Louis K. Liggett Co. v. Lee | |
---|---|
Argued January 12–13, 1933 Decided March 13, 1933 | |
Full case name | Louis K. Liggett Co., et al. v. Lee, Comptroller, et al. |
Citations | 288 U.S. 517 ( more ) |
Case history | |
Prior | Appeal from the Supreme Court of Florida |
Court membership | |
| |
Case opinions | |
Majority | Roberts, joined by Hughes, Van Devanter, McReynolds, Sutherland, Butler |
Dissent | Brandeis |
Dissent | Cardozo, joined by Stone |
Louis K. Liggett Co. v. Lee, 288 U.S. 517 (1933), is a corporate law decision from the United States Supreme Court. [1]
In his opinion, Justice Brandeis endorsed the theories that state corporate law, and lack of federal standards, enabled a race to the bottom in corporate law rules, or one of "laxity". He also expounded the evidence that the Great Depression was caused by disparities of income and wealth brought about by the corporation, which he likened to Frankenstein's monster.
The case involved retail business taxes in the Florida being based on the number of stores and not the value or sales of the stores.
This section needs expansion. You can help by adding to it. (July 2022) |
The majority of the Supreme Court, with the opinion delivered by Roberts J, held that § 5 of the Florida Act, which increased tax if stores were present in more than one county, was unreasonable and arbitrary and violated the equal protection clause.
Justice Brandeis dissented. He agreed with the race to the bottom theory of corporate law, proposed by Adolf Berle and Gardiner Means in The Modern Corporation and Private Property (1932).
(b) Limitations upon the scope of a business corporation's powers and activity were also long universal. At first, corporations could be formed under the general laws only for a limited number of purposes — usually those which required a relatively large fixed capital, like transportation, banking, and insurance, and mechanical, mining, and manufacturing enterprises. [2] Permission to incorporate for "any lawful purpose" [3] was not common until 1875; and until that time the duration of corporate franchises was generally limited to a period of 20, 30, or 50 years. [4] All, or a majority, of the incorporators or directors, or both, were required to be residents of the incorporating state. [5] The powers which the corporation might exercise in carrying out its purposes were sparingly conferred and strictly construed. Severe limitations were imposed on the amount of indebtedness, bonded or otherwise. [6] The power to hold stock in other corporations was not conferred or implied. [7] The holding company was impossible.
(c) The removal by the leading industrial States of the limitations upon the size and powers of business corporations appears to have been due, not to their conviction that maintenance of the restrictions was undesirable in itself, but to the conviction that it was futile to insist upon them; because local restriction would be circumvented by foreign incorporation. Indeed, local restriction seemed worse than futile. Lesser States, eager for the revenue [8] derived from the traffic in charters, had removed safeguards from their own incorporation laws. [9] Companies were early formed to provide charters for corporations in states where the cost was lowest and the laws least restrictive. [10] The states joined in advertising their wares. [11] The race was one not of diligence but of laxity. [12] Incorporation under such laws was possible; and the great industrial States yielded in order not to lose wholly the prospect of the revenue and the control incident to domestic incorporation.
The history of the changes made by New York is illustrative. The New York revision of 1890, which eliminated the maximum limitation on authorized capital, and permitted intercorporate stockholding in a limited class of cases, [13] was passed after a migration of incorporation from New York, attracted by the more liberal incorporation laws of New Jersey. [14] But the changes made by New York in 1890 were not sufficient to stem the tide. [15] In 1892, the Governor of New York approved a special charter for the General Electric Company, modelled upon the New Jersey Act, on the ground that otherwise the enterprise would secure a New Jersey charter. [16] Later in the same year the New York corporation law was again revised, allowing the holding of stock in other corporations. [17] But the New Jersey law still continued to be more attractive to incorporators. [18] By specifically providing that corporations might be formed in New Jersey to do all their business elsewhere, [19] the state made its policy unmistakably clear. Of the seven largest trusts existing in 1904, with an aggregate capitalization of over two and a half billion dollars, all were organized under New Jersey law; and three of these were formed in 1899. [20] During the first seven months of that year, 1336 corporations were organized under the laws of New Jersey, with an aggregate authorized capital of over two billion dollars. [21] The Comptroller of New York, in his annual report for 1899, complained that "our tax list reflects little of the great wave of organization that has swept over the country during the past year and to which this state contributed more capital than any other state in the Union." "It is time," he declared, "that great corporations having their actual headquarters in this State and a nominal office elsewhere, doing nearly all of their business within our borders, should be brought within the jurisdiction of this State not only as to matters of taxation but in respect to other and equally important affairs." [22] In 1901 the New York corporation law was again revised. [23]
The history in other states was similar. Thus, the Massachusetts revision of 1903 was precipitated by the fact that "the possibilities of incorporation in other states have become well known, and have been availed of to the detriment of this Commonwealth." [24]
