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On March 26, 2010, the D.C. Circuit Court of Appeals held that the provisions of the Federal Election Campaign Act that limit the contributions that individuals may make to SpeechNow.org, and the contributions that SpeechNow.org may accept from them, violate the First Amendment.
SpeechNow is a nonprofit, unincorporated association organized as a section 527 entity under the Internal Revenue Code. The organization was formed by individuals who seek to pool their resources to make independent expenditures expressly advocating the election or defeat of federal candidates. SpeechNow plans to accept contributions only from individuals, not corporations or other sources prohibited under the Act. The individual plaintiffs wish to contribute to SpeechNow, both in federally permissible amounts and in amounts exceeding the federal limits.
SpeechNow submitted an advisory opinion request with the Commission on November 19, 2007, asking whether its activities, raising funds from individuals to pay for independent communications that contained express advocacy, would require it to register as a political committee under the Act. The General Counsel’s Office prepared a draft opinion for Commission discussion stating that contribution limits would apply to contributions given to SpeechNow, and that SpeechNow would be required to register as a political committee once it raised or spent more than $1,000 in a calendar year for the purpose of influencing federal elections. Since the Commission only had two of the requisite four members at the time the draft was considered, it could not issue an advisory opinion. The Commission notified SpeechNow of that fact on January 28, 2008.
On February 14, 2008, SpeechNow, a group formed to make independent expenditures, and several individual plaintiffs, filed a complaint in the U.S. District Court for the District of Columbia challenging the constitutionality of the Federal Election Campaign Act (the Act) provisions governing political committee registration, contribution limits and disclosure.
The plaintiffs contend that the Act unconstitutionally restricts their association guaranteed under the First Amendment. By requiring registration as a political committee and limiting the monetary amount that an individual may contribute to a political committee, SpeechNow and the other plaintiffs assert that the Act unconstitutionally restricts the individuals’ freedom of speech by limiting the amount that an individual can contribute to SpeechNow and thus the amount the organization may spend. SpeechNow also argues that the reporting required of political committees is unconstitutionally burdensome.
The plaintiffs asked the court to find the contribution limits, reporting
requirements and political committee registration requirements unconstitutional as applied to their proposed activities. The plaintiffs also requested that the court preliminarily and permanently enjoin the FEC from enforcing these provisions against SpeechNow and the individual plaintiffs.
The District Court denied SpeechNow’s request for a preliminary injunction, refusing to apply strict scrutiny review and holding that sufficiently important government interests support limits on contributions to political committees, including groups like SpeechNow who intend to spend all of their money on independent expenditures.
SpeechNow argued that limits on contributions to committees that make only independent expenditures implicate the same First Amendment interests as limits on independent expenditures themselves, and therefore should be subject to strict scrutiny as expenditure limits generally are. The court disagreed, finding that limits on contributions to committees that make only independent expenditures are not the same as direct limits on expenditures of either the organization or its donors. "[C]ontributors to SpeechNow are not, through their donations," the court explained, "engaging in direct speech. SpeechNow, as a legally separate organization, is speaking as their proxy." Citing Buckley and McConnell, the court held that strict scrutiny did not apply because the limits do not restrict the amount that the political committee can spend on independent expenditures, but rather limit the source and amounts of contributions. Accordingly, the court concluded that the $5,000 limit is subject to intermediate scrutiny, meaning that the regulation need only be "closely drawn" to further a "sufficiently important" government interest.
Applying intermediate scrutiny, the district court held that limits on contributions to committees making solely independent expenditures serve important government interests by preventing actual and apparent corruption. Looking to the past behavior of so-called "527 groups" that did not register with the Commission yet had close ties with the major political parties and made millions of dollars of expenditures influencing the federal elections of 2004, the court found that such "nominally independent" organizations are "uniquely positioned to serve as conduits for corruption both in terms of the sale of access and the circumvention of the soft money ban."
Additionally, the court explained that the $5,000 limit on contributions to political committees like SpeechNow "promotes the important government interests underlying the Act’s disclaimer requirements." The court held that SpeechNow’s proposed course of action would conceal from the public the source of the advertisement’s funding in the advertisement itself and would allow wealthy donors to hide behind "dubious and misleading names," thus evading the Act’s disclaimer requirements.
In denying the preliminary injunction, the Court stated that since the regulations are "closely drawn to match the government interests in preventing corruption and the circumvention of the Act’s disclaimer requirements, plaintiffs have failed to demonstrate a likelihood of success
on their claim that [the Act’s] $5,000 contribution limit is unconstitutional
as applied to independent expenditure committees."
On March 26, 2010, the U.S. Court of Appeals for the District of Columbia Circuit ruled in SpeechNow.org. v. FEC that the contribution limits of 2 U.S.C. §441a are unconstitutional as applied to individuals’ contributions to SpeechNow. The court also ruled that the reporting requirements of 2 U.S.C. §§432, 433 and 434(a) and the organizational requirements of 2 U.S.C. §431(4) and §431(8) can be constitutionally applied to SpeechNow.
The court of appeals held that when the government attempts to regulate the financing of political campaigns and express advocacy through contribution limits, it must have a countervailing interest that outweighs the limit’s burden on the exercise of First Amendment rights. In light of the Supreme Court’s recent decision in Citizens United v. FEC, in which the Supreme Court held that the government has no anti-corruption interest in limiting independent expenditures, the appeals court ruled that “contributions to groups that make only independent expenditures cannot corrupt or create the appearance of corruption.” As a result, the court of appeals held that the government has no anti-corruption interest in limiting contributions to an independent group such as SpeechNow. Contribution limits as applied to SpeechNow “violate the First Amendment by preventing [individuals] from donating to SpeechNow in excess of the limits and by prohibiting SpeechNow from accepting donations in excess of the limits.” The court noted that its holding does not affect direct contributions to candidates, but rather contributions to a group that makes only independent expenditures.
The appeals court held that, while disclosure and reporting requirements do impose a burden on First Amendment interests, they “‘impose no ceiling on campaign related activities’” and “‘do not prevent anyone from speaking.’” Furthermore, the court held that the additional reporting requirements that the Commission would impose on SpeechNow if it were organized as a political committee are minimal, “given the relative simplicity with which SpeechNow intends to operate.” Since SpeechNow already has a number of “planned contributions” from individuals, the court ruled that SpeechNow could not compare itself to “ad hoc groups that want to create themselves on the spur of the moment.” Since the public has an interest in knowing who is speaking about a candidate and who is funding that speech, the court held that requiring such disclosure and organization as a political committee are sufficiently important governmental interests to justify the additional reporting and registration burdens on SpeechNow.
On May 27, 2010, the U.S. District Court for the District of Columbia entered final judgment on behalf of SpeechNow.org and declared that the contribution limitations in 2 U.S.C. §§441a(a)(1)(C) and 441a(a)(3) cannot be constitutionally applied against SpeechNow.org and others who wish to contribute to SpeechNow.org and ordered that the Commission is permanently enjoined from enforcing those contribution limits.