Austin v. Michigan Chamber of Commerce - Oral Argument

Argument of Louis J. Caruso

Chief Justice Rehnquist: We'll hear argument first this afternoon in Number 88-1569, Richard H. Austin v. the Michigan Chamber of Commerce.

Mr. Caruso.

Mr. Caruso: Mr. Chief Justice, and may it please the Court:

The issue in this case is whether a provision in the Michigan Campaign Finance Act that prohibits independent expenditures from being made in candidate elections from the general treasuries of corporations is constitutionally permissible.

The Michigan Chamber of Commerce, a nonprofit membership corporation, contends that it violates the First and Fourteenth Amendments.

The district court, the trial court, sustained the validity of the Act and disagreed with the Chamber.

The court of appeals, Sixth Circuit, reversed, holding that as applied to the Chamber, the provision violates the Chamber's First Amendment free speech rights.

This Court has said in earlier cases that the government's interest in regulating the activity of... political activity of corporations are sufficiently important to justify such regulations when the means are closely drawn.

The prevention of corruption and the appearance of corruption in the electoral process by a legislative scheme aimed in part at corporations reflects a legislative judgment that the special characteristics of a corporation require particularly careful regulation and should be given considerable deference by the court.

It is Michigan's position that the potential danger from corporate independent expenditures in connection with candidate elections poses a sufficient compelling interest that permits Michigan to regulate those corporations that do not fall within the exception set out by this Court in Federal Election Commission v. Massachusetts Citizens for Life, that the Chamber is unlike that corporation the Court dealt with in MCFL and may be regulated.

Now, I am not unmindful that in Buckley and in National Conservative Political Action cases, that the Court struck down independent limitations on independent expenditures.

However, in Buckley, the Court dealt with individuals and groups, and not with corporations.

And in the NCPAC case, the spending limits applied to any group, association, as well as corporations, all impermissibly, as the court said, lumped together.

The court found the regulation in NCPAC over inclusive, and not narrowly drawn.

And the group at which the regulation was aimed was not regulated... historically was not regulated to justify deference by the court to legislative judgment in that case, as the court had done in National Right to Work case when it permitted inclusion of nonprofit corporations in the legislative regulatory scheme to stand.

Here the prohibition applies only to corporations.

Unknown Speaker: Why are labor unions excluded from the scheme, Mr. Caruso?

Mr. Caruso: Labor unions--

Unknown Speaker: Do they not pose some of the same dangers that corporate expenditures do?

Mr. Caruso: --Justice O'Connor, labor unions are not excluded as such.

They are not included when you read the particular language.

If a labor union is incorporated, it is included.

As a matter of fact, I believe there are 22 major labor unions in the State of Michigan incorporated, including the MEA, and they are included.

And with respect to not including them expressly, whether they are incorporated or not incorporated, this Court has said many times we defer to legislative judgment as to those entities that require regulation.

There may be some entities that pose the same problem and the same potential threat to the electoral process as do corporations, but we defer to the legislative judgment in this area, and that, and perhaps at some particular time the legislature may see fit to include labor unions, labor unions if they are not incorporated, but they have not done so at this time.

Unknown Speaker: General Caruso, why is there a greater risk to the political process from an independent political expenditure by a family corporation, closely held corporation, eight family members, and they want to spend the corporation's money for a particular candidate whom they think will favor their business.

That... that is prohibited by this.

But if Donald Trump wants to come in and spend as much money as he likes, that is perfectly all right.

Why wouldn't it make much more sense, if you are worried about the problem, to establish an amount of money as the criterion?

Mr. Caruso: Well, the Court has viewed that political corporations, that corporations are given by state authorities certain benefits by virtue of the corporate form.

They are given certain benefits in respect of liability, certain benefits in respect of taxes, certain benefits in respect of perpetual life.

And what this Court has seen in the past, that that... the legislature has seen this and has provided against their taking advantage of that... those particular advantages given to corporations and turning them into an advantage in the electoral process and in the political arena.

Now, the Court has said that the legislature's judgment in this area is one that we will defer to.

Now, with respect to an individual, for example, doctors--

Unknown Speaker: Well, let me ask this.

We are talking about, you... everyone concedes, I take it, that an expenditure in election, direct expenditure is speech.

It is speech we are talking about, an expenditure--

Mr. Caruso: --Yes, that is correct, Justice Kennedy.

Unknown Speaker: --And I take it that the state must establish a compelling interest to restrict that speech?

Mr. Caruso: That is correct.

Unknown Speaker: And that the means be narrowly tailored.

Mr. Caruso: And the means are to be narrowly tailored, that is correct.

