Brief for Appellee — First Nat. Bank of Boston v. Bellotti

In the

Supreme Court of the United States

Ocroser Term, 1976

No. 76-1172

THE FIRST NATIONAL BANK OF BOSTON,

NEW ENGLAND MERCHANTS NATIONAL BANK,

THE GILLETTE COMPANY,

DIGITAL EQUIPMENT CORPORATION,

AND

WYMAN-GORDON COMPANY,

APPELLANTS,

0

FRANCIS X. BELLOTTI, Atrorney GeNneERAL,

APPELLEE.

ON APPEAL FROM THE SUPREME JUDICIAL COURT

FOR THE COMMONWEALTH OF MASSACHUSETTS

Brief for the Appellee

Francis X. BeLLortt,

Attorney General

Commonwealth of Massachusetts

Tuomas R. Kivey

STEPHEN SCHULTZ

Assistant Attorneys General

Commonwealth of Massachusetts

One Ashburton Place

Boston, Massachusetts 02108

Attorneys for Appellee

BATEMAN & SLADE, INC. BOSTON, MASSACHUSETTS.

Table of Contents

Preliminary statement

Summary of argument

Argument

I. The issues presented are non-justiciable be-

cause this case has become moot on appeal.

II. Corporations not in the business of com-

munications or speech do not have First

Amendment rights.

III. Even if, arguendo, corporations have First

Amendment rights, those rights are limited to

issues materially affecting the corporation's

business, profits or assets.

IV. Even if, arguendo, corporations have First

Amendment rights which are co-extensive with

those of natural persons, Mass. Gen. Laws

c. 55, § 8, is still constitutional.

A. The state has substantial interests in pre-

venting corporations from making contri-

butions or expenditures to influence the vote

on referendum and initiative issues.

1. Mass. Gen. Laws c. 55, § 8, furthers

the significant governmental interest in

sustaining an active, alert role for the

individual citizen in the election process.

2. Mass. Gen. Laws c. 55, § 8, furthers

the significant governmental interest in

sustaining the individual citizen's confi-

dence in government.

3. Mass. Gen. Laws c. 55, § 8's prohi-

bition on corporations spending the stock-

13

19

32

ii TABLE OF CONTENTS.

holders’ money for political purposes

furthers the significant governmental

interest in protecting stockholders who

may hold political views contrary to those

held by corporate management.

B. Mass. Gen. Laws c. 55, § 8, avoids un-

necessary abridgement of First Amendment

rights.

V. The statutory provision prohibiting corpo-

rate contributions to affect the outcome of

questions relating solely to individual taxation

is not vague and contains no evidentiary

presumption.

VI. The equal protection clause of the Four-

teenth Amendment is not violated by a statute

prohibiting contributions to affect ballot

questions made by business corporations.

A. The character of the classification

B. The individual interests concerned

C. The government interests asserted in

support of the classification

Conclusion

Table of Authorities Cited

Cases

Abood v. Detroit Board of Education, 45 U.S.L.W.

4473 (May 27,1977)

Abrams v. Van Schaick, 293 U.S. 188 (1934)

American Party v. White, 415 U.S. 767 (1974)

42

ess

S 3

ss

12n

TABLE OF AUTHORITIES CITED. iii

Arnett v. Kennedy, 416 U.S. 134 (1974) 27

Asbury Hospital v. Cass County, 326 U.S. 207 (1945) 14

Ashwander v. TVA, 297 U.S. 288 (1936) 8

Associated Press v. National Labor Relations Board,

301 U.S. 103 (1937) 25

Bank of Augusta v. Earle, 38 U.S. (13 Peters) 519

(1839) 14

Bell v. Maryland, 378 U.S. 266 (1964) 15n, 16

Blake v. McClung, 172 U.S. 239 (1898) 14

Board of Regents v. Roth, 408 U.S. 564 (1972) 24

Brockington v. Rhodes, 396 U.S. 41 (1969) 12n

Broderick v. Oklahoma, 413 U.S. 601 (1973) 47

Buckley v. Valeo, 424 U.S. 1 (1976) 20n, 21n, 27, 29,

30n, 31, 32 et seq.

Bullock v. Carter, 405 U.S. 134 (1972) 29

California Bankers Assoc. v. Schultz, 416 U.S. 21

(1974) 15n, 26

C.S.C. v. Letter Carriers, 413 U.S. 548 (1973) 29, 3ln,

32n, 35, 36n, 47

Colten v. Kentucky, 407 U.S. 104 (1972) 47

Cousins v. Wigoda, 419 U.S. 477 (1975) 30

Dartmouth College v. Woodward, 17 U.S. (4 Wheat.)

518 (1819) 13, 23

D.D.B. Realty Corp. v. Merrill, 232 F. Supp. 629

(D. Vt. 1964) 22

DeFunis v. Odegaard, 416 U.S. 312 (1974) 8

Dunn v. Blumstein, 405 U.S. 330 (1972) 12, 29, 50

Fahey v. Mallonee, 332 U.S. 245 (1947) 27

First National Bank v. Attorney General, 362 Mass.

570, 290 N.E. 2d 526 (1972) 9, 10n, 33n

iv TABLE OF AUTHORITIES CITED.

Franks v. Bowman Transp. Co., Inc., 424 U.S. 747

(1976)

Frontiero v. Richardson, 411 U.S. 677 (1973)

Gertz v. Robert Welch, Inc., 418 U.S. 323 (1974)

Giaccio v. Pennsylvania, 382 U.S. 399 (1969)

Golden v. Zwickler, 394 U.S. 103 (1969)

Grosjean v. American Press Co., 297 U.S. 233

(1936)

Hague v. Committee for Industrial Organization, 307

U.S. 496 (1939)

Hallmark Productions, Inc. v. Mosley, 190 F. 2d 904

(8th Cir. 1951)

Harper v. Virginia Board of Elections, 383 U.S. 663

(1966)

Hemphill v. Orloff, 277 U.S. 537 (1928)

Herb v. Pitcairn, 324 U.S. 117 (1945)

Hynes v. Mayor of Oradell, 425 U.S. 610 (1976)

Jenness v. Fortson, 403 U.S. 431 (1971)

Joint Anti-Fascist Refugee Committee v. Clark, 177

F. 2d 79 (D.C. Cir. 1949), rev'd, 341 U.S. 123

(1951)

Joseph Burstyn, Inc. v. Wilson, 343 U.S. 495 (1952)

Kingsley International Pictures Corp. v. Regents, 360

U.S. 684 (1959)

Leary v. United States, 395 U.S. 6 (1969)

Levy v. Louisiana, 391 U.S. 68 (1968)

Liberty Warehouse Co. v. Burley Tobacco Growers’

Co-operative Marketing Assoc., 276 U.S. 71 (1928)

Liggett Co. v. Lee, 288 U.S. 517 (1933)

14

51

TABLE OF AUTHORITIES CITED. v

Lincoln Federal Labor Union v. Northwestern Iron

& Metal Co., 335 U.S. 525 (1949) 26

Liner v. Jafeo, Inc., 375 U.S. 301 (1964) 7

Linmark Associates, Inc. v. Township of Willingboro,

45 U.S.L.W. 444) (May 2, 1977) 17, 18

Lorain Journal Co. v. United States, 342 U.S. 143

(195i) 26

Loving v. Virginia, 388 U.S. 1 (1967) 5ln

Lustwerk v. Lytron, Inc., 344 Mass. 647, 183 N.E.

2d 871 (1962) 9, 10n

MeGowan v. Maryland, 366 U.S. 420 (1961)

Mexican-American Federation — Washington State

v. Naff, 299 F. Supp. 587 (E.D. Wash. 1969) 22

Moore v. Ogilvie, 394 U.S. 814 (1969) 12n

NAACP vy. Button, 371 U.S. 415 (1963) 17, 52

National Labor Relations Board v. Virginia Electric

& Power Co., 314 U.S. 469 (1941) 26

New York Times Co. v. Sullivan, 376 U.S. 254

(1964) 16n

Paul v. Virginia, 75 U.S. (8 Wall.) 168 (1868) 14

Pennekamp v. Florida, 328 U.S. 331 (1946) 16n

Pennsylvania Railroad Co. v. St. Louis, etc., Rail-

road Co., 118 U.S. 290 /\86) 23

People v. Gansley, 158 N.W. 195 (Mich. 1916) 24, 25

Pierce v. Society of Sisters of Holy Name, 268 U.S.

510 (1925) 21, 22

Police Dept. of Chicago v. Mosley, 408 U.S. 92

(1972) 52

Prudential Insurance Co. of America v. Cheek, 259

U.S. 530 (1922) 23

CW

vi TABLE OF AUTHORITIES CITED.

Railway Express Agency, inc. v. New York, 336 U.S.

106 (1949) 55

Roe v. Wade, 410 U.S. 113 (1973) 8, 12

Rosario v. Rockefeller, 410 U.S. 752 (1973) 12n, 29, 42

San Antonio Independent School District v. Rodri-

guez, 411 U.S. 1 (1973) 51, 52

Schwartz v. Romnes, 357 F. Supp. 30 (S.D. N.Y.

1973), rev'd, 495 F. 2d 844 (2d Cir. 1974) 41

Smith v. Goguen, 415 U.S. 566 (1974) 47n, 49

Sosna v. lowa, 419 U.S. 393 (1975) 8

Southeastern Promotions, Ltd. v. Conrad, 420 U.S.

546 (1975) 30n

Southern Pacific Terminal Co. v. ICC, 219 U.S.

498 (1911) 8

Sproles v. Binford, 286 U.S. 374 (1932) 55

Stanley v. Georgia, 394 U.S. 557 (1969) 18

Steffel v. Thompson, 415 U.S. 452 (1974) 7,8

Storer v. Brown, 415 U.S. 724 (1974) 12n

Sugarman v. Dougall, 413 U.S. 634 (1973) 5ln

Thomas v. Railroad Co., 101 U.S. 71 (1879) 23

Time, Inc. v. Hill, 385 U.S. 374 (1967) 16n

United States v. Boyle, 482 F. 2d 755 (D.C. Cir.

1973) 44

United States v. Chestnut, 394 F. Supp. 581 (S.D.

N.Y. 1975), affd, 533 F. 2d 40 (2d Cir. 1976),

cert. denied, 429 U.S. 829 (1976) 42,43

United States v. Chestnut, 533 F. 2d 40 (2d Cir.

1976), cert. denied, 429 U.S. 829 (1976) 41

United States v. Maryland Savings-Share Insurance

Corp., 400 U.S. 4 (1970) 55

TABLE OF AUTHORITIES CITED. vii

United States v. Morton Salt Co., 338 U.S. 632

(1950) 15n, 26, 36

United States v. Petrillo, 332 U.S. 1 (1947) 55

United States v. Pipefitters Local Union No. 562, 434

F. 2d 1116 (8th Cir. 1970), rev'd, 407 U.S. 385

(1972) 40

United States v. United Auto Workers, 352 U.S. 567

(1957) 34

United States v. United States Brewers’ Association,

239 Fed. 163 (W.D. Pa. 1916) 34

United States v. White, 322 U.S. 694 (1944) 15n

Virginia State Board of Pharmacy v. Virginia Citizens

Consumer Council, Inc., 425 U.S. 748 (1976) 18

Weinstein v. Bradford, 423 U.S. 147 (1975) 8, 10

Williams v. Rhodes, 393 U.S. 23 (1968) 29

Wilson v. United States, 221 U.S. 361 (1911) 15n

Yick Wo v. Hopkins, 118 U.S. 356 (1886) 34

Younger v. Harris, 401 U.S. 37 (1971) 30

CONSTITUTIONAL AND STATUTORY PROVISIONS

United States Constitution

Article III 3, 7, 11

First Amendment 3, 4, 13, 14, 16, 17, 18 et seq.

