially affected, is there a constitutional right of self defense?

Thomas R. Kiley:

I would start with the bold proposition that corporations have no First Amendment rights to free speech per se.

I would agree with the Court below that to the extent that corporations do have any right of speech that they have an incident of the Due Process Clause of the Fourteenth Amendment and stem from some right to protect their interests.

William H. Rehnquist:

Then, let me interrupt you, I realize you haven’t fully answered.

Do you, do you think that the incorporation of the First Amendment has more or less and the Fourteenth has been proceeded by a bodily incorporations so that the Fourteenth Amendment now reads, no state shall abridge the right of freedom of speech or of the press.

It is religious, not political.

I mean, it is a political or constitutional question, not a religious one.

Thomas R. Kiley:

I recognize that the Mr. Justice Rehnquist is alluding to the suggestion in some of the opinions that he has written at the Fourteenth Amendment may just embody the principle of free speech, as it is been handed down for the Fourteenth Amendment.

It is not the position that I advance today.

William H. Rehnquist:

Certainly, it is not the position the Court has taken but it seems to me that your case is on stronger ground if you say that, one must first pass through the person loophole of the Fourteenth Amendment than if you say, the Fourteenth Amendment without any reference to any of its language says, “No state shall abridge the freedom of speech or freedom of the press”.

Thomas R. Kiley:

I think I would agree Mr. Justice.

William H. Rehnquist:

Yes, and which position do you take?

Thomas R. Kiley:

The position that I advance today is simply that the lower Court has found that there is a right to protect businesses whether it is under the federal constitution or the state constitution and that we will abide by that decision by the lower Court, under the state constitution if not, the federal.

William H. Rehnquist:

Well but which position do you take with the respect of the First and Fourteenth Amendments to the federal constitution?

Thomas R. Kiley:

I would take a position —

William H. Rehnquist:

Do you think you first have to show you are a person in order to take advantage of the First Amendment?

Thomas R. Kiley:

I would say that you do not and you would not simply because there is a right of speech when business interests are affected, that is an incident of the Due Process Clause of the Fourteenth Amendment as opposed to the Privileges and Immunities clause of the Amendment.

May I back up just a minute, I want to be sure I understand your position.

If the appellants in this case had been able to show to the satisfaction of the Massachusetts Court that their business interest were protected, is it your position that this case would have been decided differently by the Massachusetts Supreme Judicial Court?

Thomas R. Kiley:

I think that if you had read again, reread the first First National case in 1972, there is a suggestion to that effect in that opinion.

But how about the opinion that is before us in this case, I am looking at language on page eight of the appendix of jurisdictional statement, there is a flat sentence that says, the legislature which I think by virtue of the 1972 amendment has specifically proscribed corporate expenditures of money relative to the proposed amendment.

There is other language in the opinion that also supports that view, it is very confusing it seems to me but, what is your position?

Thomas R. Kiley:

The challenge that was brought to this specific statute embodied a host of Due Process, Equal Protection kinds of challenges.

The appellants’ challenged the statute on its face and as applied to them and asserted that there was a constitutional right to contribute or expend monies when there was a material effect.

Justice Liakos (ph) in his opinion, appears to have agreed that the Fourteenth Amendment and state constitution confer that kind of right and finds that as applied to these particular defendants this statute is not unconstitutional.

He also appeals to concur with the legislative judgment that a graduated income tax amendment on its face can have no impact on the business interest of specific corporations.

In accordance with the provisions on Rule 16 of this, I will turn just briefly and just by way of digression to the Mootness arguments that have been raised in this particular case.

I agree with Mr. Fox, that there is a doctrine which has been applied by these another Appellate Courts permitting it to review and decide cases which are capable of repetition, evading review even after this specific controversy has passed.

We disagree as to the application of the principle to this particular case.

We do not believe as Mr. Fox asserts that this case is likely to recur in any real sense.

