Opinion ID: 169649
Heading Depth: 3
Heading Rank: 2

Heading: Post-MCFL Supreme Court decisions

Text: In response to the district court's analysis, the Secretary suggests that the four circuits that have applied the MCFL exemption have misconstrued the Court's decision. Recognizing that every circuit that has addressed the issue has allowed for incidental or de minimis corporate contributions, the Secretary argues that Supreme Court precedent dictates we should apply the MCFL exemption only sparingly, citing Austin v. Michigan Chamber of Commerce, 494 U.S. 652, 110 S.Ct. 1391, 108 L.Ed.2d 652 (1990), FEC v. Beaumont, 539 U.S. 146, 123 S.Ct. 2200, 156 L.Ed.2d 179 (2003), and McConnell v. FEC, 540 U.S. 93, 124 S.Ct. 619, 157 L.Ed.2d 491 (2003). After reviewing these cases, we conclude that the Secretary's arguments are unpersuasive.
In Austin v. Michigan Chamber of Commerce, 494 U.S. 652, 110 S.Ct. 1391, 108 L.Ed.2d 652 (1990), the Supreme Court revisited the MCFL exemption when it addressed the Michigan Chamber of Commerce's (the Chamber's) as-applied challenge to Michigan's Campaign Finance Act. Id. at 655, 110 S.Ct. 1391. Initially, the Supreme Court rejected a facial overbreadth challenge to the law on the grounds that it regulated closely held corporations that do not possess vast reservoirs of capital. Id. at 661, 110 S.Ct. 1391. The Court determined that although some closely held corporations may not have accumulated significant amounts of wealth, they receive from the State the special benefits conferred by the corporate structure and present the potential for distorting the political process, which justified the law's general applicability. Id. Additionally, the Court held that although the Chamber was a non-profit ideological corporation, it did not qualify as an MCFL corporation under the three factors. Id. at 662, 110 S.Ct. 1391. First, the Court held that although the Chamber engaged in political activities, its primary purposes involved business and economic issues in contrast to MCFL's primary political purpose. Id. Second, the Court observed that: Although the Chamber also lacks shareholders, many of its members may be similarly reluctant to withdraw as members even if they disagree with the Chamber's political expression, because they wish to benefit from the Chamber's nonpolitical programs and to establish contacts with other members of the business community. Id. at 663, 110 S.Ct. 1391. Accordingly, the Court found that the Chamber's members are more similar to shareholders of a business corporation than to members of MCFL.  Id. Finally, the Court remarked that more than three-quarters of the Chamber's members are business corporations, whose political contributions and expenditures can constitutionally be regulated by the State. Id. at 664, 110 S.Ct. 1391. Consequently, recognizing the Chamber as an MCFL corporation would circumvent the purpose of Michigan's campaign finance law. The Secretary suggests that Austin supports his theory that the Court intends a bright constitutional line to exist between MCFL and non- MCFL entities. In fact, the Court's analysis suggests that the Chamber's challenge to Michigan's law failed because it was closer to a traditional corporation than a voluntary political association. Given CRLC's close resemblance to a voluntary political association, much like the one at issue in MCFL, we agree with the district court that CRLC's acceptance of de minimis contributions does not transform it into a potential conduit for corporate funding of political activity. 395 F.Supp.2d. at 1014 (quoting Nat'l Rifle Ass'n, 254 F.3d at 192).
In Beaumont, the plaintiff was an officer of North Carolina Right to Life, Inc. (NCRL), a not-for-profit corporation organized under North Carolina law. NCRL's funding came almost entirely from donations from individual members, but it also accepted a small amount in corporate donations. NCRL used its general treasury funds to make both independent expenditures and contributions to candidates for state office, as allowed by North Carolina law. NCRL challenged the federal prohibition on contributions from its treasury to candidates for federal office. NCRL, like CRLC, based its challenge on MCFL, contending that as an MCFL entity, NCRL had a constitutionally protected right to make contributions to candidates. The Fourth Circuit agreed, holding that contributions by such a group, like independent expenditures, fell within the MCFL exemption to prohibitions on corporate activity. The Supreme Court reversed, noting that the case was correctly characterized as a contributions, rather than an expenditures, case, and thus subject to reduced scrutiny. The Court admonished that advocacy corporations may also raise corruption concerns, as they too benefit from significant state-created advantages. Beaumont, 539 U.S. at 159-60, 123 S.Ct. 2200 (internal quotation marks omitted). The Court asserted that [n]on-profit advocacy corporations are, moreover, no less susceptible than traditional business companies to misuse as conduits for circumventing the contribution limits imposed on individuals. Id. (emphasis supplied). The district court here rejected the Secretary's reliance on Beaumont because the case focuses on contributions, not expenditures, and is thus not analogous. Cf. Beaumont, 539 U.S. at 164, 123 S.Ct. 2200 (Kennedy, J., concurring) ( MCFL contains language supporting the Court's holding here that corporate contributions can be regulated more closely than corporate expenditures.) (emphasis supplied). Because we focus on Article XXVIII's restrictions on expenditures, we agree with this distinction, and reject the Secretary's argument on appeal.
