North Carolina Right to Life, Inc. v. Bartlett

PUBLISHED

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

NORTH CAROLINA RIGHT TO LIFE,

INCORPORATED; NORTH CAROLINA

RIGHT TO LIFE POLITICAL ACTION

COMMITTEE; BARBARA HOLT,

President of North Carolina Right to

Life, Incorporated,

Plaintiffs-Appellees,

v.

GARY O. BARTLETT, in his official

capacity as Executive Secretary-

Director of the State Board of

Elections of the State of North

Carolina; STEVE A. BALOG, in his

official capacity as District Attorney

for North Carolina Prosecutorial

No. 98-1636

District 15A, and as a representative

of the class of District Attorneys in

the State of North Carolina; MIKE

EASLEY, in his official capacity as

Attorney General for the State of

North Carolina; JUNE K.

YOUNGBLOOD, in her official capacity

as a Member of the State Board of

Elections; DOROTHY PRESSER, in her

official capacity as a Member of the

State Board of Elections; LARRY

LEAKE, in his official capacity as

Chairman of the State Board of

Elections; S. KATHERINE BURNETTE,

in her official capacity as Secretary

of the State Board of Elections;

FAIGER M. BLACKWELL, in his

official capacity as a Member of the

State Board of Elections,

Defendants-Appellants.

NORTH CAROLINA ALLIANCE FOR

DEMOCRACY; AMERICAN CIVIL

LIBERTIES UNION OF NORTH CAROLINA

LEGAL FOUNDATION, INCORPORATED,

Amici Curiae.

Appeal from the United States District Court

for the Eastern District of North Carolina, at Raleigh.

Terrence W. Boyle, Chief District Judge.

(CA-96-835-5-BO-1)

Argued: October 27, 1998

Decided: February 17, 1999

Before WILKINSON, Chief Judge, and ERVIN and

WILKINS, Circuit Judges.

_________________________________________________________________

Affirmed in part and reversed in part by published opinion. Chief

Judge Wilkinson wrote the opinion, in which Judge Ervin and Judge

Wilkins joined.

_________________________________________________________________

COUNSEL

ARGUED: Susan Kelly Nichols, Special Deputy Attorney General,

NORTH CAROLINA DEPARTMENT OF JUSTICE, Raleigh, North

Carolina, for Appellants. James Bopp, Jr., BOPP, COLESON &

BOSTROM, Terre Haute, Indiana, for Appellees. ON BRIEF:

Michael F. Easley, North Carolina Attorney General, James Peeler

2

Smith, Special Deputy Attorney General, Alexander McC. Peters,

Special Deputy Attorney General, NORTH CAROLINA DEPART-

MENT OF JUSTICE, Raleigh, North Carolina, for Appellants. John

K. Abegg, BOPP, COLESON & BOSTROM, Terre Haute, Indiana;

Paul Stam, Jr., STAM, FORDHAM & DANCHI, Apex, North Caro-

lina, for Appellees. James G. Exum, Jr., John J. Korzen, SMITH,

HELMS, MULLISS & MOORE, Greensboro, North Carolina; Marta

Nelson, Glenn Moramarco, Nancy Northup, Brennan Center for Jus-

tice, NEW YORK UNIVERSITY SCHOOL OF LAW, New York,

New York, for Amicus Curiae Alliance. Hugh Stevens, EVERETT,

GASKINS, HANCOCK & STEVENS, L.L.P., Raleigh, North Caro-

lina; Deborah K. Ross, AMERICAN CIVIL LIBERTIES UNION OF

NORTH CAROLINA, Raleigh, North Carolina, for Amicus Curiae

ACLU.

_________________________________________________________________

OPINION

WILKINSON, Chief Judge:

Appellees North Carolina Right to Life (NCRL), its political action

committee, and its president brought suit in federal district court chal-

lenging the constitutionality of several provisions of North Carolina

election and campaign finance law. The district court found for

NCRL on each of its claims. North Carolina Right to Life, Inc. v.

Bartlett, 3 F. Supp. 2d 675 (E.D.N.C. 1998). The State of North Caro-

lina appeals. For the reasons that follow, we affirm in part and reverse

in part.

I.

NCRL is a nonprofit corporation operating in the State of North

Carolina. NCRL has as a purpose the protection of human life. In fur-

therance of that purpose, it provides information to the public about

abortion and euthanasia. NCRL is not associated with any political

candidate, political party, or campaign committee. Nor is one of

NCRL's major purposes to nominate, elect, or defeat specific candi-

dates for public office or to pass or defeat ballot measures. In other

words, NCRL does not engage in "express advocacy" -- advocacy

3

"that in express terms [calls for] the election or defeat of a clearly

identified candidate for . . . office." Buckley v. Valeo, 424 U.S. 1, 44

(1976) (per curiam). Rather, NCRL engages in "issue advocacy" --

the discussion of issues of public concern, including candidates' posi-

tions on those issues -- by, among other means, distributing voter

guides to the general public. Thus, issue advocacy may influence an

election even though it does not expressly advocate the election or

defeat of a particular candidate or party. See Virginia Society for

Human Life, Inc. v. Caldwell, 152 F.3d 268, 270 (4th Cir. 1998).

