Labor union dissenters influence political speech more than shareholders: law profs to SCOTUS

November 9, 2015

(Reuters) – Scathing commentary about the U.S. Supreme Court’s 2010 decision in Citizens United v. Federal Election Commission has tended to focus on the court’s refusal to restrict corporate political spending. As you know, the justices struck down campaign finance reforms as an unconstitutional violation of corporations’ free speech rights, triggering an avalanche of predictions that corporate donors would wield outsized political influence. The other free speech beneficiaries of Citizens United – labor unions also subject to the invalidated campaign finance restrictions – haven’t been the subject of nearly as much fear and loathing.

That’s going to change, at least a little, later this term when the Supreme Court hears Friedrichs v. California Teachers Association. As the merits brief from Rebecca Friedrichs and several of her fellow California teachers and school administrators explains, state law requires that public school educators either join the union or pay “agency fees” they contend are roughly the equivalent of union dues. Friedrichs and the other plaintiffs, represented by Jones Day contend that the law requires them to subsidize the union’s political pronouncements, in which their brief calls “the largest regime of compelled political speech in the nation.” They want the Supreme Court to hold that the First Amendment prohibits agency fees or, at the very least, prohibits fees used for political speech unless non-union members explicitly authorize that spending.

The union and its counsel of record, David Frederick of Kellogg Huber Hansen Todd Evans & Figel, argue the Supreme Court established in the 1977 Abood v. Detroit Board of Education that unions can collect agency fees from non-members who benefit from collective bargaining agreements and other union procedures. In Abood and subsequent decisions, the union brief said, the Supreme Court has endorsed frameworks permitting non-union members to opt-out from union fees unrelated to collective bargaining and other common benefits. California has just such an opt-out regimen for non-union teachers, the brief said, so they’re not compelled to pay for political speech at all.

This case is obviously of huge consequence for unions, especially because the non-union teachers want the Supreme Court to roll back its own Abood precedent on agency fees. But a really interesting amicus brief Friday by an illustrious bunch of corporate law professors explains why the teachers’ First Amendment litigation should inform future consideration of corporate free speech and political spending.

The essential message of the brief is that the Supreme Court equated political spending rights of corporations and unions in Citizens United, yet has not treated equally those who actually provide the money for that spending. Under Abood, the law professors said, opponents of political spending by the unions whose work otherwise benefits them can opt out of subsidizing political speech. Corporate shareholders, they contend, cannot even find out about businesses’ political spending, let alone do much to affect it.

“Because of how capital is saved and invested in corporations, most individual shareholders cannot obtain full information about corporate speech or political activities, even after the fact, nor can they prevent their savings from being used to speak in ways with which they disagree,” the professors’ brief said.

The filing refutes the Supreme Court’s assumption that shareholders can simply sell their stock or vote to replace corporate directors if they are at odds with the corporation’s campaign contributions. The vast majority of shareholders have little to no influence on director elections, partly because they own equity through pension or mutual funds, the brief said. It’s difficult to sell shares in the millions of registered private corporations in the U.S. and expensive to cash out even public shares. And under permissive disclosure laws, even public corporations aren’t required to disclose most political expenditures.

“From the perspective of the shareholder, a sale in response to an unwanted political expenditure would come too late, would be at a price where the expenditure was already ‘priced in,’ and would entail relatively large costs (including taxes),” the professors’ brief said. “Shareholders thus have no means to respond to corporate political spending to which they object.”

The point of the amicus brief, according to law professor John Coates of Harvard, was to highlight the relative rights of union beneficiaries and shareholders, particularly because in this case, the justices are being asked to give non-union members even more control over political expenditures they don’t support.

“It seemed like a good opportunity to intervene – even better than a corporate case,” said Coates, who said he wrote the initial draft of the brief and circulated it to likely co-signers. He said he was pleasantly surprised that so many corporate law professors – 19 in all – ended up joining a brief in a case that nominally has nothing to do with corporate law. (Among the amici are Lucian Bebchuk of Harvard, John Coffee of Columbia and Donald Langevoort of Georgetown, though the 15 I haven’t named are just as notable and well regarded.)

The only professors who declined to join the brief, Coates said, were those who wanted to argue that Citizens United was decided wrongly, not simply that the state of the law gives union dissenters much more power than shareholders over political expenditures. Coates’ hope is that this brief will help show the justices why their assumptions in Citizen United were wrong.

(This post has been corrected. An earlier version incorrectly reported that Peter Fagen of Fagen Friedman & Fulfrost is counsel of record to non-union member plaintiffs at the Supreme Court. He is not.)

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