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 BRIEF FOR THE APPELLEE

ELENA KAGAN

Solicitor General

Counsel of Record

Department of Justice

Washington, D.C. 20530-0001

(202) 514-2217
(I)

QUESTION PRESENTED

Whether, for the proper disposition of this case, the

Court should overrule either or both Austin v. Michigan

State Chamber of Commerce, 494 U.S. 652 (1990), and

the part of McConnell v. FEC, 540 U.S. 93 (2003), which

addresses the facial validity of Section 203 of the Bipartisan Campaign Reform Act of 2002.
(III)

TABLE OF CONTENTS

 Page

A. This case is an unsuitable vehicle for reexamination of Austin and McConnell .............. 2

B. The Court’s decision in Austin was correct and

should not be overruled . . . . . . . . . . . . . . . . . . . . . . . . . . 5

1. The Court in Austin correctly held that

business corporations may be barred from

using treasury funds for electioneering, either

directly or through conduits . . . . . . . . . . . . . . . . . . . . 6

2. The decision in Austin ratified a longstanding

principle of federal and state election law on

which Congress has subsequently relied and

that should not now be abandoned . . . . . . . . . . . . . . 16

C. The relevant holdings of McConnell were correct

and should not be overruled . . . . . . . . . . . . . . . . . . . . . . 19

1. The Court in McConnell correctly held that

express advocacy and its functional equivalent

may be treated alike, and that BCRA’s

definition of “electioneering communication”

is not facially overbroad . . . . . . . . . . . . . . . . . . . . . . 20

2. No sound justification exists for overruling

the relevant holdings in McConnell . . . . . . . . . . . . . 22

Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

 TABLE OF AUTHORITIES

Cases:

Abood v. Detroit Bd. of Educ., 431 U.S. 209 (1977) . . . . . 13

Austin v. Michigan State Chamber of Commerce,

494 U.S. 652 (1990) ......................... passim
IV

Cases—Continued: Page

Buckley v. Valeo, 424 U.S. 1 (1976) . . . . . . . . . . . . . . . . . . . 11

Caperton v. A.T. Massey Coal Co., 129 S. Ct. 2252

(2009) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

Colorado Right to Life Comm., Inc. v. Coffman,

498 F.3d 1137 (10th Cir. 2007) ..................... 3

FEC v. Beaumont, 539 U.S. 146 (2003) . . . . . . . . . . . . . . . 15

FEC v. Massachusetts Citizens for Life, Inc.,

479 U.S. 238 (1986) . . . . . . . . . . . . . . . . . . 3, 7, 9, 12, 13, 14

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

197 (1982) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8, 9, 12, 15

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

449 (2007) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4, 22

Grojean v. Commissioner, 248 F.3d 572 (7th Cir.

2001) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

McConnell v. FEC:

251 F. Supp. 2d 176 (D.D.C.), aff’d in part and

rev’d in part, 540 U.S. 93 (2003) . . . . . . 8, 9, 10, 14, 20

540 U.S. 93 (2003) . . . . . . . . . . . . . . . . . 1, 14, 15, 19, 20, 21

Pipefitters Local Union No. 562 v. United States,

407 U.S. 385 (1972) ............................... 8

Randall v. Sorrell, 548 U.S. 230 (2006) ................ 4

State v. Alaska Civil Liberties Union, 978 P.2d 597

(Alaska 1999), cert. denied, 528 U.S. 1153 (2000) . . . . . 18

United States v. IBM Corp., 517 U.S. 843 (1996) . . . . . 5, 19

United States v. International Union UAW, 352 U.S.

567 (1957) ....................................... 7

United States v. United Foods, Inc., 533 U.S.

405 (2001) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
V

Constitution, statutes and regulation: Page

U.S. Const. Amend. I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

Bipartisan Campaign Reform Act of 2002, Pub. L. No.

107-155, 116 Stat. 81:

§ 203, 116 Stat. 91 . . . . . . . . . . . . . . . . . . . . . 4, 15, 19, 20

§ 403(a), 116 Stat. 113 . . . . . . . . . . . . . . . . . . . . . . . . . 23

Labor Management Relations Act, 1947, ch. 120,

§ 304, 61 Stat. 159 ................................ 7

2 U.S.C. 434(f)(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

2 U.S.C. 441b . . . . . . . . . . . . . . . . . . . . . . . . 8, 11, 14, 15, 16, 20

2 U.S.C. 441b(b)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

2 U.S.C. 441b(b)(2)(C) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

Ariz. Rev. Stat. Ann. (2006):

§ 16-917(C) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

§ 16-919 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

§ 16-920 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

11 C.F.R. 114.15 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

Miscellaneous:

147 Cong. Rec. (2001) :

p. 4895 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

p. 4899 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

pp. 4905-4907 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

p. 5003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

Alicia D. Evans, A Requiem for the Retail Investor?,

95 Va. L. Rev. 1105 (2009) . . . . . . . . . . . . . . . . . . . . . . . . 13
VI

Miscellaneous—Continued: Page

FEC:

