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Michael C. Dorf

The Supreme Court Rejects a Limit on Corporate-Funded Campaign Speech


Monday, January 25, 2010

Last week, in Citizens United v. FEC, the Supreme Court struck down a provision of federal election law that forbids corporations and unions from spending their general treasury funds to support or oppose candidates for federal office. The ruling is significant in its own right, but may be more important still for what it portends about the Supreme Court's placid acceptance of money's influence on politics.

In reaching its decision, the high court expressly overruled two of its precedents, one of them decided only seven years ago. With the Court showing such little regard for its own case law governing regulation of corporate speech, one may legitimately wonder whether Citizens United is merely the first step on the road to the judicial invalidation of all campaign-finance regulation. After all, most of the Justices in the 5-4 majority in Citizens United have previously criticized Buckley v. Valeo—the 1976 ruling that established the modern framework for evaluating such regulation—on the ground that it permits too much regulation of campaign finance.

For now, however, the prospect of a wholesale rejection of campaign finance regulation appears remote. Writing for the majority, Justice Anthony Kennedy rejected every argument that had been advanced to justify limiting corporate speech, but in doing so, he squarely relied on Buckley and its progeny. As candidates, parties, corporations, unions, individuals, the Federal Election Commission (FEC), and lower court judges struggle to ascertain the reach of Citizens United, therewill undoubtedly be considerable confusion and uncertainty. But the case probably should not be read to cast doubt on the entire enterprise of campaign finance regulation.

If the immediate damage that Citizens United will do to campaign finance regulation is thus limited, the Court's performance is troubling nonetheless. At a time of widespread resentment of government programs that funnel hundreds of billions of dollars to mismanaged corporations and their grossly overpaid stewards, the majority opinion in Citizens United is stunningly tone-deaf to the real concern of most Americans who support campaign finance regulation: the concern that government increasingly represents the interests of those who pay for influence.

What the Court Decided

Section 203 of the Bipartisan Campaign Reform Act (BCRA), commonly known as "McCain-Feingold," forbids corporations and unions from using their general treasury funds for "electioneering communications," a term of art that is defined in the Act and the Court's prior cases to cover advocacy by broadcast, cable, or satellite communication for or against a candidate for federal office in the period leading up to an election. The provision is the descendant of a similar prohibition that was first enacted in 1947, which itself built on legislative efforts to control corporate influence on politics dating back over a century.

As I explained in an earlier column previewing Citizens United, the underlying case arose out of the application of Section 203 of BCRA to a 90-minute film that was extremely critical of then-Senator Hillary Clinton's bid for the Presidency. Because some of the funding for the film, Hillary: The Movie, came from corporate donations, the FEC deemed its proposed video-on-demand distribution to be forbidden.

The parties suggested several ways in which the Court could allow distribution of Hillary: The Movie without striking down BCRA in its entirety. The majority rejected each of these narrow grounds for decision, however—prompting Justice Stevens, who dissented on the main issue, to observe snidely that "five Justices were unhappy with the limited nature of the case before us, so they changed the case to give themselves an opportunity to change the law." That critique, in turn, prompted a separate opinion by Chief Justice Roberts, joined by Justice Alito, defending the majority's decision to reach the merits as consistent with his oft-expressed philosophy of judicial restraint.

Although much of the discussion in the lengthy opinions in Citizens United focused on procedural issues, the core of the majority decision proceeded by the following, relatively straightforward steps: (1) BCRA § 203 should be treated as a ban on a form of political speech by corporations and unions, even though they are permitted to form separate political action committees (PACs) to engage in electioneering communications, because the requirements for forming and speaking through a PAC are onerous; (2) As a ban on political speech, BCRA § 203 must be measured by the demanding standard of strict judicial scrutiny, which requires that it both serve a compelling interest and be the least speech-restrictive means of furthering that interest; and (3) None of the interests that have been advanced in support of BCRA § 203 satisfies that test.

In addition to invalidating the prohibition on independent expenditures from general corporate funds, the Court upheld two other challenged provisions of BCRA—requiring disclosure of which persons or entities have funded independent expenditures, and making clear that these expenditures were not coordinated with the candidate—as constitutional. Only Justice Thomas disagreed with this portion of the ruling.

The First Interest That BCRA § 203 Serves: Preventing Distortions of Politics

Three arguments were advanced to justify BCRA § 203. The majority's reasons for rejecting each of them were, taken in isolation, plausible. However, viewed in wider focus, the opinion is quite insensitive to the realities that drove Congress to seek to limit corporate interventions in politics in the first place. Let us consider each argument in turn.

The Citizens United majority began by confronting its own 1990 decision in Austin v. Michigan Chamber of Commerce. There the Court upheld a Michigan law much like BCRA § 203: It forbade corporations, other than media corporations, from using general corporate treasury funds for independent expenditures for or against candidates for office. The Austin majority credited the concern that corporations—which amass huge wealth aided by favorable state laws conferring limited liability, corporate immortality, and advantageous treatment with respect to accumulating and distributing assets—could, if left unregulated, use that wealth to distort politics.

