Amicus Curiae Brief — Austin v. Michigan Chamber of Commerce

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c | «FILED

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No. 88-1569 ape,

T CLERK J

IN THE —_

Supreme Court of the United States

OCTOBER TERM, 1988

RICHARD H. AUSTIN, Michigan Secretary of State,

and

FRANK J. KELLEY, Michigan Attorney General,

Appellants,

MICHIGAN STATE CHAMBER OF COMMERCE,

a non-profit Michigan Corporation,

Appellee.

On Appeal from the United States

Court of Appeals for the Sixth Circuit

BRIEF OF AMICI CURIAE

THE WASHINGTON LEGAL FOUNDATION AND

THE ALLIED EDUCATIONAL FOUNDATION

IN SUPPORT OF THE APPELLEE

DANIEL J. POPEO

PAUL D. KAMENAR*

Washington Legal Foundation

1705 N Street, N.W.

Washington, D.C. 20036

(202) 857-0240

*Counsel of Record

July 28, 1989

CASILLAS PRESS INC. — 1717 K STREET NW, WASHINGTON DC 20036 — 223-1220

St J Ae

i

TABLE OF CONTENTS

Page

TABLE OF AUTHORITIES ................ ili

INTEREST OF THE AMICI CURIAE ........ l

STATEMENT OF THE CASE ............. 2

SUMMARY OF THE ARGUMENT .......... 5

ES er ae ee ee ee 7

I. MICHIGAN’S LAW

PROHIBITING INDEPENDENT

EXPENDITURES BY

INCORPORATED ENTITIES IS

UNCONSTITUTIONAL UNDER

THE FIRST AMENDMENT ...... 7

A. The Michigan Law Bans

Political Speech that Lies at

the Core of the First

Ee 8

B. There has Been No

Showing of a Compelling

Governmental Interest in

Banning All Independent

Expenditures Made by the

re 11

I. SECTION 54(1)’"S BAN ON

INDEPENDENT EXPENDITURES

BY CORPORATE ENTITIES

VIOLATES THE EQUAL

PROTECTION CLAUSE

BECAUSE THE LAW PERMITS

‘3

SUCH EXPENDITURES TO BE

MADE BY MEDIA

CORPORATIONS AND

UNINCORPORATED ENTITIES .._ 18

CORMCLAIGBOMN 0. cette eee ee 21

APPENDIX

lil

TABLE OF AUTHORITIES

Cases Page

Boos vy. Barry, 108 S. Ct. 1157 (1988) ....... 2, 20

Buckley v. Valeo, 424 U.S. 1 (1976) ........ 8, 16

California Medical Association v. Federal

Election Commission, 453 U.S. 182 (1981) .. 12

Carey v. Brown, 447 U.S. 455 (1980) ......... 20

Consolidated Edison Company v. Public

Service Commission, 447 U.S. 530 (1980) ... 2

Federal Election Commission v. Massachusetts Citizens

for Life Committee, 479 U.S. 238 (1986) . 8, 18

Federal Election Commission v. National

Conservative Political Action Comm.,

re 12

Federal Election Commission v. National Right

to Work Committee, 459 U.S. 197 (1982)... 12

First National Bank of Boston v. Bellotti,

re 4,5, 9, 10

Grosjean v. American Press Co.,

I ve tt to 18

Meyer v. Grant, 108 S.Ct. 1886 (1988) ......... 4

Michigan State Chamber of Commerce v. Austin,

643 F. Supp. 397 (W.D. Mich. 1986)... 3, 19

iv

~

Michigan State Chamber of Commerce vy. Austin,

856 F.2d 783 (6th Cir. 1988) ......... 3,7

Murphy v. Hunt, 455 U.S. 478 (1982) .......... 4

Pacific Gas & Electric v. Public Utilities of

California, 475 U.S. 1 (1986) ........ 2, 10

People v. Gansley, 191 Mich. 357,

kp ee fee ee 11, 12

Police Dept. of Chicago v. Mosley,

RS ee ee oe 20

Southern Pacific Terminal Co. v. ICC,

SED Ts Gos FEO COED 6 bcc ees 4

Texas v. Johnson, 57 U.S.L.W. 4770 (1989) ... 13, 14

Weinstein v. Bradford, 423 U.S. 147, 149 (1975) ... 4

Constitutional Provisions

OU Gi, PA, Bc tcc wes passim

Fe eo eee ee — +

Statutes

ee eo 6 6 one ee 68 SOE Ski 18

Michigan Campaign Finance Act,

DECAL. O Bees HOM. ww cts 3

1913 Mich. Pub. Acts 109.............. 12

No. 88-1569

IN THE SUPREME COURT OF THE UNITED STATES

OCTOBER TERM, 1988

eee ee Oe ee eee eee eee ee

RICHARD H. AUSTIN,

Michigan Secretary of State,

and FRANK J. KELLEY,

Michigan Attorney General,

Appellants,

v.

