Recently, the U.S. Supreme Court issued a ruling that sent a campaign finance case regarding the constitutionality of Alaska’s campaign finance laws back to the Ninth Circuit. That case is called Thompson et al. v. Hebdon et al. and is primarily focused on whether Alaska’s individual-to-candidate contribution limit of $500 per year is consistent with the First Amendment, which prohibits Congress (and state legislatures through the Fourteenth Amendment) from making any law “abridging the freedom of speech[.]”

A few weeks earlier in a different lawsuit taking place in Alaska state court, Alaska Superior Court Judge William Morse ruled that the Alaska Public Offices Commission (APOC) had wrongfully stopped enforcing Alaska’s $500 per year contribution limit to independent expenditure groups created to support particular candidates for political office. In Patrick et al. v. Interior Voters for John Coghill et al., Judge Morse ruled that APOC was incorrectly refusing to enforce Alaska’s $500 per year limitation on contributions to independent expenditure groups. APOC has not enforced this limitation since 2012, when APOC concluded that the contribution limitation to independent expenditure groups could not withstand the U.S. Supreme Court’s decision in Citizen United v. FEC. But, in his recent ruling, Judge Morse reasoned that the Ninth Circuit’s Hebdon decision confirmed the opposite by upholding the contribution limit. Judge Morse ordered APOC to restart its enforcement of the contribution limit to independent expenditure groups.

To understand these disputes and the legal landscape on which these disputes are taking place, a discussion of the famous U.S. Supreme Court decision Citizens United v. FEC is necessary. It is also helpful to understand some definitions. Campaign “contributions” are the monies, goods or services donated to a campaign. Independent expenditures are monies spent by someone other than the candidate or the candidate’s campaign and without coordination with the candidate or his or her campaign.

Citizens United v. FEC

In 2010, the U.S. Supreme Court issued its famous Citizens United decision, setting off a firestorm of debate about the First Amendment’s interaction with political campaign activities.

In Citizens United, the Court held that a federal statute that prohibited unions and corporations from using their general treasury funds (their normal walking-around money/revenues, and not money solicited from others to engage in campaigning) during times close to primary and general elections violated the First Amendment’s prohibition on laws that prohibit speech.

During the Democratic primaries of the 2008 election, Citizens United corporation released a 90-minute film entitled “Hillary: The Movie.” Hillary was released on DVD and on video-on-demand streaming services. Citizens United was not operated or managed by anyone campaigning for office, and it did not coordinate with any candidate or campaign. It was a group engaged in independent expenditures that advocated against candidate Hillary Clinton. But, federal law—specifically, the Bipartisan Campaign Reform Act of 2002 (BCRA, pronounced “BIK-RAH” in political and legal circles)—prohibited unions and corporations from engaging in any broadcast, cable or satellite communication that could be received by 50,000 or more people and “refers to a clearly identifiable candidate for Federal office” within 30 days of a primary election or 60 days of a general election.

Citizens United filed a lawsuit seeking a declaration from the court that the federal law was unconstitutional because it impinged on its First Amendment rights and seeking an injunction prohibiting the Federal Election Commission from enforcing the prohibition. The Court was particularly troubled by the penalty for violating the prohibition: federal prison. BCRA made it a felony for all corporations to advocate the election or defeat of candidates or to expressly advocate the election or defeat of candidates within 30 days of a primary or 60 days of a general election. The Court noted the following situations could result in felony charges under BCRA’s prohibition:

The Sierra Club runs an ad, within the crucial phase of 60 days before the general election, that exhorts the public to disapprove of a Congressman who favors logging in national forests; the National Rifle Association publishes a book urging the public to vote for the challenger because the incumbent U.S. Senator supports a handgun ban; and the American Civil Liberties Union creates a Web site telling the public to vote for a Presidential candidate in light of that candidate’s defense of free speech. These prohibitions are classic examples of censorship.

The Citizens United Court then spent pages citing all of the cases in which the U.S. Supreme Court had held the “First Amendment protection extends to corporations.” For instance, the Anchorage Daily News is actually the “Anchorage Daily News, LLC,” a registered Alaska limited liability corporation. The ADN and its employees do not lose their First Amendment rights to publish reports and commentary about politicians and campaigns because the media entity they work for is a corporation. The Court also noted that corporations had long contributed to the “discussion, debate, and the dissemination of information and ideas that the First Amendment seeks to foster.” Therefore, with the fundamentals laid down—that the First Amendment protects corporations, like everyone in the United States, from government censorship by the First Amendment—the Court turned to the government’s arguments in favor of upholding the statute prohibiting unions and corporations from spending general fund monies within a certain amount of days of primary and general elections.

