Amicus Brief — First Nat. Bank of Boston v. Bellotti

ae

IN THE

> Supreme Court of the United States.

October 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,

8

aS

Ss &

RS

v.

FRANCIS X. BELLOTTI, ATTORNEY GENERAL,

APPELLEE.

Motion of New England Council for Leave to File Brief as

Amicus Curiae and

Brief of Amicus Curiae the New England Council

in Support of Appellants.

By its Attorneys,

Jack R. Prrozzoxo,

Ricuarp F. McCarray,

Wucox, Pmozzoco & McCarray,

50 Federal Street,

Boston, Massachusetts 02110.

Harrison A. Fitca,

New England Legal Foundation,

1032 Statler Building,

Boston, Massachusetts 02116.

James S. Hostrer.er,

Cuapman, Durr anv Pavt,

1730 Pennsylvania Avenue, N.W.,

Washington, D.C. 2006.

ADDISON C. GETCHELL &@ SON, INC., THE LAWYERS’ PRINTER, BOSTON

Table of Contents.

Motion of New England Council for Leave to File

Brief as Amicus Curiae 1

Brief of Amicus Curiae the New England Council in

Support of Appellants

Introductory Statement

Questions Presented

Summary of Argument

Argument

I. Preliminary Statement

II. The Right to Receive Information

Ill. Corporations Have the Same First Amend-

ment Rights as Natural Persons 19

IV. A Tax on Individuals Materially Affects

Corporations

ceowo wore ao ow

& &

Conclusion

Table of Authorities Cited.

Cases.

Advisory Opinion on Constitutionality of 1975 PA

227, 396 Mich. 465, 242 N.W.2d 3 (1976) 16, 17, 18-19, 21

Bigelow v. Virginia, 421 U.S. 809 (1975) 21

Borough of Collingswood v. Ringgold, 66 N.J. 350,

331 A.2d 262 (1975) 21-22

Buckley v. Valeo, 424 U.S. 1 (1975) 12, 16, 20, 22-23

C & C Plywood Corp. v. Hanson, 420 F.Supp. 1254

(D. Mont. 1976) 16, 17, 18, 19, 21

Fram v. Yellow Cab Co. of Pittsburgh, 380 F.Supp.

1314 (W.D. Pa. 1974) 21

Garrison v. Louisiana, 379 U.S. 64 (1964) 12

Griswold v. Connecticut, 381 U.S. 479 (1965) 9

EEE EE OO SaaS...

ii TABLE OF AUTHORITIES CITED

Grosjean v. American Press Co., 297 U.S. 233 (1936) 20

Hague v. C.1.0., 307 U.S. 496 (1939) 20n.

Lamont v. Postmaster General, 381 U.S. 301 (1965) 11

Linmark Associates, Inc. v. Willingboro, —— U.S.

—, 45 U.S.L.W. 4441 (May 2, 1977) 21

Mills v. Alabama, 384 U.S. 214 (1966) 12, 23

Minarcini v. Strongsville City School District, 541

F.2d 577 (6th Cir. 1976) 11

N.L.R.B. v. Gissel Packing Co., Inc., 395 U.S. 575

(1969) 20

Northwestern Nat’! Life Ins. Co. v. Riggs, 203 U.S.

243 (1906) 20n.

Pacific Gas & Electric Co. v. Berkeley, 60 Cal. App.

3d 123, 131 Cal. Rptr. 350 (1976) 16, 22

Pickering v. Board of Education, 391 U.S. 563

(1968) 12, 13

Pierce v. Society of Sisters, 268 U.S. 510 (1925) 20n.

Pittsburgh Press Co. v. Pittsburgh Comm’n on

Human Relations, 413 U.S. 376 (1973) 21

Procunier v. Martinez, 416 U.S. 396 (1974) 10

Red Lion Broadcasting Co., Inc. v. F.C.C., 395 U.S.

367 (1969) 11

Schwartz v. Romnes, 495 F.2d 844 (2nd Cir. 1974) 17-18, 21

Stanley v. Georgia, 394 U.S. 557 (1969) 12

Valentine v. Chrestensen, 316 U.S. 52 (1942) 20

Vanasco v. Schwartz, 401 F.Supp. 87 (S.D.N.Y.

1975), aff’d 423 U.S. 1041 (1976) 12

Virginia State Board of Pharmacy v. Virginia Citi-

zens Consumer Council, Inc., 425 U.S. 748 (1976) 9-10,

11, 14-16, 21

TABLE OF AUTHORITIES CITED iii

Western Turf Ass’n v. Greenberg, 204 U.S. 359

(1906) 20n.

CONSTITUTIONAL PROVISIONS.

United States Constitution

First Amendment 2, 3, 9, 11, 13, 14, 15, 16,

17n., 18, 19, 20, 21, 22, 26

Fourteenth Amendment 20

STATUTES.

Massachusetts General Laws, Chapter 55 § 8 6, 23

Montana Corrupt Practices Act 21n.

RvLgEs.

Rules of the Supreme Court, Rule 42 2

MISCELLANEOUS.

A. Meiklejohn, Free Speech and its Relation to Self-

Government (1948) 12

IN THE

Supreme Court of the United States.

October 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,

v.

FRANCIS X. BELLOTTI, ATTORNEY GENERAL,

APPELLEE.