MICHIGAN STATE CHAMBER OF

COMMERCE, a non-profit Michigan

. Corporation

Appellee.

On Appeal from the United States

Court of Appeals for the Sixth Circuit

BRIEF OF AMICI CURIAE THE

WASHINGTON LEGAL FOUNDATION AND THE

ALLIED EDUCATIONAL FOUNDATION IN

SUPPORT OF THE APPELLEE

INTEREST OF THE AMICI CURIAE

The Washington Legal Foundation (WLF) and the

Allied Educational Foundation (AEF) hereby file this

brief as amici curiae with the written consent of the

parties.

The Washington Legal Foundation is a non-profit

public interest law and policy center with over 120,000

members nationwide that engages in litigation and

2

administrative proceedings on a variety of issues of

concem to its membership. In particular, WLF has

championed the First Amendment rights of individuals

and businesses in a number of cases before the Court.

See, e.g., Consolidated Edison Company Vv. Public

Service Commission, 447 U.S. 530 (1980), Pacific Gas

& Electric v. Public Utilities of California, 475 US. 1

(1986); Boos v. Barry, 108 S. Ct. 1157 (1988).

The Allied Educational Foundation is a non-profit

charitable and educational foundation based in New

Jersey that is devoted to the expansion of knowledge

and education in a broad variety of areas, and has

appeared with WLF as amicus before this Court on 4

number of occasions. Both WLF and AEI believe that

the public interest is best served by full and robust

debate on electoral issues, and that laws prohibiting

such speech are wholly at odds with the guarantee of

freedom of speech provided by the First Amendment.

STATEMENT OF THE CASE

The appellee, Michigan State Chamber of Commerce

(Chamber), desired to communicate its views to the

public at large in 1985 by purchasing a one-quarter

page advertisement in the Grand Rapids Press (the only

major daily in that area). That communication, for the

most part, discussed the Chamber’s views on important

economic issues, particularly those policies that affect

the growth of jobs in the State of Michigan. The

advertisement concluded by informing the reader that a

particular candidate running in a special election shares

those concerns, and asked the reader to “elect” that

candidate to office. A copy of that proposed

advertisement is reproduced in the appendix to this

brief, and in the Joint Appendix (J.A.) at 17a. As an

independent expenditure, there was no coordination or

3

communication with the candidate about the placement

of the advertisement.

The Chamber, which is a non-profit corporation,

was, however, prohibited from communicating its views

because it is a felony under Michigan law for an entity

that happens to .be incorporated to make any

expenditure to assist or oppose any candidate, including

independent expenditures of the kind the appellee

wished to make. Section 54(1) of the Michigan

Campaign Finance Act, M.C.L. § 169.254(1). However,

media corporations, (§ 169.206(3)(d)) and corporations

formed for political purposes" (§ 169.254(2)) are not

prohibited from making such expenditures. In addition,

individuals, partnerships, and unincorporated entities

such as labor unions are not prohibited under Michigan

law from making such expenditures, and are thus free

to exercise their First Amendment rights in an

uninhibited and robust way. In _ addition, such

unincorporated entities can make direct contributions to

political candidates.

Plaintiff filed suit challenging the constitutionality of

the Michigan statute as violative of the First

Amendment guarantee of free speech and the Fourteenth

Amendment's guarantee of equal protection, as well as

violative of the Michigan constitution. The district

court held that Section 54(1) does not violate the First

or Fourteenth Amendments to the Constitution.

Michigan State Chamber of Commerce v. Austin, 643 F.

Supp. 397 (W.D. Mich. 1986). The U.S. Court of

Appeals for the Sixth Circuit reversed, finding that the

law does contravene the First Amendment. Michigan

State Chamber of Commerce y. Austin, 856 F.2d 783

(6th Cir. 1988). Accordingly, the court of appeals did

not reach the equal protection issue, or whether the law

is narrowly tailored to satisfy a compelling

governmental interest in restricting such

communications.’

' While the special election in question has long past, amici

submit that this case is not moot. While the court of appeals did

not address the mootness question, the district court did, finding

that the case falls within the class of controversies “‘capable of

repetition, yet evading review."" 642 F. Supp. 397 (W.D. Mich.