The Citizens United Court overruled Austin because it thought the anti-distortion rationale was "dangerous," especially as applied to media corporations. A law that forbade a corporate-owned newspaper or TV station from endorsing candidates for office would indeed be deeply problematic. Yet both the Michigan law and BCRA § 203 specifically exempt media corporations from their coverage. Why then did the Court think that the regulation of media corporations was at issue?

Justice Kennedy said that the logic of the anti-distortion rationale made the media company exemptions a matter of legislative grace, rather than constitutional right. At the same time, he said that the Court could not hold that the First Amendment itself mandates an exception for media companies, because that would violate another principle of the Court's jurisprudence—one that forbids distinctions between the institutional press and other actors. Moreover, the Court worried that a large corporation that owns media companies could use those companies to influence politics in a way that a large corporation that does not own any media companies could not.

Although the Citizens United decisionportrayed this aspect of BCRA § 203 as posing an equality problem, the real issue its argument raised was a worry about the distortion of journalism itself. There is a long (if not always honored) tradition in American journalism of keeping editorial decisions and business decisions separate. If the effect of BCRA § 203 were to induce media companies to use their editorial platforms simply to serve the interests of their corporate masters, that indeed would be a serious problem, and one with First Amendment scope.

However, the Citizens United majority offered no evidence that this actually is, in fact, the effect of BCRA § 203. Recall that federal law first forbade the use of general corporate funds for independent expenditures over six decades ago. At least since the Supreme Court's 1948 decision in United States v. Congress of Indus. Org.,it has been clear that this prohibition does not apply to media corporations. If the media-company exception to BCRA § 203 were leading to distortions of editorial judgment, then one would surely expect to see evidence for that by now.

The Anti-Corruption Rationale

Having rejected the anti-distortion rationale for BCRA § 203, the Court next turned to the argument that the provision is needed to combat the reality or appearance of corruption. Here the majority pointed to an absence of documented cases of candidates exchanging votes for corporate independent expenditures. In so doing, however, it applied a remarkably narrow conception of corruption.

For one thing, because such quid pro quo exchanges are illegal under BCRA § 203 as well as other statutes, one would not expect them to be easy to spot. More importantly, there can certainly be an appearance of corruption without even an implied quid pro quo. Politicians know well that corporations are more likely to donate to their campaigns if they favor policies beneficial to those corporations. Yet the Court dismissed this broader notion of corruption in the following terms: "The fact that speakers may have influence over or access to elected officials does not mean that these officials are corrupt."

That observation is true as far as it goes; yet it does not speak to the appearance of corruption. When voters see their government acting speedily over a mere weekend to deliver hundreds of billions of dollars to some of the nation's largest corporations and banks, but dithering for months over health care for the uninsured, many will understandably come to think that corporate money buys policy, and that perception can only be strengthened by a ruling that will permit corporations to air advertisements for specific candidates.

The Shareholder-Protection Rationale

In defending BCRA § 203, the government also argued that it served to protect the interests of diffuse shareholders. Overwhelmingly, shareholders purchase stock in corporations seeking to maximize the return on their investments. Shareholders in any publicly-traded corporation will typically include people with very diverse political views, some of them individuals who directly own stock and others whose ownership is filtered through institutional investors such as pension funds. Thus, when a corporation uses its general treasury funds to support or oppose particular candidates, it will be using shareholder money to advance political views that are not shared by many, or even most, of its shareholders.

The Citizens United Court rejected the shareholder-protection defense of BCRA § 203 as poorly fitted to the actual provisions of the latter. As Justice Kennedy correctly noted, Section 203 does nothing to protect dissenting shareholders against corporate-funded speech with which they disagree outside of the election period, nor does it protect dissenting shareholders against having corporate money used to fund other sorts of speech with which shareholders may disagree. BCRA § 203's under-inclusiveness means that it is not "narrowly tailored," as required by the Court's First Amendment doctrine.

The majority's analysis of the shareholder-protection rationale is plausible, but in the context of the opinion as a whole, it seems disingenuous. It is hard to take seriously the Court's worry that Section 203 does not forbid enough corporate speech to protect shareholders, when throughout the opinion the majority complains that the provision forbids too much corporate speech.

The Likely Impact of Citizens United

Good-government groups have already condemned the decision in Citizens United as being likely to open a new era of corporate control of American politics. Whether the decision will have a large impact remains to be seen. Even prior to the Court's ruling, campaign finance regulation was so shot through with loopholes that individuals and corporations seeking to buy influence in Washington had little difficulty doing so.

Meanwhile, there are reasons why many corporations that sell to mass markets would be reluctant to support or oppose particular candidates for office. Michael Jordan
—whose fortune was partly built on Nike endorsements—once explained why he declined to endorse a Democratic candidate for office in this way: "Republicans buy sneakers too." A company that is too closely aligned with a political party or position risks alienating potential customers. Thus, it would not be especially surprising if Citizens United has only a modest effect on the political landscape.

The decision's effect on the Court is another story. Ironically, the majority's failure to acknowledge the importance of the government's interest in avoiding the appearance of corruption could lead to just that appearance—except that the government institution that will appear to many Americans to have been corrupted is the Supreme Court itself.

Michael C. Dorf, a FindLaw columnist is the Robert S. Stevens Professor of Law at Cornell University. He is the author of No Litmus Test: Law Versus Politics in the Twenty-First Century and he blogs at

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