NCRL created North Carolina Right to Life Political Action Com-

mittee (NCRLPAC) to engage in express advocacy consistent with

NCRL's views. NCRLPAC, therefore, does have as a primary pur-

pose supporting or opposing specific candidates and political parties.

Toward that end, NCRLPAC contributes money to the campaigns of

candidates with whom it agrees and makes "independent expendi-

tures" -- expenditures made independently of candidates that finance

an express call for their election or defeat -- to support them.

NCRL's president, Barbara Holt, oversees the operations of both

NCRL and NCRLPAC. Holt is also a registered lobbyist in the State

of North Carolina.

While preparing for North Carolina's 1996 general election, NCRL

became concerned that some of the activities in which it wished to

engage might violate North Carolina's election law. Specifically,

NCRL worried that it might be considered a "political committee"

under North Carolina law if it were to distribute its voter guide. N.C.

Gen. Stat. § 163-278.6(14). If NCRL were a political committee, it

would need to register as such, keep detailed accounts of its expendi-

tures and contributions, and regularly file organizational and financial

reports with the State. Id. §§ 163-278.7(b), .8, .9, .11. If NCRL failed

to satisfy these requirements, its officers would be subject to criminal

penalties. Id. §§ 163-278.27, .34.

In addition, NCRL was concerned that, by publishing its voter

guide, it might violate the provision prohibiting corporations from

making any contributions or expenditures for a "political purpose," id.

§§ 163-269, -278.19, which the statute defines as any attempt to "in-

fluence an election," id. § 163-278.6(16). Were the State to determine

that NCRL's voter guide was for a political purpose, NCRL's officers

4

would be similarly subject to criminal penalties. Id. §§ 163-269,

-278.19(c).

To determine whether it would violate these provisions by distrib-

uting a voter guide, NCRL twice wrote to Yvonne Southerland, Chief

Deputy Director of the State Board of Elections, to request her opin-

ion. Along with each letter, NCRL sent a sample voter guide. The

first sample guide inadvertently contained a one-page candidate

endorsement list -- i.e., express advocacy -- prepared by NCRL-

PAC. Southerland informed NCRL that the distribution of this voter

guide would violate the State's prohibition against corporate expendi-

tures for a political purpose. Southerland also stated more generally

that any expenditure for a political purpose would make NCRL a

political committee. Realizing that its first sample voter guide acci-

dentally contained NCRLPAC's express advocacy, NCRL sent a sec-

ond letter to Southerland and attached a voter guide without any

candidate endorsements. In this second letter, NCRL asked only

whether the distribution of this second guide would violate North Car-

olina's prohibition against corporate expenditures for a political pur-

pose. Southerland again answered affirmatively.

NCRL, NCRLPAC, and Holt then brought suit in federal district

court challenging several provisions of North Carolina's election law.

They named as defendants the members of the State Board of Elec-

tions, the State Attorney General, and the district attorney for the pro-

secutorial district in which Holt lives. First, NCRL challenged North

Carolina's definition of political committee on the ground that it

includes entities that engage in issue advocacy only. Id. § 163-

278.6(14). Second, it challenged the State's total ban on corporate

expenditures for a political purpose because it prohibits NCRL from

engaging in both issue advocacy and express advocacy. Id. §§ 163-

269, -278.6(16), -278.19. Third, NCRLPAC and Holt challenged the

provision prohibiting lobbyists, and the political committees that

employ them, from contributing to members and candidates for the

General Assembly and Council of State while the General Assembly

is in session. Id. § 163-278.13B(c). They also challenged the provi-

sion prohibiting members and candidates for the General Assembly

and Council of State from soliciting contributions from lobbyists and

the political committees that employ them. Id. § 163-278.13B(b).

Finally, NCRLPAC objected to North Carolina's requirement that all

5

political committees provide prospective donors with the name of the

candidate for whom the money will be used. Id. § 163-278.20(a). On

each of their claims, NCRL, NCRLPAC, and Holt sought declaratory

and injunctive relief.

With respect to North Carolina's definition of political committee,

the district court declared section 163-278.6(14) to be unconstitu-

tional because it defines as political committees those entities that

engage in issue advocacy as well as express advocacy. NCRL, 3 F.

Supp. 2d at 679-80. With regard to North Carolina's ban on corporate

contributions and expenditures, the district court declared it to be

unconstitutional because it prohibits all corporations, including non-

profits, from making expenditures for a political purpose. Id. at 681.

As to North Carolina's prohibition on lobbyists and the political com-

mittees that employ them contributing to candidates and incumbents

during the General Assembly session, the district court declared sec-

tion 163-278.13B unconstitutional as an undue burden on Holt's and

NCRLPAC's First Amendment rights. Id. at 682. Finally, with respect

to North Carolina's requirement that political committees alert donors

of the use to which their donation will be put, the district court

granted NCRLPAC a declaratory judgment that it need only alert pro-

spective donors of its name and need not tell them for whom the

money will be used. Id. at 677. North Carolina now appeals.

II.

