14

tees, including separate segregated funds, was effec-
tively rejected by this Court long ago. In Buckley v.
Valeo, 424 U.S. at 68, this Court upheld the reporting
requirement against First Amendment attack as “the
least restrictive means of curbing the evils of cam-
paign ignorance and corruption that Congress found
to exist.” The Court then rejected the argument that
the First Amendment entitles fringe groups to a
‘blanket exemption from the reporting requirement,
and ruled that exemption from the Act’s reporting
requirements is constitutionally mandated only if a
group presents specific evidence that it is likely that
its contributors will be subjected to harassment if
their names were disclosed. Buckley v. Valeo, 424
U.S. at 72-74. See also Brown v. Socialist Workers
"74 Campaign Committee (Ohio), 459 U.S. 87, 91-98
(1982). The court of appeals did not even attempt
to explain why these principles would not be as ap-
plicable to MCFL as to any other group. See also
Zauderer v. Office of Disciplinary Counsel of the Su-
preme Court of Ohio, 105 S. Ct. 2265, 2282 n.14
(1985) .

In sum, there has been no showing in this case that
section 441b has interfered at all with the freedom

11 The court of appeals’ further observation that some cor-
porations might not find the separate segregated fund option
palatable because they have chosen to be nonpartisan‘ i§ not
relevant to this case. As the court of appeals concluded:¢App.
16a), the expenditure in this case was for a flyer that ex-
pressly advocated the election or defeat of specified federal
candidates. If a case ever arises in which a non-profit corpora-
tion is charged with violating section 441b by making an ex-
penditure to publish a nonpartisan statement, the applicability
of section 441b in such circumstances can be resolved at that
time; it is not presented by this case. See California Medical
Association v. FEC, 458 U.S. at 197 n.17.


8

Conservative Political Action Committee, 105 S. Ct.
1459, 1468 (1985), a consideration which is equally
applicable here.® The decision of the court below to
single out “non-profit, ideological corporations” for a
constitutional exemption from Congress’ longstanding
regulation of the financing of corporate and union ex-
penditures to influence federal elections cannot be
reconciled with this Court’s conclusion in National
Right to Work Committee, 459 U.S. at 206-211, that
the First Amendment does not require Congress to
treat such corporations differently under section 441b.

6 The Eleventh Circuit, sitting en banc, unanimously found
this Court’s reasoning in FEC v. National Right to Work
Committee to compel upholding section 441b’s prohibition on
the use of corporate and union treasury funds to make ex-
penditures in connection with federal elections. Athens Lum-
ber Co. v. FEC, 718 F.2d 363 (11th Cir. 1983) (en banc)
(answering in the negative questions listed at 689 F.2d 1006,
1015-1016 (1982) ), appeal dismissed, cert. denied, 104 S. Ct.
1580 (1984). The courts have upheld 2 U.S.C. § 441b and its
predecessors against similar First Amendment challenges in a
variety of circumstances. See California Medical Association
v. FEC, 453 U.S. 182, 193-201 (1981); United States v.
Chestnut, 394 F. Supp. 581, 588-591 (S.D.N.Y. 1975), affirmed,
533 F.2d 40, 51 n.12 (2d Cir.), cert. denied, 429 U.S. 829
(1976) ; International Association of Machinists v. FEC, 678
F.2d 1092, 1099-1118 (D.C. Cir.) (en banc), affirmedTMmem.,
459 U.S. 983 (1982); Bread Political Action Committee v.
FEC, 635 F.2d 621, 626-633 (7th Cir. 1980) (en banc), rev’d
on other grounds, 455 U.S. 577 (1982); United States v.
Boyle, 482 F.2d 755, 763-764 (D.C. Cir.), cert. denied, 414
U.S. 1076 (1973) ; United States v. Pipefitters, 434 F.2d 1116,
1122-1123 (8th Cir. 1970), adhered to en banc, 434 F.2d
1127, 1128, rev’d on other grounds, 407 U.S. 385 (1972);
FEC v. National Education Association, 457 F. Supp. 1102,
1109 (D.D.C. 1978); FEC v. Weinsten, 462 F. Supp. 243,
246-249 (S.D.N.Y. 1978) ; United States v. Clifford, 409 F.
Supp. 1070, 1071, 1072 (E.D.N.Y. 1976).


18

poration 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.
See United States v. CIO, 335 U.S. 106, 113 (1948).”
FEC v. National Right to Work Committee, 459 U.S.
at 208. This emphasis upon ensuring that individ-
uals have the opportunity to make an informed and
voluntary choice as to whether their money can be
used by others to support political candidates (see,
eg. 2 U.S.C. § 441b(b) (3) (C)), safeguards the in-
dividual’s First Amendment interest in not being re-
quired to contribute to the support of any political
candidates against his or her will.“ It also furthers
the important governmental interest in “sustain[ing]
the active, alert responsibility of the individual citizen
in a democracy for the wise conduct of government,”
by guaranteeing each individual the opportunity to
make a personal decision about the political options he
or she will support. First National Bank of Boston
y. Bellotti, 435 U.S. at 788-789, quoting United States
v. UAW, 352 U.S. at 575.