In the 60 years since we have our current form of amending the constitution and in the 29 General Elections that have passed, the a graduated income tax question has appeared on the ballot about four times and three judicial challenges have eventuated challenging the corporate prescription against contributions to oppose or favor that tax.

But in each instance that the nature of this specific amendment, the form of the prescription embodied in chapter 55 section 8 and in its precursors and the form of the specific challenge that of judicial challenge had eventuated has varied.

I would submit that it is sheer speculation that suggests that if a First Amendment argued is again raised and if the legislature or the Commonwealth of Massachusetts again puts a grad tax on the ballot, if corporations again want to oppose it, that these issues will arise between these parties that there will be the same issues or that will be in this format.

Furthermore on the second pattern of the analysis, the record amply illustrates that this case, First National Bank versus Bellotti did not arise in a time frame social at the complete appellant reviews was impossible.

The appellants could have brought their case as the lower Court noted in noted in note 15 of its opinion, a full year before they did bring their case.

Had they brought their case reasonably close to the date on which the controversy arose, and had they sought and obtained expedited review in light of the impending election, the appellants clearly could have obtained plenary consideration by this Court within the available time frame.

Their delay and their delay only is the reason that they have not managed to obtain complete appellate review on this case. Under these circumstances the capable of repetition yet evading review doctrine is in the opposite and the case has become moot.

Turning once again to the First Amendment issues that have been raised, the Commonwealth asserts three basic interests which we think justify any incidental impact that this statute might have one any imagined first amendment rights.

We start first from the proposition though that corporations do not have first amendments rights per se that they are not natural persons and that they may be restricted to protection of the rights that are contained in their charters.

The Fourteenth Amendment is not inapplicable to these appellants because they are artificial entities.

Warren E. Burger:

If this were a First Amendment case strictly speaking and in the federal government, you would not be dealing with any question of whether they were natural persons because the First Amendment by its terms does not require that it would be a person that takes advantage of it.

Thomas R. Kiley:

I think though, that this Court has never held that the first amendment rights per se , the right of free speech per se attaches to business corporations whose charters do not relate either to the press, the communication of ideas of the advancement of other First Amendments rights or in the alternative unless there has been some finding of a business interest.

The business corporations are simply quite different from natural persons and the opinions of this Court have held that they do not exercise other purely personal rights such as the privilege against self-incrimination, right —

Let us see if I understand this.

How do you explain the presence of a New York Times case?

Thurgood Marshall:

That is right.

Thomas R. Kiley:

It would be a case in which the New York Times in its charter or it is part of its business was involved in the dissemination of news that was involved in the business of the first amendment.

And how do you explain Doran against the Salem Inn?

Thomas R. Kiley:

Again, the protection of arguably a business interest like the commercial speech case.

I would assert that in every case in which a pure, in which a right of speech has been found that there is either a business interest as in the commercial speech cases or that there is an idea of dissemination of First Amendment, I guess.

Harry A. Blackmun:

I think in most of those cases, the First Amendment issue was not specifically raised in the sense is it applicable or not to a corporation probably.

Thomas R. Kiley:

I think Mr. Justice Blackmun that Mr. Fox’ has answered the Court was — it is as and I believe it was to Mr. Justice Stewart’s question was as good and answers could be provided.

There are no cases which hold directly with the First Amendment right of free speech per se applies to business corporations as such.

That the issue is, this is, and I would submit a fairly unique case.

Warren E. Burger:

What would you say about proposition that corporations could be organized in such a way that after the declaration of corporate purpose would be a statement generally and to engage in the dissemination of information and knowledge necessary for the well being of the United States and the people there of, that gave them First Amendment rights then.

Thomas R. Kiley:

That was also of the charter of the New York Times, I clearly answered yes.

Warren E. Burger:

And I do not know what the New York Times charter says but it must be something like that.

Thomas R. Kiley:

The reason that I would answer yes is that, when an individual invests his money in a corporation like the New York Times or which or like the Boston Globe, there is the idea that his money will be utilized in the dissemination of certain ideas.