Unknown Speaker: All right.

Then it... it seems to me that Justice Scalia's question indicates that you have to give a specific reason why a corporation of that type presents more a danger than Donald Trump, and I didn't really hear the answer to that question.

Mr. Caruso: Well, the thing of it is--

Unknown Speaker: And it has to be answered in the terms of a compelling interest that is narrowly tailored.

Mr. Caruso: --The compelling interest is the fact that they have been given certain advantages by the state legislature for other purposes.

Unknown Speaker: Well, that's not an interest.

Mr. Caruso: Well, it's the fact, the fact--

Unknown Speaker: That's not an interest, that is just a rationale, that's just a rationale for the legislative exercise of power.

That is not an interest.

An interest is an evil that has to be corrected.

Mr. Caruso: --The evil is the fact that by virtue of the fact that they are incorporated, corporations, they gain an advantage, and they are able to amass great wealth in the economic sphere--

Unknown Speaker: But you have just been put... you've just been put a hypothetical where that is not the case.

Mr. Caruso: --Not in the family corporation case, that is true.

But in the traditional corporations it is true.

Now, the fact that a family corporation, as compared to a large corporation, do not have equal funds.

Nevertheless, it doesn't make any difference according to the decision in MCFL.

This Court said the big corporations as well as those less fortunate are nevertheless... may come within the prohibition because we refer... defer to the legislative judgment.

As a matter of fact--

Unknown Speaker: But, but... that does not sound to me... that does not sound to me like a compelling interest, and it does not sound to me like scrutiny.

That is just legislative deference.

Mr. Caruso: --That is, the fact is that the evil is a potential corruption of injecting monies that have been generated through the corporate process in the economic sphere to effect an equal... to unequal a playing field in the political arena.

And this is what the... what is aimed at.

Now, historically, corporations have been regulated.

For example, in Michigan historically they have been regulated since 1913, and they have been regulated to begin with with the, first was the Corrupt Practices Act since 1913.

And it was not until 1976 that the Campaign Finance Act as we know it today, came along.

And for the first time the legislature included within the prohibition independent expenditures.

Here... heretofore, the impediment of the prohibition related only to contributions.

But in 1976 they added independent expenditures.

And at the same time they did that they permitted corporations to establish separate segregated funds by using corporate monies.

They also--

Unknown Speaker: As I understand... as I understand this statute, if a candidate Smith has been a member of the Ku Klux Klan, the ACLU cannot take out an advertisement explaining that fact and asking people to vote for Jones.

Or am I incorrect?

Can the ACLU do that, the ACLU being a nonprofit corporation?

Mr. Caruso: --The ACLU?

I don't know whether they are--

Unknown Speaker: It is a nonprofit corporation.

Mr. Caruso: --Nonprofit corporation.

If they do not come within the exception that has been cast by this Court in MCFL I would say that that prohibition, yes, unless they did it through a segregated fund.

Now, the fact is that there are--

Unknown Speaker: I find it very hard to see that, the fact that they can make this expenditure through a fund in any way really mitigates the evil, but it certainly does diminish the message.

I am not interested in what a PAC says, I am interested in what the ACLU says.

Mr. Caruso: --The thing of it is, the segregated fund, they can do this, simply because the money contributed to a segregated fund is money given for political purposes.

It is given, in Michigan it is restricted to... in a membership corporation, to the members, to the officers... and to the officials who occupy a managerial position.

With respect to profit corporations, it is similarly limited to stockholders, employees who have managerial positions and the officers of that corporation.

And the fund is given voluntarily, it is given for specific purposes, for political activity.

Now, if we are permitting these corporations to use funds that have been generated for another purpose into the political arena, we are causing what the, this Court has, what the legislature believes to be a potential threat to the economic market, or to the political marketplace, and causing an unfair advantage to corporations over private parties.

I would respect--

Unknown Speaker: Mr. Caruso, there is some kind of a media exception in the statute.

Can the corporation, under the statute, publish something that would include some candidate endorsement and sell it as a magazine or distribute it, and fall under the media exception?

Mr. Caruso: --There is a media exception, but that media exception, Justice O'Connor, has to do specifically with news stories, commentaries, editorials, and the regular course of publication and broadcasting.

So, if they are incorporated and it is a news media, they may sell those magazines.

But what--

Unknown Speaker: If they publish something, they can editorially endorse a candidate.

Mr. Caruso: --That is correct.

They may be able to do that.

But what they cannot do, they are not excluded from the act, but if they are incorporated and a newspaper wants to pay for an ad in another newspaper, or pay for an ad through some broadcasting station, I think they would be precluded by this statute because the exception only applies to news stories, commentaries, editorials and the regular course of business.

