Opinion ID: 807897
Heading Depth: 2
Heading Rank: 2

Heading: Independent Expenditures

Text: The appellants contend the district court abused its discretion by denying their motion for a preliminary injunction because they will likely succeed on the merits of their claim that Minnesota’s campaign finance laws unconstitutionally infringe upon the right to engage in political speech through independent expenditures. We agree. Independent expenditures are indisputably political speech, and any restrictions on those expenditures strike “at the core of our electoral process and of the First Amendment freedoms.” Buckley v. Valeo, 424 U.S. 1, 39 (1976) (quoting Williams v. Rhodes, 393 U.S. 23, 32 (1968)) (internal quotation marks omitted). And “[p]rotection of political speech is the very stuff of the First Amendment.” Republican Party of Minn. v. White, 416 F.3d 738, 748 (8th Cir. 2005) (en banc); accord Ariz. Free Enter. Club’s Freedom Club PAC v. Bennett, 565 U.S. ___, ___, 131 S. Ct. 2806, 2817 (2011) (“[T]he First Amendment ‘has its fullest and most urgent application to speech uttered during a campaign for political office.’” (quoting Eu v. San Fran. Cnty. Democratic Cent. Comm., 489 U.S. 214, 223 (1989))). Because political “[s]peech is an essential mechanism of democracy,” “the means to hold officials accountable to the people,” “a precondition of enlightened self-government and a necessary means to protect it,” “political speech must prevail against laws that would suppress it, whether by design or inadvertence.” Citizens United, 558 U.S. at ___, 130 S. Ct. at 898. “[P]olitical speech does not lose its First Amendment protection” because it comes from a corporation. Id. at ___, 130 S. Ct. at 900. To the contrary, “restrictions -9- distinguishing among different speakers, allowing speech by some but not others” are “[p]rohibited,” and “the Government may commit a constitutional wrong when by law it identifies certain preferred speakers.” Id. at ___, 130 S. Ct. at 898-99; cf. Rosenberger v. Rector and Visitors of Univ. of Va., 515 U.S. 819, 828 (1995) (“In the realm of private speech or expression, government regulation may not favor one speaker over another.”). “The First Amendment protects speech and the speaker, and the ideas that flow from each.” Id. at ___, 130 S. Ct. at 899. After Citizens United, it is clear Minnesota “may not suppress political speech on the basis of the speaker’s corporate identity. No sufficient governmental interest justifies limits on the political speech of nonprofit or for-profit corporations.” Id. at ___, 130 S. Ct. at 913; see Am. Tradition P’ship, Inc. v. Bullock, ___ U.S. ___, ___, 132 S. Ct. 2490, 2491 (2012) (“There can be no serious doubt” “the holding of Citizens United applies to . . . state law.”). Minnesota’s law does not prohibit corporate speech.5 The law does “distinguish[] among different speakers,” id. at ___, 130 S. Ct. at 898, forcing corporations, or any other association, to establish a political fund if it spends more than $100 on such speech in a given year.6 See Minn. Stat. § 10A.12, subdiv. 1a. The collective burdens accompanying the creation and maintenance of a political fund—appointing a treasurer who becomes subject to civil and criminal penalties, 5 We reject the appellants’ contention that Minnesota’s law is an outright ban on corporate speech, as was the federal law challenged in Citizens United. See Citizens United, 558 U.S. at ___, 130 S. Ct. at 897-98 (characterizing 2 U.S.C. § 441b as a ban on corporate speech). Unlike the law in Citizens United, see id. at ___, ___, 130 S. Ct. at 886, 897, Minnesota does not prohibit corporations from using corporate treasury funds to make independent expenditures. 6 We recognize Minnesota allows associations to contribute to an existing independent expenditure political committee or political fund. See Minn. Stat. § 10A.12, subdiv. 1a. But this option does not allow the association itself to speak. Instead it only allows the association to assist another entity in speaking. As soon as the contribution is made, the association loses control of the message. -10- segregating funds, maintaining detailed records, and registering and filing ongoing reports with the Board, see supra at 5-8—are substantial. The regulatory requirements of an individual end as soon as he or she discloses a qualifying independent expenditure to the Board, see Minn. Stat. § 10A.20, subdiv. 