As for the bumper-sticker argument that money does not equate to speech, the Court explained that all speakers use monetary resources to get their message out: “All speakers, including individuals and the media, use money amassed from the economic marketplace to fund their speech. The First Amendment protects the resulting speech, even it was enabled by economic transactions with persons or entities who disagree with the speaker’s ideas.”

The Court then turned to the three interests the Government offered to support BCRA’s restriction on corporate and union speech: (1) anti-distortion interest, (2) anti-corruption interest, and (3) shareholder protection interest.

The Court rejected the argument that the prohibition was warranted to prevent the distortion of speakers’ voices in the informational marketplace. In other words, the Government’s desire to reduce the influence of speakers who have more resources to spread their messages to others is not a valid basis under the Constitution to limit speech. For a long time, wealthier and more popular individuals have had an outsized voice, and the Court reasoned the First Amendment does not permit the Government to seek to equalize the voices of every speaker in the United States. For example, the New York Times has a wide readership, and it would be dangerous to limit its reach because it is popular and has a wide circulation. This is particularly true because anyone can be a member of the “press” in the United States, even Jeff Landfield.

As to anti-corruption, the Court noted that since its watershed decision in Buckley v. Valeo in 1976, it had become widely accepted that people and entities spending their own money to advocate for or against a candidate does not mean there is corruption or that there is an appearance of corruption. Independent expenditures are just that—a voice independent from a candidate advocating a position.

Finally, as to the shareholder protection interest, the Government was caught flat footed. The Government’s argument was that there was a valid interest in protecting shareholders of companies engaged in political speech from the company spending corporate funds on speech the shareholder may not agree with. But this argument could not survive the reality that BCRA only prevented corporations from spending general funds 30 days before a primary and 60 days before a general election. The Court was not persuaded that BCRA protected shareholders from misusing corporate funds for political speech because the law only cared about 90 days total in every election cycle.

The Court ended its opinion by striking down as unconstitutional the provision of BCRA that prohibited unions and corporations from spending their general-treasury funds to advocate for or against a candidate. It then issued a reminder to readers of the unintended consequences of giving the government the power to control corporate speech:

When word concerning the plot of the movie Mr. Smith Goes to Washington reached the circles of Government, some officials sought, by persuasion, to discourage its distribution. Under Austin [a case from 1990 that upheld a ban on corporate political speech], though, officials could have done more than discourage its distribution—they could have banned the film. After all, it, like Hillary, was speech funded by a corporation that was critical of Members of Congress. Mr. Smith Goes to Washington may be fiction and caricature; but fiction and caricature can be a powerful force.

Modern day movies, television comedies, or skits on YouTube.com might portray public officials or public policies in unflattering ways. Yet if a covered transmission during the blackout period creates the background for candidate endorsement or opposition, a felony occurs solely because a corporation, other than an exempt media corporation, has made the “purchase, payment, distribution, loan, advance, deposit, or gift of money or anything of value” in order to engage in political speech. Speech would be suppressed in the realm where its necessity is most evident: in the public dialogue preceding a real election. Governments are often hostile to speech, but under our law and our tradition it seems stranger than fiction for our Government to make this political speech a crime. Yet this is the statute’s purpose and design.

Some members of the public might consider Hillary to be insightful and instructive; some might find it to be neither high art nor a fair discussion on how to set the Nation’s course; still others simply might suspend judgment on these points but decide to think more about issues and candidates. Those choices and assessments, however, are not for the Government to make. “The First Amendment underwrites the freedom to experiment and to create in the realm of thought and speech. Citizens must be free to use new forms, and new forums, for the expression of ideas. The civic discourse belongs to the people, and the Government may not prescribe the means used to conduct it.”

Citizens United was a divided opinion with five members of the Court voting to strike down the statute and four members voting to uphold the statute. Justice Paul Stevens wrote a strongly worded dissent that readers should read if they are interested in this area.

