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No. 08-205

 

In the Supreme Court of the United States

CITIZENS UNITED, APPELLANT

v.

FEDERAL ELECTION COMMISSION

ON APPEAL FROM THE
UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA

SUPPLEMENTAL REPLY BRIEF FOR THE APPELLEE

ELENA KAGAN
Solicitor General
Counsel of Record
Department of Justice
Washington, D.C. 20530-0001
(202) 514-2217

 

In the Supreme Court of the United States

 

No. 08-205

CITIZENS UNITED, APPELLANT

v.

FEDERAL ELECTION COMMISSION

ON APPEAL FROM THE
UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA

SUPPLEMENTAL REPLY BRIEF FOR THE APPELLEE

 

A. Appellant Has Failed To Preserve A Challenge To Austin

Appellant expressly abandoned its facial challenge to BCRA Section 203 in the district court; its jurisdictional statement did not cite Austin v. Michigan State Chamber of Commerce, 494 U.S. 652 (1990); and its merits brief con tained only a two-paragraph argument that Austin should be overruled. Appellant nevertheless contends (Supp. Br. 20) that it preserved its current challenge to Austin by in cluding in its jurisdictional statement a question as to whether Hillary: The Movie was "subject to regulation" under BCRA. Read in its entirety, however, that question did not suggest any assault on Austin. See J.S. i (fourth question presented). Rather, appellant asked-and in the corresponding portion of the body of its jurisdictional state ment discussed-whether BCRA could constitutionally be applied to a full-length documentary film as distinct "from the broadcast 'ads' at issue in" McConnell v. FEC, 540 U.S. 93 (2003). J.S. 26.

Appellant also suggests (Supp. Br. 19) that, because this case falls within the Court's mandatory appellate jurisdic tion, appellant was not obliged to comply with the ordinary requirement that it preserve its argument. But the courts of appeals also have mandatory appellate jurisdiction, and they routinely-and appropriately-decline to consider arguments that were waived below or inadequately pre sented on appeal.

Appellant's extraordinary contention (Supp. Br. 3) that the Court should reach its facial challenge first, "even if" appellant could prevail on narrower grounds, is particularly unsound. That course of action would invert this Court's usual practice, which it follows in First Amendment cases as in others: to adjudicate non-constitutional claims before constitutional ones and as-applied challenges before facial ones. Board of Trs. v. Fox, 492 U.S. 469, 484-485 (1989).

B. Austin Is Not An Outlier But Rather Reflects A Core Prin ciple Of Campaign-Finance Law, And It Is Entitled To Full Stare Decisis Effect

Appellant characterizes Austin as a "jurisprudential outlier" that reflected a "precipitous break with prior prece dent" and is in "unmistakable tension with later decisions." Supp. Br. 10. Appellant further suggests (id. at 14-15) that Austin's "aberrational" nature deprives it of full stare decisis effect. Those arguments are fundamentally wrong.

1. Since 1947, Congress has barred the use of corpo rate-treasury funds for independent expenditures in federal election campaigns. FEC Supp. Br. 7-8, 16. Far from breaking new ground, the Austin Court's recognition that corporate electioneering poses distinctive and serious con cerns simply confirmed a congressional judgment incorpo rated in federal law for more than 40 years prior to the de cision. Indeed, the different treatment of corporations in federal election law has its roots in legislation enacted more than a century ago, the Tillman Act of 1907. In asserting (Supp. Br. 15) that "no considerations of 'antiquity'" weigh against overruling Austin, appellant ignores Congress's longstanding efforts to restrict corporate influence in elec tions.

2. In arguing that Austin is inconsistent with the bulk of this Court's campaign-finance jurisprudence, appellant principally relies on decisions that either did not specifically consider corporate electioneering, see Davis v. FEC, 128 S. Ct. 2759 (2008); FEC v. National Conservative PAC, 470 U.S. 480 (1985) (NCPAC); Buckley v. Valeo, 424 U.S. 1 (1976) (per curiam), or did not involve the election of candi dates to public office, see First Nat'l Bank v. Bellotti, 435 U.S. 765 (1978). Appellant's reliance on Bellotti is particu larly misplaced because the Court there explained that its "consideration of a corporation's right to speak on issues of general public interest implies no comparable right in the quite different context of participation in a political cam paign for election to public office." Id. at 788 n.26. The Court further observed that various federal statutes ad dressed "the problem of corruption of elected representa tives through the creation of political debts," and that "Congress might well be able to demonstrate the existence of a danger of real or apparent corruption in independent expenditures by corporations to influence candidate elec tions." Ibid.; see FEC Supp. Br. 8-9. The state statute struck down in Bellotti is further distinguishable from BCRA Section 203 because it offered no PAC option and therefore imposed a true ban on corporate speech concern ing referenda. See 435 U.S. at 768 n.2; FEC v. Massachu setts Citizens for Life, Inc., 479 U.S. 238, 259 n.12 (1986) (MCFL) (explaining that the PAC-financing requirement imposed by 2 U.S.C. 441b "is of course distinguishable from the complete foreclosure of any opportunity for political speech that [the Court] invalidated in the state referendum context in" Bellotti); pp. 6, 7-8, infra.