The court of appeals’ conclusion that contributors
to an ideological corporation like MCFL do not need
this protection was candidly based upon a presump-
tion, without any supporting evidence, that anyone
who supported MCFL’s anti-abortion position would
necessarily be willing to contribute to its efforts to
elect candidates (App. 22a-23a). However, there is no
reason to assume that individuals who oppose abortion
necessarily use this as the sole criterion for choosing
candidates, or that they are any less interested than

44 See generally International Association of Machinists v.
Street, 367 U.S. 740 (1961) ; Abood v. Detroit Board of Edu-
cation, 431 U.S. 209 (1977); Railway Employes’ Dept. v.
Hanson, 351 U.S. 225 (1956).


v
Cases—Continued Page

Lowe v. SEC, 105 S. Ct. 2557 (1985) .....------------ 12
National Right to Work Committee v. FEC, 665

F.2d 871 (D.C. Cir. 1981), rev’d sub nom.,

FEC Vv. National Right to Work Committee, 459

U.S. 197 (1982) ..

passim
Oklahoma Press Publishing Co. v. Walling, 327

U.S. 186 (1946) . 12
Railway Employes’ We

225 (1956) - 18
Regan Vv. Taxation With Representation, 461 U. s.

540 (1983) _........-... 12
Rostker v. Goldberg, 453. U: 8.57 (1981) 11
Spence v. Washington, 418 U.S. 405. (1974) 13
United States v. Boyle, 482 F.2d 755 (D.C. Cir.),

cert. denied, 414 U.S. 1076 (1978) . 8
United States v. Chestnut, 394 F. “Supp. 581

(S.D.N.Y. 1975), aff'd, 583 F.2d 40 (2d Cir.),

cert. denied, 429 U.S. 829 (1976) 8
United States v. Clifford, 409 F. Supp. 1070

(E.D.N.Y. 1976) ...... 8

United States v. CIO, 385 U.S. 106 (1948). 18
United States v. Darusmont, 449 U.S. 292 (1981).. 7
United States v. Morton Salt Co., 338 U.S. 632

(1950) ... 16
United States v. Pipefitters, 484 F2a “T116 (8th

Cir. 1970), adhered to en banc, 484 F.2d 1127,

rev’d sub nom., Pipefitters v. United States, 407

U.S. 885 (1972) oon eeeneeecec cence cececeeeeeeeeeeeeeneeeneneneeee! passim

United States v. UAW, 352 U.S. 567 (1957).....15-16, 18

Walters v. National Association of Radiation Sur-
vivors, 105 S. Ct. 8180 (1985) nee 11,19

Zauderer v. Office of Disciplinary Counsel of the
Supreme Court of Ohio, 105 S. Ct. 2265 (1985).. 14

Statutes and Regulations

2 USC. § 481 (4) (B) nnn eens eeeec sees ceceeeceneeecennennene 3
431(9) (B) (i) ...



15

of corporations and unions to expend as much as they
want, through their separate segregated funds, to
publicize their views on federal candidates. In the
absence of such a showing, the court of appeals’ deci-
sion to strike down section 441b as applied on First
Amendment grounds cannot stand.

B. Section 441b Serves Compelling Governmental Purposes.

Even if the court of appeals were correct in con-
cluding that section 441b indirectly burdens corpo-:
rate and union political speech to some extent by,
making fundraising less “simple”, the statute should!
nevertheless be upheld.

[I]t is clear that “[nJeither the right to asso-
ciate nor the right to participate in political ac-
tivities is absolute.” CSC v. [National Ass’n of]
Letter Carriers, 413 U.S. 548, 567 (1973). Even
a “ ‘significant interference’ with protected rights
of political association” may be sustained if the
State demonstrates a sufficiently important in-
terest and employs means closely drawn to avoid
unnecessary abridgment of associational free-
doms.

Buckley v. Valeo, 424 U.S. at 25, quoting Cousins v.
Wigoda, 419 U.S. 477, 488 (1975). Accord FEC v.
National Right to Work Committee, 459 U.S. at 207.

Section 441b serves several purposes which this
Court has already found to be compelling. First, it
is intended to ensure that the wealth which corpora-
tions and unions are able to accumulate with the aid
of special legal protections intended to serve other
purposes cannot be diverted to the electoral process
to incur political debts from candidates for federal
elective office. See FEC v. National Right to Work
Committee, 459 U.S. at 207; United States v. UAW;


21

Moreover, it is not only the identity of individual
contributors that will be withheld from the public.
Although it appears that MCFL presently may have
a voluntary policy against accepting money from cor-
porations, there is no legal bar to other non-profit,
apparently “ideological” corporations covered by the
lower court’s decision accepting funding from com-
mercial corporations having a financial interest in the
causes they advocate. The court of appeals’ decision
would, for the first time, permit such corporations to
convert unlimited amounts of money from corpora-
tions with substantial commercial interests into cam-
paign expenditures, without ever disclosing to the
public the true source of financing. Thus, despite the
court of appeals’ assumption that its decision only in-
validates section 441b’s requirements with respect to
non-profit, “ideological” corporations, this decision’s
actual effect is to open an avenue that could be

utilized by any corporation or union to transfer un- ..

limited amounts of their treasury funds into political
expenditures, while keeping the actual source of the
financing secret.

