Federal Election Commission v. Beaumont - Oral Argument

Argument of Paul D. Clement

Chief Justice Rehnquist: We'll hear argument now in No. 02-403, the Federal Election Commission v. Christine Beaumont.

Mr. Clement.

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

This Court's campaign finance cases consistently emphasize the fundamental distinction between contributions and expenditures.

Direct transfers of cash to a candidate pose unique risks of the appearance of corruption or the threat of actual corruption while, at the same time, imposing less significant interference with First Amendment values.

And so this Court's jurisprudence consistently recognizes that there is less rigorous scrutiny on limitations on contributions relative to limitations on expenditures.

The court below lost sight of that fundamental dichotomy.

It held that corporations of the type that this Court exempted from the general limitations on corporate expenditures in Massachusetts Citizens for Life were equally exempt from the broad prohibitions on corporate contributions to candidates.

That reasoning ignores this Court's decision in Massachusetts Citizens for Life itself, which specifically distinguished between the expenditures and contributions of nonprofit corporations.

More fundamentally, the decision below ignores this Court's decision in National Right to Work Committee.

There this Court held that the broad limitations on corporate contributions and the specific limitations on solicitation embedded in that broad prohibition were constitutional against a First Amendment challenge.

Justice Scalia: Mr. Clement, the Government does... does not challenge the exemption of this not-for-profit corporation from expenditure limitations?

Mr. Clement: That's right, Justice Scalia.

The court below addressed both an expenditure issue and a prohibition issue with respect to contributions, and the Government only took up the prohibition on contributions.

So that is the only issue before the Court.

I think it's important, though, to understand that that is a distinction that the court below placed insufficient emphasis on because that is a distinction between contributions and expenditures that underlies the last quarter century of this Court's campaign finance jurisprudence.

And in National Right to Work Committee itself, this Court recognized that the broad prohibitions on contributions applied to all corporations, including those like National Right to Work Committee itself that were without great financial resources.

Nonetheless, in the particular context of corporate contributions to candidates, this Court held that it would not second guess Congress' decision that a broad, prophylactic approach was necessary when corruption was the evil feared.

Chief Justice Rehnquist: Do you think after the decision in Massachusetts... the Massachusetts case, the NRWC would have a right to make independent expenditures?

Mr. Clement: Well, I think it would, Chief Justice Rehnquist, and I think that where I would point to first is your dissent in that case because in that case in your dissent, you made the argument that National Right to Work Committee was essentially the same as Massachusetts Citizens for Life.

And the majority, in responding to that argument, didn't draw any particular distinction between National Right to Work Committee and Massachusetts Citizens for Life, but rather drew a firm distinction between the level of scrutiny that applies to limitations on contributions and the level of scrutiny that applies to limitations on expenditures.

So I would read that decision as saying that the critical distinction is not the differences among the types of corporations with respect to contribution bans, but is the fact that contribution bans are much more readily approved under First Amendment analysis than expenditure bans.

And National Right to Work Committee obviously wasn't the last word on that subject.

This Court reaffirmed the validity of a broad, prophylactic approach to corporate contributions both in National Conservative Political Action Committee and in Massachusetts Citizens for Life itself.

Particularly, in light of Massachusetts Citizens for Life, a ban on corporate contributions by nonprofits does not impose significant burdens on First Amendment interests.

In the particular context of this type of corporation, the corporation is free to engage in unlimited spending on elections through the corporate form, and the individual respondents are free to give unlimited contributions to North Carolina Right to Life.

In addition and equally important, the individual members of North Carolina Right to Life are free to give contributions to the candidates of their choice up to the constitutionally valid contribution limits.

Accordingly, this case doesn't involve the right to associate together or the right to associate with candidates of someone's individual choosing, but only the right to assemble together collectively to give money to candidates of an organization's collective choosing.

And even that rather attenuated First Amendment interest is only affected to the extent that a corporation must direct its contributions through a separate segregated fund with enhanced disclosure and reporting and bookkeeping requirements.

Justice Scalia: Why... why is that an attenuated First Amendment right?

Isn't that the right that enables the formation of political parties, people forming together in order to collectively give money to particular candidates?

Mr. Clement: Well, certainly in... in the first point, parties are subject to a different type of regulation under the campaign finance laws.

But secondly--

Justice Scalia: Well, it may well be, but... but I... I wouldn't shrug off as inconsequential the importance of individuals being able to band together to support individual candidates.

That's the whole basis for our... our party system.

Mr. Clement: --And... and I don't want to suggest that there's no First Amendment interest on the other side of... of the argument in this case, but what I did mean to suggest is that interest is less significant than the interest in individuals banding together to make expenditures that they might otherwise not be able to make.

And I think even in the party context, this Court recognized that distinction in the Colorado Republican cases where it held that limitations on what the... the party can spend to support a candidate are not subject to limitation, but what... but there... but there are valid limitations on what the party can contribute to a candidate of its choosing.

Now, in contrast to the rather minimal First Amendment interests that are interfered with by section 441b, it plays an important role in safeguarding the integrity of the election process.

