Yes, Free Speech Sometimes Costs Money

Agent of Plutocracy? 

In a recent blog post, one Jim Hightower claims that: "[b]izarrely the Supreme Court decreed in its Citizens United ruling that money is a form of free speech."  As a result, he says, people with more money can engage in more free speech, and speech is "no longer free," with the result that we live in a '"Plutocracy, not a Democracy." 

Citizens United did not equate the expenditure of money with speech.  Instead, the Court simply held that quintessential speech --- there a movie critical of a political candidate --- did not lose its status as free speech because production and distribution of the movie cost money.   This was not a novel conclusion.  In New York Times v. Sullivan, 376 U.S. 254 (1964), the Supreme Court, in an opinion by Justice William Brennan (pictured above) held that states cannot punish speech --- there a newspaper advertisement --- absent proof of "actual malice" by the speaker.  In so doing, the Court expressly rejected the claim that the speech in that case --- a full page statement in the New York Times by various civil rights leaders and their supporters --- lost First Amendment protection because it was a paid advertisement.  (The advertisement, placed in 1960, cost $4,830, over $38,000 in 2015 dollars.)  According to Justice Brennan's opinion, which was unanimous on this point:

"[The advertisement] communicated information, expressed opinion, recited grievances, protested claimed abuses, and sought financial support on behalf of a movement whose existence and objectives are of the greatest public concern [citation omitted].  That the Times was paid for publishing the advertisement is as immaterial in this connection as is the fact that newspapers and books are sold..."

Far from "bizarre," this holding is unremarkable. The exercise of individual liberties often consumes scarce resources, and free societies rely upon the price mechanism to allocate such resources. In such a system, wealthy individuals will be able to exercise certain constitutional rights more often and or in different ways. For instance, as previously noted on this blog, the Constitution protects the right to travel, a bulwark of competitive federalism. Travel can be expensive, with the result that wealthy individuals can exercise this right more often than others, if they so choose. Moreover, the Bill of Rights protects the right to counsel, pursuant to which a criminal defendant can hire the best lawyer she can find. The framers and ratifiers of the Constitution would not have been surprised to learn that wealth individuals can hire more and better lawyers than the poor as a result.  Wealth individuals can also purchase more books, movies or art than the poor. As Eugene Volokh has pointed out, a law placing on ceiling on expenditures employed to exercise constitutional rights violates those rights in a straightforward way.  A ceiling on expenditures for movies, books, art, advertisements or handbills is no different. It is difficult to reconcile the views of those who disagree with the basic premises of a free society.

Will Progressives Follow the Chief's Lead and Embrace Citizens United?

A recent op-ed by Michael Kinsley of Bloomberg News argues that progressives should follow the example of Chief Justice John Roberts and embrace a constitutional result with which they disagree as a policy matter.  Kinsley surmises that the Chief Justice opposes Obamacare on policy grounds but notes that he nonetheless found the measure to be constitutional as an exercise of Congress's taxing power, albeit beyond the power of Congress under the Commerce and Necessary and Proper clauses.  (Go here for a brief explanation of the ruling.)

As Kinsley notes, speech costs money, and spending money on speech is distinguishable from campaign contributions, which candidates may or may not spend on speech.  Moreover, the law before the Court in Citizens United banned speech and not spending as such.  Hence, those who criticize Citizens United because the ruling equates "money" with "speech" are simply wrong.  (For a similar and more didactic argument, see this essay by Geoff Stone on the Huffington Post.)   Moreover, as Kinsley perceptively points out:

"As applied to an individual, such a law [a ban on political speech] would be obviously unconstitutional. Endorsement of a political candidate -- even if that candidate is yourself -- is about as central to the First Amendment as any category of speech can be."

Kinsley concedes that corporations are not natural persons, and that one could distinguish a ban on personal speech from a ban on corporate speech on this ground.  But, as he points out, this rationale for censorship would also empower Congress and the states to ban speech by newspapers and other media companies altogether, so long as such entities are organized as corporations, as they invariably are.  While the particular law at issue in Citizens United exempted media companies, such an exemption would be unnecessary if the now-fashionable progressive view that corporations are not entitled to protection under the First Amendment prevailed.  As a result, Kinsley calls on progressives to acknowledge that Citizens United is correct, even if they believe the decision has deleterious effects for democracy, in the same way that Chief Justice Roberts acknowledged the constitutionality of Obamacare.

Of course Chief Justice Roberts did not announce his policy views on Obamacare; hence, Kinsley's assertion about the Chief Justice's personal opinion on the matter is speculation.  Moreover, the joint dissent of Justices Scalia, Kennedy, Thomas and Alito made a powerful argument that the Obamacare penalty is not a bona fide exercise of the taxing power, with the result that their vote to invalidate the individual mandate is no less principled that Chief Justice Roberts' conclusion to the contrary. 

