No. 08-205

In the Supreme Court of the United States

CITIZENS UNITED, APPELLANT

v.

FEDERAL ELECTION COMMISSION

ON APPEAL FROM THE 

UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF COLUMBIA

SUPPLEMENTAL REPLY BRIEF FOR THE APPELLEE

ELENA KAGAN

Solicitor General

Counsel of Record

Department of Justice

Washington, D.C. 20530-0001

(202) 514-2217
(I)

TABLE OF CONTENTS

Page

A. Appellant has failed to preserve a challenge

to Austin ....................................... 1

B. Austin is not an outlier but rather reflects a

core principle of campaign-finance law, and it

is entitled to full stare decisis effect . . . . . . . . . . . . . . . . 2

C. The Court in Austin correctly held that

electoral advocacy by for-profit corporations

raises special concerns . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

D. The Court in Austin correctly held that nonprofit corporations may be regulated if they

are potential conduits for electoral spending

by business corporations . . . . . . . . . . . . . . . . . . . . . . . . 10

E. If Austin remains good law, there is no sound

basis for overruling McConnell . . . . . . . . . . . . . . . . . . . 11

Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

TABLE OF AUTHORITIES

Cases:

Austin v. Michigan State Chamber of Commerce,

494 U.S. 652 (1990) . . . . . . . . . . . . . . . . . . . . . . . . . . 1, 7, 10

Board of Trs. v. Fox, 492 U.S. 469 (1989) ............... 2

Buckley v. Valeo, 424 U.S. 1 (1976) . . . . . . . . . . . . . . . . 3, 8, 9

Davis v. FEC, 128 S. Ct. 2759 (2008) ................... 3

FEC v. Massachusetts Citizens for Life, Inc.,

479 U.S. 238 (1986) . . . . . . . . . . . . . . . . . . . . . . . . . . . 3, 4, 7

FEC v. National Conservative PAC, 470 U.S. 480

(1985) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3, 8

FEC v. National Right to Work Comm., 459 U.S.

197 (1982) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4, 7
II

Cases—Continued: Page

FEC v. Wisconsin Right to Life, Inc., 551 U.S.

449 (2007) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4, 9

First Nat’l Bank v. Bellotti, 435 U.S. 765 (1978) . . . . . . . 3, 8

McConnell v. FEC, 540 U.S. 93 (2003) . . . . . 2, 4, 5, 6, 10, 11

Mills v. Alabama, 384 U.S. 214 (1966) . . . . . . . . . . . . . . . . 10

Constitution, statutes and regulations:

U.S. Const. Amend. I . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2, 4, 9

Bipartisan Campaign Reform Act of 2002,

Pub. L. No. 107-155, § 203, 116 Stat. 91 ........ passim

Tillman Act of 1907, ch. 420, 34 Stat. 864 ............... 3

2 U.S.C. 441b . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4, 9

2 U.S.C. 441b(b)(2)(C) ............................... 6

11 C.F.R.:

Section 114.5(b) .................................. 6

Section 114.10 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

Section 114.15(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

Section 114.15(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

Miscellaneous:

FEC, Number of Federal PACs Increases

(Mar. 9, 2009) <http://www.fec.gov/press/

press2009/20090309PACcount.shtml> .............. 6
(1)

In the Supreme Court of the United States

No. 08-205

CITIZENS UNITED, APPELLANT

v.

FEDERAL ELECTION COMMISSION

ON APPEAL FROM THE 

UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF COLUMBIA

SUPPLEMENTAL REPLY BRIEF FOR THE APPELLEE

A. Appellant Has Failed To Preserve A Challenge To Austin

Appellant expressly abandoned its facial challenge to

BCRA Section 203 in the district court; its jurisdictional

statement did not cite Austin v. Michigan State Chamber

of Commerce, 494 U.S. 652 (1990); and its merits brief contained only a two-paragraph argument that Austin should

be overruled. Appellant nevertheless contends (Supp. Br.

20) that it preserved its current challenge to Austin by including in its jurisdictional statement a question as to

whether Hillary: The Movie was “subject to regulation”

under BCRA. Read in its entirety, however, that question

did not suggest any assault on Austin. See J.S. i (fourth

question presented). Rather, appellant asked—and in the

corresponding portion of the body of its jurisdictional statement discussed—whether BCRA could constitutionally be

applied to a full-length documentary film as distinct “from
2

the broadcast ‘ads’ at issue in” McConnell v. FEC, 540 U.S.