Third and finally, the Secretary and Amici Curiae Colorado Common Cause and the League of Women Voters of Colorado, turn to McConnell for support of a bright-line application of MCFL. They focus specifically on the McConnell Court's statement that [o]ur decision in MCFL related to a carefully defined category of entities. 540 U.S. at 210, 124 S.Ct. 619. Standing alone, we acknowledge this language limits the breadth of MCFL factors; however, the McConnell Court also distinguished the case before it from MCFL: MCFL was not established by a business corporation or a labor union, and it is its policy not to accept contributions from such entities. This prevents such corporations from serving as conduits for the type of direct spending that creates a threat to the political marketplace.  Id. at 211, 124 S.Ct. 619 (quotation marks omitted) (emphasis supplied). The district court applied the same analysis. It noted that CRLC closely resembled MCFL's plaintiff: both are nonprofit, non-stock corporations sharing very similar purposes, advocacy activities, and funding mechanisms, including voluntary donations from members and informal fund-raising sales such as bake sales, in the case of MCFL, or baby-feet pin sales in the case of CRLC. 395 F.Supp.2d at 1014. The notable difference between the two is that CRLC receives about $50 of corporate funding per year. [9] This amount represents less than one percent of CRLC's gross income and does not invite the creation of a political conduit for corporate funding of political activity. [10] We agree with the district court that the Secretary has not demonstrated that [§] 6(2)'s infringement upon CRLC's protected speech is supported by a compelling justification. . . . For the same reasons, [§] 3(4)(a), to the extent it proscribes a corporation from making `expenditures expressly advocating the election or defeat of a candidate' except through a committee, is unconstitutional as applied to CRLC. Id. at 1014-15. 2. As-applied challenge to Article XXVIII § 2(12)'s definition of political committee The Secretary next challenges the district court's grant of summary judgment to and enjoinment of his enforcement of § 2(12) against CRLC. Section 2(12)(a) defines political committee as any person, other than a natural person, or any group of two or more persons, including natural persons that have accepted or made contributions or expenditures in excess of $200 to support or oppose the nomination or election of one or more candidates. Colo. Const. art. XXVIII, § 2(12)(a). The district court struck down § 2(12) as applied to CRLC. The district court stated that  Buckley establishes that regulation should be tied to groups controlled by candidates or which have a `major purpose' of electing candidates. 395 F.Supp.2d at 1020. Because [i]t [was] not clear whether the facts presented would expose CRLC to `political committee regulation,' the district court assumed that they did and ruled on an as-applied basis. Id. at 1020 n. 22. Here, the Secretary argues he can regulate an entity even if it does not have Buckley 's major purpose of nominating, electing, or defeating a candidate. Should this court disagree with the Secretary's proposed broad regulatory powers, he urges us to construe § 2(12) as incorporating the major purpose test, thus still requiring disclosure. a. Federal regulation of political committees: Buckley's major purpose test Regulation of political committees by campaign finance law began with the passage of FECA. According to FECA, a political committee is any group that receives contributions or makes expenditures exceeding $1,000 per year. 2 U.S.C. § 431(4). A contribution or expenditure is any gift or payment made for the purpose of influencing any election for Federal office. Id. § 431(8)(A)(i), (9)(A)(i). The Supreme Court later added in Buckley, that a group is not a political committee unless its major purpose is to influence federal elections. 424 U.S. at 79, 96 S.Ct. 612. The Court explained that: The general requirement that political committees and candidates disclose their expenditures could raise similar vagueness problems, for political committee is defined only in terms of amount of annual contributions and expenditures, and could be interpreted to reach groups engaged purely in issue discussion. The lower courts have construed the words political committee more narrowly. To fulfill the purposes of [FECA] they need only encompass organizations that are under the control of a candidate or the major purpose of which is the nomination or election of a candidate. Expenditures of candidates and of political committees so construed can be assumed to fall within the core area sought to be addressed by Congress. They are, by definition, campaign related. Id. (footnotes omitted) (emphasis supplied). This construction of the term political committee as applied to non-candidate organizations has come to be known as the major purpose test. See FEC v. Akins, 524 U.S. 11, 29, 118 S.Ct. 1777, 141 L.Ed.2d 10 (1998) (considering whether certain of organization's expenditures were membership communications in connection with application of the `major purpose' test). In MCFL, the Court suggested two methods to determine an organization's major purpose: (1) examination of the organization's central organizational purpose; or (2) comparison of the organization's independent spending with overall spending to determine whether the preponderance of expenditures are for express advocacy or contributions to candidates. 