Reclaim Democracy!

Appreciating Recent Victories for Citizens and Consumers Against Corporations

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May 2024

Amid much horrific news this month, some major victories for citizens over corporate power have received little attention. Among the recent victories delivered by federal civil service agencies:

Non-compete Agreements
Lina Khan, President Biden’s selection to chair the Federal Trade Commission (FTC), has emerged as a civil service superhero, and it’s been delightful to follow the reactions of corporate mouthpieces to Khan fulfilling her role as an advocate for the public. In April, the FTC voted to ban non-competition contracts (“non-competes”) that corporations often impose on employees that prevent them from leaving to work for any competitor. 

While such agreements may be legitimate in rare instances involving intellectual property issues, the practice has been wildly abused and applied to positions like fast-food service, where no legitimate purpose is served. Some 30 million U.S. workers today are trapped by such involuntary “contracts,” leading to:

  • Limiting entrepreneurship (workers often are banned from starting a business that overlaps in any way with their previous job).
  • Suppressing wages. If workers are not free to work where they choose, corporations gain power, including power over compensation. “Non-competes” restrict workers’ ability to find new employment opportunities within a given field.
  • “Job Lock.” Noncompete clauses make it tougher for workers to advance their careers by limiting job mobility within their field. 

The Biden Administration claims the non-compete ban will raise wages by $400 billion over the next decade once the ban takes effect in August. Corporate advocates like the U.S. Chamber of Commerce have filed lawsuits to try stopping the rule from taking effect.

Credit Card Fees

In March, the Consumer Financial Protection Bureau (CFPB) finalized a rule limiting the penalty credit card corporations may impose for a single late payment to $8 (current averaging $32, exclusive of interest fees). It will take effect by late May, barring any successful legal challenge. 

The CFPB says late fees cost U.S. residents more than $14 billion a year and that 45 million Americans charged late fees will see an average savings of $220 a year.

The fee cap is part of the Biden administration’s campaign against “junk fees,” including air travel, event tickets and airline fees, which the FTC defines as “unnecessary, unavoidable or surprise charges that inflate costs while adding little to no value.“ The credit card fee cap also is under legal attack from financial corporations and their lobbying groups.

Blocking Anti-competitive Mergers

The FTC is joined by the Department of Justice in increasing vigilance over corporate mergers and acquisitions that would harm competition, small businesses, and consumers. A lawsuit by the DOJ succeeded in stopping the merger of JetBlue and Spirit Airlines, which would have reduced or eliminated competition on many travel routes.

Most recently (January 2024), the FTC sued to block a major hospital acquisition by Novant Health Corporation. The FTC said the merger would raise healthcare costs for patients and could likely harm quality of care.

While these wins have not fundamentally altered the power imbalance between citizens and corporations, they represent a sharp reversal from the last several presidential administrations. Let’s thank and encourage the people responsible for these actions while continuing to push for the  longer-term structural changes we’re working to achieve.

Key 2024 Supreme Court Cases — environment and democracy: Loper Bright Enterprises v. Raimondo

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Will a majority of Justices overturn a 40-year-old precedent to grab more power for itself and for corporations?

March 2024

On the surface Loper Bright is a dispute about fishing corporations challenging the power of the National Marine Fisheries Service to require them to pay the cost of observers who monitor companies’ compliance with federal fishery rules. But this seemingly narrow legal question actually could yield widely destructive consequences because the justices have opted to re-examine a 40-year-old precedent the court established in Chevron Inc. v. Natural Resources Defense Council. 

That precedent, widely known as the Chevron Doctrine, says state courts should defer to federal agencies’ interpretation of a law when the language is ambiguous or leaves discretion regarding implementation.

Chevron effectively says the civil servants with expertise in their field and who are accountable to an elected president should decide how to implement Congress’ mandates, rather than judges — a principle clearly rejected by the most regressive justices. Reversing this precedent would do enormous harm, stripping many federal agencies charged with protecting civil rights, consumers, and public health and safety; limiting pollution and environmental harm; and much more. 

Stripping the Environmental Protection Agency of its authority to limit carbon emissions is one obvious industry target. 

Dozens of corporate and far-right advocacy groups are pushing the court to overturn Chevron and anoint federal courts as the arbiters of which federal regulations are proper. Such a ruling would invite floods of lawsuits challenging rules that limit or regulate corporate activities. Workplace safety rules, product safety regulations, and limiting emissions to abate the climate crisis are among the obvious targets.

Reversing Chevron also would undermine other core Unitarian Universalist values by enabling state politicians to challenge crucial federal civil rights and voting protections.