Fifth Amendment 15

Fourteenth Amendment 4, 19, 21, 49, 50, 56

Federal Corrupt Practices Act, 2 U.S.C. § 441 (b) 32n

Ala. Code Tit. 17, § 286 (1976) 32n

Ariz. Rev. Stat. § 16-471(a) (1976) 32n

Ark. Stat. Ann. § 3-110 (Supp. 1975) 32n

viii TABLE OF AUTHORITIES CITED.

Del. Code Tit. 15, § 8004(a) (Supp» 1974)

Fla. Stat. Ann. § 106.08(1) (Supp. 1975)

Ind. Code Ann. § 3-4-3-3 (Supp. 1975)

lowa Code Ann. § 56.29 (Supp. 1976)

Kan. Stat. § 25-1709 (1975)

Ky. Rev. Stat. §§ 121.025, 121.035 (Supp. 1976)

La. Rev. Stat. Ann. §§ 18:1482, 1483 (1976)

Me. Rev. Stat. Tit. 21, §§ 1395.2, 1395.3 (Supp.

1976)

Md. Ann. Code § 226-9 (b) (Supp. 1976)

Mass. Gen. Laws Ann. c. 55, § 8 (Supp. 1976) 2, 3,

4, 5, 6, 7, 8n et seq.

PR BERR EEF

R

Mass. Gen. Laws Ann. c. 155, § 3

Mass. St. 1975, c. 151 lln

Minn. Stat. Ann. § 210A.34 (Supp. 1973)

Mo. Ann. Stat. § 130.020.5 (Supp. 1976)

Mont. Rev. Codes Ann. §§ 23-4795(1), 23-4744

(Supp. 1972)

32n

N.H. Rev. Stat. Ann. § 70:2 (1) (Supp. 1972) 32n

N.J. Rev. Stat. §§ 19:34-35 (Supp. 1976) 32n

N.Y. Election Law § 480 (McKinney Supp. 1972) 32n

N.C. Gen. Stat. §§ 163-278.14, 163-278.19 (Supp.

1975)

N.D. Cent. Code § 16-20-08 (1975)

Ohio Rev. Code Ann. § 3599.03 (Supp. 1972) 33n

Okla. Stat. Tit. 26, § 15-110 (1975) 33n

Or. Rev. Stat. § 260.472 (1971) 33n

33n

33n

PE

Pa. Stat. Ann. Tit. 25, § 3225(b) (1977)

$.D. Compiled Laws Ann. § 12-25-2 (1969)

TABLE OF AUTHORITIES CITED. ix

Tenn. Code Ann. § 2-1932 (Supp. 1976) 33n

Tex. Civ. Code Ann. Art. 14.06 (1977) 33n

W. Va. Code § 3-8-8 (1975) 33n

Wisc. Stat. Ann. § 11.38(1)(a)(1) (Supp. 1977) 33n

Wyo. Stat. § 22.1-389(c) and (d) (Supp. 1976) 33n

OTHER AUTHORITIES

I. Brant, James Madison: The Nationalist (1948) 39, 44

‘45-47 CCH Dec. $75,502 (Jan. 3, 1945) 24n

Comment, “The Constitutionality of the Federal Ban

on Corporations and Union Campaign Contri-

butions and Expenditures,” 42 U. of Chicago L.

Rev. 148 (1974) 45

93 Cong. Rec. 6438 (1947) 40

Hearings before the House Committee on the Election

of the President, 59th Cong., Ist Sess. 76; 40

Cong. Rec. 96 39, 40

H. Henn, The Law of Corporations (1970) 13n

I Journal of the Senate, 1409-1412 (1975) 1]

Note, “Corporate Political Affairs Programs,” 70 Yale

L.J. 821 (1961) 14, 38n, 44

Rauh, “Legality of Union Political Expenditures,” 34

S. Cal. L. Rev. 152 (1961) 52n

Rules of the Supreme Court of the United States,

Rule 40(3) l

S.E.C. Reg. § 240.14a-8 24n

State of California Fair Political Practices Com-

mission, “Campaign Contribution and Spending

Report,” March 14, 1977 55n

x TABLE OF AUTHORITIES CITED.

Wolfinger and Greenstein, “The Repeal of Fair

Housing in California: An Analysis of Referendum

Voting,” 62 Am. Pol. Sci. Rev. 753 (1968)

35, 36

In the

| Supreme Court of the United States

Octroser Term, 1976

No. 76-1172

| THE FIRST NATIONAL BANK OF BOSTON,

NEW ENGLAND MERCHANTS NATIONAL BANK,

THE GILLETTE COMPANY,

DIGITAL EQUIPMENT CORPORATION,

AND

WYMAN-GORDON COMPANY,

APPELLANTS,

©

FRANCIS X. BELLOTTI, Atrorney Generac,

APPELLEE.

ON APPEAL FROM THE SUPREME JUDICIAL COURT

FOR THE COMMONWEALTH OF MASSACHUSETTS

Brief for the Appellee

Preliminary Statement

In accordance with the provisions of Rule 40(3) and

except as noted in this preliminary statement, the Attorney

| General of the Commonwealth of Massachusetts accepts the

Appellants’ reference to opinions below, statement of juris-

diction, reference to the statute involved, statement of issues

2

presented and statement of the case. The Attorney General

states, however, that the jurisdiction of this Court has been

improperly invoked (a) because the case has become moot

on appeal and (b) because the Appellants seek review of

certain questions of state and federal law not properly

before this Court on appeal. More specifically, the Attor-

ney General asserts that questions pertaining to the vague-

ness of the first sentence of Mass. Gen. Laws c. 55, § 8,

may not be raised on appeal.

For the convenience of the court, Appellee utilizes the

same form of citation to the record as the Appellants.

Citations to the Appendix to the Jurisdictional Statement

appear as “J.S. App. ___” and citations to the Appendix

simply as “App. ___”’.

Summary of Argument

I.

Appellee’s first argument is jurisdictional in nature. The

particular controversy between the parties to this appeal

expired when the 1976 general election passed and the

Appellants had not contributed money to oppose the

graduated income tax question. The case became moot at

that time, unless it is “capable of repetition, yet evading

review.” This appeal is not within the narrow range of

cases which trigger that exception to the doctrine of

mootness because (a) if the issues presented do again recur,

it will be in an entirely different context permitting review

on a concrete factual record, and (b) the time frame during

which the statutory proscription against corporate campaign

contributions actually operated was not too short to permit

3

adequate review. Delay in bringing this case before this

Court is a function of the trial strategy of the Appellants

and not a consequence of the operation of natural or

man-made laws. Appellants cannot remove themselves

from the operation of Article III of the United States

Constitution merely because that strategy backfired.

Il.

Corporations not in the business of communications or

speech do not have First Amendment rights. First Amend-

ment rights, encompassing the freedom of unfettered

thought, opinion and speech, are peculiarly personal in

nature. This Court has repeatedly found that corporations,

as artificial entities, do not enjoy other peculiarly personal

rights guaranteed to their owners and managers by other

provisions of the Constitution. Only corporations in

communications or speech-related businesses have been

found to have First Amendment rights; and, in these cases,

the fact that the party was a corporation was incidental to

the questions before the Court.

As the court below found, the “right to hear” is not

involved in this case, and unlike a ban on advertising, Mass.

Gen. Laws c. 55, § 8, does not deprive the public from

receiving any information.

ITI.

Even if, arguendo, corporations have First Amendment

rights, those rights are limited to issues materially affecting

the corporation’s business, profits or assets. Appellants’

First Amendment claims stem from the due process of law

4

clause of the Fourteenth Amendment. While the due

process clause may protect the property interests of a

corporation, the liberty guaranteed by the due process

clause is the liberty of natural, not artificial, persons.

A corporation’s powers, purposes and property interests

are determined by the State. A corporation’s property

interests are necessarily limited by its corporate charter.

Having voluntarily accepted the benefits that go with the

corporate form, corporations must also accept the restric-

tions placed on their purposes and the use of their funds

largely accumulated because of the privileges granted by the

State.

Appellants claim that at a minimum the First Amend-

ment should be held to protect corporate speech where

corporations “believe” their material interests to be affected.

However, a balancing of interests, and not a speaker's

belief, determines whether speech is protected by the First

Amendment.

IV.

Even if, arguendo, corporations have First Amendment

rights which are co-extensive with those of natural persons,

Mass. Gen. Laws c. 55, § 8, is still constitutional. Be-

cause Mass. Gen. Laws c. 55, § 8, permits corporate

managers and even corporations to express their political

views in many different forms and forums, the statute has

only an incidental effect on corporate and corporate

managers speech.

On the other hand, the statute furthers several significant

state interests. First, by freeing elections from possible

corporate interference, the statute furthers the state's

interest in sustaining an active, alert role for the individual

5

citizen in the election process. This interest is particularly

significant in initiatives and referenda, which are the purest

form of democracy, introduced as a method for giving

individual citizens the last say on particular legislative

matters. Second, by preventing corporations from using

their influence gained through governmental privileges, the

statute furthers the state’s interest in sustaining the indi-

vidual citizen’s confidence in government. Third, by

prohibiting corporations from spending stockholders’ money

for political purposes, the statute furthers the state’s interest

in preventing stockholders from being compelled to furnish

contributions for the propagation of political opinions in

which they do not believe. Other schemes to protect

shareholder rights, such as requiring a majority vote of

shareholders for political expenditures or notification to the

shareholders, would not effectively protect minority interests

that would still be disregarded.

V.

The provision of Mass. Gen. Laws c. 55, § 8, which was

applicable to the Appellants’ proposed course of action is

not vague and contains no evidentiary presumptions. The

statute creates two separate but related crimes. The first is

general in nature and prohibits certain corporations from

making contributions or expenditures to oppose ballot

questions which will not “materially affect” their business,

property or assets. The second crime is specific in nature

and prevents corporate contributions to oppose ballot

questions dealing solely with the taxation of individuals.

The Appellants brought this litigation because they wanted

to follow the course of conduct interdicted by the second

crime, but material effect is not an element of that offense.

Hence questions as to the vagueness of the phrase “ma-

terially affecting” or the existence of an evidentiary

presumption alleviating the Commonwealth’s assumed

burden of proving a material effect are simply not

presented. In any event, the legislative and judicial history

of the statute indicates, and the Appellants concede, that

the second crime was “tailor-made” to prohibit corporate

campaign contributions to oppose a graduated income tax

amendment. There is no doubt that the statute afforded

Appellants fair notice that such contributions were pro-

scribed.

VI.

By prohibiting contributions by business corporations, but

not other artificial entities organized for business purposes,

Mass. Gen. Laws c. 55, § 8, does not deny business

corporations equal protection of the laws. The classifica-

tion implicit in the statutory scheme is based on economic

differences which make it more likely that corporate

contributions, as opposed to contributions by other artificial

entities, will undermine the role of the individual voter in

the initiative and referendum process and will result in

diminution of the political rights of individual stockholders.

These factors justify restrictions on business corporations

that may not legitimately be applied to other organizations.

Even if restrictions could be constitutionally imposed on

these other organizations, however, the equal protection

clause does not mandate the conclusion that the Common-

wealth must proscribe all contributions by unnatural

persons or none at all.

7

Argument

I. Te Issues PresENTED ARE NON-JUSTICIABLE BECAUSE

Tuts Case Has Become Moot ON APPEAL.

The specific dispute which spawned this appeal is over.