The State argues initially that no case or controversy exists with

respect to several of the provisions NCRL and NCRLPAC challenge.

Initially, the State claims that, irrespective of the statute's plain lan-

guage, it interprets the definition of political committee in section

163-278.6(14) to allow NCRL to distribute a voter guide free of can-

didate endorsements, or to engage in other forms of issue advocacy,

without registering or filing the required reports. Indeed, the State

points out that in the twenty-five years since the statute's enactment,

it has never interpreted it to apply to groups engaging only in issue

advocacy. Consequently, NCRL proffers nothing more than a hypo-

thetical risk of prosecution under section 163-278.6(14).

We disagree. When a plaintiff faces a credible threat of prosecution

under a criminal statute he has standing to mount a pre-enforcement

6

challenge to that statute. See Doe v. Bolton, 410 U.S. 179, 188 (1973).

A non-moribund statute that "facially restrict[s] expressive activity by

the class to which the plaintiff belongs" presents such a credible

threat, and a case or controversy thus exists in the absence of compel-

ling evidence to the contrary. New Hampshire Right to Life PAC v.

Gardner, 99 F.3d 8, 15 (1st Cir. 1996). This presumption is particu-

larly appropriate when the presence of a statute tends to chill the exer-

cise of First Amendment rights. See Wilson v. Stocker, 819 F.2d 943,

946 (10th Cir. 1987).

Section 163-278.6(14) appears by its terms to apply to NCRL.

North Carolina law provides that any entity "the primary or incidental

purpose of which is to . . . influence or attempt to influence the result

of an election," N.C. Gen. Stat. § 163-278.6(14), must register and

file certain reports with the State, or its officers risk criminal prosecu-

tion. Since the record in this case demonstrates that NCRL has distrib-

uted voter guides -- which attempt to influence elections -- the

statute facially restricts "expressive activity by the class to which the

plaintiff belongs." Gardner, 99 F.3d at 15.

More importantly, NCRL has stated that it wants to distribute these

guides in the future, and would do so but for its fear that it would fall

within North Carolina's definition of political committee. To deter-

mine whether that fear was well-founded, NCRL wrote the State

Board of Elections. The State did not indicate that it would interpret

the statute to mean anything other than what its plain language would

suggest. As a result, NCRL refrained from disseminating its guide,

and its speech was chilled.

The State's litigation position -- that it does not interpret section

163-278.6(14) to encompass issue advocacy -- fails to alter our anal-

ysis in this case. The record does not indicate that the Board has pro-

mulgated a rule exempting from its definition of political committee

those entities that engage in issue advocacy only. See, e.g., Wisconsin

Right to Life, Inc. v. Paradise, 138 F.3d 1183, 1185 (7th Cir.), cert.

denied, 119 S. Ct. 172 (1998). Nor does the record indicate that the

local district attorneys have any intention of refraining from prosecut-

ing those who appear to violate the plain language of the statute. See

id.

7

NCRL is left, therefore, with nothing more than the State's promise

that NCRL's officers will face no criminal penalties if NCRL distrib-

utes its voter guide without registering as a political committee.

NCRL's First Amendment rights would exist only at the sufferance

of the State Board of Elections. It has no guarantee that the Board

might not tomorrow bring its interpretation more in line with the pro-

vision's plain language. Without such a guarantee, NCRL will suffer

from the reasonable fear that it can and will be prosecuted for failing

to register and file the necessary disclosures, and its constitutionally

protected speech will be chilled as a result.

This same analysis applies to the State's argument that no case or

controversy exists with respect to its prohibition on corporate contri-

butions and expenditures for a political purpose. See N.C. Gen. Stat.

§§ 163-269, -278.6(16), -278.19. As noted, section 163-278.6(16)

defines political purpose to include seeking to influence an election

-- language which certainly appears to cover NCRL's endorsement-

free voter guide. More importantly, in its response to NCRL's second

letter, the State indicated that it would consider NCRL's

endorsement-free guide to be for a political purpose and therefore

prohibited by sections 163-269 and 163-278.19. Again, the only thing

standing in the way of a criminal prosecution is the State's litigation

position that it will voluntarily refrain from enforcing the statute

according to its plain language.

Finally, the State claims that no case or controversy exists with

regard to section 163-278.20(a). Section 163-278.20(a), in relevant

part, requires "any group" or "committee" soliciting contributions to

advise those solicited of either the name of the candidate for whom

the funds will be used, id. § 163-278.20(a)(1), the name of the politi-

cal committee or party for which they will be used, id. § 163-

278.20(a)(2), or that a decision will be reached as to the candidate,

committee, or party to be supported at some later date no later than

twenty days prior to the upcoming primary or general election, id.

§ 163-278.20(a)(3). Section 163-278.20(b) provides that a violation of

this provision is a criminal offense.

The State argues that only section 163-278.20(a)(2) applies to

NCRLPAC, and that it interprets that section to require political com-

mittees such as NCRLPAC to do nothing more than identify them-

8

selves when they solicit funding. In a prior interpretive letter,

however, the State informed another political committee that it must

comply with each subsection of 163-278.20(a) -- not just (a)(2). Con-

sequently, as was true with respect to NCRL above, NCRLPAC is

protected from possible prosecution by nothing more than the State's

post-suit position that the section does not apply as its plain language

would suggest.

