FDLI symposium: John Coates keynote on deconstitutionalizing corporate speech

John Coates, John F. Cogan, Jr. Professor of Law and Economics, Research Director, Center on the Legal Profession, Harvard Law School: Re-de-constitutionalizing Corporate & Commercial Speech

 

What I see as a mess in my space is even more of a mess in your space.  Struck by practitioners who were candid about some of the directions—ways in which industry is very deliberately using 1A attacks to unsettle regulation across the board.  Another perspective w/in many large companies that don’t view what’s going on with total happiness, though they like particular wins. Undoing entire regulatory space will not make some big companies happy.

 

1978: Bellotti/Central Hudson: that was first non-expressive business victory under 1A; emerged very late.  US was dominant economic power by 1900.  Business & corporations didn’t need the constitution to achieve world economic dominance, despite the existence of extensive regulation of corporate speech.  Pre-founding, we had contract law (silence = assent); commercial law—assignability of notes; tort law (fraud, silence); agency law (apparent authority); waiver, estoppel (liability from speech); antitrust in common law (price-fixing); corporate law (charter limits on purposes).  Pre-1931: Sherman Act (speech about prices); Pure Food and Drug Act; state blue sky securities laws; professional licensing laws.  Pre-1952: Securities laws; FDCA; Wheeler-Lea Act; pre 1976: Drug Industry Act; Truth in Lending Act; state consumer protection laws.

 

Business involvement in 1A SCt cases.  First none, then low level of activity (media); then giant increase, then stabilized in SCt at about 1/2.  Due to Powell, who was corporate lawyer before he went to SCt/technical and strategic genius in thinking about clients’ interest.  Memo to Chamber of Commerce, 1972: lays out his plan. “Under our const’l system … the judiciary may be the most important instrucment for social, economic and policital change.” Didn’t have this memo when they confirmed Powell.  At odds w/standard conservative fictions about judiciary.  Business 1A cases ramp up when he’s on SCt.

 

Businesses get much higher win rates in cases.  Appeals court citations to Central Hudson keep increasing.  Different citation pattern than for Mapp v. Ohio or Roe v. Wade.  What drives this: people who want to disrupt existing regulatory system to get advantage. Massive amounts of capital are ready for any company w/a strategy to exploit the 1A for purposes not w/in contemplation of Founders or those in 1900 etc.  Among other cases, consider Safelite Group (2d Cir. 2014)—remarkable factfinding about what’s important to consumers as a way of avoiding Zauderer and using the incredibly malleable “fit” requirement of Central Hudson.  Invites judicial discretion to be abused. Asking for what we’ve got on DC Circuit, which is a lottery. 

 

Brilliant strategy: no fit b/c we can find some other sugary drinks you’re not imposing labeling on.  Requires regulation to be much tougher to survive scrutiny, which is not generally something businesses would like if the regulation is adopted.

 

Rent-seeking: stealing/deceiving consumers is rent-seeking, a form of cost that could be better spent on productive uses.  SCt has essentially said that preventing rent-seeking isn’t a compelling purpose for 1A principles, in IMS v. Sorrell, preventing economic regulation that enhances social welfare.  In other cases, anti-rent-seeking becomes justification for applying stricter scrutiny: in Safelite, court says “we don’t believe what was articulated as justification; this was essentially protection for established industry, so we’re going to apply Central Hudson.”  This is worse than ordinary rent seeking b/c it unsettles old policy, delays convergence on new policy. What’s the current law on off label promotion?  No one knows.  Suppresses resolution of difficult policy tradeoffs. Can’t undo constitutional law through Congress or rewrite statute through FDA—impose burdens on polity that we’re not up for.  Forces greater restrictions on liberty to justify lesser. 

 

For business: Encourages investment in litigation and deception.  Discourages R&D, reinforced by uncertainty.  Given scarcity of time, dilutes strategic focus: C-suite can only focus on one or two things at once.  Simple strategy is required. Distorts careers in business.  For society: more rent seeking = more corruption = less investment = lower growth.

