422 U.S. 66 (1975), 73-1908, Cort v. Ash

Docket NºNo. 73-1908
Citation422 U.S. 66, 95 S.Ct. 2080, 45 L.Ed.2d 26
Party NameCort v. Ash
Case DateJune 17, 1975
CourtUnited States Supreme Court

Page 66

422 U.S. 66 (1975)

95 S.Ct. 2080, 45 L.Ed.2d 26

Cort

v.

Ash

No. 73-1908

United States Supreme Court

June 17, 1975

Argued March 18, 1975

CERTIORARI TO THE UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

Syllabus

Respondent stockholder brought this action seeking damages in favor of petitioner [95 S.Ct. 2082] Bethlehem Steel Corp., a Delaware corporation, and injunctive relief because of advertisements in connection with the 1972 Presidential election that petitioner corporate directors had authorized from general corporate funds in alleged violation of 18 U.S.C. § 610, which prohibits corporations from making contributions or expenditures in connection with specified federal elections. Respondent alleged jurisdiction under 28 U.S.C. § 1331, and sought to state a private claim for relief under 18 U.S.C. § 610, and also invoked pendent jurisdiction for an ultra vires claim under Delaware law. The District Court's denial of a preliminary injunction was upheld on appeal, following which respondent dropped the pendent claim rather than post security for expenses under state law before proceeding with that claim. The District Court then granted petitioners' motion for summary judgment. The Court of Appeals reversed, holding that the passage of the election had not mooted the case, since damages were sought, and that

a private cause of action, whether brought by a citizen to secure injunctive relief or by a stockholder to secure injunctive or derivative damage relief [is] proper to remedy violation of § 610.

After the Court of Appeals decision Congress enacted the Federal Election Campaign Act Amendments of 1974 (hereinafter the Amendments), under which, inter alia, the Federal Election Commission can receive citizen complaints of statutory violations and, where warranted, request the Attorney General to seek injunctive action.

Held:

1. The Amendments constitute an intervening law that relegates to the Commission's cognizance respondent's complaint as citizen or stockholder for injunctive relief against any alleged violations of § 610 in future elections, since this Court must examine this case according to the law existing at the time of its decision. United States v. Schooner Peggy, 1 Cranch 103, 110; Bradley v. Richmond School Board, 416 U.S. 696, 711. Pp. 74-77.

Page 67

2. Respondent stockholder's derivative suit with regard to the alleged 1972 violation cannot be implied under 18 U.S.C. § 610, and respondent's remedy, if any, must be under Delaware's corporation law. Pp. 77-85.

(a) Section 610 was primarily concerned not with the internal relations between corporations and stockholders, but with corporations as a source of aggregated wealth, and therefore of potential corrupting influence; thus, this statute differs from other criminal statutes in which private causes of action have been inferred because of a clearly articulated federal right in the plaintiff, e.g., Bivens v. Six Unknown Federal Narcotics Agents, 403 U.S. 388, or a pervasive legislative scheme governing the relationship between the plaintiff class and the defendant class in a particular regard, e.g., J. I. Case Co. v. Borak, 377 U.S. 426. Pp. 78-82.

(b) The legislative history of § 610 suggests no congressional intention to vest in corporate shareholders a federal right to damages for a violation of the statute. Pp. 82-84.

(c) A private remedy would not further the statutory purpose of dulling corporate influence on federal elections, since any compelled repayment to the corporation might well not deter the initial violation. P. 84.

(d) The cause of action is one traditionally relegated to state law in an area of primarily state concern. In addition to the ultra vires claim urged by respondent the alleged misuse of corporate funds might, under the law of some States, give rise to a cause of action for breach of a fiduciary duty. Pp. 84-85.

496 F.2d 416, reversed.

BRENNAN, J., delivered the opinion for a unanimous Court.

Page 68

BRENNAN, J., lead opinion

MR. JUSTICE BRENNAN delivered the opinion of the Court.