93 (2003). J.S. 26.

Appellant also suggests (Supp. Br. 19) that, because this

case falls within the Court’s mandatory appellate jurisdiction, appellant was not obliged to comply with the ordinary

requirement that it preserve its argument. But the courts

of appeals also have mandatory appellate jurisdiction, and

they routinely—and appropriately—decline to consider

arguments that were waived below or inadequately presented on appeal.

Appellant’s extraordinary contention (Supp. Br. 3) that

the Court should reach its facial challenge first, “even if”

appellant could prevail on narrower grounds, is particularly

unsound. That course of action would invert this Court’s

usual practice, which it follows in First Amendment cases

as in others: to adjudicate non-constitutional claims before

constitutional ones and as-applied challenges before facial

ones. Board of Trs. v. Fox, 492 U.S. 469, 484-485 (1989).

B. Austin Is Not An Outlier But Rather Reflects A Core Principle Of Campaign-Finance Law, And It Is Entitled To Full

Stare Decisis Effect

Appellant characterizes Austin as a “jurisprudential

outlier” that reflected a “precipitous break with prior precedent” and is in “unmistakable tension with later decisions.”

Supp. Br. 10. Appellant further suggests (id. at 14-15) that

Austin’s “aberrational” nature deprives it of full stare

decisis effect. Those arguments are fundamentally wrong.

1. Since 1947, Congress has barred the use of corporate-treasury funds for independent expenditures in federal

election campaigns. FEC Supp. Br. 7-8, 16. Far from

breaking new ground, the Austin Court’s recognition that

corporate electioneering poses distinctive and serious concerns simply confirmed a congressional judgment incorpo-
3

rated in federal law for more than 40 years prior to the decision. Indeed, the different treatment of corporations in

federal election law has its roots in legislation enacted more

than a century ago, the Tillman Act of 1907. In asserting

(Supp. Br. 15) that “no considerations of ‘antiquity’” weigh

against overruling Austin, appellant ignores Congress’s

longstanding efforts to restrict corporate influence in elections.

2. In arguing that Austin is inconsistent with the bulk

of this Court’s campaign-finance jurisprudence, appellant

principally relies on decisions that either did not specifically

consider corporate electioneering, see Davis v. FEC, 128

S. Ct. 2759 (2008); FEC v. National Conservative PAC, 470

U.S. 480 (1985) (NCPAC); Buckley v. Valeo, 424 U.S. 1

(1976) (per curiam), or did not involve the election of candidates to public office, see First Nat’l Bank v. Bellotti, 435

U.S. 765 (1978). Appellant’s reliance on Bellotti is particularly misplaced because the Court there explained that its

“consideration of a corporation’s right to speak on issues of

general public interest implies no comparable right in the

quite different context of participation in a political campaign for election to public office.” Id. at 788 n.26. The

Court further observed that various federal statutes addressed “the problem of corruption of elected representatives through the creation of political debts,” and that

“Congress might well be able to demonstrate the existence

of a danger of real or apparent corruption in independent

expenditures by corporations to influence candidate elections.” Ibid.; see FEC Supp. Br. 8-9. The state statute

struck down in Bellotti is further distinguishable from

BCRA Section 203 because it offered no PAC option and

therefore imposed a true ban on corporate speech concerning referenda. See 435 U.S. at 768 n.2; FEC v. Massachusetts Citizens for Life, Inc., 479 U.S. 238, 259 n.12 (1986)
4

(MCFL) (explaining that the PAC-financing requirement

imposed by 2 U.S.C. 441b “is of course distinguishable from

the complete foreclosure of any opportunity for political

speech that [the Court] invalidated in the state referendum

context in” Bellotti); pp. 6, 7-8, infra.

When this Court has specifically focused on corporate

participation in candidate elections, it has recognized that

Congress’s longstanding effort “to account for the particular legal and economic attributes of corporations and labor

organizations warrants considerable deference.” FEC v.

National Right to Work Comm., 459 U.S. 197, 209 (1982).