Unknown Speaker: Why doesn't that distort the electoral process?

Mr. Caruso: Pardon?

Unknown Speaker: Why doesn't that distort the electoral process?

I find it difficult to see what the evil being driven at here is.

When it is a contribution to the candidate you can say, well, some candidates just have too much money at their disposal.

Mr. Caruso: Well, the fact is that--

Unknown Speaker: But here the only evil, as I understand it, is that there will be too much speech on one side of the issue, funded by vast amounts of money.

Is that right?

We mistrust too much speech.

Mr. Caruso: --Well, I couldn't put it that quite way.

We mistrust too much speech, but the thing of it is they get--

Unknown Speaker: Well how else would you put it?

Mr. Caruso: --They get speech, they are able to get a great deal of speech, and perhaps very effective speech, by virtue of the fact that the state has given them an advantage to develop... to acquire these monies, limited liability and so forth, and then... and put... and direct this thing toward the, in the electoral process, which... which the legislature has seen for many years to prohibit and which this Court says that they will defer to that judgment, even though they recognize... and they said this... and you said this in MCFL, even though you recognize there are other entities that perhaps pose as much a danger or a greater danger than corporations do.

But nevertheless, if the fact is that the--

Unknown Speaker: Danger of what?

It depends on what the danger is.

If you are giving the money directly to a candidate there is a much greater danger of subverting the political process by getting some commitments from that candidate that you wouldn't otherwise... that you have no entitlement to.

But here we are talking about whether a corporation, just like a private individual, can go out and express to the public that corporation's view, with, I assume, indication that this is the view of General Motors.

I mean, your election law requires that... that identification be given of--

Mr. Caruso: --That is right.

Unknown Speaker: --So, you think that is a threat to the democratic process, that the state is going to be swept away by ads signed by General Motors, or whatever.

Mr. Caruso: Well, the thing of it is, here again, insofar as making contributions is concerned and independent expenditures is concerned, in today's society I don't see the effect being any different.

In other words, this Court has prohibited in the past contributions by corporations, but they have not reached and answered the question on independent expenditures.

Unknown Speaker: Quite so.

Mr. Caruso: Pardon?

Unknown Speaker: Yes.

That's--

Mr. Caruso: Independent expenditures, I believe, today, with the political consultants, they abound in the states, and with the sophisticated news media we have today, electronic systems that we have, I think that money, independent expenditures can be very skillfully manipulated in such a way that it would be just as much a benefit to that candidate and... as contributions.

Unknown Speaker: --Right.

People are getting too much information.

That's the problem.

Mr. Caruso: Pardon?

Unknown Speaker: The people get too much... they get talked at too much.

That is an evil.

Mr. Caruso: The evil is that they get talked at too much by... because money has been made available.

Unknown Speaker: Well, I don't care why.

What is the evil in being talked at too much?

I mean, I understand the evil of giving money directly to a candidate.

It is close, you know, could be very close to a bribe.

But this is not giving money to a candidate, it is just talking.

And you are saying that that is an evil.

Mr. Caruso: It's more than just a bribe.

Heretofore it was considered... contributions were outlawed on the basis that there is a quid pro... a quid pro quo, in other words, an exchange, which doesn't exist in independent expenditures perhaps.

I think that it does.

Nevertheless, the fact is that the corporations have an unfair advantage in the marketplace because they are in a position of generating monies, they are in a position of not being subjected to the liability that individuals are and these other entities are, and the legislature has historically regulated corporations for so many years.

And the whole, sole reason they regulating these corporations for so many years is simply because they do occupy that special position and the advantages given to these corporations by the legislature.

Unknown Speaker: xxx from giving contributions to religious charities, to religions?

Mr. Caruso: Why, I suppose it can.

I don't think that the Michigan Campaign Finance Act prohibits that.

As a matter of fact, the Michigan Campaign Finance Act permits corporations to make direct expenditures and contributions without limit to ballot questions.

Unknown Speaker: Can it prohibit corporations from contributing to one party but not to another?

Mr. Caruso: To one party and not to another?

I wouldn't think so.

I don't think they should be permitted to contribute to any party.

Unknown Speaker: I suppose you would think that the legislature could prohibit the nonprofit corporation from publishing a journal then, the AMA monthly journal.

Mr. Caruso: To do... to say what?

Unknown Speaker: Well, if corporations can be regulated, if there is too much speech, if that is an evil, why can't the state prohibit the American Medical Association from publishing its monthly journal?