1986)(quoting First National Bank of Boston v. Bellotti, 435 U.S.

765, 774 (1978) quoting Southern Pacific Terminal Co. v. ICC, 219

U.S. 498, 515 (1911). In Meyer v. Grant, 108 S.Ct. 1886 (1988),

this Court did not find moot a constitutional challenge to

Colorado’s law that prohibited the plainuff in that case from paying

petition circulators to gather signatures necessary to put a initiative

measure on the ballot for the November 1984 election. /d. at

1890, n.2. As the Court stated in Meyer, the test for mootness is

(1) whether the challenged action in its duration is "‘too short to be

fully litigated prior to its cessation or expiration’” and (2) whether

there is a ‘reasonable expectation that the same complaining party

would be subjected to the same action again.’” /d. (quoting Murphy

v. Hunt, 455 U.S. 478, 482 (1982), quoting Weinstein v. Bradford,

423 US. 147, 149 (1975).

In both the Bellotti and Meyer cases, the Court noted that the

parties indicated that they planned to engage in the specific actions

under challenge in the future. In the case at bar, the candidate in

question won the special election. Although the appellee did not

specifically allege that it intended to make independent expenditures

in the form of "public statement([s} by purchasing

...advertisement[s]" in support of or in opposition to future political

candidates (Plaintiff's Complaint, | 14, J.A. 6a), it did allege that it

desired "to timely, effectively, and fairly participate in . . . other

elections held in the State of Michigan" (/d., ¢ 19; J.A. 7a), and

that enforcement of the ban on independent expenditures by

corporations would preclude it from “fully and fairly participating

in . . . any succeeding election. . . ." /d., | 29; J.A. 9a.

We think that these allegations could be fairly read to mean

that the appellee wishes to "participate" in the electoral process not

in the general sense, but by making independent expenditures in the

future in the form of paid political advertisements of the kind it

proffered for the Special Election in 1985, as opposed to making

independent expenditures that do not necessarily result in actual

speech or communication. In addition, it is amici’s understanding

SUMMARY OF THE ARGUMENT

The court of appeals correctly held § 54(1)

unconstitutional under the First Amendment’s guarantee

of freedom of speech. Section 54(1) makes it a felony

for a non-profit yet incorporated associatic. to pay for a

newspaper advertisement informing tl« public about its

views on important economic issues, and how the

citizenry can act to advance those issues by electing a

candidate whom the association believes is sympathetic

with those concerns. The free and open marketplace of

ideas guaranteed by the First Amendment becomes less

free and open by excluding from the market certain

ideas and views simply because they are funded by a

corporate entity. The public needs more information,

not less, about issues that affect its well-being and self-

governance, especially about candidates for public office

who could, if elected, be in a position to act on those

concems. The First Amendment protects the public’s

interest in receiving information. The public can

intelligently weigh the merits of the speech and assess

the credibility of the speaker without the draconian and

patronizing measure of preventing all such financed

speech from reaching their attention.

The state interest advanced to justify the complete

ban on the financing of such communications is not

sufficiently compelling to overcome the protection of

the First Amendment, especially where there has been

absolutely no evidence adduced in the district court nor

any legislative findings that independent expenditures of

that the time from the date a person announces his candidacy for

state elective office to the date of the election is usually less than

18 months, a time period determined in Bellotti to be insufficient

for plenary review. Accordingly, appellee satisfies both parts of

the mootness test.

6

this kind have a corrupting influence. This is not

surprising, for as this Cour has repeatedly

acknowledged, independent expenditures, which are

uncoordinated with the candidate and indeed may be

unwelcoined by him, do not have the tendency to

corrupt the candidate or give the appearance of

corruption.

Indeed, since corporations are permitted under the

law to expend unlimited treasury funds for a myriad of

political purposes (e.g., communications to its members

on candidate and political issues; administration of its

political action committees, lobbying, contributions to

elected officials’ officeholder expense funds), one may

legitimately ask what evil is prevented by prohibiting

the publication of pure speech. Such an unlimited use

of treasury funds for political purposes totally undercuts

the state’s alleged interesi in preventing large amounts

of corporate money from being used in the political

process, and the interest in protecting the rights of the

dissenting shareholder.