Third. Able, discerning scholars [25] have pictured for us the economic and social results of thus removing all limitations upon the size and activities of business corporations and of vesting in their managers vast powers once exercised by stockholders — results not designed by the States and long unsuspected. They show that size alone gives to giant corporations a social significance not attached ordinarily to smaller units of private enterprise. Through size, corporations, once merely an efficient tool employed by individuals in the conduct of private business, have become an institution — an institution which has brought such concentration of economic power that so-called private corporations are sometimes able to dominate the State. The typical business corporation of the last century, owned by a small group of individuals, managed by their owners, and limited in size by their personal wealth, is being supplanted by huge concerns in which the lives of tens or hundreds of thousands of employees and the property of tens or hundreds of thousands of investors are subjected, through the corporate mechanism, to the control of a few men. Ownership has been separated from control; and this separation has removed many of the checks which formerly operated to curb the misuse of wealth and power. And as ownership of the shares is becoming continually more dispersed, the power which formerly accompanied ownership is becoming increasingly concentrated in the hands of a few. The changes thereby wrought in the lives of the workers, of the owners and of the general public, are so fundamental and far-reaching as to lead these scholars to compare the evolving "corporate system" with the feudal system; and to lead other men of insight and experience to assert that this "master institution of civilised life" is committing it to the rule of a plutocracy. [26]
The data submitted in support of these conclusions indicate that in the United States the process of absorption has already advanced so far that perhaps two-thirds of our industrial wealth has passed from individual possession to the ownership of large corporations whose shares are dealt in on the stock exchange; [27] that 200 non-banking corporations, each with assets in excess of $90,000,000, control directly about one-fourth of all our national wealth, and that their influence extends far beyond the assets under their direct control; [28] that these 200 corporations, while nominally controlled by about 2,000 directors, are actually dominated by a few hundred persons [29] — the negation of industrial democracy. Other writers have shown that, coincident with the growth of these giant corporations, there has occurred a marked concentration of individual wealth; [30] and that the resulting disparity in incomes is a major cause of the existing depression. [31] Such is the Frankenstein monster which States have created by their corporation laws. [32]
Fourth. Among these 200 corporations, each with assets in excess of $90,000,000, are five of the plaintiffs. These five have in the aggregate, $820,000,000 of assets; [33] and they operate, in the several States, an aggregate of 19,718 stores. [34] A single one of these giants operates nearly 16,000. [35] Against these plaintiffs, and other owners of multiple stores, the individual retailers of Florida are engaged in a struggle to preserve their independence — perhaps a struggle for existence. The citizens of the State, considering themselves vitally interested in this seemingly unequal struggle, have undertaken to aid the individual retailers by subjecting the owners of multiple stores to the handicap of higher license fees. They may have done so merely in order to preserve competition. But their purpose may have been a broader and deeper one. They may have believed that the chain store, by furthering the concentration of wealth and of power and by promoting absentee ownership, is thwarting American ideals; that it is making impossible equality of opportunity; that it is converting independent tradesmen into clerks; and that it is sapping the resources, the vigor and the hope of the smaller cities and towns. [36]
Corporatocracy is a term used to refer to an economic, political and judicial system controlled by corporations or corporate interests.
American Record Corporation (ARC), also referred to as American Record Company, American Recording Corporation, or ARC Records, was an American record company.
A chain store or retail chain is a retail outlet in which several locations share a brand, central management, and standardized business practices. They have come to dominate the retail and dining markets, and many service categories, in many parts of the world. A franchise retail establishment is one form of chain store. In 2005, the world's largest retail chain, Walmart, became the world's largest corporation based on gross sales.
The causes of the Great Depression in the early 20th century in the United States have been extensively discussed by economists and remain a matter of active debate. They are part of the larger debate about economic crises and recessions. The specific economic events that took place during the Great Depression are well established. There was an initial stock market crash that triggered a "panic sell-off" of assets. This was followed by a deflation in asset and commodity prices, dramatic drops in demand and credit, and disruption of trade, ultimately resulting in widespread unemployment and impoverishment. However, economists and historians have not reached a consensus on the causal relationships between various events and government economic policies in causing or ameliorating the Depression.
Montgomery Ward is the name of two successive U.S. retail corporations. The original Montgomery Ward & Co. was a world-pioneering mail-order business and later also a leading department store chain that operated between 1872 and 2001. The current Montgomery Ward Inc. is a national online shopping and mail-order catalog retailer that started several years after the original Montgomery Ward shut down.