In November of 1976 the voters of the Commonwealth once

again rejected a proposed graduated income tax amendment

to the Massachusetts Constitution. J.S. App. 4, n. 6. The

Appellants, all Massachusetts corporations which had

expressed a desire to make political contributions or ex-

penditures to oppose the amendment and who unsuccess-

fully appeared before the Supreme Judicial Court to

challenge the Commonwealth’s right to restrict their activi-

ties, refrained from contributing or expending corporate

funds to express their opposition. Whatever the outcome of

this appeal, there can be no future enforcement efforts as a

result of the facts underlying this case because there has

been no violation of Mass. Gen. Laws c. 55, § 8. Under

these circumstances the case has become moot on appeal.

The rule against deciding moot cases is not discretionary;

it is a rule of constitutional dimension having its roots in

Article III of the United States Constitution. See, e.g.,

Liner v. Jafco, Inc., 375 U.S. 301, 306 (1964). To the

extent that the rule “defines constitutionally minimal condi-

tions for the invocation of federal judicial power, its

meaning and scope ... must be derived from the funde-

mental policies informing the ‘cases or controversies’ limita-

tion imposed by Art. III.” Franks v. Bowman Transp.

Co., Inc., 424 U.S. 747, 754 (1976). The “cases and

controversies” limitation is a jurisdictional prerequisite to

the exercise of federal judicial power and requires that “an

actual controversy must be extant at all stages of review,

not merely at the time the complaint is filed.” Steffel v.

Thompson, 415 U.S. 452, 459, n. 10 (1974), citing Roe v.

Wade, 410 U.S. 113, 125 (1973). A “rigid insistence” on

this requirement is particularly important here, because a

major constitutional issue is presented on a less than optimal

record. Ashwander v. TVA, 297 U.S. 288, 347 (1936)

(Brandeis, J., concurring).

Ordinarily the current controversy requirement is not

met, and a case becomes moot on appeal, whenever the

party claiming to be aggrieved ceases to have a personal

stake in its outcome. See, DeFunis v. Odegaard, 416 U.S.

312 (1974). The Appellants in this case seek to avoid the

consequences of mootness by invoking the “capable of repe-

tition, yet evading review” exception to the doctrine.

Southern Pacific Terminal Co. v. ICC, 219 U.S. 498, 515

(1911). The exception is of no avail to the Appellants.

The instant case was not commenced as a class action,

App. 3-9, a factor which “significantly affects the mootness

determination.” Sosna v. Iowa, 419 U.S. 393, 399 (1975).

In the absence of a class action, the “capable of repetition,

yet evading review” exception was limited by the decision in

Sasna to situations “where two elements combined: (1) the

challenged action was in its duration too short to be fully

litigated prior to its cessation or expiration, and (2) there

was a reasonable expectation that the same complaining

party would be subjected to the same action again.”

Weinstein v. Bradford, 423 U.S. 147, 149 (1975). Neither

of these elements is present in this case.

Whether or not the same controversy will recur is a

matter of sheer speculation.' The Appellants argue with

‘This Court is asked to speculate in another significant regard. The

judgment of the Supreme Judicial Court effectively constituted a refusal

to preclude institution of criminal proceedings against corporations for

making contributions violative of Mass. Gen. Laws c. 55, § 8. Ap-

pellants ask this Court to conclude that if such proceedings had been

assurance that the issues will arise again because, in their

view, a graduated income tax amendment will inevitably

again be placed on the Massachusetts ballot. In the past,

graduated income tax amendments in one form or another

have repeatedly been placed before the voters of the

Commonwealth, who have just as consistently rejected

them. Appellants’ Brief, 20, n. 5. The 1976 election

marked the first time, however, that corporate contribu-

tions to oppose the amendment had been effectively fore-

closed. See, First National Bank v. Attorney General, 362

Mass. 570, 290 N.E. 2d 526 (1972) (hereinafter referred to

as FNBI); Lustwerk v. Lytron, Inc., 344 Mass. 647, 183

N.E. 2d 871 (1962). In light of the defeat of the amend-

ment at this last election, it is doubtful whether it will

again be placed on the ballot. In any event, this is not

the kind of election issue which will necessarily recur at

regular intervals, as questions pertaining to nomination of

candidates or eligibility to vote will. On the contrary, an

affirmative vote of two consecutive sessions of the General

Court must precede placing the amendment on the ballot.

While past history may be instructive in this regard, it

simply cannot be conclusively presumed that the legislature

will take that action.

Moreover, if a similar controversy does arise between

these parties in the future, it will presumably be litigated in

a different manner.’

commenced, they would have operated to deprive corporations of

asserted constitutional rights. This is a matter of conjecture which does

not present a substantial federal question. See, Abrams v. Van Schaick,

293 U.S. 188 (1934).

*In fact the history on which Appellants rely for the assertion that the

same controversy will recur belies their conclusion. The history of the

graduated income tax amendments is evolutionary. Both the text of the

10

Given the holding of the lower court, corporations would

stand little chance of successfully instituting an action for

declaratory judgment if they submitted their case on an

agreed statement of facts and merely argued from those

facts. Realistically, the issues presented by this appeal can

only recur either by way of criminal prosecution or after a

civil trial to determine the merits of the corporate claim.

Appellants’ Brief, 32. Thus, while the issues presented may

be capable of repetition, presumably they will reappear

before this Court not in the “same action” as that term is

used in Weinstein v. Bradford, supra, but in an entirely

different context and on a more concrete factual record.

Assuming, arguendo, that there is a reasonable probabili-

ty that the issues presented will arise again between the

parties to this appeal, this matter still does not fall within

the narrow range of cases which are capable of repetition,

yet evading review. That exception to the mootness

doctrine is triggered only where the action, order or statute

challenged operated during a time period so short that it

was virtually impossible fully to litigate its validity. Ap-

pellants seek to have this Court determine the question of

mootness not on the basis of what actually happened in the

underlying litigation, but on the basis of what may happen

in similar cases brought in years to come. Appellants’

Brief, 22-23. They argue not that the proscription against

corporations operated in this case in a time frame too short

for complete adjudication, but that in the future case back-

logs in the trial courts of the Commonwealth may effective-

ly preclude appellate review. Their prospective examina-

amendments submitted to the voters and the form of corporate challenges

to a restriction on their contributions have constantly changed. See,

FNBI; Lustwerk v. Lytron, Inc., supra. If the issues are litigated again,

history suggests it will not be in the same fashion.

ll

tion of this element of the “capable of repetition, yet

evading review” exception is totally inconsistent with the

cases or controversies requirement of Article II] which

informs mootness analysis. Franks v. Bowman . Transp.

Co., Inc., supra. Unless this Court is prepared to issue an

advisory opinion on supposed facts, inquiry into the time

frame available for review must be confined to an examina-

tion of the actual course of this litigation.

It is not surprising that Appellants argue from hypo-

thetical facts, because it was their actual treatment of this

case which made appellate review impossible. They could

have brought suit to challenge Mass. Gen. Laws c. 55, § 8,

as early as May 7, 1975. On that date the Massachusetts

General Court took the final legislative action necessary to

place the graduated income tax amendment on the Novem-

ber 1976 ballot. I Journal of the Senate, 1409-1412 (1975).

At that time the 1975 amendment to Mass. Gen. Laws

c. 55, § 8, was fully effective.’ As the Supreme Judicial

Court noted in its decision, the Appellants had complete

control over the commencement of their litigation and could

have sought declaratory relief in the spring of 1975, nearly

eighteen months prior to the election. App. 15, n. 15.

Instead, they waited nearly a year and filed a complaint on

April 9, 1976. App. 1, 2. By choosing to file at that late

date, Appellants not only prevented a full trial proceeding

but precluded any meaningful opportunity to seek review

by this Court. If the suit had begun in May of 1975 and

proceeded through all stages at exactly the same pace as this

litigation, it could have been submitted to this Court while

the controversy was a current one. Thus the limited period

for review in this case is a direct consequence of the

Appellants’ trial strategy and is not a result of the operation

*St. 1975, c. 151, became effective on April 28, 1975.

12

of natural or man-made laws. Contrast, Roe v. Wade, 410

U.S. 113 (1973); Dunn v. Blumstein, 405 U.S. 330 (1972).

Appellants should not be extricated from their plight

simply by characterizing this as an election case. This

Court has not established a unique rule for election matters.

Certainly the “capable of repetition, yet evading review”

exception has been invoked in the past to assume jurisdic-

tion after the relevant election has passed,‘ but the Court

has also sustained mootness claims in such cases. The

Court has rejected a talismanic invocation of the election

process with its obvious time constraints and has instead

analyzed each case on its own merits.

Finally, this is not a typical election case presenting

questions about the constitutionality of nominating pro-

cedures or voter qualifications which will necessarily recur

every two or four years and which implicate the ability of

classes of citizens to participate in a democratic election

process. The public policy arguments which militate in

favor of deciding such cases are totally lacking here, where

the difficulty of obtaining appellate review was caused by

the Appellants’ own delay in bringing suit and where a

ruling by this Court will have no direct impact on the

elective process. Based on the foregoing analysis, this Court

should dismiss this appeal for lack of jurisdiction.

*American Party v. White, 415 U.S. 767 (1974); Storer v. Brown, 415

U.S. 724 (1974); Rosario v. Rockefeller, 410 U.S. 752 (1973); Dunn v.

B'umstein, supra; Moore v. Ogilvie, 394 U.S. 814 (1969).

‘Brockington v. Rhodes, 396 U.S. 41 (1969); Golden v. Zwickler, 394

U.S. 193 (1969).

13

Il. Corporations Not IN Tue Business Or CoMMUNICA-

TIONS Or SpeecH Do Nor Have First AMENDMENT RiGHTs.

Appellants contend that Mass. Gen. Laws c. 55, § 8, is

unconstitutional as a violation of freedom of expression.

However, Appellants, as corporations not in the business of

communications or speech, do not have First Amendment

rights.

Corporations are artificial entities. They are legal

fictions created as a convenient way to do business which

exist for the benefit of the entire economy. As this Court

noted in Dartmouth College v. Woodward, 17 U.S. (4

Wheat.) 518, 636 (1819):

A corporation is an artificial being, invisible,

intangible, and existing only in contemplation of law.

Being the mere creature of law, it possesses oniy those

properties which the charter of its creation confers

upon it, either expressly, or as incidental to its very

existence.

One of the most important characteristics of a corpora-

tion is that it divorces its human owners and managers from

the corporate entity.* Corporations cannot have opinions.

In fact, because of the dispersion of stock ownership and

shareholder apathy, opinions purportedly expressed on

*Harry Henn in The Law of Corporations 110 (1970) lists the six

major attributes of the modern corporation. At least four of these attri-

butes [(1) the power to contract and to take, hold, and convey property

in the corporate name; (2) the power to sue and to be sued in the

corporate name; (3) perpetual succession; and (4) limited liability) can

at least in part be attributed to the desire to keep the corporate entity

separate from its human owners and managers.

14

behalf of a corporation tend to be the personal opinions of

its management. Note, “Corporate Political Affairs Pro-

grams,” 70 Yale L.J. 821, 833 (1961). Mass. Gen. Laws

c. 55, § 8, does not prohibit corporate managers from

expressing their opinions. Rather, it prohibits corporate

managers from using the corporate treasury to express their

personal views on election issues not materially affecting the

corporation.

This Court has never decided whether corporations enjoy

First Amendment rights entitling them to express their

opinions on electoral issues. However, this Court has

repeatedly found that corporations do not enjoy other

peculiarly personal rights guaranteed to their owners and

managers by other constitutional provisions. The logic of

these cases is totally applicable to the instant case.

