On Monday, a three-judge panel of the Court of Appeals for the
D.C. Circuit refused to stay a lower-court ruling that requires
corporations, unions, and non-profits engaged in a certain form
of campaign-related advertising to disclose their donors. In a
2-to-1 decision, the appeals court held that there's no
irreparable harm in waiting for a full appellate record to
decide whether U.S. District Judge Amy Berman Jackson was
correct in ruling that the Federal Election Commission may notcurtail disclosure requirements Congress specified. In fact,
D.C. Circuit Judges Judith Rogers and Thomas Griffith said the
public's interest is in disclosure, rather than secrecy.
On its most basic level, the ruling means that groups like
the U.S. Chamber of Commerce, Crossroads GPS, Americans for
Prosperity, and other non-profits that run a particular kind of
election-related advocacy ad must reveal who is giving them
money. (The case doesn't affect political action committees,
which have their own set of rules.) "This is a very important
victory in the battle to end secret contributions being funneled
into federal elections," said Democracy 21 president Fred
Wertheimer, who was co-counsel for the plaintiff in the
underlying case, Congressman Chris Van Hollen, a Maryland
Democrat. "This case represents the first major breakthrough in
the effort to restore for the public the disclosure of
contributors who are secretly providing massive amounts to
influence federal elections," Wertheimer said in a statement.
(Here's an excellent overview of the case from the L.A. Times.)
But here's the thing: The D.C. Circuit's ruling may have the
entirely unintended effect of pushing more money from
politically active non-profits into television and radio ads
that directly call on voters to support (or vote against)
particular candidates. According to both election law professor
(and blogger) Rick Hasen of the University of California,
Irvine, and Hispanic Leadership Fund counsel Jason Torchinsky of
Holtzman Vogel Josefiak, there's now a peculiar distinction
between the ads at issue in the Van Hollen case -- so-called
"electioneering communications" that talk about particular
candidates but stop short of recommending a vote for or against
them -- and "indirect expenditures," in which groups run ads
specifically urging you to vote for or against a candidate. The
Van Hollen suit didn't address indirect expenditures, so,
according to Hasen, if non-profit groups want to keep their
donor lists secret, they may switch their spending to ads that
contain express advocacy.
Hasen said the groups risk losing their tax-exempt status if
they do, but since none have apparently suffered that fate, "I
think (the D.C. appellate ruling) is going to cause a shift."
The bizarre distinction between "electioneering
communications" and "independent expenditures" is the result of
the U.S. Supreme Court's 2007 ruling in Federal ElectionCommission v. Wisconsin Right to Life, which held that, contrary
to Congress's McCain-Feingold campaign finance reform,
corporations and labor unions were permitted to spend money on
election ads as long those ads did not contain "express
advocacy" for or against a candidate. (As you know, the high
court subsequently struck down all bars on corporate campaign
spending in Citizens United v. FEC.)
The Wisconsin Right to Life decision didn't strike down
McCain-Feingold's disclosure provisions, though, so after the
ruling, the FEC held hearings to figure out what groups had to
disclose about the electioneering communications they were now
permitted to run. Concerned by the burden groups would face if
they had to disclose the name and address of everyone who gave
them more than $1,000, the FEC decided to limit disclosure to
contributions made specifically to facilitate the campaign ads.
That's the rule Van Hollen and his counsel from Democracy 21
and Wilmer Cutler Pickering Hale and Dorr challenged. The
Washington, D.C., district court agreed with them that the FEC
doesn't have the power to narrow disclosure obligations imposed
by Congress, even when the Supreme Court has complicated
matters. On March 30, Jackson ruled that groups engaged in
electioneering communications must make public contributors who
donated $1000 or more.
If two non-profits -- the Hispanic Leadership Fund and the
Center for Individual Freedom -- hadn't intervened to support
the limited disclosure rule, the district court ruling would
have been the last word in the case because the FEC
commissioners split on whether to appeal. The involvement of the
non-profits, however, means the D.C. Circuit's ruling Monday is
only the beginning of the appellate road. The two groups can ask
the entire circuit to review the stay denial en banc, and, if
that doesn't work, can eventually ask the U.S. Supreme Court to
get involved. Without a stay of Jackson's decision, the new
disclosure obligations will take effect in this campaign cycle.
Hispanic Leadership counsel Torchinsky declined to comment on
the group's next move, but Hasen, the election law expert, said
the Supreme Court generally doesn't like to see mid-campaign
changes in the law so may be inclined to grant a stay.
In the meantime, according to Torchinsky, electioneering
communications have dried up since Jackson's ruling took effect,
which suggested to him that groups are worried about having to
disclose their contributors. "The whole point of this was to
discourage speech, and that is what Congress and the incumbent
politicians have done," Torchinsky said.
Democracy 21's Wertheimer is already gearing up to address
the loophole that may divert money to express advocacy by
electioneering non-profits that want to keep their donors
secret. His group has already filed complaints about such
groups, including Crossroads GPS and Priorities USA, with the
Internal Revenue Service, and he said Van Hollen is
contemplating a suit similar to the one now at the D.C. Circuit,
in which he challenges the FEC rule narrowing disclosures
related to indirect expenditure ads.
Van Hollen co-counsel Roger Witten of Wilmer said the
appellate decision not to stay Jackson's ruling "was
demonstrably" correct and he's hopeful the lower court will
eventually be upheld on the merits.
(Reporting by Alison Frankel)
Follow us on Twitter: @AlisonFrankel@ReutersLegal