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I-194 Is a Corporate Charter Law. Professor Natelson Reviewed a Different Statute.
Rob Natelson brings a lot of disdain to I-194. He says it is "flagrantly unconstitutional." He says it is "obviously defective." He says the sponsors of this measure get a grade of "Zero."
What the good professor doesn't bring is any Supreme Court caselaw to make his point, which is a little unusual for a constitutional law professor. And there's good reason for that: He doesn't have any. The one case he does mention proves our point, not his.
His argument runs on three hypotheticals. A driver's license conditioned on not driving to church. A barber's license conditioned on not talking politics. A corporate charter conditioned on not running a newspaper.
All three are unconstitutional. None of them is I-194.
The third comes closest. A state that let businesses incorporate but barred incorporated newspapers would be shutting one industry out of the corporate form, and that industry is the one the Press Clause names. It would also be pointless, because publishing needs no charter at all: a partnership publishes, a sole proprietor publishes, a woman with a printing press publishes. I-194 shuts no industry out of anything. Every artificial person in Montana gets the same powers, and publishing is among them. The measure's news, commentary, and editorial exclusion says so in the text.
Every one of his hypotheticals has the same structure: a person starts off holding a constitutional right, and the government demands he surrender it to keep a license. That is what the unconstitutional conditions doctrine addresses, and the cases bear it out — veterans told to sign a loyalty oath to keep a tax exemption, a trucker ordered to become a common carrier to use the highways, a teacher fired for testifying to the legislature. Rights-holder, demand, surrender.
I-194 demands nothing of anyone. Montanans who form a corporation walk into the Secretary of State's office holding every First Amendment right they have, and they walk out holding every one of them — plus a legal instrument they didn't have before. Nobody is asked to forswear anything. Every Montanan with a corporation may still spend his own money on any race, in any amount, for any candidate or cause.
What a state declines to design into a corporation it creates is a different question from what a state takes away from a person. Natelson's column never addresses that distinction. He assumes it away.
The Corrupt Practices Act.
Natelson's one citation is American Tradition Partnership v. Bullock, where the U.S. Supreme Court summarily reversed Montana. He's right that it took about fifteen minutes. He's wrong about why, and whether it matters to I-194.
The Corrupt Practices Act was passed by Montana voters themselves, by initiative, in 1912 — after the Copper Kings had spent a generation buying legislators outright. It was a hundred years old when the state defended it, and Montana brought the Court exactly the factual record the Court had said was missing from Citizens United: a documented history of corporate domination of this state's politics. The Court didn't care. It reversed in a paragraph, without argument.
It did that because the Corrupt Practices Act made it unlawful for a corporation to spend in a candidate race. It was a prohibition laid on top of a corporate code it never touched. Those corporations held the power to spend under Montana law, and the state told them they couldn't use it. That is the same legal posture as Citizens United: a ban on an empowered corporation. The Court treated it as the case it had already decided.
That is the lesson Montanans should take from 2012, and it is the opposite of the one Natelson draws. A damn good law with a solid factual record behind it lost in the post-Citizens United world because of how it was built.
I-194 is built differently. It makes nothing unlawful and prohibits nothing. It says what the powers of an artificial person are, and spending in elections isn't among them.
Where corporations come from.
Corporations are not created by the Constitution or by Congress. They are created by the states. The power to create them — and to say what they are — is reserved to the states under the Tenth Amendment. That authority predates the Founding and has never been federalized.
Montana does not have to offer the corporate form at all. It does not have to grant limited liability. It does not have to grant perpetual existence, or the power to hold property in the entity's own name, or the power to sue under the entity's name. Every one of those exists because Montanans put it in Montana law, and Montanans can take any one of them — or all of them — out.
There is plenty of caselaw here. It just isn't on his side.
Dartmouth College v. Woodward (1819) held that a corporation is a creature of law possessing only the properties its charter confers. Justice Story's concurrence told the states how to keep control of what they create: reserve the power to alter, amend, or repeal. The states did, Montana included.
The Supreme Court has enforced that reservation ever since. In Greenwood v. Freight Co. (1881), Massachusetts had made every charter "subject to amendment, alteration, or repeal, at the pleasure of the legislature," and when the legislature repealed one, the Court held the charter "no longer exists" — whatever the corporation had lawfully done while it stood, "there can be no new transactions dependent on the special power conferred by the charter." In Hamilton Gaslight & Coke Co. v. Hamilton City (1892), the Court held that a reservation of power "to alter or revoke a grant of special privileges necessarily became a part of the charter of every corporation formed under the general statute," and that the power "may be exerted at the pleasure of the legislature." And in CTS Corp. v. Dynamics Corp. of America (1987), the Court said no principle of corporation law is more firmly established than a state's authority over the corporations it creates, whose "very existence and attributes" are products of state law.
Two unbroken centuries of Supreme Court decisions, and every one of those cases says the same thing: what the state makes, the state defines. It's corporation law, not constitutional law, but it's still the law.
Professor Natelson's position requires holding that once Montana chooses to offer the corporate form, the federal Constitution obligates Montana to include a particular power in it — that the First Amendment writes a line item into the Montana code.
So here is the question, and we'd like an answer rather than another adjective:
Name the case holding that a state which offers the corporate form must include the power to spend in elections. Not a case striking down a ban on a corporation that already had the power — we'll stipulate to every one of those. A case holding that the First Amendment requires the state to put the power in the grant.
If he can't name one, the column is a prediction, not a legal analysis. And he can't name one, because no court has ever come close to holding that. The Supreme Court did not hold that Virginia had to give Citizens United the capacity to spend. It held that once Virginia had, the federal government couldn't make it illegal for the corporation to use it. Nobody in that case asked where the capacity came from. It was assumed on all sides, because nobody had thought to ask.
What Natelson is proposing is a federal mandate on the most traditional area of state authority there is. At the Founding, corporations were chartered one at a time with enumerated powers, and nobody thought the Constitution added items to the list. For a scholar who has built a career on the original Constitution and the powers reserved to the states, that is a strange place to end up.
Two smaller errors.
Natelson writes that I-194 "tries to protect the establishment media from a restriction it imposes on everyone else." The measure's news, commentary, and editorial exclusion runs to the activity, not to a class of favored companies. The Whitehall Ledger is covered by it. So is a Billings church newsletter, a co-op's member magazine, and a trade association's newsletter. There is no establishment-media carve-out, because there is no category of favored speaker.
He repeats the claim that out-of-state entities escape — that "Montana businesses and committees would be subject to I-194, while out-of-staters would be exempt."
That gets Montana corporate law backwards. Section 35-14-1501(3), MCA is directly on point: "Registration of a foreign corporation to do business in this state does not permit the foreign corporation to engage in any business or affairs or exercise any power that a domestic corporation may not engage in or exercise in this state."
That is the Montana Business Corporation Act, enacted by our Legislature, sitting in our code right now. Narrow what Montana grants its own corporations and the out-of-state grant narrows with it, automatically.
A Delaware corporation has enormous powers to do what it wants — in Delaware. But it has no power to act as a corporation in Montana except the ones Montana gives it. That has been the law since before statehood.
What the measure does.
A Montana business or nonprofit keeps every power it has except one: the power to spend its treasury telling voters to support or oppose a candidate or issue. Lobbying, research, testimony, endorsements, publishing, organizing, talking to members — all untouched. And the real people behind the entity keep that power in their own names.
We can't imagine Professor Natelson accepting a paper from one of his students that called a statute flagrantly unconstitutional and then just left it there. He'd have sent it back and asked for the authority. Montanans should expect the same of him.
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