In Bank of Augusta v. Earle, 38 U.S. (13 Peters) 519, 536

(1839), this Court declared that corporations did not enjoy

the privileges and immunities of citizens. The Court noted

that a corporation is an “artificial being created by the

charter,” and “[t}he only rights it can claim are the rights

which are given to it in that character, and not the rights

which belong to its members as citizens of a state.” 38 U.S.

at 587. In Paul v. Virginia, 75 U.S. (8 Wall.) 168, 177

(1868), this Court observed that the term “citizen” as found

in the privileges and immunities clause “applies only to

natural persons .. ., owing allegiance to the State.” See

also, Blake v. McClung, 172 U.S. 239 (1898); Liberty

Warehouse Co. v. Burley Tobacco Growers’ Co-operative

Marketing Assoc., 276 U.S. 71 (1928); Hemphill v. Orloff,

277 U.S. 537 (1928); and Asbury Hospital v. Cass County,

326 U.S. 207 (1945), for later cases declaring that corpora-

tions do not enjoy the rights of citizens guaranteed by

the privileges and immunities clause.

15

This Court has also held that corporations cannot claim

the Fifth Amendment right against self-incrimination,’

equality with individuals in the enjoyment of a right to

privacy,* or even freedom of association.’ In each instance

the Court has differentiated between rights belonging to

individuals and those pertaining to corporations, con-

sistently refusing to permit corporations to exercise the

personal rights guaranteed to their management. In the

context of corporate freedom of association claims in sit-in

cases, Justice Douglas asked:

So far as the corporate owner is concerned, what

constitutional right is vindicated? It is said that

ownership of property carries the right to use it in

association with such people as the owner chooses.

The corporate owners in these cases — the stockholders

— are unidentified members of the public at large,

who probably never saw these petitioners, who may

never have frequented these restaurants. What

personal rights of theirs would be vindicated by af-

firmance? .. .

Who, in this situation, is the corporation? Whose

racial prejudices are reflected in “its” decision to refuse

service to Negroes? The racial prejudices of the

manager? Of the stockholders? Of the board of

directors? ...

"United States v. White, 322 U.S. 694, 699 (1944); Wilson v. United

States, 221 U.S. 361, 382-86 (1911).

*California Bankers Assoc. v. Schultz, 416 U.S. 21 (1974); United

States v. Morton Salt Co., 338 U.S. 632, 651 (1950).

*Bell v. Maryland, 378 U.S. 226 (1964).

16

[H Jow is a “personal” right infringed when a corporate

chain store, for example, is forced to open its lunch

counters to people of all races? How can that so-called

right be elevated to a constitutional level? How is that

corporate right more “personal” than the right against

self-incrimination? Bell v. Maryland, 378 U.S. 226,

‘ (1964) (Douglas, J., concurring).

In at least two lower court cases, courts have concluded

that corporations do not enjoy the right to freedom of

speech or association. Joint Anti-Fascist Refuge Committee

v. Clark, 177 F. 2d 79, 83 (D.C. Cir. 1949), rev'd on other

grounds, 341 U.S. 123 (1951); Hallmark Productions, Inc.

v. Mosley, 190 F. 2d 904, 909 (8th Cir. 1951).

Appellants in their Brief, at 37, 39, make no attempt to

distinguish the cases cited in this section of Appellee’s Brief,

or to explain why the right to freedom of speech is not a

personal right. Rather, they have cited cases which pur-

portedly stand for the proposition that corporations do

enjoy First Amendment rights. None of the cases cited in

Appellants’ Brief make any such flat assertion.

All but two of the cases cited by Appellants involve

corporations or individuals involved in the communications

business." They do not declare that corporations per se

"Grosjean v. American Press Co., 297 U.S. 233 (1936), involved a

license fee imposed directly on newspapers. In Joseph Burstyn, Inc. v.

Wilson, 343 U.S. 495 (1952), and Kingsley International Pictures Corp.

v. Regents, 360 U.S. 684 (1959), the corporations were engaged in the

business of distributing motion pictures. A newspaper was the de-

fendant corporation in New York Times Co. v. Sullivan, 376 U.S. 254

(1964). Pennekamp v. Florida, 328 U.S. 331 (1946), was a contempt

action against a newspaper publisher and editor and did not even

directly involve a corporation. Time, Inc. v. Hill, 385 U.S. 374 (1967),

was a libel and right to privacy action against a national magazine.

17

have First Amendment rights, but merely recognize that

natural persons retain their First Amendment rights even

though they publish or distribute their views under

corporate auspices. None of these cases raised the question

of the propriety of corporate managers spending stock-

holder funds for purposes unrelated to the corporation’s

charter. Instead, in all of these cases, the fact that a party

was a corporation was incidental to the questions before the

court.

Appellants cite only two cases involving corporations not

in the communications business to support the proposition

that corporations per se have First Amendment rights.

Appellants’ Brief, 37. In NAACP v. Button, 371 U.S. 415

(1963), this Court declared Virginia’s ban on certain forms

of solicitation of legal business unconstitutional. The Court

did not find that all corporations have First Amendment

rights, but, rather, quite carefully stated that the NAACP,

although a corporation, could assert First Amendment rights

on its own behalf expressly because “it is directly engaged in

those activities [protected by the First and Fourteenth

Amendments].” 371 U.S. at 428.

Finally, Appellants have cited the case of Linmark

Associates, Inc. v. Township of Willingboro, 45 U.S.L.W.

4441 (May 2, 1977), where this Court struck down a ban on

placing “For Sale” signs in front of people’s homes. How-

ever, in Linmark there was no discussion of a corporation's

right to bring the action, and, in fact, the case involved a

non-corporate as well as a corporate petitioner. Of more

importance, this Court did not find that corporations have

First Amendment rights, but, rather, that the Township's

ban affected the interest of other members of the

community in receiving the information. Despite Appel-

lants’ repeated attempts to characterize this case as one

18

involving “the right to hear,” this issue simply is not

involved given the facts and parties in this case.

Appellants correctly note that “(t]he court below never

once alluded to the right of the people to hear, although

this point was stressed throughout plaintiffs presenta-

tion .. .” Appellants’ Brief, 43. The court below realized

that “the right to hear” is not involved in this case. The

public’s interest in receiving information is one of the

important interests embodied in the First Amendment.

Stanley v. Georgia, 394 U.S. 557, 564 (1969). This does

not mean, however, that a party with no First Amendment

rights can invoke these interests. One of the reasons for

granting parties First Amendment rights was so that others

could hear what they had to say. However, if it should be

determined that the corporations in this case do not have the

First Amendment rights they are seeking, it does not matter

that one of the interests that would be embodied in their

rights (if they had them) would be the interests of the other

people to hear what they have to say. Furthermore, unlike

a ban on advertising, Virginia State Board of Pharmacy v.

Virginia Citizens Consumer Council, Inc., 425 U.S. 748

(1976), or a ban on “For Sale” signs, Linmark Associates,

Inc. v. Township of Willingboro, 45 U.S.L.W. 4441

(May 2, 1977), which effectively close off the public’s ability

to obtain certain information, Mass. Gen. Laws c. 55, § 8,

effects no such ban. Instead, the law simply forbids

corporate managers from spending corporate money to

express their personal views. Because the corporate

managers are free to express their opinions in their private

capacity, the public is not deprived of any information."'

“If Appellants’ “right to hear” argument is construed to challenge

Mass. Gen. Laws c. 55, § 8, as unconstitutional as applied, Appellants

have failed to meet their burden of showing that the statute deprives

19

See Section IV of this Brief, at 31, for a discussion of further

ways that even corporations have for making their opinions

known.

Ill. Even Ir, Arcuenpo, Corporations Have Fist

AMENDMENT Ricuts, THose Ricuts Are Liwrrep To

Issues MATERIALLY AFFECTING THE CORPORATION'S BuslI-

NEss, Prorrrs Or Assets.

The court below concluded that even though in their

opinion corporations possess certain rights of speech and

expression, those rights are limited to issues materially

affecting the corporation’s business, profits or assets.'*

Specifically, noting that Appellants’ claims stem only from

the equal protection and due process of law clauses of the

Fourteenth Amendment, J.S. App. 12; Appellants’ Brief, 36,

the court below declared:

It seems clear to us that a corporation does not have

the same First Amendment rights to free speech as

those of a natural person, but, whether its rights are

designated “liberty” rights or “property” rights, a

corporation’s property and business interests are

anyone of hearing their views. It is important to note that even with

corporations prohibited from making expenditures or contributions on

the 1976 referendum question which would have legalized a graduated

income tax, the proposed referendum was nevertheless defeated, indi-

cating that Appellants’ views obviously managed to reach the public.

].S. App. 4, n. 6.

‘Such a ruling offers another way for reconciling the restrictions on

corporate speech involved in this case with all of the cases cited by

Appellants involving commercial speech. In all commercial speech

cases, the corporation(s) (if any) involved necessarily have a direct

financial interest in the speech being contested.

entitled to Fourteenth Amendment protection. Pierce

v. Society of Sisters, supra. See Bowe v. Secretary

of the Commonwealth, 320 Mass. 230, 251 (1946). It

is also clear that, as an incident of such protection,

corporations possess certain rights of speech and expres-

sion under the First Amendment.

Thus, we hold today that only when a general

political issue materially affects a corporation's business,

property or assets may that corporation. claim - First

Amendment protection for its speech or other activities

entitling it to communicate its position on that issue

to the general public. This limitation is identical to

the legislative command in the first sentence of G.L.

c. 55, § 8. Put in another way, the Legislature has

clearly identified in the challenged statute the pa-

rameters of corporate free speech.'* (Footnotes

omitted.)

Appellee contends that corporations not in the business of

communications or speech do not possess any rights of

freedom of speech or expression. However, if this argu-

ment were rejected, this Court’s decisions involving the due

process clause make it clear that any such First Amend-

ment rights would be limited to issues materially affecting

the corporation's business, profits or assets. Since the court

below found that Appellants failed to demonstrate a

material effect, they cannot lay claim even to these limited

First Amendment rights.

Significantly, as noted by the court below, under this view of the

First Amendment, the restrictions this Court placed on campaigning

expenditures in Buckley v. Valeo, 424 U.S. 1 (1976), are not relevant

to a decision in this case. J.S. App. 10, n. 11.

-*-?eeorF ©

_-

——

21

In Hague v. Committee for Industrial Organization, 307

U.S. 496 (1939), the Supreme Court held that a corporation

could not maintain a suit to enjoin interference with its

freedom of speech and of assembly. As Mr. Justice Stone

said in his concurring opinion:

As to the American Civil Liberties Union, which is a

corporation, it cannot be said to be deprived of the

civil rights of freedom of speech and of assembly, for

the liberty guaranteed by the due process clause is the

liberty of natural, not artificial, persons. North-

western Nat. Life Insurance Co. v. Riggs, 203 U.S.

243, 255 (1906); Western Turf Ass'n v. Greenberg,

204 U.S. 359, 363 (1970). Id. at 527."

In Pierce v. Society of Sisters of Holy Name, 268 U.S.

510 (1925), this Court specifically recognized that those

rights which corporations do enjoy under the Fourteenth

Amendment are related to the direct business and property

interests of the corporation. The Court stated:

Appellees are corporations and therefore, it is said,

they cannot claim for themselves the liberty which the

Fourteenth Amendment guarantees. Accepted in the

proper sense, this is true. ([Citations.] But they have

business and property for which they claim protection.

“Another view of the Fourteenth Amendment also relevant to this

case is found in Justice Rehnquist's separate opinion in Buckley v. Valeo,

424 U.S. 1, 291 (1976), in which Justice Rehnquist states that in his

opinion “not all of the strictures which the First Amendment imposes

upon Congress are carried over against the States by the Fourteenth

Amendment, but rather that it is only the ‘general principle’ of free

speech .. . that the latter incorporates.” (Citations omitted.)

These are threatened with destruction through the

unwarranted compulsion which appellants are exer-

cising over present and prospective patrons of their

schools. And this court has gone very far to protect

against loss threatened by such action. ([Citations. }

Id. at 535.

In the more recent case of D.D.B. Realty Corp. v.