 

Legal options: Constitutional amendments?  Convention?  What about the current constitution?  Courts should ok anti-rent seeking as a compelling interest for legislative and regulatory action. Defer to judgments, contra Safelite, of those bodies where there’s a risk how it should be regulated.  Recognize that court-generated rentseeking is a bad consequence of constitutional method.  Reverse unworkable precedents that didn’t allow anti-rent-seeking moves by gov’t, such as Bellotti, Central Hudson, Citizens United, and IMS Health, all of which reversed previous precedents. 

 

In securities regulation, the DC Circuit judges have no capacity to evaluate the output of the Federal Reserve Board—they don’t know how to evaluate a change in the capital reserve rule.  The drug industry seems similar.  The idea of relying on drug companies to help us—that’s not good enough.  Corporations have no souls to damn/moral claims on free speech.  Citizens United should be decided as it was for the nonprofit, but that’s b/c members of the nonprofit all have the same interests in forming the nonprofit.  Contrast to Chevron: almost everyone in this room is part owner of Chevron.  Chevron is speaking on our behalf?  We have no ability to discover or respond to that speech.  The corporate structure is not one in which individuals’ speech interests are typically well represented or vindicated.  Caronia: salesperson isn’t speaking out of his own individual interest, but to get paid by his company. 

 

Current trend: Capitalism will completely prevent established companies from doing business as usual. They will have to invest in destroying regulation too or they will go bankrupt.

 

RT: is there any room for judicial factfinding? What if we think the agency is captured?

 

A: the answer to that we had for the first few hundred years of the republic is political action. Go to legislature, lobby for change.  There will be pockets that survive for a long time with rentseeking in place.  The uncertainty created now deters investment across the board, and creates rent-seeking opportunities of its own.

 

It’s a cross-regulatory problem. My solution requires a change in the composition of the bench, or a revelation for those on the bench now.  In the meantime, you have a big problem, but a bunch of people share it.  Agency task forces exist to deal w/the constitution everywhere—could try to coordinate strategies/share intelligence. The FTC’s problem in the Second Circuit will become the FDA’s problem. 

 

If federal laws fall because of the constitution, haphazardly, then all the states get to come in, b/c there will be no more preemption. If you don’t want tort litigation in every state, if regulation enhances your ability to sell things effectively—FDA’s success is totally coincident with pharma’s success—then you should be dramatically worried with return to state level, w/uneven and sometimes very strict regulation.

 

Q: other areas of 1A are different from off-label uses.  Can be used very paternalistically to block people’s access to genetic information.

 

A: we already do distinguish between levels of scrutiny depending on the type of speech. I’d be happy to give robust protection to individuals. But when business interests capture your data, they have a lot more money to litigate.  1978 was a robust time for individual speech. 

 

Q: but regulations can restrict ability of clinical labs to communicate information to individuals—to deliver results to a patient who wants to hear them.  Regulator says no.

 

A: consumer protection requires difficult tradeoffs, and courts using the 1A won’t do it well. There are real interests at stake in getting some of this info.  But those same organizations also by design have interests in exploiting the ordinary person’s inability to understand this information without an intermediary.  Another natural outcome of where we’re going: patch holes at federal level by starting to regulate doctors, and we’re already starting to do that with health care costs/payors. If individuals on the ground don’t pay attention, will find themselves victims of unintended consequences.

 

Q: my daughter had a rare disease for which all the treatments are off label and off patent, but nobody can talk about it.  A lot of people don’t have the ability to find that truthful information.  It’s unconstitutional to keep away truthful information about the standard of care.  Medical standard for drug induced abortions is different from what FDA has indicated. To prevent people from learning about information from the source.

 

A: I’m sorry for your family’s suffering. Others will suffer if the 1A results in a radical cutback of regulation.

 

Q: we’re talking about truthful.

 

A: no, we’re talking about truthful in the eye of one particular regulator after the fact.  To enforce the law, the agency has to bring cases.  If they don’t then there will be people who aren’t deterred.  Nobody reading Caronia could think that the statement at issue was truthful (this is a very safe drug = 300 people had died).  These are hard decisions. The question is who should decide. You don’t like how the FDA does it. That’s cool.  But I don’t want the courts to rewrite drug policy. That’s the wrong mechanism and the wrong branch.