Austin v. Michigan Chamber of Commerce/Opinion of the Court

by Thurgood Marshall

In this appeal, we must determine whether § 54(1) of the Michigan Campaign Finance Act, 1976 Mich.Pub. Acts 388, violates either the First or the Fourteenth Amendment to the Constitution. Section 54(1) prohibits corporations from using corporate treasury funds for independent expenditures in support of, or in opposition to, any candidate in elections for state office. Mich.Comp. Laws § 169.254(1) (1979). Corporations are allowed, however, to make such expenditures from segregated funds used solely for political purposes. § 169.255(1). In response to a challenge brought by the Michigan State Chamber of Commerce (Chamber), the Sixth Circuit held that § 54(1) could not be applied to the Chamber, a Michigan nonprofit corporation, without violating the First Amendment. 856 F.2d 783 (1988). Although we agree that expressive rights are implicated in this case, we hold that application of § 54(1) to the Chamber is constitutional because the provision is narrowly tailored to serve a compelling state interest. Accordingly, we reverse the judgment of the Court of Appeals.

* Section 54(1) of the Michigan Campaign Finance Act prohibits corporations from making contributions and independent expenditures in connection with state candidate elections. ^[1] The issue before us is only the constitutionality of the State's ban on independent expenditures. The Act defines "expenditure" as "a payment, donation, loan, pledge, or promise of payment of money or anything of ascertainable monetary value for goods, materials, services, or facilities in assistance of, or in opposition to, the nomination or election of a candidate." § 169.206(1). An expenditure is considered independent if it is "not made at the direction of, or under the control of, another person and if the expenditure is not a contribution to a committee." § 169.209(1); see § 169.203(4) (defining "committee" as a group that "receives contributions or makes expenditures for the purpose of influencing or attempting to influence the action of the voters for or against the nomination or election of a candidate"). The Act exempts from this general prohibition against corporate political spending any expenditure made from a segregated fund. § 169.255(1). A corporation may solicit contributions to its political fund only from an enumerated list of persons associated with the corporation. See §§ 169.255(2), (3).

The Chamber, a nonprofit Michigan corporation, challenges the constitutionality of this statutory scheme. The Chamber comprises more than 8,000 members, three-quarters of whom are for-profit corporations. The Chamber's general treasury is funded through annual dues required of all members. Its purposes, as set out in the bylaws, are to promote economic conditions favorable to private enterprise; to analyze, compile, and disseminate information about laws of interest to the business community and to publicize to the government the views of the business community on such matters; to train and educate its members; to foster ethical business practices; to collect data on, and investigate matters of, social, civic, and economic importance to the State; to receive contributions and to make expenditures for political purposes and to perform any other lawful political activity; and to coordinate activities with other similar organizations.

In June 1985 Michigan scheduled a special election to fill a vacancy in the Michigan House of Representatives. Although the Chamber had established and funded a separate political fund, it sought to use its general treasury funds to place in a local newspaper an advertisement supporting a specific candidate. As the Act made such an expenditure punishable as a felony, see § 169.254(5), the Chamber brought suit in District Court for injunctive relief against enforcement of the Act, arguing that the restriction on expenditures is unconstitutional under both the First and the Fourteenth Amendments.

The District Court upheld the statute. 643 F.Supp. 397 (WD Mich.1986). The Sixth Circuit reversed, reasoning that the expenditure restrictions as applied to the Chamber, violated the First Amendment. We noted probable jurisdiction, 490 U.S. 1045, 109 S.Ct. 1952, 104 L.Ed.2d 421 (1989), and now reverse. II

To determine whether Michigan's restriction on corporate political expenditures may constitutionally be applied to the Chamber, we must ascertain whether it burdens the exercise of political speech and, if it does, whether it is narrowly tailored to serve a compelling state interest. Buckley v. Valeo, 424 U.S. 1, 44-45, 96 S.Ct. 612, 646-647, 46 L.Ed.2d 659 (1976) (per curiam ). Certainly, the use of funds to support a political candidate is "speech"; independent campaign expenditures constitute "political expression 'at the core of our electoral process and of the First Amendment freedoms.' " Id., at 39, 96 S.Ct., at 644 (quoting Williams v. Rhodes, 393 U.S. 23, 32, 89 S.Ct. 5, 11, 21 L.Ed.2d 24 (1968)). The mere fact that the Chamber is a corporation does not remove its speech from the ambit of the First Amendment. See, e.g., First National Bank of Boston v. Bellotti, 435 U.S. 765, 777, 98 S.Ct. 1407, 1416, 55 L.Ed.2d 707 (1978).