Montana Fights the Citizen United Decision and Loses

Following the Citizens United decision, individual states’ bans on corporate and union political speech were struck down state-by-state across the Country. But, not every state gave in. Montana refused. In 2011, the Washington Post reported: “Only Montana still wages a lonely court battle to maintain the [corporate speech] ban.” On December 30, 2011, the Montana Supreme Court issued a ruling in Western Tradition Partnership v. Attorney General of the State of Montana that upheld Montana’s ban on corporate speech as a means of protecting its elections from corruption or the appearance of corruption. In part, the Montana Supreme Court rested its decision on Montana’s experience with the corrupt Copper Kings of the mining-boom town of Butte, who bribed judges to get rulings they desired and, in the case of  W.A. Clark, bribed the entire legislature to be appointed as U.S. Senator back before the 17th Amendment was ratified making senators elected by the public and not appointed by each state legislature. The Court’s discussion is worth reading in full:

In the fight over mineral rights between entrepreneur F. Augustus Heinze and the Anaconda Company, then controlled by Standard Oil, Heinze managed to control the two State judges in Butte, who routinely decided cases in his favor. The Butte judges denied being bribed, but one of them admitted that Anaconda representatives had offered him $250,000 cash to sign an affidavit that Heinze had bribed him.

In response to the legal conflicts with Heinze, in 1903 Anaconda/Standard closed down all its industrial and mining operations (but not the many newspapers it controlled), throwing 4/5 of the labor force of Montana out of work. Its price for sending its employees back to work was that the Governor call a special session of the Legislature to enact a measure that would allow Anaconda to avoid having to litigate in front of the Butte judges. The Governor and Legislature capitulated and the statute survives.

W.A. Clark, who had amassed a fortune from the industrial operations in Butte, set his sights on the United States Senate. In 1899, in the wake of a large number of suddenly affluent members, the Montana Legislature elected Clark to the U.S. Senate. Clark admitted to spending $272,000 in the effort and the estimated expense was over $400,000. Complaints of Clark’s bribery of the Montana Legislature led to an investigation by the U.S. Senate in 1900. The Senate investigating committee concluded that Clark had won his seat through bribery and unseated him. The Senate committee “expressed horror at the amount of money which had been poured into politics in Montana elections … and expressed its concern with respect to the general aura of corruption in Montana.”

In a demonstration of extraordinary boldness, Clark returned to Montana, caused the Governor to leave the state on a ruse and, with assistance of the supportive Lt. Governor, won appointment to the very U.S. Senate seat that had just been denied him.  When the Senate threatened to investigate and unseat Clark a second time, he resigned. Clark eventually won his Senate seat after spending enough on political campaigns to seat a Montana Legislature favorable to his candidacy.

After the Anaconda Company cleared itself of opposition from Heinze and others, it controlled 90% of the press in the state and a majority of the legislature.  By 1915 the company, after having acquired all of Clark’s holdings as well as many others, “clearly dominated the Montana economy and political order … [and] local folks now found themselves locked in the grip of a corporation controlled from Wall Street and insensitive to their concerns.” Even at that time it was evident that industrial corporations controlled the state “thus converting the state government into a political instrument for the furthering and accomplishment of legislation and the execution of laws favorable to the absentee stockholders of the large corporations and inimical to the economic interests of the wage earning and farming classes who constitute by far the larger percentage of the population in Montana.”

In 1900 Clark himself testified in the United States Senate that “[m]any people have become so indifferent to voting” in Montana as a result of the “large sums of money that have been expended in the state….” This naked corporate manipulation of the very government (Governor and Legislature) of the State ultimately resulted in populist reforms that are still part of Montana law. In 1906 the people voted to amend the state Constitution to allow for voter initiatives. Not long thereafter, in 1906 this new initiative power was used to enact reforms including primary elections to choose political candidates; the direct election of United States Senators; and the Corrupt Practices Act, part of which survives as § 13–35–227, MCA, at issue in this case.  (Internal citations to books and cases omitted for clarity).

The Court also noted that because of Montana’s small population and large geographic area, corporate expenditures had a large impact on Montana elections, and therefore should be prohibited. (This was merely a repackaged anti-distortion argument that the Citizens United Court rejected as an invalid reason to prohibit corporate speech.)