This Court in... in National Right to Work Committee already has recognized that corporate contributions pose a risk of the reality and appearance of corruption and that a broad, prophylactic limitation on all corporations, including those without great financial resources, is an appropriate response to that threat.

All corporations, regardless of their size, also pose risks of circumvention and of undermining the workability of candidate disclosure requirements.

As this Court recognized in Cedric Kushner Promotions against King, the whole point of a corporation, its basic purpose and fundamental reason for... for existing is to create legal separateness between the individuals that form and run the corporation and the artificial corporate entity itself.

Giving such an artificial entity the right to contribute in its own name, independent of the individuals that underlie the corporation, obviously poses a distinct risk to a campaign finance system that is based largely on individual contribution limits.

Section 441b addresses that risk by requiring that those contributions be made through a segregated fund subject to enhanced bookkeeping and disclosure requirements.

Those bookkeeping and disclosure requirements, in turn, make the campaign disclosure forms that individual candidates have to file work in a meaningful fashion.

If those candidate disclosure forms simply revealed that the candidate received money from an artificial entity with either an ambiguous name or what this Court in Citizens Against Rent Control v. Berkeley termed a seductive name that tends to conceal the true identity and true source of the funds, then those campaign finance forms... or disclosure forms will not provide meaningful information.

If, on the other hand, 441b makes the underlying corporations use a segregated fund that discloses the individual sources of the contributions, then the disclosure forms can work in a meaningful fashion.

I think it bears emphasis, as this Court recognized in Massachusetts Citizens for Life, that the distinction between contributions and expenditures applies with full force in the context of nonprofit organizations.

A limitation on expenditures can prevent an organization's members, who might otherwise not have the resources to reach a certain audience, to pool their resources together to reach that audience.

There is no comparable function or benefit from the pooling of individual candidate contributions.

The individual candidates themselves can perform that pooling function by assembling together candidate contributions of whatever size in order to reach an audience or to engage in political speech.

The intermediate pooling function that the nonprofit corporation serves can only benefit by either circumventing the individual contribution requirements or assembling an aggregate contribution of a sufficient size to potentially capture the attention of a candidate for purposes of a quid pro quo.

To be sure, the same provisions of the campaign finance laws allow corporations to assemble funds in... in aggregate amounts through a segregated fund, but only with the additional safeguards that are imposed, including enhanced disclosure requirements.

Congress, in adopting section 441b, drew an important distinction between corporations and their ability to contribute and individuals.

In the expenditure context, the limitations on corporate expenditures stand in stark contrast to the general right of individuals to engage in unlimited independent expenditures.

But no one has a right to engage in unlimited corporate... in unlimited contributions to candidates.

Congress addresses the threat of individual contributions through dollar amounts.

It addresses the distinct risks of corporate contributions through the requirement of a segregated fund, higher limits, and enhanced disclosure requirements.

Respondents effectively ask this Court to disregard and second guess Congress' decision to treat corporations differently from individuals for purposes of candidate contributions.

With respect, I think essentially respondents ask this Court to treat North Carolina Right--

Chief Justice Rehnquist: Can you summarize briefly what the enhanced disclosure requirements are?

Mr. Clement: --Certainly, Chief Justice Rehnquist.

The... the main difference is that in the context of a segregated fund, all... both all incoming contributions to the segregated fund and all disbursements must be disclosed.

Justice Scalia: You're talking about PACs.

Right?

Mr. Clement: PACs.

I mean, the PACs generally... there are segregated funds in the particular context of corporations and labor unions.

Chief Justice Rehnquist: And the donor is listed.

Mr. Clement: The donor is listed.

There are specific provisions for very small donations where the name only goes to the FEC and is not publicly disclosed.

But there's a... but really, everything that comes in and comes out of the segregated fund is traceable either by the FEC or through the public in disclosure requirements.

In the context of the corporation generally, only... only donations that are given over $200 and for the express purpose of... of political activity have to be disclosed.

And that does create a significant loophole.

In the--

Justice O'Connor: Mr. Clement, is this... is this section 441b related or affected in any way by the McCain-Feingold legislation?

Mr. Clement: --Justice O'Connor, it really isn't, at least as this case comes to this Court.

The prohibitions on corporate contributions have been in the law since 1907 and have been left completely unaffected by the Bipartisan Campaign Finance Reform Act.

It is true that certain limitations on electioneering activity, which is a new term introduced into the law by the Bipartisan Campaign Finance Reform Act, do apply to corporations.

So in considering challenges to the McCain-Feingold legislation, this Court may have to consider the restrictions on corporations engaged in expenditures and these new electioneering activities, but not--

Justice O'Connor: But at least the issue here in this case is unaffected by that.

Mr. Clement: --The issue of corporate contributions is miraculously unaffected by the many reforms that are put in place by the Bipartisan Campaign Reform Act.

[Laughter]

In the end--

Justice Breyer: What is the... what is the limitation of the PAC?

How much can they contribute, say, to a Senator?

Mr. Clement: --A... a political action committee or any segregated fund can give $5,000.