Motion of New England Council for Leave to File Brief

as Amicus Curiae.

Now comes the New England Council and, through its

attorneys, moves this Honorable Court, pursuant to Rule

42 of the Rules of the Supreme Court, for leave to file a

brief as amicus curiae in support of appellants.

The New England Council was founded in 1925 by the

New England governors for the purpose of developing and

strengthening the New England economy. The New Eng-

land Council is financed by membership dues. The member-

ship of the Council consists of approximately 2,000 New

England individuals and business entities. These members

include banks and other Anancial institutions, manufactar-

ing concerns, tourist related businesses, civie associations,

utilities, segments of the transportation industry, govern-

mental agencies, professional persons and other individu-

als. The members of the Council range in size from among

the smallest to the largest businesses. As a result, the Coun-

cil is broadly representative of New England and it reflects

a wide range of interests within the region.

The New England Council is particularly concerned with the

decision of the Supreme Judicial Court of Massachusetts.

That decision gives scant consideration to the right of mem-

bers of the public, including members of the New England

Council, to hear debate on an issue — an important element

of the tax structure of Massachusetts — which substantially

affects the New England economy. The predominant con-

cern of the parties to the case has been and appears to be

with the right of corporations under the First Amendment

to speak. Little attention has been given to the effect of the

decision of the Massachusetts Supreme Judicial Court in

abridging the public right to hear vigorous debate on a polit-

ical matter, including all points of view on a significant

political and economic issue having an important impact

upon New England. In addition, the New England Coun-

cil believes that it is patently erroneous to uphold a legisla-

tive finding that taxation upon individuals, as an element

of the overall system of taxation within Massachusetts, does

not materially affect corporations. Finally, a presumption

underlying the arguments in the case is that corporations

are opposed to a graduated income tax. This is not neces-

sarily so; corporations may have differing views on the ad-

visability of a graduated income tax or other taxes on in-

dividuals.

At this time, when the New England economy is hampered

by many adverse factors, including high energy costs, a

high unemployment rate, and relatively stagnant business

development, it is particularly important for the public to

hear all points of view on matters which may affect business

decisions and consequently affect the Massachusetts and

New England economy. Members of the public are entitled

to be informed of the points of view of corporations so as

to have an opportunity to be fully informed. This right to

hear uninhibited, robust and wide-open debate, guaranteed

by the First Amendment, is severely jeopardized by the

opinion of the Massachusetts Supreme Judicial Court.

By its Attorneys,

Jack R. Prrozzo1o,

Ricnarp F. McCarray,

Wuucox, Pmozzoco & McCarruy,

50 Federal Street,

Boston, Massachusetts 02110.

* Hargison A. Fitcn,

New England Legal Foundation,

1032 Statler Building,

Boston, Massachusetts 02116.

James S. Hostetier,

Cuapmax, Durr anv Patt,

1730 Pennsylvania Avenue, N.W.,

Washington, D.C. 20006.

IN THE

Supreme Court of the United States.

October 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,

v.

FRANCIS X. BELLOTTI, ATTORNEY GENERAL,

APPELLEE.

ON APPEAL FROM THE SUPREME JUDICIAL COURT FOR THE

COMMONWEALTH OF MASSACHUSETTS.

Brief of Amicus Curiae the New England Council

in Support of Appellants.

Introductory Statement.

The New England Council, a non-profit corporation

which is broadly representative of New England interests,

files this brief as amicus curiae in support of the appellants.

The New England Council invites this Court’s attention to

the serious infringement upon the public’s right to hear re-

sulting from the enactment by the Massachusetts legisla-

ture of the statute in issue. The effect of the statute is to

chill public debate upon an issue of great importance. The

New England Council fears that if the legislative and ju-

dicial action in question were permitted to stand, by logical

extension, the legislature could restrict the right of free

speech of all forms of corporate organizations, including

charities, educational, trade and special purpose associa-

tions carrying on their activities as corporations by merely

finding that particular matters were not of material con-

cern to them.

The New England Council adopts appellants’ descrip-

tion of the opinion and the statute in issue and appellants’

statement of the case.

Questions Presented.

The New England Council believes that this appeal pre-

sents, in addition to those questions set forth in the appel-

lants’ brief, the following issues:

1. Whether the action of the Massachusetts Legislature,

as upheld by the Supreme Judicial Court of Massachusetts,

infringes upon the right to hear of the recipients of those

expressions of corporations prohibited under the statute

in issue, Mass. Gen. Laws, c. 55, 4 8.

2. Whether corporations have lesser rights to free speech

than natural persons.

3. Whether this Court should find as a matter of law

that as a part of the overall state mechanism for raising

needed revenue, a tax on the income, property or transac-

tions of individuals does materially affect the property,

business or assets of corporations.

7

Summary of Argument.

Any intrusion upon the right of free expression is so

dangerous to free and full public debate, particularly upon

the right of the minority to attempt to persuade the ma-

jority, that this Court should overrule any attempt of state

institutions to limit the right of parties to speak and the

right of the public to hear. Particular points made in this

memorandum are:

1. The right to hear free and unrestrained expression on

matters of public concern is paramount. Any restriction

upon free expression, however erroneous or disagreeable

such expression may be, is abhorrent to the most treasured

freedom upon which this country was founded. Even if it

were so that matters involving the taxation of individuals

do not in fact materially affect business corporations, the

public has a right to know the s ate of mind of business cor-

porations on this subject. If business corporations were to

hold the belief that a tax on individuals has a material

effect upon thei, even if such a belief were erroneous, the

public has a right to know because business corporations

may act upon their beliefs.