This Court concluded in FEC v. Massachusetts Citizens for Life, Inc., 479 U.S. 238, 107 S.Ct. 616, 93 L.Ed.2d 539 (1986) (MCFL ), that a federal statute requiring corporations to make independent political expenditures only through special segregated funds, 2 U.S.C. § 441b, burdens corporate freedom of expression. MCFL, 479 U.S., at 252, 107 S.Ct., at 624 (plurality opinion); id., at 266, 107 S.Ct., at 632 (O'CONNOR, J., concurring in part and concurring in judgment). The Court reasoned that the small nonprofit corporation in that case would face certain organizational and financial hurdles in establishing and administering a segregated political fund. For example, the statute required the corporation to appoint a treasurer for its segregated fund, keep records of all contributions, file a statement of organization containing information about the fund, and update that statement periodically. Id., at 253, 107 S.Ct., at 625 (plurality opinion). In addition, the corporation was permitted to solicit contributions to its segregated fund only from "members," which did not include persons who merely contributed to or indicated support for the organization. Id., at 254, 107 S.Ct., at 626 (plurality opinion). These hurdles "impose[d] administrative costs that many small entities [might] be unable to bear" and "create[d] a disincentive for such organizations to engage in political speech." Ibid; see also id., at 265-266, 107 S.Ct., at 631-632 (O'CONNOR, J.).

Despite the Chamber's success in administering its separate political fund, see, e.g., Tr. 443 (Chamber expected to have over $140,000 in its segregated fund available for use in the 1986 elections), Michigan's segregated fund requirement still burdens the Chamber's exercise of expression because "the corporation is not free to use its general funds for campaign advocacy purposes." MCFL, 479 U.S., at 252, 107 S.Ct., at 624 (plurality opinion). The Act imposes requirements similar to those in the federal statute involved in MCFL: a segregated fund must have a treasurer, § 169.221; and its administrators must keep detailed accounts of contributions, § 169.224, and file with state officials a statement of organization, ibid. In addition, a nonprofit corporation like the Chamber may solicit contributions to its political fund only from members, stockholders of members, officers or directors of members, and the spouses of any of these persons. § 169.255. Although these requirements do not stifle corporate speech entirely, they do burden expressive activity. See MCFL, 479 U.S., at 252, 107 S.Ct., at 624 (plurality opinion); id., at 266, 107 S.Ct., at 632 (O'CONNOR, J.). Thus, they must be justified by a compelling state interest.

The State contends that the unique legal and economic characteristics of corporations necessitate some regulation of their political expenditures to avoid corruption or the appearance of corruption. See FEC v. National Conservative Political Action Committee, 470 U.S. 480, 496-497, 105 S.Ct. 1459, 1468, 84 L.Ed.2d 455 (1985) (NCPAC ) ("[P]reventing corruption or the appearance of corruption are the only legitimate and compelling government interests thus far identified for restricting campaign finances"). State law grants corporations special advantages-such as limited liability, perpetual life, and favorable treatment of the accumulation and distribution of assets-that enhance their ability to attract capital and to deploy their resources in ways that maximize the return on their shareholders' investments. These state-created advantages not only allow corporations to play a dominant role in the Nation's economy, but also permit them to use "resources amassed in the economic marketplace" to obtain "an unfair advantage in the political marketplace." MCFL, 479 U.S., at 257, 107 S.Ct., at 627. As the Court explained in MCFL, the political advantage of corporations is unfair because

"[t]he resources in the treasury of a business corporation . . . are not an indication of popular support for the corporation's political ideas. They reflect instead the economically motivated decisions of investors and customers. The availability of these resources may make a corporation a formidable political presence, even though the power of the corporation may be no reflection of the power of its ideas." Id., at 258, 107 S.Ct., at 628.