Electioneering Communication Summary

(visited July 23, 2009) <http://www.fec.gov/

finance/disclosure/ECSummary.shtml> . . . . . . . . . 23

FEC Form 9 (2007) <http://www.fec.gov/pdf/

forms/fecfrm9.pdf> . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

Summary of PAC Activity (Apr. 24, 2009)

<http://www.fec.gov/press/press2009/20090415

PAC/documents/4sumhistory 2008_000.pdf> . . . . . 16

63 Fed. Reg. 29,359-29,360 (1998) ..................... 3

Dee J. Hall, High Court Races as Barroom Brawls,

Wis. State J., Apr. 6, 2008, at A1 . . . . . . . . . . . . . . . . . . 10

Thomas R. Phillips, The Merits of Merit Selection,

32 Harv. J.L. & Pub. Pol’y 67 (2009) . . . . . . . . . . . . . . . 10

Adam Winkler, “Other People’s Money”:

Corporations, Agency Costs, and Campaign

Finance Law, 92 Geo. L.J. 871 (2004) . . . . . . . . . . . . . . 12
(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 BRIEF FOR THE APPELLEE

The Federal Election Commission (FEC) respectfully submits this supplemental brief in response to this

Court’s order of June 29, 2009. For the reasons set

forth below, this case is an unsuitable vehicle in which to

re-examine either Austin v. Michigan State Chamber of

Commerce, 494 U.S. 652 (1990), or the relevant portion

of McConnell v. FEC, 540 U.S. 93 (2003). If the Court

reaches those questions, however, it should not overrule

either decision. The decisions in Austin and McConnell

were correct; a reversal of those decisions would likely

invalidate federal legislation that has restricted corporate electioneering for over 60 years, as well as similar

legislation enacted by many States; and basic principles

of stare decisis, including most notably concern with

reliance interests, demand adherence to precedent in

this case.
2

A. This Case Is An Unsuitable Vehicle For Re-Examination

Of Austin And McConnell

A decision overruling Austin and the relevant portion of McConnell would call into question the constitutionality of all federal and state regulation of all independent corporate electoral advocacy, including a federal law dating back to 1947 and the laws of dozens of

States. Overruling Austin and McConnell would fundamentally alter the legal rules governing participation of

corporations—including the Nation’s largest for-profit

corporations—in electoral campaigns, and would make

vast sums of corporate money available for overt electioneering. At least three idiosyncratic features of this

case make it a particularly unsuitable vehicle for considering a course of action that would have such far-reaching consequences.

1. Appellant is a nonprofit corporation whose stated

purpose is expressly ideological: “to promote the social

welfare through informing and educating the public on

conservative ideas and positions on issues.” J.A. 11a. In

addition, appellant has represented to this Court that

the funds used to finance Hillary: The Movie were

raised “overwhelmingly” from individual donations. Appellant’s Br. 29-34. For those reasons, appellant is, according to its own self-description, a distinctly atypical

corporation.

These special features of appellant make it an inappropriate prism through which to view the world of corporate electioneering. A decision recognizing a constitutional right for large for-profit corporations to use their

general treasuries, as opposed to segregated funds (i.e.,

PACs), to advocate the election or defeat of candidates

for public office would have potentially avulsive consequences. And because most such corporations engage in
3

1 This Court has held that certain small, ideologically-oriented corporations are constitutionally entitled to use their treasury funds for

independent electoral advocacy if, inter alia, they have a policy against

accepting contributions from business corporations or labor unions.

See FEC v. Massachusetts Citizens for Life, Inc., 479 U.S. 238, 264

(1986) (MCFL); FEC Br. 3. Thus, corporations having the attributes

that appellant says it possesses—i.e., corporations that rely principally

on individual donations but that nevertheless fail to qualify for the

MCFL exception—are likely to be both rare and unrepresentative of

the corporations that would be most substantially affected by a decision

overruling Austin and McConnell. Some courts before McConnell, and

one court afterward, have held that a corporation may claim the MCFL

exemption even if it raises de minimis sums from corporate donations

or business revenue. See, e.g., Colorado Right to Life Comm., Inc. v.

Coffman, 498 F.3d 1137, 1148-1151 (10th Cir. 2007); see also 63 Fed.

Reg. 29,359-29,360 (1998) (discussing disagreement among lower

courts). If appellant’s overall operations are financed “overwhelmingly”

by individual donations, as it asserts is true of the financing of Hillary,

appellant would appear to be covered by these decisions.

businesses that are essentially unrelated to the dissemination of political ideas, restrictions on their electioneering intrude less significantly on their performance of

core functions than is true of a nonprofit advocacy corporation like appellant. Even many nonprofit corporations, including the plaintiff in Austin, see 494 U.S. at

664, receive much more substantial funding from business corporations than appellant claims to receive (at

least for the financing of Hillary). Any re-examination

of the constitutional rules governing electoral advocacy

by for-profit corporations, or by nonprofit corporations

that are substantially financed by for-profit businesses,

should occur in a case to which such a corporation is a

party.1

2. The question the Court has set to the parties is

not appropriately raised in this case. Early in this litigation, appellant asserted a facial challenge to BCRA
4

Section 203, of the kind decided in McConnell. J.A. 23a24a. Appellant subsequently announced, however, that

it “inten[ded] to abandon th[at] count,” 07-CV-2240

Docket entry No. 52, at 1-2 (D.D.C. May 16, 2008), and

the parties stipulated to dismiss the facial challenge.