At the same time, Kinsley, who obviously disagrees with the result in Citizens United, has himself taken a principled stand.  Moreover, he is certainly correct that many "progressives" (including the President of the United States) strongly believe that Congress and the states should censor high value political speech by corporations, even corporations of very modest means that spend far less on speech than many individuals.  He's also correct that many of these same individuals (including again the President, who mischaracterized the decision in a State of the Union Address) continually decry the Citizens United decision, despite the fact that the Supreme Court has treated corporations as persons for more than 110 years and the Constitution forbids bans on high value speech.  At the same time, the case for corporate free speech rights is even stronger the Kinsley acknowledges.  For, as previously explained on this blog corporations are simply associations of individuals who voluntarily contribute their skills and capital to a joint enterprise.  (See here and here),   Thus, when the corporation speaks, it does so on behalf of the various participants in the corporate enterprise, thereby ensuring a more effective exercise of constituent members' free speech rights.  To be sure, some members of that enterprise may disagree with positions that a Board of Directors take on behalf of a corporation.  But that is true of any organization, whether the ACLU, Cato Institute, or Firefighters Union.  The possibility of disagreement within an organization does not empower the government to censor it.


Indeed, Kinsley might also have noted that, if the Constitution did not treat corporations as persons, states and the national government could simply confiscate corporate property without providing compensation or impose regulatory penalties without providing due process, a regulatory approach the Supreme Court rejected over a century ago in decisions premised upon the finding that corporations are persons within the meaning of the 14th Amendment.  See Chicago, Burlington & Quincy Railroad Co. v. City of Chicago, 166 U.S. 226 (1897) (14th Amendment forbids taking of corporate property without just compensation); Chicago, Milwaukee & St. Paul Railway Company v. Minnesota, 134 U.S. 418 (1890) (14th Amendment requires states to afford due process protections to corporations).  The result would be a kleptocracy, a state of affairs that progressives would themselves decry.

Justice O'Connor's Prescient Support for Corporate Political Speech

More "Conservative" Than Chief Justice Rehnquist?

In a recent and informative analysis of the Supreme Court, David Savage of the Los Angeles Times concludes that the appointment of then-Judge Samuel Alito to replace Justice Sandra Day O'Connor shifted the Supreme Court "to the right." He also reports that opinion polling establishes that the public generally agrees with various decisions the Court has reached in recent years, including those that evidence a rightward tilt. That is the say (and I am extrapolating somewhat here), Savage concludes that Justice Alito is more likely to reach results congenial to constitutional conservatives --- and the American Public --- than was Justice O'Connor.

Savage provides several examples of decisions congenial to conservatives that the public approves. As he puts it:


"A strong majority [of the public] favored conservative rulings that prohibited “partial-birth” abortions, upheld a homeowner’s right to have a gun, and required voters to show photo identification."


Savage also notes that the public agreed with a couple decisions more congenial to those on the left, e.g., decisions allowing EPA regulation of carbon emissions (a decision, I will note, that did not involve application of the Constitution) as well as a decision striking down laws providing life in prison without parole for juveniles who commit heinous murders. Finally, Savage notes:

"There were two notable exceptions [that is, instances in which the public disagreed with the Court]. The public disagreed with the liberal decision two years ago that gave detainees at the U.S. prison in Guantanamo Bay, Cuba, a right to challenge their detention in a civilian court. Sixty-one percent of respondents said these noncitizen detainees should not be allowed to go to court. The public also disagreed with the conservative ruling earlier this year that gave corporations a right to spend freely to endorse or oppose candidates for election. By 58 percent to 40 percent, they disagreed with the notion that 'corporations ought to be able to spend their profits on TV advertisements urging voters to vote for or against candidates.'"

The decision protecting corporate speech, of course, was Citizens United v. Federal Election Commission, a decision advocated and then approved by this blog.

Savage points out that most of these decisions (including Citizens United and District of Columbia v. Heller, which found that the Second Amendment protects the individual right to bear arms) were decided 5-4, and asserts that Justice Alito's presence on the Court, replacing Justice O'connor, tipped the balance in favor of the more "conservative" result.