Justice Breyer: This... this... you're saying that this particular kind of organization can't contribute directly, but it could set up a... what you call a segregated fund, which I was thinking of as a PAC.

And so if that segregated fund now wants to make a contribution to Senator Smith for his reelection campaign, is there a limit as to how much they can give?

I'd think so.

Mr. Clement: There is indeed, Justice Breyer.

It's $5,000.

Justice Breyer: $5,000.

Mr. Clement: And two points of emphasis just on that question.

One is that respondents here don't just have the right to set up a segregated fund, but they've actually already done that.

They've already set up a segregated fund.

And I know that this Court in Massachusetts Citizens for Life emphasized that there are unique restrictions and burdens on setting up a segregated fund, and I think that's true in the context of expenditures.

But I do think it's easy to exaggerate the burdens that are imposed in setting up a segregated fund.

Although a segregated fund is like a PAC, there's no requirement that they have separate offices or separate officers.

They have to have a distinct leadership and... and... but it can be the same leadership as the corporation itself.

Justice Breyer: I mean, could they have two members?

Mr. Clement: I don't know of any particular limit on... on the members.

But the point is all that's really required is segregation of funds and keeping it separate.

It's not an onerous requirement.

And I think it's no accident that in the four cases that this Court has had that involved a nonprofit corporation, National Right to Work Committee, Massachusetts Citizens for Life, Austin against Michigan Chamber of Commerce, and this case, all four of those nonprofits had already set up segregated funds before the case got to this Court.

So I don't think, at least in the contribution context, that those are onerous requirements.

Justice Scalia: Well--

Justice Ginsburg: --In Massachusetts Citizens for Life, there was a separate PAC?

Mr. Clement: There was.

This Court in footnote 8 suggested that that wasn't dispositive of its reasoning because other... other entities could set... be in a position that were similar to Massachusetts Citizens for Life, might not be able to afford those burdens.

But Massachusetts Citizens--

Justice Ginsburg: But the Court did say for that type of... for that type of corporation, not a commercial corporation, that was burdensome and unnecessary because the risk of corruption for that kind of corporation was significantly less than for commercial corporations.

And that would apply here as well.

If the... if the evil is corruption, I'm buying the candidate by my dollars, then that risk is less for an advocacy organization.

Is that... isn't--

Mr. Clement: --I don't want to suggest that the... that it may not be true that the risks are slightly less in the context of a nonprofit advocacy corporation than in the context of something like General Motors.

But I think in the particular context of candidate contributions by corporations, this Court has repeatedly decided that it's willing to accept a broad, prophylactic approach and to limit all corporate contributions, including contributions by corporations without great financial resources.

The Court said as much in National Right to Work Committee.

It repeated that again in National Conservative Political Action Committee, but I think most tellingly, it said that in Massachusetts Citizens for Life itself.

And in particular, if you look at footnote 13 of the Massachusetts Citizens for Life decision, the Court there specifically said that it understood that Massachusetts Citizens for Life would continue to be subjected to the National Right to Work Committee regime for purposes of its contributions, and it was talking about the fact that it didn't have... that Massachusetts Citizens for Life, for example, didn't have shareholders.

But it was quick to... to reinforce that that didn't mean that it didn't have members for purposes of National Right to Work Committee that it could solicit, subject of course to the overall limit that it could not give direct contributions to candidates.

Justice Scalia: --That was an assumption in the case.

You don't... you don't... you don't assert that it was a holding of the case.

Mr. Clement: Well, I don't think it's necessarily the holding of the case because, obviously, that case involved expenditures.

But I do think that when this Court distinguishes a prior precedent of the Court, that that's not a part of the opinion that a lower court is free to ignore.

I think that part of the opinion is critical to the reasoning of the Court and should be given stare decisis effect.

And I don't think there's any reason that's been brought to bear here to revisit this Court's distinction in Massachusetts Citizens for Life between contributions and expenditures, which after all, is the fundamental building block of this Court's campaign finance jurisprudence.

Justice Scalia: You think whenever we distinguish a prior case in one of our opinions, that... that distinguishing has stare decisis effect.

Mr. Clement: I would think that in many respects that's the most important part of the opinion.

It's not to say that the Court can't subsequently revisit that part of the opinion.

I mean, that's certainly what this Court can do, but I think for purposes of a lower court, anyway, if... if this Court distinguishes two cases on the ground that the prior case involved a corporation that had less than $10,000 and a subsequent case comes along where there's $9,999 involved, I would think the lower court would be well served to heed the distinction that this Court drew.

And I think in this particular context, obviously, this Court is free to reconsider its prior precedents, but I don't think there's any reason to do so.

The distinction between contributions and expenditures has proved workable particularly in the context of nonprofit corporations.

As I say, this isn't some abstract application of the contribution/expenditure dichotomy that this Court has never considered.

Massachusetts Citizens for Life involved a nonprofit corporation and this Court was at pains, pretty much at every step in the Court's reasoning, to distinguish between contributions and expenditures.

