The terms we discuss in Lawtalk come from sources ancient (eye for an eye) and modern (CSI effect), Shakespeare (pound of flesh) and Dr. Seuss (wet foot, dry foot). Today, thinking about the Occupy Wall Street movement, I want to highlight one that was popularized by a law professor: pierce the corporate veil.
Piercing and veils have had metaphoric significance for centuries, and corporations and veils appeared together from the earliest days of the US legal system. Some of the old uses have a contemporary feel. In 1840, for example, the governor of Michigan urged the legislature to protect the public from banks that issued worthless paper money: "Take from them . . . the corporate veil, which now encourages, and at the same time, conceals and protects their frauds and villainies."
We don't know who brought piercing, veils, and corporations together for the first time, but we do know who made it a popular phrase. In 1912, Fordham law professor I. Maurice Wormser wrote a landmark law review article: "Piercing the Veil of Corporate Entity." It was jam packed with metaphors, many based on the idea of the corporation as a person and the corporate form as its clothing: garments of Little Red Riding Hood's grandmother, veils, cloaks, disguises, robes, and armor-plate. In addition to being pierced, Wormser's veil is drawn aside, torn aside, penetrated, shaken aside, brushed aside, stripped off, and lifted. The mind boggles at what the dominant phrase might have become. But the most popular turned out to be the one in the title, and after Wormser republished his article in a book fifteen years later, courts began to talk with some regularity of "piercing the corporate veil."
In 1931, Wormser published a follow-up book: Frankenstein, Inc., which vividly portrays various abuses of the corporate device. One prominent reviewer (Columbia University Finance professor James Bonbright) hoped that Wormser's account would weaken the influence on the legislature of New York law firms and their powerful clients. More to the point for readers of this blog, Bonbright pointed to law school faculties and their role in the unraveling of the economy: "The very leaders of the legal profession who have been most influential in inducing legislators to pander to the demands of their predatory promoter clients are among the most brilliant examples of the output of the law schools of Columbia, Yale, Harvard, Pennsylvania, and Cornell. . . . [Instead], the leading law schools of the country must assume a responsibility that they have hitherto neglected in the education of lawyers for decent citizenship."
This time around, business schools are taking some of the blame for the economic meltdown. Finance professionals make up about 14% of Occupy Wall Street's 1%, with business executives and managers outside of the finance area adding another 31%. Can law schools, whose graduates blessed exotic financial instruments and who now litigate both sides of the fallout, be far behind?