While it may be that Justice Alito has tilted the Court "to the right" on certain issues, e.g., the authority of states and Congress to regulate "partial birth abortion" (a practice that Senator Moynihan called "only minutes away from infanticide" and that then-Senator Biden voted to ban) his appointment did not tilt the Court on the question of free speech rights for corporations. Citizens United overruled Michigan Chamber of Commerce v. Austin, which sustained, by a vote of 6-3, Michigan's ban on speech by corporations for or against a candidate during an election. Justice Kennedy, the author of the majority opinion in Citizens United, issued a lengthy dissent in Michigan Chamber of Commerce, arguing that Michigan's ban on high value political speech violated the First Amendment. In so doing, he rejected the rationale for speech suppression articulated by the majority, namely, that corporations receive "special benefits" from the state, with the result that their speech does not reflect "actual public support" for the views expressed. He also rejected the argument that bans on corporate political speech protect shareholders from seeing "their" money (retained corporate earnings) used to support candidates with whom shareholders might disagree, an argument made by Justice Brennan in a concurrence. (It should be noted here that Michigan allowed shareholders and others affiliated with corporations to make contributions to so-called "segregated funds," and Justice Brennan argued that the ability to "speak" via these funds sufficed to protect shareholders' free speech rights. As I have argued elsewhere, this argument by Justice Brennan ignores the basic economic truth that relegating shareholders to individual contributions to segregated funds will result in significantly less speech than shareholders actually desire and for which shareholders would be willing to pay. Such speech is what economists call a collective good --- the party producing the good cannot exclude others from consuming it --- with the result that contributions by one shareholder to support production of the good benefit other shareholders as well. (Put more technically, from the perspective of individual shareholders, production of such speech is characterized by "non-excludability.") As a result, each shareholder will have an incentive to "free ride" on the contributions that other shareholders might make to support such speech. If each shareholder free rides in this way, no shareholder will contribute to support such speech, with the result that relegating corporations to reliance on such segregated funds will result in a severe burden on political speech that shareholders would otherwise support.)

Here is one of many "money quotes" from Justice Kennedy's opinion:

"Far more than the interest of the Chamber is at stake. We confront here society's interest in free and informed discussion on political issues, a discourse vital to the capacity for self-government. "In the realm of protected speech, the legislature is constitutionally disqualified from dictating the subjects about which persons may speak and the speakers who may address a public issue." First National Bank of Boston v. Bellotti, 435 U.S. 765, 784 -785 (1978). There is little doubt that by silencing advocacy groups that operate in the corporate form and forbidding them to speak on electoral politics, Michigan's law suffers from both of these constitutional defects."

Importantly, Justice Kennedy did not speak alone. Instead, both Justice O'Connor and Justice Scalia joined his opinion in its entirety. That is to say, more than a decade before President Bush nominated then-Judge Alito to replace Justice O'Connor, Justice O'Connor had herself gone on record as opposing the sort of speech suppression schemes exemplified by the statute the Court sustained in Michigan Chamber of Commerce. Justice Kennedy's majority opinion in Citizens United was simply a reaffirmation of the views that he had expressed for himself, Justice O'Connor and Justice Scalia in his dissent in Michigan Chamber of Commerce.

As Savage reports, Justice Alito joined the Citizens United opinion, thereby reaching the same result that Justice O'connor would have reached, as evidenced by her dissenting vote in Michigan Chamber of Commerce. To be sure, Justice O'Connor may have felt compelled to follow Michigan Chamber of Commerce based on considerations of stare decisis, but there is no reason to believe she would have been more committed to stare decisis on this question than Justices Kennedy and Alito, for instance.

What, then, accounts for the Court's shift, from a 6-3 vote to sustain such suppression in 1990, to a 5-4 vote to condemn it last term? Two changes in personnel resulted in the shift. First, Justice Thomas, who joined Citizens United, replaced Justice Thurgood Marshall, who authored the majority opinion in Michigan Chamber of Commerce. Second, Chief Justice Roberts replaced Chief Justice Rehnquist, who had joined the majority opinion in Michigan Chamber of Commerce. The result was therefore a 5-4 majority in favor of protecting the free speech rights of corporations and the shareholders that employ the corporate form to express their views.

Some may be surprised that Chief Justice Rehnquist, often described as an "arch conservative," supported Court's decision in Michigan Chamber of Commerce. Don't conservatives always support the rights of big business, including corporations? Apparently not. While then-Chief Justice Rehnquist did not explain his vote in Michigan Chamber of Commerce, it's not hard to figure out why he joined the majority. After all, then Justice Rehnquist had dissented in First National Bank of Boston v. Belloti, where the Court struck down the effort by Massachusetts to suppress the speech of corporations during referenda campaigns. In that dissent, he argued that corporations are mere creatures of the state. As a result, he said, when states create corporations, providing them with limited liability and perpetual life, states need not empower such firms to employ the profits derived from these economic advantages in the political marketplace. Michigan Chamber of Commerce employed a similar rationale in sustaining Michigan's effort to suppress corporate political speech. Chief Justice Roberts, who replaced Chief Justice Rehnquist (for whom he had clerked), apparently rejected this line of reasoning when he joined Justice Kennedy's majority opinion in Citizens United. The divergence in views between these two "conservative" Chief Justices is further evidence that the fit between a Justice's (supposed) politics and his or her jurisprudence is not as tight as many apparently believe.

Missourians Reject an Individual Health Insurance Mandate Despite Corporate Speech!

Yesterday Missouri's citizens voted to reject the National Government's effort to require the state's citizens to purchase health insurance against their will. So-called Proposition C amends Missouri law to protect each citizen's right to pay health care providers directly for services rendered as well as the right to decline to purchase health insurance. Presumably Missouri voters had in mind their state model, inscribed on the state seal pictured above, i.e., "salus populi suprema lex esto" ("Let the welfare of the people be the supreme law.") The measure passed with 71 percent of the vote.