In the end, I think respondents ask this Court effectively to disregard Congress' decision to treat corporate contributions distinctly from individual contributions.

They effectively ask this Court to treat North Carolina Right to Life Incorporated as if it were not incorporated, but there's no reason to disregard either respondents' decision to incorporate or Congress' decision to subject all corporations to the same regime, segregated funds, distinct disclosure requirements, and higher limits, in fact, on their contributions.

If there are no further questions, I'll reserve the rest of my time for rebuttal.

Argument of James Bopp, Jr.

Chief Justice Rehnquist: Very well, Mr. Clement.

Mr. Bopp, we'll hear from you.

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

Expressive associations play a vital role in our democratic republic.

Because they attract financial support due to their political ideas, not their prowess in the economic marketplace, their participation in our political process poses no threat of corruption, as long as they do not serve as a conduit for business corporation contributions.

Justice Scalia: I... I don't understand that.

If... if I bribe somebody, a Senator, out of... out of political motivation because I'm an environmentalist or whatever, that's not corruption?

It's only... it's only if I have some economic motive that it's corruption?

Mr. Bopp: Well, that's classic quid pro quo corruption which is dealt with by contribution limits, now--

Justice Scalia: Well, I mean, I... it may well be, but I don't see that the distinction between whether it's an economic actor or a political actor has anything to do with whether there's corruption or not.

Mr. Bopp: --Well, there has been some controversy on this Court on... on whether or not the... the decisions of this Court in Mass. Citizens and on Austin were in accordance with the Constitution, but in both cases the Court distinguished between the types of corruption that are entailed by the corporate form, which is the potential for unfair employment of wealth for political purposes.

This applies to economic corporations, that... that is, those that are not, as Mass. Citizens or North Carolina Right to Life, formed to advance political ideas.

Justice Scalia: Well, but you can have an immense corporation formed to advance political ideas.

I... I don't... this one happens to be a small one, but--

Mr. Bopp: Yes.

And--

Justice Scalia: --if you attract enough people, you can have an immense organization.

What's the organization for... American Association of Retired Persons.

I mean, that's an immense organization with... with a large amount of available money.

Mr. Bopp: --That's right and the size of the organization is not the issue.

The issue in this Court's jurisprudence is whether... is the nature of the organization itself and not the corporate form per se.

If the nature of--

Chief Justice Rehnquist: Well, Mr. Bopp, would you say that the AARP, which was referred to by Justice Scalia, the National Right to Work Committee, which was involved in that opinion, and Massachusetts Citizens for Life are all in the same boat?

Mr. Bopp: --I don't believe so, Your Honor.

I think we do--

Chief Justice Rehnquist: Why not?

Mr. Bopp: --Well, the... the Court in Mass. Citizens established some criteria to determine whether or not an organization, a corporation, benefitted from the MCFL exemption.

And those include whether or not there are incentives to disassociate... lack of incentives to disassociate by, for instance, having insurance plans and other benefits of membership that are economically related.

Secondly, you would look to the amount of corporate... business corporation contributions or business activities.

If those are too much or those are not insignificant, in... in comparison with the total sums raised, then again they would not qualify.

Justice Ginsburg: Mr. Bopp, on that point I thought that Massachusetts Citizens for Life went further.

It said having a policy against accepting corporate contributions, which is one difference between your organization and Massachusetts Citizens for Life.

They said they would take no money from corporations.

You accept money from corporations.

You get very little from business corporations, but you don't have a policy of turning them away.

Mr. Bopp: That's correct, Your Honor.

And the... all the circuits that have considered this, which have been four of the circuits, all agree that the features explained and... and characterizing Mass. Citizens in... in the Supreme Court's decision were not constitutional requirements, but descriptions of the organization before it.

And all of them have agreed that... that not-for-profit ideological corporations can still qualify for the... for the Massachusetts Citizens exemption.

Chief Justice Rehnquist: Well, would you call AARP an ideological organization?

Mr. Bopp: I think they have a mixture of political and nonpolitical purposes and are, therefore, more like Austin... the... the Michigan Chamber of Commerce and Austin that had a mixture of political and nonpolitical purposes and therefore did not qualify for the MCFL exemption.

And to complete my answer--

Justice Kennedy: I'll bet the members also get benefits--

Mr. Bopp: --Yes.

Justice Kennedy: --and... and that criterion would... would make it different from--

Mr. Bopp: There were also incentives that were economic in nature that would cause people to be reluctant to disassociate with Michigan Chamber of Commerce if it... if it proved to be that they disagreed with their political ideas or the advancement of their political ideas.

And the four circuits that have considered the question of the amount of business corporation contributions have all said that as long as they are insignificant, in comparison with the total revenue of the organization, they still... they do not serve as a conduit for business corporation contributions and still qualify for the exemption.

Justice Ginsburg: --But they could serve as a conduit for a very large donor, a very wealthy person, who wants to avoid the personal limitations on how much that individual could give.

Mr. Bopp: Well, it is true that there are no contribution limits to not-for-profit corporations.

