American University Law Review

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American University Law Review
October, 1999

ARTICLE

From Special Privilege to General Utility:
A Continuation of Willard Hurst's Study of Corporations

Susan Pace Hamill*

INTRODUCTION

At the dawn of the twenty-first century, the business corporation symbolizes the vast power and strength of United States business on a worldwide basis and remains the dominant legal form for doing business. Although federal law plays a very important role in regulating corporate conduct, the foundation of U.S. corporate law started, and currently resides, in the state, rather than the federal, domain. General incorporation statutes in all fifty states provide access to the corporate form, serve as the exclusive legal mechanism to legitimize the relationships created by the corporate form, and set out the fundamental legal principles that apply to corporations whose articles have been filed in that particular state.

During Americas earliest years, general incorporation statutes did not exist, and corporations were relatively rare. To secure access to the corporate form, corporate sponsors had to petition one of the thirteen state legislatures for a special corporate charter. The special charter, essentially a private bill creating the particular corporation, outlined the corporations terms and conditions, such as authorized capital and permitted activities, applicable to that individual corporation, and in certain circumstances granted special privileges such as monopoly and eminent domain rights. In his seminal book published in 1970, The Legitimacy of the Business Corporation in the Law of the United States: 1780-1970, the late James Willard Hurst, lauded as the dean of American legal historians, explored the evolution of corporate law from the earliest years when the special charter served as the only access to the corporate form, to the time when general incorporation statutes operated as the exclusive channels to the corporate form. Although Professor Hurst recognized that he did not have a full inventory for all states, he wove together a vast amount of material and discussed the widespread enactment of state general incorporation statutes, the persistence of special charters, and finally the total disappearance of such legislation from the last quarter of the nineteenth century on. Among his broad conclusions regarding the evolution of corporate law, Professor Hurst noted that the interplay of the federal and state spheres of power greatly affected the law of corporations, concerns over the growth of corporate power led to federal regulation in the twentieth century, and special charters lingered largely because of inefficiency rather than widespread corruption.

To explore further state laws pivotal role in developing the current regulatory regime of state and federal law occupying separate spheres of power over business organizations, this Article continues Professor Hursts study of the corporations evolution from special privilege, characterized by a significant presence of corporate special charters to general utility, in which incorporation under general laws supplanted the use of special charters. Documenting for the first time the primary sources covering the full inventory of all fifty states, this Article empirically proves that incorporation by special charter remained a significant feature of the corporate landscape until the early twentieth century, and identifies the domination of state law over the regulation of corporations through the early decades of the twentieth century as the principal reason why [s]pecial chartering lingered longer than it should have.

* Associate Professor of Law, The University of Alabama School of Law. The author gratefully acknowledges the financial support of the University of Alabama Law School Foundation, the Edward Brett Randolph Fund, and the William H. Sadler Fund. Professor Hamill thanks her faculty colleagues, Dean Ken Randall, Bill Brewbaker, David Epstein, and Norman Stein for their valuable comments along with Tim Coggins, the members of the Cumberland Law School Legal History Forum, Howard Walthall, and Herbert Hovenkamp for comments on an earlier draft. Professor Ann Puckett and her staff at the University of Georgia Law Library made this research possible by generously providing the use of their librarys special collections of corporate statutes and session laws. Jamie Leonard, Robert Marshall, and Penny Gibson of the Bounds Law Library at the University of Alabama offered endless support, scouring the country for microfiche interlibrary loans. Special thanks goes to Wythe Holt and Tony Freyer, two legal historians who patiently provided constant practical advice, historical perspectives, comments on multiple drafts, and unlimited friendship and support. Finally, Professor Hamill especially recognizes the hard work and tireless efforts of the members of her research assistant team: Carol Longshore, James Coomes, Rick McBride, Charles Gorham, John Donsbach, Davis Smith, Wade Hartley, Todd Schroeder, Lisa Moss, Chris Davis, Kermit Kendrick, and Mike Perrett. These students, who come from four law school class years, participated in four grueling trips to the University of Georgia School of Law Library and labored in the trenches conducting the empirical research for this Article.

American University Law Review October, 1999

American University Law Review
October, 1999