July 8, 2014
posted by Bob Bauer

Spectators of campaign finance are waiting for the next big case, and many bets have been placed on the RNC’s suit to lift the limits on contributions to party independent expenditure programs.  Now another entry into the sweepstakes: the question of whether an independent committee (or “hybrid”) can retain its independence if it also makes contributions, or functions within a family of related organizations that includes one making contributions.  See Carey v. FEC, 791 F. Supp. 2d 121 (D.D.C. 2011).  At issue is the capacity of the self-proclaimed independent committee to collect unlimited contributions.

In a recently decided case, Vt. Right to Life Comm., Inc. v. Sorrell, 12-2904-CV, 2014 WL 2958565 (2d Cir. July 2, 2014), the Second Circuit has held that such committees may operate as independent entities—but the independence can’t be bogus. Having separate accounts is the beginning and not the end; formal without functional separation won’t satisfy the legal requirement for operating independently.  With the Fourth Circuit seeming to have gone the other way, see N.C. Right to Life Comm., Inc. v. Leake, 525 F.3d 274 (4th Cir. 2008), there is some thought that we have a circuit split and the Supreme Court will take the case.

Perhaps—but it is not clear that there is such a “split,” and not much reason to think that, without a compelling reason, the Court would go out of its way to step in at this time.

The Fourth Circuit in Leake was concurring, briefly, with the point made by the lower court that an organization and the PAC it established are legally separate entities. The mere fact of a connection between the two would  not be sufficient to nullify a claim to independence.  There has to be more—evidence of coordination, of circumvention of the requirement of independence—and on the evidence, the Fourth Circuit found none. Leake at 306, 294 n.8 (declining to pierce the corporate veil “absent any evidence that the plaintiffs are abusing their legal forms”).  That’s pretty much all there was to it.

The Second Circuit in Sorrell was making a different point: that the organizations before it—two nominally separate committees, one making independent expenditures and the other contributions—were operating really as one committee: “indistinguishable” as shown by “the State’s undisputed evidence.”  Sorrell at 20.  The committees were not “segregated at all”: they had established no “operational barriers” between the contribution and independent expenditure activities, with the result that the independent expenditure committee was not separated from the “lines of communication” with candidates.  Id. at 20-21. In the absence of any “organizational divide,” the Court concluded that the independent committee was not in fact independent.  Id. at 22.

True, the Second Circuit distinguished its position from Leake, but it was making too much of the difference, incorrectly suggesting that the Fourth Circuit would rely entirely on a committee’s formal intention, expressed in organizational documents, to function independently.  Sorrell at 19.  But the Fourth Circuit made clear that it would consider a showing that, notwithstanding stated policies of independence or separate bank accounts, a committee’s independence was fictitious. But there was “no evidence” of the kind, it found, and

[E]ven if there was [such] evidence … this would hardly be sufficient justification to regulate all independent expenditure committees. Such committees would be judged guilty with no chance of proving their innocence, while the state neglected the use of a more narrowly tailored regulatory option: applying contribution limits to independent expenditure committees shown to have abused their corporate form.

Leake at 306.

Hybrid committees, or independent committees within a family of organizations that includes contribution-making committees, are here to stay.  The reason is simple: there is no basis in Buckley for the position that an organization making contributions can’t also make expenditures, or operate alongside related organizations that do.  Contrary to what is often alleged, the independence of consequence under the law is the independence of the expenditure—an independence that keeps the candidate from shaping or consulting on the expenditure and bolstering the chance that the committee will be spending to her liking, for which she will be indebted.  Committees can establish the “operational barriers” or “organizational divides” that protect against circumvention of this requirement.

In McConnell, the Supreme Court struck down a provision of McCain-Feingold that would have required parties to choose between coordinated and independent expenditures. McConnell v. FEC, 540 U.S. 93, 213-20 (2003).  There was an additional complicating factor, which ensured the doom of this compelled choice: the decision of any unit of the party bound all the other units. But given the change in the composition of the Court, no one in a betting mood should place their chips on a different outcome in a case not involving party spending and this particular feature of one-chooses-for-all. The Court has shown itself suspicious of attempts, some of the more indirect variety, to hinder independent spending. See, e.g., Ariz. Free Enter. Club’s Freedom Club PAC v. Bennett, 131 S.Ct. 2806 (2011) (holding that Arizona’s matching funds provision violated the First Amendment rights of independent committees even though their own spending remained unlimited.)

So if the Court does eventually address the issue,  the chances are good that it will side with the spender.  The time for that decision does not seem to have come nearer with the Second Circuit decision.

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