Mr. Caruso: I don't believe they can prohibit that.

That is not the issue here.

The issue here, Justice Kennedy--

Unknown Speaker: Well, you're saying... you're saying that corporations have too much power, that there is too much speech, that this is an evil, the corporations gather great deals of money, that they are created by the state.

Therefore, we give legislative deference.

All of those arguments can be made to support the proposition that the AMA journal, that the ACLU newsletter, ought to be regulated by the state.

Mr. Caruso: --But not in... in candidate elections is what we are talking about.

Not anything other than candidate elections.

Unknown Speaker: We are talking about a matter of principle.

And we are asking you to tell us what the evil is in the speech that nonprofit corporations present in election campaigns.

And all of the comments you have made so far would equally support the proposition that you can prohibit the publication of their monthly newspaper, or prohibit them from giving to churches, as Justice Scalia suggested, or that you can require them to give to one party and not to the other.

Mr. Caruso: I don't know of anything like that being in the Campaign Finance Act.

Here again I say that the evil is that they are... they have members, people involved in corporations, they give money to corporations, they invest money in corporations, not for the purposes of becoming involved in the political process.

They become... the purposes they give money to the corporations for the most part is for economic benefit.

Unknown Speaker: And the ACLU?

Mr. Caruso: The ACLU, that is--

Unknown Speaker: People give money to the ACLU for economic benefit?

Mr. Caruso: --And here again, as I say, the ACLU may well come within the exception of the MCFL decision.

In other words, if it is a politically, if it is a political action group and it is an ideological group--

Unknown Speaker: Have you read the amicus briefs in this case?

Mr. Caruso: --Pardon?

Unknown Speaker: The ACLU has filed an amicus brief in this case.

Mr. Caruso: Yes, they have.

Unknown Speaker: Have you read it?

Mr. Caruso: Yes.

Unknown Speaker: Don't they indicate in that case that they take corporate contributions, and therefore they do not qualify under the third prong of the test that we set forth in the Massachusetts case?

Mr. Caruso: If that is the case, if that is correct, then I suggest--

Unknown Speaker: Well, do you have any reason to doubt that what they've said is correct?

Mr. Caruso: --No, I have no, no--

Unknown Speaker: All right, then the ACLU doesn't qualify under that case.

Mr. Caruso: --Then I would say that... I would say that the ACLU, if they take corporate contributions, if they get involved in the electoral process, they are a conduit for these corporations to put money into the electoral process.

And that is the thing that Congress doesn't want to happen, that is the thing that the Michigan legislature does not want to happen.

Unknown Speaker: Isn't it true that the ACLU is a membership, nonprofit corporation?

Mr. Caruso: Yes.

Unknown Speaker: That is a little different from General Motors, isn't it?

Mr. Caruso: It's totally different than General Motors.

Unknown Speaker: How does it compare with the Michigan Chamber of Commerce?

Mr. Caruso: Pardon?

Unknown Speaker: I mean, we're talking about a nonprofit membership corporation on the one hand, versus a profit-making corporation like General Motors on the other.

How about the Michigan Chamber of Commerce, which is the corporation involved here?

Mr. Caruso: The Michigan Chamber of Commerce, I would say, looking at it on a spectrum, the Chamber... the General Motors at one end and MCFL, that type of corporation at the other, the Chamber comes some place in between, and we suggest closer to General Motors than the MCFL.

And the reason for that is they have been established by business corporations, they have an 8,000 membership, 75 percent of those members are business corporations, and they pay dues, they pay substantial dues.

They have a very sound membership base, and a very sound financial resource to draw on.

That definitely can become a conduit with respect to the political process.

With respect to MCFL, the case this Court dealt with earlier, there was no possibility that they could become a conduit for political expenditures.

They absolutely refused to accept any money from business corporations.

And there wasn't any threat that they posed to the electoral process whatsoever.

That is not so here with respect to General Motors... I mean to the Chamber of Commerce.

Now, the Chamber of Commerce has very effectively set up the segregated funds.

They have a segregated fund, and they have had since it has been authorized in 1976 by the Michigan legislature, and they have developed kits for the local branches to use.

They are effectively in the political process, but through the separate segregated funds.

So those monies that are used by the separate, by the Chamber through the separate segregated fund, are monies given for political purposes and not for some other purpose.

There are so many people that, corporations and business entities, that join General Motors for many benefits, and they may not want to associate themselves in any kind of political activity.

But if they are permitted to make independent expenditures, they have no choice in the matter, because they face too many disincentives to leave the Chamber, unlike some other companies.

