Washington State Corporations:
Outline of History, Resistance, Law
by George Draffan
Washington State Corporations: Outline of History, Resistance, Law
Thanks to Richard Grossman, Ward Morehouse, Jane Anne Morris, Dave Henson, and the other organizers of the Program on Corporations, Law & Democracy (the study questions in italics are from a 1993 memo by Richard Grossman). Thanks to Thomas Linzey and Eric Nelsen, for taking the first steps in researching the law in Washington State, and to colleagues who are working in the other states.
1. Definitions & Distinctions
There are different types of corporations: (1) "private" (public or private corporations), (2) regulated monopolies (such as utilities), (3) public authorities (such as ports, power authorities, hospitals, etc), and (4) non-profit corporations.
Private corporations: Which corporations have a state-issued charter of incorporation (versus a certificate of authority to operate in the state)? See list of Washington State corporations (attached).
Regulated monopolies: How have the basic laws relating to utilities and other regulated monopolies evolved? Specifically, what do the charters of such corporations require? How does this compare with historical requirements?
Public authorities: What does their enabling and governing legislation look like? Does the public have standing via their chartering process? What is relevant case law?
Non-profit corporations: How have some exceeded their authority? How are they causing public harms? How have they misused their non-profit status?
2. How Corporations Have Been Defined
in Constitutional, Statutory, and Case Law
Can you provide an historical sense of the constitutional, legislative, judicial and citizen views of the corporation as an institution of enterprise? How does this state history compare with the national history summarized in Taking Care of Business [pamphlet by Richard Grossman and Frank Adams], or in the chronology in George Draffan's Primer on Corporations?
Historical constitutions and amendments in many states gave legislators very clear instructions regarding what corporations could and couldn't do (for example, prohibiting the chartering of private banking corporations). Have those "populist era" constitutional amendments been repealed? What does the current constitution say?
Washington State (entered the U.S. in 1889, along with North and South Dakota and Montana, and Idaho and Wyoming in 1890) came late in the corporation game (the U.S. Supreme Court declared corporations to be persons in 1886), but the history of the 1888 Washington State constitutional convention is instructive. Several of the Kinnear Commission proposals defeated (on the grounds that they would hamper investment in the state) at the convention would have limited corporate activities to those specificed in the charter or law; kept corporation books open for inspection; defined where corporations could be sued; and established a railroad commission (Dolliver, 1989, 192-193, n. 171).
Washington Constitution, Article XII, Sec. 1, Organic Law (year?): Corporations may be formed under general laws, but shall not be created by special acts. All laws relating to corporatios may be altered, amended, or repealed by the legislature at any time, and all corporations doing business in this state may, as to such business, be regulated, limited, or restrained by law.
To what extent (and when) were corporate charters considered a public trust, and how was this manifested? What is the state case law relating to occasions when the state has revoked charters of corporations for abuse or misuse?
Ballinger's Code (1897) includes legislative histories and cross-references to other state constitutions and statutues.
"The Criminal Liability of Corporations statute, enacted in 1975, establishes that: 'Every corporation, whether foreign or domestic, which shall violate any provision of RCW 9A.28.040, shall forfeit every right and franchise to do business in this state. The attoney general shall begin and conduct all actions and proceeding necessary to enforce the provisions of this subsection.' (RCW 9A.08.030(5)). The referenced statute, 9A.28.040, prohibits agreement between two or more persons, including directors or officers of a corporation, 'with intent that conduct constituting a crime be performed.' Thus, if a corporation engages in a criminal conspiracy, the attorney general is required by law to seek dissolution of the corporation. Furthermore, it is no defense if the person(s) (including the corporation) '(a) has not been prosecuted or convicted; (b) has been convicted of a different offense; or (c) has been acquitted.'" (William Sherlock, Memorandum to Richard Grossman and Richard Gwynallen, Re: Oregon and Washington Corporate Charters, June 27, 1995).
Cultural and Legal Theory Supporting Sovereignty Over Corporations
How has Northwest economic history influenced our views and law regarding corporations?
Influential corporations include Hudson's Bay Company, the Great Northern, Northern Pacific, and Southern Pacific trancontinental railroad empires and the Eastern capital they brought, including Rockefeller and Morgan/Hill in Everett, Tacoma, and Seattle), railroad and telegraph technology, Midwestern timbermen including Weyerhaeuser and Boeing, World War I and labor struggles, World War II and the rise of Boeing, and current corporate dominance by Microsoft and other high-tech enterprises (see George Draffan's "The Rise and Fall of Corporations in the Pacific Northwest").