Merrill, 232 F. Supp. 629 (D. Vt. 1964), relying on the

Northwestern Nat. Life Insurance Co. line of cases, the

District Court of Vermont summed up:

Insofar as the Due Process clause applies to “proper-

ty”, a corporation is considered a “person”. Insofar

as the Due Process clause applies to “liberty” and “life”,

a corporation is without standing to sue for the loss of

these two elements. ... On the other hand, there are

cases where the artificial body of a plaintiff corporation

has been allowed standing to sue for these subjective

elements possessed by human beings, although such

allowance was often over a vigorous dissent. .

It is — worthy to note that in many of these

latter cases, the “liberty” or “life” claimed to have been

impinged is one which an inanimate corporation could

possess and does not affect human emotions or sensitivi-

ties. Id. at 637.

See also, Mexican-American Federation — Washington

State v. Naff, 299 F. Supp. 587 (E. D. Wash. 1969)

(denying a corporation standing to challenge the state's

constitutional provision regarding literacy in the English

language as a voter qualification, even though the express

23

purpose of the corporation was to represent, promote and

achieve the economic, social and cultural interests of all

Mexican-American people in the State of Washington).

The Northwestern Nat. Life Insurance Co. line of cases

makes it clear that the due process rights to which a

corporation is entitled are limited to those areas materially

affecting the corporation’s business, profits or assets.

Another line of cases leading to the same conclusion involves

the right of the state to impose limitations on corporations.

A corporation is a creature of the State. As this Court

stated in Prudential Insurance Co. of America v. Cheek,

259 U.S. 530 (1922):

[T he right to conduct business in the form of a corpo-

ration .. . is not a natural or fundamental right. It

is a creature of the law; and a State in authorizing its

own corporations or those of other States to carry on

business ... may qualify the privilege by imposing

such conditions and duties as reasonably may be

deemed expedient in order that the corporation's activi-

ties may not operate to the detriment of the rights of

others with whom it may come in contact. Id. at 536.

As a creature of the State, the powers of a corporation

are simply such as state statutes confer, and the enumera-

tion of them implies exclusion of all others. Thomas v.

Railroad Co., 101 U.S. 71 (1879); Pennsylvania Railroad

Co. v. St. Louis, etc., Railroad Co., 118 U.S. 290 (1886).

A corporation's specific purposes are set forth in its charter

which is created pursuant to the requirements of state law.

Dartmouth College v. Woodward, supra, at 636.

Like everyone else, a corporation's property interests “are

not created by the Constitution. Rather, they are created

24

and their dimensions are defined by existing rules or under-

standings that stem from an independent source such as

state law ....” Board of Regents v. Roth, 408 U.S. 564,

577 (1972). In sum, a corporation’s powers, purposes and

property interests are defined by the State. Thus, the due

process property rights of corporations must be limited to

protecting those property interests determined by the State

to be consistent with the corporation’s powers and purposes.

By definition, a corporation cannot have property interests

going beyond its purposes; in other words, a corporation's

due process interests must necessarily be limited to matters

materially affecting its business, profits or assets.'* This is

the exact conclusion reached by the Michigan Supreme

Court in the case of People v. Gansley, 158 N.W. 195

(Mich. 1916), which examined whether restrictions on

corporate expenditures in election campaigns violated the

corporation's due process rights. The court reasoned:

The expenditure of the money of the Lansing Brewing

Amendment. Such corporations have no right to par-

ticipate in the elective franchise. We are not dealing

with a measure that deprives a corporation of any of its

property, or that impairs the value of that property.

such corporation was created and exists, as was the fact

in the cases cited, and relied upon by counsel for

respondent... .

We agree with counsel for the people wherein they say:

“If the respondent in this case, or the stockholders

and officers of the Lansing Brewing Company

desired, as individuals, to contribute to the campaign

fund, it was their privilege so to do, subject to the

regulations imposed by the statute. This artificial

person, however, that was created for the purpose of

manufacturing beer, has no such right; and it lies

within the power of the Legislature of this state to

say that its funds should not be used for such a

purpose.” Id. at 200, 201.

Appellants, having accepted the privilege of conducting

business in the corporate form by voluntarily accepting the

benefits that go with the corporate form, must also accept

the restrictions placed on their purposes and the use of their

funds largely accumulated because of the privileges granted

by the State. In Massachusetts, all individuals forming

corporations are subject to Mass. Gen. Laws c. 155, § 3,

which provides that “[ajll corporations organized under

general laws shall be subject to such laws as may be here-

after passed affecting or altering their corporate rights or

duties or dissolving them.”

This Court repeatedly has upheld over First Amendment

objections regulatory schemes which restrict corporate

communication so long as they do not discriminate against

communications media. See, e.g., Associated Press v.

National Labor Relations Board, 301 U.S. 103 (1937);

Lincoln Federal Labor Union v. Northwestern Iron &

Metal Co., 335 U.S. 525 (1949); Lorain Journal Co. v.

United States, 342 U.S. 143 (1951); National Labor Rela-

tions Board v. Virginia Electric & Power Co., 314 U.S. 469

(1941).

On several occasions, this Court has specifically noted

that corporations, having accepted the privileges of corpo-

rate existence, cannot complain of the limitations neces-

sarily accompanying the limited corporate purpose. In

finding that corporations do not enjoy a right to privacy

equal to an individual's, this Court just recently declared in

California Bankers Assoc. v. Schultz, 416 U.S. 21, 65

(1974), quoting United States v. Morton Salt Co., 338 U.S.

632, 651-52 (1950):

“While they may and should have protection from

unlawful demands made in the name of public in-

vestigation, cf. Federal Trade Comm'n v. American

Tobacco Co., 264 U.S. 298, corporations can claim no

equality with individuals in the enjoyment of a right to

privacy.... They are endowed with public attri-

butes. They have a collective impact upon society,

from which they derive the privilege of acting as arti-

ficial entities.... Favors from government often

carry with them an enhanced measure of regula-

tion.... Even if one were to regard the request for

information in this case as caused by nothing more

than official curiosity, nevertheless law-enforcing

agencies have a legitimate right to satisfy themselves

that corporate behavior is consistent with the law and

the public interest.” (Citations omitted.)

Similarly, this Court has declared:

27

It would be intolerable that the Congress should endow

an association with the right to conduct a public

banking business on certain limitations and that the

Court at the behest of those who took advantage from

the privilege should remove the limitations intended for

public protection. It would be difficult to imagine a

more appropriate situation in which to apply the

doctrine that one who utilizes an Act to gain advan-

tages of corporate existence is estopped from questioning

the validity of its vital conditions. Fahey v. Mallonee,

332 U.S. 245, 256 (1947).

In the election context, this Court declared just last year

in Buckley v. Valeo, 424 U.S. 1, 57, n. 65 (1976), that even

though expenditure limitations on candidates were uncon-

stitutional when standing alone, “Congress may engage in

public financing of election campaigns and may condition

acceptance of public funds on an agreement by the

candidate to abide by specified expenditure limitations.

Just as a candidate may voluntarily limit the size of the

contributions he chooses to accept, he may decide to forgo

private fundraising and accept public funding.” See also,

Arnett v. Kennedy, 416 U.S. 134, 154 (1974), in which the

plurality opinion declared OEO discharge procedures

constitutional, noting that because the employee's property

rights were defined in part by the statute's discharge

procedures, the litigant “must take the bitter with the

sweet.”

Appellants, conceding for the sake of argument that

corporations’ constitutional rights might be limited to

matters materially affecting their business, raise one addi-

tional argument as to why Mass. Gen. Laws c. 55, § 8, is

still allegedly in violation of the First Amendment. Appel-

28

lants claim that at a minimum the First Amendment should

be held to protect corporate speech where corporations

“believe” their material interests to be affected. Appel-

lants’ Brief, 56.

However, the First Amendment has never been held to

protect all speech which the speaker “believed” to be

proper. Just recently, in the area of libel law, this Court

declared in Gertz v. Robert Welch, Inc., 418 U.S. 323, 347

(1974), that even though a speaker believed in the truth of

a statement asserted, if the statement was nevertheless negli-

gently made, it was not protected by the First Amendment.

Specifically, Appellants seem to assert that to punish

corporations for speech that they believe to materially affect

their business shifts the burden of materiality onto them.

Appellants’ Brief, 33. This argument confuses the operation

of the act with the procedural posture of this case, which

was brought as a declaratory judgment. In order to

succeed in this declaratory judgment action, Appellants,

who sought below to have Mass. Gen. Laws c. 55, § 8,

declared unconstitutional as to them even before it was

applied, had the burden of showing that their proposed

speech materially affects their businesses. However, in a

criminal prosecution under the Act, Mass. Gen. Laws c. 55,

§ 8, does not shift any burdens of proof, but rather

requires, as in any criminal proceeding, for the Common-

wealth to prove beyond a reasonable doubt each and every

element of the offense. Materiality is not an element of the

crime of contributing to oppose a graduated income tax

question; lack of materiality would instead be an affirma-

tive defense. Nevertheless, to the extent that the corpora-

tions’ belief raises a doubt as to materiality, the corpora-

tions would be found innocent. The court below correctly

concluded:

29

The plaintiffs further argue that all they need show is a

“reasonable belief” that the proposed amendment

would materially affect them. While such a belief

is relevant to the question whether such an expenditure

would be ultra vires, cf. Lustwerk v. Lytron, Inc.,

344 Mass. 647, 651 (1962), standing alone it is not

relevant to the question presented herein, J.S. App.

15, n. 15. mot ee

IV. Even Ir, Arcuenpo, Corporations Have First

AMENDMENT RicuHts Wuicw Are Co-ExtTensive WITH

Tuoset Or Naturat Persons, Mass. Gen. Laws c. 55,

§ 8, Is Stitt ConsTITUTIONAL.

Even if this Court were to find that corporations have

First Amendment rights which are co-extensive with those

of natural persons, Mass. Gen. Laws c. 55, § 8, is still

constitutional. Neither the right to associate nor the right

to participate in political activities is absolute. See, e.g.,

C.S.C. v. Letter Carriers, 413 U.S. 548, 567 (1973);

Rosario v. Rockefeller, 410 U.S. 752 (1973); Dunn v.

Blumstein, 405 U.S. 330, 336 (1972); Bullock v. Carter,

405 U.S. 134, 140-41 (1972); Jenness v. Fortson, 403 U.S.

431 (1971); Williams v. Rhodes, 393 U.S. 23, 30-31 (1968).

Even a “‘significant interference’ with protected rights of

political association” may be sustained if the State demon-

strates a sufficiently important interest and employs means

closely drawn to avoid unnecessary abridgement of associa-

tional rights.'* Buckley v. Valeo, 424 U.S. 1, 25 (1976);

"Appellants have attempted to characterize this case as involving

prior restraints, thus requiring an even stronger governmental interest to

justify the statute. Appellants’ Brief, 29-34. However, Mass. Cen.

30

Cousins v. Wigoda, 419 U.S. 477, 488 (1975). Specifically,

as this Court stated in Younger v. Harris, 401 U.S. 37, 51

(1971):

Where a statute does not directly abridge a free speech,

but — while regulating a subject within the State’s

power — tends to have the incidental effect of in-

hibiting First Amendment rights, it is well settled that

the statute can be upheld if the effect on speech is

minor in relation to the need for control of the conduct

and the lack of alternative means for doing so. (Cita-

tions omitted. )

In this case, Mass. Gen. Laws c. 55, § 8, has only an

incidental effect on corporate and corporate managers’

speech. Corporate managers can voluntarily speak inde-

pendently of the corporation.'’ The court below noted that

ws c. 55, § 8, as a criminal statute which punishes individuals only

after they have spoken, cannot be characterized as involving prior

restraints. As this Court noted in Southeastern Promotiens, Ltd. v.