However, the intent of a donor to circumvent those limits would be... contributing to a not-for-profit would be a highly inefficient and ineffective way of doing so because the political activities of not-for-profit corporations, both because of the major purpose test that would cause an organization to become a PAC if political activity became their major purpose, and the Internal Revenue Service's limitations on the activities of 501(c)(4) organizations, which is what the regulations require you to be qualified as in... in order to quality for the MCFL exemption, all... all mean that a very small percentage of any contribution to a not-for-profit corporation could ever be used for political activity.

Furthermore, contributing to a not-for-profit versus a PAC and a... or a political party is also an unfavorable prospect for a donor.

I mean, after all, the... a not-for-profit under the 441a contribution limits is limited to a $2,000 contribution, where a PAC can give $5,000 and political parties can give much more.

Furthermore, all of the money that PACs or political parties receive in their hard money accounts can be used for political activity, whereas I've mentioned for not-for-profits it's really a very small percentage in order to continue to qualify under the MCFL exemption and continue to not be deemed a PAC for... for the purposes of the Federal Election Campaign Act.

Now, the disclosure interest that there... that there is for contributions can be readily and in a narrowly tailored way dealt with by simply requiring that any contribution to a not-for-profit that is to be used for or is intended to be used for contributions to candidates must be reported and is... and is thereby subject to the aggregate contribution limits.

This is a much more narrowly tailored way to deal with disclosure and the aggregate contribution limits than prohibiting the organization completely from making any contribution.

Justice Breyer: What you do then... this is what I understand you to be saying.

The... one of their justifications that has been advanced for this restriction on contributions I've interpreted as the following.

We have five people.

These five people each write a check to Candidate Smith for $2,000.

They get annoyed.

They think they should be able to give $4,000, which the law forbids.

So they form a committee, a nonprofit corporation, called the $4,000 for Smith Corporation.

Unknown Speaker: [Laughter]

Justice Breyer: And now each of them writes another check for $2,000, gives it to the corporation, and the corporation gives it to Smith.

And I think the Government says, well, Congress wanted to stop that.

It's not actually going to limit them to zero.

They're going to be limited to $5,000 as a group provided they jump through certain hoops.

All right.

Now, what's--

Mr. Bopp: Well, if they're a PAC--

Justice Breyer: --what's wrong with that argument?

Mr. Bopp: --Well, if they're... if they're a PAC, then they can give $5,000 out of the... out of the $10,000 that you posit.

If they're a not-for-profit corporation, the most they can give--

Justice Breyer: I know, but do you see what I'm saying?

I'm saying Congress doesn't want to have groups called the $4,000 for Smith group even if they call themselves something different.

Mr. Bopp: --I agree.

Justice Breyer: They want to limit each of those members to $2,000.

Mr. Bopp: Agreed.

Justice Breyer: And that's what they do, though for a variety of other reasons, not directly relevant to my question, they've allowed those people to get together, jump through various hoops called the PAC hoops, and give up to $5,000 extra.

So if Congress wanted to, they might say none.

Mr. Bopp: Yes.

Justice Breyer: All right.

Now, that's their... that's basically the argument, and I want to get a straight, you know, direct reply to it.

Mr. Bopp: Well, the... the desire of subjecting the aggregate contribution limit or a contribution in excess of $2,000, one direct and one through another source, is dealt with two ways and can be.

One is if the contribution made to this group that you posit is earmarked, then that contribution is considered to be a contribution not just to the group but also to the candidate him or herself.

So that earmarked contribution is subject to the $2,000 limit, and the contribution used for that would be in violation of the act currently.

Justice Breyer: All right.

So now... is that--

Mr. Bopp: That is current law.

And... and so that prospect is prohibited and appropriately so.

Secondly, as the Federal Election Campaign Act previously required, that anyone contributing to a organization, not a PAC, that contributes money for an independent expenditure, that that contribution must be reported by the group that does the independent expenditure.

Congress could require the same thing here.

They could require money given more generally, not earmarked, but more generally for candidates to be reported by the... the group and thereby subject to the aggregate contribution limits.

Justice Scalia: --Mr. Bopp, isn't it also the case that the... that the corporation that Justice Breyer posits would not qualify as... as a 501 exempt organization if the only thing it's using its money for is to make contributions to political candidates?

Mr. Bopp: That would also be true.

They--

Justice Breyer: I'm just trying--

Justice Scalia: --It has to be... it has to be a relatively insignificant part of its overall activity.

Mr. Bopp: --Yes.

The Internal Revenue Service would treat the organization that he described as a political organization--

Justice Scalia: So these five people would had to... have to get together with maybe 100,000 other people so that their... their little portion is so watered down that it's not a significant part of the corporation's business.

Mr. Bopp: --That's exactly--

Justice Breyer: I didn't think there was a numerical limit.

And my question which tried to eliminate extraneous points I think you understood perfectly well there.

I mean a 503(c) corporation but... et cetera.

But I want to go back to your answer.

The... the... because I'm trying to get clear about this.

