2

them as mere “disclosure” laws despite this Court’s
conclusion in Citizens United that they burden speech.
See id. Indeed, the D.C. Circuit did essentially what
this Court refused to do in Citizens United: It carved
up the restrictions that apply to groups that must
become PACs in order to make independent expendi-
tures, excising the contribution limits but leaving in
place the remaining burdens of PAC status. Cf.
Citizens United v. FEC, 130 S. Ct. 876, 891-92 (2010)
(refusing to carve out a narrow exception to § 441b for
certain corporations). The result will inevitably be
what this Court sought to avoid in Citizens United — a
slew of new rules, legal tests, and litigation to deter-
mine who must endure burdensome PAC regulations
in order to speak and who may speak freely.’

The government has now made clear that this is
precisely what will happen as a result of the D.C.
Circuit’s decision. According to the government, not
only must SpeechNow.org become a PAC in order to
make independent expenditures, but any group —
“incorporated and unincorporated alike” — must do so
if it has the “major purpose” of making independent
expenditures. See Resp. Br. at I (question presented),
21-23. As a result, groups that only occasionally make

‘ Since the D.C. Circuit’s decision, a district court in
Minnesota has held that, to make independent expenditures,
corporations must either create what amounts to a PAC under
state law or contribute to other PACs. See Minn. Citizens
Concerned for Life, Inc. v. Swanson, Civ. No. 10-2938, 2010 U.S.
Dist. LEXIS 98498, at *21-29 (D. Minn. Sept. 20, 2010).

3

independent expenditures need not become PACs and
may disclose their independent expenditures and the
contributions that fund them under §§ 434(c) and
441d. Id. at 17. However, groups like SpeechNow.org
that wish to spend the majority of their funds on
independent speech must comply not only with those
disclosure provisions, but with the registration, or-
ganizational, and reporting obligations for PACs as
well. See id. at 15-16.

The government attempts to justify this position
by arguing that Citizens United involved. entirely
different statutory provisions and thus has no bear-
ing on whether any group, corporate or otherwise,
must become a PAC under the provisions that apply
to SpeechNow.org. Id. at 12-13. But this is a distinc-
tion without a difference, in that the law treated
groups like SpeechNow.org substantially similarly
to corporations prior to Citizens United. Under
§ 441b, corporations were prohibited from making
independent expenditures themselves, but were per-
mitted to make them through PACs that were subject
to source and amount limits on funds and the other
obligations of PACs. See 2 U.S.C. § 441b(a), (b)(2)(C).
Although there is no outright prohibition on unincor-
porated groups making independent expenditures,
SpeechNow.org is defined as a PAC because it intends
to raise or spend more than $1,000 and has a “major
purpose” of making independent expenditures. See
App. 55 (2 U.S.C. § 431(4)); App. 224 (FEC Draft
Advisory Opinion). Thus, groups like SpeechNow.org
faced the same alternative as corporations — refrain



12

confronted by many groups forced to operate as PACs.
See Comm. for Truth in Politics Amicus Br. at 9-20;
see also MCFL, 479 at 255 n.8 (noting that PACs are
burdensome for many groups even if not always for
any particular group).

Moreover, as this Court noted in Citizens United,
time is of the essence during elections. See 130 S. Ct.
at 898. Groups may not be able to get their message
out quickly enough if they must first form burden-
some PACs. See id. Indeed, under the major purpose

___ test —- which requires an intensive case-by-case analy-
sis to determine whether a group must become a
PAC - many groups will not even know in advance
whether they must form PACs in order to speak. See
Supplemental Explanation & Justification, 72 Fed.
Reg. 5595, 5601-02 (Feb. 7, 2007). The uncertainty
and burden of a process such as this will surely chill
speech. See Citizens United, 130 S. Ct. at 892.

+:

CONCLUSION

The D.C. Circuit’s decision conflicts with Citizens
United and Buckley and finds no support in this
Court’s other precedents. The government’s defense of
that decision shows precisely how the decision will
undermine Citizens United and the principles on
which it was based. This case thus involves both a

noted, a group’s tax status has no bearing on the FEC’s author-
ity to regulate it. See MCFL, 479 U.S. at 256 n.9.

13

direct conflict with this Court’s decisions and a mat-
ter of national importance that justifies this Court’s

review.

