On August 5, 2014, the U.S. Court of Appeals for the District of Columbia Circuit affirmed the district court’s decision to dismiss a constitutional challenge to provisions that impose limitations on a corporation’s solicitations for contributions to its separate segregated fund (SSF). The court rejected the challenge brought by Stop the Insanity, Inc. (STII) and Stop This Insanity, Inc. Employee Leadership Fund (the Fund), and upheld the statutory restrictions on SSF solicitations, including provisions that generally permit SSFs to solicit only a limited class of individuals for contributions. The court noted that it lacked jurisdiction over the claims brought by the individual plaintiffs because such claims were not asserted through the mandatory jurisdictional provision in 2 U.S.C. §437h.
Prior to the Supreme Court’s decision in Citizens United v. FEC, 558 U.S. 310 (2010), the Federal Election Campaign Act (the Act) generally restricted corporations from participating in the electoral process, but allowed limited, indirect corporate political activity through the establishment of an SSF. 2 U.S.C. §441b(b)(2)(C). The costs of establishing, administering and soliciting for an SSF may be paid exclusively by the SSF’s sponsoring entity (the connected organization) and such costs are not subject to disclosure requirements. However, the Act imposes restrictions on SSF solicitations, including limits on who may be solicited to contribute to the SSF: Shareholders, executive and administrative personnel and the families of both groups may be solicited, but not the general public. 2 U.S.C. § 441b(b)(4)(A)(i).
STII is the connected organization of the Fund, its SSF. STII wished to be able to solicit the general public for contributions to a separate account that was to be opened by the Fund and used solely to make independent expenditures, while not disclosing its payments for the administrative and solicitation costs of the Fund. The U.S. District Court for the District of Columbia dismissed the case on November 5, 2012, and STII and the other plaintiffs appealed that decision to the Court of Appeals.
Court of Appeals decision
The Court of Appeals disagreed with STII’s constitutional claims, holding that they fell short on the merits. The court stated that, “Simply put, Stop This Insanity would like to use its segregated fund to solicit the entire public while concealing its expenses for such solicitation.”
Although Stop This Insanity, Inc. has the ability to make independent expenditures directly from its corporate treasury funds without using an SSF to do so, the court noted that it nonetheless chose to establish an SSF to make such independent expenditures: “Despite the availability of a more robust option—at least when it comes to independent expenditures—the Corporation has decided to do things the hard way. And now, trapped in a snare it has fashioned for itself, STII decries its inability to use the [SSF] in the way it sees fit—without the limits Congress attached to the operation of these funds.”
The court wrote that a “critical flaw” in STII’s argument was that it voluntarily chose a more complicated means of engaging in its political speech than it had to use and “claims [that] there is a constitutional right to do things the hard way. We cannot sanction such an illogical conclusion.” The court further noted that no PAC has the ability to make solicitations of the general public (as opposed to only a limited class of individuals) for contributions to pay for political speech without disclosing who is funding the PAC’s administrative and solicitation expenses.
The court explained that solicitation restrictions do not restrict the manner or amount in which a PAC may spend money, and held that the solicitation restrictions challenged by STII “are not properly treated as constraints on independent expenditures,” nor do they “silence” a particular speaker.
The court declined to accept the argument of STII, writing that STII already is capable of conducting broad solicitations, yet “it wants a vehicle capable of soliciting without transparency.” In affirming the District Court’s dismissal, the Court of Appeals held that “[i]f the Fund wishes to solicit freely, it must do so in the light.”