And the... what you're saying is that Congress could take my group, with whatever else they have to do to qualify them... they could take my group and you're saying Congress could just say, very well, we will limit the corporation so that it can only give money from these five people insofar as they haven't met their $2,000 individual limit.

Mr. Bopp: --That would be an effect of what I said, yes.

Justice Breyer: And... and moreover, it could require reporting so we know who they are.

Mr. Bopp: Yes.

Justice Breyer: All right.

Now, is that a less restrictive alternative than what Congress has actually done, which is to say, proceed through a segregated fund?

Mr. Bopp: Yes, much less restrictive.

Justice Breyer: Because?

Because?

Mr. Bopp: Well, because this Court held in Mass. Citizens and Austin that the PAC requirements, both administrative, including record keeping, appointment of a treasurer, filing regular reports, et cetera, and the limits that are imposed upon PACs... there's a $5,000 contribution limit to PACs, et cetera... all impose an... a constitutionally burden... a burden on constitutionally exercised rights that did not... that did not pass constitutional muster.

So... so while it is true that you can do it under a PAC, that imposes an unconstitutional burden on the First Amendment activities.

And that, of course, all goes back to, you know, is there a justification for this.

In other words, we have a prohibited source--

Justice Kennedy: Well, just before you go on, I don't see why your proposal doesn't have all of the same administrative inconveniences.

Mr. Bopp: --Well, there's a one-page report.

There are organizations that can do independent expenditures that are not PACs.

There's a one... one-page report to file, and that... and that report would say how much is being spent on the independent expenditure and how much has been donated to the organization for the purpose of that independent expenditure.

Similarly, a report like that could be filed for contributions so that we could capture those people who are trying to circumvent the limits to... to make undisclosed or excessive contributions.

We would capture them because then the only choice left to the donor would be a completely undifferentiated, unearmarked contribution that is going to be used by the organization 95, 98 percent for other purposes, for lobbying, for education, for other charitable activity.

Justice O'Connor: Mr. Bopp, the Court basically decided this issue in National Right to Work Committee case, didn't it?

You just want us to distinguish your type of nonprofit corporation.

Mr. Bopp: Well, we are asking you to distinguish the Massachusetts Citizens for Life type--

Justice O'Connor: I think that's very hard to do.

I mean, we dealt with this precise issue in that case.

Mr. Bopp: --But there was no issue in that case about whether or not the organization itself should not be viewed as a prohibited source of... of making independent expenditures or making contributions in that case.

Justice O'Connor: But the organization opted for the corporate form--

Mr. Bopp: Yes.

Justice O'Connor: --knowing about these limitations.

Mr. Bopp: Yes, but this Court has... was clear in Mass. Citizens that it's not the corporate form per se, but the potential for unfair deployment of wealth for political purposes and held that these types of organizations pose no threat, no threat whatsoever.

Chief Justice Rehnquist: Well, it couldn't have been a holding in... in the Massachusetts case because there you were talking about independent expenditures rather than contributions.

Mr. Bopp: Well, but... but--

Chief Justice Rehnquist: Certainly the Massachusetts case doesn't control the outcome here.

Mr. Bopp: --Well, we... we believe that it... that the holding of the Court in Mass. Citizens... that this organization serves no potential for corruption of the democratic process, was essential for the Court to hold that no independent... that independent expenditures would be allowed because, after all--

Justice Ginsburg: Mr. Bopp, at least three times in the text of the Court's opinion in Massachusetts Citizens for Life, at least three times, it distinguishes direct contributions to candidates from expenditures, and each time it explains why it reached the result it did.

It makes that distinction.

Mr. Bopp: --Yes.

Justice Ginsburg: And I think that... that that's so central to Massachusetts Citizens for Life.

So if... if we just had this opinion shorn of all but however, remember that this is not a contribution to a candidate and then citing back to the... the earlier decision that Justice O'Connor mentioned, the National Right to Work Committee, to distinguish it from this case, but it just seems so all over Massachusetts Citizens for Life that it is drawing this bright line between contributions to candidates and independent expenditures.

Mr. Bopp: But in... but in Right to Work, it wasn't a prohibition on contributions.

It was a... a limit on the amount of contributions.

And we agree that limits on amounts--

Justice Ginsburg: Yes, but I'm... I'm talking about Massachusetts Citizens for Life and the line that Justice Brennan drew in the Massachusetts Citizens for Life between contributions to candidates.

Every time he talks about the holding in this case, he said, remember, this is not contributions to candidates.

Mr. Bopp: --Yes, Your Honor, that's correct.

That's what you said.

But the... the case did not involve... neither Mass. Citizens nor Right to Work involved a limit on the amount of contributions, that is, like a $2,000 limit.

We have not challenged that.

Justice Souter: Mr. Bopp, do you challenge the distinction for First Amendment purposes between restricting contributions and restricting expenditures?

Mr. Bopp: Only as to a prohibition on them.

That is, this Court in Buckley and reaffirmed in Shrink said that there were both speech and association aspects of making a contribution.

That is, it's a... as far as speech is concerned, this is a general expression of support that is found in the undifferentiated act of contributing.

Well, here they are prohibited from contributing.