Even if a governmental interest in limiting large

corporations from overwhelming the electorate with too

much political speech is compelling, a complete ban on

all such speech is not a narrowly tailored or precisely

drawn means of serving that interest. The proposed

speech in this case was a simple, concise message, that

would be published on only one day as a quarter page

advertisement in a newspaper, at a cost of

approximately $1,100, an amount roughly equivalent to

13 cents from each of the 8,000 members of the

Chamber. There is no showing that such a modest

independent expenditure would corrupt or appear to

corrupt the candidate c+ dominate the marketplace of

ideas, assuming that such a marketplace can have a

surfeit of ideas. It would be a felony for the Chamber

7

even to respond to a voter’s legitimate request for

information on the Chamber’s position on a candidate,

for even that modest communication would necessarily

entail expenditures for postage, telephone, photocopying,

administrative costs, and the like.

Mere administrative convenience achieved by

prohibiting a// independent expenditures by corporate

entities is not a sufficient reason for the state to escape

its obligation to narrowly tailor its restrictions on pure

speech to serve the alleged compelling interest.

Finally, the court of appeals decision can also be

affirmed on the grounds that the law violates the equal

protection clause of the Fourteenth Amendment in that

it does not prohibit such expenditures by individuals,

partnerships, or unincorporated associations such as

labor unions, or incorporated media organizations.

ARGUMENT

I. MICHIGAN’S LAW PROHIBITING

INDEPENDENT EXPENDITURES BY

INCORPORATED’ ENTITIES IS

UNCONSTITUTIONAL UNDER THE

FIRST AMENDMENT

As is recognized by all the parties, this Court has

never expressly helc that the state may constitutionally

prohibit a corporation from expending funds

independently of candidates’ campaigns to disseminate

its views about those candidates. The lower court

correctly held the Michigan statute in question was

unconstitutionally applied to a non-profit ideological

corporation such as the Chamber, "for it infringes upon

speech at the core of the first amendment without a

compelling justification.” 856 F.2d 783, 790 (footnote

8

omitted). The court found no actual corruption by such

speech, nor any appearance or threat of such corruption,

and found that the attributes of the Chamber were

sufficiently similar to the attributes of the non-profit

corporation in Federal Election Commission v.

Massachusetts Citizens for Life Committee, 479 U.S. 238

(1986), where the Court struck down as unconstitutional

as applied a federal statute similar to the one at bar that

prohibited all corporations from making any

expenditures, independent or otherwise. Amici further

submit that even if the Court were to treat the Chamber

as more of a traditional "for profit" corporation, the

state has nevertheless failed to demonstrate a compelling

governmental interest in banning pure speech that is

made independently of any candidate.

A. THE MICHIGAN LAW_~ BANS

POLITICAL SPEECH THAT LIES AT

THE CORE OF THE _ FIRST

AMENDMENT

There can be no question that the speech which the

Chamber wishes to make and disseminate is core

political speech which deserves the highest protection by

the first amendment. As this Court stated in Buckley v.

Valeo, 424 U.S. 1 (1976):

[D]ebate on the qualifications of candidates [is]

integral to the operation of the system of

government established by our Constitution. The

First Amendment affords the broadest protection to

such politicai expression in order "to assure the

unfettered interchange of idea for the bringing about

of political and social changes desired by the

people’ Roth v. United States, 354 U.S. 476, 484 [77

S.Ct. 1304, 1308, 1 L.Ed.2d 1498] (1957)... In a

republic where the people are sovereign, the ability

9

of the citizenry to make informed choices among

candidates for office is essential, for the identities of

those who are elected will inevitably shape the

course that we follow as a nation. As the Court

observed in Monitor Patriot Co. v. Roy, 401 USS.

265, 272 [91 S.Ct. 621, 625, 28 L.Ed.2d 35] (1971),

‘it can hardly be doubted’ that the constitutional

guarantee has its fullest and most urgent application

precisely to the conduct of campaigns for political

office.’

Id. at 14-15. The proposed communication in the case

at bar attempted to inform the citizenry about issues of

importance to them, and the Chamber’s view of the

qualifications of a candidate with respect to those

issues. In an age of 30-second campaign commercials,

sound bites, bumper strips, campaign rhetoric and

hoopla, the proposed advertisement is a refreshing piece

of serious information about the growth of jovs in

Michigan and the expert views of an organization as to

where a particular candidate stands on those issues.

This communication may very well be the only

substantive information that a voter might glean about

the candidate before entering the voting booth. At the

same time, the Chamber takes the risk that some voters

may oppose the Chamber’s views on the matter and for

that reason may vote against the candidate supported.

