Supreme Court Rejects Challenge to Soft-Money Rules of McCain-Feingold Act

This morning, the U.S. Supreme Court summarily affirmed a lower court decision rejecting a challenge to the “soft money” rules of the McCain-Feingold Bipartisan Campaign Reform Act of 2002.

This is a significant development, likely with positive implications for Free Speech For People’s work to limit contributions to super PACs and the influence of foreign-influenced corporations.

Soft money

Federal law has long set limits on the size of contributions to national political parties, and prohibited certain contributions altogether (e.g., from corporations). Before the McCain-Feingold law, national political parties would often set up two accounts: a “hard money” account that would take only money that complied with these limits, and a “soft money” account that would take money above and beyond those limits, or from corporations. The “soft money” would be used for activities that nominally did not involve federal elections, such as get-out-the-vote efforts supposedly for a local election or general issue advertisements, but which in fact affected federal elections. Over time, soft money became an opportunity for big donors to do an end-run around the limits, and “soft money often dwarfed contributions of hard money.”

The McCain-Feingold law aimed to plug the soft money loophole by banning national political parties from accepting any “nonfederal” money, i.e., money that did not comply with the federal limits. But “Congress additionally understood that the soft-money ban for national parties would have little effect if state and local parties remained free to use nonfederal money for activities affecting federal elections—donors would then simply route soft-money donations to state and local parties instead of national parties.” So the McCain-Feingold law prohibits state and local political parties from using nonfederal (soft) money for federal election activity.

The Supreme Court upheld this in 2003’s McConnell v. FEC opinion. As the Court explained:

[C]orporate, union, and wealthy individual donors have been free to contribute substantial sums of soft money to the national parties, which the parties can spend for the specific purpose of influencing a particular candidate’s federal election. It is not only plausible, but likely, that candidates would feel grateful for such donations and that donors would seek to exploit that gratitude. The evidence in the record shows that candidates and donors alike have in fact exploited the soft-money loophole, the former to increase their prospects of election and the latter to create debt on the part of officeholders, with the national parties serving as willing intermediaries. Thus, despite FECA’s hard-money limits on direct contributions to candidates, federal officeholders have commonly asked donors to make soft-money donations to national and state committees “solely in order to assist federal campaigns,” including the officeholder’s own.

The Republican Part of Louisiana’s Challenge

In 2010, the Supreme Court decided Citizens United v. FEC, which struck down limits on corporate independent spending, and in the process, overruled other parts of the McConnell decision unrelated to soft money. And later in 2010, a lower federal court of appeals extended Citizens United by issuing SpeechNow.org v. FEC, which struck down limits on contributions to “independent expenditure” political committees, thus creating super PACs. (The Department of Justice declined to appeal SpeechNow to the Supreme Court.) Opponents of campaign finance reform were on a roll.

The Republican Party of Louisiana challenged the soft-money ban as violating the First Amendment’s protections for freedom of speech.  A 2010 case had rejected a very similar claim, but perhaps the challengers thought that, in retrospect, that was too soon, and that now, the Court would be ready to strike down the soft money ban.

They were wrong. The lower court noted that the Supreme Court’s McConnell decision upheld the soft money ban, and that part of it still stands. And the Supreme Court affirmed the lower court’s judgment without opinion. The Court’s two-line ruling noted that Justices Gorsuch and Thomas would have set the case for argument; it says nothing about Justice Kennedy, Chief Justice Roberts, or Justice Alito, all part of the Citizens United majority. But as an affirmance, the panel opinion now enjoys the precedential force of a Supreme Court decision on the merits.

Soft Money and Super PACs

The pre-2002 “soft money” problem as described in McConnell sounds remarkably like the “super PAC” phenomenon that has exploded since 2010. Indeed, a research report that Free Speech For People released earlier this month, written by political scientist Stephen Weissman, found that “a considerable proportion of top individual and organizational donors to independent groups – approximately 40 to nearly 50% – followed a two-track policy of making legally limited contributions to party committees while also providing massive funds to party-linked Super PACs for the same elections.”

