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Ultra Vires Statutes: Alive, Kicking, and a Means of Circumventing the Scalia Standing Gauntlet in Environmental Litigation
Abstract
The ultra vires statutes are recommended as novel solutions based in corporate law for the enforcement of environmental statutes by allowing shareholder to sue to enjoin the company from acting outside the authorization of its corporate charter. The US government also leads to enforcement of environmental laws, where citizen lawsuits play an important role in assuring the relevant statutes. These statutes are provided by means of circumventing the problem of establishing standing, assumed to be dead or dormant with relevant legislation, and also allow for the owner of a single share in a company. The citizen enforcement suits are considered as a solution to all environmental problems, where statutes provide an elegant end-run around the maddening exercise of showing that a citizen plaintiff is sufficiently harmer by a violation of a law. The statues can also be used to either dissolve or to enjoin ongoing or planned illegalities.
... " The ultra vires doctrine in the corporate setting originated as an English common law tradition allowing shareholders or parties dealing with corporations to sue to enjoin or invalidate corporate acts that were outside of the activities specifically authorized in a corporate charter. The ultra vires doctrine is rooted in the more ancient doctrine of quo warranto " (Sulkowski, 2009, p. 95, footnote omitted). Certain individuals had standing to bring an action because " [t]he primary justification for the doctrine was the dual protection of investment interests of the company's shareholders and security interests of its creditors " (Sulkowski, 2009, pp. ...
... " Lawsuits … continued to be used into the 1900s to restrain corporate activities " (Sulkowski, 2009, p. 98, footnote omitted). In addition to injunctions, at times " courts agreed to dissolve corporations for illegalities into the 1890s " (Sulkowski, 2009, p. 98, footnote omitted). 5 ...
This paper considers the likely combinatorial effects of U.S. deregulatory broadband policies and the evolution of law as applied to corporations as a general matter. It explains how legal developments in both areas have dismantled bodies of law or doctrines that had developed to address corporate power in both commercial and political spheres and to protect consumers from vulnerability in commercial activities. Moreover, the coexistence of these developments enables an unprecedented transfer of corporate power between economic and policymaking institutions. With the decline in regulatory constraints, as well as the rise in constitutional rights to block attempts to impose regulatory constraints, there is a resurgent rise of corporate power. The result may be a phase transition undermining the rule of law so critical to sustainable democracies. --
... 19 On a related note, there are also opportunities to remove perverse incentives in obsolete legal structures, as I explained with Mystica Alexander and William Wiggins. 20 On the other hand, some traditions 21 and little used statutes 22 should arguably be reinvigorated and used. ...
We are all wondering: what's next? This paper poses and answers 10 questions.
These are predictions for the COVID-19 era and beyond based on my research.
... 63 First, assuming conventional structures using existing tools, is it possible to guide these imaginary beasts to behave better, despite the incentive of their nominal leaders to harm people and the environment as a side effect of profit-seeking? 64 Is it a means to "take the blinders off" these imaginary beings and help decision-makers take into account real risks and opportunities connected to people and ecosystems through enhanced gathering and publication of data on societal and environmental impacts? 65 Would deeper and more comprehensive data monitoring by business organizations that explicitly coprioritize societal and environment stewardship, 66 enabled by more inclusive managerial practices 67 and new certifications, 68 help create artificial beings that create more value and less harm? ...
This essay surveys legal issues raised by the wave of technological innovations that are defining the present era, known as Industry 4.0. These include the standards governing the gathering, keeping, use, and transfer of data, defining relationships when technology enables novel employment interactions, and fundamental questions about liability and legal personhood. After examining these distinct directions for future research, the essay concludes by urging that those of us in the legal profession—academics, practicing attorneys, judges, and policy-makers—become uncharacteristically proactive. It is explained that, absent our proactive involvement, advances in technology alone are not likely to bring about fundamental progress away from fundamental societal problems rooted in the 1st Industrial Revolution.