When this Court has specifically focused on corporate participation in candidate elections, it has recognized that Congress's longstanding effort "to account for the particu lar legal and economic attributes of corporations and labor organizations warrants considerable deference." FEC v. National Right to Work Comm., 459 U.S. 197, 209 (1982). In MCFL, the Court held that a narrow class of nonprofit corporations is entitled to a constitutional exemption from the restrictions imposed by 2 U.S.C. 441b, see 479 U.S. at 259-265, but did not otherwise question Section 441b's con stitutionality, see id. at 259, 263. In sustaining BCRA Sec tion 203 against a facial First Amendment challenge, the Court in McConnell stated that "Congress' power to pro hibit corporations and unions from using funds in their treasuries to finance advertisements expressly advocating the election or defeat of candidates has been firmly embed ded in our law." 540 U.S. at 203. And the controlling opin ion in FEC v. Wisconsin Right to Life, Inc., 551 U.S. 449 (2007) (WRTL), while holding BCRA Section 203 unconsti tutional as applied to the particular corporation-funded advertisements at issue, cast no doubt on Congress's au thority to bar the use of corporate-treasury funds for ex press electoral advocacy or its functional equivalent. See id. at 464-481 (opinion of Roberts, C.J.). The Court's deci sion in Austin is thus fully consistent with this Court's other precedents addressing the constitutionality of restric tions on corporate spending in candidate elections.

3. In arguing that Austin is entitled to reduced stare decisis effect, appellant suggests that the underlying First Amendment question has somehow remained unsettled because "BCRA § 203 has been subject to repeated consti tutional challenges since its enactment in 2002." Supp. Br. 14 (citing McConnell and WRTL). But even if regulated entities' resistance to a decision of this Court could reduce its precedential force, this constitutional challenge to BCRA Section 203-the argument that for-profit corpora tions' electioneering cannot be regulated at all and that Austin was wrongly decided-has never been made to the Court until the two-paragraph discussion appeared in appel lant's merits brief. In McConnell, the plaintiffs did not dis pute that corporations may be barred from using their trea sury funds for express electoral advocacy; they asserted only a right to use treasury funds for everything except ex press advocacy. See 540 U.S. at 189-194, 203-209. One non profit plaintiff (WRTL) subsequently prevailed in an as- applied challenge to BCRA Section 203, but it likewise did not advocate the overruling of Austin.

Thus, until this case reached the Court, the regulated community-while continuing to litigate questions concern ing the appropriate test for identifying electoral advocacy and the precise scope of the constitutional exemption granted to certain nonprofit corporations-had acquiesced in Austin's core holding.1 In short, the principle that corpo rations may be barred from using treasury funds for inde pendent electoral advocacy is just as settled as the different principle on which appellant relies, that individuals' inde pendent electioneering cannot be restricted.

C. The Court In Austin Correctly Held That Electoral Advo cacy By For-Profit Corporations Raises Special Concerns

For-profit corporations have attributes that no natural person shares. Three characteristics of the state-created business corporation justify the special rule that Congress has applied to those entities for more than 60 years.

1. Corporate speech is speech by proxy, and the indi viduals who own, fund, or manage a corporation remain free to engage in their own advocacy no matter what restrictions are placed on the corporation. Indeed, they can even band together to do so under the corporate name: business cor porations can and do engage in electoral advocacy through their PACs, which ensure that the advocacy is funded only by stockholders and employees who choose to take part.2 Appellant is therefore simply wrong in characterizing BCRA Section 203 as a "ban" or "prohibition" (Supp. Br. 1, 10) on corporate electoral speech.

