On January 21, 2010, the Supreme Court issued its opinion in Citizens United v. Federal Election Commission, a landmark ruling that declared that laws barring corporations and unions from making direct independent advocacy expenditures violate the First Amendment. While an important ruling, its immediate impact on the political process has likely been overstated, in that corporations and labor unions, through issue advocacy, already had significant opportunities to impact elections. Its real impact could be the doctrinal shift that it represents — which could pave the way for more dramatic changes in the funding of political campaigns.

WHAT HAPPENED:

  1. Legal Background

Since the late nineteenth century, corporations and unions have been restricted in their ability to directly contibute to candidates. But until 1947, when Congress passed some limited restrictions in the Labor Management Relations Act (“LMRA”), corporations and unions had an unfettered right to make “independent expenditures” (i.e., not coordinated with a candidate) advocating the election or defeat of candidates.

Congress bolstered these limited LMRA restrictions with the Federal Election Campaign Act of 1971 (amended in 1974), which created 18 U.S.C. §§ 608(b), 608(e), and 610. Section 608(b) prohibited corporate/union contributions to federal candidates. Sections 608(e) and 610 prohibited, respectively, individuals and corporations/unions from making independent expenditures in support of a candidate. In Buckley v. Valeo, 424 U.S. 1 (1976), the Supreme Court upheld the contribution prohibitions in Section 608(b), but struck down limits on independent expenditures made by individuals (Section 608(e)). The Court based this disparate treatment on a concern that direct corporate/union contributions could be used “to secure a political quid pro quo.” Buckley, 424 U.S. at 25-26.

Buckley did not address the constitutionality of Section 610’s ban on independent expenditures by corporation and unions. (Congress later recodified Section 610 in 2 U.S.C. § 441b.) But two years later, in First Nat’l Bank of Boston v. Bellotti, 435 U.S. 765 (1978), the Supreme Court considered the constitutionality of a state-law prohibition on corporate independent expenditures related to referenda. It ultimately struck down that prohibition as violative of the First Amendment, finding that the legislature “is constitutionally disqualified from dictating the subjects about which persons may speak and the speakers who may address a public issue.” Bellotti, 435 U.S. at 784-85.

In 1990, the Supreme Court — in Austin v. Michigan Chamber of Commerce, 494 U.S. 652 — confronted the question of whether a state could ban corporate independent expenditures supporting or opposing a candidate for state office. There, the Supreme Court shifted its prior stance and adopted a novel “antidistortion rationale”— that “aggregations of wealth” facilitated by the corporate form can distort the political process. Austin, 494 U.S. at 660.

In 2002, Congress passed the Bipartisan Campaign Reform Act (“BCRA”), also known as McCain-Feingold. Through BCRA, Congress, among other things, amended Section 441b to bar corporations and unions from using general treasury funds to pay for an “electioneering communication,” defined as any “broadcast, cable, or satellite” communication that “refers to” a candidate for federal office and is made within a certain number of days of a federal election. 2 U.S.C. § 434(f)(3)(A). (These communications are also known as “issue advertisements.”) Implementing regulations required that the communication be “publicly distributed” and, in the case of a presidential race, able to be “received by 50,000 or more persons in the state where a primary . . . election is being held . . . .” 11 CFR § 100.29.

When a party challenged Section 441b in 2003, the Supreme Court — relying on Austin — found that this section did not violate the First Amendment because it blocked the “functional equivalent of express advocacy” related to a specific candidate. McConnell v. FEC, 540 U.S. 93, 206 (2003). Four years later, however, the Supreme Court narrowed this “functional equivalancy” test to permit restrictions on issue advertisements only where the communication “is susceptible to no reasonable interpretation other than as an appeal to vote for or against a specific candidate.” FEC v. Wisconsin Right to Life, 551 U.S. 449, 469-70 (2007) (as applied to ads advocating confirmation of federal-court nominees, Section 441b is unconstitutional).

  1. The Citizens United Ruling

In January 2008, Citizens United, a non-profit corporation with a rightward bent, released Hillary, a documentary film that was critical of then-Presidential candidate Hillary Clinton, within 30 days of a federal primary election. Citizens United only wanted to distribute the film through the “video on demand”service of a cable company. To avoid potential sanctions, Citizens United sought court clarification of whether it had the right to broadcast Hillary under § 441b.

In the lower courts, Citizens United initially argued that (1) its communication did not violate § 441b; (2) as applied to Citizens United, this section violated the First Amendment; (3) on its face § 441b violated the First Amendment; and (4) requiring Citizens United to disclose its donors violated the First Amendment. Citizens United later stipulated to dismissal of its third argument — the facial challenge to Section 441b. Both the federal district and appellate court for the District of Columbia rejected the first, second and fourth arguments.

The Supreme Court initially took the case in 2008 and heard arguments at that time. It later took the unusual step of asking the parties to submit supplemental briefs and present arguments on a new question: should Austin and a portion of McConnell be overturned because Section 441b’s bans on corporate/union independent expenditures violate the First Amendment? Citizens United v. FEC, 588 U.S. 5 (Jan. 21, 2010). In so doing, the Supreme Court took up the facial challenge to Section 441b that Citizens United had dismissed in the lower court.

In the first section of its ruling, the Supreme Court explained that it could not rule on any of the narrow grounds proposed by Citizens United. Id. at 5-12. In its next section, it held that Citizens United had not waived its facial challenge by stipulating to a dismissal of that argument in a lower court. Id. at 12-20.