... A majority on the Supreme Court sided with Justice Scalia in a sequence of decisions during the 1990s creating a much stricter set of standing tests. 116 To establish "the irreducible constitutional minimum of standing," a plaintiff must "clearly ... allege facts demonstrating" that it has "(1) suffered an injury in fact, (2) that is fairly traceable to the challenged conduct of the defendant, and (3) that is likely to be redressed by a favorable judicial decision." 117 An "injury-in-fact" has been defined as '"an invasion of a legally protected interest' that is 'concrete and particularized' and 'actual or imminent, not conjectural or hypothetical.'" ...
The two Emoluments Clauses in the U.S. Constitution forbid federal officials from accepting “any present, Emolument, Office, or Title, of any kind whatsoever” from foreign or domestic governments. President Donald Trump’s business interests generate numerous opportunities to use public office for his personal benefit. This article examines the history of the Emoluments Clauses and the Framers’ conception of corruption. The conflicts of interest alleged in pending emoluments lawsuits against President Trump would not be allowable in the private sector, and various plaintiffs argue that the Emoluments Clauses apply to all public officials, including the President. The President’s lawyers have claimed he is exempt from the application of these clauses and have raised numerous procedural objections, such as challenging who might have” standing” to bring a lawsuit to compel his compliance with the clauses. Out of three cases filed in 2017, one has been dismissed, while two judges have recognized that the plaintiffs have standing. In each lawsuit, the President’s lawyers insist on a conception of corruption that is quid pro quo, where only bargained for exchanges count as corruption. While the Emoluments Clauses require public officials to get Congressional permission before receiving such benefits, the President’s position is that Congress must first demand an accounting of any personal benefits, rather than the burden being on the President to ask permission. Thus far, two courts have rejected that approach, and as of this writing, further appeals can be expected.
... The observations above concern classic legal questions and quandaries related to our imaginary friends and sometimes masters: business forms (Geldart, 1911). Given conventional business structures, is it possible to guide these imaginary beasts to behave better, despite the incentives of their nominal leaders to potentially make profits from (legally sanctioned or not) harm to people and the environment (Sulkowski, 2009;Sulkowski & Greenfield, 2006). Is encouraging the practice of gathering, considering, and publishing data on societal and environmental impacts a means to "take the blinders off" these imaginary beings and help decision-makers take into account real risks and opportunities connected to people and ecosystems (Hughey & Sulkowski, 2013) conventional corporate hierarchy and overhead (and inefficiencies, limitations, and costs), it is argued, could be replaced by a nexus of self-executing smart contracts (Sulkowski, forthcoming). ...
... A majority on the Supreme Court sided with Scalia in a sequence of decisions during the 1990s creating a much stricter set of standing tests. 116 These tests amount to a malleable yet effective tools for dismissing cases that would involve difficult public policy issues; they were even applied when federal laws clearly spelled out the right of any citizen to bring a suit in court. 117 The relatively weak standing claim in the CREW lawsuit could be remedied if a more secure plaintiff could be found and added to the complaint. ...
In this article, the ethics of public service and the relatively untested Emoluments Clause of the U.S. Constitution will be considered and contrasted with the jurisprudence surrounding conflict of interest in the private sector. Part I establishes the framers’ understanding of law and ethics for U.S. public service. Part II considers the clause itself, and whether it applies to the office of the President. Part III relates just a few of the foreign-based business interests of the 45th U.S. President and how they could compromise his loyal discharge of duties to the nation he serves. Part III also analyzes the President’s plan to avoid conflicts of interest, finds it inadequate, and concludes that only full disclosure of his tax returns would reveal the complete range of conflicts that might color his judgment as President of the United States.
Moving beyond the descriptive to the more normative business ethics issues, Part IV describes the insights of behavioral psychology to demonstrate how common it is for people and politicians to overlook their own conflicts of interest, even where those conflicts strongly influence their decisions. Part V summarizes observations related to conflict of interest laws and fiduciary duties in business, lending support to the conclusion that Trump’s attempt to hold the office of president would be untenable in other contexts. Returning to legal issues raised by the President’s conflicts of interest, Part VI describes the federal lawsuit filed by Citizens for Responsibility and Ethics in Washington (CREW). CREW seeks an injunction on Mr. Trump’s holding office while holding various assets subject to foreign governmental influence, and Part IV offers insight into how a challenge to standing could be overcome. Both courts and Congress—the ultimate judges of the President’s conflicts of interest, at least until the next election cycle––should support the original intent and plain meaning of the Emoluments Clause. Without Congressional action, however, it is unlikely that the President’s conflicts of interest will be resolved early in his term of office.