6, but a corporation or other association must continue to comply with these burdensome regulations even after it stops speaking. Minnesota’s law imposes virtually identical regulatory burdens upon political funds as it does political committees. See Minn. Stat. §§ 10A.11, 10A.12, 10A.121, 10A.13, 10A.14, 10A.15, 10A.17, 10A.20, 10A.24. This equality of burdens is meaningful in view of past judicial efforts to ensure laws imposing PAC status and accompanying burdens are limited in their reach. In Buckley, for example, the Supreme Court narrowly construed the federal definition of a PAC, see Buckley 424 U.S. at 74-80, to “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.” Id. at 79. The Supreme Court reasoned this narrow interpretation ensured the scope of the law was not “impermissibly broad.” See id. at 79-80. Emerging from Buckley was the so-called major-purpose test, “a judicial construct that limits the reach of the statutory triggers . . . for [PAC] status.” Colo. Right to Life Comm. v. Coffman, 498 F.3d 1137, 1153 (10th Cir. 2007); accord FEC v. Mass. Citizens for Life, Inc. (MCFL), 479 U.S. 238, 262 (1986) (recognizing Buckley’s major-purpose test). Since Buckley, some courts have invalidated state laws imposing PAC status and burdens upon organizations not meeting the major-purpose test. See N.M. Youth Organized v. Herrera, 611 F.3d 669, 675-79 (10th Cir. 2010) (determining organizations did not qualify as PACs under the major-purpose test); N.C. Right to Life, Inc. v. Leake, 525 F.3d 274, 289-90 (4th Cir. 2008) (reasoning North Carolina’s law—which imposed PAC status upon “entities when influencing elections [was] only -11- ‘a major purpose’ of the organization”—was unconstitutionally “overbroad and vague” (emphasis added)); Coffman, 498 F.3d at 1151-55 (applying Buckley’s majorpurpose test and holding unconstitutional Colorado’s law defining PACs). But see Nat’l Org. for Marriage v. McKee, 649 F.3d 34, 58-59 (1st Cir. 2011) (rejecting application of the major-purpose test to a state’s regulation of PACs); Human Life of Wash., Inc. v. Brumsickle, 624 F.3d 990, 1008-11 (9th Cir. 2010) (rejecting the assertion that “the First Amendment categorically prohibits . . . imposing disclosure requirements on groups with more than one ‘major purpose’”); Nat’l Org. for Marriage Inc. v. Sec’y of State, Fla., No. 11-14193, 2012 WL 1758607, at  (11th Cir. May 17, 2012) (unpublished per curiam). By subjecting political funds to the same regulatory burdens as PACs, Minnesota has, in effect, substantially extended the reach of PAC-like regulation to all associations that ever make independent expenditures. The Supreme Court has recognized forcing a corporation to speak through a PAC creates “First Amendment problems” because of the associated regulatory burdens. See Citizens United, 558 U.S. at ___, 130 S. Ct. at 897; see also N.C. Right to Life, Inc., 525 F.3d at 296 (“[T]he Constitution makes clear that excessive regulation of political speech is suspect.”). In Citizens United, the Supreme Court characterized PACs as “burdensome alternatives” to direct corporate speech because “they are expensive to administer and subject to extensive regulations.” Citizens United, 558 U.S. at ___, 130 S. Ct. at 897. The Supreme Court highlighted requirements substantially similar to those Minnesota imposes upon political funds. See id. The Court surmised these “onerous restrictions” likely stop many corporations from speaking through PACs. See id. at___, 130 S. Ct. at 897-98. We surmise the same is true of Minnesota’s expansive regulation of political funds. Perhaps most onerous is the ongoing reporting requirement. Once initiated, the requirement is potentially perpetual regardless of whether the association ever again makes an independent expenditure. See Minn. Stat. § 10A.20, subdivs. 2 and 7 -12- (requiring political funds to file five reports during a general election year, even if the political fund has been inactive during that period). The reporting requirements apparently end only if the association dissolves the political fund. See id.; Minn. Stat. § 10A.24, subdiv. 