2. No decision of this Court has held that corporations

do not have the same rights to free speech as natural per-

sons. On the contrary, the decided cases hold that corpora-

tions and natural persons stand upon the same footing.

3. Logical extension of the principles involved in the

decision of the Supreme Judicial Court would permit legis-

lative findings which could have the effect of stifling free

speech by all forms of corporations on wide ranges of sub-

ject matters.

4. The decision of the Supreme Judicial Court, along with

the history of the controversy concerning a graduated in-

come tax, appears to presume that corporations would spend

huge sums of money in opposing a graduated income tax.

This presumption is not necessarily valid, particularly when

it is considered that the statute in question affects not only

large, wealthy and publicly held corporations, but it also

affects the large number of closely held and family corpora-

tions which carry on business within the Commonwealth of

Massachusetts. Such corporations are particularly affected

by tax on individuals.

5. The legislative finding that a tax on individuals does

not affect business corporations is on its face incorrect since

taxation of individuals is one element of the scheme for

raising revenue of the Commonwealth every element of

which affects every other element.

Argument.

I. Preliminary Statement.

The New England Council has filed this brief as amicus

curiae so as to present to the Court the point of view of a

broadly representative New England organization, and par-

ticularly, to emphasize the public’s right to hear debate on

issues substantially affecting the New England economy.

The New England Council was organized in 1925 by the

governors of the six New England states for the purpose of

working to develop and strengthen the economy of New

England. The Council has approximately 2,000 members,

both individuals and business entities, from the six New

England states. It maintains a principal place of business

in Boston, Massachusetts, and its operations are financed by

membership dues. The Council is broadly representative

and reflects the interests of the region.

The membership of the New England Council is made up

of approximately 300 banks and other types of financial

institutions, 600 manufacturing businesses, 200 tourist

related businesses, over 75 civic associations, utilities, seg-

ments of the transportation industry, governmental agen-

cies, professional persons and other individuals. The busi-

nesses represented range in size from among the smallest

to the largest.

The New England Council is particularly concerned with

the possible extension of the principle, which it would ap-

pear has been upheld by the Massachusetts court, that the

legislature may make a finding as to what speech has a mate-

rial effect upon corporations and may restrict the speech of

corporations on those matters which the legislature finds to

have no material effect. This principle, if upheld, would not

necessarily be restricted to business corporations and could

be applied to all corporations, including charitable corpora-

tions, educational institutions, various special purpose or-

ganizations carrying on their activities as corporations, and,

possibly, other entities created by the Commonwealth.

Il. The Right to Receive Information.

The state court failed to consider the right of the public

to receive the information which would result from expen-

ditures or contributions by appellants and other corpora-

tions. See, Appendix, Jurisdictional Statement (‘‘AJS’’)

9-15. It is well established that the First Amendment cre-

ates the right to receive information in addition to the right

to communicate. ‘‘The right of freedom of speech and press

includes ... the right . . . to receive, the right to read .. .”’

Griswold v. Connecticut, 381 U.S. 479, 482 (1965). This point

was recently emphasized in Virginia State Board of Phar-

macy Vv. Virginia Citizens Consumer Council, Inc., 425 US.

748 (1976), establishing the right of the public to receive

advertising information concerning the price of prescrip-

tion drugs. In so holding this Court stated:

10

‘*Freedom of speech presupposes a willing speaker. But

where a speaker exists, as is the case here, the protec-

tion afforded is to the communication, to its source and

to its recipients both. This is clear from the decided

eases.’’ 425 U.S. at 756.

The right to receive information has been recognized in a

broad range of contexts. In Procunier v. Martinez, 416 U.S.

396 (1974), this Court recognized the right of individuals

desiring to communicate with prisoners to receive the in-

formation which would be contained in the writings of the

prisoners. In so holding this Court stated:

‘*Communication by letter is not accomplished by the

act of writing words on paper. Rather, it is effected

only when the letter is read by the addressee. Both par-

ties to the correspondence have an interest in securing

that result, and censorship of the communication be-

tween them necessarily impinges on the interest of

each. Whatever the status of a prisoner’s claim to un-

censored correspondence with an outsider, it is plain

that the latter’s interest is grounded in the First

Amendment’s guarantee of freedom of speech. And

this does not depend on whether the nonprisoner cor-

respondent is the author or intended recipient of a par-

ticular letter, for the addressee as well as the sender of

direct personal correspondence derives from the First

and Fourteenth Amendments a protection against un-

justified governmental interference with the intended

communication.’’ 416 U.S. at 408-09.

The public’s right to receive information has also been

recognized in a decision upholding the Federal Communica-

tion Commission fairness doctrine which requires television

and radio stations to provide reply time to individuals and

organizations disagreeing \-..b their editorials. In Red Lion

ll

Broadcasting Co., Inc. v. F.C.C., 395 U.S. 367 (1969), this

Court stated:

‘‘It is the right of the viewers and listeners, not the

right of the broadcasters, which is paramount. [cita-

tions omitted.) It is the purpose of the First Amend-

ment to preserve an uninhibited marketplace of ideas

in which truth will ultimately prevail, rather than to

countenance monopolization of that market, whether it

be by the Government itself or a private licensee. . . .