There are other questions, but the principal issue presented for decision is whether a private cause of action for damages against corporate directors is to be implied in favor of a corporate stockholder under 18 U.S.C. § 610, a criminal statute prohibiting corporations from making "a contribution or expenditure in connection with any election at which Presidential and Vice Presidential electors . . . are to be voted for."1 [95 S.Ct. 2084] We conclude

Page 69

that implication of such a federal cause of action is not suggested by the legislative context of § 610 or required to accomplish Congress' purposes in enacting the statute. We therefore have no occasion to address

Page 70

the questions whether § 610, properly construed, proscribes the expenditures alleged in this case, or whether the statute is unconstitutional as violative of the First Amendment or of the equal protection component of the Due Process Clause of the Fifth Amendment.

I

In August and September, 1972, an advertisement with the caption "I say let's keep the campaign honest. Mobilize `truth squads'" appeared in various national publications, including Time, Newsweek, and U.S. News and World Report, and in 19 local newspapers in communities where Bethlehem Steel Corp. (Bethlehem), a Delaware corporation, has plants. Reprints of the advertisement, which consisted mainly of quotations from a speech by petitioner Stewart S. Cort, chairman of the board of directors of Bethlehem, were included with the September 11, 1972, quarterly dividend checks mailed to the stockholders of the corporation. The main text of the advertisement appealed to the electorate to "encourage responsible, honest, and truthful campaigning." It alleged that vigilance was needed because "careless rhetoric and accusations . . . are being thrown around these days -- their main target being the business community." In italics, under a picture of Mr. Cort, the advertisement quoted "the following statement made by a political candidate: `The time has come for a tax system that says to big business -- you must pay your fair share.'" It then printed Mr. Cort's rejoinder to this in his speech, including his opinion that to say "large corporations [are] not carrying their fair share of the tax burden" is "baloney." The advertisement concluded with an offer to send, on request, copies of Mr. Cort's entire speech2 and a folder "telling how to

Page 71

go about activating Truth Squads."3 These publications could be obtained free from the Public Affairs Department of Bethlehem. It is stipulated that the entire costs of the advertisements and various mailings were paid from Bethlehem's general corporate funds. App. A29-A30; 350 F.Supp. 227, 229 (ED Pa.1972).

Respondent owns 50 shares of Bethlehem stock and was qualified to vote in the 1972 Presidential election. He filed this suit in the United States District Court for the Eastern District of Pennsylvania on September 28, 1972, on behalf of himself and, derivatively, on behalf of Bethlehem. The complaint specified two separate and distinct bases for jurisdiction and relief. Count I alleged jurisdiction under 28 U.S.C. § 1331 and sought to state a private claim for relief under 18 U.S.C. § 610, which, as mentioned, in terms provides only for a criminal penalty. Count II invoked pendent jurisdiction for a claim under Delaware law, alleging that the corporate campaign expenditures were "ultra vires, unlawful and [a] willful, wanton and gross breach of [defendants'] duty owed to [Bethlehem]." Immediate injunctive relief against further corporate expenditures in connection with [95 S.Ct. 2085] the 1972 Presidential election or any

Page 72

future campaign was sought, as well as compensatory and punitive damages in favor of the corporation.

The District Court denied a preliminary injunction on October 25, 1972. 350 F.Supp. 227. While the denial was supported on three grounds,4 it was upheld on appeal to the Court of Appeals for the Third Circuit only on the narrow ground that irreparable harm was not shown. 471 F.2d 811 (1973).5

After the affirmance on appeal, petitioners sought an order requiring respondent to post security for expenses as required by Pennsylvania law. The court declined to order such security with regard to the federal cause of action alleged in Count I, but did order respondent to post $35,000 before proceeding with the pendent claim under Count II. Rather than post security, respondent filed an amended complaint, which dropped Count II, the separate state cause of action, from the case.6

Page 73

[95 S.Ct. 2086] The District Court then granted petitioners' motion for summary judgment without opinion. The Court of Appeals reversed, 496 F.2d 416 (1974). The Court of

Page 74

Appeals held that, since the amended complaint sought damages for the corporation for violation of § 610, the controversy was not moot, although the election which occasioned it was past. The Court of Appeals held further that

a private cause of action, whether brought by a citizen to secure injunctive relief or by a stockholder to secure injunctive or derivative damage relief, [is] proper to remedy violation of § 610.

Id. at 424. We granted certiorari, 419 U.S. 992 (1974). We reverse.

