The Supreme Court’s next corporate campaign finance quandary

September 7, 2012

If you hate the current state of campaign finance, in which corporations and non-profits exert influence through trade associations, political action committees and so-called super PACs, you can’t lay all of the blame at the doorstep of the U.S. Supreme Court’s 2010 ruling in Citizens United v. Federal Election Commission, which held that corporations and labor unions have the same First Amendment rights to free speech as individuals.

Nor can you say that the root of the problem was the court’s 2007 ruling in Federal Election Commission v. Wisconsin Right to Life that corporations and labor unions are permitted to spend money on election ads as long as those ads do not contain “express advocacy” for or against a candidate.

Instead, you have to look back to 1976, when the Supreme Court decided in Buckley v. Valeo that the constitution permits limits on direct campaign contributions to candidates by corporations. Such restrictions, the Buckley court held, do not violate the First Amendment.

That bar on direct contributions to candidates, reaffirmed by the U.S. Supreme Court in 2003 in FEC v. Beaumont, has remained in place despite repeated assaults in recent years. As Rick Hasen, an election-law expert at the University of California, Irvine, School of Law wrote Wednesday at his Election Law Blog, the current justices may well overturn Beaumont‘s holding on direct corporate contributions to candidates if they decide to take up the issue, but so far they haven’t.

Direct contributions, however, weren’t the only issue in that seminal 1976 ruling in Buckley. The court drew a line between direct contributions and “independent expenditures,” in which people (or groups) exercise their First Amendment rights to express political support for a candidate. Buckley said that while corporations can’t make direct contributions, people and groups cannot be barred from independent political expenditures. More than a quarter-century later, in Citizens United, the Supreme Court explicitly extended that reasoning to corporations and unions, ruling that the First Amendment protects their right to independent political expenditures.

Those independent expenditures have become the raison d’être of the political associations known as super PACs. According to election-law practitioners Frederick Lowell and Emily Erlingsson of Pillsbury Winthrop Shaw Pittman, super PACs limit their political spending to independent expenditures: supporting candidates without contributing directly to or coordinating with them. That division — between the political group and the candidates it supports — permits super PACs to receive contributions from corporations and unions that are prohibited from making direct contributions to candidates. (Lowell and Erlingsson said that, contrary to popular opinion, it wasn’t Citizens United that led to the perceived explosion in super PACs but a subsequent 2010 ruling by the District of Columbia Court of Appeals in a case called v. FEC, in which the D.C. Circuit said contributions to groups that make only independent expenditures cannot be limited under the First Amendment.)

Between their right to unlimited donations and their unlimited First Amendment right to make independent expenditures, super PACs have become the bane of groups that oppose corporate political spending. Public interest groups have been hard-pressed to rein in PAC power. (I’ve written, for example, about the mixed results of shareholder demands for transparency.) But according to Lowell, one of the few weapons available to lawmakers who want to restrict political contributions through super PACs is to boost disclosure and reporting requirements for the political groups, with the intention of making them so onerous to establish and maintain that would-be contributors won’t bother.

That was the issue the 8th Circuit Court of Appeals considered en banc in Wednesday’s ruling in Minnesota Citizens Concerned for Life v. Swanson, which addressed Minnesota’s 2011 amendment to the state’s campaign finance law. The amendment created strict requirements — with potential criminal penalties — for any group, no matter how small, that spends more than $100 on an election in a given year. The 8th Circuit majority, in an opinion written by Judge William Riley, held that the regulatory requirements were so “burdensome” that they created a First Amendment problem. “Minnesota’s law hinders associations from participating in the political debate and limits their access to the citizenry and the government,” the majority opinion said. “The law manifestly discourages associations, particularly small associations with limited resources, from engaging in protected political speech.” (My colleague Terry Baynes had a terrific analysis of the ruling on Wednesday.)

The importance of the decision, according to Lowell, is that an en banc federal appeals court has rejected an attempt to restrict political spending via beefed-up reporting and disclosure requirements. “This is a significant instance in this ongoing debate,” he said. “For anyone who wants to make an independent expenditure, you can’t create a red-tape obligation that’s so onerous you prevent people from participating in the system.”

The 8th Circuit decision, according to election-law expert Hasen, is at odds with rulings by the 1st Circuit (in National Organization for Marriage v. McKee), the 9th Circuit (in Human Life of Washington v. Brumsickle) and the 11th Circuit (in National Organization for Marriage v. Secretary), all of which have recently upheld burdensome reporting obligations for political associations. Many of the challenges, including the Minnesota case at the 8th Circuit, have been brought by James Bopp of The Bopp Law Firm, who told me that forcing groups to comply with onerous PAC regulations means “you can’t do what the Supreme Court said you can do under Citizens United.” (Bopp, who has brought several unsuccessful attacks on the ban on direct corporate contributions, said he hasn’t decided whether to appeal that aspect of the Minnesota decision, but that if the state asks the Supreme Court to review the opinion, he will appeal that piece.)

Lowell, the Pillsbury election-law partner, said that the circuit split makes it likely that the Supreme Court will eventually take up the issue of reporting requirements for political groups, in a sequel to Citizens United. Lowell also said, though, that he doesn’t believe additional PAC regulations have served to squelch corporate political spending. “If you try to put a lid on the political teapot,” he said, “the steam is just going to come out from somewhere else.”

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