It is the right of the public to receive suitable access

to social, political, esthetic, moral, and other ideas and

experiences which is crucial here. That right may not

constitutionally be abridged either by Congress or by

the F.C.C.’’ 395 U.S. at 390.

The First Amendment right to know has also been recog-

nized in the context of preventing censorship of literature.

In Lamont v. Postmaster General, 381 U.S. 301 (1965), the

Court recognized the right of the public to receive foreign

literature without the chilling effect of a requirement to

register with the post office. This point was re-emphasized

in a recent decision by the United States Court of Appeals

for the Sixth Circuit which prevented a local school board

from banning the discussion of certain books in high school

classes and eliminating such books from the school library.

Minarcini v. Strongsville City School District, 541 F.2d 577

(6th Cir. 1976). In Minarcini the court relied heavily on

Virginia State Board of Pharmacy v. Virginia Consumer

Council, Inc., supra, in finding that the First Amendment

protection of the right to know prevented the school district

from banning the discussion of various publications in

classes. The right to receive information and ideas is ‘‘fun-

damental to our free society’’ and exists ‘‘regardless of’’

12

the ‘‘social worth’’ of the information and ideas.’ Stanley

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

The right to receive information is particularly important

in situations, as in the instant case, in which the restriction

affects political speech. This Court has recognized that

‘*[t]he public interest in having free and unhindered debate

on matters of public importance”’ is ‘‘the core value of the

Free Speech Clause of the First Amendment.’’ Pickering

v. Board of Education, 391 U.S. 563, 573 (1968).? In Milis

v. Alabama, 384 U.S. 214, 218 (1966), the Court stated

‘*(w]hatever differences may exist about interpretations of

the First Amendment, there is practically universal agree-

ment that a major purpose of that Amendment was to pro-

tect the free discussion of governmental affairs.’’ Similarly,

in Garrison v. Louisiana, 379 U.S. 64, 74-75 (1964), the

Court held ‘‘speech concerning public affairs is more than

self-expression; it is the essence of self-government. The

First and Fourteenth Amendments embody our profound

national commitment to the principle that debate on public

issues should be uninhibited, robust, and wide-open, ...’’ It

is with these cases in mind that a district court recently

stated, ‘‘([f]ree debate on public issues is essential to the

survival of the Republic. It hardly needs repeating that

such speech should be ‘uninhibited, robust and wide-open.’ ’’

Vanasco v. Schwartz, 401 F.Supp. 87, 97 (S.D.N.Y. 1975),

aff'd, 423 U.S. 1041 (1976). This point was again empha-

sized in the context of political campaigns in Buckley v.

Valeo, 424 U.S. 1, 14 (1975), where this Court recognized

? The ‘‘ideas and information”’ protected in Stanley were obscene

films. It would seem that the right to receive word of business cor-

porations’ perception of the effect of a tax on individuals would be

at least as important as the right to hear obscene matter.

2 See, e.g., A. Meiklejohn, Free Speech and Its Relation to Self-

Government (1948).

13

that discussion of political affairs is ‘‘an area of the most

fundamental First Amendment activities’ and ‘‘[d]iscus-

sions of public igsues and debate on the qualifications of

candidates are integral to the operation of the system of

government established by our Constitution.’’

In Pickering v. Board of Education, supra, this Court held

that the First Amendment protected the right of a school

teacher to express his opinion on the wisdom of approving

a bond issue for educational purposes:

‘‘On such a question free and open debate is vital to

informed decision-making by the electorate. Teachers

are, as a class, the members of a community most likely

to have informed and definite opinions as to how funds

allotted to the operation of the schools should be spent.

Accordingly, it is essential that they be able to speak out

freely on such questions without fear of retaliatory dis-

missal.’’ 391 U.S. at 571-72.

Similarly, the appellants and other Massachusetts corpora-

tions have a special insight into the effect that political

choices may have on businesses located in Massachusetts

or contemplating expansion in Massachusetts. It is par-

ticularly harmful to the public to deprive it of the informa-

tion which such businesses may wish to give and which may

affect the public. Appellants employ a large number of in/

dividuals who would be affected by a graduated income tax.

They also employ professional economists who have studied

the effect of a graduated income tax. AJS. 32-38, 42. The

effect that political decisions, such as the institution of a

graduated income tax, have on corporations is certainly

a matter of concern to voters. Likewise, the corporate per-

ception of such an effect is also of significant public interest.

Citizens of Massachusetts, including members of the New

England Council, are concerned with the economic impact of

14

political decisions on corporations which have the resources

to provide jobs and strengthen the tax base of the Common-

wealth. Therefore, voters have a vital interest in receiving

communications from the appellants and other business

corporations on issues upon which corporations are willing

to expend time and money to communicate their views.