II

We consider first the holding of the Court of Appeals that respondent has "a private cause of action . . . [as] a citizen [or as a stockholder] to secure injunctive relief." The 1972 Presidential election is history, and respondent as citizen or stockholder seeks injunctive relief only as to future elections. In that circumstance, a statute enacted after the decision of the Court of Appeals, the Federal Election Campaign Act Amendments of 1974, Pub.L. 93-443, 88 Stat. 1263 (Amendments) (amending the Federal Election Campaign Act of 1971, 86 Stat. 3), requires reversal of the holding of the Court of...

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2883 practice notes
  • 210 F.Supp.2d 1106 (N.D.Cal. 2002), C-02-0213, Precision Pay Phones v. Qwest Communications Corp.
    • United States
    • Federal Cases United States District Courts 9th Circuit United States District Courts. 9th Circuit. Northern District of California
    • May 31, 2002
    ...a separate and independent regulation for which a separate private right of action must be found, the analytical framework of Cort v. Ash, 422 U.S. 66, 95 S.Ct. 2080, 45 L.Ed.2d 26 (1975), suggests it would be appropriate to find such a right here. The touchstone to this determination is th......
  • 237 B.R. 687 (Bkrtcy.N.D.Ill. 1999), 97 B 25819, In re Knox
    • United States
    • Federal Cases United States Bankruptcy Courts Seventh Circuit
    • June 1, 1999
    ...intended to create an implied private right of action. Allison v. Liberty Sav., 695 F.2d 1086, 1088 (7th Cir.1982) (citing Cort v. Ash, 422 U.S. 66, 78, 95 S.Ct. 2080, 45 L.Ed.2d 26 A four part test is applied to determine propriety of implying a private right of action: (1) whether the pla......
  • 243 B.R. 385 (Bkrtcy.C.D.Cal. 1999), 98-36713, In re Jacks
    • United States
    • Federal Cases United States Bankruptcy Courts Ninth Circuit
    • December 29, 1999
    ...federal common law of corporations. In the United States, corporations are created and exist under state statutes. See, e.g., Cort v. Ash, 422 U.S. 66, 84, 95 S.Ct. 2080, 2091, 45 L.Ed.2d 26 (1975). The obligations of officers and directors to shareholders, and the obligations of directors ......
  • 253 B.R. 653 (Bkrtcy.W.D.N.C. 2000), 97-32126, In re Tate
    • United States
    • Federal Cases United States Bankruptcy Courts Fourth Circuit
    • October 2, 2000
    ...a legal remedy under § 506(b), and that a cause of action cannot be implied under the four-factor analysis first set out in Cort v. Ash, 422 U.S. 66, 95 S.Ct. 2080, 45 L.Ed.2d 26 (1975). 9 By allowing the Page 668 lawsuit to go forward, NationsBanc contends the Court is creating substantive......
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2835 cases
  • 210 F.Supp.2d 1106 (N.D.Cal. 2002), C-02-0213, Precision Pay Phones v. Qwest Communications Corp.
    • United States
    • Federal Cases United States District Courts 9th Circuit United States District Courts. 9th Circuit. Northern District of California
    • May 31, 2002
    ...a separate and independent regulation for which a separate private right of action must be found, the analytical framework of Cort v. Ash, 422 U.S. 66, 95 S.Ct. 2080, 45 L.Ed.2d 26 (1975), suggests it would be appropriate to find such a right here. The touchstone to this determination is th......
  • 237 B.R. 687 (Bkrtcy.N.D.Ill. 1999), 97 B 25819, In re Knox
    • United States
    • Federal Cases United States Bankruptcy Courts Seventh Circuit
    • June 1, 1999
    ...intended to create an implied private right of action. Allison v. Liberty Sav., 695 F.2d 1086, 1088 (7th Cir.1982) (citing Cort v. Ash, 422 U.S. 66, 78, 95 S.Ct. 2080, 45 L.Ed.2d 26 A four part test is applied to determine propriety of implying a private right of action: (1) whether the pla......
  • 243 B.R. 385 (Bkrtcy.C.D.Cal. 1999), 98-36713, In re Jacks
    • United States
    • Federal Cases United States Bankruptcy Courts Ninth Circuit
    • December 29, 1999
    ...federal common law of corporations. In the United States, corporations are created and exist under state statutes. See, e.g., Cort v. Ash, 422 U.S. 66, 84, 95 S.Ct. 2080, 2091, 45 L.Ed.2d 26 (1975). The obligations of officers and directors to shareholders, and the obligations of directors ......
