PROTECT MY CHECK, INC. v. CRAIG C. DILGER, JOHN STEFFEN UNITED STATES DISTRICT COURT, E.D. KENTUCKY,

PROTECT MY CHECK, INC. v. CRAIG C. DILGER, JOHN STEFFEN UNITED STATES DISTRICT COURT, E.D. KENTUCKY, CENTRAL DIVISION. FRANKFORT 176 F.SUPP.3D 685 (2016) Protect My Check, Inc. is a section 501(c)(4), an organization that must not be organized for profit and must be operated exclusively to promote social welfare. While it is based in Florida, PMC conducts business in Kentucky. PMCs purpose in Kentucky is to expand employee rights by promoting legislation for right to work protections. In order to carry out its mission, PMC makes both direct and indirect contributions to candidates for
PROTECT MY CHECK, INC. v. CRAIG C. DILGER, JOHN STEFFEN UNITED STATES DISTRICT COURT, E.D. KENTUCKY, CENTRAL DIVISION. FRANKFORT 176 F.SUPP.3D 685 (2016) Protect My Check, Inc. is a section 501(c)(4), an organization that must not be organized for profit and must be operated exclusively to promote social welfare. While it is based in Florida, PMC conducts business in Kentucky. PMCs purpose in Kentucky is to expand employee rights by promoting legislation for right to work protections. In order to carry out its mission, PMC makes both direct and indirect contributions to candidates for state and local offices, and to organizations that support such candidates. In addition, PMC maintains a PAC to make the contributions. Section 150 of Kentuckys Constitution forbids corporations from contributing money or other assets to influence elections. PMC brought this action against the Kentucky Registry of Election Finance to obtain a preliminary injunction to seek relief from Kentuckys political corporate contribution laws. In its argument, PMC asserted that Section 150 and other related laws violated its right to free speech under the First Amendment of the federal Constitution. In addition to the First Amendment violation, PMC also contended that its right to equal protection under the Fourteenth Amendment was violated because unions and LLCs are not similarly restricted under the Kentucky laws. PMC and the Kentucky Registry agreed during oral argument that the campaign finance laws allowed PMC to make indirect contributions. Moreover, the Kentucky Registry agreed with PMC that excluding unions and LLCs but not corporations from the Kentucky laws was not constitutional. The only remaining dispute was whether the ban on direct corporate contributions violated PMCs free speech rights. JUDGE TATENHOVE_The First Amendment provides that Congress shall make no law . . . abridging the freedom of speech. U.S. Const. Amend. 1. Political speech concerning candidates for public office is at the core of our First Amendment freedoms. Speech is an essential mechanism of democracy, for it is the means to hold officials accountable to the people . . . . The First Amendment has its fullest and most urgent application to speech uttered during a campaign for political office. As explained above, First Amendment protection extends to corporations, and political speech does not lose [such] protection simply because its source is a corporation. The Supreme Court has rejected the argument that political speech of corporations or other associations should be treated differently under the First Amendment simply because such associations are not natural persons. Citing the above principles, PMC contends that the protected political speech of corporations includes the right to make direct contributions to candidates as well as independent expenditures. According to PMC, the reasoning in Citizens United that struck down the federal ban on independent corporate expenditures should also be applied to strike down. Kentuckys ban on direct contributions by corporations. At the very least, PMC argues that because the Supreme Court has never upheld bans on direct contributions unless the regulation at issue provided for indirect contributions through a PAC option, Kentuckys ban should be struck down because it lacks a similar option. In response, Defendants argue that because Citizens United only addressed independent expenditures, the Supreme Court decision in Federal Election Comn v. Beaumont, which upheld the federal ban on direct contributions from corporations, remains controlling. . . . Historically there have been four main reasons for bans on corporate contributions and expendituresthe anti-distortion rationale, the anti-corruption interest, a shareholder-protection interest, and an anti-circumvention rationale. Citizens United invalidated the anti-distortion and the shareholder-protection interests, affirmatively upheld the anti-corruption rationale, and did not address the anticircumvention rationale. . . . Although PMC recognizes that Citizens United focused on independent expenditures rather than bans on direct corporate contributions, PMC contends that its reasoning makes Beaumont no longer applicable even in the context of direct contributions. Contrary to PMCs implication, however, Beaumont, decided nearly seven years before Citizens United, remains good law and appears to be more controlling in the present case. In Beaumont, a nonprofit advocacy group challenged the federal ban on corporate contributions as applied to nonprofit corporations. The plaintiff there argued that because a federal prohibition on independent expenditures had been found unconstitutional as applied to nonprofit advocacy corporations, bans on direct contributions should also be deemed unconstitutional as applied to nonprofits. The plaintiff in Beaumont further argued that the reasons behind the ban were not as applicable to nonprofit corporations as they were to large corporations and therefore would not survive strict scrutiny. After explaining that a lower standard than strict scrutiny applied, the Supreme Court rejected these arguments and upheld the ban on direct contributions as consistent with the First Amendment. In doing so, the Court noted the specific distinction that the Court