The publie’s right to receive such information exists re-

gardless of whether the Massachusetts legislature deems

that a particular issue has a material effect upon the prop-

erty, business or assets of corporations. If corporations

perceive that the institution of a graduated income tax on

individuals will create an unfavorable business climate in

Massachusetts that perception may affect their decisions

on expanding or even maintaining their operations in Mas-

sachusetts. The electorate is entitled to be apprised of the

concerns of corporations in order to make informed deci-

sions on public affairs.

Even if it were so that a graduated income tax on indi-

viduals would nvt in fact materially affect the interests of

corporations, there would be no justification for preventing

the public from hearing the exposition of the point of view

of corporations. It is not relevant to First Amendment con-

siderations whether a speaker’s views are accurate. In his

concurring opinion in Virginia Pharmacy Board v. Virginia

Consumer Council, Inc., supra, Mr. Justice Stewart drew a

distinction between commercial price and product adver-

tising, as to which factual accuracy may be required, and

ideological communications, as to which such accuracy need

not be required. Mr. Justice Stewart said:

‘*Tdeological expression, be it oral, literary, pictorial,

or theatrical, is integrally related to the exposition of

thought — thought that may shape our concepts of the

15

whole universe of man. Although such expression may

convey factual information relevant to social and in-

dividual decision-making, it is protected by the Con-

stitution, whether or not it contains factual representa-

tions and even if it includes inaccurate assertions of

fact. Indeed, disregard of the ‘truth’ may be employed

to give force to the underlying idea expressed by the

speaker. ‘Under the First Amendment there is no

such thing as a false idea,’ and the only way that ideas

can be suppressed is through ‘the competition of other

ideas.’ *’’ 425 U.S. at 779-80.

The public, including members of the New England Council,

are entitled to hear ‘‘the competition of ideas’’ between

the economists representing the appellants and economists

with opposing views.*

The approach of the Massachusetts legislature in seek-

ing to keep the public in ignorance of the position of corpo-

rations on political issues out of fear that the presentation

of the corporate point of view will unduly influence the

electorate is repugnant to the First Amendment. As the

Supreme Court stated in Virginia Pharmacy Board v. Vir-

ginia Consumer Council, Inc., supra:

**There is, of course, an alternative to this highly pa-

ternalistic approach. [preventing pharmacists from

advertising the price of prescription drugs.] That al-

ternative is to assume that this information is not in

itself harmful, that people will perceive their own best

interest if only they are well enough informed, and that

the best means to that end is to open the channels of

communication rather than to close them. . . . But the

choice among these alternative approaches is not ours

to make or the Virginia General Assembly's. It is pre-

* Compare AJS. 32-38 with AJS. 47-48.

cisely this kind of choice, between the dangers of sup-

pressing information, and the dangers of its misuse

if it is freely available, that the First Amendment

makes for us.’’ 425 U.S. at 770.

To the extent that the decision of the Supreme Judicial

Court was premised upon the notion that the relative voices

of corporations and private citizens in the electoral process

should be equalized, such a position runs contrary to the

decision of this Court in Buckley v. Valeo, supra. In hold-

ing that placing a monetary limit on the amount an indi-

vidual or group could expend in voicing their views in

political campaigns violated the First Amendment, this

Court stated :

**But the concept that government may restrict the

speech of some elements of our society in order to

enhance the relative voice of others is wholly foreign

to the First Amendment, which was designed ‘to se-

cure ‘‘the widest possible dissemination of information

from diverse and antagonistic sources,’’’ and ‘ ‘‘to

assure unfettered interchange of ideas for the bringing

about of political and social changes desired by the

people’’ ’.’’ [citations omitted]. 424 U.S. at 48-49.

Other courts which have considered whether barring corpo-

rations from making contributions or expenditures on ref-

erendum questions violates the First Amendment have re-

lied in part on the Buckley opinion in concluding that such

restrictions violate the First Amendment. See, e.g., C € C

Plywood Corp. v. Hanson, 420 F.Supp. 1254 (D. Mont.

1976), appeal docketed, No. 76-3118, 9th Cir., Sept. 29, 1976;

Advisory Opinion on Constitutionality of 1975 PA 227, 396

Mich. 465, 242 N.W.2d 3 (1976); Pacific Gas & Electric Co.

v. Berkeley, 60 Cal. App.3d 123, 131 Cal. Rptr. 350 (1976).

17

The justification which exists for preventing corpora-

tions from participating in the election of candidates to

public office is inapplicable to campaigns on referendum

questions. See, e.g., Schwarte v. Romnes, 495 F.2d 844 (2nd

Cir. 1974); C & C Plywood Corp. v. Hanson, supra; Ad-

visory Opinion on Constitutionality of 1975 PA 227, supra;

Pacific Gas & Electric Co. v. Berkeley, supra.* In Romnes,

the court recognized that the primary reason for prohibiting

corporate contributions or expenditures in elections is ‘‘to

prevent corruption of legislators and other elected officials’’

and that this rationale was inapplicable to contributions in

connection with referenda questions.

