(Fortune Magazine) -- The U.S. Supreme Court's stunning campaign-finance ruling last month -- finding that the "government may not suppress political speech on the basis of the speaker's corporate identity" -- triggered passionate reactions from critics, extending even to an unprecedented, point-counterpoint exchange during the State of the Union address between President Barack Obama and one of the five justices who signed it. In this article we'll aim to depressurize the debate and explain what all the fuss is about.
The decision, Citizens United v. Federal Election Commission, has repercussions of at least two types. First, it sets precedents in constitutional law regarding when unelected judges in our democracy can strike down the laws passed by elected legislatures, and when it's appropriate for the court to overrule the decisions of earlier courts.
Critics assert that the conservative justices here not only overstepped in each instance but did so in ways that expose the conservative jurisprudential principles they profess to live by as shams.
Second, the ruling has enormous impact on campaign finance law, where it frees corporations (and presumably unions) to use their vast financial resources to influence elections. At the same time the decision upholds certain disclosure requirements for corporations, which the majority of justices hope might act as a brake on abuse.
Legislative attempts to rein in corporations' powers to influence elections date to the 1890s, when states began enacting laws limiting or banning companies' rights to make campaign expenditures.
In the Tillman Act of 1907, Congress followed suit, banning corporate direct contributions to federal political candidates. Supporters of the laws hoped to curb corruption, and they sought to prevent managers of corporations from using shareholder money to support political causes the shareholders might oppose.
Direct contributions to candidates were of particular concern because they could so easily descend into bribery. Conventional bribery laws might prevent an oil company executive, say, from telling a candidate, "We'll contribute $100,000 to your campaign if you promise to vote against that oil-and-gas tax." However, the concern was that less explicit quid pro quo understandings might result if candidates were beholden to large contributors to their campaigns.
The ban on direct contributions was easily evaded, however: A corporate official could still exercise enormous influence over a candidate by spending $100,000 independently to take out ads saying, "Vote against the candidate's opponent." So long as there was no proof of coordination with the candidate and the money never entered the candidate's campaign chest, the Tillman Act wouldn't cover it.
To stop these end runs around the Tillman Act, Congress enacted an additional prohibition in its Taft-Hartley legislation of 1947 that barred corporations and labor unions from using money drawn from their general treasuries for "independent expenditures" to fund "express advocacy" concerning an election.
In subsequent years Congress would allow corporations to set up separate accounts for political action committees (PACs), into which employees and shareholders could voluntarily contribute money for political purposes. Funds from general treasuries, however, continued to be restricted, both because they were so enormous and because they were generated by the equity and sweat equity of shareholders and employees who might not share the political views of corporate managers.
In 1974, Congress added restrictions on independent campaign expenditures by individuals. In response, a group of plaintiffs led by conservative New York Sen. James Buckley (William F.'s brother) challenged all federal campaign restrictions on individuals on the then novel ground that money was speech in this context, and that the restrictions therefore violated the First Amendment.
That case, Buckley v. Valeo, reached the Supreme Court in 1976. In a split-the-baby ruling, the court found that Congress had indeed violated the First Amendment when it limited individuals' ability to make "independent expenditures." At the same time the court upheld restrictions on an individual's direct contributions to candidates. The "important government interest in the prevention of corruption and the appearance of corruption" was considered sufficient to justify the latter restrictions, though not the former. (The Buckley plaintiffs hadn't challenged restrictions on corporate contributions or expenditures, so their status was not affected.)
Then, in 2002, Congress decided to curb the rise of "issue ads." Although they conveyed unambiguous (typically negative) political messages about candidates and were funded by independent expenditures, they were not covered by previous restrictions because they steered clear of using "magic words" like "vote for" or "vote against."
In the McCain-Feingold legislation, known formally as the Bipartisan Campaign Reform Act (BCRA, pronounced bick-ra), Congress took a big new step. For limited periods -- 30 days before a primary and 60 days before a general election -- it barred corporations and labor unions from using general treasury revenue to engage in "electioneering communications," even if they did not use any of the magic words. This newly defined concept included "any broadcast, cable, or satellite communication" that could be "received by at least 50,000 people" and that referred to "a clearly identified candidate for federal office."
This was strong medicine, and everyone knew it. In fact, Congress wrote a special exemption into BCRA to exempt media corporations from the provision, lest they be barred from airing editorials, opinion pieces, and news stories during "electioneering" periods.
Despite that and a few other exemptions, Floyd Abrams, the eminent liberal First Amendment expert, felt that BCRA still violated free-speech guarantees and, to the chagrin of many friends and admirers, agreed to represent Republican Sen. Mitch McConnell of Kentucky in mounting an immediate constitutional challenge to the law.
The law's defenders, on the other hand, argued that the restrictions were justifiable because of their limited nature. They applied only to TV (not to newspapers, magazines, the Internet, etc.); they lasted only for short periods; and they affected only ads paid for with corporate treasury funds (i.e., if an ad was funded by corporate PAC money, it could still run anytime).