in MCFL made between regulation of contributions and regulation of expenditures in that restrictions on contributions require less compelling justifications than restrictions on independent spending. The Court in Beaumont also applied the same level of scrutiny to the ban as the parties agree should be applied in this case i.e., that of being closely drawn to match a sufficiently important interest, and rejected the notion that a complete ban should be subject to a more exacting level of scrutiny than simply a limitation. . . . As explained above, the interest in preventing actual or apparent corruption was specifically affirmed by the Supreme Court in Citizens United and in McCutcheon, and is the only reason proffered by Kentuckys government in the case at hand. Although Citizens United reasoned that independent expenditures by corporations did not give rise to quid pro quo corruption, the Court indicated that preventing such corruption is still a valid interest for other speech restrictions. Therefore, as applied to PMCs instant case, the Court does not believe Citizens United invalidates theholding in Beaumont, and it certainly does not invalidate Defendants justification for the ban at issue here. If anything, Citizens United supports Defendants justification of preventing quid pro quo corruption as a valid reason and a sufficiently important interest for Kentuckys restriction on corporate contributions. . . . Although Kentuckys interest in preventing quid pro quo corruption or the appearance thereof is a legitimate problem for governments to solve, and is sufficiently important to justify certain restrictions on speech, the inquiry does not end there. The Supreme Court has specified that regardless of the level of scrutiny applied, we must assess the fit between the stated governmental objective and the means selected to achieve that objective. . . . Here, Defendants contend that Kentuckys ban on direct contributions is sufficiently closely drawn because corporations should be able to form a state PAC and administer a state PAC and give money to candidates through that PAC. Defendants also point to Minnesota Citizens, in which the Eighth Circuit upheld similar laws, including prohibitions on direct corporate contributions, and argue that [a] Minnesota-style PAC option also exists in Kentucky. Leaving aside for the moment the question of whether that is actually the current state of the law in Kentucky, PMC contends that the PAC option is not enough to prevent the ban on direct contributions from being found unconstitutional after Citizens United. PMC argues that a ban on all direct contributions, even with the PAC option that Defendants insist is present, is not closely drawn because having some type of cap on direct contributions or imposing donor disclosure requirements would be a less restrictive alternative. . . . PMC is correct that because disclosure requirements do not impose a ceiling on speech, the Supreme Court has noted that disclosure often represents a less restrictive alternative to flat bans on certain types or quantities of speech. Thus, it would be constitutionally permissible for Kentucky to allow contributions while imposing disclosure requirements or other similar less restrictive alternatives. However, even if less restrictive alternatives such as disclosure requirements exist, the Court must give certain deference to the legislatures choice in regulating political involvement unless the legislatures action clearly violates federal constitutional requirements. . . . Even if the PAC option did not exist, PMC does not point to any authority where bans on direct contributions were found unconstitutional due to the lack of a PAC option, or indeed were found unconstitutional at all. Moreover, because Defendants maintain that a PAC option does exist in Kentucky, until PMC establishes otherwise, the concern over the absence of a PAC option is rather academic. In sum, PMC has not provided the Court with legal authority supporting its argument that Kentuckys ban on direct corporate contributions is not sufficiently closely drawn. . . . The circumstances in this case do not clearly demand all of the relief PMC requests. As long as the Kentucky laws at issue allow corporations to administer a state PAC and contribute to state candidates through that PAC, and as long as the ban on direct contributions applies equally to corporations, LLCs, and other similarly situated groups, such laws are closely drawn to combat the legitimate interest of preventing the reality or appearance of quid pro quo corruption and are therefore constitutional. If the laws at issue are not structured this way, however, then to the extent they are not, they may violate PMCs First Amendment rights. Because at this stage in the litigation PMC has not shown a strong likelihood that this is true, however, the requested relief will only be granted in part. CRITICAL THINKING One argument that PMC made was that because disclosure requirements do not impose a ceiling on speech, and are constitutional, the Kentucky law should be amended to only require disclosure requirements instead of a ban on direct contributions. Explain in your own words, why disclosure requirements are sufficient to be constitutional but not necessary. How does this play into the courts decision? ETHICAL DECISION MAKING In Citizens United, the seminal case cited by PMC, the Supreme Court rejected the anti-distortion rationale to limit campaign contributions, which is based on the idea that corporations should be regulated because of their greater ability to amass wealth and influence the economy. In the same case, the Supreme Court upheld the anti-corruption rationale used to limit political corporate contributions. Why do you think the anti-corruption rationale holds sway while the antidistortion rationale does not? What values are being honored by this decision and what values are being deemed less important?

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