Conrad, 420 U.S. 546 (1975), a system of prior restraints is to be con-

trasted with a system of criminal penalties:

by .

theory deeply etched in our law: a free society prefers to punish the

few who abuse rights of speech after they break the law than

throttle them and all others beforehand. (Emphasis in opinion.)

‘Compare this with the situation in Buckley, where the Court de-

clared unconstitutional the campaign expenditure limitations since they

inhibited “actions voluntarily undertaken by citizens independently of a

candidate's campaign.” 424 U.S. at 37, 39-51.

31

there is no language in Mass. Gen. Laws c. 55, § 8, “which

would preclude corporate officers, directors, stockholders or

employees from expressing their views publicly on the merits

of such a proposed referendum by participation in television

or radio discussions, news conferences, statements issued to

the press or through other similar means not involving

contributions or expenditures of corporate funds.” J.S.

App. 17. In addition, the court below observed that a

corporation could express its views on political proposals in

“a trade journal, a house organ or a newspaper, published

by a corporation.” J.S. App. 16. In light of the many

means still available to corporations and corporate mana-

gers to express their opinions on political issues, any attempt

to characterize Mass. Gen. Laws c. 55, § 8, as a total pro-

hibition on corporate involvement in campaigns, more

stringent than the expenditure limitations involved in

Buckley, must be rejected.'*

“Similarly, this Court apparently found it important in C.S.C. v.

Letter Carriers, 413 U.S. at 556, that the “Hatch Act” did not prohibit

public employees from participation in all public activities. The Court

specifically noted that:

.. . The Act did not interfere with a “wide range of public activi-

ties.” ... It was “only partisan political activity that is inter-

dicted... . [Only] active participation in political management

and political campaigns [is proscribed]. Expressions, public or pri-

vate, on public affairs, personalties and matters of public interest,

not an objective of party action, are unrestricted by law so long as

the government employee does not direct his activities toward party

success.” (Citations omitted.)

This Court in Buckley rejected Appellee’s attempted reliance on C.S.C.

This Court stated that:

In upholding the Hatch Act's broad restrictions on the associational

freedoms of federal employees, the Court repeatedly emphasized the

statutory provision and corresponding regulation permitting an

A. The State Has Substantial Interests In Preventing

Corporations From Making Contributions Or Expendi-

tures To Influence The Vote On Referendum And

Initiative Issues.

The Commonwealth has substantial interests in prevent-

ing corporations from making contributions or expenditures

to influence the vote on referendum and initiative issues. '*

employee to “[e}xpress his opinion as an individual privately and

publicly on political subjects and candidates.” (Citations omitted.)

Buckley v. Valeo, 424 U.S. at 48, n. 54. For the very reasons that this

Court found C.S.C. inapplicable to Buckley, this Court should find

C.S.C. applicable to this case.

‘*Currently 31 states and the federal government have enacted

statutes restricting contributions either by limiting them as to amount or

restricting the source from which they are received. All of those juris-

dictions, with the exception of the two noted by asterisk, have singled

out corporations for special treatment:

Federal Corrupt Practices Act, 2 U.S.C. § 441(b);

Ala. Code Tit. 17, § 286 (1976);

Ariz. Rev. Stat. § 16-471(a) (1976);

Ark. Stat. Ann. § 3-1110 (Supp. 1975);

*Del. Code Tit. 15, § 8004(a) (Supp. 1974);

*Fla. Stat. Ann. § 106.08(1) (Supp. 1975);

Ky. Rev. Stat. §§ 121.025, 121.035 (Supp. 1976);

Rev. Stat. Ann. §§ 18:1482, 1489 (1976);

EEE:

|

i

2]

Hid

4

23

3

3

. Aan. Code § 26-9(b) (Supp. 1976);

ws Ann. c. 55, § 8 (Supp. 1976);

t. Ann. § 210A.34 (Supp. 1973);

. Aan. Stat. § 130.020.5 (Supp. 1976);

Pang on Ann. §§ 23-4795(1), 23-4744 (Supp. 1972);

a

ee!

H

a

Fi

N.H. ‘Rev. Ann. § 70:2(I) (Supp. 1972);

N.J. Rev. Stat. 65 19:34-35 (Supp. 1976);

N.Y. Election Law § 480 (McKinney Supp. 1972);

33

These interests are significant enough to justify the

limitations placed on both contributions and expenditures.

Specifically, as to the limits placed on contributions, in

conducting a balancing test, this Court should weigh the

fact that “a limitation upon the amount that any one person

or group may contribute to a candidate or political

committee entails only a marginal restriction upon the

contributor’s ability to engage in free communication.

A contribution serves as a general expression of support for .

the candidate and his views, but does not communicate the

underlying basis for the support.”*® Buckley v. Valeo, 424

U.S. at 20-21.

N.C. Gen. Stat. §§ 163-278.14, 163-278.19 (Supp. 1975);

N.D. Cent. Code § 16-20-08 (1975);

Ohio Rev. Code Ann. § 3599.03 (Supp. 1972);

Okla. Stat. Tit. 26, § 15-110 (1975);

Or. Rev. Stat. § 260.472 (1971);

Pa. Stat. Ann. Tit. 25, § 3225(b) (1977);

S.D. Compiled Laws Ann. § 12-25-2 (1989);

Tenn. Code Ann. § 2-1932 (Supp. 1976);

Tex. Civ. Code Ann. Art. 14.06 (1977);

W. Va. Code § 3-8-8 (1975);

Wisc. Stat. Ann. § 11.38(1)(a)(1) (Supp. 1977);

Wyo. Stat. § 22.1-389(c) and (d) (Supp. 1976).

“It is important to note that Appellants’ history is one of making

contributions and not expenditures to influence votes regarding referen-

dum issues legalizing a graduated income tax in Massachusetts. The

Appellants state that they desire to “expend monies in an effort to

persuade the voters to vote against the proposed constitutional amend-

ment.” Appellants’ Brief, 9. Similar assertions were made by three of

these Appellants in FNBI. In fact, the statement of agreed facts in this

case illustrates that contributions were made by four of the Appellants in

1972 and not that they made the kind

would suggest are in issue in this case. J.S.

The

].S. App. 41, Ex. “D” of the Record Appendix below, at 48-50.

34

1. Mass. Gen. Laws c. 55, § 8, Furthers The Signifi-

cant Governmental Interest In Sustaining An Active,

Alert Role For The Individual Citizen In the Election

Process.

Voting is the “fundamental political right, because

preservative of all rights.” Yick Wo v. Hopkins, 118 U.S.

356, 370 (1886). The right to vote has been given to

individual citizens, but has not been given t0° corporations.

The state has a significant interest in seeing that the

individual citizen’s role in the electoral process remains

paramount and free from interference in any shape, manner

or form by a corporate presence.

As this Court stated in describing the purpose of the

federal ban on corporate contributions to elections:

As the historical background of this statute indicates,

its aim was not merely to prevent the subversion of

the integrity of the electoral process. Its underlying

philosophy was to sustain the active, alert responsibility

of the individual citizen in a democracy for the wise

conduct of government. (Emphasis added.) United

States v. United Auto Workers, 352 U.S. 567, 575

(1957).

In a similar vein, the first court ever to rule on the con-

stitutionality of the federal ban on corporate contributions

to elections declared that corporations “are not citizens of

the United States, and, so far as the franchise is concerned,

must at all times be held subservient and subordinate to the

government and the citizenship of which it is composed.”

United States v. United States Brewers’ Association, 239

Fed. 163, 168 (W.D. Pa. 1916).

35

As important as the state’s interest is in sustaining the

active role of individual citizens in candidate elections, this

same state interest in referenda and initiatives, if anything,

is greater. Referenda were generally introduced in the

progressive era as a way to reduce the influence of special

interests. Wolfinger and Greenstein, “The Repeal of Fair

Housing in California: An Analysis of Referendum

Voting,” 62 Am. Pol. Sci. Rev. 753, 767 (1968). The

referendum and initiative are the people’s forum. They can

be considered the purest form of democracy. When the

regular political process (which includes interest group and

corporate lobbying, as well as political bargaining) fails, the

people have been given the final say. What makes

referenda and initiatives unique is that they are not a part

of the regular political process, subject to regular political

influences. The government has a strong interest in

keeping this people’s forum free from third party influence.

2. Mass. Gen. Laws c. 55, § 8, Furthers The Signifi-

cant Governmental Interest In Sustaining The

Individual Citizen’s Confidence In Government.

In C.S.C. v. Letter Carriers, supra, this Court sustained

restrictions on political activity by public employees,

declaring, “it is not only important that the Government

and its employees in fact avoid practici:ug political justice,

but it is also critical that they appear to the public to be

avoiding it, if confidence in the system of representative

Government is not to be eroded to a disastrous extent.”

413 U.S. at 565. This Court also noted in C.S.C. that one

legitimate governmental purpose was to limit the political

influence of federal employees on others and on the

electoral process. Id. at 557, 558. Thus, C.S.C. makes it

clear that limiting the political influence of a group with

special privileges, in order to restore confidence in govern-

ment and the electoral process, is a significant govern-

mental interest. Just as political employees have gained by

grace of their relationship with the government a position

potentially giving them the power to unduly influence an

election, corporations, having been endowed by the state

with a collective impact on society for economic purposes,

United States v. Morton Salt Co., supra, at 652, have

gained the power to unduly influence elections. Just as the

government was able to limit the influence of political

employees gained through their peculiar relationship to the

state, the government should also be able to limit the

influence of corporations gained because of special privileges

granted for non-political purposes.*'

Corporations have so significantly influenced initiatives

and referenda in the past that their power has inevitably

undercut the individual citizen’s confidence that as an

individual he can still make a difference. Voter choices in

referenda and initiatives are likely to be more responsive to

group influence than in general election voting, where party

identification guides most voters. Wolfinger and Green-

stein, supra, at 762. Corporations have spared no expense

in spending to influence initiatives and referenda. The case

at bar provides a good example. In 1972, a proposed

amendment to the Massachusetts Constitution which would

have authorized the imposition of a graduated income tax

was put before the voters. J.S. App. 7. Appellants First

National Bank of Boston, New England Merchants National

*' Buckley is inapposite. This case, like C.S.C., presents the very

limited issue of preventing undue influence resulting from the misuse of

governmental privileges and powers granted for one purpose but poten-

tially usable for another.

37

Bank, Wyman-Gordon Company and Gillette Company

each contributed $3,000 to the Committee for Jobs and

Government Economy to oppose the amendment. J.S.

App. 35-37.

The only duly organized non-elected political committee

to raise and expend money to oppose the proposed amend-

ment in 1972 in fact was the Committee for Jobs and

Government Economy. It raised and expended one

hundred twenty thousand dollars in 1972, J.S. App. 41, the

bulk of it raised through large corporate contributions. In

fact, the Committee raised $112,436.50 in a two-week

period between the date of its organization on June 6 and

June 19, 1972. See, Record Appendix of court below, pp.

48-84.

The only duly organized non-political committee to raise

and expend money to promote the 1972 proposal was the

Coalition for Tax Reform, Inc. J.S. App. 41. The records

on file with state officials indicate it raised and expended

only seven thousand dollars in support of the ballot ques-

tion. J.S. App. 41. Thus, the named corporate plain-

tiffs in this case themselves may have contributed more

money in 1972 to oppose the graduated income tax amend-

ment than all of the measure’s proponents combined

contributed to promote its passage. Of course, the

individual contributions by corporate managers are not a

factor in this calculus. In light of this history, restoring

confidence to the Massachusetts voter that initiatives and

referenda are not controlled by corporations represents an

extremely significant governmental interest.