We therefore have recognized that "the compelling governmental interest in preventing corruption support[s] the restriction of the influence of political war chests funneled through the corporate form." NCPAC, supra, 470 U.S., at 500-501, 105 S.Ct., at 1470; see also MCFL, supra, 479 U.S., at 257, 107 S.Ct., at 627.

The Chamber argues that this concern about corporate domination of the political process is insufficient to justify a restriction on independent expenditures. Although this Court has distinguished these expenditures from direct contributions in the context of federal laws regulating individual donors, Buckley, 424 U.S., at 47, 96 S.Ct., at 648, it has also recognized that a legislature might demonstrate a danger of real or apparent corruption posed by such expenditures when made by corporations to influence candidate elections, Bellotti, supra, 435 U.S., at 788, n. 26, 98 S.Ct., at 1422, n. 26. Regardless of whether this danger of "financial quid pro quo " corruption, see NCPAC, supra, 470 U.S., at 497, 105 S.Ct., at 1468; post, at 702-705; (KENNEDY, J., dissenting), may be sufficient to justify a restriction on independent expenditures, Michigan's regulation aims at a different type of corruption in the political arena: 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. See supra, at 658-659. The Act does not attempt "to equalize the relative influence of speakers on elections," post, at 705 (KENNEDY, J., dissenting); see also post, at 684 (SCALIA, J., dissenting); rather, it ensures that expenditures reflect actual public support for the political ideas espoused by corporations. We emphasize that the mere fact that corporations may accumulate large amounts of wealth is not the justification for § 54; rather, the unique state-conferred corporate structure that facilitates the amassing of large treasuries warrants the limit on independent expenditures. Corporate wealth can unfairly influence elections when it is deployed in the form of independent expenditures, just as it can when it assumes the guise of political contributions. We therefore hold that the State has articulated a sufficiently compelling rationale to support its restriction on independent expenditures by corporations.

We next turn to the question whether the Act is sufficiently narrowly tailored to achieve its goal. We find that the Act is precisely targeted to eliminate the distortion caused by corporate spending while also allowing corporations to express their political views. Contrary to the dissents' critical assumptions, see post, at 698, 699, 706 (KENNEDY, J.); post, at 680, 682-683 (SCALIA, J.), the Act does not impose an absolute ban on all forms of corporate political spending but permits corporations to make independent political expenditures through separate segregated funds. Because persons contributing to such funds understand that their money will be used solely for political purposes, the speech generated accurately reflects contributors' support for the corporation's political views. See MCFL, supra, 479 U.S., at 258, 107 S.Ct., at 628.

The Chamber argues that § 54(1) is substantially overinclusive, because it includes within its scope closely held corporations that do not possess vast reservoirs of capital. We rejected a similar argument in FEC v. National Right to Work Committee, 459 U.S. 197, 103 S.Ct. 552, 74 L.Ed.2d 364 (1982) (NRWC ), in the context of federal restrictions on the persons from whom corporations could solicit contributions to their segregated funds. The Court found that the federal campaign statute, 2 U.S.C. § 441b, "reflect[ed] a legislative judgment that the special characteristics of the corporate structure require particularly careful regulation. While § 441b restricts the solicitation of corporations and labor unions without great financial resources, as well as those more fortunately situated, we accept Congress' judgment that it is the potential for such influence that demands regulation." 459 U.S., at 209-210, 103 S.Ct., at 555-556 (citation omitted; emphasis added). Although some closely held corporations, just as some publicly held ones, may not have accumulated significant amounts of wealth, they receive from the State the special benefits conferred by the corporate structure and present the potential for distorting the political process. This potential for distortion justifies § 54(1)'s general applicability to all corporations. The section therefore is not substantially overbroad.

The Chamber contends that even if the Campaign Finance Act is constitutional with respect to for-profit corporations, it nonetheless cannot be applied to a nonprofit ideological corporation like a chamber of commerce. In MCFL, we held that the nonprofit organization there had "features more akin to voluntary political associations than business firms, and therefore should not have to bear burdens on independent spending solely because of [its] incorporated status." 479 U.S., at 263, 107 S.Ct., at 630. In reaching that conclusion, we enumerated three characteristics of the corporation that were "essential" to our holding. Ibid. Because the Chamber does not share these crucial features, the Constitution does not require that it be exempted from the generally applicable provisions of § 54(1).