The fact that this core political speech is financed

by a corporation does not lessen the protection that such

speech deserves. As this Court stated in First National

Bank of Boston vy. Bellotti, 435 U.S. 776 (1978):

If the speakers here were not corporations, no one

would suggest that the State could silence their

proposed speech. It is the type of speech

indispensable to decisionmaking in a democracy, and

10

this is no less true because the speech comes from a

corporation rather than an individual. The inherent

worth of this speech in terms of its capacity for

informing the public does not depend upon the

identity of its source, whether corporation,

association, union, or individual.

Id. at 780. See also Pacific Gas & Electric v. Public

Utilities of California, 475 U.S. 1, 8 (1986)(the “identity

of the speaker is not decisive in determining whether

speech is protected").

Amici recognize that the Court in Bellotti dealt with

the constitutionality of a law that made it a crime for a

corporation to finance~ expenditures relating to a

referendum as opposed to a political campaign. The

Court did not foreclose, however, a challenge against

laws that prohibit corporate independent expenditures on

political campaigns, noting that "Congress might well be

able to demonstrate the existence of a danger of real or

apparent corruption in independent expenditures by

corporations to influence candidate elections." Bellotti,

435 U.S. 765, 788, n. 26 (emphasis added). While

amici submit that Congress could not be able to

demonstrate the existence of such corruption, it is clear

that the State of Michigan, in fact, has not made such a

demonstration.

1]

B. THERE HAS BEEN NO SHOWING

OF A COMPELLING

GOVERNMENTAL INTEREST _ IN

BANNING ALL INDEPENDENT

EXPENDITURES MADE BY THE

CHAMBER

While amici recognize that the prevention of the

corruption of candidates is an important governmental

interest, such an interest does not, by its mere

articulation, justify a sweeping ban on all political

speech made by an incorporated entity such as the

Chamber. The State of Michigan has failed abysmally

to demonstrate that independent expenditures corrupt or

tend to corrupt candidates who later become

officeholders.

The appellants seem to argue that simply because

Miichigan has_ long had laws on the books preventing

such expenditures, that in and of itself is sufficient

demonstration that independent expenditures pose a

threat to the integrity of the electoral process.’

* Aside from the circular reasoning of such a statement, the

historical references are misleading and inaccurate. The Appellants

state “In 1913, six years after Congress passed the Tillman Act,

Michigan enacted the Corrupt Practices Act which banned the use

of corporate treasury funds for the payment of election expenses.

This statutory ban withstood a constitutional attack in People y.

Gansley, 191 Mich. 357; 158 N.W. 195 (1916)." Appellants’ Brief

at 5-6 (footnotes cited omitted). The district court similarly stated,

"It does not matter, of course, that there has not been a finding of

actual corruption, given that corporate independent expenditures for

candidates have been banned since 1913." Michigan State Chamber

of Commerce v. Austin, 643 F. Supp. 397, 404 (W.D. Mich. 1986).

However, the Corrupt Practices Act enacted in 1913 did nor ban

corporate independent expenditures, but only made it illegal to

“pay, give or lend, or authorize to be paid, given or lent, any

money belonging to such corporation to any candidate or to any |

political committee, for the payment of any election expenses

12

Appellants’ Brief at 5-6, 33. The appellants are simply

unable to point to any evidence, however, that

independent expenditures have or are likely to have a

corrupting influence on _ candidates who become

officeholders.

The district court merely opined, without reference

to any supporting evidence, that independent

expenditures "may . . . create an atmosphere of distrust

or the appearance of corruption” (emphasis added) and

cited Federal Election Commission v. National Right to

Work Committee, 459 U.S. 197, 209 (1982). 643 F.

Supp. 397, 403-04. The district court’s ipse dixit

certainly is not sufficient to satisfy the scrutiny

demanded in this case.

In the first place, the appellants’ reliance on cases

such as National Right to Work, supra, and California

Medical Association vy. Federal Election Commission,

453 U.S. 182 (1981) are inapposite since those cases

dealt with "contributions" and not with independent

expenditures. Secondly, since independent expenditures

are by definition made independently of the candidate

without any prior cooperation, the quid pro quo that

might be attached to a contribution made directly to a

candidate is not present. As this Court observed in

Federal Election Commission v. National Conservative

Political Action Comm., 470 U.S. 480 (1985):

Unlike contributions, such independent expenditures

may well provide little assistance to the candidate’s

whatever." 1913 Mich. Pub. Acts 109, § 14. See People v.

Gansley, supra, 158 N.W. 195, 197. The current law, MCL

§ 169.254(2), is much broader, making it a felony to “make a

contribution or expenditure," which includes independent

expenditures of the kind, which by definition, are not "given" to

any candidate or committee.