In sum, political expenditures by corporations are
not restricted by section 441b; only the manner of
financing such expenditures is affected, and corpora-
tions and unions have been demonstrably successful in

16 For example, an organization engaged in apparently
“{deological” opposition to nuclear power might receive fund-
ing from a corporation engaged in coal mining that is inter-
ested in reducing its competition, or an organization engaged
in apparently “ideological” advocacy of increased defense
spending could be funded primarily by defense contractors.
Cf. Citizens Against Rent Control v. City of Berkeley, 454
U.S. 290, 298 (1981), (“[W]hen individuals or corporations
speak through committees, they often adopt seductive names
that may tend to conceal the true identity of the source.”)

aa


17 a

the electoral process.” FEC vy. National Right to
Work Committee, 459 U.S. at 209.

The court below found this purpose to be inappli-
cable here because “MCFL’s expenditures did not
incur any political debts from legislators” (App.
22a). However, the same could be said about the
independent expenditures for solicitations made by
the National Right to Work Committee; in fact, the
court of appeals in that case concluded that such in-
dependent “solicitation, without more, will neither
corrupt officials nor distort elections.” National
Right to Work Committee v. FEC, 665 F.2d 371, 375
(D.C. Cir. 1981), vev’d, 459 U.S. 197 (1982). In
reversing that decision, this Court emphasized that
the constitutionality of section 441b was not to be
judged by evaluating the effects on the electoral proc-
ess of the particular expenditure at issue. Rather,
this Court found section 441b to be a valid “prophy-
lactic measure[]” aimed at “the special characteris-
tics of the corporate structure”, and concluded:

While § 441b restricts the solicitation of corpo-
rations and labor unions without great financial
resources, as well as those more fortunately sit-"
uated, we accept Congress’ judgment that it is.
the potential for such influence that demands
regulation. i

FEC v. National Right to Work Committee, 459 U.S.
at 210. As was true of the National Right to Work
Committee, MCFL’s corporate structure carries the
potential for influence which is the proper object of
Congressional regulation; whether or not debts were
actually incurred in this case does not alter the con-
stitutional analysis.

The second purpose behind section 441b “is to pro-
tect the individuals who have paid money into a cor-


12

First National Bank of Boston v. Bellotti, 435 U.S.
765, 775-795 (1978); Buckley v. Valeo, 424 U.S. at
39-59; and FEC v. National Conservative Political
Action Committee, 105 S. Ct. at 1465-1471, section
441b has not had the effect of limiting the free flow
of political information and opinion from corporations
and unions to the public.

The court of appeals did not dispute the Commis-
sion’s showing that section 441b has not had the
effect of limiting corporate or union political speech.
Instead, the court found the statute unconstitutional
because it eliminated what the court considered “the
simplest method” of financing corporate speech
(App. 20a). While the Act’s administrative re
quirements for political committees, 2 U.S.C. §§ 432-
434, are applicable to separate segregated funds as
well, this Court has never suggested that the First
Amendment entitles corporations to employ a “sim-
pler method” of financing political expenditures than
is available to others who wish to engage in group
political expenditures. As we have shown, section
441b leaves the amount and content of a separate
segregated fund’s expenditures unrestricted, and “it
is well settled that ‘[t]he [First] Amendment does
not forbid . . . regulation which ends in no restraint
upon expression or in any other evil outlawed by its
terms and purposes.’” Lowe v. SEC, 105 S. Ct. 2557,
2581 n.8 (1985) (White, J., concurring), quoting
Oklahoma Press Publishing Company v. Walling, 327
US. 186, 193 (1946). Cf. Regan v. Taxation With
Representation, 461 U.S. 540, 545, 549 (1988) (up-
holding Congress’ requirement that corporations ex-
empt from federal taxation under 26 U.S.C. § 501
(c) (3) must finance their lobbying efforts through
a separate, affiliated corporate entity). Indeed. this

Bae

PREIS

i
4
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‘

PY RERBE SRE NCR


|

4

flyer entitled “Special Election Edition.” The flyer
was headed “EVERYTHING YOU NEED TO
KNOW TO VOTE PRO-LIFE.” Every candidate
for each office in Massachusetts was identified as
either supporting a pro-life position or opposing a
pro-life position on three issues which MCFL chose
to highlight. The flyer expressly urged readers that
“Tn]Jo pro-life candidate can win in November with-
out your vote in September .... Thus, your vote in
the primary will make the critical difference in elect-
ing pro-life candidates.” The last page of the flyer
contained a form, captioned “VOTE PRO-LIFE,” to
be filled in with the pro-life candidates in the reader’s
district, and clipped out to take to the polls.’

MCFL had more than 100,000 copies of the Special
Election Edition flyers printed for distribution (App.
4a).2 MCFL expended $9,812.76 to prepare, print
and distribute the flyers. MCFL paid the entire
$9,812.76 for the election flyer from the corporation’s
general treasury funds, for it did not establish its
separate segregated fund until 1980 (App. 5a).

On May 1, 1979, a complaint was filed with the
Commission alleging that MCFL had violated the Act

2Ten Copies of the Special Election Edition flyers, des-
ignated as Exhibits 1 and 2 of the District Court Complaint,
App. E, infra have been lodged with the Court.

3 MCFL distributed a newsletter irregularly several times
a year. Each of these regular newsletters included a news-
letter masthead and carried a volume and issue number,
neither of which appeared on the Special Election Edition.
The regular newsletters contained articles of interest to MCFL
members, information on relevant legislation, opinions and
commentary on pro-life issues, and entertainment informa-
tion. MCFL had never distributed any of its regular news-
letters to more than a few thousand recipients, and the Oc-
tober, 1978 newsletter was distributed to only 3,119 recipients.
(App. 8a).

oe resco

ek a ean


In the Supreme Court of the United States

OcTOBER TERM, 1985

No.
FEDERAL ELECTION COMMISSION, APPELLANT,
v.