See id. Nos. 53 (May 22, 2008), 54 (May 23, 2008). Appellant’s jurisdictional statement did not urge that either

Austin or McConnell should be overruled. See FEC Br.

33-34.

Appellant’s merits briefs contained, in total, only two

paragraphs and a footnote arguing that Austin should

be overruled. See Appellant’s Br. 30-31; Appellant’s

Reply Br. 16 n.7. Those briefs did not discuss considerations of stare decisis, and they did not urge the Court

to overrule the relevant portion of McConnell. That is

an even more “incomplete presentation” than the “afterthought” assault on another campaign-finance principle

that this Court rejected three Terms ago. Randall v.

Sorrell, 548 U.S. 230, 263 (2006) (Alito, J., concurring in

part and concurring in the judgment); see FEC Br. 34-

35. At oral argument, moreover, appellant effectively

abandoned its challenge to Austin by (a) acknowledging

that General Motors can constitutionally be banned from

broadcasting express electoral advocacy and (b) expressly “accept[ing] the Court’s decision in” FEC v.

Wisconsin Right to Life, Inc., 551 U.S. 449 (2007)

(WRTL), under which a corporation may use treasury

funds for candidate-related broadcast advertising only

when the advertising is not the functional equivalent of

express electoral advocacy. Tr. of Oral Arg. 9, 55.

Rather than mounting any sustained challenge to

Austin or the relevant portion of McConnell, appellant

argued (1) that it received insubstantial funding from

business corporations to produce Hillary, (2) that Hil-
5

lary is a feature-length film meant to be distributed

through video-on-demand, and (3) that Hillary does not

contain express advocacy or its functional equivalent.

Appellant’s own litigation choices make this case an unsuitable vehicle for reconsidering Austin and McConnell, particularly given the far-reaching consequences

that overruling those decisions would entail. Cf., e.g.,

United States v. IBM Corp., 517 U.S. 843, 856 (1996).

When a plaintiff asserts only as-applied challenges to a

statute, the usual course is to consider only those challenges. If one or more has merit, the Court should reverse the judgment on that ground. If, as here, those

challenges lack merit or are procedurally barred, the

proper disposition is to affirm—not to question the statute’s facial constitutionality.

3. Appellant was a plaintiff in McConnell, joining

with other parties to challenge BCRA’s restrictions on

the use of corporate treasury funds for electioneering

communications. Br. for Appellants Paul et al. at 5,

McConnell, supra (No. 02-1747). Appellant’s brief cited

Austin only in a single footnote, which did not urge that

the decision be overruled. Id. at 26 n.9. Appellant’s

party status in McConnell, combined with its failure to

urge the overruling of Austin during that massive litigation conducted to resolve facial constitutional challenges

to BCRA, would render particularly inappropriate a

decision by the Court to reverse either of those decisions

in this litigation.

B. The Court’s Decision In Austin Was Correct And Should

Not Be Overruled

The Court in Austin held that corporations may constitutionally be prohibited from financing electoral advocacy with funds derived from business activities. That
6

holding was correct when issued and should not be overturned now. Use of corporate treasury funds for electoral advocacy is inherently likely to corrode the political system, both by actually corrupting public officeholders and by creating the appearance of corruption.

Moreover, such use of corporate funds diverts shareholders’ money to the support of candidates whom the shareholders may oppose.

Congress’s interest in preventing these pernicious

consequences is compelling, and Congress has chosen a

valid means of achieving it—requiring a corporation to

fund its electoral advocacy through the voluntary contributions of officers and shareholders who agree with its

political statements. For the Court to overrule Austin

now would open the political system, at every level of

our representative democracy, to a form of corporate

influence that federal law has proscribed since 1947.

And it would do so in direct affront to Congress, which

conducted years of factfinding and debate in reliance on

Austin’s holding that corporations may constitutionally

be required to finance electoral advocacy with funds

donated specifically for political purposes.

1. The Court in Austin correctly held that business corporations may be barred from using treasury funds

for electioneering, either directly or through conduits

The Court in Austin rested its decision on three basic propositions. First, electoral advocacy by for-profit

corporations poses distinct risks, both to the public interest and to the corporation’s shareholders, that are

not implicated by individual electioneering. 494 U.S. at

658-660. Second, electoral advocacy by non-profit, nonstock corporations poses similar dangers if such corporations are allowed to serve as conduits for spending by
7

for-profit corporations. Id. at 664. Third, the option of

engaging in electoral advocacy through a separate segregated fund is for most corporations a constitutionally

sufficient alternative to the use of general treasury monies. Id. at 660-661. In endorsing those propositions,

Austin is scarcely an outlier. Rather, those holdings are

consistent with decades of federal legislation, as well as

with this Court’s case law both before and after Austin

was decided.

a. i. Congress first recognized the special problem

of corporate money in electoral politics more than a century ago, in 1907, when it banned corporate contributions to federal election campaigns. Congress similarly

banned union contributions during World War II. In the

wake of that ban, a dispute arose over whether the statutory term “contributions” encompassed independent

expenditures. Extensive study of the efficacy of those

prohibitions on corporations and unions led Congress to

conclude that independent expenditures had frequently

been used to evade the contribution bans. See United

States v. International Union UAW, 352 U.S. 567, 579-

584 (1957) (UAW).