2. A business corporation's use of treasury funds for electoral advocacy distorts the political process because the communication does not correspond to the electoral prefer ences of the individuals whose money is used to fund it. Dissenting in McConnell, Justice Scalia alluded to the sign ers of the Declaration of Independence, who pledged their "Fortunes" alongside their "sacred Honor." 540 U.S. at 255. But John Hancock pledged his own fortune; when the CEO of John Hancock Financial uses corporate-treasury funds for electoral advertising, he pledges someone else's. Corporate electoral spending is thus distortive because it converts the resources of individuals into political expres sion with which they may well disagree-or, otherwise said, because such spending fails to "reflect actual public support for the political ideas espoused by corporations." Austin, 494 U.S. at 660.3

Even before Austin, this Court had recognized the gov ernment's interest in protecting corporate shareholders "from having [their] money used to support political candi dates to whom they may be opposed." NRWC, 459 U.S. at 208; accord MCFL, 479 U.S. at 260. A union member's analogous interest has constitutional stature, see FEC Supp. Br. 13, and the shareholder-protection interest is properly viewed as compelling here. Appellant's conclusory assertion that the interest "is not * * * compelling" (Supp. Br. 13) is supported only by a reference to NCPAC, but that decision says nothing about the shareholder ques tion, either on the cited page or elsewhere. The PAC option both furthers the shareholder-protection interest and facili tates voluntary advocacy. Willing individuals associated with the corporation can pool their resources for effective electoral advocacy under the corporation's auspices, while unwilling shareholders are protected against the diversion to electoral advocacy of funds they invested for a different purpose. The result is both fairer to individual sharehold ers and less distortive of the political process.4

3. For-profit corporations are inherently more likely than individuals to engage in electioneering behavior that poses a risk of actual or apparent corruption of office-hold ers. See FEC Supp. Br. 9; CPA Supp. Br. 12-14; NCPAC, 470 U.S. at 500. The Buckley Court's observation that inde pendent expenditures "may prove counterproductive" to the candidate they support, 424 U.S. at 47, has no meaning ful application to modern business corporations. An indi vidual may simply wish to add his own views to the debate, and those views may be idiosyncratic or "off message." Business corporations, by contrast, have no beliefs to ex press, but rather engage in electoral advocacy for purely instrumental reasons. See FEC Supp. Br. 10 n.2; CED Br. 10.

For an independent expenditure to incur a candidate's gratitude (or temper the candidate's hostility, see CED Br. 11-13; Justice at Stake Br. 17), it need only be known to the candidate and perceived to be effective in assisting her campaign. Since Buckley, both ends have become much easier for an independent-expenditure sponsor to achieve. Now that virtually every campaign advertisement is avail able online, along with data showing how it is targeted, a sophisticated business corporation can easily make well- publicized efforts that harmonize neatly with a candidate's message, without the need for overt coordination. CPA Supp. Br. 15. The mammoth record compiled in McConnell confirmed that, before BCRA, corporations had repeatedly used electioneering advertisements to curry favor with, and gain influence over, federal office-holders. See FEC Supp. Br. 8.5

4. Appellant contends (Supp. Br. 11-12) that the re strictions on corporate spending at issue here and in Austin are "dramatically underinclusive" because they do not ap ply to wealthy individuals or media commentary. Corpora tions, however, reap special state-created advantages that are unavailable to natural persons, and restrictions on indi vidual advocacy comparable to 2 U.S.C. 441b or BCRA Sec tion 203 would impose far greater burdens on First Amend ment interests because they would prevent natural persons from spending their own money to disseminate their own ideas. See FEC Supp. Br. 9-10. At the same time, as stated above, the dangers of actual and apparent corruption from corporate electioneering dwarf those arising from individ ual expenditures.

This Court has previously upheld federal and state elec tioneering restrictions that distinguish between media com mentary and other corporate electoral advocacy. See McConnell, 540 U.S. at 208-209; Austin, 494 U.S. at 666- 668. In so doing, the Court has recognized the special role the press plays in maintaining a vibrant sphere of free ex pression. See, e.g., Mills v. Alabama, 384 U.S. 214, 218-219 (1966). And investors in media corporations presumably understand that their company's business is disseminating content, including electoral and other political commentary, to the viewing public.

D. The Court In Austin Correctly Held That Nonprofit Corpo rations May Be Regulated If They Are Potential Conduits For Electoral Spending By Business Corporations

Appellant asserts (Supp. Br. 12) that, under current law, "individuals of modest means are barred * * * from pool ing their resources to fund the political speech of ideologi cally oriented nonprofit corporations." But if appellant raised its money wholly from individual donations, it would be free under MCFL to use those funds for electoral advo cacy. FEC Br. 29-32; 11 C.F.R. 114.10. Instead, appellant raised funds to produce Hillary from for-profit corpora tions. J.A. 244a, 251a-252a. Those corporations cannot be allowed to evade the government's compelling interests by funneling their monies through ideological nonprofits like appellant. FEC Supp. Br. 13-15.6

Appellant contends (Supp. Br. 11) that Congress cannot prevent nonprofit corporations from being used as conduits for business-corporation electoral spending because it could not preclude individuals who receive corporate money from spending it on electoral advocacy. There is ample reason, however, to distinguish between the two situations. A nonprofit corporation can be created quickly and rela tively cheaply; given an appealing name, see McConnell, 540 U.S. at 197; operated for a single purpose; easily con trolled by donors; and terminated when the task is done. Individuals share none of those attributes.