*Counsel of Record

Respectfully submitted,

INSTITUTE FOR JUSTICE
WILLIAM H. MELLOR

STEVEN M. Simpson*

Rosert W. GALL

RoBERT P. FROMMER

PAuL M. SHERMAN

901 N. Glebe Road, Suite 900
Arlington, VA 22203

(703) 682-9320

CENTER FOR COMPETITIVE POLITICS
BraDLey A. SMITH

STEPHEN M. HOERSTING

124 W. Street South, Suite 201
Alexandria, VA 22314

(703) 894-6800

Counsel for Petitioners


6

corruption from making independent expenditures.
MCFL, 479 U.S. at 263. The “major purpose” dicta at
the end of MCFL simply cannot be transformed into a
holding that protected speech is subject to burden-
some regulations because a party engages in too
much of it. This Court rejected that basic premise in
Citizens United in overturning Austin v. Michigan
Chamber of Commerce. See 180 S. Ct. at 913. Indeed,
the Court even noted that the MCFL Court had
erroneously relied on the “corporate distortion” ra-
tionale in discussing § 441b. See id. at 883, 912. The
MCFL dicta can thus be seen as consistent with this
erroneous view, in that it implies that the more of its
budget a group spends on speech, the more it can be
regulated. See MCFL, 479 U.S. at 262. That dicta
thus cannot justify the government's position.

Finally, Citizens United provides no support for
the government’s position. Nowhere in that decision
did this Court even hint that PACs are burdensome
only for groups that make only occasional independ-
ent expenditures. Indeed, this Court rejected an
argument in Citizens United that is very similar to
the result the government supports in this case. As
an alternative to striking down § 441b, the govern-
ment urged the Court to carve out an exception to the
statute for certain nonprofits that would allow them
to operate under the Snowe-Jeffords Amendment. 130
S. Ct. at 891. Under that approach, those nonprofits
would avoid § 441b’s expenditure ban if they only
accepted individual donations and maintained those
funds in a separate segregated account. Id. Here, the

7

government grudgingly accepts that SpeechNow.org
prevailed on its challenge to contribution limits
below, yet it contends that in order to make unlimited
independent expenditures, SpeechNow.org will have
to become a PAC — a far more burdensome option
than the segregated account under Snowe-Jeffords.
Compare 2 U.S.C. § 441b(c)(2)-(3) with App. 72-93
(2 U.S.C. §§ 482-434(a)). In Citizens United, the Court
rejected that approach not only because it would
require a tortured interpretation of the statute, but
also because it would “require case-by-case determi-
nations” and would chill “archetypical _ political
speech.” 130 S. Ct. at 892. This Court should reject
the government’s and the D.C. Circuit’s approach
here for the same reason.

The government’s claim that PAC burdens are
mere disclosure laws, see Resp. Br. at 11-12, does not
rejuvenate its otherwise unsupportable position.
First, that claim is factually incorrect, as the burdens
that apply to PACs go well beyond disclosure. See
Citizens United, 130 S. Ct. at 897-98. In any event,
this Court has never held that the government has an
interest in requiring the disclosure of every aspect of
a group’s operations — to say nothing of requiring it to
appoint a treasurer, keep all records for three years,
open a separate bank account, and comply with a host
of other regulations — simply because it wishes to
engage in independent political speech. Cf. NAACP v.
Ala. ex rel. Flowers, 377 U.S. 288, 307-08 (1964)
(preventing Alabama from obtaining a civil rights
group’s membership list in order to protect rights of



4

from making independent expenditures or make them
through PACs that are subject to funding limits and
the other obligations that applied to PACs. This Court
held in Citizens United that the government could not
impose such a choice on corporations. The same
principle should apply here.