In MCFL, the Court held that a narrow class of nonprofit

corporations is entitled to a constitutional exemption from

the restrictions imposed by 2 U.S.C. 441b, see 479 U.S. at

259-265, but did not otherwise question Section 441b’s constitutionality, see id. at 259, 263. In sustaining BCRA Section 203 against a facial First Amendment challenge, the

Court in McConnell stated that “Congress’ power to prohibit corporations and unions from using funds in their

treasuries to finance advertisements expressly advocating

the election or defeat of candidates has been firmly embedded in our law.” 540 U.S. at 203. And the controlling opinion in FEC v. Wisconsin Right to Life, Inc., 551 U.S. 449

(2007) (WRTL), while holding BCRA Section 203 unconstitutional as applied to the particular corporation-funded

advertisements at issue, cast no doubt on Congress’s authority to bar the use of corporate-treasury funds for express electoral advocacy or its functional equivalent. See

id. at 464-481 (opinion of Roberts, C.J.). The Court’s decision in Austin is thus fully consistent with this Court’s

other precedents addressing the constitutionality of restrictions on corporate spending in candidate elections.

3. In arguing that Austin is entitled to reduced stare

decisis effect, appellant suggests that the underlying First
5

1 Amicus CED’s brief suggests (at 11-15) one reason: many CEOs

view the current restrictions on corporate electoral spending as preventing a wasteful arms race, in which corporations would have to

spend ever more money to compete for influence over public officeholders. 

Amendment question has somehow remained unsettled

because “BCRA § 203 has been subject to repeated constitutional challenges since its enactment in 2002.” Supp. Br.

14 (citing McConnell and WRTL). But even if regulated

entities’ resistance to a decision of this Court could reduce

its precedential force, this constitutional challenge to

BCRA Section 203—the argument that for-profit corporations’ electioneering cannot be regulated at all and that

Austin was wrongly decided—has never been made to the

Court until the two-paragraph discussion appeared in appellant’s merits brief. In McConnell, the plaintiffs did not dispute that corporations may be barred from using their treasury funds for express electoral advocacy; they asserted

only a right to use treasury funds for everything except express advocacy. See 540 U.S. at 189-194, 203-209. One nonprofit plaintiff (WRTL) subsequently prevailed in an asapplied challenge to BCRA Section 203, but it likewise did

not advocate the overruling of Austin.

Thus, until this case reached the Court, the regulated

community—while continuing to litigate questions concerning the appropriate test for identifying electoral advocacy

and the precise scope of the constitutional exemption

granted to certain nonprofit corporations—had acquiesced

in Austin’s core holding.1

 In short, the principle that corporations may be barred from using treasury funds for independent electoral advocacy is just as settled as the different

principle on which appellant relies, that individuals’ independent electioneering cannot be restricted.
6

2 More than 1500 business corporations maintain their own PACs,

and many more are represented by trade-association PACs. See FEC,

Number of Federal PACs Increases (Mar. 9, 2009) <http://www.fec.

gov/press/press2009/20090309PACcount.shtml>. Various amici suggest that requiring corporations to finance electioneering with PAC rather than treasury funds is unconstitutional because maintaining a PAC

is difficult and expensive. But for-profit corporations can use their

treasury funds to set up and administer their PACs, see 2 U.S.C.

441b(b)(2)(C); 11 C.F.R. 114.5(b), thereby ensuring that all funds raised

for political advocacy can be spent on political advocacy.

C. The Court In Austin Correctly Held That Electoral Advocacy By For-Profit Corporations Raises Special Concerns

For-profit corporations have attributes that no natural

person shares. Three characteristics of the state-created

business corporation justify the special rule that Congress

has applied to those entities for more than 60 years.

1. Corporate speech is speech by proxy, and the individuals who own, fund, or manage a corporation remain free

to engage in their own advocacy no matter what restrictions

are placed on the corporation. Indeed, they can even band

together to do so under the corporate name: business corporations can and do engage in electoral advocacy through

their PACs, which ensure that the advocacy is funded only

by stockholders and employees who choose to take part.2

Appellant is therefore simply wrong in characterizing

BCRA Section 203 as a “ban” or “prohibition” (Supp. Br. 1,

10) on corporate electoral speech.

2. A business corporation’s use of treasury funds for

electoral advocacy distorts the political process because the

communication does not correspond to the electoral preferences of the individuals whose money is used to fund it.