Accordingly, in the Taft-Hartley Act, Congress

barred both corporations and unions from using their

treasury funds for “expenditure[s]” on federal elections.

Labor Management Relations Act, 1947, ch. 120, § 304,

61 Stat. 159; see UAW, 352 U.S. at 589 (prohibition applies to “the use of corporation or union funds to influence the public at large to vote for a particular candidate

or a particular party”); FEC v. Massachusetts Citizens

for Life, Inc., 479 U.S. 238, 248-249 (1986) (MCFL) (construing the term “expenditure,” in the context of regulating independent candidate-related communications,

to require “express advocacy” of the candidate’s election
8

or defeat). Congress has since re-enacted the expenditure prohibition, while expressly authorizing corporations and unions to establish and administer separate

segregated funds for election-related spending. See

Pipefitters Local Union No. 562 v. United States, 407

U.S. 385, 409-412 (1972) (discussing 1971 revision); 2

U.S.C. 441b. “This careful legislative adjustment of the

federal electoral laws, in a cautious advance, step by

step, 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) (NRWC) (citation and internal quotation marks omitted).

ii. Corporate participation in candidate elections

creates a substantial risk of corruption or the appearance thereof. Corporations can use electoral spending

to curry favor with particular candidates and thus to

acquire undue influence over the candidates’ behavior

once in office. See Austin, 494 U.S. at 678 (Stevens, J.,

concurring) (concluding, with respect to “corporate participation in candidate elections,” that “the danger of

either the fact, or the appearance, of quid pro quo relationships provides an adequate justification for state

regulation of both expenditures and contributions”).

The record in McConnell—which is by far the most extensive body of evidence ever compiled on these issues—indicated that, during the period leading up to

BCRA’s enactment, federal office-holders and candidates were aware of and felt indebted to corporations

and unions that financed electioneering advertisements

on their behalf or against their opponents. See McConnell v. FEC, 251 F. Supp. 2d 176, 623-624 (D.D.C. 2003)

(Kollar-Kotelly, J.); see also id. at 555-560 (discussing

evidence).
9

The nature of business corporations makes corporate

political activity inherently more likely than individual

advocacy to cause quid pro quo corruption or the appearance of such corruption. Even minor modifications

in complex legislation have great potential to benefit or

burden particular companies, industries, or sectors. The

economic stake of corporations in the nuances of such

matters as industry-specific tax credits, subsidies, or

tariffs generally dwarfs that of any set of individuals.

And when those benefits can be obtained through a

game of “pay to play,” corporations are better suited

than individuals to afford the ante. Corporate managers

need not assemble a coalition of the like-minded; they

can draw on the firm’s entire capitalization without

seeking the approval of shareholders. If only businesses

can afford the investment necessary to pursue rents in

this way, only businesses can reap the (even larger) reward. See, e.g., McConnell, 251 F. Supp. 2d at 491, 511-

512 (Kollar-Kotelly, J.). And the public perception that

businesses reap such rewards from legislators whom

they supported in campaigns creates an appearance of

corruption that corrodes popular confidence in our democracy. Id. at 517.

Corporations, moreover, are artificial persons endowed by government with significant “special advantages” that no natural person possesses. NRWC, 459

U.S. at 207. Well before Austin, this Court recognized

the need for “particularly careful regulation” to limit the

effect of those corporate special advantages on the political process. Id. at 209-210; see id. at 207; MCFL, 479

U.S. at 256-257. Because corporations do not age, retire,

or die, they can amass great wealth from their business

activities even while changing owners, directors, and

officers as needed. Corporations also benefit from lim-
10

2 As Judge Kollar-Kotelly explained in her opinion in McConnell,

corporations during the pre-BCRA period frequently financed advertisements that praised or criticized candidates based on issues unrelated to the mission of the financing corporation. 251 F. Supp. 2d at

613-614. A similar phenomenon has been observed in state judicial elections, where business and union advertising often focuses on candidates’

records on crime rather than on issues of special concern to the corporate or union speaker. See, e.g., Thomas R. Phillips, The Merits of

Merit Selection, 32 Harv. J.L. & Pub. Pol’y 67, 81 & n.63 (2009); Dee J.

Hall, High Court Races as Barroom Brawls, Wis. State J., Apr. 6, 2008,

ited liability; by permitting investors to contribute without taking responsibility for the corporations’ actions,

state law promotes corporations’ accumulation of investment capital. See, e.g., Grojean v. Commissioner, 248

F.3d 572, 575 (7th Cir. 2001) (Posner, J.). The government may take into account in its regulatory framework

these state-created “advantages unique to the corporate

form.” Austin, 494 U.S. at 665.

