UPDATE:  In another major campaign finance decision, a three-judge U.S. District Court in Washington on Friday rejected a constitutional challenge by the Republican Party to some federal limits on donations to political parties.  That ruling is explored in a separate post (see above).  That ruling, too, discusses the impact of the Supreme Court’s Citizens United ruling.

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In the first major court ruling to apply the Supreme Court’s ruling in Citizens United v. Federal Election Commission, the en banc D.C. Circuit Court on Friday unanimously struck down a ceiling on contributions to independent political groups that want to spend money directly to support or oppose candidates for the presidency and Congress.  The ruling came in SpeechNow.org,  et al., v. Federal Election Commission (Circuit docket 08-5223).  The ruling (found here) came two months after the Supreme Court, in the Citizens United decision on Jan. 21, gave sweeping new constitutional protection for spending on federal campaigns by corporations and labor unions.  The SpeechNow ruling significantly broadens the impact of Citizens United, extending its constitutional reasoning from campaign spending to campaign donations.

Although the SpeechNow case involved contributions to advocacy groups, rather than their spending, the Circuit Court found that the Citizens United ruling “resolves this appeal.”  In an opinion written by Chief Judge David B. Sentelle, the Circuit Court said that the $5,000 annual limit on donations to groups like SpeechNow is unconstitutional.  The Court went on to rule that such organizations will have to obey the federal campaign finance law’s disclosure and reporting requirements.  Those restrictions, however, were not strenuously contested in the case, since SpeechNow’s organizers were mainly interested in clearing the way for unlimited donations to their political advocacy campaigns.

The rulings applies to so-called “527” political groups (the name comes from a section of the federal tax code).  Those groups, operating independent of political party organizations, have become major financial players in presidential and congressional campaigns, spending tens of millions of dollars to try to influence directly who wins and loses.  Those groups exist on both ends of the political spectrum, from conservative groups such as the Club for Growth to liberal groups such as MoveOn.org.

The Circuit Court explicitly rejected the FEC’s argument that large donations to groups that make independent political expenditures lead to a kind of civic corruption because such contributions lead to preferential access for donors and undue influence over officeholders.  The Circuit Court commented: “Whatever the merits of those arguments before Citizens United, they plainly have no merit after Citizens United….Contributions to groups that make only independent expenditures cannot corrupt or create the appearance of corruption.”

The only kind of corruption that Congress may attack with spending or donation limits, the Circuit Court said, is “quid pro quo” corruption — that is, giving money to obtain political favors.  The Supreme Court, the opinion added, “has effectively held that there is no corrupting ‘quid’ for which a candidate might in exchange offer a corrupt ‘quo.’ ”

“Given this analysis from Citizens United,” Sentelle wrote, “we must conclude that the government has no anti-corruption interest in limiting contributions to an independent expenditure group such as SpeechNow….All that matters is that the First Amendment cannot be encroached upon for naught.”

The Circuit Court conceded that the Supreme Court, since 1976, has generally treated campaign spending differently, giving it more freedom than campaign donations get.  And it conceded that the Citizens United ruling did not literally disrupt that basic distinction. But, it went on, the contribution limits that the Court has been prepared to uphold involved donations given directly to candidates or to the candidates’ political organizations.  When the donations are going to a group that will spend independently, the Circuit Court concluded, the distinction does not apply.

The Circuit Court did stress, though, that it was not addressing whether limits on campaign contributions should always be judged by the same standard.  But, “no matter which standard of review governs contribution limits, the limits on contributions to SpeechNow cannot stand,” it ruled.

Turning to the FEC’s conclusion that so-called “527” groups must organize as political committees and must meet reporting and disclosure requirements for such committees, the Circuit Court said the Supreme Court has consistently upheld such requirements when challenged “facially” — that is, when challenged as written, not as applied to a given factual situation.  For a group like SpeechNow, the Court decided, those requirements do not impose a significant burden.

“The public,” it commented, “has an interest in knowing who is speaking about a candidate and who is funding that speech.”  In addition, reporting rules help the FEC monitor whether other legal obligations of campaign finance law are being obeyed — such as the ban on contributions from foreign corporations and individuals.

The bottom line of the decision is that a federal District Court judge must now issue a binding order barring the FEC from enforcing the contribution limits on “527” groups like SpeechNow.

Under federal campaign finance law, a group qualifies as a “political committee” as soon as it accepts donations of more than $1,000 in a year or spends more than $1,000 in a year.  Any individual seeking to donate money to such a committee may not give more than $5,000 per calendar year to any single committee, and no more than a total of $69,900 every two years to all political committees.  Those are the provisions the Circuit Court nullified for “527” groups.

SpeechNow is an organization that was set up to spend money independently, directly advocating the election or defeat of candidates for the presidency and for Congress, depending upon the views those candidates hold about free speech rights, in particular the free speech that should be allowed in politics, including spending as a form of speech.  Its founder is David Keating, who is also the head of a conservative “527” group, the Club for Growth.    The group has not yet begun operations, but some of its donors, including Keating, want to give more than the $5,000 annual limit to it to support independent spending.  They now are free to do so.

The FEC has the option of taking the case on to the Supreme Court and, in the meantime, to seek a court order postponing the effect of the ruling while such an appeal goes forward.

Posted in Cases in the Pipeline