Dissenting in McConnell, Justice Scalia alluded to the signers of the Declaration of Independence, who pledged their

“Fortunes” alongside their “sacred Honor.” 540 U.S. at
7

3 Austin’s reference to “public support” is best understood to refer,

not to popularity within the community at large (see U.S. Chamber

Supp. Br. 13-14), but to support among those in whose name the message is propagated—i.e., the shareholders whose resources are funding

the electioneering.

255. But John Hancock pledged his own fortune; when the

CEO of John Hancock Financial uses corporate-treasury

funds for electoral advertising, he pledges someone else’s.

Corporate electoral spending is thus distortive because it

converts the resources of individuals into political expression with which they may well disagree—or, otherwise said,

because such spending fails to “reflect actual public support

for the political ideas espoused by corporations.” Austin,

494 U.S. at 660.3

Even before Austin, this Court had recognized the government’s interest in protecting corporate shareholders

“from having [their] money used to support political candidates to whom they may be opposed.” NRWC, 459 U.S. at

208; accord MCFL, 479 U.S. at 260. A union member’s

analogous interest has constitutional stature, see FEC

Supp. Br. 13, and the shareholder-protection interest is

properly viewed as compelling here. Appellant’s conclusory

assertion that the interest “is not * * * compelling”

(Supp. Br. 13) is supported only by a reference to NCPAC,

but that decision says nothing about the shareholder question, either on the cited page or elsewhere. The PAC option

both furthers the shareholder-protection interest and facilitates voluntary advocacy. Willing individuals associated

with the corporation can pool their resources for effective

electoral advocacy under the corporation’s auspices, while

unwilling shareholders are protected against the diversion

to electoral advocacy of funds they invested for a different
8

4 As appellant emphasizes (Supp. Br. 10, 13-14), the Bellotti Court

found shareholder protection to be an insufficient justification for the

Massachusetts statute at issue there. Public advocacy concerning ballot

measures, however, is directed at the “lawmakers” themselves (the citizens) and thus resembles lobbying, a traditional business activity in

which shareholders would expect their corporations to engage. Moreover, the likelihood that a shareholder would disapprove of corporate

officers’ electoral preferences is greater in candidate elections than in

referenda, because legislators vote on a variety of measures that have

no discernible impact on a particular corporation. The Bellotti Court

also emphasized the “overinclusiveness” of the Massachusetts statute,

noting that it would prohibit even corporate electioneering that shareholders “unanimously” approved. 435 U.S. at 794. By contrast, BCRA

Section 203’s PAC option ensures that willing shareholders can pool

their resources for electioneering under the corporation’s auspices.

purpose. The result is both fairer to individual shareholders and less distortive of the political process.4

3. For-profit corporations are inherently more likely

than individuals to engage in electioneering behavior that

poses a risk of actual or apparent corruption of office-holders. See FEC Supp. Br. 9; CPA Supp. Br. 12-14; NCPAC,

470 U.S. at 500. The Buckley Court’s observation that independent expenditures “may prove counterproductive” to

the candidate they support, 424 U.S. at 47, has no meaningful application to modern business corporations. An individual may simply wish to add his own views to the debate,

and those views may be idiosyncratic or “off message.”

Business corporations, by contrast, have no beliefs to express, but rather engage in electoral advocacy for purely

instrumental reasons. See FEC Supp. Br. 10 n.2; CED Br.

10.

For an independent expenditure to incur a candidate’s

gratitude (or temper the candidate’s hostility, see CED Br.

11-13; Justice at Stake Br. 17), it need only be known to the

candidate and perceived to be effective in assisting her
9

5 Appellant’s contention (Supp. Br. 22) that the government must

prove a likelihood of corruption with respect to each corporate communication misreads this Court’s cases. When the Court has upheld campaign-finance regulation on an anti-corruption rationale, it has never

required proof of likely harm at the level of specificity that appellant

now demands. See Buckley, 424 U.S. at 27-28; accord WRTL, 551 U.S.

at 464-465, 469 (opinion of Roberts, C.J.).

campaign. Since Buckley, both ends have become much

easier for an independent-expenditure sponsor to achieve.

Now that virtually every campaign advertisement is available online, along with data showing how it is targeted, a

sophisticated business corporation can easily make wellpublicized efforts that harmonize neatly with a candidate’s

message, without the need for overt coordination. CPA

Supp. Br. 15. The mammoth record compiled in McConnell

confirmed that, before BCRA, corporations had repeatedly

used electioneering advertisements to curry favor with, and

gain influence over, federal office-holders. See FEC Supp.