MASSACHUSETTS CITIZENS FOR LIFE, INC., APPELLEES.

ON APPEAL FROM THE UNITED STATES COURT
OF APPEALS FOR THE FIRST CIRCUIT

JURISDICTIONAL STATEMENT

OPINION BELOW

The July 31, 1985 opinion of the court of appeals
(App. A, infra) is published at 769 F.2d 13 (1st
Cir. 1985). The June 29, 1984 decision of the United
States District Court for the District of Massachu-
setts is published at 589 F. Supp. 649 (D. Mass.
1984) (App. B, infra).

JURISDICTION

This case arises from a suit filed by the Federal
Election Commission pursuant to 2 U.S.C. § 437g

(1)


VI

Statutes and regulations—Continued Page

437g (a) (6
487g (a) (9) .
44lb ...
441b (a

441b(b) (2) (C) .. 3,9

441b(b) (3) (C 18

441b(b) (4 3,10

26 U.S.C. § 501 (c) (3) 12

28 U.S.C. § 1252 2

1291 2

1845 2

2101 (a) - 2
Federal Courts Improvements Act, Pub. L. No.

98-620, 98 Stat. 3357 (1984) ... - 2
Federal Election Campaign Act of 1971, Pub. L.

No. 92-225, 86 Stat. 3 (1972) . 2
Federal Election Campaign Act Amendments of

1974, Pub. L. No. 93-443, 88 Stat. 1263 (1974) .. 2
Federal Election Campaign Act Amendments of

1976, Pub. L. No. 94-283, 90 Stat. 475 (1976).. 2
Federal Election Campaign Act Amendments of

1979, Pub. L. No, 96-187, 93 Stat. 1839 (1980) .... 2
Social Security Amendments of 1977, Pub. L. No.

95-216, 91 Stat. 1565 (1977) ...... a 2

Legislative History
93 Cong. Rec. 6487 (1947) ... 20
117 Cong. Rec. 48,381 (1971) 9,11
Miscellaneous

FEC Reports on Financial Activity 1983-1984,

Vol. I (May 1985) ... - 11



13

Court has upheld virtually all of the Act’s require-
ments with respect to federal campaign financing
without ever finding it necessary to determine
whether there was a “simpler method” available.’
The court of appeals cited no case in which this Court
has ever found a statute which did not limit speech to
violate the First Amendment merely because it makes
the task of financing less “simple”.

The court of appeals’ assertion (App. 21a, n.7)
that the First Amendment requires a general ex-
emption from section 441b for corporations like
MCFL because of the statute’s requirement of dis-
closure of certain contributors to all political commit-

° See, ¢.g., FEC v. National Right to Work Committee, 459
U.S. at 207-211 (limitation on use of corporate funds to
solicit contributions to finance political activities) ; Buckley v.
Valeo, 424 U.S. at 23-38 (prohibition of contributions to pub-
licly financed candidates) ; id. at 60-82 (upholding reporting
and recordkeeping requirements for political committees and
individuals) ; California Medical Association v. FEC, 453
US. at 197 (limitation upon contributions to political
committees). The Court has similarly upheld against First
Amendment challenges a variety of statutes regulating the
financial and business operation of newspapers, where the
statutes were nondiscriminatory and did not restrict the news-
papers’ expression. See cases discussed in Branzburg v.
Hayes, 408 U.S. 665, 682-683 (1972).

10 Linmark Associates v. Willingboro, 431 U.S. 85, 93-94
(1977) and Spence v. Washington, 418 U.S. 405, 411 n.4
(1974), relied upon by the court of appeals (App. 20a-21a),
are not on point. In those coses the Court concluded that the
availability of alternative means of communication did not
save statutes that prohibited a particular method of speech.
Section 441b does not affect the method of communication
employed by corporations and unions; so long as it is financed
out of a separate segregated fund, a corporation or union can
utilize any method of communication it desires.


RES EES

3

speech, or of the press; or the right of the
people peaceably to assemble, and to petition the
Government for a redress of grievances.

The full text of 2 U.S.C. § 441b is reprinted in App.
F, infra.
STATEMENT OF THE CASE
A. Background

The Federal Election Campaign Act prohibits “any
corporation whatever” or any labor organization from
utilizing treasury funds to finance contributions or
expenditures in connection with a federal election.
2 U.S.C. § 441b(a). It permits, however, the use of
such treasury funds for “the establishment, adminis-
tration, and solicitation of contributions to a separate
segregated fund to be utilized for political purposes.”
2 U.S.C. § 441b(b) (2) (C). In turn, corporations and
labor organizations are restricted to soliciting con-
tributions to those separate segregated funds from a
restricted class for unions, members and their fami-
lies, and for corporations, stockholders, executive and
administrative personnel, and their families and
members of membership corporations. 2 U.S.C..
§ 441b(b) (4). Since the statutory definition of
“political committee” expressly includes separate seg-
regated funds, 2 U.S.C. § 431(4) (B), they are gov-
erned by the same reporting and disclosure require-
ments applicable to other political committees. See
2 U.S.C. §§ 483 and 434.

