Cort v. Ash

Supreme Court of the United States · 1975 · Corporations

CorporationsImplied private right of actionFederal election lawDerivative suitsimplied private cause of action18 U.S.C. § 610criminal statutederivative damages

Facts

In 1972, Bethlehem Steel used general corporate funds to pay for advertisements and related mailings urging the public to keep the campaign honest and rebut statements attributed to a presidential candidate, and reprints were sent with dividend checks to stockholders. The respondent owned 50 shares of Bethlehem stock and was qualified to vote in the 1972 presidential election. He sued as a stockholder and derivatively for the corporation, asserting a federal claim under 18 U.S.C. § 610, which at the time provided only criminal penalties, and initially also pleaded a separate Delaware-law claim that he later dropped. The case before the Court concerned whether § 610 implied a private federal cause of action for injunctive or derivative damage relief.

Issue

Does 18 U.S.C. § 610, a criminal statute prohibiting certain corporate political contributions and expenditures, imply a private cause of action allowing a citizen or shareholder to seek injunctive relief or a shareholder to seek derivative damages against corporate directors? If not, must any such shareholder recovery come, if at all, from state corporate law rather than federal law?

Rule

In determining whether a private remedy is implicit in a federal statute that does not expressly provide one, relevant factors are: (1) whether the plaintiff is one of the class for whose especial benefit the statute was enacted, meaning the statute creates a federal right in the plaintiff; (2) whether there is any indication of legislative intent, explicit or implicit, to create or deny such a remedy; (3) whether implying such a remedy is consistent with the underlying purposes of the legislative scheme; and (4) whether the cause of action is one traditionally relegated to state law in an area basically of state concern, making it inappropriate to infer a federal cause of action based solely on federal law. Also, when an intervening statute creates an administrative enforcement mechanism, a private complainant seeking injunctive relief against future violations must at least pursue that statutory remedy.

🔒

See the holding & full analysis

Create a free KwikCourt account to unlock the rest of this brief — and practice the case.

The court's holding and reasoning
Doctrine tests, pitfalls & exam hypotheticals
10 practice questions + 4 AI-graded essays on this case

Free sample · practice this case

Test yourself

One of 10 multiple-choice questions for this case. Pick an answer to see why.

Lakefront Robotics, a Wisconsin corporation based in Milwaukee, used general corporate funds to sponsor a media blitz supporting stricter federal shipping rules before a U.S. Senate election. Shareholder Nina Patel files a derivative action in federal court against the directors, seeking repayment to the corporation under a federal criminal statute that prohibits certain corporate expenditures in connection with federal elections but says nothing about civil suits.

Which is the strongest reason a federal court should decline to imply a damages action for Nina?

Explanation. The majority identified as the first relevant factor whether the plaintiff is one of the class for whose especial benefit the statute was enacted. For a statute aimed primarily at protecting federal elections from the corrupting influence of corporate wealth, shareholder protection is at most subsidiary. That cuts strongly against implying a federal damages action. The Court did not adopt a blanket rule against civil remedies under criminal statutes, did not rest on standing, and declined to decide the merits violation question once it found no implied remedy. (Derived from Cort v. Ash (1975).)