Popular Resistance to Corporate Power
What popular resistance movements have taken place in the state and region? Who were they led by? What were their demands?
What part did late nineteenth century events and movements play?
What was the role of the land grant railroads (the Northern Pacific Railroad was given control of 20 percent of Washington State, has provided us with several Governors, and its corporate beneficiaries are still the largest landowners in several Western states)?
What about anti-Chinese sentiment which arose after the railroads had been built (the 1879 California constitution contains both anti-corporate and anti-Chinese clauses)?
What about the Wobblies, the Populists, the Granges, and the Progressives?
What about the Seattle general strike?
What were the demands and strategies of these struggles as they relate to corporations and corporate pwoer?
What successes (and failures) did such movements achieve?
3. Current Law
What currently is the constitutional, statutory, and case law regarding how corporations are defined and controlled?
How has regulatory and administrative law replaced more direct forms of defining the nature of corporations?
What are the regulatory and administrative laws and mechanisms which have replaced the defining laws and processes?
How are they supported by constitutional law, corporation codes, case law, and by cultural and legal theory?
What legacies and what new ideas and actions -- in the way of case law and judicial, popular, or legislative attitudes and precedents -- can we utilize today?
Current Constitutional Law
Current Corporation Code
Cultural and Legal Theory Supporting the Status Quo
How does the "colonization of our minds" (Cornel West) bring us face to face with "the third face of power"? The "first face" of power is winning in the legislature (see C. Wright Mills and the traditional power studies). The "second face" is keeping certain issues off the legislative and political agenda (see Bachrach & Baraz, The Two Faces of Power). The "third face" is when people no longer even perceive an issue to be put on the agenda (see John Gaventa, Power & Powerlessness). (My thanks to Jeff Lustig, for revealing these faces during a conversation at a Rethinking the Corporation meeting).
How do our cultural and social norms support our laws and politics?
How do today's laws and political processes depend upon not perceiving, questioning, and challenging society's assumptions and beliefs about sovereignty and power?
Chartering and Revocation Processes
What would a charter revocation look like today? What are the mechanisms: who initiates, who has standing? What rights do citizens have to initiate charter revocations, or otherwise use the charter process to obtain redress, to pressure the attorney general, the secretary of state and other relevant officials? Point Roberts (1906) ruled against citizens bringing quo warranto proceedings without the assistance of the prosecuting attorney, but also that the (county) attorney general cannot... prevent the state or its citizens from compelling corporations to obey the laws. and Gilbert (1916) ruled that a citizen didn't need any special standing to bring an action of mandamus against the attorney general.
What authority does the state retain to amend or revoke the charters? Which state officials have legal responsibilities and authority? What is the role of the legislature?
At what point does the matter move to the courts? What would be the judicial process from start to finish? Do criteria favorable to citizen revocation efforts exist upon which judges could make a decision to revoke charters?
Is the attorney general or other state officer required to file revocation proceedings in certain situations?
Is charter revocation mandatory in certain situations? See Wash. Rev. Stat. Sec. 1043, cited by Orloff, 1940, p. 179.
What defense can a corporation mount? (Early laws in some states forbade the corporation from functioning or resisting the state during the revocation process).
What have the historical defenses been, e.g., defect of parties to sue (South park, 1904); availability of other remedies; statute of limitation (doesn't apply when an action is brought to benefit the state, acc. to Orloff, 1940); and laches (never brought up to 1940, but might work even against state benefit argument; Orloff, 1940, p. 178).
What are the penalties and consequences? Recovery of property (See Wash. Rev. State. sec. 1045), ouster, attachment, imprisonment (sec. 1041), plaintiffs recover damages (sec. 1039).
Does the revocation process affect other civil or criminal action against the corporation? In Washington, quo warranto action is not a bar to criminal proceedings? Dunbar v. American University of Sanipractic, 140 Wash. 625 (1926).
What would happen if a corporate charter were revoked: who would be in charge of dividing up the assets?
What about outstanding liabilities, and potential liabilities, such as poisons, pensions, promises the corporation may have made to the communities in which it operated?
Could workers, communities or other entrepreneurs buy segments of the corporation without buying the liabilities? (For both good and evil!).
Laws & Processes Governing Subsidies
Subsidies are one of the primary ways our power and wealth are transferred to corporations.
Are current subsidies (e.g., Intel) and exemptions (e.g., Boeing) legal? Constitutional?
May corporations pay for elections (e.g., Paul Allen's Mariners election)?