3. Mass. Gen. Laws c. 55, § 8's Prohibition On

Corporations Spending The Stockholders’ Money

For Political Purposes Furthers The Significant

Governmental Interest In Protecting Stockholders

Who May Hold Political Views Contrary To Those

Held By Corporate Management.

Appellants concede that the decision to spend corporate

money to oppose a graduated income tax was made by the

corporate management and did not involve any stock-

holder input. Appellants’ Brief, 53, n. 31. Such a decision

by corporate management, if carried out, would violate the

rights of the shareholders to support those political views of

their own choosing."

for the corporation, with corporate assets, on matters of pu

welfare, the premise of an underlying consensus would seem

break down. Public welfare is a matter of basic on which

shareholders and employees in a publicly held corporation can be

. The proposed graduated income tax was aimed at shifting some

of the tax burden off of lower and middle class individuals and onto

Protection of minorities from the compulsory contribution

of money for political purposes not of their own choosing

has long been recognized as a legitimate governmental

interest. Thomas Jefferson declared “that to compel a man

to furnish contributions of money for the propagation of

opinions which he disbelieves, is sinful and tyrannical.”

I. Brant, James Madison: The Nationalist at 354 (1948).

President Theodore Roosevelt declared in his annual

[N]jo corporation has the right, and no board of

directors of a corporation and no manager of a corpo-

ration has the right, to embezzle the money belonging

to the stockholders of the corporation and to divert it

from its legitimate use to a purpose for which the

Just this year, this Court in Abood v. Detroit Board of

Education, 45 U.S.L.W. 4473 (May 27, 1977), struck down

as unconstitutional the use of union shop dues for political

and ideological purposes. The Court held that compelling

an individual to make political contributions infringes that

individual's First Amendment rights. 45 U.S.L.W. at 4480.

The Court declared that “the Constitution requires . . . that

such [union] expenditures [for political purposes} be

financed from charges, dues or assessments paid by

employees who do not object to advancing those ideas and

who are not coerced into doing so against their will by the

threat of loss of governmental employment.” (Emphasis

added.) 45 U.S.L.W. at 4480. For these same reasons, the

Eighth Circuit in United States v. Pipefitters Local Union

No. 562, 434 F. 2d 1116, 1123 (8th Cir. 1970), rev'd on

other grounds, 407 U.S. 385 (1972), upheld the Federal ban

on union campaign contributions, noting that there is a

compelling interest in “protect [ing] union members holding

political views contrary to those supported by the union

from use of funds contributed by them to promote

acceptance of those opposing views.”

The logic of these cases protecting union members applies

equally to the stockholder’s situation. Senator Robert Taft

noted in the debates on extending Federal campaign pro-

hibitions to unions that “the prohibition . . . against labor

is eactly the same as the prohibition against a corporation

using its stockholders’ money for political purposes, and

perhaps in violation of the wishes of many of its stock-

holders.” 93 Cong. Rec. 6438 (1947).

41

Two recent cases have upheld bans on corporate

campaign contributions, noting among other reasons the

need to protect shareholders who may hold political views

contrary to those held by corporate management. In

Schwartz v. Romnes, 357 F. Supp. 30 (S.D. N.Y. 1973),

rev'd on other grounds, 495 F. 2d 844 (2d Cir. 1974), the

court declared:

In enacting corrupt practices legislation, the United

States Congress and the various state legislatures have

sough’ to protect the elective process from the undue

influence which corporations might exercise through

financial contributions. In addition, they have sought

to prevent corporate officials from devoting the assets

of a corporation to political causes with which its

shareholders might not agree. See United States v.

Congress of Industrial Organizations, supra, at p. 113,

68 S. Ct. 1349. These overriding governmental

interests are sufficient to justify the regulation of

corporate participation in electioneering efforts. Id.

at 36.

United States v. Chestnut, 533 F. 2d 40, 50, 51, n. 12

(2d Cir. 1976), cert. denied, 429 U.S. 829 (1976), is of

particular significance, because the court specifically noted

that nothing in Buckley was contrary to upholding a ban

on corporate campaign contributions on the grounds of the

government's interests in preserving the integrity of the

electoral process and preventing corporations from using

general funds for political purposes without the consent of

the stockholders.

42

B. Mass. Gen. Laws c. 55, § 8, Avoids Unnecessary

Abridgement Of First Amendment Rights.

Appellants assert that even if some of the State’s interests

may be justifiable, the legislature has not even attempted to

adopt the least restrictive alternative available. Appel-

lants’ Brief, 54, n. 32. However, as this Court stated in

Rosario v. Rockefeller, 410 U.S. 752, 762, n. 10 (1973),

“{i}n requiring that the state use to a proper end the means

designed to impinge minimally upon fundamental rights,

the Constitution does not require that the state choose

ineffectual means.”

Appellants raise three specific arguments in support of

their contention that Mass. Gen. Laws c. 55, § 8, does not

employ the least drastic alternatives. Appellants state:

... Section 8 bars, instead of merely limiting, all

expenditures on the ballot question at issue. Further-

more, any interest in preventing the use of corporate

funds to express political viewpoints contrary to the

desires of shareholders might be attempted to be satis-

fied by requiring a majority vote of shareholders for

political expenditures, or perhaps notification to the

shareholders. Appellants’ Brief, 54, n. 32.

This brief, supra, at - , has already discussed Appel-

larts’ contention that Section 8 acts as a bar rather than

only a limitation on corporate expenditures and contribu-

tions. As pointed out, corporate managers as individuals

are not limited in any way whatsoever, and even the

corporation retains numerous means for conveying the

managers’ opinions. The district court in United States v.

Chestnut, 394 F. Supp. 581 (S.D. N.Y. 1975), affd, 533

43

F. 2d 40 (2d Cir. 1976), cert. denied, 429 U.S. 829 (1976),

upheld the federal! ban on corporate campaign contribu-

tions and expenditures against a “least drastic alternative”

argument. The lower court stated:

Given the government's legitimate interest in the

purposes of section 610, the question is whether the

government has chosen the “least drastic means” of

protecting these interests or whether it has enacted

overly broad prohibitions that unnecessarily impinge

upon First Amendment rights.... As authoritatively

construed by the Supreme Court, the statute only

prohibits contributions or expenditures from certain

sources. For example, the statute prohibits only union

contributions from monies derived from compulsory

union dues and \ssessments.... [I]n United States —

v. C.1.0O., the Supreme Court held that the statute

does not prevent unions or corporation from publishing

a regular periodical for union members, shareholders

or customers that may contain political commen-

tary.... Thus the statute has been construed in a

careful fashion to minimize its restrictive impact.

Id. at 591.

Appellants’ proposed less restrictive alternatives do not

offer effective means for protecting minority rights. First,

Appellants suggest that requiring a majority vote of share-

holders for political expenditures would protect those share-

holders who hold contrary political views to those of

management. However, placing a matter to a vote in the

endocractic corporation does not protect shareholder rights.

One commentator noted that research has failed to uncover

a single shareholder proposal that has been adopted over

44

the opposition of the management of an endocractic corpo-

ration. Note, “Corporate Political Affairs Programs,” 70

Yale L.J. at 849. This same commentator cited as some of

the reasons for this shareholder impotency the practice of

fiduciary and institutional holders always to vote their

proxies as requested by management, and the fact that a

majority of individual owners holding stock in “street” name

fail to designate the manner in which they wish proxies to

be voted, thereby permitting banks and brokerage houses to

do the actual voting. Jd. at 849.

Of even more importance, Appellants’ “majority vote”

proposal does not even conceptually protect minority stock-

holders. What is at stake is “compel[ling] a man to furnish

contributions of money for propagation of opinions which

he disbelieves.” Thomas Jefferson in I. Brant, supra, at

354. The fact that a majority of stockholders support a

proposal does not in any way lessen the compulsion inflicted

on the minority stockholder. For this reason, the court in

United States v. Boyle, 482 F. 2d 755 (D.C. Cir. 1973),

upheld the ban on union campaign contributions over

objections that minority interests are adequately protected

by the democractic procedures under which a union must

operate. The court concluded:

By definition the protection of minority interests

requires that the majority be restrained in exercising

its will over the minority. If a union could expend

“involuntary” funds upon the vote of a majority of its

members, minority interests would not be protected —

they would be rendered irrelevant. Id. at 763.

Finally, Appellants propose that minority interests could

be protected effectively by a system of notification to the

45

shareholders of political stances taken by the corporate

managers. Conceptually, this proposal gives less protection

to minority stockholders then a majority voting plan,

which, as just discussed, must itself be found wanting.

In fact, under this proposal, management could spend the

shareholders’ money even if a majority of stockholders held

a different political view. One commentator has addressed

this exact issue of whether notification of political activity

would be a valid, less restrictive alternative than a ban on

corporate campaign expenditures and contributions. Com-

ment, “The Constitutionality of the Federal Ban on Corpo-

rations and Union Campaign Contributions and Expendi-

tures,” 42 U. of Chicago L. Rev. 148 (1974). The com-

mentator reasoned:

[A] notice system fails to qualify as a less drastic means

of protecting the dissenting stockholders for two rea-

sons. First, it might reduce the number of investments

acceptable to an investor. Although corporate securi-

ties are somewhat interchangeable, they are not

fungible. The notice system could force the investor

to choose between an otherwise optimal investment and

his political principles, a dilemma the Act seeks to

prevent. The second problem would arise in the

transition from the current system to a notice system.

Rather than merely choosing among new investment

opportunities, current shareholders who object to

political contributions made subsequent to the adoption

of this alternative scheme would have to sell their

investments, subjecting their appreciated value to

capital gains taxes.... [E]}ven if it were less restric-

tive of the corporation's first amendment rights, the

notice scheme is not a comparable alternative to section

610, because it would fail to provide investors who

tect minority interests to the same extent as section 610.

Therefore, it cannot be considered a less restrictive

alternative to the voluntary contribution system. Id.

at 157, 158. -

Thus, Appellants have been unable to present any proposed

less restrictive alternatives which would effectively protect

the minority interests presently protected by Mass. Cen.

Laws c. 55, § 8.

V. Tue Sraturory Provision Pronisrrinc CORPORATE

Contrisutions To Arrect THe Outcome Or QUESTIONS

Revatinc Sovecy To Inprvipvat Taxation Is Not Vacue

Anp Contains No EvipenTIARY PRESUMPTION.

While the primary thrust of the plaintiff corporations’

due process argument is the assertion of a constitutional

right freely to contribute money to affect ballot questions,

they have also catalogued a series of other imagined due

process infirmities. Specifically, they argue that provi-

sions of Mass. Gen. Laws c. 55, § 8, are impermissibly

vague, and that the statute contains an unreasonable evi-

dentiary presumption.*® Neither of these claims is worthy

of extended discussion.

** The Appellants had argued below that the statute was impermissibly

overbroad. They have apparently dropped their overbreadth claim on

appeal and this brief therefore does not separately address overbreadth.

47

A statute is void for vagueness only “if it is so vague

and standardless that it leaves the public uncertain as

to the conduct it prohibits or leaves judges and jurors free

to decide, without any legally fixed standards, what is pro-

hibited and what is not in each particular case.” Giaccio

v. Pennsylvania, 382 U.S. 399, 402-03 (1969). Statutes

must “set out in terms that the ordinary person exercising

ordinary common sense can sufficiently understand and

comply with.” C.S.C. v. Letter Carriers, 413 U.S. 548,

579 (1973). It is not asserted that Mass. Gen. Laws c. 55,

§ 8, contains the most precise or appropriate language

possible. Recognizing, however, that “there are limitations

in the English language with respect to being both specific

and manageably brief,” id. at 578-79, and that “words in-

evitably contain germs of uncertainty,” Broderick v.

Oklahoma, 413 U.S. 601, 608 (1973), it is submitted that

the statutory proscription is drawn with the degree of spe-

cificity required by the Constitution and that it afforded the

Appellants fair warning that their desired course of action

was unlawful. Colten v. Kentucky, 407 U.S. 104, 110

(1972).