13

campaign and indeed may prove counterproductive.

The absence of prearrangement and coordination of

an expenditure with the candidate or his agent not

only undermines the value of the expenditure to the

candidate, but also alleviates the danger that

expenditures will be given as a quid pro quo for

improper commitments from the candidate. [Buckley

v. Valeo,| 424 U.S., at 47, 96 S.Ct., at 648.

** *

It is of course hypothetically possible here, as in the

case of the independent expenditures forbidden in

’ Buckley, that candidates may take notice of and

reward those responsible for PAC expenditures by

giving official favors to the latter in exchange for

the supporting messages. But here, as in Buckley,

the absence of prearrangement and _ coordination

undermines the value of the expenditure to the

candidate, and thereby alleviates the danger that

expenditures will be given as a quid pro quo for

improper commitments from the candidate. On this

record, such an exchange of political favors for

uncoordinated expenditures remains a hypothetical

possibility and nothing more.

Id. at 1469 (emphasis added).

Similarly, the record in the case at bar is bereft of

any evidence that independent expenditures cause

corruption or are viewed as likely to cause corruption.

While the state can take prophylactic measures to

prevent corruption, it certainly does not have carte

blanche to run roughshod over the First Amendment

without any showing that the prophylactic measure was

needed. For example, in Texas v. Johnson, 57 U.S.L.W.

4770 (1989), this Court held that burning the American

flag is “symbolic speech," ruling unconstitutional as

applied a Texas statute forbidding desecration of the

14

flag. The Court rejected as uncompelling the state’s

interest in preserving the integrity of our nation’s

symbol as well as prohibiting a breach of the peace that

may be occasioned by public flag burning. As for the

latter state interest, the Court had no problem second-

guessing the wisdom of Texas state legislatur=’s

enactment of a prophylactic measures to prevent the

breach of the peace. The Court noted that in this

particular case, no breach of the peace occurred, and

that "[nJo reasonable onlooker would have regarded" the

protestor’s flag buming as an "invitation to exchange

fisticuffs." 57 U.S.L.W. at 4773. While many would

sharply disagree with this Court’s assessment on that

point, amici submit that it can be safely assumed that

no reasonable citizen would regard the Chamber’s

proposed advertisement as a corrupting influence on the

candidate.’ Michigan, as do the other states, has laws

prohibiting bribery and attempted bribery. There is also

a plethora of disclosure laws that are more narrowly

tailored to ensure the integrity of the electoral process

than the sweeping ban of an entire category of speech.

Appellants make much of the fact that the Chamber

has numerous ways in which to participate in the

electoral process without having to use its treasury

funds to pay for the independent expenditure in

. : It should be noted that although the communication involved

in this case deals with an independent expenditure that advocates

the election of a candidate, the law also prohibits the expenditure

of corporate funds to pay for independent expenditures that

advocate the defeat of a candidate. While the Chamber did not

specifically allege that it intended to make such expenditures, it did

not rule them out either. Amici submit that while there is no

showing that positive independent expenditures cause corruption, it

is even less likely that negative independent expenditures would do

so. The maker of such an advertisement may be opposing the

greater of two evils, with no expectation or desire to obtain any

favors from the other candidate not attacked.

all

15

question. Appellants’ Brief at 52 (Chamber may use its

treasury funds, inter alia, to pay for the administration

and solicitation costs of its political action committee;

to contribute to ballot committees; to donate to an

elected official’s officeholder expense fund; to pay for

communicating to its members its views on political

candidates; to contribute to political party organizational

activities).

All of this electioneering activity that can be

lawfully financed by the Chamber’s treasury merely

undercuts the alleged state interest in preventing

corruption or the appearance of corruption by the use of

corporate funds to pay for pure speech, as well as the

other alleged interest in protecting the objecting

shareholder from having treasury funds spent on partisan

activities. Ironically, it may very well be that all of

these permitted political contributions and expenditures

by treasury funds have caused many people to have a

negative image of corporate or union political action

committees, rather than the modest communication of

pure speech proposed to be made by the Chamber with

its own funds.

Indeed, Michigan readily admits that the Chamber's

Political Action Committee (PAC) could have lawfully

paid for the proposed advertisement. Yet the Chamber

testified in the court below that because of a media

attack on the bona fides of such political action

committees, an expenditure by the PAC with the

corresponding disclosure that such communication was

paid for by the Chamber PAC, would have less

credibility, and hence generate more distrust of PACs.

J.A. 153a (LaBrant testimony). In other words, it

appears that an advertisement financed directly by the

Chamber will generate greater credibility and trust than

the one paid for by the Chamber’s PAC.