... For those companies that are violating existing clear reporting guidance, it would be especially advisable to start respecting minimum mandates to avoid embarrassing and potentially costly legal action on the part of shareholders to force such disclosure. 128 Further, mandating integrated reporting may be forestalled if enough companies voluntarily adopt integrated reporting. To retain credibility and investor trust, companies should adhere to the best available standards. ...
Ninety-five percent of the Global Fortune 250, along with thousands of other companies worldwide, voluntarily report on their environmental, societal, and economic impacts. The practice is variously known as sustainability reporting, corporate responsibility (CR) reporting, corporate social responsibility (CSR) reporting, citizenship reporting, environmental, societal, and governance (ESG) reporting, or triple bottom line (TBL) reporting. A growing number of countries now mandate or provide guidance related to this practice to some extent. For example, in the United States, the Dodd-Frank Wall Street Reform and Consumer Protection Act explicitly requires publicly traded companies to disclose data related to their supply chains of certain minerals. Should greater disclosures be explicitly and specifically required? Should companies begin greater disclosures for their own benefit? Do the basic principles of existing laws already require a greater amount of disclosure in our current context? If so, what would be gained from greater and more explicit guidance from legislators or regulators such as the SEC? We seek to answer these questions. This article summarizes the history, current state, and motivations and impacts of sustainability reporting and regulation-by-disclosure, along with data on the present needs of investors and recent market trends. It also reviews the definition of materiality under U.S. securities laws and regulations – the key to understanding what data a company must publicly disclose for the benefit of investors. Based on our review of recent history, the current needs of investors, and the definition of materiality, it is clear that existing laws and related rules already require greater disclosure of data on environmental and societal impacts than commonly understood. The article concludes with recommendations for managers, their attorneys, accountants, and policymakers, and provokes further questions for constructive scholarship in the fields of business and law.
The Supreme Court's decisions under the pollution control statutes administered by the Environmental Protection Agency (EPA) reach startlingly anti-environmental results, but they are explained more by the Court's overwhelming hostility toward the private enforcement of statutes, rather than an anti-environmental bias. While other Justices have raised the same concern, Justice Kennedy's invitation is particularly significant because he is a swing vote in environmental and other social justice cases. A closer look at the issue' is warranted by the overwhelming hostility of the Court toward citizen suits; the continued development of the unitary theory of the executive the Court's embrace of that theory in its latest separation of powers decision; new insights and research into the origins and nature of prosecutorial discretion; and changes in the composition of the Court making it potentially more sympathetic to Article II challenges.
For most of human history the natural environment stood separate from man: indifferent and alien, to be overcome, exploited, or managed. This article draws on the legal concept of standing and the nonlegal concept of voice to argue that nature no longer has standing as an "other" within the global environmental governance framework. Reviews of the transition toward "sustainable development" in environmentalism and also the post-Cold War global environmental governance framework are offered to support this point. Freed of the role that nature plays to ground humanity in space, sustainability now frames mankind only in temporal terms that are developmental but, without reference to context, irrational. The implications that nature has no standing are applied as alternative perspective on Blühdorn's arguments for a "politics of unsustainability."
One of corporate law's enduring issues has been whether state-to-state competitive pressures on Delaware make for a race to the top or to the bottom. States, or at least some of them, are said to use their corporate law to compete for corporate tax revenue and ancillary benefits; Delaware has "won" that race, as most large American firms incorporate there. Here I argue that this long-running debate is misconceived. Delaware's chief competitive Pressure comes not from other states but from the federal government. When the issue is big, the federal government takes control of it or threatens to do so, or Delaware players are conscious that the federal government, even if silent, could step in if roused. And even if Delaware, when making its corporate law, were oblivious to the federal authorities, those authorities can and do act. Delaware may not even get to act upon some important issues, as federal authorities can decide without waiting for the states to gear up. Thus, that which persists in Delaware is that which the federal authorities tolerate. This reconception (a) explains corporate law developments and data that neither the race-to-the-top nor the race-to-the-bottom theory has explained well; (b) fits several developments in takeover law, going-private transactions, and the rhetoric of corporate governance in Delaware; and (c) can be detected in corporate lawmaking in Washington and Wilmington from the "origins" of Delaware's dominance in the early twentieth century right through the passage of the Sarbanes-Oxley Act in reaction to the corporate governance failures at Enron and WorldCom.