They cannot... these organizations cannot give one cent.

Therefore, that's--

Justice Souter: So... so you're... you're saying there is a distinction--

Mr. Bopp: --Yes, as to a prohibition.

Justice Souter: --for... for valid First Amendment purposes between the... the contribution limit and the... and the expenditure limit, but that distinction is not strong enough to forbid an entire prohibition.

Mr. Bopp: That's correct because both the speech aspects and association aspects of contributing that are... that remain after limits on the amounts are imposed because the speech aspect is a general expression of support and the association aspect is to serve to affiliate a person with the candidate.

You have your name now through the... the method of the contribution affiliated with the candidate.

When you have a zero contribution limit, then there is no speech and no association that is allowed through the act of contributing.

Therefore--

Justice Ginsburg: But you can say... you can--

Chief Justice Rehnquist: --I don't think any of our cases have sliced the onion quite that fine to get into these nuances that there's a difference between prohibiting a contribution and limiting it.

I think our distinctions have been primarily that contributions may be quite substantially regulated, independent expenditures cannot be.

Mr. Bopp: --Well, that is... that is generally a correct characterization of your jurisprudence, but you have to examine why.

Why is it that contributions are subject to a lower level of scrutiny?

And the... the why is is that the speech and association aspects of giving a smaller contribution remain, but if you can't give any contribution, then both that speech and association aspect--

Justice Ginsburg: But when you say can't give any, you are overlooking or saying the PAC doesn't count.

Mr. Bopp: --Yes.

Justice Ginsburg: It isn't an absolute no contribution.

It is, if you do it, you have to do it through this arm that you create, this segregated fund, this 501... of the 501(c)(4) organization.

You can... you can do it but you have to do it in a rather cumbersome way.

Mr. Bopp: Yes.

Justice Ginsburg: So it isn't you cannot make any contributions.

Mr. Bopp: Well, not only is it cumbersome, but it's constitutionally... it's an unconstitutional burden this Court has held in Mass. Citizens and in Austin to require First Amendment political activity to be done through a PAC.

So--

Justice Ginsburg: Not First Amendment activity in... in the Massachusetts case itself, as I just said.

I don't want to repeat that except that Justice Brennan did repeat it at least three times.

Mr. Bopp: --Yes.

And I'm aware of that, but I'm just asking this Court to... to consider not... not to apply what is dicta in Mass. Citizens since it did not involve contributions... to... to just apply that, but to consider the rationale.

And in North... in... in National Right to Work, the Court was considering not a prohibition on soliciting contributions from members to its PAC, it was considering a limit on what is considered to be a member.

So once again, that case involved contribution limits, not prohibition.

Justice Scalia: Mr. Bopp, that... that First Amendment right that you talk about as the associational interest, the... the ability to give at least a dollar will identify you with a... with the candidate, is that really a First Amendment interest that applies to the association, or does it apply to the members of the association?

And as Mr. Clement pointed out, the individual members of the association remain free to give a dollar, indeed up to $2,000, to the particular candidate.

All you're really talking about here is... is not the ability of individuals to identify themselves with a candidate, but the ability of individuals by pooling their resources to help a candidate significantly.

It seems to me that that's the only interest at... at issue here.

Mr. Bopp: Well, there's valid reasons unlike the representation... or the argument of the Government for people to want to pool their resources in an association.

That those valid reasons are, in fact, why people already contribute to PACs and the political--

Justice Scalia: But among those reasons is not in order to identify myself with that candidate.

Mr. Bopp: --Well, but the--

Justice Scalia: To... to do that, all you have to do is reach in your pocket and give them a dollar.

Mr. Bopp: --That is true, but many people choose to pool their resources because they want the group, which has a separate existence and has a political purpose, unlike them as an individual... you know, they are not as identified with a particular point of view or political idea like a group would be, like... like NARAL would be.

So if... so they choose then to pool their resources with the group in order to make the much more powerful statement about the political ideas that they are attempting to support and they want candidates to be associated with.

Now, in addition, the fact that the group can aggregate these small contributions and then make a large contribution to a particular candidate enhances the... the contribution that the individual would otherwise made... be made because it is being done by the group and in an aggregate.

So there are justifiable reasons why people want to associate.

And then further, the association--

Justice Stevens: Mr. Bopp, it seems to me that your argument really would go just the same way to an amount limitation as to a total prohibition.

Mr. Bopp: --No, because amount limitations do not--

Justice Stevens: Everybody can just contribute $10.

Wouldn't that... would that be okay with you?

Mr. Bopp: --You mean the... the amount that--

Justice Stevens: Say the amount limitation was very low.

As I understand it, you're trying to draw a categorical distinction between total prohibition and amount limitation.

Mr. Bopp: --Yes.

Justice Stevens: And I don't know... I don't see that your argument really is directed to that.

Mr. Bopp: Well, it goes to the source of the... of the rights, the First Amendment rights, that are implicated by a... by an amount limitation as opposed to a prohibition.

Justice Stevens: But it seems to me an amount limitation that's very, very low would have the same vice under your argument as a total prohibition.