But at any rate, the Chamber is in a situation where they can have a serious impact on the political process.

Unknown Speaker: By which you mean a lot of speech.

Mr. Caruso: Well, if that is the way you want to cast it, Justice Scalia, a lot of speech, I suppose that is true.

But it is--

Unknown Speaker: But no other thing that you are directing this narrowly at except that they'll have too much speech.

Mr. Caruso: --Pardon?

I didn't... I'm sorry--

Unknown Speaker: I mean, there is no other element of a corporation that accounts for the legislature's restriction here, except the fact that they will have a lot of... of political speech.

Mr. Caruso: --They have a very, their presence, a corporations presence in the political marketplace is very formidable.

Just the very presence is formidable.

To think that they are in to advocate the election of a particular candidate, aside from the fact that they have, some of these business corporations generate a great deal of money that they can inject into the electoral process, I say, causing an unbalanced playing field.

They nevertheless are... for the most part they are well organized and they can turn this advantage that they have into very serious problems with the--

Unknown Speaker: What, isn't one of the reasons you are urging why corporations like this were treated differently, or could be treated differently from individuals, was that the stockholders of the member corporations could find their funds put to uses that they had not intended?

Mr. Caruso: --That is exactly right.

As I have mentioned earlier, Justice, Mr. Chief Justice, that these monies that are put in by the stockholders by way of investments is for economic benefit and economic gain, to earn profits.

And they certainly do not anticipate those monies being used in the... to... in the electoral process to urge the election of a particular candidate.

And they have free speech rights.

Their free speech rights might be violated by the fact that the corporation is going out and spending monies that has been put in for other purposes.

They may not want this candidate elected for their own particular reasons.

And yet their monies that go in for another purpose are being used to elect some other candidate.

Unknown Speaker: Does this law apply only to Michigan corporations?

It applies to all corporations, doesn't it?

It applies to all corporations, in and out of state.

Mr. Caruso: Any corporation within the State of Michigan.

Unknown Speaker: Well, that policy you are just defending there, I mean, that is a sensible policy for the Michigan legislature to require for Michigan corporations, I suppose, if it doesn't want the shareholders of Michigan corporations to accept unanimously... use any... use any money for political purposes.

I can understand that.

But they are imposing this upon other states who think that shareholders generally don't mind their money being used by the corporation for a purpose that it considers valid to its business.

Mr. Caruso: I think it is any corporation doing business in the State of Michigan, and that may include corporations incorporated elsewhere, that is true.

I can't answer that.

But in any event, as I say, the... this legislature... this Court has historically deferred to legislative judgment in the regulation of the political process where corporations are concerned.

They have perceived that there is a potential danger and a potential threat to the... to the electoral marketplace, and that they, that deference should be given to the regulation.

Unknown Speaker: Thank you, Mr. Caruso.

Mr. McLellan.

Argument of Richard D. McLellan

Mr. McLellan: Mr. Chief Justice, and may it please the Court:

Michigan State Chamber of Commerce is a nonprofit Michigan membership corporation.

It was organized in 1959 for the specific purpose of promoting economic development and the preservation and enhancement of the American enterprise system.

Both the purpose and the activities of the state Chamber of Commerce are ideological.

The state Chamber lobbies in the state capital on legislation, it is actively involved in ballot question campaigns and referenda in the state, it educates its members and the public with respect to public policy issues.

It maintains a separate segregated fund for the purpose of making political contributions to candidates, and it rates candidates on a job provider index.

But the state Chamber of Commerce does not communicate its views to the general public with respect to candidates because Section 54 of the Michigan Campaign Finance Act makes it a felony for such commun... for the Chamber to engage in such communications.

Unknown Speaker: Can it communicate the ratings?

Mr. McLellan: It cannot.

Not if those are in any way in support of or opposition to the election of a candidate.

Unknown Speaker: So if one candidate was rated on a scale of one to... or zero to ten, and he was rated at ten and the... his opponent was regulated at one, then that would obviously be interpreted as support if you communicated the rating?

Mr. McLellan: If the purpose was... and I am assuming that the purpose would be to influence the general public.

They do not publish ratings as a general educational matter.

Their purpose in speaking is ideological and it is designed to influence the election or defeat of candidates.

Importantly though, the Michigan Campaign Finance Act is different from the Federal Election Campaign Act.

The Michigan Act, which was adopted in 1976, prohibits only corporate speech.

Unincorporated labor organization speech is unregulated.

In fact--

Unknown Speaker: Was this point argued in the court of appeals?

Mr. McLellan: --Yes, it was, Your Honor.

Unknown Speaker: The equal protection point?