Since global warming potentially affects everyone in the world, does any individual have standing to sue the U.S. EPA or other federal agencies to force them to address climate change issues? Suits addressing global warming raise difficult standing questions because some Supreme Court decisions have stated or implied that courts should not allow standing for plaintiffs who file suits alleging general injuries to the public at large because the political branches of government - Congress and the executive branch - are better equipped to resolve such issues. There is a better argument, however, for courts to recognize standing for plaintiffs who suffer "concrete" mass injuries, including any physical harms that are more likely than not caused by global warming. Under the National Environmental Policy Act of 1969 (NEPA), courts should use a "reasonable possibility" standard to determine whether a federal agency must discuss the possible impact of its actions on global warming. In 2003, the EPA concluded that the Clean Air Act does not give the Agency authority to regulate carbon dioxide, although several states are challenging that conclusion. Even if the EPA cannot regulate carbon dioxide directly, there is a strong argument that the Agency must consider carbon dioxide emissions when new power plants apply for a permit under the new source review process. Under the Administrative Procedure Act and general standing principles, a plaintiff who suffers small, but tangible injuries should have standing under the Clean Air Act. A concurring opinion in a recent decision involving chemicals that cause global destruction of stratospheric ozone addressed the difficult issue of whether a plaintiff may have standing to sue those who contribute in a small ways to global pollution problems. In Covington v. Jefferson County, the Ninth Circuit held that the plaintiffs had standing to bring citizen suits under the Clean Air Act (CAA) for the local injuries caused by the defendants from improper disposal of ozone destroying chemicals at a landfill. In a concurring opinion, Judge Gould concluded the plaintiffs had standing to sue based on the global impacts on stratospheric ozone resulting from the defendants' mishandling of CFCs. Some courts, especially in taxpayer suits, had suggested that a plaintiff may not assert standing if an alleged injury harms all persons equally, or in other words, "that injury to all is injury to none." On the whole, Judge Gould determined that the Supreme Court's most recent standing cases have allowed a plaintiff to achieve standing resulting from general injury if the injury to the plaintiff is sufficiently concrete. Judge Gould concluded that the risk of skin cancer, cataracts and suppressed immune systems to the plaintiffs was sufficiently concrete to justify Article III standing even though the defendants' only contributed a small amount of harm to a global problem. But global warming suits present more complex issues. This Article concludes that at least some plaintiffs with concrete injuries, i.e., Alaskan natives, have standing to file global warming suits under either the National Environmental Policy Act of 1969 (NEPA) or the CAA. Today, the strongest case for standing by climate change plaintiffs is under NEPA. There is currently a split in the circuits regarding the test for standing under NEPA. Building upon precedent in the Ninth and Tenth Circuits, this Article proposes a liberal approach to standing in NEPA cases that could allow at least some plaintiffs to raise global warming issues under the statute. Under the CAA, no decision has yet directly addressed whether plaintiffs have standing to raise climate change issues. In deciding whether a plaintiff has standing under the CAA to sue concerning global warming, a crucial issue is whether the EPA has the authority to regulate GHGs under the CAA. During the Clinton Administration, two different EPA general counsels concluded EPA had some authority to regulate Carbon dioxide under the CAA even if the United States did not ratify the Kyoto Protocol. In 2003, however, the Bush Administration EPA concluded that the Agency has no authority to regulate carbon dioxide or other GHGs. Several states are challenging the EPA's refusal to regulate GHGs. If this suit is successful, there would be a stronger basis for concluding that there is standing in climate change cases. Even if it does not have direct authority to regulate carbon dioxide, the EPA may have indirect authority under CAA's "new source review" (NSR) process for approving permits for new power plants to consider unregulated pollutants, i.e., carbon dioxide, in determining what is the best available control technology. This article will argue that at least some plaintiffs would have standing to argue that the EPA must consider technology that would reduce unregulated pollutants such as CO2.