1. To dissolve the political fund, the association must first settle the political fund’s debts, dispose of its assets valued in excess of $100—including physical assets and credit balances—and file a termination report with the Board.7 See id. Of course, the association’s constitutional right to speak through independent expenditures dissolves with the political fund. To speak again, the association must initiate the bureaucratic process again. Under Minnesota’s regulatory regime, an association is compelled to decide whether exercising its constitutional right is worth the time and expense of entering a long-term morass of regulatory red tape. Suppose two Minnesota farmers owning adjoining property near a highway support a particular candidate for state office. The farmers decide to erect a large sign in support of the candidate and spend over $100 in supplies and labor. To comply with Minnesota’s law, the farmers must create and register a political fund, appoint a treasurer, keep detailed records, and file ongoing reports with the Board. The farmers must continue to file even if the farmers do not continue to “speak.” To escape these ongoing burdens, the farmers must file a 7 Upon notice to an association, Minnesota’s Board may force dissolution of an “inactive” political fund if “two years have elapsed since the end of a reporting period during which the political . . . fund made an expenditure or disbursement requiring disclosure under [the Campaign Finance and Public Disclosure Act].” Minn. Stat. § 10A.242, subdivs. 1 and 2. Until the Board provides such notice, an association presumably must continue to file reports on its inactive political fund. The statute is unclear as to what mechanism triggers the process of dissolving inactive political funds. Regardless, an association wishing to retain its First Amendment right to make independent expenditures must continue reporting on an ongoing basis. -13- termination statement. Before they can do that, they must dispose of the political fund’s assets—including the sign.8 If the farmers forget to file, or assume continued reporting is unnecessary, they are subject to significant fines and possible imprisonment. Faced with these regulatory burdens—or even just the daunting task of deciphering what is required under the law, see N.C. Right to Life, Inc., 525 F.3d at 296 (noting campaign finance regulation has become “an area in which speakers are now increasingly forced to navigate a maze of rules, sub-rules, and cross-references in order to do nothing more than project a basic political message”)—the farmers reasonably could decide the exercise is simply not worth the trouble. See MCFL, 479 U.S. at 255 (plurality opinion) (“Faced with the need to assume a more sophisticated organizational form, to adopt specific accounting procedures, to file periodic detailed reports . . . it would not be surprising if at least some groups decided that the contemplated political activity was simply not worth it.”). And who would blame them? Minnesota’s law hinders associations from participating in the political debate and limits their access to the citizenry and the government. The law manifestly discourages associations, particularly small associations with limited resources, from 8 At oral argument, Minnesota claimed the hypothetical farmers could terminate the political fund at the same time they registered the fund. When pressed on the issue of whether the farmers would have to get rid of the sign before terminating, Minnesota claimed the Board does not interpret the statute to require associations such as the farmers to dispose of all physical assets before terminating the fund. But the statute says otherwise. See Minn. Stat. § 10A.24, subdiv. 1 (“‘Assets’ include . . . physical assets.”). We do not expect potentially regulated associations to rely on Minnesota’s informal assurance that it would not enforce the plain meaning of the statute. “Unguided regulatory discretion and the potential for regulatory abuse are the very burdens to which political speech must never be subject.” N.C. Right to Life, Inc., 525 F.3d at 290. -14- engaging in protected political speech. See Citizens United, 558 U.S. at ___, 130 S. Ct. at 897-98 (surmising the burdensome regulations might be the reason such a small percentage of corporations maintain PACs); MCFL, 479 U.S. at 254-55 & n.7 (plurality opinion) (observing the regulatory burdens accompanying operation of a PAC “impose administrative costs that many small entities may be unable to bear”); N.C. Right to Life, Inc., 525 F.3d at 296 (surmising “[o]nly those able to hire the best team of lawyers may one day be able to secure advisory opinions . . . or otherwise figure out the myriad relevant rulings with any degree