Cort v. Ash
Encyclopedia
Cort v. Ash, 422 U.S. 66 (1975), was a case in which the United States Supreme Court determined whether a court may imply a cause of action
from a criminal statute.
/petitioner Stewart S. Cort, chairman of the board of directors
of Bethlehem Steel Corporation, published a series of political advertisements in nineteen local newspapers where the company had plants, as well as several national publications (including Time
, Newsweek
, and U.S. News & World Report
). The advertisements were in support of the business community, asserting that an allegation (supposedly made by 1972 Presidential candidate George McGovern
) that big business was not paying its fair share of taxes was untrue, and suggesting that people mobilize “truth squads” to spread this idea. The funding for these ads came from Bethlehem’s general corporate funds.
The plaintiff
/respondent was a shareholder of Bethlehem, and a qualified voter. He sued in the United States District Court for the Eastern District of Pennsylvania
, on behalf of both himself and the corporation
(a derivative suit
). He sued under both (a criminal statute
forbidding corporations from making contributions or expenditures in connection with Presidential elections), and the corporate law
of the state of Delaware
. He then amended his complaint to drop the state law claim, after he declined to post $35,000
in security for expenses in order to proceed with the claim.
The District Court held that the criminal penalties of the federal statute did not include any private cause of action
, and granted summary judgment
for the defendant. The plaintiff appealed. The United States Court of Appeals for the Third Circuit
reversed, holding that because the plaintiff sought money damages for the corporation, that a private cause of action was proper.
for damages against corporate directors under 18 U.S.C. § 610?
to create the Federal Election Commission
, which was granted primary jurisdiction
over such complaints. Because of this intervening law, the Court chose to apply the law which was in effect at the time the case was commenced.
Brennan also laid out four factors for determining when a cause of action should be implied from a statute:
422 U.S. at 78.
Here, the Court found that there was no legislative indication that private cause of action was intended by Congress, or that the plaintiffs in this action were within the class sought to be benefited by the statute. Brennan commented that the intent to protect corporate shareholders “was at best a subsidiary purpose” of the statute. 422 U.S. at 80. He also found that implying a cause of action was inconsistent with the statutes purpose, and that the plaintiff had a remedy under state corporate law. Thus, the Third Circuit’s decision was overturned.
These factors were also used in the case of Cannon v. University of Chicago
, .
Implied cause of action
Implied cause of action is a term used in United States statutory and constitutional law for circumstances when a court will determine that a law that creates rights also allows private parties to bring a lawsuit, even though no such remedy is explicitly provided for in the law...
from a criminal statute.
Facts & procedural history
DefendantDefendant
A defendant or defender is any party who is required to answer the complaint of a plaintiff or pursuer in a civil lawsuit before a court, or any party who has been formally charged or accused of violating a criminal statute...
/petitioner Stewart S. Cort, chairman of the board of directors
Board of directors
A board of directors is a body of elected or appointed members who jointly oversee the activities of a company or organization. Other names include board of governors, board of managers, board of regents, board of trustees, and board of visitors...
of Bethlehem Steel Corporation, published a series of political advertisements in nineteen local newspapers where the company had plants, as well as several national publications (including Time
Time (magazine)
Time is an American news magazine. A European edition is published from London. Time Europe covers the Middle East, Africa and, since 2003, Latin America. An Asian edition is based in Hong Kong...
, Newsweek
Newsweek
Newsweek is an American weekly news magazine published in New York City. It is distributed throughout the United States and internationally. It is the second-largest news weekly magazine in the U.S., having trailed Time in circulation and advertising revenue for most of its existence...
, and U.S. News & World Report
U.S. News & World Report
U.S. News & World Report is an American news magazine published from Washington, D.C. Along with Time and Newsweek it was for many years a leading news weekly, focusing more than its counterparts on political, economic, health and education stories...
). The advertisements were in support of the business community, asserting that an allegation (supposedly made by 1972 Presidential candidate George McGovern
George McGovern
George Stanley McGovern is an historian, author, and former U.S. Representative, U.S. Senator, and the Democratic Party nominee in the 1972 presidential election....
) that big business was not paying its fair share of taxes was untrue, and suggesting that people mobilize “truth squads” to spread this idea. The funding for these ads came from Bethlehem’s general corporate funds.
The plaintiff
Plaintiff
A plaintiff , also known as a claimant or complainant, is the term used in some jurisdictions for the party who initiates a lawsuit before a court...
/respondent was a shareholder of Bethlehem, and a qualified voter. He sued in the United States District Court for the Eastern District of Pennsylvania
United States District Court for the Eastern District of Pennsylvania
The United States District Court for the Eastern District of Pennsylvania is one of the original 13 federal judiciary districts created by the Judiciary Act of 1789...
, on behalf of both himself and the corporation
Corporation
A corporation is created under the laws of a state as a separate legal entity that has privileges and liabilities that are distinct from those of its members. There are many different forms of corporations, most of which are used to conduct business. Early corporations were established by charter...