In sum, this case presents a statute aimed directly at plaintiffs who

"will have to take significant . . . compliance measures or risk crimi-

nal prosecution." Virginia v. American Booksellers Ass'n, Inc., 484

U.S. 383, 392 (1988). In such a circumstance, courts have long recog-

nized that the statute's mere existence risks chilling First Amendment

rights. Indeed, in this case, NCRL has discontinued distributing its

voter guide and NCRLPAC has stopped soliciting without providing

a disclaimer because of a credible threat of prosecution. Conse-

quently, a case or controversy inheres in each provision.1

_________________________________________________________________

1 The State also argues that we should abstain from ruling on appellees'

claims concerning sections 163-269, 163-278.6(14), and 163-278.19

because no state court has construed these provisions and such a con-

struction may either render unnecessary this court's constitutional deter-

mination or substantially alter the questions before us. Railroad Comm'n

v. Pullman Co., 312 U.S. 496 (1941). Recognizing that North Carolina

has no procedure by which we may certify these questions to its Supreme

Court, the State suggests that we solicit the State Board of Elections for

its interpretation of these provisions under section 163-278.23. N.C. Gen.

Stat. § 163-278.23. Quite apart from the problem of applying Pullman

abstention to the unauthoritative declarations of a state administrative

body, section 163-278.23 provides no mechanism for a federal court to

certify a question to the Board. And in all events, courts "have been par-

ticularly reluctant to abstain in cases involving facial challenges based on

the First Amendment," City of Houston v. Hill , 482 U.S. 451, 467 (1987),

because the delay involved "might itself effect the impermissible chilling

of the very constitutional right [the litigant] seeks to protect," Zwickler

v. Koota, 389 U.S. 241, 252 (1967). Consequently, abstention in this case

is inappropriate.

9

III.

We next proceed to the merits of NCRL, NCRLPAC, and Holt's

constitutional challenges. Section 163-278.6(14) defines political

committee as "a combination of two or more individuals, or any per-

son, committee, association, or organization, the primary or incidental

purpose of which is to support or oppose any candidate or political

party or to influence or attempt to influence the result of an election."

N.C. Gen. Stat. § 163-278.6(14). The consequences of finding NCRL

a political committee are substantial -- NCRL would be required to

register as such, keep detailed records of its expenditures and contri-

butions, and file organizational and financial reports with the State.

Id. §§ 163-278.7(b), .8, .9, .11.

The district court found section 163-278.6(14)'s definition of polit-

ical committee to be impermissibly broad because it includes groups

such as NCRL that engage in issue advocacy only. NCRL, 3 F. Supp.

2d at 679-80. The State appeals, claiming that the district court should

have narrowly construed North Carolina's definition of political com-

mittee so as not to include groups that only engage in issue advocacy.

Specifically, the State requests that we follow the path of the

Supreme Court which in Buckley v. Valeo narrowly construed a simi-

lar provision. In Buckley, the Supreme Court addressed a provision

that required any entity falling within the Federal Election Campaign

Act's (FECA) definition of "political committee" to make certain dis-

closures to the federal government. FECA defined a political commit-

tee as any entity making contributions or expenditures above a certain

amount "for the purpose of . . . influencing" the nomination or elec-

tion of individuals to federal office. Buckley , 424 U.S. at 63. The

Court held that, without a narrowing construction, the general require-

ment that political committees "disclose their expenditures could raise

. . . vagueness problems, for `political committee' is defined [in such

a way that it] could be interpreted to reach groups engaged purely in

issue discussion." Id. at 79.

To save the provision from being unconstitutionally vague, the

Court defined political committee as including only those entities that

have as a major purpose engaging in express advocacy in support of

a candidate, id., by using words such as"vote for," "elect," "support,"

10

"vote against," "defeat," or "reject," id. at 44 n.52. Otherwise, "absent

the bright-line limitation, the distinction between issue discussion (in

the context of electoral politics) and candidate advocacy would be

sufficiently indistinct that the right of citizens to engage in the vigor-

ous discussion of issues of public interest without fear of official

reprisal would be intolerably chilled." FEC v. Christian Action

Network, 110 F.3d 1049, 1051 (4th Cir. 1997) (emphasis omitted).

The question then is whether we may similarly construe North Car-

olina's definition of political committee to save it from being void for

vagueness. We cannot. Two crucial differences exist between section

163-278.6(14) and the provisions of FECA at issue in Buckley. First,

unlike the provisions of FECA, North Carolina's definition expressly

sweeps within its ambit those groups that only incidentally engage in

express advocacy. This is a much broader definition of political com-

mittee than that at issue in Buckley, and to save it would require quite

a stretch -- in fact, we would have to excise the word "incidental"

from the statute.

Second, the North Carolina definition of political committee covers

groups engaging in issue advocacy by explicitly juxtaposing express

and issue advocacy, and thereby indicating that it encompasses both.

