Overview

On January 21 the United States Supreme Court issued a landmark decision that will fundamentally alter the political landscape by providing new opportunities for corporations to influence federal, state, and local elections. In Citizens United v. Federal Election Commission, the Court held that the First Amendment guarantees all corporations the right to spend unlimited amounts of money from their general treasuries on independently produced advertisements and communications that expressly advocate the election or defeat of candidates, and do so at any time.

The 5-4 decision, which effectively struck down a 1947 federal law and other state laws aimed at limiting the clout of corporations in elections, will permit corporations to engage in the political process in ways that many of us have not seen in our lifetimes. The Court did, however, uphold disclosure requirements and left other prohibitions intact, so those corporations seeking to take advantage of their newly recognized constitutional rights are encouraged to seek guidance from attorneys with expertise in federal campaign finance laws to safely navigate them through the legal minefields that still exist.

Background

Before the Bipartisan Campaign Reform Act of 2002, known by many as McCain-Feingold, federal law prohibited corporations and unions from using their general treasury funds to make independent expenditures that advocate the election or defeat of a candidate, through any form of media, in connection with certain qualified elections. McCain-Feingold sought to reinforce this restriction by also prohibiting any "electioneering communication," which is defined as "any broadcast, cable, or satellite communication" that "refers to a clearly identified candidate for federal office" and is made within 30 days of a primary or 60 days of a general election.

Citizens United, a nonprofit corporation, produced a 90-minute documentary about Hillary Clinton entitled Hillary: The Movie . At the time Clinton was a candidate in the Democratic Party's 2008 presidential primary elections. The documentary, which was harshly critical of Clinton, was released in theaters and on DVD, but Citizens United also wanted to increase its distribution by making it available through video-on-demand within 30 days of the 2008 primary elections. The group feared, however, that both the film and the advertisements promoting it would be covered by the ban on corporation-funded independent expenditures, thus subjecting the corporation to civil and criminal penalties. In December 2007 Citizens United brought a lawsuit against the Federal Election Commission alleging that McCain-Feingold's ban on electioneering communications violated its free speech rights guaranteed by the First Amendment. The challenge subsequently led to one district court decision and two arguments before the Supreme Court.

Citing the First Amendment's broad protections, the Court specifically overruled a 1990 precedent, Austin v. Michigan Chamber of Commerce , that upheld the government's ability to prohibit corporation-funded independent expenditures and invalidated McCain-Feingold's ban on electioneering communications. The Court's majority opinion cited long-standing precedents that had extended First Amendment protection to corporations and stated, "Speech is an essential mechanism of democracy, for it is the means to hold officials accountable to the people .... The First Amendment 'has its fullest and most urgent application' to speech uttered during a campaign for political office .... The Government may not by these means deprive the public of the right and privilege to determine for itself what speech and speakers are worthy of consideration."

What Has Changed

There are a myriad of practical implications from this decision, but the most basic is that corporations will be permitted to make direct expenditures from their general treasury funds for advertisements and other communications that advocate the election or defeat of candidates, as long as such expenditures are independent of the candidates and their campaigns.

What Has NOT Changed

The Supreme Court's ruling does not allow corporations to make direct contributions to candidates, political parties, or PACs, so such contributions must continue to be made through a separate PAC established by a corporation. With that said, the decision will permit corporations to communicate with their employees regarding their preferred political candidates more freely than previously allowed.

Furthermore, since the Court's ruling opens the door for independent expenditures only, corporations are still prohibited from coordinating their political spending with federal candidates and political parties. As for what does and does not constitute "coordination," the Federal Election Commission has issued regulations and other guidance that the national party committees (e.g., the Republican National Committee) have operated under for several election cycles. The policies and procedures employed by these national party committees, such as the processes for vetting political consultants and implementing "firewall" policies, will serve as an effective guidepost for corporations that want to produce independent advertisements and communications that expressly advocate the election or defeat of a candidate.

The Court also upheld disclaimer requirements and the current Federal Election Commission regulations that require the disclosure of those donors who were solicited to, and whose contributions are used to pay for, electioneering communications.

Impact on State Laws

While the Supreme Court did not directly invalidate any state or local laws prohibiting or restricting such independent expenditures, the opinion clearly strikes down any such laws as unconstitutional. Since most states do not have statutes or regulations defining what does and does not constitute an "independent" expenditure, expect some state legislatures to try to define the boundaries in new campaign finance legislation prior to the 2010 general elections.

Akin to the federal law that prohibits corporations from making direct contributions to candidates, political parties, and PACs, any state or local law that prohibits corporations from making direct contributions to candidates, political parties, or PACs will remain intact.

What This Means

The Supreme Court's decision could make the hundreds of millions spent in past presidential and congressional elections look paltry, which will dramatically alter the landscape for candidates and political parties. For example, many candidates will now have to compete with corporations to define their message on the airwaves, and some experts believe political parties may find it difficult to remain viable. Given the potentially negative consequences for candidates and political parties, as well as the fact that corporate spending traditionally favors Republican candidates, expect the Democrat-controlled Congress to introduce new restrictions and disclosure laws designed to reduce the impact of Citizens United.