479 U.S. at 252, 107 S.Ct. 616 n. 6 (noting that MCFL's central organizational purpose [wa]s issue advocacy, although it occasionally engage[d] in activities on behalf of political candidates); see id. at 262, 107 S.Ct. 616 (noting that should MCFL's independent spending become so extensive that the organization's major purpose may be regarded as campaign activity, the corporation would be classified as a political committee). Thus, under FECA, any group that (1) spends more than $1,000 in a year, and (2) has as its major purpose the influencing of a federal election, should be considered a political committee. As a political committee, the group must adhere to certain registration, organizational, recordkeeping, reporting, and disclosure requirements. See MCFL, 479 U.S. at 254, 107 S.Ct. 616 ([M]ore extensive requirements and more stringent restrictions . . . may create a disincentive for such organizations to engage in political speech.). b. Colorado's regulation of political committees Under Colorado's definition of political committees, any group that spends more than $200 a year to support or oppose the nomination or election of one or more candidates is subject to the State's various administrative, organizational, and reporting requirements. In concluding that § 2(12) was unconstitutional as applied to CRLC, the district court noted that the $200 trigger, standing alone, is incompatible with a major purpose test: [T]he amount of money an organization must accept or spend  $200  is not substantial and would, as a matter of common sense, operate to encompass a variety of entities based on an expenditure that is insubstantial in relation to their overall budgets. 395 F.Supp.2d at 1021. The court added that, under § 2(12)(a), an entity that spends $200,000 on various non-political activities and donates $200 (1/10 of 1% of its budget) to a candidate is deemed a political committee. Id. The Secretary first argues the district court erred when it determined § 2(12) was unconstitutional as-applied to CRLC and that its reasoning [was] based upon the flawed assumption that the major purpose component is constitutionally compelled by Buckley . . . . Aplt's Br. at 31. The Secretary also suggests that McConnell somehow reevaluated Buckley. The Secretary avers without much explanation, that, [a]s with the distinction between express advocacy and issue advocacy, the incorporation of a major purpose test into the definition of political committee `was an endpoint of [statutory] interpretation, not a first principle of constitutional law.' Aplt's Br. at 31-32 (quoting McConnell, 540 U.S. at 190, 124 S.Ct. 619). Because the distinction between issue advocacy and express advocacy is not constitutionally compelled, he argues, there is also no required inclusion of the major purpose test. In other words, it is the `major purpose' of the expenditure and not the `major purpose' of the organization that is constitutionally significant. Aplt's Reply Br. at 23 (emphasis supplied). Thus, the Secretary seems to suggest that the $200 trigger satisfied the major purpose test. We cannot agree with the Secretary's broad propositions. [11] First, there is little question that Buckley 's major purpose test is left unaltered in the wake of McConnell. See Political Committee Status, Definition of Contribution, and Allocation for Separate Segregated Funds and Nonconnected Committees, 69 Fed.Reg. 68,056, 68,065 (Nov. 23, 2004) ([N]o change through regulation of the definition of `political committee' is mandated by [the Bipartisan Campaign Reform Act, (BCRA)] or the Supreme Court's decision in McConnell. The `major purpose' test is a judicial construct that limits the reach of the statutory triggers in FECA for political committee status. The Commission has been applying this construct for many years without additional regulatory definitions, and it will continue to do so in the future. ) (emphasis added); N.C. Right to Life, Inc. v. Leake, 482 F.Supp.2d 686, 692 (E.D.N.C.2007) (In McConnell, [reviewing BCRA] the major purpose test was not directly examined. Thus, the Court in McConnell did not overturn or criticize the major purpose test, and its authority remains in force.); see also Trevor Potter, McConnell v. FEC Jurisprudence and its Future Impact on Campaign Finance, 60 U. MIAMI L.REV. 185, 198 (2006) ([T]he [ McConnell Court] implicitly affirmed the continuing applicability of the `major purpose' test when it referred to the `major purpose' language in the Buckley opinion.) (citing McConnell, 540 U.S. at 170 n. 64, 124 S.Ct. 619 (quoting Buckley, 424 U.S. at 79, 96 S.Ct. 612)). Hence, we hold that Colorado's interest in disclosure . . . can be met in a manner less restrictive than imposing the full panoply of regulations that accompany status as a political committee. . . . MCFL, 479 U.S. at 262, 107 S.Ct. 616. Second, for substantially the same reasons as the district court, we agree that the $200 trigger, standing alone, cannot serve as a proxy for the major purpose test as applied to CRLC: [T]he amount of money an organization must accept or spend  $200  is not substantial and would, as a matter of common sense, operate to encompass a variety of entities based on an expenditure that is insubstantial in relation to their overall budgets. 395 F.Supp.2d at 1021. The court added that, under § 2(12)(a), an entity that spends $200,000 on various non-political activities and donates $200 (1/10 of 1% of its budget) to a candidate is deemed a political committee. Id. Section 2(12), as written, is thus unconstitutional as applied to CRLC.