Specifically, the definition covers any group "the primary or inciden-

tal purpose of which is to support or oppose any candidate . . . or to

influence or attempt to influence the result of an election." N.C. Gen.

Stat. § 163-278.6(14) (emphasis added). The only reasonable reading

of this definition is that political committee encompasses both entities

that have as a primary or incidental purpose supporting a candidate

-- i.e., engaging in express advocacy -- and those that merely wish

to influence an election -- i.e., engage in issue advocacy. To accept

the State's proffered interpretation would read the references to influ-

encing elections (a classic form of issue advocacy) right out of the

statute.

Without the benefit of a narrowing construction, section 163-

278.6(14) is unconstitutionally vague and overbroad. See Buckley,

424 U.S. at 79-80. The statute subjects groups engaged in only issue

advocacy to an intrusive set of reporting requirements. In so doing,

it "blankets with uncertainty" the entire field of campaign politics

"compel[ling] the speaker to hedge and trim." Thomas v. Collins, 323

11

U.S. 516, 535 (1945). Burdening speech of this sort is unacceptable

in an area of such crucial import to our representative democracy. The

district court was correct in finding section 163-278.6(14) facially

unconstitutional, and we affirm its judgment.

IV.

North Carolina prohibits corporate expenditures or contributions

for a political purpose. N.C. Gen. Stat. §§ 163-269, -278.6(16),

-278.19. Sections 163-269 and 163-278.19 prohibit corporations from

making "any contribution or expenditure . . . for any political purpose

whatsoever." Section 163-278.6(16) defines "political purpose" in rel-

evant part as "any purpose in aid of seeking to influence an election."

Because North Carolina's ban on corporate expenditures makes no

exception for nonprofit corporations, the district court declared sec-

tions 163-269, 163-278.6(16), and 163-278.19 to be unconstitution-

ally overbroad. NCRL, 3 F. Supp. 2d at 681. The State appeals.

The Supreme Court has recognized that, in the realm of campaign

politics, "the special characteristics of the corporate structure require

particularly careful regulation." FEC v. National Right to Work

Comm., 459 U.S. 197, 209-10 (1982). The economic advantages of

the corporate form such as "limited liability, perpetual life, and favor-

able treatment of the accumulation and distribution of assets" all

enhance a corporation's ability "to attract capital and to deploy . . .

resources." Austin v. Michigan Chamber of Commerce, 494 U.S. 652,

658-59 (1990). These advantages enable corporations to create enor-

mous "war chests" and "to incur political debts from legislators who

are aided by [their] contributions" and expenditures. National Right

to Work Comm., 459 U.S. at 207. The danger, of course, is that there

is no guarantee that any relationship exists between the amount of

corporate expenditures in favor of a position and the popularity of that

position with the public at large. FEC v. Massachusetts Citizens for

Life, 479 U.S. 238, 258 (1986) [hereinafter MCFL]. Recognizing this,

the Supreme Court has, in some circumstances, upheld complete pro-

hibitions on both corporate political contributions, National Right to

Work Comm., 459 U.S. 197, and independent expenditures, Austin,

494 U.S. 652.

Nevertheless, the Court has been careful to note that "[r]egulation

of corporate political activity . . . has reflected concern not about use

12

of the corporate form per se, but about the potential for unfair deploy-

ment of wealth for political purposes." MCFL , 479 U.S. at 259. More-

over, such a concern is not omnipresent. For instance, in MCFL, the

Court considered a prohibition on corporate expenditures in connec-

tion with federal elections. MCFL, like NCRL, was a nonprofit corpo-

ration founded for the purpose of fostering respect for human life by

opposing abortion. MCFL did not accept contributions from for-profit

corporations. MCFL, 479 U.S. at 242.

After reiterating its general concern with the distorting effect of the

corporate form in politics, the Court held that its analysis with respect

to corporate expenditures must be more nuanced. Specifically, it held

that MCFL was sufficiently distinct from the traditional for-profit cor-

poration. First, MCFL could not engage in for-profit activity, and it

was created simply to disseminate political ideas. Second, it had no

shareholders or other persons who held a claim on its assets or earn-

ings. Finally, it was not established by a business or a labor union,

and it had a policy of refusing to accept contributions from either type

of entity. Such organizations, the Court held, do not pose the same

dangers to the political system since they are organized to promote a

political message and their revenues typically reflect the public's sup-

port of that message. Id. at 264.

Like the federal election law in MCFL, North Carolina's law

makes no exception for nonprofits that present a minimal risk of dis-

torting the political process. Rather, it bars all corporations from mak-

ing any expenditures and contributions for a political purpose. As

such, it is substantially overbroad and thus unconstitutional.

The State, in an apparent last-ditch effort to save its statute, argues

that NCRL is ineligible for the MCFL exception because, unlike

MCFL, NCRL has no policy against accepting contributions from for-

profit corporations. Indeed, from 1993 to 1995, NCRL's contributions

from such entities fluctuated from zero to eight percent of its overall

revenues.