A restriction on individuals’ independent electionrelated spending, moreover, would intrude far more

deeply on First Amendment values because it would

prevent individuals from spending their own money to

express their own electoral preferences. That is not the

case with corporate spending, which does not reflect the

personal views of the officers (who cannot appropriately

spend corporate money for purposes of personal selfexpression), the customers or shareholders (whose political preferences officers do not and generally cannot

ascertain), or the corporation itself (which is an artificial

entity that has no “beliefs” to express). Thus, while restrictions on the use of treasury funds for electioneering

may prevent corporate officers from utilizing one effective means to further the corporations’ economic interests, those restrictions do not hinder the expression of

any natural person’s ideas.2
11

at A1 (describing corporate-funded advertisement calling state judge

“Loophole Louie”). That pattern of behavior reinforces the understanding that, for corporations and unions, electoral advocacy is a means to

an end rather than an expression of political conviction.

iii. The Court did not decide in Austin or McConnell

whether the compelling interest in preventing actual or

apparent corruption provides a constitutionally sufficient justification for prohibiting the use of corporate

treasury funds for independent electioneering. Nor did

the Court’s previous decisions resolve that question. In

Buckley v. Valeo, 424 U.S. 1 (1976) (per curiam), this

Court struck down an independent-expenditure limit

that applied to all persons, concluding that “the independent advocacy restricted by the provision does not

presently appear to pose dangers of real or apparent

corruption comparable to those identified with large

campaign contributions.” Id. at 46. Whatever the accuracy of that assessment with respect to individual independent expenditures as of 1976, the record compiled in

McConnell indicated that corporate spending on

candidate-related speech, even if conducted independently of candidates, had come to be used as a means of

currying favor with and attempting to influence federal

office-holders. If for-profit corporations were permitted

to use treasury funds to finance all forms of candidaterelated expression—both everything permissible before

BCRA and the express advocacy that has long been forbidden by 2 U.S.C. 441b—the risk of corruption and the

appearance of corruption would only increase.

If the Court regards the fact or extent of that risk as

uncertain, that doubt provides no ground for overruling

Austin. Nor does the conclusion of the Buckley Court,

offered 33 years ago without specific consideration of

the distinct risks posed by corporate electioneering, pro-
12

vide a sound basis for discounting the import of the massive and much more recent McConnell record. Rather,

if the Court concludes that the proper disposition of this

case turns on the likelihood that unrestricted corporate

electoral advocacy would lead to actual or apparent corruption, the Court should remand the case for evidentiary proceedings in the district court.

iv. Restrictions on the use of treasury funds for corporate or union electioneering also “protect the individuals who have paid money into a corporation or union for

purposes other than the support of candidates from having that money used to support political candidates to

whom they may be opposed.” NRWC, 459 U.S. at 208.

Even before Austin, this Court had recognized the legitimacy of that interest. See ibid.; MCFL, 479 U.S. at 260.

See generally Adam Winkler, “Other People’s Money”:

Corporations, Agency Costs, and Campaign Finance

Law, 92 Geo. L.J. 871, 928-930 (2004) (explaining that

support for the Taft-Hartley expenditure limitation was

based in large part on the need to protect dissenting

union members and shareholders). Persons who buy

shares in for-profit corporations entrust money to the

corporations’ managers because of their business acumen, not their political ideology, and the purchase of

corporate stock does not imply any intent to subsidize

electoral advocacy.

If Austin were overruled, investors could not practicably divest from or avoid acquiring interests in corporations that engage in electioneering. Investors in mutual funds and beneficiaries of pension funds cannot easily monitor election-related expenditures by the various

corporations in which the funds invest over time. And

an individual’s decision to eschew all mutual funds that

might invest in a particular corporation’s shares could
13

substantially limit his investment options. Even for the

shrinking minority of investors who own shares directly,

see Alicia D. Evans, A Requiem for the Retail Investor?,

95 Va. L. Rev. 1105, 1105 (2009) (noting that “retail investors own less than 30%” of the stock of U.S. corporations), keeping track of the corporation’s electioneering

may be difficult, see Austin, 494 U.S. at 674 n.5 (Brennan, J., concurring), and the capital-gains tax will often

impose a financial disincentive to divestment.

This Court has approved protections against the use

of investors’ money without their consent to finance

speech with which they disagree, as well as protections

against the use of compulsory union dues for political

purposes. MCFL, 479 U.S. at 260 (noting the Court’s

“acknowledg[ment of] the legitimacy of this concern” in

both corporate and union contexts). Indeed, in the union

context, the Court has recognized that the use of funds

exacted from an individual for political or ideological

messages with which that individual disagrees can itself

be a First Amendment injury. Abood v. Detroit Bd. of

Educ., 431 U.S. 209, 235-236 (1977); cf. United States v.