The Appellants direct their vagueness challenge at the

“materially affecting” phrase which appears in the first

sentence of Mass. Gen. Laws c. 55, § 8. Their focus on the

alleged vagueness of this statutory term is inappropriate.

In construing the challenged statute, the highest court of

the Commonwealth has determined that it proscribes two

separate but related courses of conduct. The first prohi-

bition is general in nature and runs against corporate

™ Because we have demonstrated at Parts II and III that the Appel-

lants lack First Amendment rights, cases suggesting a stricter vagueness

standard where speech is involved are inapplicable. Hynes v. Mayor of

Oradell, 425 U.S. 610, 620 (1976); Smith v. CGoguen, 415 U.S. 566

(1974).

48

contributions to favor or oppose ballot questions which will

not “materially affect their business, property or assets.”

The second prohibition is specific in terms and runs against

corporate contributions to favor or oppose questions dealing

with the taxation of individuals. The Appellants fall within

the scope of this second specific prohibition, which requires

no showing of a lack of material effect. J.S. App. 24, n. 19.

The case before this Court does not properly raise the issue

the Appellants have chosen to brief.**

In any event, there can be no doubt that the Appellants

were fairly put on notice that contributions to oppose the

1976 graduated income tax amendment were prohibited by

Mass. Gen. Laws c. 55, § 8. Whether the statute creates

one crime or two, the legislative and judicial history of the

statute clearly indicates that the law was specifically

amended to reach such contributions. See discussion at J.S.

App. 5-8. Indeed, the Appellants themselves characterize

the statute as one containing “a tailor made prohibition

against graduated income tax expenditures.” Appellants’

Brief, 21, n. 6. Whatever the phrase “materially affecting”

might mean, the second sentence of the statute makes it

clear that questions pertaining solely to the taxation of

individuals do not meet the standard. These Appellants

therefore fall within the “hard core” of corporations, whose

conduct could not be more clearly prohibited, however the

**It is beyond dispute that the Supreme Judicial Court's determination

of the meaning of Mass. Gen. Laws c. 55, § 8, is a matter of state law

and is not reviewable by this Court. This Court's power over state

judgments is the power “to correct them to the extent that they incor-

rectly adjudge federal rights.... [The Court is] not permitted to

render an advisory opinion ....” Herb v. Pitcairn, 324 U.S. 117, 126

(1945). Since the statutory proscription affecting the Appellants is one

which does not require a “material effect,” consideration of the alleged

vagueness of that phrase would be inappropriate on this appeal.

49

statute were rewritten. See, Smith v. Goguen, 415 U.S.

566 (1974).

As a final due process argument, the Appellants assert

that the second sentence of Mass. Gen. Laws c. 55, § 8,

incorporates a presumption of fact which is unreasonable

and is, therefore, violative of the Fourteenth Amendment.

Appellants’ Brief, 82-87. More specifically, the corporations

argue that the sentence relieves the prosecution of its

burden of proving beyond a reasonable doubt that a

particular ballot question will not materially affect a

defendant corporation.

This argument depends entirely on the premise that

Mass. Gen. Laws c. 55, § 8, creates a single crime, i.e.. that

of contributing or expending corporate funds to influence

the outcome of ballot questions which questions will not

materially affect corporations. This premise is expressly

rejected not only by the court below, but also by the

Appellants themselves. Appellants’ Brief, 15, 85.

As contrued by the highest court of the Commonwealth,

the second sentence of Mass. Gen. Laws c. 55, § 8, contains

no evidentiary presumption. Instead, it creates a specific

crime. The lack of a material effect is not an element of

that crime. J.S. App. 28. The device of a presumption to

aid in the prosecution of a case is therefore not utilized by

the statute, and Appellants’ irrebuttable presumption

analysis is simply inapposite.

Even if the statute did erect such a presumption, it would

not necessarily fail. A legislatively imposed presumption

will pass constitutional scrutiny if it can be said “with

substantial assurance that the presumed fact is more likely

than not to flow from the proved fact on which it is made

to depend.” Leary v. United States, 395 U.S. 6, 36 (1969).

The Appellants have suggested nothing credible here or in

the court below to rebut the legislative judgment that the

50

taxation of individuals has no material effect on corpo-

rations. A dispute among experts as to the indirect impact

of such taxation is an insufficient factual basis for invali-

dating a statute advancing clearly legitimate state interests.

VI. THe Eguat Protrecrion CLAUSE OF THE FOURTEENTH

AMENDMENT Is Not VioLatep By A STATUTE PROHIBITING

ContrisuTions To Arrect BALLot Questions Mape By

Business CORPORATIONS.

The equal protection clause of the Fourteenth Amend-

ment does not prevent the establishment of classifications

which may result in unequal treatment of various classes.

Instead, it prohibits the enactment of laws containing

irrational and arbitrary classifications. McGowan v.

Maryland, 366 U.S. 420, 425-26 (1961). It further

mandates that, within a particular class, the law must be

evenly applied.

Guidance for judicial inquiry in equal protection cases

involving elections is provided in Dunn v. Blumstein, 405

U.S. 330 (1972), where this Court stated, “we look, in

essence, to three things: the character of the classification in

question; the individual interests affected by the classifi-

cation; and the governmental interests asserted in support of

the classification.” Id. at 335. This section of Appellee’s

brief tracks the analytical approach adopted in that case.

A. The Character of the Classification

Mass. Gen. Laws c. 55, § 8, proscribes conduct by

business corporations incorporated or doing business in the

Commonwealth. That conduct would be lawful if engaged

Classifications based on economic differences, on the other

First, laws pertaining to taxation and tort liability have

of

claim parity.

Labor unions, for instance, normally do not hold vast

sums of money. They are associations of individuals united

for the common purpose of improving their employment

rights which also operate various social services for their

“ See, Loving v. Virginia, 388 U.S. 1 (1967) (race); Levy v. Lowisi-

ana, 391 U.S. 68 (1968) (illegitimacy); Sugarman v. Dougall, 413 U.S.

634 (1973) (alienage); Frontiero v. Richardson, 411 U.S. 677 (1973)

(gender)

B. The Individual Interests Concerned

Whether or not the parties agree on a characterization of

the classification as economic, there is certainly no agree-

ment as to the existence of individual interests. When a

fundamental interest is affected by a classification, the

Court again engages in a strict scrutiny inquiry, see, ¢.g.,

Harper v. Virginia Board of Elections, 383 U.S. 663 (1966),

and the Appellee freely concedes that freedom of speech is a

Rodriguez, 411 U.S. 1, 17 (1973); Police Dept. of Chicago

v. Mosley, 408 U.S. 92, 101 (1972).

"For a discussion of the differences between labor unions and business

corporations in the context of political contributions see, Rauh, “Legality

of Union Political Expenditures,” 34 S. Cal. L. Rev. 152, 162, n. 49

(1961).

“In fact, the lack of shareholders distinguishes all other entities from

arguendo, that they possess such a freedom, its scope is

limited to situations where its exercise is necessary to protect

the business, property or assets of corporations. Part III,

supra. The lower court found that the corporations before

this Court on appeal had failed to sustain their burden, as

plaintiffs in a civil action, of proving that the graduated

income tax amendment question would materially affect

their business, property or assets. Hence no individual

interests operate on the side of the Appellants.

This is not to say, however, that individual interests are

C. The Government Interests Asserted In Support Of The

Classification

In Part IV, A, of this Brief we have articulated the

interests which justify restricting the political “speech” of

corporations in the face of a First Amendment challenge.

We have shown that Mass. Gen. Laws c. 55, § 8, is

intended to sustain the role of the individual citizen in the

election process, particularly in the area of the popular

initiative and referendum which are intended to be the

“people's process.” Part IV, A, 1. We have also demon-

strated the need to maintain the individual citizen's confi-

54

dence in government by eliminating the unrestricted flow of

corporate funds to politicians and political causes. Part IV,

A, 2. Finally, we have shown that the ban on corporate

political contributions is necessary to protect stockholders

from the coerced use of their funds for the promotion of

political views antithetical to their own.” Part IV, A, 3.

These identical interests warrant singling out business

corporations for special attention.

The lower court itself recognized that these interests

justified disparate treatment for business corporations. It

held that business corporations were properly distinguished

trom most other artificial entities organized or doing busi-

ness in the Commonwealth, simply because the other

entities lack shareholders. J.S. App. 22. This distinction is

inapplicable only to business trusts and real estate in-

vestment trusts (REIT’s). Even business trusts and REIT’s

stand on a different footing than business corporations,

however. Differences in their organizational structure

submit them to varying degrees of regulation by federal and

state governments and the tax consequences of their organi-

zation differ slightly from those of business corporations.

This bears directly on the possibility that they will

accumulate large sums of money capable of being expended

for political purposes.

Whatever the technical distinctions among these entities

might be, the fact remains that only business corporations

have in the past exerted what may be deemed undue influ-

"Never is the need to protect minority stockholders more obvious

than when a question concerning the taxation of individuals is involved.

In such situations the existence of even an indirect impact on business

corporations is speculative. Meanwhile, the personal interests of

corporate managers are directly implicated. Thus the objectivity of a

management decision to favor or oppose such a question is highly

suspect.

55

ence in the political sphere. The record in this case amply

illustrates that the 1972 campaign to oppose a graduated

income tax amendment was dominated by corporate funds,

not funds from REIT’s or business trusts.*° Nor is the

experience on this particular question unique; the pattern of

corporate spending in initiative campaigns is common to all

jurisdictions which have provisions for submitting questions

to the voters and which do not restrict corporate contri-

butions.*'

The Massachusetts legislature may justifiably have con-

cluded on this basis alone that spending by REIT’s, business

trusts and other artificial entities simply does not pose a

serious threat to the integrity of the initiative process. In

any event, “[i}t is no requirement of equal protection that

all evils of the same genus be eradicated or none at all.”

Railway Express Agency, Inc. v. New York, 336 U.S. 106,

110 (1949). It is no indictment of the Massachusetts

statutory scheme that it could have gone further and

proscribed contributions and expenditures by other business

entities as well. The legislature may act selectively, and a

prohibition otherwise within its power will not fail merely

because it does not also reach every other class whose

conduct may be interdicted. United States v. Maryland

Savings-Share Insurance Corp., 400 U.S. 4 (1970); United

States v. Petrillo, 332 U.S. 1, 8-9 (1947); Sproles v. Binford,

286 U.S. 374, 396 (1932). In fact, the particularity of the

** The campaign finance reports of the committee organized to oppose

the 1972 graduated income tax amendment are referenced in the

appendix, App. 25, but because of their length have been omitted from

the document itself. They appear as Exhibit D at pp. 48-84 of the

Record Appendix submitted below.

”' See, e.g., State of California Fair Political Practices Commission,

“Campaign Contribution and Spending Report,” March 14, 1977.

56

statute may be its greatest virtue, for as the opinion of the

lower court suggests, the General Court of Massachusetts

has “clearly identified . . . the parameters of corporate free

speech.” J.S. App. 13. Further proscriptions may have the

effect of impinging on the rights, if any, of other business

entities.

Conclusion

For the foregoing reasons, this case has become moot and

this appeal should be dismissed. In the alternative, this

Court should affirm the judgment of the Supreme Judicial

Court of Massachusetts, because Mass. Gen. Laws c. 55,

§ 8, is consistent with the First and Fourteenth Amendments.

Respectfully submitted,

FRANCIS X. BELLOTTI

Attorney General

Commonwealth of Massachusetts

THOMAS R. KILEY

STEPHEN SCHULTZ

Assistant Attorneys General

Commonwealth of Massachusetts

July, 1977.