Congress is ill-equipped to manage the day-to-day administration of legislation it passes and necessarily must empower federal agencies to turn its broad directives into specific actions based on good-faith interpretations. Those actions remain subject to judicial oversight if any agency truly exceeds its authority. Accordingly, SCOTUS should uphold theChevron precedent and sustain the ability of civil servants to do their jobs effectively.

SCOTUS however, appears likely to at least weaken, if not overturn, the Chevron Principle, based on reports from oral argument.

Origin and Status: The case came on a writ of certiorari to the U.S. Court of Appeals for the District of Columbia Circuit. In October, the court also agreed to hear a second challenge to the Chevron Doctrine, Relentless v. Department of Commerce, which will be argued simultaneously with Loper v. Raimondo. 

Related: Edison Electric Institute v. Federal Energy Regulatory Commission (FERC):  Other corporations also are pushing the Court to overrule Chevron and grant them more power. The Edison Electric Institute and the utility NorthWestern Energy seek to have a lower court ruling in favor of the U.S. Federal Energy Regulatory Commission overturned. They object to approval of a FERC finding that a Montana solar and battery storage facility qualifies for incentives that encourage small renewable energy producers to upload power to the grid. No action has been taken by the Court as of April 2024.

Asbestos Corporations Use Sham Bankruptcies to Evade Accountability

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By Jeff Milchen and Stuart Levit
First Published in The American Prospect, April 6, 2005

It’s hard for many Montanans not to feel outrage when we hear President Bush speak of “frivolous asbestos lawsuits” causing business bankruptcies. We know how the WR Grace & Co. used accounting trickery to “go bankrupt,” and thereby avoid fully compensating more than 1,000 Lincoln County residents who had been exposed to deadly asbestos dust.

But WR Grace is not an isolated example. Many of the several dozen business bankruptcies — touted as the tragic results of “runaway lawsuits” — are examples of corporate planning to shield assets from victims rather than a function of being “broke” in any traditional sense.

For example, WR Grace CEO Paul J. Norris made $5 million last year. Not bad for a company in the midst of Chapter 11 bankruptcy reorganization. Many other top executives in “bankrupt” asbestos corporations have seen lucrative bonuses or salary increases.

To be sure, people who have not been hurt have taken advantage of some companies with no culpability for asbestos deaths (typically small businesses that simply resold products containing asbestos). Relatively few of the 6,000 businesses that have defended or settled asbestos claims should bear responsibility for criminal actions and victim compensation, and it would be unjust to ignore that many small-business owners have also become victims of corporations like WR Grace.

Such economic harm, however, pales when compared with the events at WR Grace’s Libby, Montana, mine, where it knowingly exposed thousands of workers and area residents to tremolite, a particularly lethal form of asbestos, while managers lied to employees, residents, and government health officers and regulators about the danger.

The main product of the Libby plant was vermiculite, a mineral valuable for insulation, potting soil, vehicle’s brake pads, and other products. The vermiculite in Libby, however was naturally intermingled with the deadly asbestos.

Asbestos was once widely used for insulation and other applications because of its light, fine, fire-resistant fibers. But when inhaled, those fibers can lodge permanently in lungs, causing scarring of the lung lining. This process gradually chokes off breathing and often causes lung cancer.

In 1994, Congress passed a law permitting bankruptcy protection for companies with asbestos liability. This effectively made bankruptcy the most sensible response for many corporations facing asbestos claims.

But the Bush administration seems intent on recasting the perpetrators as victims by focusing attention on the costs of asbestos litigation to corporations.

Already, the U.S. Senate passed a bill to divert many of the largest class-action lawsuits from state courts into the federal court system. Though not inherently bad, the law also limits the kinds of claims that can be made, which effectively denies some victims the chance to be heard at all — a radical change from current and historic law. The Bush administration has pushed for absurdly low limits on noneconomic damages in civil lawsuits that would be incapable of deterring illegal or negligent actions by multibillion-dollar corporations like WR Grace.

Further, capping asbestos liability is irresponsible because the scope of damages is not yet known. Despite being banned in most industrialized nations, asbestos-bearing products, including many vehicle brakes, still are imported to the United States.

WR Grace executives knew tremolite caused lung disease and cancer from the day Grace acquired the Zonolite Company and its Libby mine in 1963. We know this because Zonolite memos dating from the mid-1950s discussed the dangers of exposing workers to asbestos.