Of course, valid federal law preempts state law, including Proposition C, under the Federal Constitution's Supremacy Clause. But many argue that a coercive federal requirement to purchase health insurance exceeds the scope of Congress's limited and enumerated powers and is thus invalid. (For a summary of this argument, see the following Op-Ed in the Wall Street Journal by Randy Barnett, of Georgetown Law School.) Presumably many Missourians who voted for Proposition C did so because they believe Congress exceeded the powers the Constitution confers upon it, though some may simply agree with former Vermont Governor Howard Dean that the individual mandate is poor public policy.

Ordinarily, the "proper party" for challenging such a mandate would be an individual citizen facing a fine for not complying with the new law. (Note in this connection that the individual mandate does not even take effect until 2014.) That is to say, ordinarily a state cannot itself challenge a federal law, even one that burdens its citizens, simply because the law exceeds the scope of Congress's power. See Frothingham v. Mellon, 262 U.S. 447 (1923). However, by enshrining the right not to purchase health insurance in state law, Missouri, like several other states, has ensured that any effort to enforce the individual mandate will also preempt Missouri law. The prospect of such preemption thereby increases the chance that Missouri would itself have standing to challenge the individual mandate as a sovereign entity. Indeed, earlier this week, Judge Hudson of the Eastern District of Virginia ruled that Virginia has standing to challenge such an individual mandate, relying in part upon Virginia's Patient Protection and Affordable Care Act, which, like Proposition C, protects Virginia's from an individual mandate.

It should be noted that the Missouri Hospital Association, exercising their first amendment rights, apparently spent over $400,000 speaking in opposition to Proposition C, according to one organization that tracks these sorts of things. This is not surprising, for two different reasons. First, some citizens who choose not to purchase insurance may nonetheless require medical attention that hospitals receiving federal subsidies must provide under federal law. If the citizen cannot pay for that care, then hospitals will be left holding the bag. An individual mandate would thereby reduce the anticipated costs that hospitals must incur. Second, the premiums mandated by federal law, particularly those imposed on the young, may significantly exceed the prices justified by the expected cost of providing health care for those required to purchase insurance. If so, then the individual mandate will, other things being equal, increase overall spending on health care and thereby increase the profits earned by hospitals.

Strangely, progressive opponents of corporate political speech have not condemned the Missouri Hospital Associations efforts to drown out the speech of individual Missourians who oppose the national mandate, some of whom relied upon billboards strapped to pickup trucks to convey their support for Proposition C.

President Obama's Off-Target Critique of Citizens United

Here are some thoughts on the President's State of the Union critique of the Citizens United decision, a critique that let to a simple and immediate rebuttal by Justice Alito.

1) The President began his criticism by expressing his respect for the Separation of Powers. It's not clear to me why the President felt it necessary to begin his remarks in this way. Presidents and members of Congress should feel perfectly free to criticize rulings of the Supreme Court, and doing so has no implications for the separation of powers. Andrew Jackson criticized McCulloch v. Maryland, Lincoln criticized Dred Scot, FDR criticized numerous decisions during the New Deal, and Reagan criticized Roe v. Wade. None of these criticisms alone or taken together in any way undermined the Separation of Powers. As Madison and Lincoln both explained, Presidents and individual citizens are perfectly free to disagree with decisions of the Supreme Court. Moreover, when acting in the sphere of their own authority, Presidents and members of Congress are perfectly free to take actions inconsistent with such decisions. So, for instance, Andrew Jackson was perfectly free to veto on constitutional grounds a bill to create a National Bank, even though the Supreme Court had unanimously held that Congress had the constitutional authority to create such a bank. In the same way, President Reagan was perfectly free to veto, on Constitutional grounds, Congress's effort to re-impose the so-called Fairness Doctrine, even though the Supreme Court had held that the doctrine is constitutional.

When Presidents and other political actors take issue with judicial rulings and/or act on their own views of the Constitution, they thereby facilitate a dialogue about the meaning of the constitution, a dialogue that can enhance both the quality and legitimacy of the resulting constitutional consensus.

2) Of course, if the President is going to criticize the Court in an effort to facilitate such a dialogue, he should characterize accurately the decision he is criticizing. President Obama's criticism's was factually inaccurate in a couple of ways.

First, the President claimed that the Court's decision would protect speech by "foreign companies." However, Citizens United, the actual party before the Court, was an American company, and the Court expressly declined to address whether Congress may place greater limits on foreign corporations (or, for that matter, foreign citizens) than it may impose on domestic companies. Hence, Citizens United in no way provides that foreign corporations or persons have the same free speech rights as American companies.

