45 26 Cort v. Ash 8212 1908

Decision Date17 June 1975
Docket NumberNo. 73,73
Parties. 45 L.Ed.2d 26 Stewart S. CORT et al., Petitioners, v. Richard A. ASH, etc. —1908
CourtU.S. Supreme Court
Syllabus

Respondent stockholder brought this action seeking damages in favor of petitioner 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, 2 L.Ed. 49; Bradley v. Richmond School Board, 416 U.S. 696, 711, 94 S.Ct. 2006, 2016, 40 L.Ed.2d 476. Pp. 74-77 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, 91 S.Ct. 1999, 29 L.Ed.2d 619, 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, 84 S.Ct. 1555, 12 L.Ed.2d 423. 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.

Edwin P. Rome, Philadelphia, Pa., for petitioners; Jerome R. Richter, Richard P. McElroy, William H. Roberts, Philadelphia, Pa., and Curtis H. Barnette, New Haven, Conn., on the briefs.

David Berger, Philadelphia, Pa., for respondents; Cletus P. Lyman and Paul J. McMahon, Philadelphia, Pa., on the brief.

Solicitor Gen. Robert H. Bork, Acting Asst. Atty. Gen. John C. Keeney, and Jerome M. Feit, Washington, D.C., filed a brief for the United States as amicus curiae.

James F. Rill, Thomas F. Shannon, John Hardin Young, Milton A. Smith, and Lawrence B. Kraus, Washington, D.C., filed a brief for the Chamber of Commerce of the United States as amicus curiae.

Alan B. Morrison and Reuben B. Robertson III, Washington, D.C., filed a brief for Judith Bonderman and others as amici curiae.

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 We con- clude 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 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, and 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 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. Court 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 the 1972 Presidential election or any 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 $135,000 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

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 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, 95 S.Ct. 302, 42 L.Ed.2d 264 (1974). We reverse.

II

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