16

Since most of the copy in the proposed

advertisement is merely issue discussion rather than

express advocacy, the Chamber could easily split it in

two for a double display advertisement. The one

advertisement could be devoted to a discussion of the

issues in the campaign without expressly advocating the

election of the candidate who shares those same views

(such as the first five paragraphs of the proposed

advertisement reproduced in the Appendix hereto).

Such an advertisement can be paid for lawfully with the

Chamber’s treasury funds. The final "Elect Candidate

X" message, which can lawfully be financed by the

Chamber’s PAC, could then be placed in a separate

advertisement right next to the issue discussion

advertisement. The Chamber could also publish the

advertisement in its own newsletter to its members, and

encourage them to "pass it along" to a friend or

neighbor.

All of this merely demonstrates that the state has

woefully failed to show that corporate independent

expenditures would cause corruption or the appearance

of corruption. The numerous activities that may be

financed with treasury funds simply pale in comparison

to the modest advertisement the Chamber wishes to

make in this case, and thereby calls into question the

legitimacy of the _ state’s alleged compelling

governmental interest. As this Court noted in Buckley

v. Valeo, 424 U.S. 1 (1976):

It would naively underestimate the ingenuity and

resourcefulness of persons and groups desiring to

buy influence to believe that they would have much

difficulty devising expenditures that skirted the

restriction on express advocacy of election or defeat

but nevertheless benefited the candidate’s campaign.

Yet no substantial societal interest would be served

17

by a loophole-closing provision designed to check

corruption that permitted unscrupulous persons and

organizations to expend unlimited sums of money in

order to obtain improper influence over candidates

for elective office. Cf. Mills v. Alabama, 384 US.,

at 220, 86 S.Ct., at 1437.

Id. at 45.

While the Chamber does not propose to expend

"unlimited sums" or “obtain improper influence over

candidates," the state’s complete ban on independent

expenditures by corporations is an arbitrary restraint that

does not serve any compelling governmental interest. It

is simply ludicrous to suggest that if there were any

possibility of corruption by the financing of the

advertisement by the Chamber, such a possibility would

vanish or be diminished if the disclaimer at the bottom

of the advertisement were to read "Paid for by the

Michigan State Chamber of Commerce PAC," instead of

"Paid for by the Michigan State Chamber of

Commerce." Indeed, the candidate might appreciate the

PAC financed message more, knowing that the

aggregate amount of funds expended by that interest

group and its PAC were greater than the cost of the

advertisement alone, since the Chamber had to expend

its own funds to generate the PAC funds that ultimately

were used to pay for the advertisement.”

‘ Testimony in the district court indicated that the

administrative costs to a corporation may be as high as 50 percent

of the amount spent by PAC. (J.A. 103a, 108a) (Mayberry

testimony). Thus, an independent expenditure by a PAC in the

amount of $2,000 actually represents an aggregate outlay of $3,000

by that interest.

18

Accordingly, amici submit that this content-based

ban on speech by incorporated entities is not narrowly

tailored to serve a compelling governmental interest

even assuming a threat to that interest exists.

II. SECTION 54(1)’S BAN ON INDEPENDENT

EXPENDITURES BY CORPORATE

ENTITIES VIOLATES THE EQUAL

PROTECTION CLAUSE BECAUSE THE

LAW PERMITS SUCH EXPENDITURES TO

BE MADE BY MEDIA CORPORATIONS

AND UNINCORPORATED ENTITIES

While the court of appeals did not need to address

the appellee’s claim that Section 54(1) violates the

Equal Protection Clause of the Fourteenth Amendment,

this Court can of course affirm on those grounds since

the issue was raised and briefed in the lower courts.

The appellants opening brief simply dismisses the

argument as “meritless,” citing to footnote 11 of this

Court’s decision in Federal Election Commission vy.

MCFL, 479 U.S. 238, 258-259, n.11. Appellants’ Brief

at 17, n.l4. However, the party in that case and in

similar cases did not raise an equal protection challenge

to the federal legislation. Indeed, unlike the federal

legislation which treats corporations and labor unions in

a roughly equivalent way, 2 U.S.C. § 441b, Michigan

and ten other states prohibit corporate contributions and

expenditures, “but allow union contributions and

expenditures to be made.

It is well established that a corporation is a "person"

under the Equal Protection Clause of the Fourteenth

Amendment. Grosjean vy. American Press Co., 297 U.S.