Second, the President claimed that the Citizens United decision "reversed a century of law." Again, this is demonstrably false. Congress did not attempt to regulate corporate speech until 1947, and the Supreme Court did not sustain such a ban until 1990, when, in Michigan Chamber of Commerce v. Austin, the Court upheld Michigan's ban on speech by the state's Chamber of Commerce. Before Austin, the Court struck down a Massachusetts ban on corporate political speech in connection with referenda campaigns. See First National Bank of Boston v. Bellotti, 435 U.S. 765 (1978). After First National Bank, the Court held that Congress could not ban speech by non-profit ideological corporations, even when such speech took place in connection with an election. See Massachusetts Citizens for Life v. Federal Election Commission, 479 U.S. 238 (1986). (The Court thus did not decide one way or the other whether Congress had the authority to ban speech in connection with elections by for profit corporations.) To reiterate, Austin, decided just less than 20 years ago, was the first decision by the Court sustaining a ban on corporate political speech.

In referring to "a century of law," the President is implicitly invoking the so-called "Tillman Act," which, in 1907, banned corporate contributions to candidates for Federal office. The Act did not purport to ban corporate speech, even speech that required large expenditures of money on, say, newspaper advertisements announcing a corporation's endorsement of a candidate. For decades now, the Supreme Court has repeatedly distinguished between the (weaker) constitutional protections afforded to contributions, on the one hand, and speech, on the other. (Thus, for instance, Congress may limit the size of individual contributions to political candidates.) Citizens United dealt only with a Congressional ban on speech itself, and not with a ban on contributions.

It is certainly true that, like contributions, speech can involve an expenditure of money. (Though, some corporate speech my be as simple as a statement of endorsement by the firm's Board of Directors.) It's also true, however, that outright bribery of a public official involves an expenditure of money. However, no one would claim that Citizens United somehow called into question federal anti-bribery laws.

3) Let's hope that the President's future critique of Citizens United focuses on the decision's actual holding and rationale.

Update (February 1):

One of President Obama's supporters has issued another imprecise description of the Citizens United decision. According to E.J. Dionne, the decision was a "ruling on corporate money." It was not, of course. It was, instead, a ruling on "corporate speech." The decision did not address the regulation of, say, corporate campaign contributions, as explained above. Here is a link to Mr. Dionne's Op-Ed.

Citizens United/Good Riddance to Austin v. Michigan Chamber of Commerce

"Congress shall make no law. . . abdidging the Freedom of Speech, or of the Press . . ."

Last week the Supreme Court issued its long-anticipated decision in Citizens United v. Federal Election Commission. Thankfully, the Court "got it right." In particular, the Court overruled Austin v. Michigan Chamber of Commerce, a decision that had sustained, for the first time, a ban on core political speech simply because the speaking entity was a corporation, that is, a voluntary association of individuals.

In the fall, your not-so-humble blogger argued that Austin was incorrect, because the distinction it drew between corporations and other entities or, for that matter, natural persons, did not withstand analysis. Among other things this Blog said:

"Third, there is no good reason for treating corporations, large or small, any differently from Ross Perot or Bill Gates, both of whom earned most of their wealth from . . . corporations!Corporations are legal fictions, just like "partnerships," "sole proprietorships," "limited liability companies," "labor unions," "non profit corporations," etc. Behind these fictions are actual human beings who contribute labor, capital, know how, etc. to a joint enterprise. Corporations, like other forms of business organization, are best understood as a "nexus of contracts" between various categories of individuals that supply inputs to a joint enterprise. Where corporations are concerned, such suppliers include shareholders, debtholders, managers, employees, directors and others. Hopefully such enterprises earn enough to pay off lenders, pay handsome wages and salaries, and earn a profit. In the case of a corporation, some of the profits are paid out as dividends, some are reinvested in new projects, and some remain in the corporate treasury, for future use at the discretion of management."

The post also rejected the claim that corporations receive "special privileges from the state" that justify regulation not imposed on other actors, as well as the so-called "shareholder protection rationale" for banning corporate speech:

"Fifth, there are two counterarguments to the pro-speech approach that I have just sketched. First, that corporations receive "special privileges" from the state that justify additional state regulation, privileges such as perpetual life, entity status, and limited liability. Each such privilege, it is said, facilitates the creation of wealth in the economic marketplace that corporations might improperly transfer into the political arena, by spending resources on speech that exceeds the "actual public support" for the ideas expressed. Second, that shareholders need protection from managers who will use "their" (shareholders') money to speak about candidates the managers support, whether or not shareholders support them.

The Supreme Court bought the first argument in Austin v. Michigan Chamber of Commerce, 494 U.S. 652 (1991). Justice Brennan, in a concurrence, bought the second argument, analogizing corporate speech to a "theft" of shareholder assets to support viewpoints with which shareholders might disagree. Neither argument withstands scrutiny, in my view.

