More Citizens United
posted by Michael Kang
Thanks to Danielle Citron for giving me the chance to share a few quick thoughts about Citizens United v. FEC. In that decision, as you probably know, the Supreme Court struck down federal campaign finance laws that prohibited corporations from making independent expenditures in connection with federal elections.
Justice Kennedy frames his majority opinion in Citizens United around the basic issue whether “the Government may impose restrictions on certain disfavored speakers,” namely corporations, but in so doing, Justice Kennedy asks the wrong set of questions. Corporations aren’t the relevant actors whose rights we ought to be concerned about. Corporations are not people, nor entitled to all the constitutional rights of individual citizens. But as many supporters of Citizens United argue correctly, we nonetheless invest institutions, such as corporations and political parties, with constitutional entitlements when it appropriately serves the rights of individuals who constitute those institutions. And yes, corporate expenditures would be a more efficient way for shareholders to convert treasury funds into political speech. However, there’s lots of campaign finance regulation that complicates the ability of shareholders or other individuals to direct funds to political speech. For instance, contribution limits restrict the ability of all individuals to deploy their funds to maximum advantage, but the Court (at least so far) permits the government to restrict contributions anyway. In other words, the fact that a government restriction makes shareholder speech more difficult is obviously insufficient by itself to justify a constitutional prohibition of that restriction—we need to know a lot more about how shareholders’ expressive interests are compromised, if at all, to a degree that requires the Court to intervene.
In the context of Citizens United, it is unclear to me how shareholders are inappropriately disadvantaged by a prohibition on corporate expenditures. Shareholders aren’t disadvantaged by their decision to incorporate, because they always remain free to make independent expenditures on an unlimited basis in their individual capacity, just like non-shareholders and everyone else. The analysis might be different if shareholders were in a worse position than non-shareholders, but they’re not. Just as non-shareholders can aggregate funds through a PAC or political party, so too can shareholders. Perhaps the government should allow corporate expenditures and simply expect non-shareholders to incorporate as well, but whether the Constitution prohibits the government from refusing to do so is a different matter.
What functional difference does Citizens United achieve by permitting corporations to spend treasury funds on independent expenditures?—a key difference is that shareholders obtain the advantage of streamlined aggregation through the corporation, as opposed to other entities. To aggregate their funds, non-shareholders pool their funds, subject to personal income tax, derived from various sources by contributing individually to a PAC or political party. The PAC or party collects their pooled money, but it does so only subject to applicable restrictions on contributions under campaign finance law. By contrast, the post-Citizens United corporation may serve as both a source of funds and the pooling entity for those funds all at once for its shareholders. It can pool shareholder money simply by retaining earnings, instead of distributing dividends to shareholders who then must aggregate those funds through a separate entity. This streamlined aggregation not only lowers transaction costs, but uses pre-tax dollars (for purposes of personal income tax) and bypasses restrictions on contributions. Aggregation through PACs and parties is quite inefficient by comparison. So, I don’t understand why shareholders should be constitutionally entitled to this advantage. And it is difficult to understand why speech by PACs and political parties, whose First Amendment credentials are at least as strong in this context as for-profit corporations, would receive less constitutional protection.
The justification, according to Citizens United, is doctrinal consistency with Buckley v. Valeo, but the arrogance of Citizens United on this point is awful. Citizens United’s reasoning is that Buckley determined that there is no government interest in limiting independent expenditures. According to Buckley, independent expenditures present no risk of corruption, and therefore government regulation restricting independent expenditures is unconstitutional, regardless of their source. Of course, the Court in Austin v. Michigan Chamber of Commerce had engaged in doctrinal calisthenics to avoid this very conclusion and uphold a prohibition on corporate expenditures. Citizens United overrules Austin for this reason and mocks it as “not well reasoned.” Although this criticism is understandable in certain respects, Citizen United’s overwhelming confidence in the original correctness of Buckley is not. If Austin doesn’t make sense, the same thing can be said about Buckley.
Buckley is absurd as a matter of political reality in its constitutional assertion that contributions are potentially corrupting, but that independent expenditures are not at all. Citizens United depends on this absurdity from Buckley, without any reservation about its unreality. Notably, Justice Kennedy spends only a single paragraph from his 56-page majority opinion in dismissing the relevance of his majority opinion in Caperton v. Massey, which recognizes the corrupting potential of independent expenditures less than a year ago. Of course, Caperton involved a different remedy than the government sought in Citizens United, as Kennedy notes, but both cases hinged on a critical judgment about the plausibility of corruption from independent expenditures. In Caperton, Kennedy’s answer is basically yes, while his answer in Citizens United is no. There are ways to distinguish the cases, but only members of Justice Kennedy’s immediate family could find his summary dismissal of Caperton in any way convincing. If the payoff from Citizens United is doctrinal consistency with Buckley, there’s no payoff at all.
The inconsistency between Buckley and Austin, now resolved by Citizens United, was a tension intrinsic to campaign finance law, and not necessarily a failing in the actual practice of campaign finance law. Campaign finance law is a compromise in terms of both law and democratic values. It imperfectly expresses tension between abstract notions of liberty and abstract notions of equality. It expressed tension between unease about government restriction of speech on one hand and concern about the influence of economic power on the other hand. The need for campaign finance law to negotiate these tensions, with legal categories that don’t fully capture their nuances, account for many logical failings of Buckley, Austin, and McConnell that are difficult to justify as consistent First Amendment doctrine. However, campaign finance law as a whole, over the course of many cases, arguably strove for some pragmatic balance between these legal and democratic values. Citizens United, by contrast, charts a very different course.
January 31, 2010 at 7:38 pm
Posted in: Constitutional Law, Corporate Law, Current Events, Politics, Uncategorized
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Responses (3)
SCOTUSblog » Monday round-up - February 1, 2010 at 6:15 am
[...] At the Washington Post, Martha White investigates when the Court first began treating corporations as people, concluding that this Fourteenth Amendment interpretation emerged around the end of the nineteenth century. Meanwhile, at Slate, Dahlia Lithwick compares Justice Stevens’ dissent in Citizens United with a memoir by South African judge Albie Sachs, and comments that both of these “judicial swan songs” reveal the ways in which the personal experiences of these jurists shaped their unique views of the law. Though some writers are interested in the history of the case and arguments, Congress is more interested in the future, and David S. Broder at the Washington Post surveys the legislative options Congress might pursue in response to the decision. Further coverage is available at Concurring Opinions. [...]
Maryland Conservatarian - February 1, 2010 at 6:45 am
“And it is difficult to understand why speech by PACs and political parties, whose First Amendment credentials are at least as strong in this context as for-profit corporations, would receive less constitutional protection.”
You’re right – free the PACS and parties from their limits. No way the likes of Keith Olberman should have more constitutional protections than the rest of us.
Brett Bellmore - February 1, 2010 at 7:23 pm
Independent expenditures are, indeed, potentially corrupting; They could be the result of quid pro quo’s, rather than genuinely independent. But the failure of the campaign reformers to confront the fact that campaign regulations can be corruption, on the part of incumbent office holders, is staggering. It terribly biases their judgment in favor of restricting speech.
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