Supreme Court Strikes Down Limits on Campaign Communications by Corporations and Unions

Government Relations Update

On January 21, 2010, in a 5-4 opinion, the Supreme Court struck down most of the limits that the Bipartisan Campaign Reform Act of 2002 (“BCRA”—also popularly known as “McCain-Feingold”) had placed on the ability of corporations and unions to use their general treasury funds to make expenditures for election communications.  The Court’s opinion in Citizens United v. Federal Election Commission was much anticipated and not entirely unexpected.  The most significant impact of the opinion is the Court’s holding that under the First Amendment, corporations, both non-profit and for-profit, and unions may make independent expenditures regarding candidates for office at the federal and state level.    

Background and Review of Majority Opinion

In January 2008, the Appellant, Citizens United, a non-profit corporation, released a documentary critical of then-candidate Hillary Clinton 30 days before a primary.  The film was entitled “Hillary:  The Movie.”  Citizens United had produced a video-on-demand, which it wanted to promote through television ads.  Prior to releasing the video, Citizens United asked the Federal Election Commission to rule on the legality of its actions, fearing the imposition of civil and criminal penalties under BCRA.  The FEC and the lower federal court ruled against Citizens United. 

The Court’s majority opinion was written by Justice Kennedy, who was joined by Chief Justice Roberts and Justices Scalia, Alito, and Thomas.  Justices Stevens, Ginsburg, Breyer and Sotomayor joined as to Part IV of the majority opinion, which upheld the disclaimer and disclosure provisions of BCRA, however dissented to the remainder of the opinion. 

The ruling was not entirely unexpected.  The Court had signaled that it might overrule its previous 1990 ruling in Austin v. Michigan Chamber of Commerce, which allowed a ban on political speech based on the speaker’s corporate identity, when, in an unusual move, it re-heard the case last September. 

Writing for the Court, Justice Kennedy reviewed the law and his reasoning that the Court should overturn its 20-year precedent in Austin, which held that political speech may be banned based on the speaker’s corporate identity.  Section 441b of BCRA prohibits corporations and unions from using general treasury funds to make independent expenditures for speech, defined as an “electioneering communication,” or for speech expressly advocating the election or defeat of a candidate.  2 U.S.C. 441b.  “Communication” includes 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.  These limits on corporate activity were upheld by the Court in 2003 in the case of McConnell v. FEC, in which the Court relied on its earlier rationale in Austin.  In Citizens United, the majority took pains to explain why it was departing from its earlier rulings, with the Chief Justice writing separately to address the issue. 

The Court reviewed the law in light of the First Amendment’s protection of free speech and found the restrictions did not pass Constitutional muster.  To do otherwise, Justice Kennedy wrote, would “prolong the substantial, nation-wide chilling effect caused by § 441b’s prohibitions on corporate expenditures.”  Justice Kennedy also found that the section is not simply an abridgement of free speech, but is a ban on corporate speech, notwithstanding that a PAC created by a corporation can still speak.  According to Justice Kennedy, fewer than 2,000 corporations in the United States have PACs.  In the most stirring words of the majority’s opinion, Justice Kennedy wrote:

Speech is an essential mechanism of democracy, for it is the means to hold officials accountable to the people ... The right of citizens to inquire, to hear, speak, and to use information to reach consensus is a precondition to enlightened self-government and a necessary means to protect it. The First Amendment “has its fullest and most urgent application” to speech uttered during a campaign for political office … For these reasons, political speech must prevail against laws that would suppress it, whether by design or inadvertence.  

Majority op. at 23. 

The Court also rejected all of the Government’s arguments for upholding the bans and for maintaining the precedent of Austin.  Initially, Justice Kennedy rejected the argument that allowing corporations to speak in the form of communications prior to elections would distort the outcome of elections.  According to the majority, this rationale would “produce the dangerous, and unacceptable, consequence that Congress could ban political speech of media corporations”, and there is no rationale for distinguishing between media corporations and other corporations.  (Media corporations had already been exempt from the BCRA ban.) In other language overturning Austin, the majority wrote:

Austin interferes with the “open marketplace” of ideas protected by the First Amendment. … It permits the Government to ban the political speech of millions of associations of citizens.  Most of these are small corporations without large amounts of wealth. … The censorship we now confront is vast in its reach.  

Majority op. at 38-39.  The majority opinion also rejected the Government’s arguments that overturning BCRA’s limits on corporation communications during an election campaign could lead either to corruption or to decisions that distort the views of individual shareholders. 

The Court returned to the reasoning in its pre-Austin decisions that the Government may not suppress political speech on the basis of the speaker’s corporate identify.  The Court did, however, uphold the law’s requirements that candidates must place a disclaimer on the ad, letting the public know of the corporate sponsor, and file disclosures with the FEC. 

Justice Stevens’ Dissenting Opinion

Justice Stevens filed a strong dissent, portions of which he read from the bench.  Justice Stevens criticized the majority for rejecting a “century of history when it treats the distinction between corporate and individual campaign spending as an invidious novelty born of Austin.”  Dissenting op. at 3.  Justice Stevens wrote that “[o]ur lawmakers have a compelling constitutional basis, if not also a democratic duty, to take measures designed to guard against the potentially deleterious effects of corporate spending in local and national races” and found that “the majority’s approach to corporate electioneering marks a dramatic break from our past.”  Dissenting op. at 2. 

Justice Stevens would have urged the Court to rule on narrower grounds, rather than addressing the Constitutional issues, and follow the principle of stare decisis and the Court’s decision in Austin, which Congress had followed for many years in considering and writing election laws.  Justice Stevens conducted an extensive review of the history of the Constitution and concluded that corporations did not have protected speech under the First Amendment.  He chastised the majority for rejecting this history and its past precedents, and directly accused the majority of overruling Austin simply because of its new members and because it did not like the result of Austin.  Justice Stevens expressed the fear that the rights of individual citizens would be diminished because large corporations would have greater resources and ability to influence election outcomes.

Implications of Citizens United v. FEC for Corporations and Elections

The airwaves and media are already bursting with analyses of this important campaign decision.  Its immediate implications for corporations and labor unions are known.  Corporations and labor unions can make independent expenditures for campaign ads and disseminate them widely at any time during and up to Election Day.  They do not have to create a separate PAC to do so.  They will, however, have to issue disclaimers (as to the sponsor of the ad) and file disclosures with the FEC. 

The long-term implications are not fully known.  Will corporations and labor unions devote significant resources to election campaign materials?  Will this have a distorted impact on the elections as some non-profits and NGOs already fear?  Will this ruling increase the influence of lobbyists at the expense of campaigns and political parties?  Will Congress try one more time to place limits on corporations in this arena?  Is it realistic to think that Congress could or would do so given the breadth of the Supreme Court’s opinion and the other volatile measures before it in an election year?  These and other questions can only be answered in the fullness of time as we see how the new ruling affects upcoming and future elections. 

As we go to press, Senator Schumer (D-NY) has called for hearings into the ruling.  In addition, Senator Schumer and Representative Chris Van Hollen (D-Md.) have said that they had been working for months to draft legislation in response to the anticipated decision.


Notice: The purpose of this newsletter is to review the latest developments which are of interest to clients of Blank Rome. The information contained herein is abridged from legislation, court decisions, administrative rulings, and other sources and should not be construed as legal advice or opinion, and is not a substitute for the advice of counsel.