Bloomberg News

Corporate Campaign Spending Rights Affirmed by High Court

June 26, 2012

Corporate Campaign Spending Rights Affirmed by High Court

Nonprofits that don’t have to report donors have invested at least $12.4 million in this election cycle so far, according to the Sunlight Foundation, a Washington-based group that promotes more campaign-finance disclosure. Photographer: Paul Sancya/AP Photo

A divided U.S. Supreme Court threw out Montana’s ban on corporate campaign spending in a reaffirmation of the 2010 decision that unleashed super-PACs and left federal elections awash in money from big spenders.

Deciding they didn’t need to hear arguments, the justices yesterday summarily reversed a Montana Supreme Court decision upholding the state’s century-old ban. The state court had ruled the law’s limits could stand for state elections even after Citizens United v. Federal Election Commission, the two-year-old Supreme Court ruling that let corporations and unions spend unlimited sums.

The court’s unsigned opinion in the 5-4 ruling said the case asked whether Citizens United applied to a state law. “There can be no serious doubt that it does,” the court said.

“Montana’s arguments in support” of the lower court ruling “either were already rejected in Citizens United or fail to meaningfully distinguish that case,” the opinion said.

The majority was identical to the 5-4 Citizens United decision, which altered the national political landscape and opened the way for campaign spending by outside groups to more than double from the level four years ago.

Missed Opportunity

The latest action makes clear the court’s five Republican appointees stand behind their conclusion that corporate campaign spending is entitled to broad protection under the First Amendment.

“Citizens United mistakenly overruled longstanding cases that protected the fairness and integrity of elections,” White House spokesman Eric Schultz said in a statement yesterday. “Unfortunately, the court today missed an opportunity to correct that mistake.”

President Barack Obama criticized the Citizens ruling in his 2010 State of the Union address. He has since given his blessing to a super-political action committee supporting his re-election, saying it is necessary to compete with Republican challenger Mitt Romney. Obama campaign aides have said they expect to be outspent by Romney and his allies because of several super-PACs backing him.

More than 600 super-PACs have raised more than $240 million and spent $133 million this election cycle, according to the Center for Responsive Politics, a nonpartisan research group in Washington.

Nonprofit Organizations

Nonprofit organizations that don’t have to report donors have spent at least $12.4 million in this election cycle so far, according to the Sunlight Foundation, a Washington-based group that promotes campaign-finance disclosure.

The expenditures by super-PACs and nonprofits add up to more than twice what outside groups had spent by this point in the 2008 election cycle, according to the Center for Responsive Politics.

The U.S. Chamber of Commerce said in court papers that “to the extent that there has been more speech in recent elections, that is a First Amendment good, not an excuse to resurrect a censorship regime.” The business trade group opposed the Montana law.

Outside spending on state and local races -- which include judgeships, ballot measures and gubernatorial and mayoral posts -- is more difficult to tally, in part because of differing disclosure requirements and deadlines.

The National Institute on Money in State Politics, a campaign-finance research group in Helena, Montana, said that in a sample of 20 states, spending by groups other than candidates rose to $139 million in 2010 from $65 million in 2008.

State Bans

Critics of the Citizens United ruling had sought to leave room for spending bans at the state level, saying they guard against corruption.

“The states have a compelling interest in preventing domination of state and local elections by nonresident corporate interests,” argued New York, joined by 21 other states and the District of Columbia, in a court filing backing Montana in the case.

“The decision today says that other states struggling to deal with corrupting political spending are essentially handcuffed,” Adam Skaggs, senior counsel of the Brennan Center’s Democracy Program at the New York University School of Law, said in an interview. “The court has removed a promising tool for states.”

U.S. Senator Mitch McConnell, the Republican Senate minority leader from Kentucky, said in a statement the ruling is “another important victory for freedom of speech.”

There has been “only minimal corporate involvement in the 2012 election cycle,” McConnell wrote in the statement and in a brief filed in support of the group seeking to toss out Montana’s corporate political spending ban.

Secret Donors

Those committees are required to report donors; many nonprofit groups that also spend money in elections may keep their donors secret.

David Bossie, president of Citizens United, the nonprofit behind the Supreme Court case of the same name, said in a statement that the Montana decision is “another win for the First Amendment.”

The five members of the Citizens United majority -- Chief Justice John Roberts and Justices Antonin Scalia, Anthony Kennedy, Clarence Thomas and Samuel Alito -- remain on the court and made up the majority in yesterday’s decision. Dissenting were Justices Ruth Bader Ginsburg, Stephen Breyer, Sonia Sotomayor and Elena Kagan.

At the time of the 2010 Citizens United ruling, 22 states had laws banning or restricting spending by corporations and unions, according to a report this month by the Corporate Reform Coalition, made up of 75 organizations and individuals from good-governance groups, environmental groups and organized labor. Those states generally repealed their limits or declared that their laws are unenforceable, according to the report.

Appearance of Corruption

The exception was Montana, which chose to continue enforcing its corporate money ban.

At issue in the Montana case was the statement by the Citizens United majority that corporate campaign expenditures “do not give rise to corruption or the appearance of corruption.” That’s an important conclusion because the court has allowed campaign-finance restrictions as a means of fighting corruption.

Montana argued that local and state elections are especially susceptible to corruption from corporate spending.

The Supreme Court put a hold on the law in February.

Montanans enacted the 1912 Corrupt Practices Act by ballot initiative. In its 5-2 ruling upholding the law, the Montana Supreme Court said the state had “unique and compelling interests” in barring corporate election spending. The majority pointed to the so-called “copper king” battle at the beginning of the 20th century, when entrepreneur Augustus Heinze and the Anaconda Co., controlled by Standard Oil, used their money to vie for dominance of the state’s government.

Shell of Authority

When the law was enacted, “the state of Montana and its government were operating under a mere shell of legal authority, and the real social and political power was wielded by powerful corporate managers to further their own business interests,” the Montana court majority said.

The Montana law barred direct election spending by corporations, including incorporated interest groups. Corporations must establish traditional political action committees, which can solicit voluntary contributions from employees. The committees were subject to contribution limits and disclosure requirements.

The challengers included American Tradition Partnership Inc., described on its website as opposed to “environmental extremism,” the Montana Shooting Sports Association Inc., a gun rights and firearms-safety group, and Champion Painting Inc., a painting and drywall business with a single shareholder.

The case is American Tradition Partnership v. Attorney General for the State of Montana, 11-1179.

To contact the reporters on this story: Greg Stohr in Washington at gstohr@bloomberg.net; Julie Bykowicz in Washington at jbykowicz@bloomberg.net

To contact the editor responsible for this story: Steven Komarow at skomarow1@bloomberg.net


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