The Massachusetts Citizens for Life, Inc.
(“MCFL”) is a non-profit, non-stock, non-membership
corporation incorporated under the laws of the Com-
monwealth of Massachusetts (App. 3a). Shortly
before the September 19, 1978 Massachusetts pri-
mary elections, MCFL published and distributed a


19

other Americans in being able to decide for themselves
whether their money will be used to assist candidates
for federal office, and if so, which candidates it will
be used to support. Instead of merely trusting MCFL
to make their political decisions for them, such in-
dividuals might prefer to make such choices in other
ways; for example, they might choose to follow party

loyalty in electoral politics, or they might favor a):

candidate that does not oppose abortion because of
that candidate’s positions on a variety of other issues
they consider important.

Even if the court’s presumption were correct, how-
ever, it would not justify rejecting the Congressional
judgment. If all of MCFL’s contributors were willing
to support its political expenditures, as the court be-
lieves, MCFL would have no more trouble obtaining
contributions to its separate segregated fund than to
its corporate treasury. If, on the other hand, even a
handful of the individuals who contribute to MCFL’s
campaign to outlaw abortion would prefer to reserve
to themselves the choice of when and how their money
will be used to support candidates, the statute will
have served an important purpose. In either event, it
is up to Congress, not the court of appeals, to deter-
mine the desirability of ensuring an opportunity for
corporate contributors to make an informed choice in
this important area. See Walters v. National Asso-
ciation of Radiation Survivors, 105 S. Ct. at 3190.”

18 The legislative history shows that Congress considered

this purpose to apply fully to non-profit corporations whose *

Money comes from ideological adherents. In fact, Senator
Taft, whose views on the reach of this statute this Court found

to be “controlling” in Pipefitters v. United States, 407 U.S. at -,

409, stated that under the statute, even corporations organized
for religious purposes “cannot take the church members’
money and use it for the purpose of trying to elect a candidate


No.

Iu the Supreme Court of the United States

OcToBER TERM, 1985

FEDERAL ELECTION COMMISSION, APPELLANT,

v.

MASSACHUSETTS CITIZENS FoR LIFE; INC., APPELLEES.

-ON APPEAL FROM THE UNITED STATES COURT
OF APPEALS FOR THE FIRST CIRCUIT

JURISDICTIONAL STATEMENT

” CHARLES N. STEELE *
General Counsel

RICHARD B. BADER
Assistant General Counsel

CaRroL A. LAHAM
Attorney

Attorneys for
FEDERAL ELECTION COMMISSION
1825 K Street, N.W. |
Washington, D.C. 20463
(202) 528-4143
* Counsel of Record

OCTOBER 25, 1985



6

expenditures in connection’ with federal elections as
well as expenditures made to candidates for federal
office (App. 6a-15a). Therefore, we hold that the
expenditure in the instant case is embraced by the
section 441b definition of expenditure.” (App. 15a).

Although it thus found that MCFL’s expenditure
of corporate funds to produce and distribute the
Special Election Edition violated section 441b, the
court went on to conclude that as applied to expendi-
tures by non-profit “ideological” corporations like
MCFL, section 441b was unconstitutional (App.
24a). Although it apparently recognized that sec-
tion 441b does not restrict corporate expenditures so
long as they are financed through a separate segre-
gated fund, the court found that the statute in-
fringed the corporation’s First Amendment rights
by eliminating what the court viewed as a “simpler
method” of financing such expenditures (App. 20a-
21a). The court of appeals acknowledged that this
Court identified several compelling governmental in-
terests supporting section 441b in FEC v. National
Right to Work Committee, 459 U.S. 197, 207-208
(1982), but concluded that MCFL’s expenditures in
this case did not pose the risks to the “integrity of
the electoral process” which section 441b was enacted
to prevent (App. 2la-22a). For these reasons, the
court of appeals affirmed the district court’s judg-
ment in MCFL’s favor, but on alternate constitu-
tional grounds.


5

by utilizing corporate funds to distribute the Special
Election Edition flyers. On June 27, 1979, the Com-
mission found reason to believe that MCFL had
violated 2 U.S.C. § 441b(a) and initiated an investi-
gation. On October 21, 1980, the Commission found
probable cause to believe that MCFL had violated ,
2 U.S.C. § 441b(a) by using corporate funds to pre-
pare, print and distribute its Special Election Edition .:
flyers to members of the general public. After the
Commission’s attempt to conciliate failed to produce
an agreement that would correct or prevent the viola-
tion, the Commission authorized the filing of this civil
action to enforce section 441b. (App. E, infra.)

B. The Decision Of The Court Below

The court of appeals rejected MCFL’s arguments
that its expenditures were not covered by 2 U.S.C.
§ 441b, and specifically found that those expenditures
violated section 441b as alleged by the Commission *
(App. 15a). The court held that the Special Elec-
tion Edition expressly advocated the election or defeat
of clearly identified candidates, and that it did not
fall within the statutory exemption for the media
codified at 2 U.S.C. § 431(9) (B) (i) (App. 16a-19a).
After a detailed examination of the legislative his-
tory, the court concluded “that section 441b prohibits

4The district court had granted MCFL’s motion for sum-
mary judgment because it had accepted the arguments re-
jected by the court of appeals and found that MCFL’s expendi-
ture of corporate funds did not violate section 441b. The dis- .
trict court also opined that if it had misinterpreted the Act,
application of section 441b to MCFL’s expenditures “would
violate its rights to freedom of speech, press and association
....” (App. 38a).


