Corporate Governance

Corporate Governance and Campaign Finance: Citizens United v. FEC (The Politics of Judicial Activism, Part 2)

By J Robert Brown Jr.

There is a second example of judicial activism in the majority opinion.

In interpreting the statute at issue, the majority characterized the prohibition on electioneering communications as a "complete ban."  In doing so, the majority addressed other avenues potentially open to corporations to influence elections, including political action committees, or PACs.  It was presumably enough to dispense with this alternative by noting that PACs could only be funded by shareholders and employees and not by the corporation itself.  2 U. S. C. §441b(b)(4)(A)

Had the majority done so, it would have left open the possibility that Congress could have amended the relevant law and, rather than prohibit electioneering communications, allow them but only through the creation and operation of PACs funded by corporations.  This would have allowed corporations to expend funds on elections but only if they met the strict requirements imposed on PACs, including detailed reporting obligations.  Instead, the majority went on to presumptively foreclose this approach.  As Justice Kennedy wrote:

• Even 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. PACs are burdensome alternatives; they are expensive to administer and subject to extensive regulations. For example, every PAC must appoint a treasurer, forward donations to the treasurer promptly, keep detailed records of the identities of the persons making donations, preserve receipts for three years, and file an organization statement and report changes to this information within 10 days.  See id., at 330–332 (quoting MCFL, 479 U. S., at 253– 254).  And that is just the beginning. PACs must file detailed monthly reports with the FEC, which are due at different times depending on the type of election that is about to occur . . . Given the onerous restrictions, a corporation may not be able to establish a PAC in time to make its views known regarding candidates and issues in a current campaign.

This was an entirely unnecessary holding, an obvious example of dictum.  Justice Kennedy himself notes at the beginning of the quote that PACs do not allow corporations to speak, making everything that followed unnecessary to the opinion. 

Moreover, the conclusion is suspect.  While it is true that PACs must adhere to many requirements, there is no affirmative evidence that the expenses impose any kind of meaningful restriction on speech.  The only evidence provided by the Court is the number of PACs.

• PACs have to comply with these regulations just to speak. This might explain why fewer than 2,000 of the millions of corporations in this country have PACs. See Brief for Seven Former Chairmen of FEC et al. as Amici Curiae 11 (citing FEC, Summary of PAC Activity1990–2006, online at http://www.fec.gov/press/press2007/ 20071009pac/sumhistory.pdf); IRS, Statistics of Income: 2006, Corporation Income Tax Returns 2 (2009) (hereinafter Statistics of Income) (5.8 million for-profit corporations filed 2006 tax returns).

Yet this sort of statistic is meaningless.  Most corporations are very small and would not have PACs even if the cost of forming them were insignificant.  Indeed, 2000 corporate PACs is arguably a large number.   As the dissent noted:

• A significant and growing number of corporations availthemselves of this option; during the most recent election cycle, corporate and union PACs raised nearly a billion dollars. Administering a PAC entails some administrative burden, but so does complying with the disclaimer,disclosure, and reporting requirements that the Court today upholds, see ante, at 51, and no one has suggested that the burden is severe for a sophisticated for-profit corporation.

It is clear that in an entirely unnecessary fashion the majority is precluding, in advance, an attempt by Congress to simply insert corporations into the pre-existing regulatory structure for PACs.   This is an approach that can only be described as legal activism.

Full post as published by The Race to the Bottom on February 11, 2010 (boomark / email).