The government also contends that the Court in
Citizens United struck down the PAC requirement for
corporations because PACs are separate entities. Resp.
Br. at 12-13. But that was only one of two grounds on

——which the Court concluded that-PACs were inade-
quate alternatives to the ban on independent expend-
itures. As the Court in Citizens United stated, “[e]ven
if a PAC could somehow allow a corporation to speak
— and it does not — the option to form PACs does not
alleviate the First Amendment problems with § 441b”
because PACs are burdensome. 130 S. Ct. at 897. The
Court specifically listed the registration, organiza-
tional, and disclosure provisions for PACs as burden-
some, and it relied on a portion of the plurality
opinion in MCFL that focused almost entirely on
those same requirements. Id. (citing McConnell v.
FEC, 540 U.S. 93, 330-32 (2004) (Kennedy, J., dis-
senting in part) (quoting FEC v. Mass. Citizens
for Life, Inc. (MCFL), 479 U.S. 238, 253-54 (1986)
(plurality opinion))). The clear conclusion is that
the registration, organizational, and disclosure provi-
sions for PACs — that is, the provisions that apply to
SpeechNow.org — impose significant burdens on
speech as a matter of law. That is true whether a

5

group is a corporation or an unincorporated associ-
ation.

Ultimately, the only salient difference between
SpeechNow.org and the corporations at issue in
Citizens United is the percentage of their budgets
they will devote to political speech. SpeechNow.org
will devote most of its funds to independent expendi-
tures, so it must become a PAC. Groups like Citizens
United, which only occasionally engage in independ-
ent speech, need not do so.

The government contends that this is justified
because PAC burdens are mere “disclosure” laws.
Resp. Br. at 10-11. This is wrong, as Petitioners have
made clear, Pet. at 14-21, but regardless of the label
or even the level of scrutiny one applies to PAC
burdens, the fact remains that no constitutional
principle permits the government to impose greater
burdens on speakers simply because they decide to
devote more resources to protected speech.

Buckley does not support this proposition. As the
government admits, the Court in Buckley used “major
purpose” as a narrowing construction to limit the
reach of PAC status in order to avoid vagueness and
overbreadth. Resp. Br. at 22. But as Buckley itself
shows, even laws that are not vague or overbroad can
still be unconstitutional. See Buckley v. Valeo, 424
U.S. 1, 44-51 (1976); see also Pet. at 33-34.

MCFL does not support the government’s posi-
tion. MCFL held that the government cannot bar
nonprofit corporations that posed no concerns about


10

there is no reason to single it out as more likely to
violate contribution limits than any citizen or group
who speaks out about any topic. Cf. Buckley, 424 U.S.
at 80-81 (holding that independent-expenditure
disclosure is not designed to facilitate enforcement of
contribution limits). In any event, making contribu-
tions above the limits and accepting contributions
from foreign nationals are already illegal. See 2
U.S.C. §§ 441a(f), 441e(a)(2). Even so, if for some
reason SpeechNow.org were to accept a contribution
of more than $200 from a foreign national for its

“independent expenditures, it would still have to
disclose that contribution under § 434(c).

At bottom, in the government’s view, groups that
spend too high a percentage of their funds on inde-
pendent speech — no matter how small in absolute
dollars — are inherently suspicious and thus properly
subjected to far-reaching regulation of all their opera-
tions. But, as demonstrated above, this view is fun-
damentally irrational, and it finds no support in this
Court’s precedents. Cf. Rubin v. Coors Brewing Co.,
514 U.S. 476, 488 (1995) (invalidating speech regula-
tion under intermediate scrutiny “because of the
overall irrationality” of the regulatory scheme).

The government also claims, as did the D.C.
Circuit, that becoming a PAC would not be much of a
burden on David Keating. Resp. Br. at 19-20. Even
if this were true, however, it would be irrelevant,
because Citizens United held that PACs are burden-
some as a matter of law. See 130 S. Ct. at 894 (stating
that it would decide claims facially). Neither the

11

government nor the lower courts are entitled to
decide that PAC regulations are not too burdensome
in a particular case, any more than they may decide
that independent expenditures sometimes do pose a
threat of corruption or that some candidates can be
subjected to expenditure limits. As this Court held in
Citizens United, “[clourts, too, are bound by the First
Amendment” and may not “draw, and then redraw,
constitutional lines” based on the particular speaker
or medium of expression. 130 S. Ct. at 891.

The PAC requirements to which this Court re-
ferred in Citizens United are just as burdensome for
SpeechNow.org as they would have been for Citizens
United. Indeed, all of the burdens that this Court listed
in Citizens United will apply to SpeechNow.org.’ And
even if David Keating can “handle” those burdens
without being completely silenced, Mr. Keating may
not always be available to serve as SpeechNow.org’s
treasurer, a position for which he receives no compen-
sation.‘ The government simply ignores the reality

* The government correctly notes that, at present, David
Keating need not charge SpeechNow.org for the costs of his
home, telephone, and Internet because he is currently volunteer-
ing his time. See 11 C.F.R. § 100.74, .94. That would change,
however, if Mr. Keating were one day able to hire others or to
be paid himself to operate SpeechNow.org. See 11 C.FR.
§ 100.52(d)(1). Furthermore, FEC regulations would not exempt
costs associated with a fundraiser conducted from Mr. Keating’s
home. See App. 50-51; 11 C.F.R. §§ 100.76-.77.

