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Supreme Court holds unusual re-argument on Citizens United case.

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Supreme Court Revisits ‘Hillary the Movie’

Supreme Court holds unusual re-argument on Citizens United case.

Yesterday, the Supreme Court conducted a highly-unusual reargument  of a case which, although superficially about a movie you’ve never heard of, represents one of the most important cases before the Court in recent years. 

The case, Citizens United v. FEC, also represents the best opportunity for the Court to start pushing back against the attack on the First Amendment coming from the McCain-Feingold Bipartisan Campaign Reform act of 2002 (“BCRA”) and other “reform”-related Court rulings.

Citizens United, a conservative grassroots 501(c)(3), produced a full-length film entitled “Hillary: The Movie” which they intended to show in theaters, on DVD, and through pay-per-view television broadcasts.  Along with the movie, they created advertisements which were to be shown on television.

The Federal Elections Commission (“FEC”) ruled that the advertisements were “electioneering communications” and prohibited under BCRA.  Citizens United sued to protect their First Amendment rights and the case went to the Supreme Court which heard arguments and was expected to release a decision earlier this year.  In an unusual turn of events, however, the Court ordered the reopening of the case.

Specifically, the Court ordered the parties “to file supplemental briefs addressing the following question:  For the proper disposition of this case, should the Court overrule either or both Austin v. Michigan Chamber of Commerce, 494.U.S. 652 (1990), and the part of McConnell v. Federal Election Comm’n, 540 U.S. 93 (2003), which addresses the facial validity of Section 203 of the Bipartisan Campaign Reform Act of 2002. 2 U.S.C. §441b.”  With this, the Court is opening the door to rolling back two of the most anti-liberty decisions of the past 20 years.

Austin v. Michigan Chamber of Commerce decided (by a 6-3 vote) that barring corporations from spending money through independent expenditures (i.e. not by contributing directly to a candidate’s campaign fund) to support or oppose candidates was constitutional based on the idea that such spending “can unfairly influence elections.”  Two of the three dissenters from the Austin decision, Justices Kennedy and Scalia remain on the Supreme Court as does one of the concurring Justices, John Paul Stevens.  

The opening of Justice Scalia’s dissent captured the essence of the issue:

"Attention all citizens. To assure the fairness of elections by preventing disproportionate expression of the views of any single powerful group, your Government has decided that the following associations of persons shall be prohibited from speaking or writing in support of any candidate: ___." In permitting Michigan to make private corporations the first object of this Orwellian announcement, the Court today endorses the principle that too much speech is an evil that the democratic majority can proscribe. I dissent because that principle is contrary to our case law and incompatible with the absolutely central truth of the First Amendment: that government cannot be trusted to assure, through censorship, the "fairness" of political debate.

Section 203 of BCRA creates a “prohibition of corporate and labor disbursements for electioneering communications”, meaning “any broadcast, cable, or satellite communication which refers to a clearly identified candidate for Federal office which is made 60 days before a general, special, or runoff election, or 30 days before a primary.”

By inviting briefs and testimony about Austin and BCRA, the 5-member “conservative” majority of the Court indicated that it might be looking for a smart lawyer to give them the ammunition with which to shoot down these assaults on the First Amendment.  It should be noted that the FEC appears quite afraid of what may transpire in the Citizens United case: They offered not to challenge the campaign film if the group would drop their lawsuit so that they could protect the regulations and be able to suppress political speech another day.

In prior argument given in March of this year, Deputy Solicitor General Malcolm Stewart argued that the current regulations would make it permissible to ban books or the distribution of information via the Internet.  Justice Samuel Alito, in a moment of understatement, responded “That’s pretty incredible.”  That moment may have been the first nail in the coffin of Austin and section 203 of BCRA.  Which brings us to today’s reopening of the case.

The government’s brief and Citizens United’s brief were both filed on July 24th. Citizens United focused mostly on the Austin decision, which they see as a weak foundation holding up later decisions such as McConnell v. FEC: “When the government of the United States of America claims the authority to ban books because of their political speech, something has gone terribly wrong and it is as sure a sign as any that a return to first principles is in order.”  After arguing that Austin changed the government’s stated reason for wanting to ban corporate political expenditures from preventing corruption to the amorphous concept of “distortion,” Citizens United then reminds the Court of a statement in a 1991 ruling that “[W]hen governing decisions are unworkable or are badly reasoned, this Court has never felt constrained to follow precedent… This is particularly true in constitutional cases.”  

This is likely the biggest hurdle for the Court: Chief Justice John Roberts’ demonstrated tendency to side with precedent.  

The government’s brief, on the other hand, seems a desperate plea to retain the power to muzzle American citizens. They begin by arguing that this case “is an unsuitable vehicle in which to re-examine either” Austin or BCRA.  They move on to arguing that if the Court were to substantially overturn either, it “would make vast sums of corporate money available for overt electioneering.”

Former FEC Chairman Bradley Smith shows the (lack of) evidence of a corrupting effect of corporate electioneering, pointing out that, “In 2002, the last election cycle in which soft money contributions from corporations were allowed in federal races, the largest corporate donor spent only $9.3 million. Fewer than 10 corporations spent as much as $2.5 million…None were banks, investment firms or insurance companies. The overwhelming majority of some $2 billion in political spending came from individuals.”  

The government’s brief takes particular aim at for-profit corporations, looking to carve a narrow loophole for Citizens United to “win” the case due to its non-profit status.

The government also makes a strained argument about the protection of shareholders in public companies, one which Justice Brennan accepted but Justice Scalia rebutted in the Austin decision, with Scalia noting that “the shareholder knows that management may take any action that is ultimately in accord with what the majority…of the shareholders wishes, SO long as that action is designed to make a profit.  That is the deal.”