United Foods, Inc., 533 U.S. 405, 410-411 (2001). Although an investor in corporate stock has no similar constitutional right to insist that the funds he contributes

not be used for electoral advocacy, Congress and state

governments may appropriately act to protect shareholders’ interests in avoiding unwanted subsidization of electioneering.

b. For the foregoing reasons, Congress and state

legislatures may constitutionally prohibit for-profit corporations from using their general treasuries (as opposed to segregated funds, or PACs) for electoral advocacy. In order to prevent those corporations from accomplishing the same purpose indirectly, Congress and
14

the States may also forbid nonprofit corporations from

engaging in electoral advocacy with funds received from

for-profit corporations. See Austin, 494 U.S. at 664; id.

at 673-674 (Brennan, J., concurring); MCFL, 479 U.S. at

262, 264.

In MCFL, the Court identified a limited class of corporations that are constitutionally exempt from Section

441b’s prohibition on the use of corporate treasury funds

for express advocacy because their political spending

does not raise the dangers at which the prohibition is

directed. 479 U.S. at 256-265. That exemption is available only to nonprofit corporations that, inter alia, decline to accept contributions from business corporations

or labor unions. Id. at 264; see McConnell, 540 U.S. at

211; Austin, 494 U.S. at 664; note 1, supra. The Court

in MCFL explained that this limitation on the scope of

the exemption “prevents such corporations from serving

as conduits for the type of direct spending that creates

a threat to the political marketplace.” 479 U.S. at 264.

To extend a constitutional exemption to all nonprofit

corporations, including those (like the plaintiff in Austin, see 494 U.S. at 664) that accept substantial funding

from business corporations, would provide a ready

means for business corporations to circumvent the ban

on their use of treasury funds for direct electoral advocacy. The record compiled in McConnell revealed that,

even when business corporations could lawfully finance

candidate-related advertisements (without express advocacy) in their own names, they often chose instead to

do so “while hiding behind dubious and misleading

names” and straw organizations. McConnell, 540 U.S.

at 196-197 (quoting McConnell, 251 F. Supp. 2d at 237);

cf. Caperton v. A.T. Massey Coal Co., 129 S. Ct. 2252,

2257 (2009) (“And For The Sake Of The Kids”). If this
15

Court were to hold that the challenged restrictions on

corporate electioneering are constitutional as applied to

for-profit corporations, but that nonprofit corporations

are categorically exempt from those restrictions, the

incentive to use nonprofits as conduits would be substantially increased.

c. “[U]nder BCRA,” as under the pre-existing limits

on corporate electoral advocacy imposed by 2 U.S.C.

441b, “corporations and unions may not use their general treasury funds” for electioneering, but they may

“organize and administer segregated funds, or PACs,

for that purpose.” McConnell, 540 U.S. at 204; see

NRWC, 459 U.S. at 201. Any shareholder or executive

can voluntarily contribute to a corporation’s PAC.

BCRA Section 203, like Section 441b in its pre-BCRA

form, thus restricts the manner in which funds for electioneering may be raised rather than the speech in

which the corporation may engage. It is therefore “‘simply wrong’ to view” those provisions “as a ‘complete ban’

on expression rather than a regulation.” McConnell, 540

U.S. at 204 (quoting FEC v. Beaumont, 539 U.S. 146, 162

(2003)).

The requirement that corporations and unions conduct their electioneering through PACs furthers the

compelling government interests described above while

allowing meaningful corporate and union participation

in electoral campaigns. By ensuring that corporate electioneering is funded solely by willing donors, the PACfinancing requirement prevents corporations from acquiring undue electoral influence—with all its potential

for actual or apparent corruption of office-holders—

through the special state-created advantages of the corporate structure. The requirement also ensures that

individuals may invest in shares of business corporations
16

without subsidizing electoral communications with which

they disagree.

The PAC option has proved to be a workable and

effective mechanism by which individuals (including individuals affiliated with corporations and unions) who

wish to contribute to political activity can pool their resources for effective electoral advocacy. During the

2007-2008 election cycle, federal PACs raised $1.2 billion, of which $840 million was raised by corporations’

and unions’ separate segregated funds. See FEC, Summary of PAC Activity (Apr. 24, 2009) <http://www.fec.

gov/press/press2009/20090415PAC/documents/4sumhi

story2008_000.pdf>. And although the formation of a

PAC does entail some administrative burden, appellant

has already chosen to incur that burden: it has maintained a PAC for 15 years. J.A. 226a.

2. The decision in Austin ratified a longstanding principle of federal and state election law on which Congress has subsequently relied and that should not

now be abandoned

a. As explained above (see p. 7, supra), Congress

has prohibited corporate treasury contributions to federal candidates since 1907, and since 1947 it has barred

the use of corporate treasury funds for independent expenditures in federal election campaigns. That longstanding congressional judgment, on a matter (the conduct of federal elections) as to which federal legislators

have particular expertise, is entitled to this Court’s respect. At the time Austin was decided, moreover, 20

States already barred electioneering expenditures by

corporations. J.S. at 16 n.13, Austin, supra (No. 88-

1569). Like 2 U.S.C. 441b, many of those state regimes

(including the Michigan law at issue in Austin) forbade
17

the use of corporate treasury funds for electioneering

but authorized corporations and unions to create and

administer segregated funds to finance election-related

spending. Because overruling Austin would negate a

longstanding and central principle of federal and state

campaign-finance law, concerns of stare decisis have

especial force.

