Victory: Corporate Challenge to Contribution Ban Fails as U.S. Supreme Court Lets Massachusetts Decision Stand

We recently celebrated a victory as the U.S. Supreme Court declined to hear 1A Auto, Inc. v. Sullivan, a challenge to a Massachusetts state law banning corporate contributions to political candidates. Free Speech For People worked with Common Cause Massachusetts on an amicus brief in the state supreme court.

The corporate challenge

Massachusetts has prohibited business corporations from making political contributions since 1907. In 2015, two business corporations, represented by the Arizona-based Goldwater Institute, challenged this law in Massachusetts state court. A key part of the corporations’ challenge was that, while Massachusetts law prohibits corporations from contributing to candidates at all, an administrative “interpretive bulletin” by the state Office of Campaign and Political Finance (OCPF) permitted labor unions to contribute up to $15,000 per year to a single candidate.

In 2015, the trial court rejected the corporations’ claims. We wrote about the trial court decision in this case, then known as 1A Auto Inc. v. Sullivan. Despite a blistering rebuke by the lower court ruling that the corporate challenge “flies in the face of years of U.S. Supreme Court and U.S. Court of Appeals jurisprudence upholding such a ban” on corporate contributions, the plaintiffs and their counsel, the Arizona-based Goldwater Institute, pressed on as part of a national strategy to weaken state protections against expanding money in politics, and appealed to the Massachusetts Supreme Judicial Court.

Our amicus brief

Free Speech For People, working closely with Common Cause, filed a “friend of the court” brief emphasizing that in this case, there was no reason to reach the constitutional claims raised by the plaintiffs. The basis for the difference between corporations (which are prohibited from contributing to candidates) and unions (which could contribute up to $15,000 per year) was not the law itself, which provides no such $15,000 limit. Under the law itself, a labor union could (like any other organization) establish a political committee that can receive up to $500 from each donor and then contribute, at most, $500 to each candidate. As we emphasized, the $15,000 “limit” was not in the law, but rather an exemption created through an “interpretive bulletin” issued by OCPF. And the interpretive bulletin was incompatible with the statute that the Goldwater Institute challenged.

Common Cause and Free Speech For People argued that a dubious administrative bulletin was no basis on which to strike down a century-old corporate contribution ban. Shortly after we filed our amicus brief, the state sent a letter to the court noting that “[t]he amicus brief raises, for the first time, important concerns about the compatibility of OCPF’s Interpretive Bulletin … with the statute it interprets … [and] whether [the bulletin], as a standard or requirement of general application, should have been promulgated as a regulation.”

The Supreme Judicial Court’s decision

On March 6, 2018, the Massachusetts Supreme Judicial Court heard oral arguments. During oral argument, the state specifically cited the argument in our brief in response to a suggestion by Justice Scott Kafker that “You’ve got to defend the $15,000 difference.”

On September 6, 2018, the Supreme Judicial Court issued its opinion rejecting the corporate challenge to the contribution limits. Following U.S. Supreme Court precedent, the Supreme Judicial Court emphasized the key distinction between contributions and independent expenditures established in Buckley v. Valeo and reaffirmed by Citizens United. As the Court explained, unlike limits on independent expenditures which are reviewed under strict scrutiny, contribution limits are reviewed under a less rigorous standard because they are viewed as only a “marginal restriction” upon speech. As a result, contribution limits are upheld so long as they are “closely drawn” to match a “sufficiently important interest.” Based upon the law and the record in Massachusetts, the Court concluded that such an important interest was at stake here, explaining that “[b]oth history and common sense have demonstrated that, when corporations make contributions to political candidates, there is a risk of corruption, both actual and perceived.”

The Court also saw through the plaintiffs’ equal protection arguments as a cynical attempt to “reframe their First Amendment challenge, to effect an end run around the Supreme Court’s well-established distinction between independent expenditure limits, which trigger strict scrutiny, and contribution limits, which do not.”