The first characteristic of Massachusetts Citizens for Life, Inc., that distinguished it from ordinary business corporations was that the organization "was formed for the express purpose of promoting political ideas, and cannot engage in business activities." Id., at 264, 107 S.Ct., at 631. Its articles of incorporation indicated that its purpose was "[t]o foster respect for human life and to defend the right to life of all human beings, born and unborn, through educational, political and other forms of activities," id., at 241-242, 107 S.Ct., at 619, and all of the organization's activities were "designed to further its agenda," id., at 242, 107 S.Ct., at 619. MCFL's narrow political focus thus "ensure[d] that [its] political resources reflect[ed] political support." Id., at 264, 107 S.Ct., at 631.

In contrast, the Chamber's bylaws set forth more varied purposes, see supra, at 656, several of which are not inherently political. For instance, the Chamber compiles and disseminates information relating to social, civic, and economic conditions, trains and educates its members, and promotes ethical business practices. Unlike MCFL's, the Chamber's educational activities are not expressly tied to political goals; many of its seminars, conventions, and publications are politically neutral and focus on business and economic issues. The Chamber's president and chief executive officer stated that one of the corporation's main purposes is to provide "service to [its] membership that includes everything from group insurance to educational seminars, and . . . litigation activities on behalf of the business community." Deposition of E. James Barrett, Nov. 12, 1985, p. 11. See also PR Newswire, July 21, 1989 (Chamber cosponsored the Automotive Management Briefing Seminar); PR Newswire, May 9, 1989 (Chamber cosponsored the Michigan New Product Awards competition); PR Newswire, June 14, 1988 (Chamber sponsored seminar on product liability losses and lawsuits); PR Newswire, Feb. 4, 1988 (Chamber cosponsored outreach program to increase awareness of investment opportunities in the Caribbean Basin). The Chamber's nonpolitical activities therefore suffice to distinguish it from MCFL in the context of this characteristic.

We described the second feature of MCFL as the absence of "shareholders or other persons affiliated so as to have a claim on its assets or earnings. This ensures that persons connected with the organization will have no economic disincentive for disassociating with it if they disagree with its political activity." 479 U.S., at 264, 107 S.Ct., at 631. Although the Chamber also lacks shareholders, many of its members may be similarly reluctant to withdraw as members even if they disagree with the Chamber's political expression, because they wish to benefit from the Chamber's nonpolitical programs and to establish contacts with other members of the business community. The Chamber's political agenda is sufficiently distinct from its educational and outreach programs that members who disagree with the former may continue to pay dues to participate in the latter. Justice KENNEDY ignores these disincentives for withdrawing as a member of the Chamber, stating only that "[o]ne need not become a member . . . to earn a living." Post, at 710 (KENNEDY, J., dissenting). Certainly, members would be disinclined to terminate their involvement with the organization on the basis of less extreme disincentives than the loss of employment. Thus, we are persuaded that the Chamber's members are more similar to shareholders of a business corporation than to the members of MCFL in this respect. ^[2] The final characteristic upon which we relied in MCFL was the organization's independence from the influence of business corporations. On this score, the Chamber differs most greatly from the Massachusetts organization. MCFL was not established by, and had a policy of not accepting contributions from, business corporations. Thus it could not "serv[e] as [a] condui[t] for the type of direct spending that creates a threat to the political marketplace." 479 U.S., at 264, 107 S.Ct., at 631. In striking contrast, more than three-quarters of the Chamber's members are business corporations, whose political contributions and expenditures can constitutionally be regulated by the State. See Buckley v. Valeo, 424 U.S., at 29, 96 S.Ct., at 639 (upholding restrictions on political contributions); supra, at 658-661 (regarding independent expenditures). As we read the Act, a corporation's payments into the Chamber's general treasury would not be considered payments to influence an election, so they would not be "contributions" or "expenditures," see §§ 169.204(1), 169.206, and would not be subject to the Act's limitations. Business corporations therefore could circumvent the Act's restriction by funneling money through the Chamber's general treasury. ^[3] Because the Chamber accepts money from for-profit corporations, it could, absent application of § 54(1), serve as a conduit for corporate political spending. In sum, the Chamber does not possess thefeatures that would compel the State to exempt it from restriction on independent political expenditures.