The Montana Supreme Court concluded that based on this unique history of corruption surrounding the Copper Kings’ extraction of natural resources in Butte, “[c]learly Montana has a unique and compelling interests to protect through preservation of this statute [prohibition on corporate expenditures to engage in political speech].”

The Western Tradition Partnership decision was immediately on a collision course with the Citizens United decision and it did not last very long.

Less than six months after the Montana Supreme Court’s decision, the U.S. Supreme Court granted review of the Western Tradition Partnership judgment—although by now the corporation had changed its name to American Tradition Partnership—and reversed the Montana Supreme Court’s decision in a single paragraph:

A Montana state law provides that a “corporation may not make … an expenditure in connection with a candidate or a political committee that supports or opposes a candidate or a political party.” Mont. Code Ann. § 13–35–227(1) (2011). The Montana Supreme Court rejected petitioners’ claim that this statute violates the First Amendment. In Citizens United v. Federal Election Comm’n, this Court struck down a similar federal law, holding that “political speech does not lose First Amendment protection simply because its source is a corporation.” The question presented in this case is whether the holding of Citizens United applies to the Montana state law. There can be no serious doubt that it does. See U.S. Const., Art. VI, cl. 2. Montana’s arguments in support of the judgment below either were already rejected in Citizens United, or fail to meaningfully distinguish that case.

The petition for certiorari is granted. The judgment of the Supreme Court of Montana is reversed.

And with that, Montana’s prohibition on corporate political speech was struck down as violating the First Amendment.

This background is important to understand because Alaska’s campaign finance laws are currently being scrutinized in both state and federal court, and the State appears to be making the same arguments that Montana used to unsuccessfully defend its ban on corporate political speech in the Western Tradition Partnership case.

Thompson v. Hebdon

U.S. District Court for the District of Alaska

In 2015, three individual Alaskans who were registered Republicans and District 18 of the Alaska Republican Party (represented by then-private attorney and now Attorney General Kevin Clarkson) sued in Alaska federal court the members of the Alaska Public Offices Commission, seeking rulings from the court that the following provisions of Alaska’s campaign finance laws were unconstitutional abridgments of the First Amendment:

• Alaska’s $500 per year limit on contributions from an individual to a candidate for office and to a group that is not a political party. This law prohibited Alaskans from donating more than $500 per year to any candidate or to any “group” that is not a political party, such as a political action committee.
• Alaska’s $3,000 limit on contributions from non-residents to a candidate. When a candidate reached $3,000 in contributions to her campaign she could not accept any further non-resident donations ($3,000 for House and $5,000 for Senate)
• Alaska’s $5,000 limit on contributions from a political party to a candidate. This law prohibits a political party, such as the Alaska Democratic Party or the Alaska Republican Party, from donating more than $5,000 to any candidate’s campaign.

On November 7, 2016, United States District Judge Timothy M. Burgess upheld all of the challenged campaign finance laws. As to the $500 per year limit on contributions to individual candidates or non-party groups, Judge Burgess reasoned that Alaska’s unique reliance on natural resource development and the widely publicized VECO public corruption scandal provided sufficient justification for Alaska to limit these contributions to prevent “quid pro quo corruption or its appearance in Alaska politics[.]” As to the $3,000 aggregate limit on non-resident contributions to a House candidate, Judge Burgess held that the State had shown that the limit was a valid exercise of its anti-corruption interest by preventing the appearance of a candidate being indebted to outside interests. Judge Burgess upheld the $5,000 limit on contributions from a political party to a candidate because “Plaintiffs  . . . have not explained how Alaska’s political party aggregate limit interferes with First Amendment free speech and associational freedoms.”

Plaintiffs appealed to the Ninth Circuit.

Ninth Circuit

On November 27, 2018, in Thompson v. Hebdon, the three-member panel of the Ninth Circuit upheld Judge Burgess’s decision on the first bullet point ($500 per year limit on individual contributions to candidates and non-party groups) and third bullet point ($5,000 limit on contributions from a political party to a candidate). The Ninth Circuit agreed with Judge Burgess that the testimony elicited by the State and Alaska’s unique history of corruption made its contribution limits acceptable to the First Amendment:

For example, Senator John Coghill testified that he was approached by a lobbyist demanding his vote, saying: “This is why we gave to you. Now we need your help.” Similarly, Anchorage Assembly member Bob Bell testified that an executive offered to hold a fundraiser for him if he would support a private prison project. When he refused, the executive held a fundraiser for his opponent instead. These examples demonstrate attempts by individuals to affect public officials’ voting behavior through the prospect of financial gain, thereby giving rise to a risk of quid pro quo corruption. Finally, there is Alaska’s VECO public corruption scandal, which came to light shortly after the 2006 Initiative passed. That scandal snared roughly 10% of Alaska’s legislature in a scheme of accepting money from VECO, and oil services firm, in return for votes and other political favors. Under [the Ninth Circuit’s prior precedent] we are compelled to conclude that the State’s evidence suffices to show that the individual-to-candidate limit furthers the important state interest of preventing quid pro quo corruption or its appearance.

The Ninth Circuit was picking up on an important distinction between independent expenditures and contributions to a candidate. Under Citizens United, the Court reasoned that political advocacy without coordination with a candidate is every individual’s, union’s, and corporation’s right under the First Amendment. But, in Thompson, Judge Burgess and the Ninth Circuit were dealing with direct contributions to a candidate. The Ninth Circuit reasoned, based on the testimony of Senator John Coghill, Assemblyman Bob Bell, and general testimony on the VECO scandal, that direct contributions to candidates give rise to quid pro quo corruption and the appearance of that corruption.

But, the Ninth Circuit struck down the $3,000 aggregate limit on contributions from non-residents to a House candidate. The State’s reason for having the limit—to prevent corruption—did not make any sense, the Court reasoned, because there was no evidence that the first dollar a candidate received from non-resident (Mr. A) was not corrupting but that the $3,001 dollar a candidate received from a different non-resident (Mr. B) was corrupting. The Court concluded that the $3,000 aggregate limit was a “poor fit” for the State’s alleged interest in fighting election corruption.

U.S. Supreme Court

Plaintiffs appealed the Ninth Circuit’s upholding of the $500 per year limit on individual contributions to a candidate or non-party group to the U.S. Supreme Court.

On November 25, 2019, in Thompson v. Hebdon, the U.S. Supreme Court vacated the Ninth Circuit’s judgment on the $500 per year contribution limit, and sent the case back to the Ninth Circuit to analyze whether Alaska’s $500 per year limit was consistent with its decision in Randall v. Sorrell. Randall involved the state of Vermont’s $400 limit on individual contributions to candidates for governor, lieutenant governor, or other statewide office; $300 to a candidate for state senator; and $200 to a candidate for state representative. The Randall Court struck down those limits as unduly harmful “to the very electoral fairness it seeks to promote.” The U.S. Supreme Court noted that Randall had identified several “danger signs” about Vermont’s limits that warranted closer review and that were also present in Alaska’s limit:

• First, “Alaska’s $500 individual-to-candidate contribution limit is substantially lower than the limits we [the U.S. Supreme Court] previously upheld. The lowest campaign contribution limit the Court has upheld was Missouri’s limit of $1,075 per two-year election cycle for candidates back in 1998. In 2019 dollars, the Court noted that Missouri’s limit translates to over $1,600 in today’s dollars. “Accordingly,” the Court stated, “Alaska’s limit is less than two-thirds of the contribution limit we upheld in [the Missouri case].”
• Second, “Alaska’s individual-to-candidate contribution limit is substantially lower than comparable limits in other States.” Unlike most states, which have limits on a per-election basis which allows a donor to contribute the same amounts twice (one for the primary election and two for the general election), Alaska’s contribution limit applies simply to 18 months preceding the general election. Moreover, Alaska’s $500 per year contribution limit applies uniformly to all state office candidates, unlike most states that distinguish gubernatorial and lieutenant governor races and set a higher contribution for those races.
• Third, “Alaska’s contribution limit is not adjusted for inflation.” The Randall Court critiqued Vermont’s limit on the basis that its failure to index the limit meant that over time it would inevitably become too low. The Thompson Court noted that Alaska’s law had the same flaw.

Notably, Justice Ginsburg did not dissent from the Thompson ruling but provided a separate statement that Alaska’s 90% reliance on the oil and gas industry made it “highly, if not uniquely, vulnerable to corruption in politics and government.”

The U.S. Supreme Court sent the case back to the Ninth Circuit (“remanded” in legal lingo) with orders “for that court to revisit whether Alaska’s contribution limits are consistent with our First Amendment protections.”