‘‘Whatever the justification for prohibiting contribu-

. tions that are prone to create political debts, it largely

evaporates when the object of prohibition is not con-

tributions to a candidate or party, but contributions

*Schwartz v. Romnes involved a derivative suit to recover a

$50,000 expenditure made by a corporation with respect to a state

bond issue submitted for a referendum vote. The court held that the

New York statute banning corporate contributions and expenditures

for political purposes did not ban contributions in connection with

referendum votes because such an interpretation would violate First

Amendment rights. In Advisory pinion on Constitutionality of

1975, PA 227, the Michigan Supreme Court answered questions pro-

pounded by the Tlouse of Representatives concerning the constitu-

tionality of proposed election laws. The court held that a provision

barring corporations from making contributions or expendi-

tures on ballot questions violated the First Amendment. In C & C

Plywood Corp. v. Hanson, several corporations brought a suit seek-

ing a declaratory judgment that a provision of the Montana Code

which barred corporations from making contributions or expendi-

tures with respect to referendum questions was unconstitutional.

The district court held that the statute violated the First Amend-

ment. In Pacifie Gas & Electrie Co. v. Berkeley, an electric utility

sought declaratory relief from the operation of a city ordinance

prohibiting corporations from making contributions to influence the

outcome of referenda. After finding that the ordinance violated the

First Amendment, the court enjoined the enforcement of the ordi-

nance.

to a public referendum. The spectre of a political debt

created by a contribution to a referendum campaign is

too distant to warrant this further encroachment on

First Amendment rights.’’ 495 F.2d at 852-53.

As a result, the court construed a provision of New York |

law banning corporate contributions not to apply to contri-

butions in support of positions on a referendum so as to

find the provision in question constitutional and not an

abridgement of First Amendment rights.

‘‘There is even greater cause for constitutional con-

cern in the present case, for the piaintiff’s broad con-

struction of § 460 would proscribe corporate contribu-

tions or expenditures for the purpose of communicating

its views to the public with respect to an important

issue to be decided by the voters and furnishing infor-

mation that might be of assistance in arriving at that

decision.’’ 495 F.2d at 852.

Similarly, the Michigan Supreme Court in issuing an

advisory opinion on the validity of proposed legislation to

ban corporate contributions in both elections and referenda

drew a distinction between referenda and elections, stating,

‘*It is our opinion that corporate contributions or ex-

penditures for the purpose of influencing the nomina-

tion or election of a candidate may be constitutionally

prohibited in order to preserve the integrity of the

electoral process. However, we would view the prohi-

bition of corporate contributions or expenditures for

the purpose of influencing the qualification, passage, or

defeat of a ballot question as an unconstitutional

abridgement of freedom of speech and press as guaran-

teed by art. 1, § 5.’’ Advisory Opinion on Constitu-

tionality of 1975 PA 227, 242 N.W.2d at 18.

19

In reaching this decision the court was concerned with the

publie’s right to hear the corporate point of view. The

court stated :

‘*It is our opinion that insofar as § 95 interferes with

the right of the public to hear divergent views of public

importance by prohibiting corporations from making

contributions or expenditures for the purpose of com-

municating its opinion concerning ballot questions, it

is violative of Const. 1963, art. 1, § 5.’’ 242 N.W.2d at

19.

In C & C Plywood Corp. v. Hanson, supra, the court held

that an amendment to the Montana Code which banned

corporate expenditures and contributions on ballot ques-

tions violated the First Amendment. In so holding, the

court identified as a crucial factor ‘‘the electorate’s right

to be informed on public issues; the very essence of self-

government and intelligent decision-making.’’ 420 F.Supp.

at 1261-62. After considering this factor, the court held:

‘*Therefore, . . . the State of Montana cannot constitu-

tionally legislate a direct prohibition on the exchange

of ideas and information, involved in one form of the

legislative process, merely because the source of the

information is a corporation.’’ 420 F.Supp. at 1265.

As these cases show, protection of the public’s right to

uninhibited, robust and wide-open debate requires reversal

of the decision of the Supreme Judicial Court of Massachu-

setts and a declaration that the statute in issue is uncon-

stitutional as repugnant to the First Amendment.

III. Corporations Have the Same First Amendment Rights

as Natural Persons.

The proposition that corporations have lesser First

Amendment rights than natural persons is not supported

by the decisions of this Court. While a distinction between

corporations and natural persons has been drawn under

the privileges and immunities clause, no such distinction is

applicable to First Amendment rights to political expres-

sion.®

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

held that a corporation is a ‘‘person’’ within the meaning

of the equal protection and due process clauses of the Four-

teenth Amendment. Similarly, V.L.R.B. v. Gissel Packing

Co., Inc., 395 U.S. 575 (1969), upheld a corporate employer’s

First Amendment rights. In one of the most recent deci-

sions by this Court arising out of the regulation of cam-

paign expenditures, Buckley v. Valeo, supra, two of the

plaintiffs were corporations.