We do not think this modest percentage of revenue disqualifies

NCRL for the nonprofit exemption to North Carolina's ban on corpo-

rate expenditures. We agree with those circuits that have addressed

the question, each of which has held that the list of nonprofit corpo-

13

rate characteristics in MCFL was not "a constitutional test for when

a nonprofit corporation must be exempt," but"an application, in three

parts, of First Amendment jurisprudence to the facts in MCFL." Day

v. Holahan, 34 F.3d 1356, 1363 (8th Cir. 1994); see also FEC v. Sur-

vival Educ. Fund, Inc., 65 F.3d 285, 292 (2d Cir. 1995). The crucial

question is not whether NCRL has a policy against accepting corpo-

rate contributions, but whether its acceptance of those contributions

means that it is serving as a conduit "for the type of direct spending

[by for-profit corporations] that creates a threat to the political mar-

ketplace." MCFL, 479 U.S. at 264.

Such is clearly not the case with respect to NCRL. Those corporate

contributions it has received are but a fraction of its overall revenues.

In addition, the contributions are not of the traditional form. They are

instead part of a program by which phone company customers may

direct their phone bill refunds to a nonprofit of their choice. Conse-

quently, while these contributions technically come from the phone

company, they in fact result from the decisions of individual phone

company customers. Moreover, NCRL displays all the typical charac-

teristics of the nonprofit form -- it does not engage in profit-making

activity, it has no shareholders or other persons who might have a

claim on its assets and earnings, and it is exempt from federal income

taxation. As a result, NCRL falls squarely within the MCFL excep-

tion. And because North Carolina law fails "to distinguish between

corporations which pose a threat to the integrity of the political pro-

cess and those which do not," we agree with the district court that sec-

tions 163-269, 163-278.6(16), and 163-278.19 are unconstitutionally

overbroad. NCRL, 3 F. Supp. 2d at 680.

V.

Section 163-278.13B prohibits a lobbyist, a lobbyist's agent, or a

political committee that employs a lobbyist from contributing to a

member of or candidate for the North Carolina General Assembly or

Council of State while the General Assembly is in session. N.C. Gen.

Stat. § 163-278.13B(c). It also prohibits candidates or incumbents

from soliciting lobbyists or political committees that employ them

during the session. Id. § 163-278.13B(b). Violation of these restric-

tions carries a criminal penalty. Id. § 163-278.13B(e). The record

indicates that the General Assembly was in session for one to two

14

months for most of the years from 1975 to 1997 in which an election

was held. In 1998 it apparently extended its session, and in nonelec-

tion years it routinely meets for a longer period of time. When the

General Assembly is not in session, lobbyists and political commit-

tees may contribute up to $4,000 per election to any candidate. Id.

§ 163-278.13(a).

Holt and NCRLPAC challenged North Carolina's prohibition on

lobbyist and PAC contributions to members and candidates for the

General Assembly while it is in session. They also challenged North

Carolina's solicitation restriction.2 The district court struck section

163-278.13B as violating the First Amendment. NCRL, 3 F. Supp. 2d

at 682. We hold, however, that North Carolina can constitutionally

enact the limited restrictions on lobbyist and political committee con-

tributions embodied in sections 163-278.13B(b) and (c).

A.

Initially, appellees argue that section 163-278.13B impermissibly

burdens their First Amendment rights of speech and association.

Appellees are correct that political contribution limits do implicate

one's speech and association rights. See Buckley , 424 U.S. at 14-15,

24-25. As such, courts have applied strict scrutiny to such limits. See,

e.g., Carver v. Nixon, 72 F.3d 633, 637 (8th Cir. 1995). Nevertheless,

it is settled that "[n]either the right to associate nor the right to partici-

pate in political activities is absolute." CSC v. National Ass'n of Letter

Carriers, 413 U.S. 548, 567 (1973). In fact, the activities of lobbyists

are extensively regulated. See, e.g., Lobbying Disclosure Act of 1995,

2 U.S.C. §§ 1601-1612 (requiring lobbyists to make detailed disclo-

sures related to their lobbying efforts).

Moreover, the Supreme Court has long noted that restrictions on

political contributions are constitutionally less problematic than are,

_________________________________________________________________

2 We cannot accept the State's argument that appellees have no stand-

ing to challenge North Carolina's solicitation restriction because they are

not members of or candidates for the General Assembly or Council of

State. North Carolina's solicitation restriction is inextricably intertwined

with its contribution limitation. Indeed, the two are the mirror reflection

of one another.

15

for instance, restrictions on independent expenditures. See Buckley,

424 U.S. at 20-21. This lesser concern springs from the fact that con-

tribution limits typically "entail[ ] only a marginal restriction upon the

contributor's ability to engage in free communication." Id. Such is the

case here. North Carolina's restrictions do nothing more than place a

temporary hold on appellees' ability to contribute during the General

Assembly session, leaving them free to contribute during the rest of

the calendar year and to engage in political speech for the entire year.

North Carolina's contribution and solicitation restrictions also sur-

vive strict scrutiny because they advance a compelling state interest.

Prohibiting lobbyist contributions and solicitations while the General

Assembly is in session serves to prevent corruption and the appear-

ance of corruption -- "the only legitimate and compelling govern-

ment interests thus far identified for restricting campaign finances."