  • 253 B.R. 653 (Bkrtcy.W.D.N.C. 2000), 97-32126, In re Tate
    • United States
    • Federal Cases United States Bankruptcy Courts Fourth Circuit
    • October 2, 2000
    ...a legal remedy under § 506(b), and that a cause of action cannot be implied under the four-factor analysis first set out in Cort v. Ash, 422 U.S. 66, 95 S.Ct. 2080, 45 L.Ed.2d 26 (1975). 9 By allowing the Page 668 lawsuit to go forward, NationsBanc contends the Court is creating substantive......
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3 firm's commentaries
  • The Perplexity and Perversity of the New Lawyer Conduct Rules©†
    • United States
    • Mondaq United States
    • July 11, 2003
    ...Act to clarify the Commission's exemptive authority generally, which can only strengthen the conclusions he reached. 10 Cort v. Ash, 422 U.S. 66 (1975). More recently, see Alexander v. Sandoval, 532 U.S. 275 (2001), indicating the Court's continued dislike for extending private rights of ac......
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    ...the court next considered whether P.G. Hospital had established an implied right of action under the four-pronged test in Cort v. Ash, 422 U.S. 66, 78 (1975). In finding that the hospital had not, the court concluded that: (i) Congress created the statutory provisions the hospital sought to......
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    ...denied in violation of Medicaid. Such an action may still be brought pursuant to the implied right of action cases under Cort v. Ash, 422 U.S. 66 (1975) and its progeny. Disclaimer: This Alert has been prepared and published for informational purposes only and is not offered, nor should be ......
43 books & journal articles
  • Modern mail fraud: the restoration of the public/private distinction.
    • United States
    • American Criminal Law Review Vol. 35 Nbr. 3, March 1998
    • March 22, 1998
    ...1083 (1991); CTS Corp. v. Dynamics Corp. of America, 481 U.S. 69 (1987): Daily Income Fund, Inc. v. Fox, 464 U.S. 523 (1984): Cort v. Ash, 422 U.S. 66 (1975). (23.) 658 F.2d 920 (2d Cir. 1981). (24.) 688 F.2d 108 (2d Cir. 1982). (25.) Bronston, 658 F.2d at 925. (26.) The charge to the jury ......
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    • Case Western Reserve Law Review Vol. 59 Nbr. 4, June 2009
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    ...L. REV. 227 (2007); Karen Jordan, Opening the Door to Hard-Look Review of Agency Preemption, 31 W. NEW ENG. L. REV. 353 (2009). (21) 422 U.S. 66 (1975). (22) See, e.g., Thomas W. Merrill, Capture Theory and the Courts: 1967-1983, 72 CHI.-KENT L. REV. 1039, 1083 (1997) ("The creation of......
  • Pennhurst, Chevron, and the spending power.
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    • Yale Law Journal Vol. 110 Nbr. 7, May 2001
    • May 1, 2001
    ...e.g., Cannon v. Univ. of Chi., 441 U.S. 677, 688 (1979) (holding, after "carefully analyz[ing] the four factors that Cort [v. Ash, 422 U.S. 66 (1975),] identifies as indicative of" congressional intent, that Title IX authorizes a private right of action against a recipient of fede......
  • The structural role of private enforcement mechanisms in public law.
    • United States
    • William and Mary Law Review Vol. 53 Nbr. 4, March 2012
    • March 1, 2012
    ...established doctrine specifies the conditions under which courts should find an implied private right of action. See Cort v. Ash, 422 U.S. 66, 78 (1975) (setting forth a four-part inquiry for determining whether a statute contains an implied right of action). Whether that doctrine produces ......
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1 provisions
  • Part III
    • United States
    • Federal Register November 26, 2008
    • December 21, 2006
    ...the central inquiry is whether Congress intended to create, either expressly or by implication, a private cause of action. Cort v. Ash, 422 U.S. 66 (1975). Where the text and structure of a statute provide no indication that Congress intends to create new individual rights, there is no basi......