Precisely because federal restrictions on corporate

electioneering have been in place for so long, the consequences of a decision recognizing a constitutional right

for all corporations to use general treasury funds for

electoral advocacy are difficult to predict. During the

2007-2008 election cycle, however, FEC-registered political parties spent $1.5 billion, and federal PACs spent

$1.2 billion, while the Fortune 100 companies had combined revenues of $13.1 trillion and profits of $605 billion. If those 100 companies alone had devoted just one

percent of their profits (or one-twentieth of one percent

of their revenues) to electoral advocacy, such spending

would have more than doubled the federally-reported

disbursements of all American political parties and

PACs combined. Cf. Austin, 494 U.S. at 659 (noting

concern about “corporate domination of the political process”). That amount of corporate cash pouring into the

political system, as earlier suggested, could dramatically

increase the reality and appearance of quid pro quo corruption. Even the possibility of such a result counsels

restraint in reversing prior decisions.

b. Particularly once Austin was decided, Congress

and state legislatures were entitled to take as given that

corporations could constitutionally be barred from using

treasury funds for at least some forms of electoral advocacy. Based on that understanding, Congress devoted

extraordinary time and energy to the consideration of
18

3 On the state level, use of corporate treasury funds for electioneering is currently prohibited by at least 22 States (and strictly limited by

two more), including some that have adopted their statutes since Austin

and in reliance on it. See, e.g., State v. Alaska Civil Liberties Union,

978 P.2d 597, 608-610 (Alaska 1999), cert. denied, 528 U.S. 1153 (2000);

Ariz. Rev. Stat. Ann. §§ 16-917(C), 16-919, 16-920 (2006).

potential refinements to the federal campaign-finance

regime. The bills that culminated in BCRA were debated for weeks and amended dozens of times during the

seven years between initial introduction and BCRA’s

ultimate enactment. Those legislative debates reflected

individual Members’ understanding of, and careful attention to, this Court’s decision in Austin. See, e.g., 147

Cong. Rec. 4895 (2001) (statement of Sen. Snowe, cosponsor of Section 203); id. at 4899, 4905-4907 (views of

legal scholars); id. at 5003 (statement of Sen. Feingold).3

Austin itself involved express electoral advocacy, see

494 U.S. at 714 (appendix to opinion of Kennedy, J., dissenting) (“Elect Richard Bandstra”), and the Court did

not delineate precisely which corporate-funded communications can properly be treated as electioneering. But

given this Court’s decision in Austin, Congress was entitled to conclude that it had some authority to act in this

area. Overruling Austin now would tell Congress, long

after the fact, that its extraordinary effort to craft a constitutionally acceptable standard was a pointless endeavor.

c. Numerous provisions of BCRA, including its definition of “electioneering communication” and its ban on

the use of corporate treasury funds for communications

falling within that definition, were promptly challenged

by a broad range of plaintiffs, including appellant. The

parties compiled a voluminous record, and the proceedings in this Court included an extraordinary four-hour
19

oral argument. The plaintiffs who challenged Title II of

BCRA, however, did not urge the overruling of Austin,

and they did not dispute the government’s general authority to prohibit the use of corporate treasury funds

for express electoral advocacy. Rather, they contended

that the challenged BCRA provisions unduly burdened

corporate speech that mentions federal candidates but

is not calculated to influence federal elections. See

McConnell, 540 U.S. at 205-206. The McConnell plaintiffs’ acceptance of Austin as controlling precedent, during the expedited proceeding authorized by Congress to

facilitate prompt clarification of the rules that govern in

this area, underscores the absence of any “special justification,” e.g., IBM Corp., 517 U.S. at 856 (citation omitted), for overruling Austin now.

C. The Relevant Holdings Of McConnell Were Correct And

Should Not Be Overruled

Over the many decades that Congress required corporations to fund express advocacy using voluntary PAC

contributions, corporations increasingly came to use

their treasuries to fund advertisements that omitted

“magic words” of express advocacy but that functioned

no differently. Voluminous evidence confirmed that the

interests recognized in Austin extend to election-eve

communications that are the functional equivalent of

express advocacy. The facts have not changed, and

there is no sound basis for rejecting the McConnell

Court’s determination that BCRA Section 203 is constitutional.
20

1. The Court in McConnell correctly held that express

advocacy and its functional equivalent may be

treated alike, and that BCRA’s definition of “electioneering communication” is not facially overbroad

After extensive study and evidence-gathering over

several sessions, Congress concluded that the existing

restriction on corporation- and union-funded express

advocacy had become ineffective. “Corporations and

unions spent hundreds of millions of dollars” on advertising “specifically intended to affect election results.”