After having struggled over the years with the question

of whether restrictions upon commercial speech were con-

trary to First Amendment rights, e.g., Valentine v. Chrest-

ensen, 316 U.S. 52 (1942), this Court has now made it clear

5 Decisions of this Court, Hague v. C.1.0., 307 U.S. 496 (1939),

Western Turf v. Greenberg, 204 U.S. 359 (1907) and Northwestern

Nat’! Life Ins. Co. v. Riggs, 203 U.S. 243 (1906), restricting the

applicability to corporations of the due process clause of the Four-

teenth Amendment, do not decide the issue of whether corporations

are entitled to First Amendment protection with respect to political

expression. While, in Hague, the American Civil Liberties Union,

a corporation, was dismissed as a plaintiff in an action challenging

a municipal ordinance as an unconstitutional restriction of the

right to free speech, the court dealt only with the privileges and

immunities clause in its analysis of the corporation's rights. Neither

the Western Turf nor Northwestern National Life Insurance case

involved First Amendment claims. The former dealt with a state

statute concerning life insurance and the latter with a statute con-

cerning admission to places of public amusement. Pierce v. Society

of Sisters, 268 U.S. 510 (1925), relied on by the Massachusetts

Supreme Judicial Court, involved a state regulation challenged on

the basis of the threat it posed to petitioners’ business and patrons

and presented no claim as to intereference with corporate rights of

free speech. The rationale applied in the above-mentioned cases has

been eroded in the context of First Amendment rights by subse-

quent decisions of this Court reviewed herein.

21

that commercial speech is protected. Linmark Associates,

Inc. v. Willingboro, — U.S. —, 45 U.S.L.W. 4411 (May 2,

1977) ; Virginia State Board of Pharmacy v. Virginia Citi-

zens Consumer Council, Inc., supra;/Bigelow v. Virginia,

421 U.S. 809 (1975); Pittsburgh Press Co. v. Pittsburgh

Comm’n on Human Relations, 413 U.S. 376 (1973).

Several recent lower court decisions, some of which were

cited in the preceding section, have determined that corpo-

rations have First Amendment rights to express their

opinions in connection with matters of political or public

significance. See e.g., Schwartz v. Romnes, supra, (corpora-

tion expenditures on referendum question protected) ;°

C & C Plywood Corp. v. Hanson, supra, (corporation con-

tributions on public ballot issues protected) ;’ Fram v. Yel-

low Cab Co. of Pittsburgh, 380 F.Supp. 1314 (W.D. Pa.

1974) (no basis for claim that First Amendment does not

apply to corporations) ;* Advisory Opinion on Constitu-

tionality of 1975 PA 227, supra, (corporation expenditures

on public ballot questions entitled to protection) ;° Borough

® Schwartz involved a stockholders derivative suit against direc-

tors of a corporation arising from expenditures made by the corpora-

tion in connection with a public referendum issue. The court stated

that state interests in prohibiting corporate contributions in con-

nection with referenda did not warrant the encroachment on First

Amendment rights. 495 F.2d at 852-53.

7 A provision of the Montana Corrupt Practices Act prohibiting

corporate payments and contributions in support of or in opposi-

tion to public ballot issues was held unconstitutional on the ground

that a state may not prohibit the exchange of ideas and information

where the source of the information is a corporation.

* Fram involved an action for slander brought against a corporate

competitor where the court held that there was no basis for plain-

tiff’s contention that the First Amendment did not apply to corpo-

rations. 380 F.Supp. at 1334.

* The Supreme Court of Michigan stated in this case that a sig-

nificant distinction exists between corporate contributions to can-

didates and corporate expenditures made in connection with public

ballot issues and that the latter type of expenditures are entitled to

constitutional protection.

of Collingswood v. Ringgold, 66 N.J. 350, 331 A.2d 262

(1975) (speech of corporate entity protected) ;"° Pacific Gas

é Electric Co. v. Berkeley, supra, (ordinance prohibiting

contributions by corporations in connection with referendum

unconstitutional) ."

Protection of expression on matters of political and pub-

lic interest is fundamental. If one entity is prevented from

expressing itself solely because it is a corporation, there

is grave danger that restrictions upon the free expression

of ideas may be applied to other entities. Charities may be

limited in their expressions to matters which the legislature

deems to be within their charitable purposes; special inter-

est groups receiving contributions and conducting their

affairs as corporations may be subjected to legislative de-

terminations as to matters upon which they may appropri-

ately speak; even an organization such as the A.C.L.U.

conceivably could be limited in its freedom of expression.

The power of the legislature may not be used to silence

opposition, to suppress minority viewpoints. Such limita-

tion on free speech cannot be tolerated.

The conclusion by the Massachusetts Supreme Judicial

Court that corporations possess certain rights of speech

and expression under the First Amendment but that corpo-

rate freedom of expression may be limited to political

issues materially affecting corporate business, property or

assets is contrary to principles established by this Court.

Where ‘‘core First Amendment rights of political expres-

sion’’ are abridged, the governmental interests supporting

’ The court upheld the validity of a municipal ordinance regu-

lating commercial solicitation but stated that speech is not unpro-

tected because it is uttered by a corporate entity and because it

serves the economic purposes of that entity. 331 A.2d at 270.

"™ The court in Pacifie Gas invalidated a municipal ordinance

which prohibited corporations from contributing to any committee

which attempted to influence the public in connection with referenda

issues as a violation of the First Amendment rights of corporations.

such regulation must satisfy ‘‘exacting scrutiny.’’ Buckley

v. Valeo, 424 U.S. at 44. As this Court stated in Mills v.

Alabama, 384 U.S. at 220, and reaffirmed in Buckley

v. Valeo, 424 U.S. at 50, ‘‘no test of reasonableness can save

a state law [abridging First Amendment rights] from in-

validation as a violation of the First Amendment... .”