of assurance that they will escape civil and criminal sanctions for their speech”). In short, the collective burdens associated with Minnesota’s independent expenditure law chill political speech. This chill is more than a theoretical concern. All three appellants—two nonprofit issue advocacy groups and one for-profit travel-services provider—claim to have abandoned planned independent expenditures in order to avoid the accompanying regulatory burdens. If true, Minnesota’s law has “interfere[d] with the ‘open marketplace’ of ideas protected by the First Amendment.” Citizens United, 558 U.S. at ___, 130 S. Ct. at 906. The dissent minimizes this concern, stating “even the smallest business regularly files government forms and reports that are significantly more complicated and burdensome than the requirements of Minnesota’s disclosure laws.” Post at 35. We disagree with such broad, unsupported conjecture, but assuming the statement is true, it misses the point. Most associations—no matter the size—are capable, for example, of assembling and completing the paperwork necessary to file tax returns. But such paperwork is not a burden interfering with the constitutionally protected marketplace of ideas. Unlike compliance with the mandatory tax laws, the laws at issue here give Minnesota associations a choice—either comply with cumbersome ongoing regulatory burdens or sacrifice protected core First Amendment activity. This is a particularly difficult choice for smaller businesses and associations for whom political speech is not a major purpose nor a frequent activity. Such a disincentive for -15- political speech demands our attention. See MCFL, 479 U.S. at 255 (plurality opinion) (reasoning “[t]he fact that [a federal law’s] practical effect may be to discourage protected speech is sufficient to characterize [the statute] as an infringement on First Amendment activities”). Generally, “[l]aws that burden political speech are ‘subject to strict scrutiny,’ which requires the [g]overnment to prove that the restriction ‘furthers a compelling interest and is narrowly tailored to achieve that interest.’” Citizens United, 558 U.S. at ___, 130 S. Ct. at 898 (quoting FEC v. Wis. Right to Life, Inc., 551 U.S. 449, 464 (2007) (opinion of Roberts, C.J.)). But this is not true when the law at issue is a disclosure law, in which case it is subject to “‘exacting scrutiny,’ which requires a ‘substantial relation’ between the disclosure requirement and a ‘sufficiently important’ governmental interest.” Id. at ___, 130 S. Ct. at 914 (quoting Buckley, 424 U.S. at 64, 66); accord Doe v. Reed, 561 U.S. ___, ___, 130 S. Ct. 2811, 2818 (2010). The district court characterized the challenged provisions as a disclosure law and accordingly determined exacting scrutiny was appropriate. We question whether the Supreme Court intended exacting scrutiny to apply to laws such as this, which subject associations that engage in minimal speech to “the full panoply of regulations that accompany status as a [PAC].”9 MCFL, 479 U.S. at 262. Allowing states to 9 The nature of the disclosure laws reviewed under exacting scrutiny in Citizens United were much different than Minnesota’s law. See Citizens United, 558 U.S. ___, 130 S. Ct. at 913-16 (analyzing 2 U.S.C. §§ 441d(d)(2), 434(f)(1)). The federal law required filing a disclosure report only when a corporation (or anyone else) spent more than $10,000 on electioneering communication (e.g., a television commercial) during any calender year. See § 434(f)(4) and (g). Then, when a communication disclosed “___ is responsible for the content of this advertising,” as required by § 441d(d)(2), a citizen could identify the responsible party in public records and discover relevant information. See Citizens United, 558 U.S. at ___, 130 S. Ct. at 915-16. This event-driven reporting requirement ended as soon as the report was filed. See § 434(f)(4) and (g)(1) and (2). The effect of the laws—requiring one-time -16- sidestep strict scrutiny by simply placing a “disclosure” label on laws imposing the substantial and ongoing burdens typically reserved for PACs risks transforming First Amendment jurisprudence into a legislative labeling exercise. But even if exacting scrutiny is appropriate, see, e.g., Real Truth About Abortion, Inc. v. FEC, 681 F.3d 544, 548-49 (4th Cir. 2012) (applying exacting scrutiny to federal provisions imposing disclosure and organizational requirements); McKee, 