Internal documents — many unearthed only as a result of civil lawsuits — revealed unmistakably that WR Grace executives knew and discussed harm to their workers and the community, but concealed the deadly problem from them and from government officials A company letter to its insurer in 1967 reported that WR Grace “did indeed have a severe problem,” with workers’ health and “might expect a good many claims involving asbestos.”

A subsequent memo from 1976 noted, “Our major [worker health] problem is death from respiratory cancer. This is no surprise.”

Yet WR Grace denied employees adequate respirators, protective clothes, or a reasonable opportunity to clean themselves at the mine and processing plant. Plant managers even gave away contaminated materials for public use, including mine tailings to build a local school’s running track. Grace managers also knew that, at one point, up to 5,000 pounds of asbestos was being released from the plant into Lincoln County’s air every day.

Nearly 200 Libby residents [as of spring 2005], most of whom never worked at the mine, have died from asbestos-caused lung disease. An estimated 1,200 more in Lincoln County are sick with asbestos-related lung disease.

While WR Grace delayed taking any action to protect workers, once they began dying, it wasted little time protecting shareholder assets from the inevitable lawsuits. Between 1988 and 1998, WR Grace executives “eliminated” more than three-quarters of the company’s $6 billion in assets by redistributing them to legally separate entities with no liability to compensate victims or creditors. WR Grace filed for bankruptcy in 2001, after most of its former assets had been removed.

Among other companies using bankruptcy as a shield is Halliburton, which faces $4.3 billion in pending asbestos claims through its KBR subsidiary. In March 2005, its Web site boasted “Chapter 11 is very good for our investors.” According to Halliburton, nobody goes out of business, business operations don’t change, and bankruptcy allows to it to “cleanse the company” of its asbestos liabilities and keep the company strong.

Senate Majority Leader Bill Frist is among those who blame asbestos litigation for “forcing” Owens Corning into bankruptcy in 2000, and subsequent layoffs at its Granville, Ohio, facility were touted as evidence of litigation’s pernicious effects. However, many jobs terminated were in Owens Corning’s litigation department, not manufacturing or industry. Oh, yes, CEO David T. Brown took home $3.8 million in 2004.

While the congressional majority has erected formidable barriers to prevent individuals from escaping debts via bankruptcy, some proposed asbestos reforms would make it easier and cheaper for corporations to do the same.

Because of the latency period for asbestosis (anywhere from seven to 30 years), many researchers believe that fatalities in the United States won’t peak for another decade. The greatest potential harm from asbestos reform is that those individuals exposed to asbestos who have not yet, but almost surely will, develop asbestosis or cancer will be denied medical care and compensation.

To achieve just asbestos litigation reform that will compensate victims without generating unnecessary business and legal costs requires us to first understand the damage and corporate culpability. So far, we are largely in the dark.

Stuart Levit is an attorney and a former mine-reclamation specialist for the state of Montana. Milchen founded Reclaim Democracy! This article was first published by American Prospect.

© 2005 ReclaimDemocracy.org

Updates:

  • June, 2005: the state of New Jersey sued Grace and two of its executives for allegedly lying about asbestos contamination at its Hamilton, NJ vermiculite processing facility. The complaint is here (26 pp pdf from scan).
  • Sept, 2005: WR Grace attorneys have petitioned U.S. District Judge Donald W. Molloy to move the trial of the corporation on conspiracy, Clean Air Act violations, and other criminal charges –scheduled to begin Sept 11, 2006 — out of Montana. The petition claims jurors likely will be predisposed to find WR Grace guilty after years of press coverage about the corporation’s actions in Libby. Full story here.

Other useful sources:

Our Hidden History of Corporations in the U.S.

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When American colonists declared independence from England in 1776, they also freed themselves from control by English corporations that extracted their wealth and dominated trade. After fighting a revolution to end this exploitation, our country’s founders retained a healthy fear of corporate power and wisely limited corporations exclusively to a business role. Corporations were forbidden from attempting to influence elections, public policy, and other realms of civic society.

Initially, the privilege of incorporation was granted selectively to enable activities that benefited the public, such as construction of roads or canals. Enabling shareholders to profit was seen as a means to that end. The states also imposed conditions (some of which remain on the books, though unused) like these*:

  • Corporate charters (licenses to exist) were granted for a limited time and could be revoked promptly for violating laws.
  • Corporations could engage only in activities necessary to fulfill their chartered purpose.
  • Corporations could not own stock in other corporations nor own any property that was not essential to fulfilling their chartered purpose.
  • Corporations were often terminated if they exceeded their authority or caused public harm.
  • Owners and managers were responsible for criminal acts committed on the job.
  • Corporations could not make any political or charitable contributions nor spend money to influence law-making.