233, 244 (1936). The district court in this case

properly stated the test to be employed as follows:

19

Federal courts consider legislative distinctions

presumptively invidious when those distinctions

burden the exercise of a fundamental right under the

Constitution. Plyer [v. Doe], 457 U.S. at 216-

217...In order to swi‘ive scrutiny under the

Fourteenth Amendment, such distinctions must be

precisely tailored to serve a compelling state interest.

Id. at 217....In this case, section 54(1) of the Act

burdens plaintiff’s exercise of its First Amendment

right to freedom of speech, which is a fundamental

right under the Constitution. Therefore, any

‘ distinction in section 54(1) between plaintiff and

other persons must be precisely tailored to serve a

compelling state interest.

Michigan State Chamber of Commerce vy. Austin, 643 F.

Supp. 397, 405 (W.D. Mich. 1986) (Emphasis added).

The district court, however, incorrectly concluded that

there was no violation of the equal protection clause

because of the alleged "unique threat of corporate power

to the electoral process." Jd. As demonstrated in the

prior section of this brief, the compelling state interest

of preventing corruption by prohibiting independent

expenditures~is illusory. In addition, if the harm to the

electoral process is the expenditure of large sums of

money by entities, it is irrelevant whether the entity

involved is incorporated or not.

Nor is the distinction between these entities narrowly

tailored to serve the alleged compelling state interest.

A small dry cleaning establishment tha‘ happens to be

incorporated is banned from making any independent

expenditures, yet an umincorporated union with

thousands of members and a large treasury are free to

spend unlimited amounts on such expenditures.

20

Similarly, Michigan’s law allowing — unlimited

expenditures by media corporations violates the (qual

Protection Clause. M.C.L. § 169.206(3)(d) excludes

from the definition of "expenditure" any ‘"newsstory,

commentary, or editorial in support of or opposition to

a candidate" by any "bro (casting station, newspaper,

magazine, or other veriodica or publication." The

district court found no violation of the equal protection

clause because "[a]ny corporation....may avail itself of

the exemption....". 643 F. Supp. at 405. While it is

true that the Chamber may publish a magazine or

néwspaper carrying a commentary on a_ particular

candidate, the only effective way of getting the message

across to the electorate as a whole rather than to the

Chambers members is by purchasing space in widely

circulated newspaper. The law in effect gives a

monopoly to corporations owning generally circulated

newspapers to inform the electorate about the

qualifications of the « andidates.

Amici submit that these distinctions cannot survive a

casual scrutiny, let alone a Strict one, to determine

whether a compelling interest is_ served. Not

surprisingly, the lower court failed to refer to Police

Dept. of Chicago v. Mosley, 408 U.S. 92 (1976) and

Carey v. Brown, 447 U.S. 455 (1980) which we believe

are dispositive of the issues here. In those cases, the

Court struck down state statutes that prohibited

picketing near certain buildings and residences, except

for certain labor pickets. Cf. Boos v. Barry, 108 S.Ct.

1157, 1170 (1988). Similarly, in this case, the state has

not demonstrated why expenditures by unincorporated

entities are less corrupting than those made by

mcorporated entities. Accordingly, ban on independent

expenditures by incorporated entities cannot survive

under the Equal Protection Clause.

21

CONCLUSION

For the foregoing reasons, amici urge this Court to

affirm the decision of the court of appeals on the

grounds that the ban on independent expenditures is a

clear violation of the First Amendment, or in the

alternative, that such a law violates the Equal Protection

Clause of the Fourteenth Amendment.

Respectfully submitted,

DANIEL J. POPEO

PAUL D. KAMENAR*

Washington Legal Foundation

1705 N Street, N.W.

Washington, D.C. 20036

(202) 857-0240

July 28, 1989 *Counsel of Record

Michigan Needs

Richard Bandstra

To Help Us Be

Job Competitive

Again

The Michigan State Chamber of are competing with firme in other states

electors in the 9rd House District Te eneure that Michigan le jot. com-

‘ we need to encourage greater efficiency hae the background and training to do

in state government by lowering the the best job in Lansing for the people of

state personal income tax. the 83rd House District. We believe he

Currently, workers’ compensation wi) work to reduce workers’ compense-

oligibility standards are not the same es The State Chamber ie committed to

Oe Ca SN ee job development in Michigan. We

allowed to quality for too long & period believe Richaid Bandstra shares (nat

atime. commitment

Many Grand Rapids businesses

On Monday June 10th,

Elect Richard Bandstra

State Representative

93rd House District

Special Election

. na maperens ty We Carcene Cowie o Maney teers

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