Br. 8.5

4. Appellant contends (Supp. Br. 11-12) that the restrictions on corporate spending at issue here and in Austin

are “dramatically underinclusive” because they do not apply to wealthy individuals or media commentary. Corporations, however, reap special state-created advantages that

are unavailable to natural persons, and restrictions on individual advocacy comparable to 2 U.S.C. 441b or BCRA Section 203 would impose far greater burdens on First Amendment interests because they would prevent natural persons

from spending their own money to disseminate their own

ideas. See FEC Supp. Br. 9-10. At the same time, as stated

above, the dangers of actual and apparent corruption from

corporate electioneering dwarf those arising from individual expenditures.
10

6 Various amici contend that the MCFL exemption should be extended to nonprofits that accept only small amounts of corporate funding.

Whatever force that contention might have in particular cases, see FEC

Supp. Br. 3 n.1, it is irrelevant to the facial challenge on which this

Court requested supplemental briefing. And appellant has neither preserved nor adequately documented an argument that its overall corporate funding is so small as to qualify for an as-applied exemption. See

FEC Br. 29-30.

This Court has previously upheld federal and state electioneering restrictions that distinguish between media commentary and other corporate electoral advocacy. See

McConnell, 540 U.S. at 208-209; Austin, 494 U.S. at 666-

668. In so doing, the Court has recognized the special role

the press plays in maintaining a vibrant sphere of free expression. See, e.g., Mills v. Alabama, 384 U.S. 214, 218-219

(1966). And investors in media corporations presumably

understand that their company’s business is disseminating

content, including electoral and other political commentary,

to the viewing public.

D. The Court In Austin Correctly Held That Nonprofit Corporations May Be Regulated If They Are Potential Conduits

For Electoral Spending By Business Corporations

Appellant asserts (Supp. Br. 12) that, under current law,

“individuals of modest means are barred * * * from pooling their resources to fund the political speech of ideologically oriented nonprofit corporations.” But if appellant

raised its money wholly from individual donations, it would

be free under MCFL to use those funds for electoral advocacy. FEC Br. 29-32; 11 C.F.R. 114.10. Instead, appellant

raised funds to produce Hillary from for-profit corporations. J.A. 244a, 251a-252a. Those corporations cannot be

allowed to evade the government’s compelling interests by

funneling their monies through ideological nonprofits like

appellant. FEC Supp. Br. 13-15.6
11

7 No one contends that Austin, which involved an advertisement containing “magic words” of express advocacy, has proved difficult to apply

in practice.

Appellant contends (Supp. Br. 11) that Congress cannot

prevent nonprofit corporations from being used as conduits

for business-corporation electoral spending because it could

not preclude individuals who receive corporate money

from spending it on electoral advocacy. There is ample

reason, however, to distinguish between the two situations.

A nonprofit corporation can be created quickly and relatively cheaply; given an appealing name, see McConnell,

540 U.S. at 197; operated for a single purpose; easily controlled by donors; and terminated when the task is done.

Individuals share none of those attributes.

E. If Austin Remains Good Law, There Is No Sound Basis For

Overruling McConnell

Appellant does not contend that McConnell should be

overruled if Austin remains good law. Supp. Br. 21. That

reticence is well-advised, because there is no sound basis

for drawing a constitutional distinction between express

advocacy and its functional equivalent. See FEC Supp. Br.

21.

Some amici contend that McConnell—or, more precisely, the two-year-old lead opinion in WRTL—has already

proved unworkable.7

 Those contentions are unfounded.

The FEC has faithfully implemented WRTL by adopting

easy-to-apply safe harbors, 11 C.F.R. 114.15(b), and by

making clear that even advertisements outside the safe

harbors are exempt if there is any reasonable doubt about

their electioneering nature, 11 C.F.R. 114.15(c). And while

appellant asserts (Supp. Br. 17) that “no corporation or

labor union would dare opine on a candidate’s qualifications

without checking with the FEC first,” in the short time
12

since WRTL, corporations and other groups using corporate money have spent well over $100 million on electioneering communications claiming exemption under WRTL.

FEC Supp. Br. 22-23.

CONCLUSION

For the foregoing reasons, as well as those stated in our

previous briefs and at oral argument, the judgment of the

district court should be affirmed.

Respectfully submitted.

ELENA KAGAN

Solicitor General

AUGUST 2009