Many corporations, even large ones, are quite young. (Microsoft is ten years younger than I am.) Still, bans on corporate political speech apply "across the board," regardless of the age of the firm. Hence, the "perpetual life" attribute does not justify the current scope of speech regulation. Moreover, limited liability limits the liability of shareholders, not corporations (who are fully liable for their own torts or contract breaches despite limited liability), and it's a bit odd to invoke a benefit granted to individuals to justify disadvantaging corporations. (Moreover, corporations often "pay" for limited liability because they must pay higher interest rates to compensate voluntary creditors for the latter's inability to access shareholder assets if the corporation is judgment proof.)

To be sure, limited liability, perpetual life, entity status, etc. all facilitate the separation of ownership from control in large public corporations and thereby facilitate the creation and retention of wealth. (An investor is far more likely to purchase shares in a corporation if he or she knows that he or she can only lose the amount invested, without putting personal assets at risk.) Still, lots of background rules, whether contract law, tort law, partnership law, agency law, property law, trademark law, the law of secured transactions, etc., facilitate the creation and retention of wealth by individuals --- where would a franchise be without the state action necessary to enforce a trademark --- but we don't therefore conclude that individuals have received "special benefits from the state" that justify additional limits on their speech. Nor would we, for instance, allow the state to squelch speech by individuals to whom it had guaranteed a minimum income, even if the state argued that it was merely preventing the recipients of state largesse from using that largesse, or the leisure made possible by subsidies from others, to distort the political marketplace. Here again, there is no reason to distinguish individuals from corporations.

Moreover, most industries are characterized by free entry, so there is no reason to believe that the special nature of the corporate form generally allows firms to earn above-average returns, because such returns would just attract additional competition from other corporations. Finally, unless I am mistaken, bans on corporate speech are not reserved for large corporations, but apply even to corporations that are much smaller than many partnerships, for instance. Thus, even taken on their own (unpersuasive) terms, such bans are not narrowly tailored to further their purported interest.

What, though, about the "shareholder protection rationale?" Proponents of this approach argue that, if shareholders want to support a candidate, they can contribute to special funds that then spend the money on speech as directed by the corporation. Under this approach, Justice Brennan said, speech reflects "actual support" for the views expressed. This is mere wordplay. Such speech reflects some actual support, yes, but not the full actual support. As Roberto Romano argued before Austin, reliance upon separate funds is beset by collective action problems. One shareholder's contribution benefits all shareholders, even those who don't contribute. The result will be free riding by some shareholders on the contributions made by others and thus suboptimal expenditures on speech. Such a burden is not justified by any effort to protect shareholders, who have voluntarily agreed to participate in an enterprise that uses retained earnings to speak. Perhaps states could adopt heightened scrutiny of speech to make sure such speech furthers a firm's interest, but an outright ban, relegating shareholders to suboptimal separate funds, sweeps too far and offends the First Amendment, in my view. For an elaboration of this rebuttal of the shareholder protection argument, see Alan J. Meese, Limitations on Corporate Speech: Protection of Shareholders or Abridgement of Expression, 2 W&M Bill of Rights Journal 305 (1993) (See here)."

The full post appears here:

Several scholars have agreed with the decision to overrule Austin, in some cases touching on themes similar to those invoked here in the fall.

For instance, over at the Volokh Conspiracy, Professor Ilya Somin rejects the argument that "people acting through corporations [should] be denied constitutional rights because corporations are 'state-created entities.'" Professor Somin's post makes very good reading.

Moreover, Professor Stephen Bainbridge, on his own blog, describes what he calls "[Justice] Stevens' pernicious view of the concession theory" that purports to justify regulation of corporations.

Also, Eugene Volokh rebuts those who claim that speech by a corporation is "money, not speech." As Volokh points out, exercising various constitutional rights costs money, and this common sense fact does not thereby undermine the importance of the right or somehow confer upon Congress or the states extra authority to ban core political speech. For instance, if the Constitution protects a right to abortion, and Congress banned spending money on abortions, pro-choice advocates would not stand idly by and say "no problem; the law merely bans spending."

More later, I'm sure . . . .

On the Regulation of Corporate Political Speech

The Blog of the William and Mary Chapter of the American Constitution Society recently posted an article reporting on and summarizing William Van Alstyne's November 11 lecture regarding Citizens United v. Federal Election Commission, currently pending before the Supreme Court. At the end of the last term, the Court ordered reargument in the case, asking the parties to address whether, for instance, the Federal Government may, consistent with the First Amendment, ban speech by Corporations in support of or in opposition to a particular political candidate. The Court first approved such a ban in Austin v. Michigan Chamber of Commerce, 494 U.S. 652 (1990), in a 6-3 decision. Two justices presently on the Court dissented: Justice Kennedy and Justice Scalia. (Justice O'Connor, it should be noted, joined Justice Kennedy's dissent).