In response to our arguments about the interpretive bulletin departing from the statute, the Supreme Judicial Court noted the point raised in our amicus brief:

An administrative bulletin, as opposed to a regulation that has benefited from the full rulemaking process, with opportunity for notice and comment is entitled to substantial deference but it is not a promulgated regulation that carries the force of law. The question whether OCPF’s interpretive bulletin accurately interprets [the statute] has not, to our knowledge, been addressed in a court of law. . . . We note that, under current Massachusetts law, it is not clear to what extent unions and nonprofit organizations are free to make political contributions.

However, the court declined to address the statutory issue because the parties themselves had not raised it.

Recent developments

The corporate challengers petitioned the U.S. Supreme Court for certiorari review, supported by four amici curiae briefs from pro-corporate entities: the Fiscal Alliance Foundation, Pacific Legal Foundation, Landmark Legal Foundation, and Liberty Justice Center.

Meanwhile, in response to the Supreme Judicial Court’s opinion and a request for rulemaking from our partner Common Cause, the state Office of Campaign Finance reopened the administrative bulletin that created the $15,000 “union loophole” in the first place. We commented first on an advanced notice of proposed rulemaking and then again in response to draft regulations. (The agency’s final regulation did not go as far as we had urged, but represents a solid step in the right direction.)

On May 20, 2019, the Supreme Court denied the petition for certiorari, thus ending the case.

Significance

This case is important for several reasons. First, the case was clearly conceived by the Goldwater Institute not just as a challenge to a Massachusetts statute, but as a vehicle to try to persuade the U.S. Supreme Court to strike down bans on contributions from corporations to candidates. Besides Massachusetts, 21 other states (across a wide range of geography and political composition) and the federal system prohibit corporate contributions to candidates. A ruling striking down Massachusetts’s ban would likely have invalidated those bans as well, with major national repercussions.

Second, we succeeded in complicating the case to keep it out of the Supreme Court. The Goldwater Institute likely believed that Massachusetts’s law was particularly vulnerable due to the difference in how corporations and labor unions were treated. In its trial court briefing and opening briefs in the Massachusetts Supreme Judicial Court, OCPF did not acknowledge any potential weaknesses in its interpretive bulletin. But after Free Speech For People and Common Cause filed our joint amicus brief, the state began to acknowledge this complication, and it became an issue at oral argument before the Supreme Judicial Court, which noted it as an open question. At the Supreme Court, the state used this issue (and the subsequent rulemaking process) as an argument against certiorari review, arguing that “the legal framework governing campaign contributions by nonprofit organizations and labor unions in Massachusetts is in flux, making this case an especially poor vehicle for addressing petitioners’ equal protection claim and argument about underinclusiveness” because “the evolving legal framework governing campaign contributions by nonprofit organizations and labor unions in Massachusetts could hinder this Court’s review of petitioners’ equal protection claim and the underinclusiveness component of their First Amendment claim.”

Finally, looking forward, the Massachusetts court’s decision is also important for additional legal groundwork laid in a concurring opinion by Justice Budd. In assessing whether the state has a “sufficiently important interest” in regulating corporate contributions, Justice Budd pointed to Article 5 of the Massachusetts Constitution, which creates an agency relationship between the people and their representatives: “All power residing originally in the people, and being derived from them, the several magistrates and officers of government, vested with authority, whether legislative, executive, or judicial, are their substitutes and agents, and are at all times accountable to them.” Justice Budd explained how a system that creates a “donor class” separate and distinct from “the people” competes with Article 5’s directive that elected officials should act in the interest of their principals. This argument also expands the bounds of what constitutes “the appearance of corruption” by tying it to the strain that campaign contributions impose on the agency relationship contemplated by Article 5, and therefore implicates the very “form and character of our representative democracy itself.” As Justice Budd explained, “the campaign finance system has created incentives for representatives to act not simply with the interests of the public in mind, but instead with an eye toward balancing the interests of the donors and the public, which may at times be divergent,” and framed this disparity of interests in terms of Article 5. This concurring opinion may provide an important foundation for further innovative legal developments.


Learn more at our 1A Auto, Inc. v. Sullivan case page.

 

 

 

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