This paper argues that a remaining vestige of the ultra vires doctrine sets off illegal activities as "beyond the power" of corporations. Though largely unnoticed and unexamined until now, this part of the doctrine has been retained because none of the important corporate stakeholders has an interest in authorizing the corporation and its managers to commit illegal acts. From an ex ante perspective, the principal stakeholders in the corporate contract would want the corporation and its management to forego illegalities as a way to increase the value of the firm. Any of the stakeholders would be a potential victim of the corporation's lawbreaking and would want to receive assurances that they would not be harmed by such conduct. Even for the shareholders, the difficulties inherent in distinguishing in the corporate contract between profitable and unprofitable unlawful acts would either be insurmountable or quite costly to resolve. On the whole, the risks of corporate or managerial illegalities would be too great, and the potential rewards too tenuous, to expect anything other than a corporate contract that would prohibit such acts. As evidence that this stakeholder analysis reflects positive law, the paper points to state incorporation statutes and individual companies' articles of incorporation, which almost invariably charter corporations only for "lawful" purposes. The continuing (though limited) existence of the ultra vires doctrine has important implications. First, because unlawful acts are ultra vires, such activities become subject to the enforcement powers of corporate law, in addition to the enforcement powers of whatever governmental or private entity is charged with enforcing the underlying, substantive legal requirement. Corporate law thus provides shareholders the right to sue to enjoin corporations' continuing unlawful activities. Because the ultra vires doctrine is alive in a form that makes general law compliance an enforceable obligation within corporate law its continuing life also has implications for the duty of corporations and their managers to maximize profits. If corporations must obey the law, then such obedience must come at times when it is not profitable to do so. This notion is in contrast to the views of those scholars who have written that corporations should, with only some small exceptions, seek to maximize profits even when it requires the firm to break the law. Finally, that the obligation to obey the law is at the heart of the corporate contract means that corporate law cannot be thought of as concerned only with the internal governance of the firm. The remaining vestige of the ultra vires doctrine imports into corporate law a concern about general law compliance, and the "lawfulness" that matters is not merely the laws of the incorporating jurisdiction. In this view, a corporation is required under its charter to act lawfully wherever it does business, whether in Delaware, California, or in a foreign jurisdiction. State corporate law would thus have something to say about a shoe company's compliance with minimum wage laws in Vietnam or an oil company's use of slave labor in Burma.
Classical political economy was dedicated to the principle that the state could best encourage economic development by leaving entrepreneurs alone, free of regulation and subsidy. The development of classical economic policy in the United States dramatically changed the concept of the business corporation. Within the preclassical, mercantilist model, the corporation was a unique entity created by the state for a special purpose and enjoyed a privileged relationship with the sovereign. The very act of incorporation presumed state involvement. State subsidy and the incorporators' public obligation were natural corollaries. Business firms that relied on the market alone to determine their prospects were simply not incorporated.As classical theory replaced the mercantilist model, the business corporation gradually evolved into a device for assembling large amounts of capital in a manner that could be controlled efficiently by a small number of managers. The classical model of the corporation did not emerge mature in a single decision. It evolved gradually in the nineteenth century, reaching its apogee in the 1880s and 1890s.The developing model of the classical corporation included two fundamental premises: (1) the corporate form is not a special privilege but merely one of many ways of organizing a business firm; and (2) the peculiar advantage of the corporation which the law should encourage is its ability to raise and concentrate capital more efficiently than other forms of business organization.These important developments formed the core of the classical corporate model: (1) the attack on the Marshall era contract clause; (2) the demise of the charter theory of business regulation; (3) the rise of the General Corporation Act and the decline of the special subsidy; (4) the application of the fourteenth amendment's protections to corporations; (5) the expansion of limited shareholder liability; (6) the narrowing scope of quo warranto and ultra vires; (7) the facilitation of multistate corporate business activities; and (8) the separation of ownership and control.
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