With all eyes on Justice Kennedy, Court watchers, campaign finance lawyers, members of the political community and people with strange hobbies anticipate the Court's reconsideration of Austin v. Michigan Chamber of Commerce, 494 U.S. 652 (1990).  If Austin dies, corporations may come alive in federal elections as independent, free spenders.  Justice Kennedy objected to Austin’s blockage of independent corporate political speech.  Dissenting vigorously, he was moved to protest by the belief that the Court had departed violently from precedent.  His brief against the decision is made up of two related parts:  that the case disregarded settled free speech rights enjoyed by corporations, and to the extent that corporate speech in elections is restricted, the limits apply to contributions to candidates and not to expenditures made independently of them.

     Justice Kennedy's position largely won the PR war.  Many who hear about Austin will repeat that it is an "outlier," a curious break with reasoning—such as it has been—in other cases.  Hence the view, expressed here and there, that the Court, if it revisits Austin, is just cleaning up after itself, innocent of uprooting settled, respectable law.

     This view seems mistaken.  Austin is not a renegade decision; it inhabits familiar territory established by precedent.  And Justice Kennedy incorrectly identifies the constitutional challenge for the Court.  The corporate spending prohibition is a source restriction—the question being the type of money rather than amount spent—and the contribution/expenditure distinction is misapplied in this context.  Source restrictions call instead for close attention to the requirements of narrow tailoring. 

     The more superficial charge against Austin—its supposed infidelity to corporate spending precedent—has been greatly overplayed.  Austin is well grounded in the case law—in FEC v. National Right to Work Comm., 459 U.S. 197 (1982) and FEC v. Massachusetts Citizens for Life, 479 U.S. 238 (1986).  True, the opinion for the Court, authored by Justice Marshall, is no masterpiece of clarity, and a concurrence by Justice Brennan, inspired perhaps by the sense that the Marshall writing fell short, fails to achieve a major improvement.  As a case undistinguished or obscure in presentation, Austin suffers a weakness certainly shared with other campaign finance cases.  It may have been decided correctly and presented poorly.  A critique of Austin should transcend frustration with its expository shortcomings.

     Justice Kennedy lodges a more fundamental doctrinal objection to Austin.  He believes that campaign finance law holds the Court to a clear line between contributions and expenditures, and that, in all cases, "independent expenditures are entitled to greater protection than campaign contributions."  494 U.S. at 702.  For Kennedy, independence dispels the dangers of corruption and deprives the State of the power to act.  But is it true that the contribution/ expenditure distinction easily resolves the issue, because the independence of the corporation, the absence of coordination with the candidate, mitigates as a constitutional matter the danger of corruption?  Or did Justice Kennedy overlook the problems of applying the contribution/ expenditure distinction to a source restriction, that is, a statutory determination that corruption (or its appearance) inheres in the source of funds rather the amount spent?

     Justice Kennedy contended that source was irrelevant.  He challenged the Court’s failure to explain satisfactorily the special harm in the corporate form that rendered the corporation somehow ineligible for independent expenditures.  To Justice Kennedy, independence is independence:  an independent corporation is quite the same as an independent, wealthy individual, and each should have the right to use their funds as they chose, neither posing any danger of corruption if they eschewed coordination with candidates.

     Source, however, is entirely relevant.  Corporations cannot contribute to federal candidates—at all, in any amount.  The smallest contribution, $1 or $5, is barred by law, and source is the justification.  Justice Kennedy, in FEC v. Beaumont, 539 U.S. 146 (2003), concurred in a decision upholding the absolute prohibition on corporate contributions.  He assumed then that if the contribution/expenditure distinction held, it would support the regulation of direct contributions.  What he missed was the question of whether the distinction holds in the sphere of source restrictions.  How is it that, on an anti-corruption theory, a corporation cannot give $5 to a candidate but may expend a fortune for the benefit of the same candidate “independently”? 

     Prohibited sources are in a class by themselves, and the Court has yet to catch up with the doctrinal challenge they pose.  For example, foreign nationals, as a prohibited source, cannot contribute to candidates or spend independently. 2 U.S.C. §§ 441e(a)(1)(A),(C).  Few argue that foreign national contributions should be impermissible but their independent expenditures allowed.  One hears that foreign nationals are a special case, regulated on a basis other than the standard anti-corruption rationale, but this is to assert a difference without really explaining it. 

