Cort v. Ash

Background

A shareholder who owned 50 shares of Bethlehem Steel sued after the company published and mailed an advertisement quoting its chairman’s speech and offered material to organize “truth squads.” The ad and mailings were paid from the company’s general funds. The shareholder filed a federal suit seeking to stop future spending and to recover damages for the company, arguing federal law (18 U.S.C. §610) barred such corporate election expenditures. Lower courts split; the Court of Appeals allowed a private federal suit. The Supreme Court then agreed to decide the legal questions.

Reasoning

The Court focused on whether Congress intended to create a private federal right to sue for damages under §610, which on its face is a criminal statute. It concluded Congress did not clearly create such a civil remedy and that implying one would intrude on areas normally handled by state law. The Court also explained that the 1974 amendments to federal campaign law created a new administrative route: complaints must now be filed with the Federal Election Commission, which has primary authority to investigate and ask the Attorney General to seek injunctions. The Court therefore reversed the appeals court and did not reach whether the ad actually violated §610 or whether the statute is constitutional.

Real world impact

Shareholders cannot, based on this decision, rely on §610 alone to bring a federal damages suit against corporate directors; damages claims are to be pursued under state corporate law if available. Persons seeking to stop future corporate election spending must first use the Federal Election Commission complaint process. Criminal penalties in §610 remain a separate enforcement route, but civil enforcement now runs mainly through the federal agency or state-law remedies.