(a derivative suit
Derivative suit
A shareholder derivative suit is a lawsuit brought by a shareholder on behalf of a corporation against a third party. Often, the third party is an insider of the corporation, such as an executive officer or director. Shareholder derivative suits are unique because under traditional corporate law,...
). He sued under both (a criminal statute
Criminal law
Criminal law, is the body of law that relates to crime. It might be defined as the body of rules that defines conduct that is not allowed because it is held to threaten, harm or endanger the safety and welfare of people, and that sets out the punishment to be imposed on people who do not obey...
forbidding corporations from making contributions or expenditures in connection with Presidential elections), and the corporate law
Corporate law
Corporate law is the study of how shareholders, directors, employees, creditors, and other stakeholders such as consumers, the community and the environment interact with one another. Corporate law is a part of a broader companies law...
of the state of Delaware
Delaware
Delaware is a U.S. state located on the Atlantic Coast in the Mid-Atlantic region of the United States. It is bordered to the south and west by Maryland, and to the north by Pennsylvania...
. He then amended his complaint to drop the state law claim, after he declined to post $35,000
United States dollar
The United States dollar , also referred to as the American dollar, is the official currency of the United States of America. It is divided into 100 smaller units called cents or pennies....
in security for expenses in order to proceed with the claim.
The District Court held that the criminal penalties of the federal statute did not include any private cause of action
Cause of action
In the law, a cause of action is a set of facts sufficient to justify a right to sue to obtain money, property, or the enforcement of a right against another party. The term also refers to the legal theory upon which a plaintiff brings suit...
, and granted summary judgment
Summary judgment
In law, a summary judgment is a determination made by a court without a full trial. Such a judgment may be issued as to the merits of an entire case, or of specific issues in that case....
for the defendant. The plaintiff appealed. The United States Court of Appeals for the Third Circuit
United States Court of Appeals for the Third Circuit
The United States Court of Appeals for the Third Circuit is a federal court with appellate jurisdiction over the district courts for the following districts:* District of Delaware* District of New Jersey...
reversed, holding that because the plaintiff sought money damages for the corporation, that a private cause of action was proper.
Issue
Could the court properly assume a private cause of actionCause of action
In the law, a cause of action is a set of facts sufficient to justify a right to sue to obtain money, property, or the enforcement of a right against another party. The term also refers to the legal theory upon which a plaintiff brings suit...
for damages against corporate directors under 18 U.S.C. § 610?
Decision
Justice William J. Brennan wrote for a unanimous Court. He found that because § 610 was a criminal statute, and because at the time suit was filed, there was no provision for civil enforcement of the statute, there was no need to imply a private cause of action. Furthermore, a statute enacted in 1974 amended the Federal Election Campaign ActFederal Election Campaign Act
The Federal Election Campaign Act of 1971 is a United States federal law which increased disclosure of contributions for federal campaigns. It was amended in 1974 to place legal limits on the campaign contributions...
to create the Federal Election Commission
Federal Election Commission
The Federal Election Commission is an independent regulatory agency that was founded in 1975 by the United States Congress to regulate the campaign finance legislation in the United States. It was created in a provision of the 1975 amendment to the Federal Election Campaign Act...
, which was granted primary jurisdiction
Jurisdiction
Jurisdiction is the practical authority granted to a formally constituted legal body or to a political leader to deal with and make pronouncements on legal matters and, by implication, to administer justice within a defined area of responsibility...
over such complaints. Because of this intervening law, the Court chose to apply the law which was in effect at the time the case was commenced.
Brennan also laid out four factors for determining when a cause of action should be implied from a statute:
- Is the plaintiff within the class for whose benefit the statuteStatuteA statute is a formal written enactment of a legislative authority that governs a state, city, or county. Typically, statutes command or prohibit something, or declare policy. The word is often used to distinguish law made by legislative bodies from case law, decided by courts, and regulations...
was enacted (i.e., does the statute create a federal right in the plaintiff’s favor)? - Is there any indication of legislative intentLegislative intentIn law, the legislative intent of the legislature in enacting legislation may sometimes be considered by the judiciary when interpreting the law...
, explicit or implicit, either to create or deny a cause of action? - Is it consistent with the underlying purposes of legislative scheme to imply such a remedy for the plaintiff?
- Is the cause of action one traditionally relegated to state law, in an area specifically of concern to the states, so that it would be inappropriate to infer a cause of action based solely on federal law?
422 U.S. at 78.
Here, the Court found that there was no legislative indication that private cause of action was intended by Congress, or that the plaintiffs in this action were within the class sought to be benefited by the statute. Brennan commented that the intent to protect corporate shareholders “was at best a subsidiary purpose” of the statute. 422 U.S. at 80. He also found that implying a cause of action was inconsistent with the statutes purpose, and that the plaintiff had a remedy under state corporate law. Thus, the Third Circuit’s decision was overturned.
These factors were also used in the case of Cannon v. University of Chicago
Cannon v. University of Chicago
Cannon v. University of Chicago, 441 U.S. 677 , was a United States Supreme Court case which interpreted Congressional silence in the face of earlier interpretations of similar laws to determine that Title IX of the Higher Education Act provides an implied cause of action.-Facts:Plaintiff Geraldine...
, .