Mr. McLellan: The... yes.

We have briefed, and we brought the case originally on both First Amendment and equal protection, it was briefed and argued in the court of appeals, and we have briefed it here.

Unknown Speaker: And did the court of appeals pass on equal protection?

Mr. McLellan: They did not.

Unknown Speaker: Any explanation of why not?

Mr. McLellan: Because the court of appeals found for us on the First Amendment--

Unknown Speaker: They did not need to reach the equal--

Mr. McLellan: --They did not need to go to the equal protection.

We point this out, the disparate treatment between corporations and unincorporated unions, for two reasons.

The primary reason that, in Michigan the political marketplace is largely characterized by the contest between the forces of organized labor and business.

And the Michigan law, because it treats the Michigan Chamber of Commerce differently than its primary adversaries, which were identified in the trial as the United Auto Workers and the AFL-CIO, this disparate treatment creates an... a disadvantage to the Michigan State Chamber of Commerce in carrying out its purposes, which is to be a political and ideological organization within the State of Michigan.

Unknown Speaker: --But all we ordinarily require to reject an equal protection claim is some sort of rational basis, and isn't it enough that the unions are unincorporated, they don't have the freedom from liability that the corporation has?

Mr. McLellan: It may be important in your analysis, Mr. Chief Justice, in this case, because Mr. Caruso and the state have argued that the amassing of wealth is the important state interest.

And unions, particularly the major labor organizations in the State of Michigan, are able, because of their size and their broad membership base and the special advantages that they have under the law, to amass substantial wealth.

Unknown Speaker: Do they do that through their own funds, or do they set up separate funds for doing that?

Mr. McLellan: In Michigan, unlike the federal law, they use their general union treasury funds for--

Unknown Speaker: They do.

Mr. McLellan: --political purposes.

Unknown Speaker: They don't have--

Mr. McLellan: Both direct contributions and independent expenditures.

Unknown Speaker: --They don't have political action committees?

Mr. McLellan: They do for federal law purposes.

Unknown Speaker: I see, just for federal elections.

Mr. McLellan: Yes.

Unknown Speaker: Is there a summary in the record or in the trial courts finding as to the number of unincorporated union associations?

Mr. McLellan: There is not any finding there, Your Honor.

The only evidence in the record that I recall was that there are 22 Michigan unions that are incorporated, including the Michigan Education Association, which--

Unknown Speaker: That are incorporated.

Mr. McLellan: --Are incorporated.

Most other large unions are unincorporated.

Unknown Speaker: But is there anything in the record that you can point to to establish that, or do we just take judicial notice of that?

Mr. McLellan: I think you take judicial notice of that.

Unknown Speaker: You suggest that there are no limitations, legal limitations on how much... how unions can use their funds for political purposes?

Mr. McLellan: There is not in the Michigan Campaign Finance Act, Your Honor.

Unknown Speaker: But members certainly have remedies, don't they--

Mr. McLellan: They, members do have the rights--

Unknown Speaker: --under the federal labor laws.

Mr. McLellan: --This Court has recognized that, in, that there are other laws that protect union members.

Unknown Speaker: So unions really aren't all that free to just use their amassed wealth to, for political purposes, are they?

Mr. McLellan: No, they are not.

There are federal restrictions on them.

Unknown Speaker: Well, there are also constitutional restrictions, aren't there?

Mr. McLellan: Yes.

Unknown Speaker: Which would apply to the use of funds in state elections.

Mr. McLellan: It would.

A member of a union would be able to assert his or her constitutional interests.

Unknown Speaker: And unions nowadays usually have a mechanism for that, don't they?

Mr. McLellan: Yes.

My understanding is that unions that are contesting it have that opportunity.

Unknown Speaker: And your organization, so long as it doesn't endorse a particular candidate, wouldn't violate the law, or seek to favor a particular candidate.

You could still campaign with respect to issues as much as you like, is that correct?

Mr. McLellan: Under the present system we are able to lobby on legislative issues, participate in ballot question campaigns.

We are not able to articulate the connection between a particular issue and a particular candidate.

Unknown Speaker: Right.

But you could... you could publicize the issue statewide to the electorate, not just lobby in the legislature, right?

Mr. McLellan: Yes.

Unknown Speaker: So long as you don't identify it with a candidate.

Mr. McLellan: That is correct.

Unknown Speaker: And you can make all the arguments you want to your own membership in connection with soliciting funds for your political action fund?

Mr. McLellan: Correct.

Unknown Speaker: Which then is free to spend the money--

Mr. McLellan: Correct.

Unknown Speaker: --Why is that?