2

(a) (6) to enforce the Federal Election Campaign
Act of 1971, as amended, 2 U.S.C. § 431 et seq.
(“the Act”). The United States Court for the Dis-
trict of Massachusetts had original jurisdiction of the
case pursuant to 28 U.S.C. § 1845, and the appellate
jurisdiction of the United States Court of Appeals
for the First Circuit was based upon 2 U.S.C. § 437g
(a) (9) and 28 U.S.C. § 1291. On July 31, 1985 the
First Circuit entered its final judgment, holding that
respondent’s corporate expenditures violated 2 U.S.C.
§ 441b, but finding that section unconstitutional as
applied to “indirect, uncoordinated expenditures by
a non-profit ideological corporation” (App. 24a).
The Commission filed a timely notice of appeal in
the United States Court of Appeals for the First
Cireuit on August 28, 1985 (App. D, infra). This
Court has jurisdiction of this appeal pursuant to
28 U.S.C. §§ 1252 and 2101(a).

CONSTITUTIONAL AND
STATUTORY PROVISIONS INVOLVED

The First Amendment to the Constitution of the
United States provides:

Congress shall make no law respecting an estab-
lishment of religion, or prohibiting the free ex-
ercise thereof; or abridging the freedom of

1The Federal Election Campaign Act of 1971, Pub. L. No.
92-225, 86 Stat. 3 (1972), was amended by the Federal Elec-
tion Campaign Act Amendments of 1974, Pub. L. No. 93-443,
88 Stat. 1268, by the Federal Election Campaign Act Amend-
ments of 1976, Pub. L. No. 94-283, 90 Stat. 475, by the Social
Security Amendments of 1977, Pub. L. No. 95-216, Title V,
Sec. 602, 91 Stat. 1565, by the Federal Election Campaign
Act Amendments of 1979, Pub. L. No. 96-187, 93 Stat. 1339
(1980), and by the Federal Courts Improvements Act, Pub.
L. No. 98-620, 98 Stat. 3357 (1984).


16

352 U.S. 567, 579 (1957). Corporations are artifi-
cial entities whose accumulation of capital is en-
hanced by such special advantages as limited liabil-
ity, perpetual life, and special tax treatment. As
such, corporations “are endowed with public at-
tributes. They have a collective impact upon society,
from which they derive the privilege of acting as arti-
ficial entities.” United States v. Morton Salt Co., 338
U.S. 682, 652 (1950). Such “[f]avors from govern-
ment often carry with them an enhanced measure of
regulation.” Id. See also FEC v. National Conserva-
tive Political Action Committee, 105 S. Ct. at 1469.

As this Court has previously explained,” Congress
acted to prevent the diversion of the assets of corpo-
rations and unions to the political sphere only after
it became aware of widespread abuses which were
thought to present imminent danger of corruption of
the federal election process, resulting in a decline of
public confidence in the integrity of elected officials
and the fair operation of government. This Court
has repeatedly recognized the elimination of such cir-
cumstances to be a governmental interest of the high-
est order, so that the “careful legislative adjust-
ment of the federal electoral laws . . . to account for
the particular legal and economic attributes of cor-
porations and labor organizations warrants consid-
erable deference . . . [and]. reflects a permissible
assessment of the dangers posed by those entities to

2 FEC y. National Right to Work Committee, 459 US. at
207; United States v. UAW, 352 U.S. at 570-584.

18 See, e.g., First National Bank of Boston v. Bellotti, 435
U.S. at 788 n.26; Buckley v. Valeo, 424 U.S. at 27; United
States v. UAW, 352 U.S. at 570, 571, 575.


22

utilizing the financing methods specified by the stat-
ute. Compelling governmental interests support the
statute’s requirements and it is narrowly drawn to
serve those interests without unnecessarily infringing
upon corporate and union political activity. In these
circumstances, the court of appeals’ decision to strike
down section 441b as applied is an unwarranted in-
fringement upon Congress’ authority to legislate to
protect the integrity of the federal electoral process.

CONCLUSION

Based on the foregoing arguments and authorities,
the appellant Federal Election Commission respect-
fully requests that this Court note probable jurisdic-
tion in this appeal, and set this case for briefing and
argument on the merits.

Respectfully submitted,

CHARLES N. STEELE
General Counsel
RICHARD B. BADER
Assistant General Counsel
CaROL A. LAHAM
Attorney
Attorneys for
FEDERAL ELECTION COMMISSION
1825 K Street, N.W.
Washington, D.C. 20463:",
OcrosER 25, 1985 :
tu

i


aa

Vv

TABLE OF AUTHORITIES

Cases Page

Abood v. Detroit Board of Education, 431 U.S. 209

(1977) 18
Athens Lumber Co. v. FEC, 718 F.2d "363 (11th

Cir. 1983) (en banc), appeal dismissed, cert.

denied, 104 S. Ct. 1580 (1984) .... 8
Branzburg Vv. Hayes, 408 U.S. 665 (1972) 18
Bread Political Action Committee v. FEC, 635

F.2d 621 (7th Cir. 1980) (en banc), rev’d, 455

U.S. 577 (1982) 8
Brown v. Socialist Workers ’74 Campaign Com-

mittee (Ohio), 459 U.S. 87 (1982) - 14
Buckley v. Valeo, 424 U.S. 1 (1976)... passim
California v. Grace Brethren Church, 457 U.S. 393

(1982) .. 7
California Medical ‘Association v. FEC, 453. U. S.