Finally, the government argues that “Congress’s restriction on corporation- and union-funded express advocacy (prior to BCRA) had become ineffective” because “advertisements overtly attacked the character, qualifications, and fitness for office of federal candidates” but were not subject to prior regulation.  In other words, people who have sworn an oath to defend our Constitution are arguing before the Supreme Court (while being paid with tax dollars) that certain ads are unconstitutional because they are critical of politicians. There’s a reason that many people call BCRA the Bipartisan Incumbent Protection Act: It restricts the ability to criticize candidates, and incumbents are usually more open to criticism of a voting record than their challengers are.  

When the Founders wrote the First Amendment, it was political speech that they were most aiming to protect.  It is now less protected than any other form of speech in America, including pornography.

Oral arguments began with Theodore Olson for Citizens United.  Olson began by remind the Court that “robust debate about candidates for elective office is the most fundamental value protected by the First Amendment’s guarantee of free speech.”  He was peppered by Justices Ginsburg, Scalia, Stevens, and Alito about whether there could be different treatment of “megacorporations” and individuals regarding free speech rights, and whether it would make any difference if shareholders of large corporations were foreign, with Alito asking whether “media corporations that are owned or principally owned by foreign shareholders have less First Amendment rights than other media corporations?”  Olson responded, “I don’t think so.”

The discussion moved to the issues of “compelling interest” and “narrowly tailored” solutions, meaning whether there is a strong enough reason for government to curtail a right and whether that curtailing was done as narrowly as possible, so as not to excessively infringe on rights. Olson pointed out that “the government has shifted position here” and that their shift from “the so-called distortion rationale…to the corruption or appearance of corruption” argument is weak because “there isn’t a sufficient record” of either corruption or its appearance being more prevalent in the absence of current regulation.

Olson was asked by Justice Breyer, who supports the regulations, whether a win for his client would create a strange situation where corporations could spend money more freely than political parties could.  Olson responded that we have smothered our must fundamental freedom “with the most complicated set of regulations and bureaucratic controls” and with some bite suggested that if the Court decides against him, “we will uphold a prohibition on all kinds of people speaking because if we allowed them to speak, someone else might complain that they don’t get to speak as much as they would like.”

In her first hearing of oral arguments, Justice Sonia Sotomayor (described as “unimpressive” by one commentator) asked Olson where in the record is proof that the current regulations are bad.  Olson answered that “it is the government that has the burden to prove the record that justifies telling someone that wants to make a 90-minute documentary about a candidate for president that they will go to jail if they broadcast it.”

After Floyd Abrams gave a statement and answered testimony on behalf of Senator Mitch McConnell supporting Citizens United, Solicitor General Elena Kagan faced the Court.  Her arguments were essentially parroting of the government’s brief, but the Justices noticed the government’s apparent shifting of position which Kagan uneasily defended by saying that any of the “quid pro quo interest, the corruption interest, or the shareholder interest, or what I would say is something related to the shareholder interest” are the reasons supporting Austin.  

Justice Scalia then asked Kagan about whether current regulations were overly burdensome to small companies, often single-owner or closely-held companies, and then moved on to the fact that there is no evidence of corruption in state elections where there are no limits on corporate contributions.  Kagan replied that the history of half the states should not trump the judgment of Congress to which Scalia replied that “Congress has a self-interest,” namely to protect incumbents.

When Kagan tried to argue that corporations are fundamentally and absolutely different from individuals, Chief Justice Roberts said, “I’m sorry, but that seems rather odd.  A large corporation, just like an individual, has many diverse interests…  The idea that corporations are different than individuals in that respect (i.e. being concerned about how their money is spent), I just don’t think that holds up.”  Justice Scalia added that “most corporations are indistinguishable from the individual who owns them.”  

Roberts then asked “isn’t it extraordinarily paternalistic for the government to take the position that shareholders are too stupid to keep track of what their corporations are doing and can’t sell their shares or object in the corporate context if they don’t like it?”  Kagan tried to push back, essentially arguing that people were too busy.  Roberts would have none of it: “But it is extraordinary. The idea…that we, the government, Big Brother, has to protect shareholders from themselves.”

Kagan’s testimony continued with uninspired defense of BCRA and Austin with Justices Stevens, Ginsberg, and Breyer limping in to her defense.  

All said, it appeared that the appellants, Citizens United, got the better of the oral arguments just as they had in the written arguments.  

Keep in mind that this case is about independent expenditures, i.e. paying for advertising not coordinated with a campaign, and does not propose to weaken current restrictions on direct corporate contributions to candidates. Corporations can currently donate to charities, including politically-active, controversial organizations. They can also support a political message through a PAC. And certainly they do both of those things to some degree. However, most corporations are relatively conservative and do not want the bad press that can result from being “outed” as excessively supporting any given political opinion.  

We will likely have to wait until October until the Court renders its decision.  My expectation is a 5-4 decision overturning of much or all of Austin and a substantial weakening of BCRA. What will be most interesting is whether one or more Justices invite further, broader challenges to BCRA, offering a glimmer of hope to the vision of James Madison for a nation where the powers-that-be are unable to crush non-violent dissent.  

As Bradley Smith said, “Those who support restrictions on speech bear the burden of proof to show that unfettered speech by corporations corrodes democracy.” Yesterday, they didn’t meet that burden.

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Written By

Ross Kaminsky has been a professional derivatives trader for over 20 years. Ross is a fellow of the Heartland Institute and writes about political economy and current events at Rossputin.com. He also contributes to blogs for the National Taxpayers Union and FreedomWorks among others.

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