I am a little interested in the difference between... why is it so important that you're not, that you be free to operate without going through the fund that the statute provides for, the separate fund?

Mr. McLellan: The primary operational reason is that PACs have a significant, negative image in the public.

And the state Chamber of Commerce, as was submitted in court, has a very strong reputation, the state Chamber of Commerce.

And to be able to speak with your own voice, with your own name on the bottom of the advertisement, that this is the view of the state Chamber of Commerce--

Unknown Speaker: But the problem is that when you speak with your own voice you purport to represent 8,000 members who all agree on your, what you are saying.

Whereas when you go through the fund you are sure that everybody who contributed to the fund authorizes you to speak in that way.

Isn't there that potential misunderstanding of... I mean, that is why it is stronger speech when it purports to represent all 8,000 members, even though they haven't all contributed to the fund.

Mr. McLellan: --The Michigan State Chamber of Commerce, every member, corporate or individual, must subscribe to the objectives of the state Chamber.

Unknown Speaker: Well, I understand, but they don't all have to vote for the same candidates for office.

Mr. McLellan: No, and they may not.

In fact they, it is a diverse membership.

There is a, it is a widely diverse membership, in size and function of business--

Unknown Speaker: And of course you want to be able to use your accumulated funds from dues, you don't want to have to go back to anybody.

Mr. McLellan: --That is right.

We don't want to have to--

Unknown Speaker: And if you are going to set up a fund, you are going to have to go raise some money.

Mr. McLellan: --We don't want to go through the same--

Unknown Speaker: And you may not be able to raise it from everybody, because they don't agree with you.

Mr. McLellan: --That is correct.

Unknown Speaker: Which means that your speech is restricted.

Mr. McLellan: Our speech is restricted.

If we have to use that mechanism, there are substantial burdens that we would be faced--

Unknown Speaker: It is not only restricted, but if it weren't restricted it might be misleading, too.

What difference does it make in your argument that you speak for a nonprofit corporation?

Can't the same arguments you are making be made for corporations that are in business for profit?

Mr. McLellan: --Yes, the same argument can be made, and we would make it.

We would make it particularly in this sense.

In this case, in Michigan under the Michigan law, there has been no showing of any state interest that would restrict independent expenditures generally.

There was no legislative findings dealing with independent expenditures.

There was no evidence submitted at the trial that would suggest that there is something inherently corrupting or potentially corrupting by corporate independent expenditures generally.

So, in answer to your question, yes.

We do not think that that is a significant distinction.

However, this has been addressed by the court and we are, and I am responding to that analysis.

This is the first time this Court has considered the constitutionality of a state law that bans independent expenditures in the... with regard to a candidate, by an ideological corporation that has business corporation members.

And we suggest that the analysis that this Court has made with respect to independent expenditures generally is equally applicable in this case.

Unknown Speaker: Mr. McLellan, do you think the case would be any different if this were a law that were a corporation law, that is Michigan made the judgment, we think that someone who takes part in the kind of an economic unit that we want to allow to be created under Michigan corporation law, should never be bound through his participation in that unit to support with his funds a particular candidate.

Are you incorporated in Michigan, by the way?

Mr. McLellan: We are incorporated in the Michigan nonprofit corporation act, that permits a corporation be organized for any lawful purpose.

Unknown Speaker: Suppose Michigan made that judgment.

You know, we set up this economic kind of a unit called a corporation.

We don't think that anybody who joins it ought to have political views attributed to him, and therefore corporations incorporated in Michigan can't endorse a particular candidate.

Would that be any different as far as the argument you are making before us is concerned?

Mr. McLellan: I think not, Your Honor.

I think that... that we would argue that the First Amendment would permit that person... again, you would still have to do the analysis as to whether or not there is a sufficient reason for the state to restrict them.

Even in the case where they create--

Unknown Speaker: Well, the reason is we don't want people to... people's money to be used to endorse a candidate that they don't like.

What if the state corporation law said that certain types of, as they do, certain types of votes have to be passed by more than just 50 percent of the shareholders.

Suppose that it said to endorse a particular candidate you need unanimous shareholder consent.

Would that be all right?

Mr. McLellan: --Yes, I think so.

I think that clearly the state laws provide a structure for the operation of that corporation and might well require that.

This is a prohibition on the speech, and I think that there may well be other steps that would be appropriate by the state.

Let me just, a final point here.