Here is a link to the story:

Among other things, the ACS article summarizes the case for stringent regulation of corporate speech as follows:

"Generally speaking, the campaign reform acts were put into place to prevent large commercial corporations from being able to contribute a large, disproportionate amount of money towards a particular campaign under the idea that such a contribution would make the democratic process less pure. Another reason why the campaign reform statutes were enacted was the fact that people purchase stocks from a corporation to further their own economic interest – not to make a political statement. The Supreme Court has upheld these campaign reform acts in the past, finding that a commercial corporation contributing money from its treasury to a candidate comes too close to bribery."

This is a fair summary of the rationales that proponents of such regulation have articulated. It should also be noted that such regulation includes outright bans on corporate political speech in connection with elections. Moreover, statutes banning such speech generally allow corporations to set up PACS that collect voluntary contributions from affiliated persons, such as shareholders and employees. Proponents of such bans on corporate speech argue that such PACS produce "enough" speech to vindicate the legitimate rights of corporations and their individual constituents to influence the political process.

Citizens United involves a slightly more complicated provision, Section 203 of the so-called Bipartisan Campaign Reform Act of 2002. Section 203 prohibits corporations from speaking 6o days before a general federal election and 30 days before a federal primary, whenever such speech requires expenditures from the corporation's general treasury, as opposed to the sort of "separate fund" described above. Moreover, Section 203's prohibitions arguably sweep more broadly than those at issue in Austin, described above, insofar as they apply even to speech that is primarily about issues, so long as a candidate is mentioned and the speech occurs during the requisite unsafe harbors before an election, i.e., when such speech is most likely to be effective.

I do not disagree with Professor Van Alstyne's description of how the Court might rule in Citizens United. Moreover, I agree that the decision could have major implications for the scope of state and federal authority over speech during political campaigns. Finally, I agree that, at least when it comes to regulation by individual states, the correct application of the Constitution could turn on whether corporations are, as the Supreme Court has repeatedly held or assumed for over a century, "persons" within the meaning of the 14th Amendment.

At the same time, I thought I would take this opportunity to offer some thoughts about the regulation/prohibition of Corporate political speech, from the perspective of someone who has taught Corporate Law and once even wrote about the regulation of corporate speech in a paper published by our own Bill of Rights Journal. See Alan J. Meese, Limitations on Corporate Speech: Protection for Shareholders or Abridgement of Expression, 2 W&M Bill of Rights Journal 305 (1993).

First, it is important to distinguish between speech, on the one hand. and contributions to candidates, on the another. Much commentary about the case, particularly by proponents of such regulation, muddies the distinction between these two means of influencing the political process.

Citizens United wants to speak, not make a contribution to a candidate or otherwise fund a campaign. Such speech costs money, but so does speech by individuals. (Even bumper stickers, yard signs and billboards cost money. Ditto for advertisements that an individual might take out in the newspaper or on television. Writing a letter to the editor or canvassing a precinct can cost money, particularly if the author or the canvasser must forgo other opportunities to write or canvass.) Ditto too for the exercise of certain other constitutional rights, e.g., building a church. If a state law provided that "no one shall spend more than $50,000 building a house of worship," we would (properly) call the law a burden on the exercise of religion, not a regulation of "religious spending." A proper application of the First Amendment in the Citizens United case requires the Court to distinguish between "speaking" and "contributing."

Second, the Supreme Court has properly (in my view) held that individuals are generally free to speak as much as they want, even if such speech is very expensive. Thus, the state could not prevent Ross Perot or Bill Gates from spending his entire personal fortune taking out newspaper advertisements in support of a candidate, so long as each really was acting independently. Nor could it prevent Mr. Perot from giving away his fortune to the Church of his choice. It would not matter in this connection if the resulting speech was "disproportionate" to the actual public support for the ideas expressed.

Third, there is no good reason for treating corporations, large or small, any differently from Ross Perot or Bill Gates, both of whom earned most of their wealth from . . . corporations! Corporations are legal fictions, just like "partnerships," "sole proprietorships," "limited liability companies," "labor unions," "non profit corporations," etc. Behind these fictions are actual human beings who contribute labor, capital, know how, etc. to a joint enterprise. Corporations, like other forms of business organization, are best understood as a "nexus of contracts" between various categories of individuals that supply inputs to a joint enterprise. Where corporations are concerned, such suppliers include shareholders, debt holders, managers, employees, directors and others. Hopefully such enterprises earn enough to pay off lenders, pay handsome wages and salaries, and earn a profit. In the case of a corporation, some of the profits are paid out as dividends, some are reinvested in new projects, and some remain in the corporate treasury, for future use at the discretion of management.

Fourth, if a corporation speaks, by, for instance, paying for an advertisement in a newspaper, it is because the directors, elected by the shareholders, have hired managers who think such speech is in the best interest of the corporation, i.e., the shareholders. Shareholders are persons. The funds expended are presumably retained earnings that managers are "investing" in speech they believe will benefit the shareholders. Corporate law traditionally grants managers very wide leeway to make investment decisions, e.g., whether to focus on building large or small cars, cars or tractors, tractors or boats, inboard or outboard motors, etc. Economists and economically sophisticated legal scholars explain this leeway by pointing out that various non-legal market mechanisms align the interests of directors and managers on the one hand, and shareholders on the other. These mechanisms are not perfect; no such mechanism is, but they deter directors and managers to some extent from employing retained earnings for projects that do not advance the interests of shareholders.