For 100 years after the American Revolution, legislators maintained tight control of the corporate chartering process. Because of widespread public opposition, early legislators granted very few corporate charters, and only after debate. Citizens governed corporations by detailing operating conditions not just in charters but also in state constitutions and state laws. Incorporated businesses were prohibited from taking any action that legislators did not specifically allow.

States also limited corporate charters to a set number of years. Unless a legislature renewed an expiring charter, the corporation was dissolved and its assets were divided among shareholders. Citizen authority clauses limited capitalization, debts, land holdings, and sometimes, even profits. They required a company’s accounting books to be turned over to a legislature upon request. The power of large shareholders was limited by scaled voting, so that large and small investors had equal voting rights. Interlocking directorates were outlawed. Shareholders had the right to remove directors at will.

In Europe, charters protected directors and stockholders from liability for debts and harms caused by their corporations. American legislators explicitly rejected this corporate shield. The penalty for abuse or misuse of the charter was not a plea bargain and a fine, but dissolution of the corporation.

In 1819 the U.S. Supreme Court tried to strip states of this sovereign right by overruling a lower court’s decision that allowed New Hampshire to revoke a charter granted to Dartmouth College by King George III. The Court claimed that since the charter contained no revocation clause, it could not be withdrawn. The Supreme Court’s attack on state sovereignty outraged citizens. Laws were written or re-written and new state constitutional amendments passed to circumvent the (Dartmouth College v Woodward) ruling. Over several decades starting in 1844, nineteen states amended their constitutions to make corporate charters subject to alteration or revocation by their legislatures. As late as 1855, it seemed that the Supreme Court had gotten the peoples’ message when in Dodge v. Woolsey it reaffirmed states’ powers over “artificial bodies.”

But the men running corporations pressed on. Contests over charter were battles to control labor, resources, community rights, and political sovereignty. More and more frequently, corporations were abusing their charters to become conglomerates and trusts. They converted the nation’s resources and treasures into private fortunes, creating factory systems and company towns. Political power began flowing to absentee owners, rather than community-rooted enterprises.

The industrial age forced a nation of farmers to become wage earners, and they became fearful of unemployment–a new fear that corporations quickly learned to exploit. Company towns arose. and blacklists of labor organizers and workers who spoke up for their rights became common. When workers began to organize, industrialists and bankers hired private armies to keep them in line — sometimes by killing key leaders. They bought newspapers to paint businessmen as heroes and shape public opinion. Corporations bought state legislators, then announced legislators were corrupt and said scrutinizing every corporate operation wasted public resources

Government spending during the Civil War brought these corporations fantastic wealth. Corporate executives paid “borers” to infest Congress and state capitals, bribing elected and appointed officials alike. They pried loose an avalanche of government financial largesse. During this time, legislators were persuaded to give corporations limited liability, decreased citizen authority over them, and extended durations of charters.

Attempts were made to keep strong charter laws in place, but with the courts applying legal doctrines that made protection of corporations and corporate property the center of constitutional law, citizen sovereignty was undermined. As corporations grew stronger, government and the courts became easier prey. They freely reinterpreted the U.S. Constitution and transformed common law doctrines.

One of the most severe blows to citizen authority arose out of the 1886 Supreme Court case of Santa Clara County v. Southern Pacific Railroad. Though the court did not make a ruling on the question of “corporate personhood,” thanks to misleading notes of a clerk, the decision subsequently was used as precedent to hold that a corporation was a “natural person.” (This story was detailed in “The Theft of Human Rights,” a chapter in Thom Hartmann’s Unequal Protection.)

From that point on, the 14th Amendment, enacted to protect rights of freed slaves, was used routinely to grant corporations constitutional “personhood.” Justices have since struck down hundreds of local, state and federal laws enacted to protect people from corporate harm based on this illegitimate premise. Armed with these “rights,” corporations increased control over resources, jobs, commerce, politicians, judges, and the law.

A United States Congressional committee concluded in 1941, “The principal instrument of the concentration of economic power and wealth has been the corporate charter with unlimited power….”

Many U.S.-based corporations are now transnational, but the corrupted charter remains the legal basis for their existence. At Reclaim Democracy!, we believe citizens can reassert the convictions of those who struggled successfully to free us from corporate rule in the past. These changes must occur at the most fundamental level — the U.S. Constitution.

We are indebted to our friends at the Program on Corporations, Law and Democracy for their research, some of which was adapted with permission for this article. Sources include:

Visit our Corporate Personhood page for a huge library of articles exploring this topic more deeply.