I repeat again that from our view, in this case the state utterly failed to prove a state interest that would permit the imposition of the substantial ban on corporate speakers; that independent expenditures in Michigan on the record in this case are not corrupt; that, in addition, this speech is valuable by the Michigan State Chamber of Commerce, its political adversaries, by other ideological groups, corporate and unincorporated; that there is a value here that should be recognized by this Court and by the Michigan legislature and that is to inform the public, to have a diversity of views and to reflect a true competition of ideas and the free market basically in ideas.

We think that the court of appeals properly interpreted the decisions of this Court.

We think that its decision was consistent with prior decisions.

It was fair, and will assure ideological groups the opportunity to--

Unknown Speaker: May I just enquire, what do you mean by an ideological group?

I can understand it in a sort of a single issue group where there is just one issue, such as right to life or something like it, very clear what, that they all have the same approach to the problem.

But one of the points you made earlier was the Chamber of Commerce, by its very nature, is very diverse in the various interests it represents.

And, sure, everybody is in favor of democracy and against crime or something like that, but do you call that... is that enough to make it an ideological group?

Mr. McLellan: --I believe an ideological group... it does... it is an ideological group.

Unknown Speaker: Well, would General Motors be an ideological group, because all the shareholders want to make money and believe in free enterprise.

Mr. McLellan: No, I do not think it, General Motors is an ideological group.

Unknown Speaker: Simply because they are a profit-making corporation?

Mr. McLellan: No, simply because they are organized for a different purpose.

I think that you can identify those groups that have organized themselves to primarily advocate ideas, not all necessarily political ideas, but they are ideological in that sense.

Unknown Speaker: Would there be any nonprofit or membership corporation, I guess you call it in Michigan, that would not be an ideological group within your concept?

Mr. McLellan: Yes.

Some health care groups, other groups may not be ideological.

Certainly, I think that they would be supporting it, their purpose would not be ideological.

Unknown Speaker: What about a trade association, the Automobile Manufacturers Association, or something like that, who seek to promote the welfare of the automobile industry?

Mr. McLellan: In general, trade associations, I think, are organized for largely public policy and ideological purposes.

Unknown Speaker: Trade associations would be included in--

Mr. McLellan: Would be.

Civic action organizations, like the ACLU, NAACP, are the more common examples of ideological groups.

But the State Chamber of Commerce, trade associations, environmental groups, are equally ideological in that sense.

The fact, from our perspective, that they, that the Chamber represents business interests does not make it any less ideological.

The issues in which they are involved are ideological.

If there are no further questions, that concludes my argument.

Thank you.

Unknown Speaker: --Thank you, Mr. McLellan.

Mr. Caruso, do you have rebuttal?

Rebuttal of Louis J. Caruso

Mr. Caruso: I have two points to make, and the first--

Unknown Speaker: You have three minutes.

Mr. Caruso: --The first point I would like to make, and that has to do with contributions and independent expenditures, and the difference between the two.

This Court has said that contributions... the restriction against contributions is valid.

They haven't dealt with the independent expenditure prohibition in term of corporations.

But I want to point out something here.

There is a difference between the federal statute this Court has dealt with on independent expenditure and that with the... and that set forth in the Michigan Campaign Finance Act.

The federal statute is much more restrictive than the state statute is.

In the federal statute, it says without cooperation or consultation with any candidate.

That is the federal statute.

But the state statute simply says is not made at the direction or under the control of, which simply means in the State of Michigan, on independent expenditures, a corporation could have dialogue with a candidate and say, look, I am going to take out these ads in this newspaper.

If you are going to spend money there, spend it some place else, we will help you there.

In the federal statute you cannot do that.

Unknown Speaker: You ought to fix that.

Mr. Caruso: In the state statute you can.

Pardon?

Unknown Speaker: You ought to fix that.

Mr. Caruso: Pardon?

Unknown Speaker: I mean you ought to fix that.

That doesn't seem to me a justification, saying therefore we have to prevent corporations from making any contributions at all.

You should fix it the way the feds fixed it.

Mr. Caruso: Well, even the feds, even the Federal Election Commission takes the position that independent expenditures are... should be... is prohibited, and it is a valid prohibition.

One other thing I wanted to mention, and that is what this Court stated in National Right to Work at 210.

And that says while Section 41b restricts the solicitation of corporations and labor unions without great financial resources, as well as those fortunately situated, we accept Congress' judgment that is it the potential for such influence that demands regulation.

Nor will we second-guess a legislative determination as to need for a prophylactic measure where corruption is the evil field... feared.

Differing structures and purposes of different entities may require different forms of regulltion in order to protect the integrity of the electoral process.

And I mention that in response to the arguments that have been made here with respect to labor unions.

Chief Justice Rehnquist: Thank you, Mr. Caruso.

The case is submitted.