McConnell, 540 U.S. at 127. Those advertisements

overtly attacked the character, qualifications, and fitness for office of federal candidates, but they were not

subject to Section 441b under then-prevailing law because they did not include “magic words” of express advocacy. The record of the McConnell litigation amply

bore out Congress’s conclusions. See id. at 126, 193;

McConnell, 251 F. Supp. 2d at 526-568 (Kollar-Kotelly,

J.) (collecting advertisements); id. at 875-889 (Leon, J.)

(same).

BCRA Section 203 was a targeted response. Consistent with the Court’s recognition in Austin of the compelling governmental interests that justify barring corporations and unions from spending their general treasury funds on electioneering, Section 203 applied the

same financing restriction to “electioneering communications,” a term defined (and temporally limited) to capture advertisements that were electoral advocacy in substance if not in form. 2 U.S.C. 434(f)(3), 441b(b)(2). If

corporations or unions wish to finance electioneering

communications, they may do so through their separate

segregated funds. 2 U.S.C. 441b(b)(2)(C).

As explained above, the plaintiffs in McConnell argued that BCRA’s definition of “electioneering communi-
21

cation” encompasses an unduly broad range of speech

that mentions federal candidates but is not intended to

influence electoral outcomes. The Court rejected that

facial challenge. Based on a voluminous record, the

Court concluded that “the vast majority” of advertisements encompassed by the electioneering communication provision had no functional difference from advertisements regulated as express advocacy, and that the

previously existing statutory dividing line had proved to

be a “functionally meaningless” set of magic words.

McConnell, 540 U.S. at 193, 206; see id. at 126-127, 131-

132, 193-194, 206-207.

The relevant holdings in McConnell rest on two subsidiary conclusions. First, the Court held that the former “express advocacy” test was not constitutionally

compelled, and that Congress could permissibly restrict

the use of corporate treasury funds for communications

that do not contain “magic words” but that are calculated to affect electoral outcomes. Second, the Court

held that BCRA’s definition of “electioneering communication” is a sufficiently accurate proxy for this kind of

electoral intent to withstand a facial challenge. No

sound basis exists for reversing either of those conclusions now. If, under Austin, corporations may constitutionally be forbidden from using treasury funds to finance advertisements that expressly urge the election or

defeat of federal candidates, then they likewise have no

constitutional right to use treasury funds for the “functional equivalent” of express advocacy. And appellant

has offered no new empirical evidence casting doubt on

the McConnell Court’s conclusion that “the vast majority” of “electioneering communications,” as defined by

the statute, were indeed calculated to influence electoral

outcomes.
22

2. No sound justification exists for overruling the relevant holdings in McConnell

Even if the relevant portion of McConnell were open

to more substantial question, there are at least three

reasons—in addition to the general importance of stare

decisis and appellant’s previous failure to urge overruling of that decision—for the Court to decline to overrule

McConnell now.

a. This Court’s intervening decision in WRTL has

eliminated any significant risk that BCRA’s restrictions

on corporate financing of “electioneering communications” will be applied to speech that is not actually calculated to influence federal elections. In WRTL, the Court

concluded that BCRA’s PAC-financing requirement is

constitutional as applied to particular communications if,

but only if, a communication is the “functional equivalent” of express advocacy, 551 U.S. at 465 (opinion of

Roberts, C.J.)—i.e., if the communication “is susceptible

of no reasonable interpretation other than as an appeal

to vote for or against a specific candidate,” id. at 470.

Thus, if some number of “electioneering communications” are not the functional equivalent of express advocacy, the as-applied constitutional exemption recognized

in WRTL (and subsequently codified by the FEC, see 11

C.F.R. 114.15) ensures that BCRA Section 203 does not

apply to those communications.

b. The FEC has provided a simple mechanism

for corporations and unions to claim that a particular

electioneering communication is permissible under

WRTL. See FEC Form 9 (2007) <http://www.fec.gov/

pdf/forms/fecfrm9.pdf>. In the short time between the

FEC’s implementation of WRTL and the 2008 election,

corporations and unions reported spending $108.5 million on electioneering communications that fell within
23

the WRTL exemption. See FEC, Electioneering Communication Summary (visited July 23, 2009) <http://

www.fec.gov/finance/disclosure/ECSummary.shtml>.

That experience suggests that the standard articulated

in WRTL has not chilled the use of corporate treasury

funds for speech that falls within BCRA’s definition of

“electioneering communication” but is not the functional

equivalent of express advocacy.

c. Congress anticipated that constitutional challenges to BCRA would be brought, and it established a

mechanism for expedited review of such challenges, including a right of direct appeal to this Court. See BCRA

§ 403(a), 116 Stat. 113. In McConnell, the parties compiled a massive record, and the district court and this

Court issued voluminous opinions resolving a variety of

constitutional challenges to the statute. Congress’s evident intent to provide prompt clarification of the rules

that apply in the campaign-finance context, and the extraordinary resources devoted by the courts and the

parties to the McConnell litigation, weigh heavily

against overruling a significant aspect of that decision

now.

CONCLUSION

For the foregoing reasons, as well as those stated

in the answering brief and at oral argument, the judgment of the district court should be affirmed.

Respectfully submitted.

ELENA KAGAN

Solicitor General

JULY 2009