In 2003 the Supreme Court upheld those restrictions, 5-4, in McConnell v. FEC. The ruling relied heavily on a 1990 precedent in which the court had upheld a Michigan law that barred that state's corporations from using general treasury funds for independent campaign expenditures.
That 1990 case, Austin v. Michigan Chamber of Commerce, was, however, itself controversial. Many election-law experts, including the politically liberal professor Samuel Issacharoff of New York University Law School, consider Austin an "outlier" in that it relied not on the legislature's need to curb corruption and its appearance -- the usual justification for imposing campaign-funding restrictions -- but rather on "the corrosive and distorting effects of immense aggregations of wealth that are accumulated with the help of the corporate form and that have little or no correlation to the public's support for the corporation's political ideas."
Though that sentiment will certainly resonate with many, the notion of having the government get involved in trying to equalize the resources available to different political factions was novel and, to critics, alarming and dangerous. (In dissenting, Justice Antonin Scalia termed it "Orwellian.")
That, finally, brings us to the current case. In January 2008 a conservative nonprofit political organization, Citizens United, released a pejorative documentary targeting presidential candidate Hillary Clinton titled Hillary: The Movie.
Though it was distributed in theaters and on DVD -- which BCRA did not restrict -- the group wanted to make it available as a video-on-demand cable selection and to run commercials for the documentary on TV.
The group sued, seeking a declaratory judgment that video-on-demand was not one of the mass airings restricted by BCRA or, alternatively, that Citizens United, a nonprofit overwhelmingly funded by individuals, wasn't the sort of corporation BCRA had been aimed at restricting, or was constitutionally capable of restricting.
Thus, when the Supreme Court agreed to hear the case in November 2008, most lawyers thought it posed narrow questions about how to apply the BCRA restrictions. In June 2009, however, after the case had been argued, the court, at its own behest, instructed the parties to brief and argue two new questions: Should the court overrule its 2003 decision in McConnell and its 1990 ruling in Austin?
On Jan. 21, the five conservative justices answered yes to the questions they had instructed the parties to ask them. "Speech restrictions based on the identity of the speaker are all too often simply a means to control content," Justice Anthony M. Kennedy wrote. "Government may not suppress political speech on the basis of the speaker's corporate identity. No sufficient governmental interest justifies limits on the political speech of nonprofit or for-profit corporations."
The ruling struck down the 62-year-old Taft-Hartley restrictions on independent expenditures, cast doubt on the continued viability of the 102-year-old Tillman Act, and invalidated up to 24 state laws, several dating back to the 1890s. In response, Justice John Paul Stevens wrote a seething 90-page dissent, which also may constitute a remarkable swan song of sorts. (There is widespread speculation that Stevens, 89, may step down after this term.)
He argues that the court, in interpreting the First Amendment in the past, has routinely drawn distinctions based on the speaker's identity and will doubtless continue to do so after this ruling. Students, prisoners, members of the Armed Forces, foreigners, and even government employees (under the Hatch Act) all receive less First Amendment protection than do most other individuals.
A minor dust devil was kicked up by President Obama's State of the Union remark that "I don't think American elections should be bankrolled by America's most powerful interests, or worse, by foreign entities." While the majority had not explicitly overturned existing federal laws prohibiting campaign expenditures by "foreign nationals," their broad rationale -- rejecting distinctions based on the identity of the speaker -- carried to its extreme would doom that restriction too. (In any case, Congress now might well need to clarify the treatment of campaign expenditures by American subsidiaries of foreign corporations.)
The fact that the court will, in all probability, continue to permit prohibitions on foreign nationals' campaign spending -- to do otherwise would be absurd -- does not weaken Stevens's argument, but rather intensifies it.
For what makes Stevens's dissent so emotionally powerful is that it is not just a criticism of a campaign finance ruling. It is an anguished cry against purportedly principled conservative judicial philosophies that have gained ascendancy during Stevens's 34 years on the court, but which he and the liberal justices view as little better than public relations covers for a conservative political agenda.
Through a variety of doctrines -- variously referred to as strict constructionism, originalism, and textualism -- the conservatives claim to give the Constitution a more objective reading than their liberal colleagues by grounding their decisions in either the text of the document or the original intention of the framers. But those sources are often indecisive, and even when they aren't, conservatives will frequently ignore them in the name of "pragmatism" when they lead to unwelcome results.
In this case, the text of the First Amendment said nothing one way or the other about the degree to which corporations might have free speech rights, and historians were unable to find any discussion of the concept of "corporate speech" in any contemporaneous writings. In his dissent Stevens argues that for all we know, the framers would have considered the notion of a tongueless abstraction engaging in "speech" as oxymoronic.
In a stab at rebuttal, Justice Scalia engages in some inconclusive armchair ruminations before concluding that "our enterprising Founders" probably would have wanted to protect corporate speech, with the possible exception of "Thomas Jefferson and others favoring perpetuation of an agrarian society."
Is this objectivity -- or a séance?