The Great Atlantic & Pacific Tea Company, better known as A&P, was an American chain of grocery stores that operated from 1859 to 2015. From 1915 through 1975, A&P was the largest grocery retailer in the United States.
Institutional economics focuses on understanding the role of the evolutionary process and the role of institutions in shaping economic behavior. Its original focus lay in Thorstein Veblen's instinct-oriented dichotomy between technology on the one side and the "ceremonial" sphere of society on the other. Its name and core elements trace back to a 1919 American Economic Review article by Walton H. Hamilton. Institutional economics emphasizes a broader study of institutions and views markets as a result of the complex interaction of these various institutions. The earlier tradition continues today as a leading heterodox approach to economics.
The distribution of wealth is a comparison of the wealth of various members or groups in a society. It shows one aspect of economic inequality or economic heterogeneity.
Waldenbooks, operated by the Walden Book Company, Inc., was an American shopping mall-based bookstore chain and a subsidiary of Borders Group. The chain also ran a video game and software chain under the name Waldensoftware, as well as a children's educational toy chain under Walden Kids. In 2011, the chain was liquidated in bankruptcy.
In the United States, the Great Depression began with the Wall Street Crash of October 1929. The stock market crash marked the beginning of a decade of high unemployment, poverty, low profits, deflation, plunging farm incomes, and lost opportunities for economic growth as well as for personal advancement. Altogether, there was a general loss of confidence in the economic future.
A food cooperative or food co-op is a food distribution outlet organized as a cooperative, rather than a private or public company. Food cooperatives are usually consumer cooperatives, where the decisions regarding the production and distribution of its food are chosen by its members. Like all cooperatives, food cooperatives are often based on the 7 Rochdale Principles, and they typically offer natural foods. Since decisions about how to run a cooperative are not made by outside shareholders, cooperatives often exhibit a higher degree of social responsibility than their corporate analogues.
Louis Kroh Liggett was an American drug store magnate who founded L.K. Liggett Drug Company and then Rexall. He was later chairman of United Drug Company. He was a member of the Republican National Committee for Massachusetts.
Adolf Augustus Berle Jr. was an American lawyer, educator, writer, and diplomat. He was the author of The Modern Corporation and Private Property, a groundbreaking work on corporate governance, a professor at Columbia University, and an important member of US President Franklin Roosevelt's "Brain Trust."
The Modern Corporation and Private Property is a book written by Adolf Berle and Gardiner Means published in 1932 regarding the foundations of United States corporate law. It explores the evolution of big business through a legal and economic lens, and argues that in the modern world those who legally have ownership over companies have been separated from their control. The second, revised edition was released in 1967. It serves as a foundational text in corporate governance, corporate law, and institutional economics.
United Drapery Stores, or UDS, was a British retail group that dominated the British high street from the 1950s to the early 1980s.
The Great Depression was a severe worldwide economic depression between 1929 and 1939 that began after a major fall in stock prices in the United States. The economic contagion began around September 4, 1929, and became known worldwide on Black Tuesday, the stock market crash of October 29, 1929. The economic shock transmitted across the world, impacting countries to varying degrees, with most countries experiencing the Great Depression from 1929. The Great Depression was the longest, deepest, and most widespread depression of the 20th century and is regularly used as an example of an intense global economic depression.
3 East 57th Street, originally the L. P. Hollander Company Building, is a nine-story commercial building in the Midtown Manhattan neighborhood of New York City. It is along the northern side of 57th Street, just east of Fifth Avenue. 3 East 57th Street, constructed from 1929 to 1930, was designed by Shreve, Lamb & Harmon in an early Art Deco style.
Economic democracy is a socioeconomic philosophy that proposes to shift decision-making power from corporate managers and corporate shareholders to a larger group of public stakeholders that includes workers, customers, suppliers, neighbours and the broader public. No single definition or approach encompasses economic democracy, but most proponents claim that modern property relations externalize costs, subordinate the general well-being to private profit and deny the polity a democratic voice in economic policy decisions. In addition to these moral concerns, economic democracy makes practical claims, such as that it can compensate for capitalism's inherent effective demand gap.
Frank Milano was a Calabrian emigrant to the United States who was boss of the Cleveland crime family in Cleveland, Ohio, from 1930 to 1935. He fled to Mexico, and in the early 1960s returned to the United States where he took up residence in Los Angeles, California. He became a criminal associate of the Cohen crime family and the Luciano crime family.
Transaction Man: The Rise of the Deal and the Decline of the American Dream is a non-fiction book which chronicles the role of corporations in relation to the American economy and shifts in public policy by Nicholas Lemann, who is a veteran journalist and a The New Yorker staff writer.