When an individual invests his money in Digital Corporation, in Wyman-Gordon in the First National Bank, there is an expectation on the part of the individual that his funds, that the corporation will exercise its best efforts to protect his investment and to enhance his investment.

And that to the extent that, political contributions and political messages, not his views, that permitting corporations to make political statements is an opportunity for the corporation to the corporate management to abuse the trust placed in them on the one hand and at best and at worst to coerce contributions from their shareholders, to use their funds for purposes which are inimical to their own constitutional and political beliefs and I think that that is antithetical to the real purpose behind the First Amendment.

I see my time is passing and I just want to make sure that I get to assert one time the three interests that we say the state has in restricting speech of this nature.

First, we think that the state has a legitimate interest in preserving the integrity of the referendum and issued of an amendment processes as the people’s quarrel.

Second, we think that there is a legitimate state interest in maintaining even in preventing even the appearance of impropriety as it relates to that process and by that I mean that we feel we have the right to remove even the suggestion of a domination by corporations in the political sphere.

That is not an imaginary evil.

In 1972, the corporations, many corporations bonded together and spent $120,000.00 to oppose the graduated income tax as opposed to 7,000 or 15,000 in favor by the proponents.

Now that is not the same under influence argument that the Court, in Mr. Fox’ view laid to rest in Buckley and Valeo.

We are not saying that that an individual who is a millionaire cannot use his funds to promote his political beliefs or that an individual who is talented in political debate cannot use his talents or is asserting to Court is that, the state has a right of keeping corporations which do not belong in the initiative process in the first place from preventing a full and robust debate among those individuals who have a direct interest in the correct answering of the questions before the Court.

And the third interest that we assert to the Court, is the state has a legitimate interest in protecting the minority shareholders of these individual corporations.

And I would suggest to the Court that Cort versus Ash has not said that protection for minority shareholders is a secondary interest at best.

That Cort and Ash is a statutory construction case in which this Court did not find the existence of an implied civil right of action under the federal election.

Thurgood Marshall:

I have trouble with your minority stockholder when you let him do all for year round, they spent all the money they want in the legislature.

That is a little problem with Massachusetts.

Thomas R. Kiley:

I would suggest only that perhaps we could limit their expenditures in the legislature as well but,

But you do not have to prove all of these —

Thomas R. Kiley:


And in fact in the opinion below, Mr. Justice Liakos (ph) has indicated that in his view of protection of minority interest is a very important element for the Massachusetts statute.

General, may I come back to the question I asked you a little while ago?

Will you take a look at page 19 of the appendix of the jurisdictional statement?

Thomas R. Kiley:


This is the opinion of your court and that part of the opinion is addressing the vagueness argument, and look at the second full paragraph that starts on consideration of these constitutional guidelines which are cases involving vagueness.

Next sentence goes on to say this.

We recognized that the “materially affects” limitation, they are general in nature, good as that saying is not vague but we also note that the statutory of proscription in question here, the prohibition against corporate expenditures on a referendum question, solely concerning a personal income tax is both precise and definite.

I have read that plus the language I referred to earlier had indicating that your Court would say that quite without regard to affect on the business or assets of a corporation, that money could not be spent.

Now, do you agree or disagree with that interpretation of this opinion?

Thomas R. Kiley:

With all due respect, I disagree.

You do.

Then your Massachusetts Course as an effect almost conceded vagueness.

Thomas R. Kiley:

I think that it is not.

I think that no reasonable man viewing the dialog between Supreme Court and legislature on this case could argue that this statute is vague indeed Mr. Fox in his brief concedes that this proscription was tailor made to apply to him.

I would submit only, that the language that Mr. Justice Powell read prompts on page 19 has to be read in context, the language on page 12 of the jurisdictional statement where Justice Liakos (ph) cites to Pierce versus Society of Sisters talks about the right of corporations if they do exist and where they stem from.

Warren E. Burger:

Thank you gentlemen.

The case is submitted.