The large donors surveyed in this study made very substantial contributions to their preferred party committees. The size of these contributions, while within legal limits, assured that these donors would be noticed by party fundraisers, many of whom were themselves candidates and elected officials. When these donors simultaneously embellished their financing by massively subsidizing independent super PACs linked to the same parties in the same elections with unlimited contributions (anywhere from ten to eighty times larger than the legal limits on contributions to official party committees), they intensified the danger of corruption and its appearance. By ignoring such political realities, the SpeechNow decision has helped undermine federal contribution limits, the primary means of federal regulation of campaign financing.

Winning campaign finance reform in the Roberts-Gorsuch Supreme Court

In 2015, prior to Justice Antonin Scalia’s passing, Free Speech For People began developing a legal strategy to bring new test cases that could win at the Supreme Court, even under the Roberts Court as it existed at that time. These test cases were built under the assumption that we would need to get Justice Kennedy and/or Chief Justice Roberts on our side to prevail.

Today’s Republican Party of Louisiana decision is a positive signal. To be sure, it is difficult to read too deeply into a two-line ruling, and it could simply mean that the Court saw some defect in the particular appeal presented to it. But, read more broadly, it augurs well for Free Speech For People’s two major projects for changes in the jurisprudence of campaign finance reform at the Supreme Court.

First, we are working to end super PACs by overturning SpeechNow, the lower court decision that created them. Back in November 2015, when Justice Scalia’s continued tenure seemed assured, Professor Laurence Tribe of Harvard Law School explained (video; Newsweek op-ed) that the legal basis for the SpeechNow decision was wrong on the day it was decided, and at least one justice from the Citizens United majority would welcome a face-saving opportunity to rein in super PACs without needing to revisit Citizens United itself. That’s the premise of our case, filed in federal court in November: a narrow argument, crafted to appeal to Justice Kennedy or Chief Justice Roberts, that contributions to super PACs can create a risk of “quid pro quo” corruption. We are also working with St. Petersburg, Florida; the state legislature of Connecticut; and the state legislature of Massachusetts on legislation that would place limits on contributions to super PACs; if challenged in court, we would use the same argument in defense.

As explained here in depth, statements by Chief Justice Roberts (in a little-noticed passage in the McCutcheon decision) and Justice Kennedy (in a public speech) suggest that they are open to an opportunity to reverse SpeechNow without reversing Citizens United itself. The fact that they did not seek to re-open the soft money ban upheld in McConnell further supports that analysis, since, as noted above, party-linked super PACs serve essentially the same function that soft money did before McCain-Feingold.

Second, we are pushing back against political spending by foreign-influenced corporations. Foreign political spending through corporations is a concern to at least two of the justices on the Citizens United majority. In Citizens United itself, Justice Kennedy noted that the Court’s decision would not affect laws “preventing foreign individuals or associations from influencing our Nation’s political process.” And when President Obama warned in his 2010 State of the Union address that the decision could open the door to foreign political influence, Justice Alito famously mouthed “Not true.”

Crucially, at least one (maybe more) of the Citizens United justices voted to uphold a campaign finance law in a little-reported 2012 Supreme Court decision called Bluman v. FEC. In Bluman, the Court upheld a longstanding federal ban on “foreign nationals” contributing or spending any amount of money in federal, state, or local elections. While the Court’s opinion didn’t report who voted how, the composition of the Bluman Court was the exact same as the Citizens United Court. In other words, at least one of the justices on the Citizens United majority voted to strike down a ban on corporate political spending, but to uphold a ban on foreign political spending.

Yet foreign nationals can in fact leverage the resources of corporations to spend money in our elections. In the more obvious or extreme cases, such as a contribution to President Trump’s Inaugural Committee by an oil company owned by the Venezuelan government, current law may be sufficient. But in many other cases, foreign nationals can exert influence over corporations in a manner poorly captured by current law. That’s why our St. Petersburg, Connecticut, and Massachusetts work also includes preventive efforts targeted towards foreign-influenced corporate political spending in state and local elections.

Limiting political spending by corporations with substantial foreign ownership is an idea well tailored to the Supreme Court majority. As Charles Fried (a professor at Harvard Law School and former Solicitor General under President Reagan) notes in a letter he submitted in support of the St. Petersburg ordinance, Citizens United simply did not address this danger, and even a relatively small percentage of shareholders can dominate corporate governance in certain situations.

Bottom line: The Supreme Court’s decision is a good result in its own right, and a positive signal for our efforts to challenge super PACs and foreign-influenced corporate spending.

 

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