There is no reason to believe that directors/managers are any less likely to act in shareholder interests when making investments in speech than when making investments in factories, charitable giving, or research and development. If shareholders think Ford is making poor investment decisions, whether the investments are speech or factories, they can sell their shares. In other words, what we sometimes call "corporate speech" is really speech on behalf of persons who have authorized such speech, utilizing resources that the corporation could otherwise pay out to shareholders in dividends or use to invest in new projects.

As a result, bans on "corporate speech" are really bans on individual speech, and they must stand or fall under the same standards applied to analyze bans on individual speech.

Fifth, there are two counterarguments to the pro-speech approach that I have just sketched. First, that corporations receive "special privileges" from the state that justify additional state regulation, privileges such as perpetual life, entity status, and limited liability. Each such privilege, it is said, facilitates the creation of wealth in the economic marketplace that corporations might improperly transfer into the political arena, by spending resources on speech that exceeds the "actual public support" for the ideas expressed. Second, that shareholders need protection from managers who will use "their" (shareholders') money to speak about candidates the managers support, whether or not shareholders support them.

The Supreme Court bought the first argument in Austin v. Michigan Chamber of Commerce, 494 U.S. 652 (1991). Justice Brennan, in a concurrence, bought the second argument, analogizing corporate speech to a "theft" of shareholder assets to support viewpoints with which shareholders might disagree. Neither argument withstands scrutiny, in my view.

Many corporations, even large ones, are quite young. (Microsoft is ten years younger than I am.) Still, bans on corporate political speech apply "across the board," regardless of the age of the firm. Hence, the "perpetual life" attribute does not justify the current scope of speech regulation. Moreover, limited liability limits the liability of shareholders, not corporations (who are fully liable for their own torts or contract breaches despite limited liability), and it's a bit odd to invoke a benefit granted to individuals to justify disadvantaging corporations. (Also, corporations often "pay" for limited liability because they must pay higher interest rates to compensate voluntary creditors for the latter's inability to access shareholder assets if the corporation is judgment proof.)

To be sure, limited liability, perpetual life, entity status, etc. all facilitate the separation of ownership from control in large public corporations and thereby facilitate the creation and retention of wealth. (An investor is far more likely to purchase shares in a corporation if he or she knows that he or she can only lose the amount invested, without putting personal assets at risk.) Still, lots of background rules, whether contract law, tort law, partnership law, agency law, property law, trademark law, the law of secured transactions, etc., facilitate the creation and retention of wealth by individuals --- where would a franchise be without the state action necessary to enforce a trademark --- but we don't therefore conclude that individuals have received "special benefits from the state" that justify additional limits on their speech. Nor would we, for instance, allow the state to squelch speech by individuals to whom it had guaranteed a minimum income, even if the state argued that it was merely preventing the recipients of state largesse from using that largesse, or the leisure made possible by subsidies from others, to distort the political marketplace. Here again, there is no reason to distinguish individuals from corporations.

Moreover, most industries are characterized by free entry, so there is no reason to believe that the special nature of the corporate form generally allows firms to earn above-average returns, because such returns would just attract additional competition from other corporations. Finally, unless I am mistaken, bans on corporate speech are not reserved for large corporations, but apply even to corporations that are much smaller than many partnerships, for instance. Thus, even taken on their own (unpersuasive) terms, such bans are not narrowly tailored to further their purported interest.

What, though, about the "shareholder protection rationale?" Proponents of this approach argue that, if shareholders want to support a candidate, they can contribute to special funds that then spend the money on speech as directed by the corporation. Under this approach, Justice Brennan said, speech reflects "actual support" for the views expressed. This is mere wordplay. Such speech reflects some actual support, yes, but not the full actual support. As Roberto Romano argued before Austin, reliance upon separate funds is beset by collective action problems. One shareholder's contribution benefits all shareholders, even those who don't contribute. The result will be free riding by some shareholders on the contributions made by others and thus suboptimal expenditures on speech. Such a burden is not justified by any effort to protect shareholders, who have voluntarily agreed to participate in an enterprise that uses retained earnings to speak. Perhaps states could adopt heightened scrutiny of speech to make sure such speech furthers a firm's interest, but an outright ban, relegating shareholders to suboptimal separate funds, sweeps too far and offends the First Amendment, in my view. For an elaboration of this rebuttal of the shareholder protection argument, see Alan J. Meese, Limitations on Corporate Speech: Protection for Shareholders or Abridgement of Expression, 2 W&M Bill of Rights Journal 305 (1993).

Let's hope the Supreme Court keeps these various principles in mind when reconsidering Austin!