(Article VIII, Sec. 5: Credit not to be loaned. The credit of the State shall not, in any manner be given or loaned to, or in aid of, any individual, association, company or corporation).
In Swanson v. Perham , 30 Wash. 2d 368, 191 P. 2d 689 (1948), the corporate charter was declared a four-fold contract between the state, a corporation, and its stockholders -- and the state constitution and its laws were a part of that contract -- but that the state's power to alter or amend charters is not unlimited (citing Dartmouth).
To require state officers to initiate revocation proceedings against a harmful corporation, and to guarantee citizens legal standing to begin charter revocation proceedings?
Current Regulatory & Administrative Law
How can we approach today's regulatory and administrative agencies and arenas in new ways which reeducate ourselves and the authorities and which change the rules of the game from regulating corporations to defining corporations and ourselves as sovereign people?
4. What Are the Arenas of Our Sovereignty?
What are the arenas in and processes by which we can truly change the status quo? How can we remove the regulatory and administrative obstacles to defining the nature and powers of corporations? How can we reclaim our civic and political power from corporations, and restore our sovereignty? Some arenas of sovereignty include, but are not limited to:
How will these processes be used to define and control corporations, to define what corporations can be and do? The following have been, in some cases still are active law, in various places, from California to Wisconsin to New Jersey:
What are the laws and institutions of a truly sovereign people? Who's in charge?
5. Annotated Citations
Amsterdam Trustees Kantoor, 15 Wash. 668, 47 Pac. 31 (1896).
Attorney General v. Seattle Gas Co., 28 Wash. 488, 68 Pac. 946, 70 Pac. 114 (1902).
South Park (1904). Defect of parties defense successful; you can't bring an action against an artifical party (in this case, a municipal corporation) in order to obtain a ruling that it doesn't exist -- "if there is not a corporation it cannot be sued" (Orloff, 1940).
White v. Point Roberts Reef Fish Co., 42 Wash. 409, 85 Pac. 22 (1906). Standing issue.
Conlan v. Oudin & Bergman Fire Clay Co., 48 Wash. 196, 93 Pac. 219 (1908). For non-use.
State ex rel. Fishback v. Globe Casket & Undertaking Co., 82 Wash. 124, 143 P. 878 (1914).
Lundin v. Merchants Protective Corp. (1919). Ultra vires against an Indiana corporation engaging in an unauthorized practice of law.
Kahan v. Alaska Junk Co., 111 Wash. 39, 189 P. 262 (1920). An injunction to prevent a corporation from doing some ultra vires act is preferrable to dissolution.
Dunbar v. American University of Sanipractic, 140 Wash. 625 (1926). For mis-use.
State Humane Society v. Hovey, 159 Wash. 584, 294 P. 258 (1930).
State ex rel. Gilbert v. Prosecuting Attorney, 92 Wash. 484, 159 P. 761 (1916).
Johnson v. Lally, 370 P.2d 971 (1962). Exhausting alternatives to quo warranto proceedings.
Bergman v. Johnson, 66 Wash. 2d 858, 405 P. 2d 715 (1965).
State ex rel. Winters v. Steele, 37 Wash. 2d 434, 224 P.2d 332. Burden of proof.
State ex rel. Cummings v. Blackwell, 91 Wash. 81, 157 P. 223. Burden of proof.
Marysville v. State, 101 Wash. 2d 50, 54-55, 676 P.2d 989, 991-991 (1984).
Housing Finance Comm'n v. O'Brien, 100 Wash. 2d 491, 494, 671 P.2d 247, 249 (1983).
State ex rel. Graham v. Olympia, 80 Wash. 2d 672, 675, 497 P.2d 924, 926 (1972).
PUD No. 1 v. Taxpayers of Snohomish County, 78 Wash. 2d 724, 726-27479 P.2d 61, 62-63 (1971).
Rausch v. Chapman, 16 Wash. 568, 573-74, 48 P. 253, 254-55 (1897).
Port of Longview v. Taxpayers of Port of Longview, 85 Wash. 2d 216, 231, 527 P.2d 263, 171, reh'g denied, 533 P. 2d 128 (1974).
Japan Line Ltd. v. McCaffree, 88 Wash. 2d 93, 98, 558 P.2d 211, 214 (1977).
State ex rel. Potter v. King County, 45 Wash. 519, 528, 88 P. 935, 938 (1907).
Dewell and Gittinger. Antitrust. 36 Wash. L. Review 239 (1961).