Mr. Bopp: Well, potentially, but that would be a case to be a decided at that point.

And... now, this Court has upheld the $5,000 limit, for instance, to political action committees.

And... but you would have to consider... if it got too low, I mean, there's certainly a potential for contributions that are too low... as Justices Breyer and Ginsburg explained in Shrink, there is certainly a potential if they're too low to be unconstitutional.

But here we're not talking about and have not challenged the... the $2,000 limit.

We accept that.

We just don't accept the proposition that because the organization poses no threat of corruption to the political process, that they should be completely prohibited from making a contribution.

So... so we view this then as a source limitation, not as an amount limitation, and as a result, the... the contribution jurisprudence of this Court that have accepted greater regulation of contributions is not applicable.

If there are no other questions, thank you.

Rebuttal of Paul D. Clement

Chief Justice Rehnquist: Thank you, Mr. Bopp.

Mr. Clement, you have 11 minutes remaining.

Mr. Clement: Thank you, Mr. Chief Justice, and may it please the Court:

Let me begin with the distinction that respondents rely on between limits on contributions and prohibitions on contributions.

Even if there is something to that distinction... and I rather doubt there is for some of the reasons unearthed by Justice Stevens' colloquy with... with counsel for respondent.

Even if that were a valid distinction, this case does not involve an absolute prohibition.

This Court, both in Massachusetts Citizens for Life and Austin, and in fact, much earlier in Pipefitters, made clear that the limitations on corporate and labor union contributions in section 441b are not a, quote, absolute prohibition, but rather just a limitation on contributions.

The availability of the segregated funds to make the contributions is another way of making this a limitation, a particular limitation designed for the unique risks of artificial entities like corporations and labor unions.

And I think any effort to distinguish the discussion in Massachusetts Citizens for Life and its distinguished... distinctions between contributions and expenditures on the grounds that a prohibition might be different just doesn't work because both Massachusetts Citizens for Life and National Right to Work Committee involved this very provision, section 441b.

So whatever there might be in the case of an absolute prohibition on somebody's right to make contributions, 441b either isn't that or isn't that in... in a constitutionally relevant way after this Court's decisions in Massachusetts Citizens for Life and National Right to Work Committee.

Some discussion was had about fine distinctions that potentially could be drawn between the American Association of Retired Persons, National Right to Work Committee, Massachusetts Citizens for Life, and North Carolina Citizens Right to Life.

The point of section 441b in the contribution context is that Congress has not found a need to draw those kind of fine distinctions.

MCFL itself, of course, drew some of those distinctions in the contribution context... in the expenditure context, rather, but drew a distinction between contributions in light of the inherently greater risk of corruption from contributions.

Another suggestion was made that perhaps there is a seemingly less restrictive alternative.

As with independent expenditures made by nonprofit associations, perhaps contributions that are made to the association with the purpose of them being used for contributions to candidates could be disclosed.

Chief Justice Rehnquist: Have we actually held, Mr. Clement, that in regulating contributions, the Government must find the least restrictive means?

Mr. Clement: No, and to the contrary.

This Court has not held that.

It did not apply a least restrictive alternative analysis in National Right to Work Committee.

In the California Medical Association case, a plurality of the Court, in fact, affirmatively held that the least restrictive alternative was not required in the context of contributions.

So I don't think there is that requirement.

But I want to address the... the supposed less restrictive alternative precisely because I believe that less restrictive alternative is illusory because the suggestion is that... that individuals could say... could disclose when they give a contribution to a nonprofit organization for the purpose of a contribution.

Well, if that's going to have the effect of avoiding the circumvention rationale, I wonder whether people are really going to volunteer the information that the contribution to the nonprofit is for that purpose.

And additionally, even if that is a permissible way and would be enforceable in the real political world, that really doesn't give you much of a different result than what Congress has specifically provided for with the segregated fund.

And indeed, the segregated fund actually is responsive to the kind of First Amendment associational interests that underlie this Court's concerns in Buckley and even going back to NAACP against Button.

The concern is that disclosure requirements imposed on organizations could be a backhanded way to get at membership lists.

The segregated fund prevents that by keeping the membership lists and the organization itself separate from the political activity of the organization.

Indeed, if Congress hadn't provided for segregated funds as a requirement for all corporations, but simply made that available, I would think that many nonprofit corporations would avail themselves of that option precisely to avoid the interference with associational interests as in cases like NAACP against Button.

The last point I'd like to talk about is simply this idea that again underlies much of respondents' arguments that because there is no threat from expenditures to these types of corporations, there is therefore no threat to these type of corporations engaging in corporate contributions.

If that analysis were applied across the board, it would undermine the entirety of this Court's campaign finance jurisprudence which is based on the fundamental recognition that contributions involve greater risks than expenditures, and... and expenditures, therefore, are largely unregulated because they are... presumably do not pose as great a risk as contributions.

If there are no further questions, I'd like the court below reversed.

Chief Justice Rehnquist: Thank you, Mr. Clement.

The case is submitted.