Patrick et al. v. Interior Voters for John Coghill et al.

Meanwhile, in Alaska State Court, another battle over a $500 per year limitation on contributions was taking place.

On November 4, 2019, Alaska Superior Court Judge William Morse issued an Order reversing APOC’s dismissal of two complaints against independent expenditure groups. APOC had applied its 2012 advisory opinion that concluded in the wake of Citizens United that Alaska’s $500 per year limitation on individual-to-independent expenditure groups violated the First Amendment. Judge Morse said this was error given Judge Burgess’s and the Ninth Circuit’s decision in Thompson v. Hebdon that the limitation prevented circumvention of the individual-to-candidate limits. The limit, the Ninth Circuit reasoned, prevented contributors from “evading the limit on contributions to candidates by channeling funds through a multicandidate political committee.”  Because the Ninth Circuit upheld the individual-to-groups limit, Judge Morse reversed APOC dismissal of the complaint against two independent expenditure groups who had accepted individual contributions exceeding the $500 per year limit.

Thoughts:

1. The U.S. Supreme Court appears to have telegraphed to the Ninth Circuit that Alaska’s contribution limits do not pass First Amendment muster under the Court’s 2006 decision in Randall. In Randall, the Court invalidated Vermont’s individual-to-candidate contribution limits as unduly harmful to the political process. Vermont had to permit its residents to contribute more to candidates. The most likely outcome seems to be the Ninth Circuit rules that Alaska must increase its contribution limit to $1,600 per candidate per 18-month period, instead of the current limit of $1,000 per candidate ($500 per year, allowing a donor to make two maximum contributions during the 18-month period leading up to the general election) over the same period. Do you think this will increase corruption, lessen corruption or have no effect on corruption?
2. There could be no contribution limits during 2020 campaign season. If the Ninth Circuit strikes down Alaska’s individual-to-candidate contribution limit of $500 per-candidate per year as unconstitutionally restrictive under Randall, and the Alaska Legislature does not quickly pass a replacement statute that raises the limit of contributions to around $800 per year per-candidate, then there will be no limit under Alaska law to amount of contributions an individual can make to a candidate during the 2020 campaign season. But look for incumbents in the Legislature—who are prohibited from campaigning during the session—to work very quickly to impose new contribution limits. Otherwise, their opponents who are not in session and remain free to campaign, would be at a significant advantage.
3. Do elected officials think the $500 per person per year contribution limit is too restrictive or do they agree with it? It may be hard to get a straightforward, honest answer on this question from politicians. It is politically unpopular for politicians to voice support for raising campaign limits, and it is politically popular to be in favor of limits. Expect politicians—especially incumbents with deep constituencies to draw many donations from—to be in favor of limits, and expect political newcomers that may have rely on a few big donations and not a high number of donors to campaign to be more disposed to raising the limit.
4. What role should history of corruption in Alaska play in analyzing whether a limitation on political speech comports with the First Amendment’s prohibition on laws that abridge speech? In lawsuits, both Montana and Alaska have pointed to eras of actual bribery in their state histories as reasons why contribution limits to politicians are important. But bribery is already illegal. The U.S. Supreme Court rejected Montana’s citation to the Copper Kings’ corruption of Montana politicians as a reason to prohibit corporations from engaging in political advocacy. That was in the context of independent expenditures, not direct contributions to a candidate. Does this distinction make a difference to you?
5. Judge Morse’s decision appears to be correct. Despite the whiplash of the Thompson v. Hebdon case and the U.S. Supreme Court’s recent remand of that case to the Ninth Circuit, administrative agencies are required to defer to court interpretation of the federal and Alaska constitutions, as well as court interpretations of state statute. The courts say what the law is, not administrative agencies. Here, Judge Burgess and the Ninth Circuit have both ruled that Alaska’s $500 per year limit on individual-to-independent expenditure groups contributions meet First Amendment muster. Therefore, APOC is not free to decide the $500 per year limit is unconstitutional and unenforceable if the courts says it is constitutional and enforceable. Judge Morse’s decision correctly directs APOC to follow the law, as interpreted by the courts.

Lee Baxter is a practicing Anchorage attorney. He provides periodic legal analysis for the Landmine in his spare time – when he is not fishing.