The Chamber also attacks § 54(1) as underinclusive because it does not regulate the independent expenditures of unincorporated labor unions. ^[4] Whereas unincorporated unions, and indeed individuals, may be able to amass large treasuries, they do so without the significant state-conferred advantages of the corporate structure; corporations are "by far the most prominent example of entities that enjoy legal advantages enhancing their ability to accumulate wealth." MCFL, 479 U.S., at 258, n. 11, 107 S.Ct., at 628, n. 11. The desire to counterbalance those advantages unique to the corporate form is the State's compelling interest in this case; thus, excluding from the statute's coverage unincorporated entities that also have the capacity to accumulate wealth "does not undermine its justification for regulating corporations." Ibid.

Moreover, labor unions differ from corporations in that union members who disagree with a union's political activities need not give up full membership in the organization to avoid supporting its political activities. Although a union and an employer may require that all bargaining unit employees become union members, a union may not compel those employees to support financially "union activities beyond those germane to collective bargaining, contract administration, and grievance adjustment." Communications Workers v. Beck, 487 U.S. 735, 745, 108 S.Ct. 2641, 2648, 101 L.Ed.2d 634 (1988). See also Abood v. Detroit Bd. of Ed., 431 U.S. 209, 97 S.Ct. 1782, 52 L.Ed.2d 261 (1977) (holding that compelling nonmember employees to contribute to union's political activities infringes employees' First Amendment rights). An employee who objects to a union's political activities thus can decline to contribute to those activities, while continuing to enjoy the benefits derived from the union's performance of its duties as the exclusive representative of the bargaining unit on labor-management issues. As a result, the funds available for a union's political activities more accurately reflects members' support for the organization's political views than does a corporation's general treasury. Michigan's decision to exclude unincorporated labor unions from the scope of § 54(1) is therefore justified by the crucial differences between unions and corporations.

Because we hold that § 54(1) does not violate the First Amendment, we must address the Chamber's contention that the provision infringes its rights under the Fourteenth Amendment. The Chamber argues that the statute treats similarly situated entities unequally. Specifically, it contends that the State should also restrict the independent expenditures of unincorporated associations with the ability to accumulate large treasuries and of corporations engaged in the media business.

Because the right to engage in political expression is fundamental to our constitutional system, statutory classifications impinging upon that right must be narrowly tailored to serve a compelling governmental interest. Police Department of Chicago v. Mosley, 408 U.S. 92, 101, 92 S.Ct. 2286, 2293, 33 L.Ed.2d 212 (1972). We find that, even under such strict scrutiny, the statute's classifications pass muster under the Equal Protection Clause. As we explained in the context of our discussions of whether the statute was overinclusive, supra, at 660-661, or underinclusive, supra, at 665 and this page, the State's decision to regulate only corporations is precisely tailored to serve the compelling state interest of eliminating from the political process the corrosive effect of political "war chests" amassed with the aid of the legal advantages given to corporations.

Similarly, we find that the Act's exemption of media corporations from the expenditure restriction does not render the statute unconstitutional. The "media exception" excludes from the definition of "expenditure" any "expenditure by a broadcasting station, newspaper, magazine, or other periodical or publication for any news story, commentary, or editorial in support of or opposition to a candidate for elective office . . . in the regular course of publication or broadcasting," § 169.206(3)(d). ^[5] The Court of Appeals did not address the Chamber's equal protection argument because it found that the application of § 54(1) to the Chamber violates the First Amendment. See 856 F.2d, at 790. The District Court, however, appeared to hold that the media exception does not implicate the Equal Protection Clause because "[a]ny corporation . . . may avail itself of the exemption" by entering the news broadcasting or publishing business. 643 F.Supp., at 405. We are persuaded, however, that a Fourteenth Amendment analysis is necessary in this case. It is true that the exemption does not refer expressly to "media corporations." Nevertheless, the exception will undoubtedly result in the imposition of fewer restrictions on the expression of corporations that are in the media business. Thus, it cannot be regarded as neutral, and the distinction must be justified by a compelling state purpose.