Dolliver, James M. Condemnation, Credit, and Corporations in Washington: 100 Years of Judicial Decisions-Have the Framers' Views Been Followed? 12 University of Puget Sound Law Review 163 (1989). Has many citations to relevant cases, including subsidies, eminent domain, tort, police powers, etc.
Linzey, Thomas. Upcoming law review article on Washington State corporation charter law. See also Linzey's reviews on New York, Pennsylvania, and Delaware law.
Nelsen, Eric. Washington Corporation Law: Structure of Washington Corporations and Avenues Toward Involuntary Dissolution. April 1997 draft.
Orloff, Monford Arthur. Information in the Nature of Quo Warranto in the State of Washington. 15 Wash. L. Review 165 (1940).
Sherlock, William. Memorandum to Richard Grossman and Richard Gwynallen, RE: Oregon and Washington Corporate Charters, June 27, 1995.
Friedheim, Robert L. The Seattle General Strike. Seattle: University of Washington Press, 1964.
Hicks, J.D. The Constitutions of the Northwest States. 1923.
Lee, W. Storrs, ed. Washington State: A Literary Chronicle. New York: Funk and Wagnalls, 1969.
Saltvig, Robert Donald. The Progressive Movement in Washington. Ph.D. dissertation, University of Washington, 1966.
Corporations Chartered in Washington State
(from 1998 Compact Disclosure database)
ACTIVE VOICE CORP
ADVANCED TECHNOLOGY LABORATORIES
AMOUR FIBER CORE INC
APPLIED VOICE TECHNOLOGY
CASCADE NATURAL GAS CORP
CELL THERAPEUTICS INC
COLUMBIA BANKING SYSTEM
CROWN RESOURCES CORP
CRYSTAL MOUNTAIN INC
CUTTER & BUCK INC
DATA I O CORP
DELTA HOLDING INC
DEVELOPMENT BANCORP LTD
DIGITAL DATA NETWORKS INC
DIGITAL SYSTEMS INTL
EAGLE HARDWARE & GARDEN
ELECTRONIC SYSTEMS TECHNOLOGY
ENVIRONMENTAL TESTING TECHNOLOGIES
EXPEDITORS INTL OF WA
FIRST CHOICE HEALTH NETWORK
FIRST COMMUNITY FINANCIAL GROUP
FRANK E BEST INC
FRONTIER FINANCIAL CORP WASHINGTON
GARDEN BOTANIKA INC
GLADSTONE RESOURCES INC
GREAT NORTHERN INSURED ANNUITY
GTE NORTHWEST INC
HART BREWING INC
HEART TECHNOLOGY INC
HORIZON FINANCIAL CORP
IMMUNEX CORP WA
INLAND RESOURCES INC WASHINGTON
INTERLINQ SOFTWARE CORP
INTERWEST BANCORP INC
JAY JACOBS INC
KEY TRONIC CORP
LABOR READY INC
LITTLE GYM INTERNATIONAL
LOGAN INTERNATIONAL CORP WA
LOGOS RESEARCH SYSTEMS
LONGVIEW FIBRE CO
LUNDELL TECHNOLOGIES INC
MACKIE DESIGNS INC
MERCER INTERNATIONAL INC
METROPOLITAN MORTGAGE & SECURITIES
MICROVISION INC WA
MONTANA PRECISION MINING
MOUNTAIN BANK HOLDING CO
MPM TECHNOLOGIES INC
MULTICOM PUBLISHING INC
MULTIPLE ZONES INTERNATIONAL
NATIONAL SECURITIES CORP
NEORX CORP WASHINGTON
OLYMPUS VENTURES INC WA
ORGANIK TECHNOLOGIES INC
OSTEX INTERNATIONAL INC
PACCAR FINANCIAL CORP
PACIFIC SECURITY COMPANIES
PACIFIC TELECOM INC
PERCON ACQUISITION INC
PUGET SOUND POWER & LIGHT
QUALITY FOOD CENTERS
REDHOOK ALE BREWERY
STERLING FINANCIAL CORP WASH
SUMMIT SECURITIES INC IDAHO
SUN SPORTSWEAR INC
TERA COMPUTER CO
UNITED SECURITY BANCORP
WALL DATA INC
WASHINGTON ENERGY CO
WASHINGTON FEDERAL INC
WASHINGTON MUTUAL INC
WASHINGTON NATURAL GAS
WASHINGTON WATER POWER
WEB PRESS CORP
WESTERN GOLD MINING
WESTERN WIRELESS CORP
WISMER MARTIN IN