NFIB Legal Center Asks SCOTUS: Do Small Business Owners Waive Constitutional Rights?

Date: June 11, 2019

NFIB Argues No and Urges the Supreme Court to Overturn Braswell v. U.S.

We all believe that the Constitution protects our inalienable rights to life, liberty and freedom. So, you may be surprised to learn that Supreme Court precedent holds that small business owners surrender core constitutional rights when going into business, or at least when incorporating their business. But how can this be?

Well, in recent years the Supreme Court has suggested that courts should respect First Amendment rights for corporate entities and those investing in closely-held corporations. But several problematic Supreme Court cases from an earlier era treat commercial actors as somehow less deserving of constitutional protections. The most startling example is the Supreme Courts’ infamous 1988 decision in Braswell v. United States, where the Court ruled that a small business cannot invoke the Fifth Amendment right against self-incrimination on behalf of its owner.

What is the Right Against Self-Incrimination?

The Fifth Amendment provides that the government shall not force an individual to provide testimony against himself. This has been understood as a right against self-incrimination. And we’re all familiar with the concept because—in every police show ever—we’ve heard officers saying: “You have the right to remain silent.”

But the right against self-incrimination also protects you against a government order to hand-over incriminating evidence, since the act of handing over evidence is a communicative act. If you are forced to hand over incriminating evidence, you are effectively testifying to the fact that the evidence exists and that it is what the government says it is.

Why Did Braswell Rule Against Small Business Rights?

Over the past three decades, we’ve seen an explosion of small businesses operating as LLCs, which may be affected by Braswell’s holding that business owners waive their right against self-incrimination upon incorporating their business. With the growth of businesses operating as LLCs, where owners might previously have operated without any corporate form, there is now a pressing reason for the Court to reconsider Braswell.

At its core, the Braswell Court assumed that individual rights cannot be inferred to extend to corporate entities. The Court premised its opinion on the idea that the corporate officer represents a collective entity of many potential actors; as such, a subpoena, requiring a corporate officer to hand-over incriminating business documents, does not necessarily implicate the owner. But its easy to see where this logic breaks down when we’re dealing with an LLC owned and operated by a single business owner, or by just two partners (often a married couple).

NFIB Legal Center Urges the Supreme Court to Revisit and Overturn Braswell

To illustrate just how this works, consider In Re: Twelve Grand Jury Members. In this case federal prosecutors subpoenaed incriminating documents from an individual who invoked his right against self-incrimination under the Fifth Amendment. In response, the prosecutors turned around and issued the very same subpoena against him, in his official capacity as the custodian of corporate records for his single-person LLC. This was a transparent attempt to circumvent his constitutional rights. But under Braswell, the lower courts say that an owner in this situation has no choice but to hand-over incriminating evidence.

NFIB believes that individuals should not be required to sacrifice their constitutional rights as a condition of opening a business. And because this issue could potentially affect any small business owner in a closely held corporation (LLC or S-Corp), it’s imperative that the Supreme Court reconsider Braswell at this time. Accordingly, the NFIB Small Business Legal Center filed an amicus brief urging the Court to grant the pending petition for certiorari in this case.

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