IV. A Taz on Individuals Materially Affects Corporations.

In enacting Mass. Gen. Laws ec. 55, § 8, the Massachusetts

legislature presumed that issues related solely to the

taxation of individuals do not ‘‘materially affect the prop-

, : —_ ’

erty, business or assets of the corporations.’’ Similarly,

in concluding that Mass. Gen. Laws c. 55, § 8 was valid, the

Supreme Judicial Court relied on the lack of ‘‘an express

finding that the plaintiffs’ material interests would in fact

be affected by the ballot question.’’ AJS. 14. That con-

clusion is contrary to the undeniable and self-evident fact

that a tax on individuals affects corporations. The ability

of corporations to attract qualified executives, the funds

available to consumers, monies on deposit in appellants’

banks are all matters dealt with in the record. However,

no record is needed to conclude that a state’s mechanism

for raising needed revenue affects all taxpayers and po-

tential taxpayers.

In raising tax revenue, a state or municipality neces-

sarily relies upon various sources. To the extent that a

system of taxation generates more revenue from one seg-

ment of society, a corresponding reduction results in the

amount of revenue which must be raised from other sources,

Thus, if a state could raise its needed revenues entirely

from taxation of individuals, it could decide not to tax

corporations at all. Conversely, if a state were to decide

to generate less revenue from the taxation of individuals,

the burden of meeting a state’s fiscal needs could be shifted

24

to corporations. It cannot be denied that decisions on the

allocation of the tax burden have a material effect on corpo-

rations as entities which, as a result of such decisions, may

bear greater or lesser degrees of the total tax burden.

In addition, the rate of taxation on individuals would

probably affect investment by individuals in corporations.

For example, by lowering the tax rates of individuals, the

legislature would free additional revenue which could be

used for investment, thereby facilitating capital formation

in corporations, an important factor for small or medium-

sized corporations. Also, small closely held corporations

would be affected by the tax rate on individuals because

such a tax would affect, among other matters, decisions

on payments of dividends or accumulation of capital or,

even, the purchase and sale of businesses.

The effect of individual income tax rates on small and

medium-sized corporations illustrates an erroneous assump-

tion underlying this case. The case has proceeded on the

assumption that corporations oppose the graduated income

tax. However, this is not necessarily so. Small corpora-

tions or corporations whose shares are held largely by out

of state shareholders may welcome the relief from the tax

burden imposed upon them by the adoption of a tax system

imposing a heavier burden upon individual taxpayers. Cor-

porations owning property may welcome relief from the

burden imposed upon them by the property tax if there

were heavier reliance upon an income tax on individuals to

raise needed state revenue. These are only illustrations of

the variety of views that corporations may hold on taxes

on individuals. These illustrations are offered to show why

corporations should not be prohibited from expressing their

opinions on matters affecting the system of taxation of the

state within which they function.

The potential impact of individual income tax rates on

small corporations and the general effect of such tax rates

on incentives for investment materially affect the assets

of such corporations. The conclusion of the Massachusetts

legislature is contrary to this plain irrebuttable principle.

Conclusion.

It is evident from the record that this case is one more

battleground in the ongoing controversy concerning the

establishment of a graduated income tax in Massachusetts.

The legislature, which has consistently favored a graduated

income tax, has attempted to silence what it perceives to

be the opposition through the adoption of a criminal penalty

for speaking on the subject. This circumstance should not

distort the important principles at issue here. The issue

is not one of pro-graduated income tax or anti-graduated

income tax; the issue is whether a state legislature may

silence debate among its citizenry.

The assumption that corporate wealth would be used in

opposition to a graduated income tax is simply not correct

since that assumption neglects the existence of many diverse

types of corporations including small closely-held corpora-

tions, family corporations, professional corporations and

the like. That any element of the scheme of taxation

adopted by a state to raise revenue materially affects all

taxpayers and potential taxpayers in the state is uncontro-

vertible. The record below shows that at least some econo-

mists believe a tax on individuals materially affects cor-

porations, and that, whether correctly or not, corporations

perceive the tax on individuals as affecting them. These

factors and the arguments bearing upon them may operate

as a distraction from the fundamental issue in this case —

whether there is any justification permitting a state to si-

lence the voice of one of its citizens and, in so doing, to

deprive its citizens of the right to hear the opinions, posi-

tions and ideas of a segment of the citizenry.

This brief has not dealt with the issue of mootness, an

issue briefed at length by the parties. However, the New

England Council wishes to invite the Court’s attention to

the already chilling effect on public debate which the cir-

cumstances leading to this case have had, and the danger-

ous potential, absent a decision in this Court, for further

state action attempting to silence voices within the Com-

monwealth. Under such circumstances, a firm pronounce-

ment by this Court upholding the First Amendment is

necessary at this time so as to make certain that action

by this or any other state to silence the opposition by mak-

ing it a crime to speak will not be permitted.

Respectfully submitted,

Jack R. Pirozzolo,

Richard F. McCarthy,

Willeox, Pirozzolo & McCarthy,

50 Federal Street,

Boston, Massachusetts 02110.

(617) 482-5470

Harrison A. Fitch,

New England Legal Foundation,

1032 Statler Building,

Boston, Massachusetts 02116.

(617) 542-2580

James S. Hostetler,

Chapman, Duff and Paul,

1730 Pennsylvania Avenue, N.W.,

Washington, D.C. 20006.

(202) 624-8800