In the corporate world, things can change tremendously over the course of 100 years. While many of those changes happen organically, others are caused by far-reaching courtroom decisions. Read on to discover five of the most defining corporate law cases in the last century, and how they still affect you today.
1. AT&T vs. Concepcion
In 2011, the United States Supreme Court upheld the supremacy of the Federal Arbitration Act over state law in its decision in AT&T vs. Concepcion. In this class action suit, the court ruled that the arbitration clause in AT&T’s consumer contracts would be upheld even in states like California, whose strict consumer protection laws banned such heavy-handed arbitration requirements. The decision was a major blow to consumers’ ability to take on large corporations like AT&T through class action litigation.
2. In Re Walt Disney Co. Derivative Litigation
The case of In Re Walt Disney Co. Derivative Litigation was one of the first cases to directly tackle what duty a company owes to its shareholders when it comes to exorbitant executive compensation. In 1995, Disney Chairman Michael Eisner approached CAA founder Michael Ovitz to gauge his interest in becoming the company’s president. Eisner ended up hiring Ovitz before Disney’s compensation committee could even review the matter. The terms of the compensation were considered double what most executives were making at the time.
After less than a year on the job, Eisner lost faith in Ovitz and fired him. The firing triggered Ovitz’s exit compensation package, which resulted in his earning more than $140 million for approximately one year of work. Shareholders of Disney were furious and sued the company in a derivative action. However, the court held that while the hiring went badly, it was part of the normal business making process and not made in bad faith, so shareholders had no recourse.
3. Zeran vs. America Online, Inc.
One of the early cases that shaped how business on the internet is done, Zeran centered around a hoax that appeared on an AOL message board shortly after the Oklahoma City bombing in 1995. The post garnered outrage because of its insensitive nature, and it includes the name and phone number of Zeran – a man claiming responsibility for the offensive content.
Zeran sued AOL for allowing his name and phone number to be associated with the posting, but the court ruled that an internet service provider cannot be treated as the publisher of a defamatory statement even if it was posted on the service provider’s website. Had the decision gone the other way, every forum or search engine would be liable for every defamatory comment made on their site.
4. Religious Technology Center v. Netcom
Another groundbreaking case involving the early days of the internet, the 1995 case Religious Technology Center v. Netcom considered whether or not an internet hosting company would be liable for one of its users posting a link to copyright material on their forum.
In this, the Church of Scientology sued Netcom over links to a copyrighted L. Ron Hubbard manuscript on its Scientology Usenet group. The court held that simply linking to copyrighted material did not constitute infringement.
5. Citizens United v. Federal Election Commission
A landmark decision for the rights of corporations, the 2010 U.S. Supreme Court ruling in Citizens United affirmed the idea that corporations were people under the law. The decision struck down as unconstitutional certain bans on electioneering communications, arguing that it violated Citizens United’s right to free speech.