Public and Private: Judicial Doctrine for Corporations in 19th Century America

• In Event: Property Rights and Corporations: Bringing the State Back in History and Theory

Abstract

This project creates a new dataset of 19th century state and federal case law on malfeasance of business corporations. It places this within the framework of North, Wallis, and Weingast’s (NWW) theory of political economic change from natural states towards open access societies as advanced in Violence and Social Orders. They identify free incorporation as the key element. This first happened in New York State, as a result of enactment in their 1846 Constitution.

Charters for business corporations had far more restrictions at the beginning of the century than they did at the end – when a corporation could do nearly anything it wanted. Prior to that, a corporation that acted outside it charter could be sanctioned, or even find its right to exist revoked. The prosecution of the North River Sugar Refining Company in 1890 stands as a ruling marking the end of that process; the company dissolved and reincorporated in New Jersey, outside the jurisdiction of New York state. But its charter revocation was built upon an extensive case law. That case law is the subject of this paper.

Cases can be identified in three ways: through citations of precedents in prior cases; though contemporaneous legal treatises that present citations to case law on specific provisions; and though WestLaw, Lexis Nexus, or HeinOnline searches. I begin with the first two, in order to identify those cases that were considered to be foundational, and then supplement this with searches via databases.

Case are coded on a set of variables. These include, whether it is a federal or state court, whether the action is brought by the state or a private party; if brought by a state, whether it s a criminal or civil case; coding of the legal complaint; whether there is a claim of ultra vires actions; whether the issue applies to all corporations (such as municipal, religious, or charitable) or just business; whether the judge was elected or appointed; the party affiliation of the judge; and whether and when the action complained of later became fully legal, and if so, whether that occurred via legislation or judicial ruling.

This paper is part of a larger project that casts the American business corporation as a political institution. It does so in part by following political actions that provided for various features of corporate existence. Thus it seeks to evaluate and elaborate on the NWW thesis in terms of law and institutional theory. Horwitz (1977), Maier (1993), and Bloch and Lamoreaux (2017) each note that the distinction between public and private changed substantially in the 50 years leading up to the 1840’s innovations on general incorporation laws. This laid the legal groundwork for a change in mentalities that contributed to free incorporation. By looking across states, I expect to assess the significance of federalism on relaxation of restraints in conjunction with the move to open access. Since I have a dataset on state legislative changes to incorporation law, I also expect to be in a position to compare the judicial actions with legislative changes, while controlling for party.


Works cited:

The People of the State of New York v. The North River Sugar Refining Company, 121 N.Y. 852 (1890) .

Bloch, Ruth and Naomi R. Lamoreaux, “Voluntary Associations, Corporate Rights, and the State: Legal Constraints on the Development of American Civil Society, 1750-100, in Organizations and Civil Society, and the Roots of Development Naomi R. Lamoreaux and John Joseph Wallis, eds. Chicago University Press. 324-36.

North, Douglass C., John Joseph Wallis, and Barry R. Weingast. 2009., Violence and Social Orders: A Conceptual Framework for Interpreting Recorded Human History. New York: Cambridge University Press.

Horwitz, Morton. 1977. The Transformation of American Law, 1790-1860. Harvard University Press.
Maier, Pauline. 1993. “The Revolutionary Origins of the American Corporation.” William and Mary Quarterly 50:1. 51-84.

Author

• Jonathan Chausovsky, SUNY, Fredonia