FEC v. National Conservative PAC, 470 U.S. 480, 496-97 (1985); see

also Buckley v. American Constitutional Law Found., Inc., 119 S. Ct.

636, 648 (1999)(noting the risk of quid pro quo corruption "when

money is paid to, or for, candidates"). Legislative action which is pro-

cured directly through gifts, or even campaign contributions, too often

fails to reflect what is in the public interest, what enjoys public sup-

port, or what represents a legislator's own conscientious assessment

of the merits of a proposal.

Appellees respond that the compelling interest the Court identified

in Buckley was not the prevention of corruption or its appearance gen-

erally, but the prevention of only that corruption or appearance of cor-

ruption that results from large contributions by individuals. Holt and

NCRLPAC, however, define the interest too narrowly. Corruption,

either petty or massive, is a compelling state interest because it dis-

torts both the concept of popular sovereignty and the theory of repre-

sentative government.

In evaluating the state interest in this case, we find a genuine risk

of both actual corruption and the appearance of corruption. With

respect to actual corruption, lobbyists are paid to effectuate particular

political outcomes. The pressure on them to perform mounts as legis-

lation winds its way through the system. If lobbyists are free to con-

tribute to legislators while pet projects sit before them, the temptation

16

to exchange "dollars for political favors" can be powerful. National

Conservative PAC, 470 U.S. at 497.

Illicit bargaining of this type is not limited to the old days when

trusts shopped state legislatures like children in a candy store. More

recent cases of improper activity, unfortunately, also exist. Indeed,

courts have recognized instances of influence peddling, Maryland

Right to Life State PAC v. Weathersbee, 975 F. Supp. 791, 797 (D.

Md. 1997), political quid pro quos, United States v. Nelson, 486 F.

Supp. 464, 468 (W.D. Mich. 1980), and other improper behavior on

the part of legislators, United States v. Bailey , 990 F.2d 119, 121 (4th

Cir. 1993) (detailing personal cash payments for support of pari-

mutuel betting legislation); Kentucky Right to Life, Inc. v. Terry, 108

F.3d 637, 639 (6th Cir.) ("Numerous Kentucky public officials have

been convicted of abusing their political offices for personal gain over

the past twenty-five years."), cert. denied , 118 S. Ct. 162 (1997).

While lobbyists do much to inform the legislative process, and their

participation is in the main both constructive and honest, there remain

powerful hydraulic pressures at play which can cause both legislators

and lobbyists to cross the line. State governments need not await the

onset of scandal before taking action.

The appearance of corruption resulting from PAC and lobbyist

contributions during the legislative session can also be corrosive.

Even if lobbyists have no intention of directly"purchasing" favorable

treatment, appearances may be otherwise. The First Amendment does

not prevent states such as North Carolina from recognizing these dan-

gers and taking reasonable steps to ensure that the appearance of cor-

ruption does not undermine public confidence in the integrity of

representative democracy. See Buckley, 424 U.S. 26-27.

Toward these ends, North Carolina enacted narrowly tailored

restrictions. First, the restrictions in section 163-278.13B are limited

to lobbyists and the political committees that employ them -- the two

most ubiquitous and powerful players in the political arena. Second,

the restrictions are temporally limited: they last only during the legis-

lative session, which typically, though not invariably, has covered just

a few months in an election year. In short, the restrictions cover only

that period during which the risk of an actual quid pro quo or the

appearance of one runs highest.

17

Holt and NCRLPAC counter that the limitations are not narrowly

tailored for two reasons. First, they maintain that the restrictions cover

any contribution, not just those large enough to support a potential

quid pro quo. But a "court has no scalpel to probe" such fine distinc-

tions. Buckley, 424 U.S. at 30 (internal quotation marks omitted). And

even were we able to distinguish those dollar amounts that are suffi-

cient to support actual purchases of political favors from those that

are not, the appearance of corruption may persist whenever a favor-

able legislative outcome follows closely on the heels of a financial

contribution. Courts simply are not in the position to "second-guess

a legislative determination as to the need for prophylactic measures

where corruption is the evil feared." National Right to Work Comm.,

459 U.S. at 210.

Second, Holt and NCRLPAC claim the restrictions are not nar-

rowly tailored because they prevent candidates for office from receiv-

ing contributions even though candidates are in no position to sell

legislative outcomes. Appellees' argument might be persuasive were

contributions to incumbents the only way to gain favorable treatment.

But sticks can work as well as carrots, and the threat of contributing

to a legislator's challenger can supply as powerful an incentive as

contributing to that legislator himself.

Finally, appellees argue that North Carolina's restrictions are con-

stitutionally infirm because they allegedly make fundraising a more

difficult proposition for challengers than it is for incumbents. The

restrictions work a particular disadvantage upon challengers, so the

argument runs, because they effectively deprive them of a major

funding source in the critical months leading up to an election or pri-

mary. Incumbents, by contrast, would allegedly benefit from a huge

infusion of contributions shortly after the General Assembly session

ends.