In Section III, the Court addressed the core question in the case. It first noted that Section 441b is an outright ban, and cited several examples of actions that would be covered by the ban. Id. at 20-21. It next explained that permitting corporations to form political action committees — PACs — does not eliminate the First Amendment issues, as PACs are burdensome to create and maintain. Id. at 21-22 (noting that only 2,000 of the millions of U.S. corporations maintain PACs). Because it is a ban, held the court, it is subject to the same kind of strict scrutiny that applies to other restrictions on speech. Id. at 22-23. Citing Bellotti, among the free-speech prohibitions, noted the court, are “restrictions distinguishing among different speakers.” Id. at 24-25 (citing more than 20 cases recognizing that First Amendment protections extend to corporations).

In the next portion of this section, the Court went through the history of statutory corporate speech restrictions and the above line of Supreme Court precedent. Id. at 25-32. After outlining the evolution of this area of the law, it first declared that it needed to resolve the conflict between the pre-1990 (Buckley; Bellotti) and post-1990 (Austin; McConnell) lines of cases. Id. at 32. It then carried out a direct attack on the anti-distortion rationale expressed in Austin. It determined, for example, that this rationale could not be reconciled the First Amendment’s prohibition against discrimination based upon the “financial ability to engage in public discussion.” Id. at 32. It likewise noted that this rationale would sanction limitations on the free speech of large media companies. Id. at 35-36. Finally, it made the point that the anti-distortion rationale only makes sense in the context of large corporations, yet Section 441b encompasses large and small corporations alike. Id. at 37-40.

Noting that the government had essentially conceded the unpersuasiveness of the anti-distortion rationale, the Court next considered whether the compelling interest cited in Buckley — avoidance of quid pro quo corruption — could be used to uphold the restrictions at issue. The Court explained that while this rationale might apply to contributions to candidates, it does not apply to independent expenditures— where coordination with candidates is illegal. Id. at 41-45. It further stated that “ingratiation and access . . . are not corruption.” Id. at 45. The Court likewise rejected an assertion that banning corporate speech protects dissenting shareholders — noting that a ban is both overinclusive and underinclusive for that purpose. Id. at 46. Finally, because Section 441b is not limited to foreign corporations, the Court refused to opine on whether a ban limited to such corporations would be constitutional. Id. at 47.

After detailing its legal basis for overturning controlling precedent (Austin and part of McConnell), the Court concluded by considering — and denying — Citizens United’s assertion that disclaimer requirements violate the First Amendment. The Court noted that disclosure does not place a ceiling on speech and serves a governmental interest in clarifying that the ad is not paid for by a political party or candidate. Id. at 52-53. Similarly, the Court rejected the argument that identifying donors could endanger them, finding no such risk for Citizens United’s donors. Id. at 54-55.

HOW DOES THE RULING CHANGE EXISTING LAW?

  1. Direct Legal Effects

Rather than being viewed in a vacuum, Citizens United should be seen as the latest step in a gradual move toward less restrictions on independent corporate political participation. The first step was Wisconsin Right to Life, where the Court created a high barrier to attempts to limit corporate issue advocacy prior to elections. Thus, in the 2008 Minnesota Senate Election, the U.S. Chamber of Commerce legally ran ads stating that “it seems like everytime Al Franken opens his mouth, he talks about raising taxes. . . . Tell Al Franken that high taxes aren’t very funny.”1 (Indeed, even BCRA only limited the use of these kinds of advertisements during the waning days of a campaign.) Citizens United merely grants corporations the right to make explicit — support or opposition to a particular candidate — what had already been implicit in ads like the one used against Al Franken. The impact of this added power depends on whether the existing issue ads are insufficiently clear as to the advertiser’s intentions. The anecdotal evidence— $400 million spent on issue ads in 2008; the fact that even candidates rarely explicitly ask for a vote2 — suggests that Citizens United’s practical impact has been overblown.

  1. Potential Legal Effects

The real impact of this case lies in the doctrinal shift that it represents. By stating that influence and access do not necessarily lead to corruption, the Court appears to authorize only statutes that protect against quid pro quo corruption. If that is true, limitations on contributions to political parties may not pass constitutional muster — in that a political party is not a specific candidate who could return concrete policy favors in the legislative process.

A related question is how Citizens United will impact the system of political groups organized by the FEC. Presently before the D.C. Circuit is a case called SpeechNow.org v. FEC, where the plaintiff claims that it is not subject to contribution limits applicable to PACs because it only intends to make independent expenditures. The plaintiff has cited Citizens United on appeal and argued that there is no danger of a quid pro quo because it is not making candidate contributions. While expansive, this position is perfectly defensible under the framework set forth by the Supreme Court. Indeed, one could argue that Citizens United jeopardizes all contribution limits to PACs — in that PACs have no ability to directly effect policy changes sought by donors.

Barring a further doctrinal leap, two areas of campaign-finance law appear to be safe in the wake of Citizens United. First, federal and state lawmakers will be able to continue to limit the amount of money that corporations and unions contribute to candidates. (It is less clear that this Court will continue to sanction outright bans on corporate/union contributions to candidates, but even these more extensive prohibitions are likely safe in the near term.) Second, disclosure requirements do not appear to be in jeopardy — unless they create a burden so severe that it blocks a corporation/union’s ability to speak on political topics.

In short, Citizens United’s immediate political impact is to give corporations/ unions only marginally more power than they previously possessed. But its landmark status is warranted by the doctrinal shift that it represents — toward a notion that only quid pro quo concerns can justify First Amendment restrictions on corporations/union political activities. That shift could dramatically alter the legal landscape, as litigants seek to overturn restrictions on donations to, for example, PACs and political parties. Consequently, political participants are well advised to pay attention to this area of the law in the coming years.