E. If Austin Remains Good Law, There Is No Sound Basis For Overruling McConnell

Appellant does not contend that McConnell should be overruled if Austin remains good law. Supp. Br. 21. That reticence is well-advised, because there is no sound basis for drawing a constitutional distinction between express advocacy and its functional equivalent. See FEC Supp. Br. 21.

Some amici contend that McConnell-or, more pre cisely, the two-year-old lead opinion in WRTL-has already proved unworkable.7 Those contentions are unfounded. The FEC has faithfully implemented WRTL by adopting easy-to-apply safe harbors, 11 C.F.R. 114.15(b), and by making clear that even advertisements outside the safe harbors are exempt if there is any reasonable doubt about their electioneering nature, 11 C.F.R. 114.15(c). And while appellant asserts (Supp. Br. 17) that "no corporation or labor union would dare opine on a candidate's qualifications without checking with the FEC first," in the short time since WRTL, corporations and other groups using corpo rate money have spent well over $100 million on election eering communications claiming exemption under WRTL. FEC Supp. Br. 22-23.

CONCLUSION

For the foregoing reasons, as well as those stated in our previous briefs and at oral argument, the judgment of the district court should be affirmed.

Respectfully submitted.

ELENA KAGAN
Solicitor General

AUGUST 2009

1 Amicus CED's brief suggests (at 11-15) one reason: many CEOs view the current restrictions on corporate electoral spending as pre venting a wasteful arms race, in which corporations would have to spend ever more money to compete for influence over public office- holders.

2 More than 1500 business corporations maintain their own PACs, and many more are represented by trade-association PACs. See FEC, Number of Federal PACs Increases (Mar. 9, 2009) <http://www.fec. gov/press/press2009/20090309PACcount.shtml>. Various amici sug gest that requiring corporations to finance electioneering with PAC ra ther than treasury funds is unconstitutional because maintaining a PAC is difficult and expensive. But for-profit corporations can use their treasury funds to set up and administer their PACs, see 2 U.S.C. 441b(b)(2)(C); 11 C.F.R. 114.5(b), thereby ensuring that all funds raised for political advocacy can be spent on political advocacy.

3 Austin's reference to "public support" is best understood to refer, not to popularity within the community at large (see U.S. Chamber Supp. Br. 13-14), but to support among those in whose name the mes sage is propagated-i.e., the shareholders whose resources are funding the electioneering.

4 As appellant emphasizes (Supp. Br. 10, 13-14), the Bellotti Court found shareholder protection to be an insufficient justification for the Massachusetts statute at issue there. Public advocacy concerning ballot measures, however, is directed at the "lawmakers" themselves (the citi zens) and thus resembles lobbying, a traditional business activity in which shareholders would expect their corporations to engage. More over, the likelihood that a shareholder would disapprove of corporate officers' electoral preferences is greater in candidate elections than in referenda, because legislators vote on a variety of measures that have no discernible impact on a particular corporation. The Bellotti Court also emphasized the "overinclusiveness" of the Massachusetts statute, noting that it would prohibit even corporate electioneering that share holders "unanimously" approved. 435 U.S. at 794. By contrast, BCRA Section 203's PAC option ensures that willing shareholders can pool their resources for electioneering under the corporation's auspices.

5 Appellant's contention (Supp. Br. 22) that the government must prove a likelihood of corruption with respect to each corporate commu nication misreads this Court's cases. When the Court has upheld cam paign-finance regulation on an anti-corruption rationale, it has never required proof of likely harm at the level of specificity that appellant now demands. See Buckley, 424 U.S. at 27-28; accord WRTL, 551 U.S. at 464-465, 469 (opinion of Roberts, C.J.).

6 Various amici contend that the MCFL exemption should be exten ded to nonprofits that accept only small amounts of corporate funding. Whatever force that contention might have in particular cases, see FEC Supp. Br. 3 n.1, it is irrelevant to the facial challenge on which this Court requested supplemental briefing. And appellant has neither pre served nor adequately documented an argument that its overall cor porate funding is so small as to qualify for an as-applied exemption. See FEC Br. 29-30.

7 No one contends that Austin, which involved an advertisement con taining "magic words" of express advocacy, has proved difficult to apply in practice.