182 (1981) _---.---8, 18, 14
Citizens Against Rent Control v. City of Berkeley,

454 U.S. 290 (1981) 21

Columbia Broadcasting System v. Democratic Na-
tional Committee, 412 U.S. 94 (1978) ........2.22--- 11

Cousins v. Wigoda, 419 U.S. 477 (1975)... . 15
CSC v. National Association of Letter Carriers,
413 U.S. 548 (1973) ... 15

FEC v. National Conservative Political Action
Committee, 105 S. Ct. 1459 (1985) —..-.-------- passim
FEC v. National Education Association, 457 F.

Supp. 1102 (D.D.C. 1978) .. 8
FEC v. Weinsten, 462 F. Supp. 243° (SD.NY.

1978) - 8
First National Bank of Boston v. Bellotti, 485 U.S.

765 (1978) ... ...-12, 16, 18
Fleming v. Rhodes, 331 U.S. 100 (1947) 7
International Association of Machinists v. FEC,

678 F.2d 1092 (D.C. Cir.) (en banc), aff'd

mem., 459 U.S. 9838 (1982) -. 8
International Association of Machinists v.

367 U.S. 740 (1961) ... 18
Linmark Associates v. Willingboro, 431 U.S. 85

(1977) - 13



9

As we show below, the court of appeals’ decision
here, if allowed to stand, will substantially alter fed-
eral election campaigns by permitting, for the first
time in almost forty years, the unlimited use of corpo-
rate and union treasury funds for political expendi-
tures with no public disclosure of the actual sources
of such financing. Just last Term, this Court noted
that it had not yet been presented with a case requir-
ing it to reach “the question whether a corporation
can constitutionally be restricted in making independ-
ent expenditures to influence elections for public of-
fice.’ FEC v. National Conservative Political Action
Committee, 105 S. Ct. at 1468. The constitutionality
of this longstanding federal statute regulating the
financing of such expenditures is an unresolved ques-
tion of significant national importance, which merits
plenary consideration by this Court.

A. Section 441b Does Not Restrict Political Speech.

As stated by the sponsor of the 1971 amendments
to the predecessor of section 441b, Congress intended
that provision to prohibit only “the use of corporate
and union treasury funds to reach the general public
in support of, or opposition to, Federal candi-
dates... .” 117 Cong. Ree, 43,381 (1971) (remarks
of Rep. Hansen) (emphasis added), quoted in Pipe-
fitters v. United States, 407 U.S. 385, 481 (1972).
To make this limited purpose clear, Congress in 1971
enacted an explicit exception from the statute’s pro-
hibitory language, now codified at 2 U.S.C. § 441b
(b) (2) (C), which allows corporations and unions to
use their treasury funds to operate a voluntary sep-
arate segregated fund for political purposes. A “sep-
arate segregated fund may be completely controlled


11

sible constitutional balance. More than 2900 sep-
arate segregated funds have been established by cor-
porations and unions, which reported to the Commis-
sion receiving $185.6 million in voluntary political
contributions and expending $169.1 million on con-
tributions and expenditures during the 1983-84 elec-
tion cycle. See FEC Reports on Financial Activity
1983-1984, Vol. I at p. 78 (May 1985). This graphi-
cally demonstrates that, in contrast to the statutes
this Court found unconstitutional in such cases as

8In 1971, when the exception expressly permitting estab-
lishment of separate segregated funds was added to section
441b, Congress carefully weighed the constitutional considera-
tions. As summarized by Congressman Hansen, the author
of the 1971 amendments:

[T]here is broad agreement as to the essence of the
proper balance in regulating corporate and union political
activity required by sound policy and the Constitution.
It consists of a strong prohibition on the use of corporate
and union treasury funds to reach the general public in
support of, or opposition to, Federal candidates and a.
limited permission to corporations and unions, allowing
them to communicate freely with members and stock-:.
holders on any subject . . . and to make political contribu-
tions and expenditures financed by voluntary donations -
which have been kept in a separate segregated fund.
This amendment writes that balance into clear and un-
equivocal statutory language.

117 Cong. Rec. 43,381 (1971), quoted in Pipefitters v. United
States, 407 U.S. at 431. This conscious conclusion by Congress
is entitled to substantial deference from the courts. FEC v.
National Right to Work Committee, 459 U.S. at 209, citing
Rostker v. Goldberg, 453 U.S. 57, 64, 67 (1981). See also,
e.g., Walters v. National Association of Radiation Survivors,
105 S. Ct. 3180, 3188-3189, 3193 (1985) ; Columbia Broadcast-
ing System v. Democratic National Committee, 412 U.S. 94,
103 (1978).


TABLE OF CONTENTS

Page
QUESTION PRESENTED ...... I
OPINION BELOW 1
JURISDICTION 1
CONSTITUTIONAL AND STATUTORY PROVI-
SIONS INVOLVED 2
STATEMENT OF THE CASE
A. Background
B. The Decision Of The Court Below .................... 5
ARGUMENT 7
THE COURT OF APPEALS ERRED IN HOLD-
ING UNCONSTITUTIONAL AN INTEGRAL
AND LONGSTANDING PROVISION OF THE
FEDERAL ELECTION CAMPAIGN ACT............. 7
A. Section 441b Does Not Restrict Political
Speech . 9
B. Section 441b Serves Compelling Governmental
Purposes ........... 15
CONCLUSION eines eects eeeeceeeeennenee 22
APPENDIX
A. Opinion of the Court of Appeals ........................ la-24a
. Opinion of the District Court
. Judgment of the Court of Appeals . 39a