649 F.3d at 55-56 (applying exacting scrutiny review to Maine’s law defining PACs); Nat’l Org. for Marriage v. Daluz, 654 F.3d 115, 118 (1st Cir. 2011) (applying exacting scrutiny review to Rhode Island’s independent expenditure reporting requirements); Brumsickle, 624 F.3d at 1003-05 (applying exacting scrutiny to Washington’s law defining PACs); SpeechNow.org v. FEC, 599 F.3d 686, 696 (D.C. Cir. 2010) (en banc) (applying exacting scrutiny to federal laws imposing disclosure and organizational requirements),10 Minnesota’s law fails. disclosure only when a substantial amount of money was spent—matched the government’s disclosure purpose. In contrast, the effect of Minnesota’s ongoing reporting requirements, which are initiated upon $100 aggregate in expenditures, and are unrelated to future expenditures, does not match any particular disclosure interest. Other requirements, such as requiring a treasurer, segregated funds, and recordkeeping, are only tangentially related to disclosure. 10 We acknowledge the D.C. Circuit, sitting en banc, upheld a federal disclosure law with ongoing reporting requirements. See SpeechNow.org, 599 F.3d at 696-98; see also 2 U.S.C. § 434(a)(4). But the law upheld in SpeechNow.org applies to far fewer associations than Minnesota’s law does. The ongoing reporting requirements at issue in SpeechNow.org applied to political committees under 2 U.S.C. § 431(4)(A), meaning associations whose “major purpose . . . is the nomination or election of a candidate,” Buckley, 424 U.S. at 79. See Emily’s List v. FEC, 581 F.3d 1, 16 (D.C. Cir. 2009) (observing those entities required to “register with the FEC as political committees . . . [are entities that] receive or spend more than $1000 annually for the purpose of influencing a federal election and whose ‘major purpose’ involves federal elections”). Minnesota’s law has a much lower trigger of $100 in expenditures, and more importantly, imposes the requirements on all associations, -17- Though possibly less rigorous than strict scrutiny, but cf. United States v. Alvarez, 567 U.S. ___, ___, 132 S. Ct. 2537, 2543, 2548, 2551 (2012) (plurality opinion) (describing exacting scrutiny, which the plurality applied to a content-based statute, as the “most exacting scrutiny,” (quoting Turner Broad. Sys., Inc. v. FCC, 512 U.S. 622, 642 (1994)) (internal quotation marks omitted), and requiring the government to use the “least restrictive means,” (quoting Ashcroft v. ACLU, 542 U.S. 656, 666 (2004)) (internal quotation marks omitted), to accomplish its compelling interests), exacting scrutiny is more than a rubber stamp. See Buckley, 424 U.S. at 64, 66 (describing exacting scrutiny as a “strict test” requiring more than a “legitimate governmental interest”). The Supreme Court has not hesitated to hold laws unconstitutional under this standard. See Davis v. FEC, 554 U.S. ___, ___, 128 S. Ct. 2759, 2774-75 (2008) (deciding certain federal disclosure requirements were unconstitutional under exacting scrutiny); Buckley v. Am. Constitutional Law Found. (ACLF), 525 U.S. 182, 186, 197-205 (1999) (deciding certain Colorado laws regulating its initiative and referendum petition process failed exacting scrutiny); McIntyre v. Ohio Elections Comm’n, 514 U.S. 334, 336, 347-57 (1995) (holding an Ohio law prohibiting the distribution of anonymous campaign contributions was unconstitutional under exacting scrutiny); Buckley, 424 U.S. at 39-51 (determining a federal law limiting the amount of independent expenditures was unconstitutional); cf. Alvarez, 567 U.S. at ___, 132 S. Ct. at 2542-43 (plurality opinion) (holding a federal criminal law prohibiting false claims of receiving military decorations or medals failed exacting scrutiny and violated the First Amendment). As the Supreme Court recently reiterated when reviewing a disclosure law, “there must be a relevant correlation or substantial relation between the governmental interest and the information required to be disclosed and the governmental interest must survive exacting scrutiny.” Davis, 554 U.S. at ___, 128 S. Ct. at 2775 (quoting Buckley, 424 U.S. at 64) (internal quotation marks omitted). “[T]he strength of the regardless of the association’s purpose. -18- governmental interest must reflect the seriousness of the actual burden on First Amendment rights.” Id.; see also Elrod v. Burns, 427 U.S. 347, 362 (1976) (plurality opinion) (“The interest advanced must be paramount, one