Although all corporations enjoy the same state-conferred benefits inherent in the corporate form, media corporations differ significantly from other corporations in that their resources are devoted to the collection of information and its dissemination to the public. We have consistently recognized the unique role that the press plays in "informing and educating the public, offering criticism, and providing a forum for discussion and debate." Bellotti, 435 U.S., at 781, 98 S.Ct., at 1418. See also Mills v. Alabama, 384 U.S. 214, 219, 86 S.Ct. 1434, 1437, 16 L.Ed.2d 484 (1966) ("[T]he press serves and was designed to serve as a powerful antidote to any abuses of power by governmental officials and as a constitutionally chosen means for keeping officials elected by the people responsible to all the people whom they were selected to serve"). The Act's definition of "expenditure," § 169.206, conceivably could be interpreted to encompass election-related news stories and editorials. The Act's restriction on independent expenditures therefore might discourage incorporated news broadcasters or publishers from serving their crucial societal role. The media exception ensures that the Act does not hinder or prevent the institutional press from reporting on, and publishing editorials about, newsworthy events. Cf. H.R.Rep. No. 93-1239, p. 4 (1974) (explaining a similar federal media exception, 2 U.S.C. § 431(9)(B)(i), as "assur[ing] the unfettered right of the newspapers, TV networks, and other media to cover and comment on political campaigns"); 15 U.S.C. §§ 1801-1804 (enacting a limited exemption from the antitrust laws for newspapers in part because of the recognition of the special role of the press). A valid distinction thus exists between corporations that are part of the media industry and other corporations that are not involved in the regular business of imparting news to the public. Although the press' unique societal role may not entitle the press to greater protection under the Constitution, Bellotti, supra, 435 U.S., at 782, and n. 18, 98 S.Ct., at 1418, and n. 18, it does provide a compelling reason for the State to exempt media corporations from the scope of political expenditure limitations. We therefore hold that the Act does not violate the Equal Protection Clause.

Michigan identified as a serious danger the significant possibility that corporate political expenditures will undermine the integrity of the political process, and it has implemented a narrowly tailored solution to that problem. By requiring corporations to make all independent political expenditures through a separate fund made up of money solicited expressly for political purposes, the Michigan Campaign Finance Act reduces the threat that huge corporate treasuries amassed with the aid of favorable state laws will be used to influence unfairly the outcome of elections. The Michigan Chamber of Commerce does not exhibit the characteristics identified in MCFL that would require the State to exempt it from a generally applicable restriction on independent corporate expenditures. We therefore reverse the decision of the Court of Appeals.

It is so ordered.

Notes

1. Section 54(1) is modeled on a provision of the Federal Election Campaign Act of 1971, 86 Stat. 11, as amended, 2 U.S.C. §§ 431-455, that requires corporations and labor unions to use segregated funds to finance independent expenditures made in federal elections. § 441b.
2. A requirement that the Chamber disclose the nature and extent of its political activities, see post, at 707 (KENNEDY, J., dissenting), would not eliminate the possible distortion of the political process inherent in independent expenditures from general corporate funds. Given the significant incentive for members to continue their financial support for the Chamber in spite of their disagreement with its political agenda, disclosure will not ensure that the funds in the Chamber's treasury correspond to members' support for its ideas.
3. A nonprofit corporation's segregated fund, on the other hand, apparently cannot receive contributions from corporations. See Mich.Comp. Laws § 169.255(3) (1979) (allowing contributions only from "(a) Members of the corporation who are individuals. (b) Stockholders of members of the corporation. (c) Officers or directors of members of the corporation"). In addition, a corporation's payment to a segregated fund would likely be considered a contribution or expenditure because the sole purpose of such segregated funds is to make political contributions and expenditures. § 169.255(1). The segregated fund, therefore, could not be used as a conduit for business corporations' political spending.
4. The Federal Election Campaign Act restricts the independent expenditures of labor organizations as well as those of corporations. 2 U.S.C. § 441b(a).
5. The Federal Election Campaign Act contains a similar exemption that excludes from the definition of expenditure "any news story, commentary, or editorial distributed through the facilities of any broadcasting station, newspaper, magazine, or other periodical publication, unless such facilities are owned or controlled by any political party, political committee, or candidate." 2 U.S.C. § 431(9)(B)(i).