. Notice of Appeal _.._..
. District Court Complaint ...
. Relevant Statutory Provisions 2... 48a-80a

yeo aw

(111)



20

Finally, a third compelling interest undermined by
the court of appeals’ decision is the public disclosure
of the sources of federal campaign financing. The
Act as a whole reflects “Congress’ effort to achieve
‘total disclosure’ by reaching ‘every kind of political
activity’ in order to insure that the voters are fully
informed and to achieve through publicity the maxi-
mum deterrence to corruption and undue influence
possible.” Buckley v. Valeo, 424 U.S. at 76, Section
441b serves this purpose by requiring that corpora-
tions and unions make their political contributions
and expenditures only from a separate segregated
fund which, as a political committee, is required to
report both its expenditures and its sources of fund-
ing for disclosure on the public record. 2 U.S.C.
§ 434. This Court has found Congress’ interest in
public disclosure of the sources of campaign spending
to be compelling even when applied to those making
independent expenditures rather than contributions,
since “the informational interest can be as strong as
it is in coordinated spending, for disclosure helps
voters to define more of the candidates’ constituten-
cies.” Buckley v. Valeo, 424 U.S. at 81.

If the court of appeals’ decision is permitted to
stand, the voting public will be denied the identities
of the individuals who finance the political expendi-
tures of corporations like MCFL, information which
Congress has reasonably determined to be important
to maintenance of an informed electorate. In fact, as
discussed supra, pp. 13-14, the court of appeals indi-
cated that eliminating this disclosure requirement was
one of the objectives of its decision.

or defeat a candidate, and they should not do so.” 93 Cong.
Rec. 6487 (1947).


QUESTION PRESENTED

Whether Congress reached a permissible balance
under the First Amendment to the Constitution of the
United States in 2 U.S.C. § 441b, which requires all
corporations and labor organizations to finance all of
their expenditures in connection with federal elections
from separate segregated funds containing contribu-
tions voluntarily designated for political purposes.

@


7

ARGUMENT

THE COURT OF APPEALS ERRED IN HOLDING
UNCONSTITUTIONAL AN INTEGRAL AND LONG-
STANDING PROVISION OF THE FEDERAL ELEC-
TION CAMPAIGN ACT.

The issue presented by this appeal is the constitu-
tionality of the Congressional judgment in enacting
2 U.S.C. § 441b, that all corporate and union political
expenditures in connection with federal elections
should be financed solely from a separate segregated
fund containing contributions voluntarily designated
for political purposes.* The court of appeals, while
acknowledging that the Act did not bar MCFL from
making such expenditures through a separate segre+
gated fund, found the provision unconstitutional as
applied to “non-profit, ideological corporations” be-
cause it eliminates what the court considered the
“simplest method” of financing political expenditures
(App. 20a-24a).

Three years ago, this Court unanimously rejected
a similar argument — that section 441b’s prohibition
on the expenditure of corporate treasury funds to
solicit political contributions from the public at large
was unconstitutional as applied to a corporation that
is as non-profit and “ideological” as MCFL. FEC v.
National Right to Work Committee, 459 U.S. at 209-
210. “That case turned on the special treatment his-
torically accorded corporations,” FEC v. National

* The court of appeals specifically found that MCFL’s cor-
porate expenditures violated 2 U.S.C. § 441b, but that the
statute as applied to MCFL was unconstitutional. It is well
settled that when a federal statute is found unconstitutional
as applied, a direct appeal pursuant to 28 U.S.C. §§ 1252 and
2101(a) is in order. Fleming v. Rhodes, 831 U.S. 100, 104
(1947) ; California v. Grace Brethren Church, 457 U.S. 398,
405 (1982) ; United States v. Darusmont, 449 U.S. 292, 293
(1981).


10

by the sponsoring corporation or union, whose officers
may decide which political candidates contributions
to the fund will be spent to assist.” FEC v. National
Right to Work Committee, 459 U.S. at 200 n.4.
See also Pipefitters v. United States, 407 U.S. at
414-417; Buckley v. Valeo, 424 U.S. 1, 28 n31
(1976). The corporation or union operating the
fund can use its own treasury money to pay the
fund’s administrative costs and to solicit contribu-
tions from the corporation’s or union’s members,
stockholders and executive and administrative per-
sonnel, and their families. 2 U.S.C. § 441b(b) (4).

Thus, the Act is carefully limited to restricting
only the corporation’s or union’s use of its treasury
funds to make contributions or expenditures to in-
fluence federal elections; it expressly permits the cor-
poration or union, through its separate segregated
fund, to contribute up to $5,000 directly to any can-
didate and to make unlimited independent expendi-
tures communicating to the public the corporation’s
or union’s support for, or opposition to, any candi-
date. Indeed, section 441b would not prohibit MCFL’s
distributing the same election flyers to the same peo-
ple in the same manner it did here, so long as it
finances it through a separate account containing con-
tributions voluntarily designated for political pur-
poses.”

There is nothing in the record of this case to jus-
tify the court of appeals’ failure to defer to Con-
gress’ considered judgment that the financial regula-
tions contained in 2 U.S.C. § 441b represent a permis-

7In fact, MCFL did establish such a separate segregated
fund in 1980, and has reported to the Commission ‘having

made expenditures from that fund in every federal ‘election
cycle since.