of vital importance, and the burden is on the government to show the existence of such an interest.”). Regulatory provisions “no more than tenuously related to the substantial interests disclosure serves . . . ‘fail exacting scrutiny.’” ACLF, 525 U.S. at 204; accord McIntyre, 514 U.S. at 347 (stating a law will withstand exacting scrutiny “only if it is narrowly tailored to serve an overriding state interest”). Minnesota’s independent expenditure law almost certainly fails this test because its ongoing reporting requirement—which is initiated upon a $100 aggregate expenditure, and is untethered from continued speech—does not match any sufficiently important disclosure interest. Minnesota can accomplish any disclosurerelated interests—providing the electorate and shareholders information concerning the source of corporate political speech, deterring corruption, and detecting violations of campaign finance laws—“[t]hrough less problematic measures,” ACLF, 525 U.S. at 204, such as requiring reporting whenever money is spent, as the law already requires of individuals, see Minn. Stat. § 10A.20, subdiv. 6. The dissent complains we discount Minnesota’s interests, resulting in “an unbalanced and flawed application of the exacting scrutiny analysis.” Post at 28. Our discussion of these interests is limited, however, not because we doubt their importance, see generally Citizens United, 558 U.S. at ___, 130 S. Ct. at 914-16 (discussing the importance of the informational interests), but because Minnesota has not stated any plausible reason why continued reporting from nearly all associations, regardless of the association’s major purpose, is necessary to accomplish these interests. Cf. Alvarez, 567 U.S at ___, 132 S. Ct. at 2551 (plurality opinion) (reasoning the law restricting false statements failed exacting scrutiny because the government did not make a “clear showing of the necessity of the statute” to accomplish the stated significant interests); see id. at ___, 132 S. Ct. at 2251-52, 2255- -19- 56 (Breyer, J., concurring) (determining the statute failed intermediate scrutiny and thus violated the First Amendment because it was “possible substantially to achieve the Government’s objective in less burdensome ways”). Because Minnesota has not advanced any relevant correlation between its identified interests and ongoing reporting requirements, we conclude Minnesota’s requirement that all associations make independent expenditures through an independent expenditure political fund, see Minn. Stat. § 10A.12, subdiv. 1a, is most likely unconstitutional. The dissent is correct to stress that a high level of deference is appropriate because this is a duly enacted statute. Post at 26. But in cases such as this, where we determine the appellants are likely to win on the merits of their First Amendment claim, a preliminary injunction is proper. See Phelps-Roper, 662 F.3d at 488. “Statutes suppressing or restricting speech must be judged by the sometimes inconvenient principles of the First Amendment.” Alvarez, 567 U.S. at ___, 132 S. Ct. at 2543 (plurality opinion). Accordingly, we reverse the district court’s denial of the appellants’ motion for a preliminary injunction to the extent it requires ongoing reporting requirements from associations not otherwise qualifying as PACs under Minnesota law.11 At this early stage of the litigation, we express no opinion as to whether any of the other obligations Minnesota imposed upon associations speaking through political funds would, by themselves or collectively, survive exacting scrutiny. Neither do we have occasion at this point to decide whether it is appropriate to remedy any constitutional infirmity, as Minnesota suggests, by severing Minn. Stat. § 10A.20, subdiv. 7 to remove the likely unconstitutional ongoing reporting obligations. See Neighborhood 11 Associations “whose major purpose is to influence the nomination or election of a candidate or to promote or defeat a ballot question” would still comply with the same essential requirements because they are political committees. See Minn. Stat. § 10A.01, subdiv. 27. Our holding does not affect Minnesota’s regulation of political committees. -20- Enters. v. City of St. Louis, 644 F.3d 728, 738-39 (8th Cir. 2011) (remanding to the district court to decide in the first instance the question of whether an unconstitutional state provision was severable from the remainder of the statute).