     Fortunately, we can look to another contribution ban, one clearly founded on a corruption rationale, to better grasp the limits of the contribution/expenditure distinction: the ban on contributions by federal contractors.  2 U.S.C. § 441c.  An individual federal contractor, operating as a sole proprietor, cannot make a contribution to a federal candidate, nor may she solicit funds for that candidate.  11 C.F.R. § 115.5.  The statute is silent on expenditures.  Assume Congress broke its silence and, as in the case of foreign nationals, it provided that the federal contractor barred from contributing or fundraising was also prohibited from spending independently.  Would this be constitutional?

     Congress might be expected to generate a record in support of this measure, and it is not hard to imagine what it might look like.  If the source is the problem, the logic of which dictates a contribution ban, Congress could easily show that a ban on independent expenditures is complementary and essential to the achievement of the regulatory goal.  A federal contractor’s political contributions threaten the procurement process with the rot of “pay to play.”  Both the contributions and the expenditures—and more the unlimited expenditures than the limited contributions—put at risk the integrity of the procurement process.  Both enable the spender to exercise illicit influence, and the corruptive element is found in the source of funds. The potential for corruption, to say nothing of the appearance of corruption, is also surely present in “independent expenditures.”

     For different prohibited sources, we may have different rationales—different forms and risks of corruption, its potential and its appearance.  The foreign national is ineligible to participate by virtue of nationality; the federal contractor is disqualified by the commercial ties to the government.  A corporation—as the Court has repeatedly stated—is a special business entity that enjoys, through the corporate form, state-supplied advantages and protections in amassing formidable wealth.  None of the sources are shut out completely—corporations have ample means of participation, through PACs and otherwise, as do government contractors, and even foreign nationals, by ruling of the Federal Election Commission, can volunteer in campaigns.  But all in various and significant ways must abide by restrictions imposed at the source.   

     There is another example of these types of restrictions and how poorly they come within the analytic framework supplied by the contribution and expenditure distinctions.  Minor children may give, but the source is suspect and so the law heavily conditions the political activity of minors, effectively prohibiting the smallest children from making contributions or expenditures. 11 C.F.R. §§ 110.19(a)-(c).  Incapacity is one concern:  Congress fears that even if the funds donated are by law the children's, minors will do as directed by adults, having no opinion (or even desire or ability to formulate one) on their own.  Here the contribution/ expenditure distinction breaks down completely:  it has no bearing on what the legislature is trying to accomplish.  No one argues that the child barred from contributing should be able to spend independently.

     Source restrictions present, then, an unresolved challenge for campaign finance theory, and misplaced reliance on the contribution/expenditure distinction only confuses the issue.  Justice Kennedy is looking in the wrong direction.  Tailoring is the primary constitutional requirement for managing source restrictions.  If Congress may single out sources of funds for special regulation, then it must attend carefully to the task of narrowly tailoring the restriction to serve the compelling anti-corruption interest it has established. See, e.g., McConnell v. FEC, 540 U.S. 93, 232 (2003) (invalidating ban on minor children  contributions and explaining that  “Even assuming, arguendo, the Government advances an important interest, the provision is overinclusive.  The States have adopted a variety of more tailored approaches….”   Sources barred from contributing are provided with other avenues of participation, but not necessarily the right to makeunlimited independent expenditures.  It does not follow that the source barred from contributing at all may go for broke on an independent basis. 

     The corporate spending cases have proven to be hard work, and the task is far from complete, because of the issues presented by nonprofit corporations.  In Massachusetts Citizens for Life, and then again in FEC v. Wisconsin Right to Life, 551 U.S. 449 (2007), the Court labored to meet the tailoring demands of regulating the nonprofit form.  It did so in Austin, but there a knotty problem complicated the work still further:  the nonprofit, the Chamber of Commerce, was funded and controlled by for-profits.  Was it a nonprofit or a for-profit case? 

     For this reason, it is a mistake to believe, as some do, that the Supreme Court will necessarily use the Citizens United case to cut the corporate spending ban out of the law entirely, liberating profits and nonprofits alike from the limits of the law.  Citizens United is a tailoring case and should be seen that way.  The Court may decide that its approval of Title II of BCRA was wrong, because the fit of justification to regulation was poor.  It may conclude that the provision allows for excessive regulation of non-campaign speech, or that its like treatment of for-profit and nonprofit corporations is untenable.  It is hard to see that the Court has cause to go beyond this and free all corporations from major constraints under the campaign finance laws.

     If it does so, it is not relieving this class of speaker from discriminatory, disfavored treatment.  The opposite would be true.  The Court would radically adjust the balance established for corporate spending, very much in these speakers’ favor.  This is the action that would demand justification, and a tall order that would be.  A close review of tailoring is the task facing the Court, and it cannot take refuge in the contribution/expenditure distinction, which is no help in resolving the constitutional questions presented by source restrictions.

Bob Bauer