‘ The government argues that SpeechNow.org’s status as a
527 organization shows that the PAC requirements impose little
burden on it. See Resp. Br. at 20 n.7. But as this Court has

(Continued on following page)


No A0-145

Iu The
Supreme Court of the United States

+

SPEECHNOW.ORG, et al.,

Petitioners,
v.

FEDERAL ELECTION COMMISSION,
Respondeft.

4

+

€ Wd AIALIO

On Petition For A Writ Of Certiorari
To The United States Court Of Appeals
For The District Of Columbia Circuit

60

+

REPLY BRIEF FOR PETITIONERS

+:

INSTITUTE FOR JUSTICE
WILLIAM H. MELLOR

STEVEN M. SIMPsON*

ROBERT W. GALL

ROBERT P. FROMMER

PAUL M. SHERMAN

901 N. Glebe Road, Suite 900
Arlington, VA 22203

(703) 682-9320
ssimpson@ij.org

CENTER FOR COMPETITIVE POLITICS
BRADLEY A. SMITH

STEPHEN M. HOERSTING

124 W. Street South, Suite 201
Alexandria, VA 22314

(703) 894-6800

Counsel for Petitioners
*Counsel of Record

‘COCKLE LAW BRIEF PRINTING CO. (800) 225-6964
CALL COLLECT (402) 842-2831



8

association). Indeed, in Citizens United, McConnell,
and Buckley, the Court held that disclosure laws
nearly identical to those with which SpeechNow.org
will comply provided voters with all the information
they need about those who engage in independent
political speech. See Citizens United, 130 S.Ct.
at 916; McConnell, 540 U.S. at 196-97; Buckley, 424
U.S. at 68. Neither the government nor the D.C.
Circuit cited any case that would justify imposing
more comprehensive and burdensome disclosure laws
on speakers simply because they spend more of their
money on protected speech.”

Thus, even under intermediate scrutiny, the
government’s and the D.C. Circuit’s position would
fail. While intermediate scrutiny is less rigorous than
strict scrutiny, the government still must show a sub-
stantial relationship between the law and its interest
and that its interest justifies the burden the law
imposes. See Citizens United, 130 S. Ct. at 914; Davis
v. FEC, 128 S. Ct. 2759, 2774-75 (2008). Yet applying
disclosure laws — especially as part of the burden-
some regulatory scheme for PACs — based solely on a
group’s major purpose of making independent ex-
penditures makes no sense for several reasons.

* The government claims that the FEC and the regulated
community have come to rely on the major purpose test. See
Resp. Br. at 22. However, “reliance interests are important con-
siderations in property and contract cases,” but they do not
justify restrictions on speech. Citizens United, 130 S. Ct. at 913.

9

First, neither the government nor the public has
an interest in knowing more about a group simply
because the group devotes more of its resources to
independent speech, and the government cites no
case to the contrary. Indeed, under the government’s
approach, smaller groups would be much more likely
to be subjected to more comprehensive and burden-
some regulations than larger groups, because the
costs of any given independent expenditure will
necessarily comprise a larger portion of their budgets.
Cf. Citizens United, 130 S. Ct. at 907-08 (noting that
the effect of § 441b is often to prevent smaller and
nonprofit corporations from having the same voice in
politics as their larger competitors).

.,

Second, the government’s and D.C. Circuit's
concern that groups that do not report as PACs may
“hide” contributions for administrative expenses, see
Resp. Br. at 17, would apply to any group, whether or
not it had a major purpose of making independent
expenditures. Donations earmarked for administra-
tive expenses would be just as beneficial to groups
with a major purpose as to those without one, so tying
disclosure to major purpose is nonsensical.

