Cort et al. v. Ash
422 U.S. 66 (1975)
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Rule of Law:
A private cause of action for damages will not be implied from a federal criminal statute unless there is a clear indication that Congress intended to create such a remedy. The determination rests on whether the plaintiff is part of the class for whose especial benefit the statute was enacted, whether implying a remedy is consistent with the legislative scheme, and whether the cause of action is one traditionally governed by state law.
Facts:
- In 1972, Bethlehem Steel Corp. (Bethlehem), a Delaware corporation, funded advertisements in national and local publications.
- The advertisements featured Bethlehem's chairman, Stewart S. Cort, and criticized statements made by a presidential candidate regarding corporate taxes.
- The ads, which appeared under the caption "I say let's keep the campaign honest. Mobilize ‘truth squads'”, appealed to the electorate for responsible campaigning.
- Bethlehem included reprints of the advertisement with the quarterly dividend checks mailed to its stockholders.
- All costs for the advertisements and mailings were paid from Bethlehem's general corporate funds.
- Respondent Ash was a stockholder in Bethlehem and a qualified voter in the 1972 presidential election.
Procedural Posture:
- Ash, a stockholder, filed a derivative suit against Cort and Bethlehem Steel Corp. in the U.S. District Court for the Eastern District of Pennsylvania.
- The complaint included a claim for damages and injunctive relief under federal law (18 U.S.C. § 610) and a pendent state law claim.
- The district court denied Ash's motion for a preliminary injunction.
- The U.S. Court of Appeals for the Third Circuit affirmed the denial of the preliminary injunction.
- After the district court ordered Ash to post security for the state law claim, Ash filed an amended complaint dropping that claim.
- The district court then granted summary judgment for Cort and Bethlehem on the remaining federal claim.
- The Court of Appeals for the Third Circuit reversed, holding that a private cause of action for damages could be implied from the statute.
- The U.S. Supreme Court granted certiorari.
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Issue:
Does 18 U.S.C. § 610, a federal criminal statute prohibiting corporations from making expenditures in connection with presidential elections, implicitly create a private cause of action for a stockholder to sue derivatively for damages on behalf of the corporation?
Opinions:
Majority - Justice Brennan
No. A private cause of action for derivative damages cannot be implied from 18 U.S.C. § 610; such a remedy, if available at all, must be sought under state corporation law. In determining whether a private remedy is implicit in a statute, the court considers four factors. First, shareholders are not the class for whose 'especial' benefit the statute was enacted; the primary congressional purpose was to prevent corporate influence over federal elections, not to regulate the internal affairs of corporations for the benefit of stockholders. Second, the legislative history shows no congressional intent to create a private remedy. Third, implying a derivative damages remedy would not aid the statute's primary purpose, as simply repaying the funds would not undo the political influence of the expenditure. Fourth, the cause of action is one traditionally relegated to state law, as corporate governance and the fiduciary duties of directors are primarily the concern of the states. Therefore, it would be inappropriate to infer a federal cause of action that intrudes upon state law.
Analysis:
This case is significant for establishing the restrictive four-part "Cort Test" used to determine whether a private right of action should be implied from a federal statute that does not expressly provide one. This decision marked a major shift away from a more liberal approach to implying private remedies, signaling the Court's increasing reluctance to create causes of action not explicitly intended by Congress. The Cort Test became the foundational framework for this area of law, significantly raising the bar for plaintiffs seeking to enforce federal statutes through private litigation and emphasizing deference to both legislative intent and traditional state-law domains.
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