This precise argument was squarely rejected by the Supreme Court

in Buckley. In Buckley, the Court faced a provision of FECA that lim-

ited to $1000 the contribution any one person could make to any can-

didate with respect to a federal election. 424 U.S. at 23-24. The

plaintiffs in Buckley argued that the FECA limitation was unconstitu-

tional because it allegedly made fundraising more difficult for chal-

lengers vis a vis incumbents. Id. at 30-31. In rejecting plaintiffs'

18

claim, the Court found important the fact that FECA, like North Caro-

lina's restriction, "applies the same limitations on contributions to all

candidates" -- incumbents and challengers alike. Id. at 31. Indeed,

the Court emphasized that "[s]ince the danger of corruption and the

appearance of corruption apply with equal force to challengers and to

incumbents, Congress had ample justification for imposing the same

fundraising constraints upon both." Id. at 33 (emphasis added). In

addition, the Court took issue with the plaintiffs' claim that fundrais-

ing is necessarily more difficult for challengers. It noted that "major-

party challengers as well as incumbents are capable of raising large

sums for campaigning" and that "a small but nonetheless significant

number of challengers have in recent elections outspent their incum-

bent rivals." Id. at 32. Finally, as a practical matter, the Court's view

was informed by the realization that if challengers and incumbents

were required to play by different sets of campaign finance rules, few

reforms would be likely to win legislative enactment.

B.

Appellees also claim that section 163-278.13B violates the Four-

teenth Amendment because it treats lobbyists and political commit-

tees differently than it does the general population with respect to

their fundamental right to associate. As the preceding section notes,

however, the State has advanced strong reasons for doing so -- rea-

sons that the Supreme Court has in fact expressly validated. National

Conservative PAC, 470 U.S. at 496-97.

C.

Appellees' last challenge to section 163-278.13B is equally

unavailing. Holt and NCRLPAC argue that the provision impermiss-

ibly forces lobbyists to forego their constitutional right to petition the

government for a redress of grievances if, during the General Assem-

bly session, they wish to exercise their First Amendment right to asso-

ciate by contributing to candidates and incumbents. They argue that

such a system creates an "intolerable [situation in which] one consti-

tutional right [must] be surrendered in order to assert another."

Simmons v. United States, 390 U.S. 377, 394 (1968).

As an initial matter, it is instructive to note that Holt's position is

in many respects similar to that of federal employees. Under the

19

Hatch Act, one must forego certain rights to participate in the political

process if one wishes to take federal employment. Despite the obvi-

ous trade-off such a scheme forces prospective federal employees to

make, the Supreme Court has upheld the Hatch Act's restrictions as

constitutional. Letter Carriers, 413 U.S. 548.

More generally, "[n]either the right to associate nor the right to par-

ticipate in political activities is absolute." Letter Carriers, 413 U.S.

at 567. When the interests sought to be advanced by the statutory

scheme are sufficiently important, minimal burdens on one's right to

associate are constitutional. Id. at 564-65. Not only are the interests

served by North Carolina's statutory scheme important, they are com-

pelling. Moreover, the burden on appellees' right to associate is mini-

mal. Appellees are not prevented from contributing to the candidates

and incumbents of their choice, they are only restrained from doing

so while the Assembly is in session.

In conclusion, this effort on the part of a state legislature to protect

itself from the damaging effects of corruption should not lightly be

thwarted by the courts. Here, the proper judicial posture should be

one of restraint. The Constitution does not prevent this attempt on the

part of North Carolina to preserve the integrity of and maintain public

confidence in its legislative process. In the end, North Carolina law

does nothing more than recognize that lobbyists are paid to persuade

legislators, not to purchase them.

VI.

The following represents a summation of our holdings. We hold

North Carolina's definition of political committee in section 163-

278.6(14) to be unconstitutionally vague and overbroad, and we

affirm the judgment of the district court. North Carolina's prohibition

on corporate expenditures and contributions in sections 163-269, 163-

278.6(16), and 163-278.19 is substantially overbroad, and we again

affirm the district court. Finally, the State's contribution and solicita-

tion limitations set forth in section 163-278.13B are constitutional,

and we thus reverse the district court.3

_________________________________________________________________

3 Before the trial court, NCRLPAC also challenged North Carolina's

requirement that political committees provide donors with the name of

20

Each of the provisions we strike works in its own way to impede

the free and open discussion of issues and candidates that sustains our

ability as citizens to control our own destiny. The one provision we

do uphold is a reasonable measure to ensure that this free and open

debate does not go for naught.

The judgment of the district court is hereby

AFFIRMED IN PART AND REVERSED IN PART.

_________________________________________________________________

the candidate for whom their contribution would be used. N.C. Gen. Stat.

§ 163-278.20(a). The district court granted NCRLPAC a declaratory

judgment that section 163-278.20(a) requires it merely to provide pro-

spective donors with its own name. NCRL, 3 F. Supp. 2d at 677. On

appeal, the State challenges only the presence of a case or controversy

-- it offers no objection to the merits of the district court's decision. As

noted, a case or controversy does exist with regard to this section. We

agree with the district court that NCRLPAC cannot be required to iden-

tify to potential contributors the names of specific candidates or parties

for whom the contributions will be used.

21