The same point applies to the government’s claim
that without PAC reporting, it will not be able to keep
track of whether groups that make independent ex-
penditures violate contribution limits or accept con-
tributions from foreign nationals. Resp. Br. at 15. This
is equally true whether the group makes a lot of in-
dependent expenditures or only a few. Indeed, because
SpeechNow.org does not make direct contributions,



1

ARGUMENT

The central question presented by the petition in
this case is whether the D.C. Circuit’s decision requir-
ing SpeechNow.org to become a PAC merely to make
independent expenditures can be squared with this
Court’s precedents. Petitioners made clear in their
petition that it cannot be, for two key reasons. First,
as this Court held in Citizens United v. FEC, the
obligations of PACs — the same obligations that apply
to SpeechNow.org — impose significant burdens on
speech. See Pet. at 10. Second, that burden can be
justified only by the government’s interest in combat-
ing corruption. Id. at 13. SpeechNow.org unquestion-
ably poses no threat of corruption because, like
Citizens United, it will only make independent ex-
penditures. Moreover, SpeechNow.org will satisfy the
interest in disclosure by complying with disclosure
provisions nearly identical to those upheld in Citizens
United. See Pet. at 3; App. 22. It follows that
SpeechNow.org cannot be required to comply with the
PAC burdens that this Court struck down in Citizens
United unless there is some constitutionally signifi-
cant difference between the corporations at issue in
Citizens United and groups like SpeechNow.org.

The D.C. Circuit found no such difference. Indeed,
it recognized the obvious applicability of Citizens
United to this case in striking down the contribution
limits that accompanied SpeechNow.org’s designation
as a PAC. See App. 20. But when it came to the re-
maining provisions of PAC status that applied to
SpeechNow.org, the D.C. Circuit inexplicably upheld



ii

TABLE OF AUTHORITIES

CASES
Buckley v. Valeo, 424 U.S. 1 (1976) ......s.ssesesseseee 5, 8, 10
Citizens United v. FEC, 130 S. Ct. 876 (2010)....passim
Davis v. FEC, 128 S. Ct. 2759 (2008).

FEC v. Mass. Citizens for Life, Inc., 479 U.S.
238 (1986)... eseseseseeeesesesesescseeeeesenetseeeseseeee 4,5, 6,12

McConnell v. FEC, 540 U.S. 93 (2004).......ceeeceeeeeee 4,8

Minn. Citizens Concerned for Life, Inc. v.
Swanson, Civ. No. 10-2938, 2010 U.S. Dist.

LEXIS 98498 (D. Minn. Sept. 20, 2010)... 2
NAACP v. Alabama ex rel. Flowers, 377 U.S.

288 (1964) oo. eceecseeecesesseeeseesensesteenesesenesseesneseteesees 7
Rubin v. Coors Brewing Co., 514 U.S. 476

(1995) ..ccsecesssesssssssscesssceesessesssseesesnesessneaeenssseneseesenses 10

CODES AND STATUTES

LL CLER. § 100.52(d)(1) ....ceeeseeseseecsceeeeeeeceeseseenseseeees 11
TL CUBR. § 100.74 ooo. eceececeseeseseseseseeeseseseseeseesseeneseneses 11
11 C.FR. § 100.76..
11 C.FR. § 100.77
11 C.E-R. § 100.94...
2US.C. § 431(4).
2US.C. § 432.
2US.C. § 433 ..

TABLE OF AUTHORITIES — Continued

2US.C. § 484 (a)... eececceesseetestesenesteseeseesteseeseeeeseeeeeeeee 7
2 US.C. § 484 (C) oecececeeesseseeeetssecseesessesnsseeseeseeneesess

2US.C. § 441a(f)
2U.S.C. § 441b ..
2US.C. § 441b(a).
2U.S.C. § 441b(b(2)(C)
2US.C. § 441b(c)(2).
2US.C. § 441b(c)(3).

2US.C. § 441d oes teseescsseseeneenecaeesceesesenceneaeene 3
2US.C. § 441e(a)(2)... ee eeeceeeeeeeseneneneneeeneneeteneeeeees 10
OTHER AUTHORITIES

Supplemental Explanation & Justification,
72 Fed. Reg. 5595 (Feb. 7, 2007) ...



i

TABLE OF CONTENTS

ARGUMENT. .......cccccccssssseseesesesesesesesenesesseesenenenens 1
CONCLUSION ..........:.cccscseseeseeersseeseseneenensenesensenes 12